Company Spotlight: Storm Resources Ltd.

Storm Resources Ltd. (SRX) is a TSX-V listed company that was formed in 2010 when ARC Energy Trust (now ARC Resources Ltd. (ARX)) acquired Storm Exploration Inc. for approximately Cdn$630 million. Undeveloped assets located in the Horn River Basin and Umbach areas in north eastern British Columbia and in the Red Earth area of Alberta, were spun-off into a newly created company, Storm Resources Ltd. Since hitting a low of C$1.20 in June 2012 the company’s share price has risen back to its spin-off level and has seen its share price double over the past 7 months to a 52-week high of C$3.54.

The company has grown production levels from nothing when it was formed, to an average of 3,460 boe/d in Q2 2013, and expects to exit the year on 4,750 boe/d. Production is heavily weighted towards natural gas, with this accounting for over 70% of total production in Q2 2013. However, the main focus of growth has been in the company’s core area in Umbach, northeast British Columbia, where Storm is investing heavily in the Montney liquids-rich natural gas play. The company’s NGL production has been steadily increasing since 2011 and now accounts for more than 50% of the liquids production. Storm’s land position in Umbach totals 112 net sections (140 gross section) and production was 1,800 boe/d in Q2, of which 22% was liquids. Storm plans to drill 6.6 net (7 gross) horizontal wells in Umbach this year, with 1.6 net (gross) already drilled in the first quarter.

Since the acquisition of Bellamont Exploration Ltd. in March 2012, cash flow from operations has increased to Cdn$5 million this quarter. The acquired assets provide shallow-decline production in the Grande Prairie area of northwest Alberta and northeast British Columbia and the company reinvests the cash flow to fund production growth at Umbach, alongside equity financings and asset dispositions. Storm’s capital expenditure guidance for 2013 is $62 million, and approximately $30 million remains to be spent by year end. Reserves have grown year-on-year, with the company holding more than 25 million barrels of oil equivalent (boe) of proved and probable reserves at December 31, 2012, of which 21% were proved developed producing.

Storm also has land holdings in the Horn River Basin shale play in northeast British Columbia totalling 135 sections, with production of 330 boe/d in Q2. This shale gas play is yet to be fully exploited due to low gas prices, however a reversal in natural gas prices and the development of LNG export capacity along Canada’s west coast could lead to increased development in the play.

Source: CanOils

This report was created using the CanOils database which provides clients with 10+ years of historical financial and operating data for all TSX and TSX-V listed oil & gas companies as well as guidance, forecasts and a comprehensive M&A and financings database. CanOils also offers an extensive Oil Sands product.

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