Daylight Energy Ltd. ("Daylight" or the "Corporation") (TSX:DAY) is pleased to
report its financial and operating results for the three and nine months ended
September 30, 2010 ("Q3 2010" and "YTD 2010", respectively) and its internal
reserves estimate effective September 30, 2010. Daylight delivered significant
growth in reserves, production and cash flow as compared to 2009. Daylight
generated exceptional growth in oil and natural gas liquids ("NGLs") production,
reserves and resource-play inventory while further expanding our depth of highly
economic natural gas resource-play inventory. Highlights of our transformation
to a growth oriented dividend paying corporation include:
- 47 million boe increase in total proved plus probable ("2P") reserves to 166
Mboe at September 30, 2010 from 119 Mboe at December 31, 2009 representing 40%
growth in the 9 month period.
- 16 million boe increase in total oil and NGLs 2P reserves to 54 Mboe at
September 30, 2010, from 38 Mboe at December 31, 2009 representing 42% growth in
the 9 month period.
- 79% increase in production volumes to 42,052 boe per day for Q3 2010 from
23,502 boe per day for Q3 2010.
- 162% increase in oil and NGLs production volumes to 17,817 bbls per day for Q3
2010 from 6,794 bbls per day for Q3 2009.
- 35% increase in funds from operations to $67.7 million for Q3 2010 from $50.2
million for Q3 2009.
Full copies of our Q3 2010 financial statements and management discussion and
analysis ("MD&A") have been filed on our website at www.daylightenergy.com and
under our profile on SEDAR at www.sedar.com.
RESERVES UPDATE AND YEAR END 2010 GUIDANCE
During Q3 2010, Daylight engaged Sproule Associates Limited ("Sproule") to
review our key resource play assets and assist the Corporation in preparing an
internal estimate of reserves effective September 30, 2010. Reserves increases
were focused primarily on our key core assets at Pembina, where Daylight is
actively developing a light oil resource play in the Cardium zone, and at our
Elmworth property where Daylight is developing two overlaid resource plays in
the Cadomin and Nikanassin zones.
Highlights of Daylight's September 30, 2010 reserves and YTD 2010 reserve
additions include:
-- 47 million boe increase to reserves since
year-end 2009 resulting in over 166 million boe of 2P reserves at
September 30, 2010 based on internal estimates and the review performed
by Sproule.
-- 84% of 2P reserve additions delivered through organic drilling and
technical revisions with remaining 16% attributed to acquisitions net of
dispositions.
-- $4.63 per boe organic Finding and Development ("F&D") cost for YTD 2010
prior to changes in Future Development Capital ("FDC") on a 2P basis and
$11.79 per boe including changes in FDC.
-- 437% of YTD 2010 production (11.3 MMboe) replaced with net new 2P
reserve additions (49.4 MMboe) prior to net acquisition and disposition
activities in the period and a 519% increase (58.6 MMboe) including net
acquisition
and disposition activities in the period.
-- 10.8 year Reserve Life Index ("RLI") on a 2P basis at September 30, 2010
based on Daylight's Q3 2010 production of 42,052 boe per day.
Our estimated September 30, 2010 proved plus probable reserves include an
estimated 20 million boe of 2P reserves attributable to assets included in our
ongoing non-core asset divestment program that have not been reviewed by
Sproule. Daylight has engaged Sproule to complete a reserve report in accordance
with National Instrument 51-101- Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"), on 100% of Daylight's assets as at December 31, 2010.
Daylight expects year-end 2010 reserves to be consistent with our September 30,
2010 reserves estimate, less the potential impact of our non-core asset
divestment program during Q4 2010.
RESERVES TABLES
Reserves included herein are stated on a company interest basis (before royalty
burdens and including royalty interests) unless noted otherwise. "Company
interest" is not a term defined by NI 51-101 and as such the estimates of
company interest reserves herein may not be comparable to estimates prepared in
accordance with NI 51-101 or to other issuers' estimates of company interest
reserves.
Based on an independent review conducted by Sproule effective September 30, 2010
of Daylight's core assets and a mechanical update effective September 30, 2010
for Daylight's non-core assets, Daylight estimates 2P reserves of 166.3 MMboe.
2P reserve additions from exploration and development activities (including
revisions) are estimated to be 49.4 MMboe. Exploration and development
activities (including revisions) combined with net 2P reserve additions of 9.2
MMboe, related to corporate acquisitions net of property dispositions, result in
total 2P reserve additions of 58.6 MMboe.
Proved developed producing reserves represent 34% of 2P reserves while total
proved reserves account for 56% of 2P reserves. Approximately 33% of Daylight's
2P reserves are crude oil and NGLs while 67% are natural gas, on a boe basis.
TOTAL COMPANY INTEREST
----------------------------------------------------------------------------
Natural Gas Oil
Crude Oil Liquids Natural Gas Equivalent
----------------------------------------------------------------------------
(Mbbl) (Mbbl) (Mmcf) (Mboe)
Proved
Developed Producing 17,312 5,474 203,123 56,640
Developed Non-
Producing 2,049 335 17,505 5,302
Undeveloped 6,018 1,954 142,857 31,782
----------------------------------------------------------------------------
Total Proved 25,380 7,763 363,484 93,723
Probable 15,113 6,325 307,065 72,615
----------------------------------------------------------------------------
Proved plus Probable 40,492 14,088 670,549 166,338
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Core Assets 35,014 13,392 590,476 146,819
Non-Core Assets 5,478 696 80,073 19,519
----------------------------------------------------------------------------
Total 40,492 14,088 670,549 166,338
----------------------------------------------------------------------------
----------------------------------------------------------------------------
NET INTEREST
----------------------------------------------------------------------------
Natural Gas Oil
Crude Oil Liquids Natural Gas Equivalent
----------------------------------------------------------------------------
(Mbbl) (Mbbl) (Mmcf) (Mboe)
Proved
Producing 13,247 3,494 166,796 44,540
Developed Non-
Producing 1,473 236 14,373 4,105
Undeveloped 4,942 1,493 116,887 25,916
----------------------------------------------------------------------------
Total Proved 19,662 5,224 298,056 74,562
Probable 11,122 4,482 256,180 58,300
----------------------------------------------------------------------------
Proved plus Probable 30,784 9,705 554,236 132,862
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Core Assets 26,325 9,163 486,187 116,520
Non-Core Assets 4,459 542 68,049 16,342
----------------------------------------------------------------------------
Total 30,784 9,705 554,236 132,862
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
1. Boe may be misleading, particularly if used in isolation. In accordance
with NI 51-101, a boe conversion ratio for natural gas of 6 Mcf: 1 bbl
has been used which is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
2. Numbers may not add due to rounding.
RESERVES RECONCILIATIONS (COMPANY INTEREST)
----------------------------------------------------------------------------
Natural Gas Oil
Crude Oil Liquids Natural Gas Equivalent
----------------------------------------------------------------------------
(Mbbls) (Mbbls) (Mmcf) (Mboe)
Proved Producing
December 31, 2009 14,191 6,169 210,912 55,512
Discoveries 2,295 239 18,077 5,547
Extensions and
Improved Recovery - - - -
Technical
Revisions and
Economic Factors 1,702 (614) 10,761 2,882
Acquisitions 6,643 680 7,747 8,614
Dispositions (3,880) (5) (4,413) (4,621)
Production (3,639) (995) (39,961) (11,294)
----------------------------------------------------------------------------
September 30, 2010 17,312 5,474 203,123 56,640
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Core Assets 14,312 5,189 172,684 48,282
Non-Core Assets 3,000 285 30,439 8,358
----------------------------------------------------------------------------
Total 17,312 5,474 203,123 56,640
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural Gas Oil
Crude Oil Liquids Natural Gas Equivalent
----------------------------------------------------------------------------
(Mbbls) (Mbbls) (Mmcf) (Mboe)
Total Proved
December 31, 2009 17,863 7,396 310,572 77,021
Discoveries 5,160 1,468 84,869 20,773
Extensions and
Improved Recovery - - - -
Technical
Revisions and
Economic Factors 1,754 (1,010) 358 804
Acquisitions 9,344 908 12,254 12,294
Dispositions (5,102) (5) (4,607) (5,875)
Production (3,639) (995) (39,961) (11,294)
----------------------------------------------------------------------------
September 30, 2010 25,380 7,762 363,485 93,723
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Core Assets 21,679 7,386 307,390 80,296
Non-Core Assets 3,701 376 56,095 13,427
----------------------------------------------------------------------------
Total 25,380 7,762 363,485 93,723
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural Gas Oil
Crude Oil Liquids Natural Gas Equivalent
----------------------------------------------------------------------------
(Mbbls) (Mbbls) (Mmcf) (Mboe)
Total Proved Plus Probable
December 31, 2009 25,991 12,365 484,234 119,062
Discoveries 9,686 3,533 223,826 50,524
Extensions and
Improved Recovery - - - -
Technical
Revisions and
Economic Factors 2,139 (2,121) (7,073) (1,161)
Acquisitions 14,163 1,313 17,673 18,422
Dispositions (7,849) (7) (8,150) (9,214)
Production (3,639) (995) (39,961) (11,294)
----------------------------------------------------------------------------
September 30, 2010 40,492 14,088 670,549 166,338
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Core Assets 35,014 13,392 590,476 146,819
Non-Core Assets 5,478 696 80,073 19,519
----------------------------------------------------------------------------
Total 40,492 14,088 670,549 166,338
----------------------------------------------------------------------------
----------------------------------------------------------------------------
RESERVE LIFE INDEX ("RLI")
Daylight's 2P RLI has improved to 10.8 years at September 30, 2010, while the
proved RLI was 6.1 years based on estimated company reserves and Daylight's Q3
2010 average production of 42,052 boe per day.
PRICE FORECAST
Daylight's crude oil, natural gas and NGLs reserves were estimated using
Sproule's product price forecasts effective September 30, 2010.
Sproule September 30, 2010 Price Forecast
----------------------------------------------------------------------------
Year West Texas
Intermediate Edmonton Light Natural Gas at Foreign
Crude Oil Crude Oil AECO Exchange
----------------------------------------------------------------------------
($US/bbl) ($Cdn/bbl) ($Cdn/mmbtu) ($US/$Cdn)
Q4 2010 75.60 79.12 3.64 0.934
2011 80.57 84.42 4.19 0.934
2012 83.76 87.82 4.82 0.934
2013 86.09 90.29 5.35 0.934
2014 90.22 94.69 6.33 0.934
2015 91.57 96.12 7.30 0.934
2016 92.94 97.57 8.01 0.934
2017 94.34 99.04 8.14 0.934
2018 95.75 100.54 8.28 0.934
2019 97.19 102.06 8.41 0.934
2020 98.65 103.60 8.55 0.934
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Escalate
thereafter at +1.5%/yr +1.5%/yr +1.5%/yr 0%/yr
----------------------------------------------------------------------------
----------------------------------------------------------------------------
FINDING, DEVELOPMENT AND ACQUISITION COSTS ("FD&A") - COMPANY INTEREST RESERVES(1)
NI 51-101 requires that finding, development and acquisition ("FD&A") costs be
calculated including changes in future development costs ("FDC"). Changes in
forecast FDC occur as a result of development activities, acquisition and
disposition activities and capital cost estimates that reflect the best estimate
of what it will cost to bring the proved undeveloped and probable reserves on
production.
During the first nine months of 2010 Daylight spent $228.6 million on its
internal capital program which added 21.6 MMboe of proved and 49.4 MMboe of 2P
reserves, including revisions. Daylight's internal capital program replaced 437%
of its 2010 YTD production on a 2P basis. In the first nine months of 2010,
Daylight drilled 62 gross (37.7 net) wells with a 100% drilling success rate.
Set forth below is certain information for Daylight's FD&A costs for the first
nine months of 2010. The aggregate of the exploration and development costs
incurred in the most recent financial period and the change during that period
in estimated FDC generally will not reflect total finding and development costs
related to reserve additions for that period.
----------------------------------------------------------------------------
Finding, Development & Acquisition Costs Proved plus
Proved Probable
----------------------------------------------------------------------------
FD&A Costs Excluding Future Development
Capital
Exploration and Development Capital
Expenditures - (000) $ 228,592 $ 228,592
Exploration and Development Reserve
Additions Including Revisions - Mboe 21,577 49,363
----------------------------------------------------------------------------
Finding and Development Cost - per boe $ 10.59 $ 4.63
----------------------------------------------------------------------------
Acquisition Capital - (000) $ 545,859 $ 545,859
Acquisition Reserve Additions - Mboe 12,294 18,422
----------------------------------------------------------------------------
Acquisition Cost - per boe $ 44.40 $ 29.63
----------------------------------------------------------------------------
Disposition Proceeds - (000) $ (124,895) $ (124,895)
Disposition Reserves Reductions- Mboe (5,875) (9,214)
----------------------------------------------------------------------------
Disposition Cost - per boe $ 21.26 $ 13.55
----------------------------------------------------------------------------
Total Capital Expenditures including Net
Acquisitions - (000) $ 649,556 $ 649,556
Reserve Additions including Net Acquisitions
- Mboe 27,996 58,571
----------------------------------------------------------------------------
Finding, Development and Acquisition Cost -
per boe $ 23.20 $ 11.09
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) In all cases, the FD&A number is calculated by dividing the identified
capital expenditures by the applicable reserves additions. Boe's may be
misleading, particularly if used in isolation. In accordance with
NI 51-101, a boe conversion ratio for natural gas of 6 mcf: 1 bbl has
been used which is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
----------------------------------------------------------------------------
Finding, Development & Acquisition Costs Proved plus
Including Future Development Capital Proved Probable
----------------------------------------------------------------------------
FD&A Costs Including Future Development
Capital
Exploration and Development Capital
Expenditures - (000) $ 228,592 $ 228,592
Exploration and Development Change in FDC -
(000) 153,406 353,552
----------------------------------------------------------------------------
Exploration and Development Capital
Including change in FDC - (000) $ 381,998 $ 582,144
Exploration and Development Reserve
Additions Including Revisions - Mboe 21,577 49,363
----------------------------------------------------------------------------
Finding and Development Cost - per boe $ 17.70 $ 11.79
----------------------------------------------------------------------------
Acquisition Capital - (000) $ 545,859 $ 545,859
Acquisition FDC - (000) 42,585 88,904
----------------------------------------------------------------------------
Acquisition Capital including FDC - (000) $ 588,444 $ 634,763
Acquisition Reserve Additions - Mboe 12,294 18,422
----------------------------------------------------------------------------
Acquisition Cost - per boe $ 47.86 $ 34.46
----------------------------------------------------------------------------
Disposition Proceeds - (000) $ (124,895) $ (124,895)
Disposition FDC - (000) (14,850) (24,194)
----------------------------------------------------------------------------
Disposition Proceeds including FDC - (000) $ (139,745) $ (149,089)
Disposition Reserve Reductions - Mboe (5,875) (9,214)
----------------------------------------------------------------------------
Disposition Cost - per boe $ 23.79 $ 16.18
----------------------------------------------------------------------------
Total Capital Expenditures including Net
Acquisitions - (000) $ 649,557 $ 649,557
Total Change in FDC - (000) 181,141 418,262
----------------------------------------------------------------------------
Total Capital Including Change in FDC -
(000) $ 830,698 $1,067,819
Reserve Additions Including Net Acquisitions
- Mboe 27,996 58,571
----------------------------------------------------------------------------
Finding, Development and Acquisition Cost
including FDC - per boe $ 29.67 $ 18.23
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) In all cases, the FD&A number is calculated by dividing the identified
capital expenditures by the applicable reserves additions. Boe's may be
misleading, particularly if used in isolation. In accordance with
NI 51-101, a boe conversion ratio for natural gas of 6 mcf: 1 bbl has
been used which is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
----------------------------------------------------------------------------
ESTIMATED FDC (000) Proved plus
Proved Probable
----------------------------------------------------------------------------
December 31, 2009 $ 291,296 $ 482,658
Exploration & development changes in period:
Internal Capital Program 153,406 353,552
Acquisitions 42,585 88,904
Dispositions (14,850) (24,194)
----------------------------------------------------------------------------
September 30, 2010 $ 472,437 $ 900,920
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Daylight's 2P F&D costs for the first nine months of 2010 were $4.63 per boe
excluding the change in FDC and $11.79 including the change in FDC. On a proved
basis, Daylight's F&D costs were $10.59 per boe excluding the change in FDC and
$17.70 including the change in FDC.
Daylight completed one corporate acquisition during the first nine months of
2010 spending $545.9 million to acquire 18.4 MMboe of 2P reserves. Incorporating
net acquisitions during 2010, Daylight's 2P FD&A costs were $11.09 per boe
excluding the change in FDC and $18.23 including the change in FDC. Daylight's
proved FD&A costs were $23.20 per boe excluding the change in FDC and $29.67 per
boe including the change in FDC. The following table sets forth comparable
information for 2008, 2009 and YTD 2010, as well as the average for the periods
presented.
RESERVES REPLACEMENT
Daylight's year to date 2010 FD&A activities replaced 519% of production on a 2P
basis and 248% on a proved basis.
----------------------------------------------------------------------------
YTD 2010
----------------------------------------------------------------------------
Production - Mboe 11,294
----------------------------------------------------------------------------
Proved plus probable reserve additions - Mboe 58,571
Proved plus probable reserve replacement - % 519
----------------------------------------------------------------------------
Proved reserve additions - Mboe 27,996
Proved reserve replacement - % 248
----------------------------------------------------------------------------
Proved producing reserve additions - Mboe 12,422
Proved producing reserve replacement - % 110
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q3 2010 FINANCIAL & OPERATING RESULTS
Operations
-- Recorded Q3 2010 production volumes of 42,052 boe per day, representing
an increase of 79% from Q3 2009. Production volumes were flat as
compared to Q2 2010, with production additions generated by Daylight's
successful YTD 2010 drilling program fully offsetting the impact of our
disposition of approximately 2,300 boe/d to Gear Energy Ltd. ("Gear")
effective July 1, 2010. In spite of weather related delays impacting
completion and tie-in operations during Q3 2010, Daylight maintains its
2010 production guidance of 42,000 boe per day.
-- Capital expenditures of $72.5 million during Q3 2010. Daylight expects
total capital spending of approximately $325 million for 2010 with a
primary focus on horizontal Cardium oil wells in Pembina, multi-zone,
high liquids natural gas in our core West Central area and resource play
natural gas in Elmworth.
-- Daylight's operating costs decreased by 2% in Q3 2010 to $10.09 per boe
as compared to $10.33 per boe in Q2 2010. Daylight's operating costs are
expected to remain between $10.00 and $10.50 per boe for the remainder
of 2010 as Daylight continues to add production in our lower cost key
resource play areas.
Commodity Prices
-- Average price received for natural gas decreased to $3.74 per mcf from
$3.94 per mcf for Q2 2010, a decrease of 5%.
-- Average price received for light oil increased slightly to $72.35 per
bbl for Q3 2010 from $72.12 in Q2 2010.
-- Average price received for heavy oil increased to $60.57 per bbl for Q3
2010, an increase of 6% from Q2 2010.
-- Average price received for NGLs was $52.50 per bbl for Q3 2010, a
decrease of 6% from Q2 2010.
Financials
-- Revenue for Q3 2010 increased to $161.3 million from $160.3 million in
Q2 2010.
-- Payout ratio for Q3 2010 improved to 45% compared to 48% in Q2 2010.
-- Operating netback of $21.81 per boe for Q3 2010 compared to $21.38 per
boe for Q2 2010.
-- Funds from operations decreased to $67.7 million during Q3 2010 from
$71.3 million in Q2 2010.
-- Royalty rates for Q3 2010 remained flat at 27.5% of revenue compared to
27.4% of revenue in Q2 2010.
-- Daylight declared a $0.05 per share per month dividend for each of
October, November and December 2010.
Balance Sheet
-- Maintained our financial flexibility with bank debt of $328 million
drawn against Daylight's $650 million credit facility at September 30,
2010.
THIRD QUARTER FINANCIAL AND OPERATIONAL RESULTS
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Financial(CDN
$ thousands,
except
share, per
share and
operational Q3 Q2 Q3 YTD YTD
data) 2010 2010 2009 2010 2009
----------------------------------------------------------------------------
Petroleum and
natural gas
revenues $ 161,279 $ 160,267 $ 66,100 $ 492,480 $ 204,642
----------------------------------------------------------------------------
Operating
netback (1) 84,373 82,232 60,252 247,211 174,951
----------------------------------------------------------------------------
Funds from
operations(1) 67,654 71,309 50,245 205,402 143,599
Per share
- Basic 0.33 0.37 0.41 1.09 1.34
- Diluted 0.31 0.35 0.39 1.02 1.25
----------------------------------------------------------------------------
Cash
dividends
declared 30,490 34,298 29,385 106,608 77,296
Per share 0.15 0.18 0.24 0.57 0.72
Payout ratio(1) 45% 48% 58% 52% 54%
----------------------------------------------------------------------------
Capital
expenditures 72,540 61,799 10,613 228,592 85,829
----------------------------------------------------------------------------
Shares
outstanding
(000s)
Basic 203,267 203,258 122,437 203,267 122,437
Diluted 235,050 235,063 138,499 235,050 138,499
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operational
----------------------------------------------------------------------------
Average daily
production
----------------------------------------------------------------------------
Natural gas
(mcf/d) 145,409 148,966 100,250 146,379 96,062
----------------------------------------------------------------------------
Light oil
(bbls/d) 13,572 12,173 3,421 11,936 3,649
Heavy oil
(bbls/d) 505 1,722 2,096 1,393 2,118
NGLs
(bbls/d) 3,740 3,551 1,277 3,644 1,345
----------------------------------------------------------------------------
Oil & NGLs
(bbls/d) 17,817 17,446 6,794 16,973 7,112
----------------------------------------------------------------------------
Combined
(boe/d) 42,052 42,273 23,502 41,370 23,122
----------------------------------------------------------------------------
Average
prices
received
----------------------------------------------------------------------------
Natural gas
($/mcf) $ 3.74 $ 3.94 $ 3.05 $ 4.31 $ 3.90
----------------------------------------------------------------------------
Light oil
($/bbl) 72.35 72.12 67.58 73.72 57.65
Heavy oil
($/bbl) 60.57 56.92 59.39 61.70 51.10
NGLs
($/bbl) 52.50 55.89 45.08 56.77 42.06
----------------------------------------------------------------------------
Oil & NGLs
($/bbl) $ 67.85 $ 67.32 $ 60.82 $ 69.09 $ 52.75
----------------------------------------------------------------------------
Combined
($/boe) $ 41.69 $ 41.66 $ 30.58 $ 43.61 $ 32.42
----------------------------------------------------------------------------
$ per boe (2)
Petroleum and
natural gas
revenues $ 41.69 $ 41.66 $ 30.58 $ 43.61 $ 32.42
Royalties (11.48) (11.41) (4.87) (12.08) (5.68)
Realized
gain on
derivative
contracts 2.41 2.30 14.93 1.61 13.88
Operating
expenses (10.09) (10.33) (11.65) (10.42) (11.80)
Transportation
expenses (0.72) (0.85) (1.12) (0.82) (1.10)
----------------------------------------------------------------------------
Operating
netback $ 21.81 $ 21.38 $ 27.87 $ 21.89 $ 27.72
Other
income 0.04 2.04 - 0.71 -
G&A - cash
charge (2.07) (2.25) (2.28) (2.06) (2.68)
Cash
financial
charges (2.29) (2.64) (2.35) (2.36) (2.28)
----------------------------------------------------------------------------
Funds from
operations
(1) $ 17.49 $ 18.53 $ 23.24 $ 18.19 $ 22.76
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
(1) See "Non-GAAP Measures" at the end of this press release.
(2) Per boe amounts may not add exactly due to rounding.
The Corporation is the entity resulting from the conversion of Daylight
Resources Trust from an income trust to a corporate structure effective May 7,
2010. Reference to "common shares" and "shares", "shareholder" and "dividends"
should be read as reference to "trust units" and "units", "unitholders" and
"distributions", respectively, for periods prior to May 7, 2010.
OUTLOOK
Despite unusually wet weather conditions that were experienced in Pembina and
portions of both our West Central and Elmworth properties delaying the
completion and tie-in of many of our Q3 and early Q4 2010 wells, we are on track
to deliver our 2010 annual production guidance of approximately 42,000 boe per
day. Daylight's annual production guidance is prior to the impact of our
non-core asset disposition program that is currently underway. Daylight expects
to provide an update to the market regarding our non-core disposition program in
late November 2010.
In addition to the results of our Pembina Cardium light oil drilling disclosed
in our October 18, 2010 press release, the Corporation initiated drilling
operations on 11 gross (5.0 net) additional wells, including wells in a variety
of high profile plays. Targeted zones, in addition to the Cardium light oil
zone, include the Bluesky and Wilrich in West Central and the Cadomin in
Elmworth. During Q4 2010 Daylight expects to continue our delineation and
development of the Nikanassin zone in Elmworth, the Belly River light oil
resource play in Pembina and our emerging Montney liquids rich natural gas play
in Elmworth. Daylight will also continue our aggressive light oil development
activity in Pembina with at least 10 additional horizontal multi-frac Cardium
wells expected to be drilled during Q4 2010. Our planned Q4 2010 activities
continue to highlight the depth and quality of Daylight's inventory of resource
play opportunities in light oil, NGLs and natural gas.
Daylight has also called all of our Series B, 8.5% Convertible Unsecured
Subordinated Debentures (the "Series B Debentures") for redemption and
cancellation on November 23, 2010 (the "Redemption Date"). Daylight will satisfy
the redemption by issuing and delivering Daylight common shares to holders of
the Series B Debentures on the Redemption Date. All Series B Debentures will be
converted into Daylight common shares under their existing conversion terms or
redeemed for Daylight common shares by the Redemption Date. There was an
aggregate of $53.2 million principal amount of Series B Debentures outstanding
at September 30, 2010 and Daylight expects that the full conversion and/or
redemption of the Series B Debentures will result in the issuance of
approximately 6.2 million Daylight common shares. For further details on the
redemption of our Series B Debentures please refer to Daylight's October 18,
2010 press release. Holders of the Series B Debentures should consult their
investment or other professional advisors with respect to the redemption of the
Series B Debentures.
Daylight is a growing intermediate oil and natural gas producing company with a
high quality suite of resource play assets in Western Canada. Our highly focused
team utilizes our technical expertise in exploitation, development, and
acquisitions to create long-term value for our shareholders. Our team has
developed a multi-year inventory of repeatable, low risk exploitation resource
play projects with substantial potential reserve additions on assets we
currently own and control in the premier Pembina Cardium light oil fairway and
in the premier Deep Basin area of Alberta and British Columbia.
Daylight has approximately 205 million common shares outstanding which trade on
the TSX under the symbol DAY. Daylight Series B, C, and D convertible debentures
trade on the TSX under the symbols DAY.DB.B, DAY.DB.C, and DAY.DB.D,
respectively.
Consolidated Financial Statements and MD&A
Q3 2010 consolidated financial statements and notes to the consolidated
financial statements, along with the MD&A for Daylight, have been filed on our
website at www.daylightenergy.com and under our profile on SEDAR
(www.sedar.com).
For further information regarding this news release or to receive a copy of our
Q3 2010 interim report, please contact our investor relations department at Toll
Free 1-877-266-6901 or email ir@daylightenergy.com.
An updated corporate presentation is available on Daylight's website at
www.daylightenergy.com.
Information Regarding Disclosure in This News Release
The term "boe" is utilized by Daylight in relation to reserves or production to
combine the volumetric measures of natural gas, light oil, heavy oil, and NGLs
to a common "barrel of oil equivalent" term of measurement. Natural gas volumes
have been converted at the ratio of 6,000 cubic feet of natural gas to one boe
and this conversion ratio is based upon an energy equivalent conversion method
primarily applicable at the burner tip and does not represent value equivalence
at the wellhead. Light oil, heavy oil, and NGLs have been converted at the ratio
of one barrel of these liquids to one boe. Use of the terms boe and amounts per
boe without reference to the underlying commodity may be misleading.
"Company interest" is not a term defined by NI 51-101 and as such the estimates
of company interest reserves herein may not be comparable to estimates prepared
in accordance with NI 51-101 or to other issuers' estimates of company interest
reserves. "Net" or "net interest" as used herein means: (i) in relation to our
interest in production or reserves, our working interest (operating or
non-operating) share after deduction of royalty obligations, plus our royalty
interests in such production or reserves; (ii) in relation to our interest in
wells, the number of wells obtained by aggregating our working interest in each
of our gross wells; and (iii) in relation to our interest in a property, the
total area in which we have an interest multiplied by the working interest owned
by us.
Production volumes and revenues are reported on a gross basis, before the
deduction of Crown and other royalties, unless otherwise stated.
Advisory Regarding Forward-Looking Information and Statements
This news release contains statements that constitute forward-looking statements
and forward-looking information (collectively "forward-looking statements")
within the meaning of applicable securities laws. The use of any of the words
"expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may",
"will", "project", "should", "believe", "plan", "forecast", "intend" and similar
expressions are intended to identify forward-looking statements.
More particularly and without limitation, this news release contains
forward-looking statements concerning anticipated drilling and completion
operations for the balance of 2010, including the number of wells to be drilled
in the Pembina area during Q4 2010, anticipated production volumes for the
balance of 2010 and anticipated exit 2010 production volumes, including the
production mix thereof as between oil, natural gas, and NGLs, expected operating
costs on a per boe basis for the balance of 2010, payment of dividends on the
Corporation's common shares during Q4 2010, expected total capital expenditures
for the balance of 2010 and the focus thereof, expected delineation and
development of the Nikanassin zone in Elmworth, the Belly River light oil
resource play in Pembina and Daylight's emerging Montney liquids rich natural
gas play at Elmworth during Q4 2010, anticipated 2010 year-end reserves and the
consistency thereof with the reserves effective September 30, 2010 as estimated
in this press release, and the potential disposition of certain assets and
associated reserves.
The forward-looking statements and information in this press release are based
on certain key expectations and assumptions made by Daylight, including
expectations and assumptions concerning: prevailing and future commodity prices
and exchange rates; applicable royalty rates and tax laws; future well
production rates; the performance of existing wells; application of existing
technologies and future advancements in technology to Daylight's operations and
drilling activities; the success obtained in drilling new wells; the inventory
of new drilling locations; the sufficiency of budgeted capital expenditures in
carrying out planned activities; the availability and cost of labour and
services, including but not limited to completion equipment and services;
adequate weather and environmental conditions for drilling and completion
activities, including transportation of associated equipment; the receipt, in a
timely manner, of regulatory and third party approvals, the assumptions and
limitations inherent in estimates of reserves and Daylight's estimated reserves
effective September 30, 2010, and the results of the 2010 year-end reserve
report prepared by Daylight's independent reserve evaluators, Sproule. This
press release also includes expectations and assumptions concerning Daylight's
previously announced intention to dispose of certain non-core assets, including
our ability to negotiate acceptable terms of sale, market demand for the assets
forming the disposition packages, and the receipt of required regulatory and
other third party approvals for such dispositions.
Although Daylight believes that the expectations and assumptions on which such
forward-looking statements are based are reasonable, undue reliance should not
be placed on the forward-looking statements because Daylight can give no
assurance that they will prove to be correct.
Since forward-looking statements and information address future events and
conditions, by their very nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors and risks. These include, but are not limited to the risks
associated with the oil and gas industry in general such as: operational risks
in development, exploration and production; delays or changes in plans with
respect to exploration or development projects or capital expenditures; the
uncertainty of reserve and resource (including original oil in place) estimates;
the uncertainty of estimates and projections relating to production, costs and
expenses; health, safety and environmental risks; risks associated with weather
and the impact on drilling and completion activities and the transportation of
associated equipment; commodity price and exchange rate fluctuations; marketing
and transportation of petroleum and natural gas and loss of markets;
environmental risks; competition; risks associated with utilizing existing
technologies and future technological advancements in Daylight's operations and
drilling activities; failure to realize the anticipated benefits of
acquisitions; risks regarding the integration of acquired entities and assets;
incorrect assessment of the values of acquisitions; Daylight's ability to
negotiate acceptable terms for the non-core assets being marketed; Daylight's
ability to obtain all third party and regulatory approvals necessary to dispose
of such assets; ability to access sufficient capital from internal and external
sources; failure to obtain required regulatory and other third party approvals;
and changes in legislation, including but not limited to tax laws, royalty
rates, and environmental regulations.
Readers are cautioned that the foregoing list of risks and assumptions is not
exhaustive. Additional information on these and other factors that could affect
the operations or financial results of Daylight are included in reports on file
with applicable securities regulatory authorities, including but not limited to
the Daylight Resources Trust's annual information form for the year ended
December 31, 2009, and the Daylight Resources Trust's Notice of Annual and
Special Meeting and Information Circular and Proxy Statement dated April 7,
2010, each of which may be accessed on Daylight's SEDAR profile at
www.sedar.com. The forward-looking statements contained in this news release are
made as of the date hereof and Daylight undertakes no obligation to update
publicly or revise any forward-looking statements whether as a result of new
information, future events or otherwise, unless so required by applicable
securities laws.
Non-GAAP Measures
Throughout this news release we use the terms "funds from operations", "funds
from operations per share", "payout ratio", and "operating netback". "Funds from
operations" and "funds from operations per share" are terms utilized by Daylight
to evaluate operating performance and assess leverage. A reconciliation of cash
provided by operating activities to funds from operations is set forth in the Q3
2010 MD&A under the heading "Non-GAAP Measures". "Payout ratio" is a term
utilized to evaluate financial flexibility and the capacity to fund dividends.
Payout ratio is defined on a percentage basis as dividends declared divided by
funds from operations. "Operating netback" is a term utilized by Daylight to
evaluate the operating performance of petroleum and natural gas assets. The term
operating netback is defined as petroleum and natural gas revenues less
royalties, operating, and transportation expenses plus the realized gain on
derivative contracts.
Such terms do not have a standardized meaning or definition as prescribed by
Canadian generally accepted accounting principles ("GAAP") and therefore may not
be comparable with calculations of similar measures by other entities. Refer to
the "Non-GAAP Measures" section of the MD&A from Q3 2010 for further
information.
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