Emerald Oil, Inc. ("Emerald" or the "Company") announced its results for the quarter ended March 31, 2013. Emerald plans to file its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission no later than Friday, May 10, 2013.
Emerald's first operated Bakken well (Pirate 1-11-2H) produced 30,485 barrels of oil equivalent (BOE) during the first 30 days of production or an average of 1,025 barrels of equivalent per day (BOEPD) with an initial peak 24 hour rate of 1,801 BOEPD;
First quarter production totaled 95,811 BOE, an average of 1,065 BOEPD;
Oil and natural gas sales of $8.2 million (97% from oil);
Adjusted EBITDA* of $2.2 million or $0.09 per share (basic);
Adjusted cash flow* of $1.5 million or $0.06 per share (basic); and
Adjusted loss* of $3.0 million or $0.12 per share (basic).
Production from the Pirate Well
In mid-March, the Company completed its first operated Bakken well, the Pirate 1-11-2H. The well was completed with 35 frac stages. The well produced 30,485 BOE during the first 30 days of production or an average of 1,025 BOEPD with an initial peak 24 hour rate of 1,801 BOEPD. McAndrew Rudisill, Director and CEO, stated, "The results of the Pirate well are very strong. The experience and technical capabilities of our operations team are commendable. We look forward to completing additional operated Bakken wells in our Low Rider Area of McKenzie County, North Dakota, and significantly growing our production and cash flow."
Operating Well Development Program
Emerald is currently fracture stimulating the Arsenal 1-17-20H well in the middle Bakken formation in McKenzie County, North Dakota. The Company plans to immediately follow with the fracture stimulation of the Caper 1-15-22H well, the Mongoose 1-8-5H well, and the Slugger 1-16-21H well. Emerald expects to report production results of its wells after it has approximately 30 days of production data. The Company has recently drilled the Slugger 1-16-21H well and will soon begin drilling its sixth operated Bakken well, the Talon 1-9-4H well.
The Company has recently acquired 5,874 net acres of undeveloped leasehold in McKenzie County, North Dakota, for $6.5 million (approximately $1,100 per net acre). The acquired acreage is contiguous with existing Low Rider Area acreage in McKenzie County, North Dakota. The acquisition adds six additional operated drilling spacing units ("DSUs"), bringing the Company's total in the area to 15.
The Company's average working interest in its Low Rider operated area after the recent acquisition is approximately 60% and the Company continues to work toward increasing the average well working interest towards 75%. On a pro forma basis to reflect pending acquisitions, the Company expects to have approximately 54,000 net acres in the Williston Basin, of which approximately 23,500 net acres are operable. Approximately 12,500 of the operated acres are located in McKenzie County. The remaining operated acreage is in Dunn and Williams County, North Dakota, and Richland County, Montana.
Sale of Non-Operated Leasehold
In April 2013, the Company sold 970 non-operated net acres for $5.9 million. Emerald will continue to analyze all AFEs on non-operated properties to ensure they meet rate of return hurdles in the context of our 2013 capital budget.
Emerald currently holds approximately 30,500 non-operated net acres in the Williston Basin, of which approximately 11,600 net acres are held by production. The Company had 9.94 net non-operated wells which produced on average 1,065 BOEPD in the first quarter of 2013. Through March 31, 2013, Emerald participated in approximately 32 gross (1.02 net) wells that were in the process of being drilled or completed.
Sand Wash Basin Divestiture
In March 2013, Emerald sold approximately 31,000 net acres in the Sand Wash Basin for approximately $10.1 million cash. Proceeds are being used to acquire additional operated acreage in the Williston Basin.
Well Development Activity
During the first quarter 2013, Emerald invested approximately $15.3 million on well development in the Williston Basin.
2013 Capital Budget
Due to operating efficiencies, Emerald is increasing its 2013 capital budget by $4 million to $100 million. The Company has been drilling operated wells in less than 30 days at a total cost of approximately $10.0 million, which is down from its previous estimate of $11.0 million. Reduced drilling times should allow the Company to drill approximately 8.2 net operated wells during 2013, up from the previous estimate of 7.5 net wells. The Company plans to spend $82.7 million to drill operated wells and approximately $7.4 million to participate in 0.8 net non-operated wells. In addition, the Company has reserved $10 million for potential acreage acquisitions in its core area. To date, the cost to acquire operated acreage has been more than offset by proceeds from sales of non-core assets.
The Company expects second quarter production to average 1,400 BOEPD. Given positive results from its initial operated wells, Emerald re-affirms its December 2013 exit rate production guidance of 2,600 BOEPD.
To better clarify management roles, McAndrew Rudisill was named the Company's Chief Executive Officer while Mike Krzus was named the President. Mr. Rudisill will focus on business strategy, corporate development and finance. Mr. Krzus will manage all oil and gas activities including oversight of the Company's technical and operations team.
First Quarter 2013 Results
For the quarter ended March 31, 2013, oil and natural gas sales totaled $8,216,981, a 10% decrease from the fourth quarter 2012. However, the sales represented a 61% increase from the prior year period. The decrease in quarter-over-quarter revenue is due primarily to production declines on non-operated wells as only 0.27 net wells were added to production during the quarter. As of March 31, 2013, Emerald had 217 gross (9.94 net) wells producing in the Bakken and Three Forks formations, compared to production from 205 gross (9.67 net) wells as of December 31, 2012 and 118 gross (5.03 net) wells as of March 31, 2012. Oil represented 97% of revenue and 93% of production during the first quarter 2013. Emerald expects total production to more than double the first quarter average by year end 2013. The increase will be driven by operated wells coming on line. Contributions from non-operated wells are expected to continue to decline.
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