Northern Blizzard Resources Inc. Announces Fourth Quarter and Year End 2014 Results, 2014 Reserves, Revised 2015 Guidance and Declares Dividend

CALGARY, March 16, 2015 /CNW/ - Northern Blizzard Resources Inc. ("Northern Blizzard" or the "Company") (TSX: NBZ) announces its operating and financial results for the three months and year ended December 31, 2014 and 2014 year-end reserves.

Northern Blizzard's financial statements, management's discussion and analysis ("MD&A") and annual information form ("AIF") for the year ended December 31, 2014 are available on our website at www.northernblizzard.com and on SEDAR at www.sedar.com.

HIGHLIGHTS

PROACTIVE MEASURES

Northern Blizzard has good liquidity, a well-structured balance sheet, supportive shareholders and high quality, low decline assets that fit with our business model.

The current low oil price environment is a challenge for the oil and gas industry. In response, Northern Blizzard has taken the following proactive measures:

These actions are designed to reduce financial outflows and ensure that Northern Blizzard remains strong and sustainable at low oil prices.

Highlights of the revised 2015 guidance include:

See "Revised 2015 Guidance" below.

FINANCIAL AND OPERATING HIGHLIGHTS

Notes:

FINANCIAL REVIEW

Fourth Quarter 2014

Full Year 2014

Risk Management

Northern Blizzard has a comprehensive hedging program in place to protect prices on crude oil volumes and maintain the stability of cash flows.  A summary of Northern Blizzard's current hedge position is provided in the table below.

Notes:

During the fourth quarter of 2014, Northern Blizzard realized $5.7 million in gains on financial derivative contracts.  The gains realized on Canadian dollar WTI contracts were due to lower than hedged oil prices and were partially offset by losses on WCS differential contracts due to narrower than hedged heavy oil differentials. 

For the year ended December 31, 2014, Northern Blizzard realized losses of $31.2 million on financial derivative contracts.  The losses were realized on WTI contracts as oil prices during the year were higher than hedged and on WCS differential contracts as heavy oil differentials were narrower than hedged.

Financial Liquidity

At December 31, 2014, we had $67.3 million drawn on our revolving credit facility, $320.5 million of senior unsecured notes outstanding and a working capital deficiency of $18.3 million. We have over $460 million available on our credit facility.

Northern Blizzard has a stock dividend program that enables shareholders to receive dividends in the form of common shares. The Company's significant shareholders, that hold approximately 67% of the outstanding shares, have indicated that they will continue to receive stock dividends.

Northern Blizzard's capital expenditure forecast for 2015 is approximately $86 million. Northern Blizzard anticipates that funds from operations, together with the revolving credit facility, will be sufficient to finance current operations, cash dividends, planned capital expenditures and working capital requirements.

Northern Blizzard's credit facility has two financial covenants that are calculated quarterly. The calculation for each financial covenant is based on specific definitions and cannot be calculated by referring to Northern Blizzard's consolidated financial statements. At December 31, 2014, the Company was in compliance with the financial covenants.

OPERATIONS REVIEW

Cactus Lake

Capital expenditures at Cactus Lake for 2014 were $75.4 million.  This included the drilling of 87 (87.0 net) wells and the construction and commissioning of a new polymer mixing facility. We ended 2014 with production of 7,600 boe/d at Cactus Lake, a 20% increase from 2013 exit production.

Cactus Lake Bakken Polymer Flood

We continue to see encouraging signs from the Bakken polymer flood with initial production response in localized areas across Phases 1 and 2 that is ahead of the anticipated response originally forecasted for mid-2015.

Phase 1 of the Bakken polymer flood included 76 producers and 37 injectors. In 2014, Northern Blizzard completed the Phase 2 expansion of the Bakken polymer flood that added 109 producers and 48 injectors to the existing operation.  The new polymer facility provides the infrastructure capacity for future polymer flood expansion across the remainder of the field.

In 2015, Northern Blizzard plans to commence the Phase 3 Bakken polymer flood expansion, which is expected to be completed in early 2016.  Phase 3 is expected to add 69 producers and 29 injectors. 

Cactus Lake SAGD Project

In 2015, Northern Blizzard will begin development of the first phase of our SAGD project at Cactus Lake.  Similar to our SAGD project at Plover Lake, the Cactus Lake SAGD project will be in a McLaren channel.  A regulatory application for this project was submitted in December 2014.  Work on the Cactus Lake SAGD project in 2015 will focus primarily on facility design, with initial production expected in 2016.

Plover Lake SAGD Project

Capital spending at Plover Lake SAGD for 2014 was $55.0 million, bringing the total project cost to $88 million.  Northern Blizzard began injecting steam in mid-July, and oil production commenced in August 2014.  We realized design capacity rates of 2,400 bbl/d in November 2014 prior to the failure of a minor component in a steam generator. The equipment has since been repaired and steam injection has recommenced. Northern Blizzard is confident production will return to design capacity rates.

Northern Blizzard's 2015 capital program at Plover Lake SAGD includes bringing an additional well pair on stream.  First oil from this expansion is expected during the second quarter of 2015.

Coleville

During 2014, Northern Blizzard drilled its first light oil wells in the Viking play at Coleville. Capital spending during 2014 on the Viking development totalled $49.4 million, with 43 (40.7 net) wells drilled.  Light oil production from the Viking averaged 425 bbl/d in 2014, with a 2014 exit production rate of 1,400 bbl/d. 

Our 2015 capital program at Coleville includes the drilling of 19 wells, the majority of which are planned for the fourth quarter.

Winter

Capital expenditures at Winter for 2014 were $32.3 million.  This included the drilling of 43 (34.1 net) wells and the commissioning of a new dewatering facility in the fourth quarter.  We exited 2014 with production of 4,100 boe/d at Winter, an 18% increase from 2013 exit rates.

In 2015, Northern Blizzard will continue with its infill drilling program and expansion of water handling facilities at Winter.

Wells Drilled

During 2014, Northern Blizzard drilled 234 wells with a 99% success rate. The following table summarizes the drilling program in the three months and year ended December 31, 2014:

Notes:

RESERVES

Independent Reserves Evaluation

Northern Blizzard's reserves were independently evaluated by Ryder Scott Company-Canada ("Ryder Scott") as at December 31, 2014 in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101").  The reserves evaluation was based on forecast pricing and foreign exchange rates as outlined in the notes to the table below entitled "Forecast Prices at December 31, 2014". Finding and development ("F&D") and finding, development and acquisition ("FD&A") costs are reported inclusive of future development costs ("FDC"). Additional reserves disclosure is included in the Company's AIF for the year ended December 31, 2014.

Highlights of the 2014 reserve report

Summary of Reserves as at December 31, 2014

Notes:

Reserves Reconciliation – Gross Volumes

Notes:

Summary of Net Present Values

Notes:

Future Development Costs

Reserve Life Index

Notes:

Finding & Development Costs

Notes:

Forecast Prices in 2014 Reserves Report

The following table summarizes the forecast prices used by Ryder Scott in preparing Northern Blizzard's estimated reserve volumes and net present values of future net revenues in the 2014 reserves report.  Complete disclosure of forecast prices used can be found in the Company's AIF for the year ended December 31, 2014.

Notes:

DIVIDEND

Northern Blizzard currently pays a monthly dividend of $0.08 per share. Northern Blizzard has a Stock Dividend Program ("SDP") and shareholders holding approximately 68% of the Company's outstanding shares currently participate in the SDP.

The SDP allows shareholders to elect to receive their dividends in the form of common shares in lieu of receiving a cash dividend on the dividend payment date. Participation in the SDP is optional; additional information can be found on Northern Blizzard's website at www.northernblizzard.com or by contacting your financial institution or investment advisor. The availability of the SDP and its terms and conditions are subject to the discretion of Northern Blizzard's Board of Directors.  

Northern Blizzard announces that the Board of Directors has declared a dividend of $0.08 per common share for March 2015. The dividend will be payable on April 15, 2015 to shareholders of record on March 31, 2015. This dividend has been designated as an eligible dividend under the Income Tax Act (Canada).

REVISED 2015 GUIDANCE  

Oil prices have declined since Northern Blizzard issued 2015 guidance in December 2014. As a result, Northern Blizzard is reducing 2015 guidance for capital spending to $86 million, production to 21,600 boe/d and funds from operations to $181 million. Year-end 2015 net debt to funds from operations is 2.1x.

Northern Blizzard operates and controls virtually all of its development program, which provides flexibility regarding capital expenditures.  We have reviewed our 2015 development program and will be focusing capital on projects that make economic sense in the current commodity price environment. We will advance projects requiring longer lead times, such as SAGD and polymer flooding. Further, Northern Blizzard continues to perform a comprehensive review of capital, operating and administrative expenditures with the objective of reducing costs and optimizing efficiencies in 2015.

Revised 2015 guidance and assumptions are as follows:  

The guidance provided in the table above is based on a number of material assumptions and factors set out above and under the heading "Forward-Looking Statements" in this news release and in the MD&A.  This financial outlook is included to provide readers with an understanding of the Company's operations for 2015. Readers are cautioned that the information may not be appropriate for other purposes. The actual results of Northern Blizzard's operations will likely vary from the amounts set forth in the table above, and such variations may be material. See "Forward-Looking Statements" in this news release and in the MD&A for a discussion of the risks that could cause actual results to vary. The foregoing guidance has been approved by management as of the date of this news release.

Conference Call Today
9:00am MT (11:00am ET)

Northern Blizzard will host a conference call today, March 16, 2015, starting at 9:00am MT (11:00am ET), to review the Company's fourth quarter and year-end 2014 results. Participants can access the conference call by dialing (403) 532-5601 or toll-free (US & Canada) 1 (855) 353-9183 and entering the passcode 98589.

A recording of the conference call will be available until March 30, 2015 and can be accessed by dialing 1 (855) 201-2300 and entering the conference number 1173584 and passcode 98589. The replay will be available approximately one hour following completion of the call. The conference call will also be available on Northern Blizzard's website at www.northernblizzard.com.

ADVISORIES

BOE Conversion and Other Reserve Advisories

In this news release, natural gas has been converted to boe based on a conversion rate of six thousand cubic feet of natural gas to one barrel (6 mcf : 1 bbl), which represents an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. While it is useful for comparative measures, it may not accurately reflect individual product values and may be misleading if used in isolation.

The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Reserve replacement ratios for a given period are determined by taking the Company's proved or proved plus probable reserve additions for that period divided by the Company's production for the same period.

Recycle ratio is calculated as finding, development and acquisition costs per barrel divided by either operating netback per barrel or cash flow netback per barrel.

The aggregate of the exploration and development costs incurred in the most recent financial year and the change during the year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for the year.

Forward-Looking Statements

This news release contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes.

In particular, this news release contains forward-looking statements pertaining to the following:

In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.

With respect to forward-looking statements contained in this news release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; and the ability to market oil and natural gas successfully to current and new customers.  Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, substantial capital requirements, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, potential cost overruns, variations in foreign exchange rates, diluent supply shortages, competition for capital,  equipment, new leases, pipeline capacity and skilled personnel, credit risks associated with counterparties, the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate decommissioning costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company's assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. Additionally, the payment of dividends is dependent on the satisfaction of the applicable liquidity and solvency tests imposed by the Business Corporations Act (Alberta). The foregoing risks and other risks are described in more detail in the Company's annual information form for the year ended December 31, 2014. Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, readers are cautioned that the actual results achieved may vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

SOURCE Northern Blizzard Resources Inc.