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Cequence anticipates lower Q1 production, but "behind pipe" production encouraging

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Cequence Energy (TSE:CQE) reported fourth quarter results in line with expectations, with analysts at Dundee Capital Markets saying the junior energy company's behind pipe production mitigates its corporate declines.

For the fourth quarter, cash flow per share of 6 cents met Dundee's and consensus expectations.

The company, which is growing through its Montney and Cretaceous liquids-rich gas in the Simonette area of the Deep Basin, reported 9,721 barrels of oil equivalent per day of production during the period.

It exited the quarter with net debt of $70.8 million.

Cequence also released its year-end 2014 reserves, which increased 5 percent in the proven and probable (2P) category, to 118 million barrels of oil equivalent. It reported all-in finding, development and acquisition (FD&A) costs of $10.26 per boe, on a 2P basis, for a cash recycle ratio of 1.7 times, Dundee said.

Looking ahead, Dundee estimates average production for 2015 of 11,500 boe/d, on a capital spend of $60 million, including 5 gross horizontal wells in the second half of the year. 

Cequence also announced that first quarter production would be around 11,500 boe/d, lower than the previous estimate of 12,500-13,000 boe/d due to onstream delays and TCPL maintenance, Dundee said. 

Current production is 12,500 boe/d, with about 1,200 boe/d of tested production to be tied in in March, and an additional 1,500 boe/d shut-in due to infrastructure capacity.

The company has drilled 13 gross horizontal wells over its winter program, with Dundee pointing out that pad drilling has helped reduce average well costs, which were down 8 percent year-over-year.

Dundee reiterated its buy recommendation on Cequence, and target price of $1.60 per share. Shares fell 8.1 percent to C$1.02 on Friday morning.

Quick facts: Cequence Energy Ltd

Price: 0.175 CAD

TSX:CQE
Market: TSX
Market Cap: $7.31 m
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