Spartan Exploration reported its financial and operating results for the three months ended March 31, 2010.
FIRST QUARTER 2010 HIGHLIGHTS
Subsequent to the end of the first quarter, Spartan drilled and completed two additional Cardium horizontal wells in West Pembina, for a total of three wells now drilled and completed on our Cynthia property. Production tubing has been run into all three wells and the wells were flowing up tubing at a combined rate of 1,275 bbl/d of new Cardium oil and 1.0 million cubic feet per day (mmcf/d) of solution gas when they were shut in for equipping. When on pump, the new wells are expected to be capable of a combined initial production rate of approximately 750 bbl/d and 0.6 mmcf/d of solution gas. See below under "Operations Update".
Boe Presentation -- For the purpose of calculating unit revenues and costs, natural gas is converted to a barrel of oil equivalent ("Boe") using six thousand cubic feet ("Mcf") of natural gas equal to one barrel of oil unless otherwise stated. Barrels of oil equivalent ("Boe") may be misleading, particularly if used in isolation. A Boe conversion ratio of six Mcf to one barrel ("bbl") is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All Boe measurements and conversions in this report are derived by converting natural gas to oil in the ratio of six thousand cubic feet of gas to one barrel of oil. Mboe means 1,000 Boe.
The first quarter of 2010 was a milestone for Spartan, in that it marked our transition from a private company to a public company. On January 18, 2010 Spartan issued 336,907 common shares to acquire all of the issued and outstanding common shares of Aztek Energy Ltd. ("Aztek") on the basis of 0.0805 of a common share of Spartan for each Aztek share. The acquisition was completed by way of a Plan of Arrangement. In addition, on January 18, 2010 Spartan raised $15.6 million at an effective price of $2.11 per Spartan share through the conversion of 93.1 million previously issued subscription receipts of Aztek into 7,496,045 common shares of Spartan under the Plan of Arrangement. Spartan commenced trading on the Toronto Stock Exchange under the symbol "SPE" on January 21, 2010.
The first quarter of 2010 also marked the beginning of the next phase of Spartan's business plan. Management has worked diligently over the previous two years assembling a premium asset base, strategically located in three highly sought after oil resource plays. With this foundation in place, 2010 will see Spartan execute upon an aggressive capital program, the goal of which is to drive per share production, reserves and cash flow growth.
Our 2010 capital program is centered on the development of our Cardium oil resource play in Pembina, where we are budgeting to drill 8 net horizontal Cardium wells. Approximately 85% of Spartan's 2010 capital budget is allocated to the Company's Pembina core area. During the quarter ended March 31, 2010 Spartan drilled its first Cardium horizontal well (100% WI). The well was completed subsequent to the end of the quarter and is expected to be on production by mid June at approximately 300 bbl/d (on pump) (see below under "Operations Update" and Spartan's April 19, 2010 press release for a full description of the completion results for this well). During the first quarter Spartan also drilled and completed a Bakken horizontal well (0.42 net) in our Viewfield core area. The well was put on production in February at approximately 140 bbl/d (59 bbl/d net to Spartan).
Total capital expenditures during the quarter ended March 31, 2010 were $4.17 million. Of this amount, $3.26 million was spent on drilling and completions and the remainder on land acquisition, facilities and capitalized G&A. The balance of our 2010 capital program will be financed with our available cash on hand, cash flow and debt. Spartan had a working capital surplus of approximately $8.1 million as at March 31, 2010.
Average production increased to 387 boe per day (83% oil and liquids) for the quarter ended March 31, 2010. Field netback for the quarter was $41.81 per boe, highlighting the quality of the Company's oil weighted production mix. Average revenue per boe (excluding interest income) was $66.91 per boe. Cash flow for the quarter was $1.26 million, an increase of 213% from cash flow of $403 thousand for the quarter ended March 31, 2009.
Spartan continued to selectively add to its undeveloped land base in the first quarter of 2010. As at March 31, 2010, our total net undeveloped land base exceeded 25,900 hectares (101 sections) of land, including 18,040 hectares in southeast Saskatchewan, 5,225 hectares in southwest Saskatchewan and 2,280 hectares in the Pembina area of central Alberta (excluding farm-in acreage).
Subsequent to the end of the first quarter, Spartan's lender completed its spring review and increased Spartan's borrowing base to $12.0 million, from the previous $10.5 million. The next review is scheduled for May 31, 2011.
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