CALGARY, Jan. 5, 2017 /CNW/ - PENN WEST PETROLEUM LTD.
(TSX – PWT; NYSE – PWE) ("Penn West", the "Company",
"we", "us" or "our") is pleased to announce a
2017 total capital budget of $180
million. Our 2017 capital budget is expected to provide
approximately 15% production growth in our key development areas
from the fourth quarter of 2016 to the fourth quarter of 2017 and
to provide ample flexibility to respond to commodity price as we
utilize only 80% of available funds flow from operations.
"Our 2017 capital budget extends the work we completed in the
second half of 2016 as we returned to drilling in our development
areas," stated David French,
President and Chief Executive Officer of Penn West. "In 2017,
we will take a balanced and disciplined approach to our portfolio
as we turn our objective to predictable growth. While living within
our means, we will build on the basic platform of Penn West:
industry leading Cardium waterflooding, cold flow heavy oil
manufacturing in Peace River, and
infrastructure advantaged Alberta Viking development. You
will also see us step into testing new ventures as we explore
commercialization of our material Mannville position. It will be an
exciting year and sets us up nicely for enhanced growth through
2018 with the corporate engine of a repositioned balance sheet and
industry leading base production declines."
Senior Management Changes
Penn West is announcing a leadership transition effective
immediately. David Dyck, Chief
Financial Officer ("CFO"), and Gregg
Gegunde, Senior Vice President of Exploitation, Production
and Delivery, will be departing the Company. Mr. Dyck has
served in his current role for nearly three years, and Mr. Gegunde
has served Penn West for over 18 years in a variety of leadership
roles.
"These changes to Penn West's management reflect a natural
evolution of the Company as we reposition as a smaller, highly
focused growth company," commented Mr. French.
"David and Gregg have been key players of Penn West's leadership
during a time of tremendous adversity. On behalf of the Board
of Directors and Penn West's staff, I wish to offer my sincere
thanks to them for their dedication and corporate stewardship which
has enabled Penn West to chart a new beginning. We wish them
the very best in their future endeavors."
We are pleased to announce that David Hendry, Penn West's Vice
President of Finance for the last two years, will assume the
position of CFO. Mr. Hendry is a Chartered Accountant, and
brings over 25 years of finance experience, most recently as
finance Vice President at Talisman Energy Inc. where he also served
overseas for nine years in the Norway and U.K. North Sea offices. David
started his career working nine years in public accounting, largely
at PricewaterhouseCoopers. "I am very pleased that Dave is assuming
the CFO mantle," said Mr. French. "Dave's commercial skills,
leadership style, and facilitation of our banking relationships
will help guide our turn to a growth agenda. His involvement in the
Company's day-to-day financial affairs over the past two years
means that his transition to CFO should be seamless."
2016 Fourth Quarter Operational Update
In the fourth quarter, we completed our second half drilling
program of 5 Cardium wells, 11 Alberta Viking wells, and 19 Peace
River oil wells. The second half 2016 drilling program contributed
over 3,000 boe per day of production on December 31, 2016.
In the J-Lease area of Pembina, we successfully
fracture-stimulated the 2 wells drilled in late September using a
cemented liner system, and brought the wells on production
November 9th. The wells
encountered higher than expected pressure and have recently been
optimized and are performing at 130 bbls of oil per day per well.
In the Crimson area of Willesden Green, we drilled the second and
third wells of our three well development program in early October
and completed all three wells in November. Flowback results from
the 3 wells averaged 1,100 bbls of oil per day per well. We
expect to bring the three Crimson wells on full production later
this month.
In the Peace River area, we
drilled and rig released the remaining 17 wells of our 19 well
second half program. Through simultaneous drilling and facility
build operations, we were able to reduce per well costs to
$2.4 million or approximately 15%
below budget. The Peace River wells are averaging 300 bbls/d of oil
in the first 30 days of production.
In the Alberta Viking, we brought 9 wells on production in the
fourth quarter. These wells are performing significantly ahead of
expectations with average to date per well production rates of 130
bbl per day of oil and 220 boe per day of total volumes. We expect
to have the last 2 wells of the program on stream in early January.
These well results provide confirmation of our target inventory and
blend seamlessly into our existing processing capacity.
Fourth Quarter and Full Year Production
Fourth quarter volumes averaged approximately 38,500 boe per
day, bringing our full year 2016 production to 55,000 boe per day.
Full year 2016 Exploration and Development ("E&D") capital
expenditures were approximately $80
million, plus $15 million for
decommissioning expenditures.
Fourth quarter volumes in our key development areas averaged
approximately 25,000 boe per day. These volumes now include
additional royalty volume and minor non-core production throughout
Alberta, and will form the basis
of our 2017 growth projections.
Asset Disposition Program Finalization
In the fourth quarter, Penn West received an additional
$20 million in proceeds, for a total
of $95 million in proceeds in the
second half of 2016. Penn West is in definitive agreement
discussions to complete transactions for additional cash
consideration of approximately $80
million. The Company anticipates receipt of the remaining
cash proceeds early in the first quarter. These are subject to all
necessary regulatory approvals and satisfaction of closing
conditions customary in deals of this nature.
Senior Secured Debt
In the fourth quarter of 2016, Penn West reduced the capacity
available under its revolving syndicated bank facility to
$600 million from $1.2 billion. The reduced facility size is more
appropriate for the Company after a meaningful debt reduction
program throughout the year and a plan to fund future capital and
other expenditures through funds flow from operations. This move is
also expected to save the Company approximately $2.5 million annually in reduced standby fees. As
at December 31, the Company had
approximately $330 million drawn on
its bank facility.
2017 Capital Budget Details
Build Cardium Waterflood Platform
Focus on integrated waterflood development in Pembina and
Willesden Green, combining new horizontal producers with
simultaneous injection drilling to support reserve development and
arrest base decline. Plan contains a 55 well program, including 45
vertical injection wells to provide pressure support for 2015 &
2016 horizontal producers, and drill new horizontal producers in
the second half of 2017.
Manufacture Cold Flow in Peace
River
Increase the development pace in the Peace River area with a program of 24
producing wells. The Company is currently carried on 90% of our
capital and operating commitments through our joint venture
partner, and we forecast the carry to finish by the end of
2017. Attractive economics and de-risked acreage lead us to
anticipate development in Peace
River well beyond carry expiration.
Leverage Infrastructure Advantage with Viking
Prospects
Optimize existing processing infrastructure and meaningful land
base with an 11 well program, including 7 operated wells, in the
Esther area. Our 2016 well results were best in class for the
area and confirm our reservoir understanding and high-graded
inventory and make full use of our local 15MMcfd gas processing
capacity.
Pursue New Ventures
Extend our reach by drilling 3 Mannville wells in 2017, our
first operated development into the multi-horizon potential across
the Cardium area acreage, and partnered on an additional 4
Mannville wells. These wells have liquid yields in the 30-40
bbls/mmscf and deliver attractive economics competitive with the
rest of our portfolio.
Overall, our $180MM total capital budget is expected to deliver
full year 2017 production of 27,000 – 29,000 boe per day,
approximately two-thirds of which will be liquids, with 2017 exit
rates 15% over 2016 fourth quarter production volumes in our key
development areas. Details on expected capital spending allocation
are as follows:
Capital
Category
|
# of
Wells
|
Net Capital
($MM)
|
|
|
|
|
|
|
Pembina
Development
|
6 Producers, 24
Vertical Injectors
|
$33
|
Willesden Green
Development
|
4 Producers, 21
Vertical Injectors
|
$34
|
Optimization
|
|
$9
|
Land &
Seismic
|
|
$6
|
2018
Pre-Spend
|
|
$10
|
Other (incl. carry
forward)
|
|
$5
|
Cardium Waterflood
Platform
|
10 Producers, 45
Vertical Injectors
|
$97
|
|
|
|
Peace River
Development
|
24 Producers, 7
Stratigraphic
|
$8
|
Manufacture Cold
Flow
|
24 Producers, 7
Stratigraphic
|
$8
|
|
|
|
Alberta Viking
Development
|
7
Producers
|
$13
|
Non-Operated
Development
|
4
Producers
|
$1
|
Optimization
|
|
$1
|
Optimize Volumes with
Viking
|
11
Producers
|
$15
|
|
|
|
Mannville
Development
|
3
Producers
|
$9
|
Non-Operated
Development
|
4
Producers
|
$6
|
Pursue New
Ventures
|
7
Producers
|
$15
|
|
|
|
Total
Development
|
52 Producers, 45
Vertical Injectors
|
$135
|
|
|
|
Base
Capital
|
|
$25
|
Total E&D
Capital Expenditures
|
|
$160
|
|
|
|
Decommissioning
Expenditures
|
|
$20
|
Updated Hedging Position
Penn West extended our hedge program to a six-quarter outlook
and entered into additional hedges for 2017 and early 2018. We have
now hedged approximately 50% of our forecasted net oil volumes and
30% of our forecasted net gas volumes for 2017.
Positions as of December 31, 2016
are as follows:
|
Q1
2017
|
Q2
2017
|
Q3
2017
|
Q4
2017
|
Q1
2018
|
Q2
2018
|
Q3
2018
|
Q4
2018
|
Oil Volume (bbl/d)
C$ WTI Price
(C$/bbl)
US$ WTI Price
(US$/bbl) (1) |
8,600
$67.67
US$50.40 |
7,800
$67.42
US$50.22 |
7,400
$67.42
US$50.21 |
7,900
$67.70
US$50.42 |
1,000
$71.00
US$52.88 |
1,000
$71.00
US$52.88
|
-
-
-
|
-
-
-
|
Gas Volume
(mmcf/d)
AECO Price (C$/mcf)
|
21
$3.04
|
19
$2.81
|
17
$2.83
|
15
$3.03
|
4
$2.89
|
4
$2.89
|
4
$2.89
|
4
$2.89
|
|
|
(1)
|
US$ price implied
using foreign exchange rates as at December 31, 2016
|
Conference Call Details
A conference call will be held
to discuss our 2017 capital budget at 6:30
a.m. Mountain Time (8:30 a.m. Eastern
Time) on Thursday, January 5,
2017.
To listen to the conference call, please call 647-427-7450 or
1-888-231-8191 (toll-free). A digital recording will be available
for replay at 9:30 a.m. Mountain Time
(11:30 a.m. Eastern Time), and will
remain available until January 19,
2017, 9:59 p.m. Mountain Time
(11:59 p.m. Eastern Time). To listen
to the replay, please dial 416-849-0833 or 1-855-859-2056
(toll-free) and enter Conference ID 44140662, followed by the pound
(#) key.
About Penn West
Penn West is a conventional oil and
natural gas producer in Canada.
Our goal is to be the company that redefines oil and gas excellence
in Western Canada. Based in
Calgary, Penn West operates a
significant portfolio of opportunities with a dominant oil position
in the Cardium, Viking and
Peace River areas of Alberta. Penn West shares are listed on the
Toronto Stock Exchange under the symbol "PWT" and on the New York
Stock Exchange under the symbol "PWE".
Additional Reader Advisories
Oil and Gas Information Advisory
Barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. A boe conversion ratio of six
thousand cubic feet of natural gas to one barrel of crude oil is
based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency conversion
ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading
as an indication of value.
Non-GAAP Measures
This news release includes non-GAAP measures not defined under
International Financial Reporting Standards ("IFRS") such as
funds flow from operations. Such terms are explained under the
heading "Non-GAAP Measures" in the most recently filed Management's
Discussion and Analysis. Non-GAAP measures do not have any
standardized meaning prescribed by GAAP and therefore may not be
comparable to similar measures presented by other issuers.
Forward-Looking Statements
Certain statements contained in this press release constitute
forward-looking statements or information (collectively
"forward-looking statements") within the meaning of the "safe
harbour" provisions of applicable securities legislation.
Forward-looking statements are typically identified by words such
as "anticipate", "continue", "estimate", "expect", "forecast",
"budget", "may", "will", "project", "could", "plan", "intend",
"should", "believe", "outlook", "objective", "aim", "potential",
"target" and similar words suggesting future events or future
performance. 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. In particular, this document contains forward-looking
statements pertaining to, without limitation, the following: our
capital spending plans in 2017, our expected full year production,
our expected production growth rate, our expected approach to
development including the area-specific asset development plans
described herein, the timing of development activities, the
timing of pending and anticipated asset dispositions, and the
anticipated reduction of standby fees associated with the capacity
reduction under the revolving syndicated bank facility.
The forward-looking information is based on certain key
expectations and assumptions made by Penn West, including
expectations and assumptions concerning: prevailing and future
commodity prices and currency exchange rates; applicable royalty
rates and tax laws; interest rates; future well production rates
and reserve volumes; operating costs; the timing of receipt of
regulatory approvals; the performance of existing wells; the
success obtained in drilling new wells; anticipated timing and
results of capital expenditures; the sufficiency of budgeted
capital expenditures in carrying out planned activities; the
timing, location and extent of future drilling operations; the
successful completion of acquisitions and dispositions; the
availability and cost of labour and services; the state of the
economy and the exploration and production business; the
availability and cost of financing; and ability to market oil and
natural gas successfully.
Although Penn West believes that the expectations and
assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because Penn West can give no
assurances that they will prove to be correct. Since
forward-looking information addresses future events and conditions,
by its very nature it involves inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include,
but are not limited to: the risks associated with the oil and gas
industry in general such as operational risks in development,
exploration and production; the possibility that we breach one or
more of the financial covenants pursuant to our amending agreements
with the syndicated banks and the holders of our senior, unsecured
notes; delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
estimates and projections relating to reserves, production, costs
and expenses; health, safety and environmental risks; commodity
price and exchange rate fluctuations; interest rate fluctuations;
marketing and transportation; loss of markets; environmental risks;
competition; incorrect assessment of the value of acquisitions;
failure to complete or realize the anticipated benefits of
acquisitions or dispositions; ability to access sufficient capital
from internal and external sources; failure to obtain required
regulatory and other approvals; reliance on third parties; and
changes in legislation, including but not limited to tax laws,
royalties and environmental regulations. Readers are cautioned that
the foregoing list of factors is not exhaustive.
Additional information on these and other factors that could
affect Penn West, or its operations or financial results, are
included in the Company's most recently filed Management's
Discussion and Analysis (See "Forward-Looking Statements" therein),
Annual Information Form (See "Risk Factors" and "Forward-Looking
Statements" therein) and other reports on file with applicable
securities regulatory authorities and may be accessed through the
SEDAR website (www.sedar.com) or Penn West's website.
The forward-looking statements contained in this document speak
only as of the date of this document. Except as expressly required
by applicable securities laws, we do not undertake any obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
The forward-looking statements contained in this document are
expressly qualified by this cautionary statement.
SOURCE Penn West