7G commences expanded natural gas deliveries to the Chicago market on Alliance Pipeline
Seven Generations Energy Ltd. has expanded its existing senior secured credit facility by $200 million to $850 million. This addition to 7G's credit facility is provided by a syndicate of ten financial institutions in recognition of the success of 7G's capital investment and natural gas marketing programs. The increase takes available funding, not including projected cash flow, to $1.34 billion as of September 30, 2015, on a pro forma basis.
"This 30 percent increase in our facility provides additional liquidity and financial flexibility, and represents an important step towards our goal of reaching cash flow self-sufficiency. We appreciate the strong support from our lenders as we continue to grow with fu ll cycle profitability," said Chris Law, 7G's Chief Financial Officer.
Seven Generations plans to fund its 2016 capital investment program of $1.10 billion to $1.15 billion through a combination of cash on hand, cash flow and prudent draws on its credit facility. The Company's planned capital investment for 2016 is about 15 percent lower than its 2015 capital plan. In 2015, average daily production is on track to grow by about 26,375 barrels of oil equivalent per day (boe/d), year-over-year, to 55,000-60,000 boe/d. The Company expects 2016 production to average 100,000-110,000 boe/d, an increase of approximately 47,500 boe/d, which is up about 80 percent from expected growth in 2015 volumes.
"We are generating more liquids-rich natural gas production growth with less capital investment. Improvements in capital efficiency over the past year are helping to keep our development profitable in the continuing over-supplied market environment," said Marty Proctor, 7G's Chief Operating Officer.
7G liquids-rich natural gas sales flowing today on Alliance Pipeline
Today, Seven Generations begins flowing shipments on its firm transportation capacity on the Alliance Pipeline, with deliveries of 250 million cubic feet per day of liquids-rich natural gas on a long-haul basis to the Chicago market. This is the first of several capacity additions, largely on Alliance, over the next three years that are set to take 7G's firm transportation capacity to more than 600 million cubic feet per day in 2018.
"When we contracted firm transportation service on Alliance Pipeline to Chicago, we had a choice between selling production here at Alberta prices, or shipping into the Chicagomarket. We chose Chicago to avoid the natural gas supply bubble that we believed would materialize, and has materialized, in Alberta, and to access a major consuming market. While Alberta is a global hub for production and related expertise, Chicago has long been a continental hub for commodity sales, transportation and commerce. The North American natural gas market is over-supplied. We see Chicago as being one of the most likely regions to devise and implement market expansion opportunities in the short to midterm," said Merle Spence, 7G's Senior Vice President, Marketing.
Seven Generations Energy
Seven Generations is a low-cost, high-growth Canadian natural gas developer generating long-life value from its liquids-rich Kakwa River Project, located about 100 kilometres south of its operations headquarters in Grande Prairie, Alberta. 7G's corporate headquarters are in Calgary and its shares trade on the TSX under the symbol VII.
This news release contains certain forward-looking information and statements that involves various risks, uncertainties and other factors. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "should", "believe", "plans", and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: anticipated production, production guidance and production growth; available funding and sources of funding; achievement of cash flow self-sufficiency; profitability; planned capital investment; growth plans; anticipated fir m transportation capacity; market expansion opportunities; and the ability to generate long-life value from the Kakwa River Project.
With respect to forward-looking information contained in this news release, assumptions have been made regarding, among other things: future oil, natural gas liquids and natural gas prices; the Company's ability to obtain qualified staff and equipment in a timely and cost efficient manner; the Company's ability to market production of oil, natural gas and natural gas liquids successfully to customers; the Company's future production levels; the applicability of technologies for the Company's reserves; future capital investments by the Company; future funds from operations from production; future sources of funding for the Company's capital program; the Company's future debt levels; geological and engineering estimates in respect of the Company's reserves and resources, the geography of the areas in which the Company is conducting exploration and development activities, and the access, economic and physical limitations to which the Company may be subject from time to time; the impact of competition on the Company; and the Company's ability to obtain financing on acceptable terms.
Actual results could differ materially from those anticipated in the forward-looking information as a result of the risks and risk factors that are set forth in the Company's Annual Information Form, dated March 10, 2015, which is available on SEDAR at www.sedar.com, including, but not limited to: volatility in market prices and demand for oil, natural gas liquids and natural gas and hedging activities related thereto; general economic, business and industry conditions; variance of the Company's actual capital costs, operating costs and economic returns from those anticipated; risks related to the exploration, development and production of oil and natural gas reserves and resource s; negative public perception of oil sands development, oil and natural gas development and transportation, hydraulic fracturing and fossil fuels; actions by governmental authorities, including changes in government regulation, royalties and taxation; the management of the Company's growth; the availability, cost or shortage of rigs, equipment, raw materials, supplies or qualified personnel; the absence or loss of key employees; uncertainty associated with estimates of oil, natural gas liquids and natural gas reserves and resources and the variance of such estimates from actual future production; dependence upon compressors, gathering lines, pipelines and other facilities, certain of which the Company does not control; the ability to satisfy obligations under the Company's firm commitment transportation arrangements; uncertainties related to the Company's identified drilling locations; the concentration of the Company's assets in the Kakwa area; unforeseen title defects; Aboriginal claims; failure to accurately estimate abandonment and reclamation costs; changes in the interpretation and enforcement of applicable laws and regulations; terrorist attacks or armed conflicts; natural disasters; reassessment by taxing authorities of the Company's prior transactions and filings; variations in foreign exchange rates and interest rates; third-party credit risk including risk associated with counterparties in risk management activities related to commodity prices and foreign exchange rates; sufficiency of insurance policies; potential for litigation; variation in future calculations of certain financial measures; sufficiency of internal controls; impact of expansion into new activities on risk exposure; risks related to the senior unsecured notes and other indebtedness, including: potential inability to comply with the covenants in the credit agreement related to the Company's credit facilities and/or the covenants in the indentures in respect of the Company's senior secured notes; seasonality of the Compan y's activities and the Canadian oil and gas industry; and extensive competition in the Company's industry.
The forward-looking information and statements contained in this news release speak only as of the date hereof, and the Company does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.
This news release also includes a reference to "available funding" which is not defined under International Financial Reporting Standards ("IFRS"). "Available funding" is comprised of adjusted working capital and the undrawn credit facility capacity. Adjusted working capital is comprised of current assets less current liabilities and excludes (current) risk management contracts and deferred credits. The reference to "available funding" is intended to provide additional information and should not be considered in isolation or as a substitute for the measures of performance prepared in accordance with IFRS. The reference to "available funding" should be read in conjunction with the Company's financial statements and the accompanying notes. For additional information regarding "available funding" please see "Non-IFRS Financial Measures" in the Company's Management's Discussion and Analysis for the three and nine months ended September 30, 2015 and 2014.
Seven Generations Energy Ltd. is referred to herein as Seven Generations, Seven Generations Energy, 7G and the Company.
|boe||barrels of oil equivalent(1)|
|boe/d||barrels of oil equivalent per day|
|Mcf||thousand cubic feet of gas|
(1) 7G has adopted the standard of 6 Mcf:1 bbl when converting natural gas to oil equivalent. Condensate and other natural gas liquids are converted to oil equivalent at a ratio of 1 bbl:1 bbl. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based roughly on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at 7G's sales point. Given the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilizing a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value.
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