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 February 18, 2015 - 9:41 AM EST
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Nighthawk Energy plc ("Nighthawk" or "the Company") 2015 Plans and Operational Update

LONDON, Feb. 18, 2015 /PRNewswire/ -- Nighthawk, the US focused oil development and production company (AIM: HAWK and OTCQX: NHEGY), announces an update on its 2015 Plans, recent production and drilling and other general corporate updates at its operations in the Denver-Julesburg Basin, Colorado.

Highlights - operational

  • 2014 gross production increased by 96% to 706,319 barrels
  • Recently drilled three new wells in the Snow King field required to retain key acreage. Two have been completed in the Spergen zone and also had excellent shows of oil potential in the Marmaton zone. The third well is in the early stages of completion
  • Plan to drill 11 new wells targeting the Spergen zone (7 for Nighthawk and 4 for Monarch Joint Venture) during third and fourth quarters 2015 at an estimated cost of $19 million
  • Plan to complete 25 behind pipe projects during the year with many of the projects targeted for the first and second quarter at an estimated cost of $3.6 million

Highlights - corporate

  • Identified five Corporate metrics to measure and monitor performance during 2015: Production; 2P Reserves; combined Lease Operating Expenses, Exploration and G&A expenses per barrel; Liquidity; and Return on Capital
  • Identified approximately $2.5 million in margin enhancement opportunities over 2014 levels
  • Business plan positions Nighthawk to accelerate growth in 2016 building liquidity and permitted drilling locations
  • Completed additional 2015 oil swaps bringing our total crude oil hedges for remainder 2015 at over $71 per barrel for volumes equivalent to 60% of 2014 net production. Also recently added costless collar for 2016 at $55 floor/$71 ceiling
  • Successfully completed first RBL borrowing base redetermination in December 2014 maintaining level at $35 million

Production/Drilling/Behind Pipe

Nighthawk's production operations have persevered through a very cold winter with ambient temperatures reaching -25 degrees Fahrenheit for close to a four-week period in late December and January. The team also encountered high winds and drifting snow and was able largely to maintain production and sales. However, the cold weather caused several mechanical failures on the surface equipment and facilities and made for challenging logistics in trying to move the completion rigs between new wells, behind pipe projects and maintenance projects focused on bringing wells back on line.  As a result, Nighthawk temporarily delayed its behind pipe program and focused on meeting its new drill commitments to retain important acreage.

Nighthawk finished its drilling obligations with the drilling contractor on January 21, 2015 after drilling three additional wells that commenced in December. The three wells (Keystone 3-7, Snow King 9-32, and the Mary Jane 8-5) are all located in what has been named the Broken Spear field, which is within the Snow King 3D seismic shoot area.  The rig was then released and stacked due to falling and unstable oil prices.

As a result of the temporary production loss in wells offline, delays in the behind pipe program and normal declines in historic production, Nighthawk averaged 2,160 bopd gross (1,771 bopd net) for the month of December 2014 and for the month of January 2015 the averages were 2,052 bopd gross (1,682 bopd net). The new wells, which should all be on line in February, should restore production levels to the 2,500 bopd gross (2,050 bopd net) range.

Nighthawk has recently reconvened its behind pipe program with the intention of adding additional production from up hole zones identified by shows during drilling and evaluated from open hole logs as hydrocarbon bearing.  These plans should stabilize and possibly grow production for the first half of 2015. The Company anticipates completing 25 behind pipe projects in 2015.  For the second half of the year, Nighthawk plans to return to a growth mode with the drilling of 11 new wells targeting the Spergen zone, being the same zone that we are producing extensively at the Arikaree Creek and Broken Spear fields.

Annual Production Results

For 2014, gross production was 706,319 barrels (net 579,182 barrels). Year on year from 2013 to 2014 production growth was 96%. The challenges ahead are adding new production to outpace the natural decline rates on existing wells, especially in the first half of 2015. In an unstable commodity price environment and with no new wells to be drilled, Nighthawk anticipates meeting this challenge through its behind pipe program. The Company will employ two to three work over rigs in the field and will be entering producing wells and adding zones in the Pennsylvanian formations to co-mingle the production with the Mississippian Spergen.

Recent New Wells

Keystone 3-7 was completed in the Mississippian Spergen at 8,300 feet and put on production in early January at an initial rate of 100 barrels per day. The Mary Jane 8-5 was completed in the Mississippian Spergen also at 8,300 feet on February 4 and is in the early stages of production testing. The initial test on this well is exceeding 300 barrels of oil per day. The Snow King 9-32 was drilled to 8,500 feet through the Mississippian Spergen zone and is currently in the early stages of completion operations.  Excellent shows of oil potential were also seen in the Marmaton zone in both the Keystone 3-7 and Mary Jane 8-5 wells and it is planned to re-enter these wells during March to complete this zone and co-mingle it with the Spergen zone.  These will be the first wells dual completed in both zones in connection with initial production.  If successful, Nighthawk hopes to pursue this approach in more wells where potential oil shows are seen in both zones.  This will be a capital effective way to bring on this new production.

Following the completion of these three wells, Nighthawk will focus on behind pipe opportunities and plans to return to drilling new wells again in the third quarter of 2015, if oil prices justify the deployment of capital.

Seismic

As recently announced, Nighthawk is working with Cascade Petroleum on an extensive 3D shoot to support the Monarch and the El Dorado joint ventures. The Company will be taking the lead on evaluating the results of the Monarch shoot and identifying new drilling locations to be pursued in the future.  It is anticipated that this process will identify a number of new possible locations for drilling wells targeted for the Spergen, Cherokee, Marmaton and possibly the St. Louis zones and it is also expected to identify a number of behind pipe opportunities as well.

Hedging and RBL

Nighthawk continues to monitor oil prices closely and seeks to augment its current hedge positions when market conditions are favourable.  The Company recently completed additional 2015 oil commodity swaps bringing total crude oil hedges for remainder 2015 at over $71 per barrel (WTI-NYMEX) for volumes equivalent to 60% of 2014 net production.  We also recently added a costless collar for 2016 at a $55 floor/$71 ceiling.

In December 2014 Nighthawk successfully completed the first redetermination of its RBL borrowing base, maintaining the level at $35 million.

Corporate Presentation

Nighthawk is presenting today at EnerCom Consulting's The Oil & Services ConferenceTM being held in San Francisco, USA.  A copy of the presentation has been posted on the Company's website at www.nighthawkenergy.com

Future updates

Going forward it is Nighthawk's intention to release production and operations updates on a quarterly basis.  It is anticipated that the next update will be provided in April in respect of the quarter ending March 31, 2015.

Rick McCullough, Chairman of Nighthawk, commented:

"While the US energy markets are experiencing difficult times, we have laid out plans for 2015 that we believe will allow us to continue to grow, albeit at more moderate levels, maintain our liquidity and set up our business for a possible ramping of operations in 2016 and beyond. Like other US operators, we are proposing to cut our capital expenditure by approximately 35% in 2015 compared to 2014. By deferring most of our capital spending until the third and fourth quarters, we expect to be able to take advantage of improved oil prices and we believe that we will be exiting the year with our highest levels of production and cash flows. We have developed metrics that are important for the growth of our business and the entire team is focused on driving results around them. We are very focused on reducing our costs and implementing progressive management processes that will drive continued growth in production, reserves and cash flows.

"The recent formation of the two JVs with Cascade Petroleum is very important to the long term growth potential of Nighthawk Energy, it alleviates some of the competitive issues we have faced over the last couple of years and we are now at liberty to share more of the potential we see in our acreage.  While the near term is challenging, we believe the future remains bright."

Chuck Wilson, Chief Operating Officer of Nighthawk, who has over 33 years of experience in the oil and gas industry and meets the criteria of qualified persons under the AIM guidance note for mining and oil and gas companies, has reviewed and approved the technical information contained in this announcement.

Definitions

Behind pipe - behind pipe opportunities, production or reserves refers to potentially producible zones that have been penetrated by a well bore but are separated from the well bore by casing (pipe) and cement and hence cannot be produced without recompleting the well in such behind pipe zones. Once completed and proved to be productive, behind pipe opportunities can increase production, cash flow and reserves.

Net revenue interest (NRI) - Nighthawk's share of oil, gas, and associated hydrocarbons produced, saved, and marketed, after satisfaction of all royalties, overriding royalties, or other similar burdens on or measured by production of oil, gas, and associated hydrocarbons.  Nighthawk has an average NRI of approximately 82% in gross oil production.

RBL – reserves based loan

Enquiries:




Nighthawk Energy plc


Rick McCullough, Chairman 

+1 303 407 9600

Chuck Wilson, Chief Operating Officer


Richard Swindells, Chief Financial Officer

+44 (0) 20 3582 1350



Westhouse Securities Limited

+44 (0) 20 7601 6100

Alastair Stratton


Robert Finlay




Canaccord Genuity

+44 (0) 20 7523 8000

Neil Elliot


Tim Redfern


Henry Fitzgerald-O'Connor




FTI Consulting

+44 (0) 20 3727 1000

Ben Brewerton

ben.brewerton@fticonsulting.com

Ed Westropp

edward.westropp@fticonsulting.com

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/nighthawk-energy-plc-nighthawk-or-the-company-2015-plans-and-operational-update-300037737.html

SOURCE Nighthawk Energy plc


Source: PR Newswire (February 18, 2015 - 9:41 AM EST)

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