Delphi Energy Corp. (“Delphi” or the
“Company”) is pleased to provide an operations
update on the winter program at its Bigstone Montney
property. The success of the program has increased current
corporate production to average over 10,000 barrels of oil
equivalent per day (“boe/d”) for the past two weeks. The
Company reconfirms its production guidance to exit 2017 between
11,000 and 12,000 boe/d.
Delphi is also pleased to announce that it will
be attending and participate at the CAPP Scotiabank Investment
Symposium in Toronto, Ontario on April 11 and 12, 2017.
OPERATIONS HIGHLIGHTS
- Corporate production has averaged over 10,000 boe/d during the
past two weeks based on field estimates with field condensate and
natural gas liquids contributing 41 percent of the total;
- Six (3.8 net) wells from the winter program, of which three
(1.8 net) wells were from the 2016 program, have been brought
on production since late December 2016;
- Delphi has two rigs currently drilling wells number five and
six of the 2017 program, with plans to remain drilling through
spring break-up. An additional well from each of the current
drilling pads will be drilled totaling five (3.2 net) wells ready
for completion after spring break up.
OPERATIONS UPDATE
Delphi’s planned drilling program in 2017 will
more than double the number of wells drilled under the 2016 program
with the addition of a second drilling rig that commenced activity
in December 2016. The 2017 development plan contemplates the
drilling of 13 gross (8.4 net) Bigstone Montney horizontal wells
and the completion, tie-in and well site equipping of 14 gross (9.0
net) wells. Recent success of the Company’s winter drilling program
has reconfirmed confidence in the 2017 development plan to grow
year-end exit production for 2017 to between 11,000 and 12,000
boe/d, an anticipated growth increase of approximately 60 percent
over 2016 exit production, while increasing leverage to condensate
materially.
Results from the Company’s Montney drilling and
completion operations are meeting or exceeding expectations.
The combination of new development moving further west on the
Company’s Bigstone Montney property, along with Delphi’s third
generation frac design, has shown significant improvements to field
condensate to natural gas yields as demonstrated by the current
corporate production weighting increase to 41 percent liquids.
The Company is pleased to report the first three
(2.0 net) wells of the 2017 program have recently been brought on
production. Initial results of the 15-08-60-223W5 (“15-08”),
15-11-60-23W5 and 13-15-60-23W5 wells have all met or exceeded
Delphi’s expectations. Over the first 20 days on production 15-08
(65 percent working interest), averaged a total of 1,326 boe/d with
a field condensate to sales gas ratio of 238 barrels per million
cubic feet (“bbl/mmcf”). Total liquid production, including
estimated natural gas liquids of 46 bbl/mmcf sales, accounted for
63 percent of the total sales production rate. Delphi will
report initial production results of the other two wells when the
data becomes available. Delphi’s fourth well of the 2017 program at
15-9-60-23W5 (61.8 percent working interest) was drilled to a total
depth of 5,912 metres with a horizontal lateral in the Montney of
2,864 metres. A 40 stage completion liner was installed with
fracturing operations scheduled to commence after spring
break-up.
In early March, the Company commenced drilling
its fifth and sixth wells of the 2017 capital program at
13-17-59-22W5 (65 percent working interest) and 13-9-60-23W5 (61.8
percent working interest). An additional well will be drilled
from each of these pad sites, resulting in Delphi having a total of
five (3.2 net) additional Montney wells ready for completion
operations after spring break-up.
Production for the first quarter of 2017 is
estimated from field data to be slightly ahead of internal
forecasts at 8,000 boe/d, representing a 13 percent increase from
the fourth quarter of 2016, while field condensate production is
estimated to have increased 46 percent to approximately 1,950
barrels per day (“bbls/d”), well ahead of expectations. Natural gas
production for the first quarter of 2017 is estimated to have
marginally increased by four percent, or approximately 1.2 million
cubic feet per day (“mmcf/d”). With the most recent three
wells being brought on-stream, production over the past two weeks
has exceeded 10,000 boe/d with field condensate production
estimated to be approximately 2,650 bbls/d, a 100 percent increase
from the fourth quarter of 2016. Total condensate and natural gas
liquids currently represent approximately 41 percent of the total
current production volumes up from 35 percent in 2016 and 30
percent in 2015. Production in the second quarter of 2017 will be
impacted by the planned maintenance turnaround at the SemCAMS
operated Kaybob South #3 gas processing plant but mitigation plans
have been put in place to re-direct some natural gas production to
the SemCAMS operated Kaybob Amalgamated gas processing plant during
the outage. As a result, the Company continues to forecast average
production volumes to be relatively flat at approximately 8,000
boe/d over the first six months of 2017, with significant second
half growth forecast given the current production capability, the
five wells expected to be brought on production during the third
quarter of 2017, and the continued drilling program in the second
half of the year.
RISK MANAGEMENT
Delphi has continued to add to its strong risk
management position. The Company believes that reducing commodity
price volatility through an active and strategic hedging program
both reduces downside cash flow risk while protecting the economics
of new capital being deployed. Protecting simple payouts for new
wells of approximately one year through a strategic hedging program
ensures the ability to effectively reinvest post-payout free cash
flow. The Company now has approximately 22 mmcf/d, or 65% of
its remainder of 2017 forecast natural gas production hedged at an
average price of CDN$4.20 per mmbtu and approximately 900 bbls/d of
condensate hedged at an average WTI price of CDN$66.67 per barrel).
Delphi has mitigated the persistent widening of the AECO and
Station 2 basis differentials by contracting most of its gas into
the Chicago market where pricing has materially outperformed local
western Canada pricing, even with the incremental transportation
costs.
Natural Gas |
|
Q2 – Q4/17 |
|
2018 |
|
2019 |
Percent
Hedged * |
|
|
65 |
% |
|
|
46 |
% |
|
|
21 |
% |
Hedge
Price (CDN $/mmbtu) |
|
$ |
4.20 |
|
|
$ |
3.88 |
|
|
$ |
3.89 |
|
Crude Oil |
|
Q2 – Q4/17 |
|
2018 |
|
2019 |
Percent
Hedged * |
|
|
42 |
% |
|
|
14 |
% |
|
|
14 |
% |
Hedge
Price (WTI CDN $/bbl) |
|
$ |
66.67 |
|
|
$ |
70.00 |
|
|
$ |
70.00 |
|
* Based on average 2017 production of 33.5
mmcf/d of natural gas and 2,150 bbls/d of field condensate.
OUTLOOK
The Company continues to forecast absolute and
per share growth across all measures during 2017, while maintaining
balance sheet strength. 2017 guidance is highlighted by a
significant increase in drilling activity funded in part by the
$20.0 million carry capital costs relating to the transaction
previously announced with its industry partner.
Delphi has secured the required firm service
transportation for 100 percent of forecasted 2017 natural gas
production growth. The contracted Alliance full path service to
Chicago with its incremental priority interruptible service handles
approximately 95 percent of the Company’s natural gas sales, and
together with the existing and incremental 2018 contracted firm
TCPL service, will provide the Company with sufficient firm service
to handle accelerated growth plans beyond 2017. Delphi’s Bigstone
Montney field compression and dehydration facilities are also
sufficient for the forecasted growth in 2017.
To handle the Company’s growing production
volumes beyond 2017, Delphi is working to expand its existing
Montney field dehydration and compression capacity at East and
South Bigstone. Through this effort, Delphi has secured a 20 mmcf/d
amine processing equipment package to sweeten a portion of the
Montney production for processing at the under-utilized Bigstone
sweet gas plant located at 14-28-59-22W5, where the Company owns a
25 percent working interest.
Delphi is now well positioned to achieve
increased production, cash flow and reserve growth over the near
and long term to the benefit of all our stakeholders.
This news release does not constitute an offer
to sell or a solicitation of any offer to buy the securities in the
United States. The securities offered have not been and will not be
registered under the U.S. Securities Act of 1933, as amended and
will not be offered or sold in the United States absent an
exemption from the registration requirements thereof.
About Delphi Energy Corp.
Delphi Energy Corp. is an industry-leading
producer of liquids-rich natural gas. The Company has
achieved top decile results through the development of our high
quality Montney property, uniquely positioned in the Deep Basin of
Bigstone, in northwest Alberta. Delphi continues to outperform key
industry players by improving operational efficiencies and growing
our dominant Bigstone land position in this world-class play.
Delphi is headquartered in Calgary, Alberta and trades on the
Toronto Stock Exchange under the symbol DEE.
FOR FURTHER INFORMATION PLEASE
CONTACT:
DELPHI ENERGY CORP.300, 500 – 4
Avenue S.W.Calgary, AlbertaT2P 2V6Telephone: (403)
265-6171 Facsimile: (403) 265-6207Email:
info@delphienergy.ca Website:
www.delphienergy.ca
DAVID J. REIDPresident &
CEO
Forward-Looking
Statements. This news release contains
forward-looking statements and forward-looking information within
the meaning of applicable Canadian securities laws. These
statements relate to future events or the Company’s future
performance and are based upon the Company’s internal assumptions
and expectations. All statements other than statements of
present or historical fact are forward-looking statements.
Forward-looking statements are often, but not always, identified by
the use of any of the words “expect”, “anticipate”, “continue”,
“estimate”, “may”, “will”, “should”, “believe”, "intends”,
“forecast”, “plans”, “guidance”, “budget” and similar
expressions.
More particularly and without limitation, this
release contains forward-looking statements and information
relating to petroleum and natural gas production estimates and
weighting, projected crude oil and natural gas prices, future
exchange rates, expectations as to royalty rates, expectations as
to transportation and operating costs, expectations as to general
and administrative costs and interest expense, expectations as to
capital expenditures and net debt, planned capital spending, future
liquidity and Delphi’s ability to fund ongoing capital requirements
through operating cash flows and its credit facilities, supply and
demand fundamentals for oil and gas commodities, timing and success
of development and exploitation activities, cash availability for
the financing of capital expenditures, access to third-party
infrastructure, treatment under governmental regulatory regimes and
tax laws and future environmental regulations.
Furthermore, statements relating to “reserves”
are deemed to be forward-looking statements as they involve the
implied assessment, based on certain estimates and assumptions that
the reserves described can be profitable in the future.
The forward-looking statements and information
contained in this release are based on certain key expectations and
assumptions made by Delphi. The following are certain
material assumptions on which the forward-looking statements and
information contained in this release are based: the stability of
the global and national economic environment, the stability of and
commercial acceptability of tax, royalty and regulatory regimes
applicable to Delphi, exploitation and development activities being
consistent with management’s expectations, production levels of
Delphi being consistent with management’s expectations, the absence
of significant project delays, the stability of oil and gas prices,
the absence of significant fluctuations in foreign exchange rates
and interest rates, the stability of costs of oil and gas
development and production in Western Canada, including operating
costs, the timing and size of development plans and capital
expenditures, availability of third party infrastructure for
transportation, processing or marketing of oil and natural gas
volumes, prices and availability of oilfield services and equipment
being consistent with management’s expectations, the availability
of, and competition for, among other things, pipeline capacity,
skilled personnel and drilling and related services and equipment,
results of development and exploitation activities that are
consistent with management’s expectations, weather affecting
Delphi’s ability to develop and produce as expected, contracted
parties providing goods and services on the agreed timeframes,
Delphi’s ability to manage environmental risks and hazards and the
cost of complying with environmental regulations, the accuracy of
operating cost estimates, the accurate estimation of oil and gas
reserves, future exploitation, development and production results
and Delphi’s ability to market oil and natural gas successfully to
current and new customers. Additionally, estimates as to expected
average annual production rates assume that no unexpected outages
occur in the infrastructure that the Company relies on to produce
its wells, that existing wells continue to meet production
expectations and any future wells scheduled to come on in the
coming year meet timing and production expectations.
Commodity prices used in the determination of
forecast revenues are based upon general economic conditions,
commodity supply and demand forecasts and publicly available price
forecasts. The Company continually monitors its forecast
assumptions to ensure the stakeholders are informed of material
variances from previously communicated expectations.
Financial outlook information contained in this
release about prospective results of operations, financial position
or cash flows is based on assumptions about future events,
including economic conditions and proposed courses of action, based
on management’s assessment of the relevant information currently
available. Readers are cautioned that such financial outlook
information contained in this release should not be used for
purposes other than for which it is disclosed.
Although the Company believes that the
expectations reflected in such forward-looking statements and
information are reasonable, it can give no assurance that such
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon. Since forward-looking
statements and information address future events and conditions, by
their very nature they involve inherent known and unknown risks and
uncertainties. Delphi’s actual results, performance or
achievements could differ materially from those expressed in, or
implied by, these forward-looking statements and, accordingly, no
assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of
them do so, what benefits Delphi will derive therefrom. Should one
or more of these risks or uncertainties materialize, or should
assumptions underlying forward-looking statements prove incorrect,
actual results may vary 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, delays or changes in plans with respect to
exploration or development projects or capital expenditures, the
uncertainty of estimates and projections relating to production
rates, costs and expenses, commodity price and exchange rate
fluctuations, marketing and transportation, environmental risks,
competition from others for scarce resources, the ability to access
sufficient capital from internal and external sources, changes in
governmental regulation of the oil and gas industry and changes in
tax, royalty and environmental legislation. Additional
information on these and other factors that could affect the
Company’s operations or financial results are included in the
Company’s most recent Annual Information Form and other reports on
file with the applicable securities regulatory authorities and may
be accessed through the SEDAR website (www.sedar.com).
Readers are cautioned that the foregoing list of
factors is not exhaustive. Furthermore, the forward-looking
statements contained in this release are made as of the date of
this release for the purpose of providing the readers with the
Company’s expectations for the coming year. The forward-looking
statements and information may not be appropriate for other
purposes. Delphi undertakes no obligation to update publicly
or revise any forward-looking statements or information, whether as
a result of new information, future events or otherwise, unless so
required by applicable securities laws. The forward-looking
statements contained in this release are expressly qualified in
their entirety by this cautionary statement.
Basis of Presentation.
For the purpose of reporting production
information, reserves and calculating unit prices and costs,
natural gas volumes have been converted to a barrel of oil
equivalent (boe) using six thousand cubic feet equal to one
barrel. A boe conversion ratio of 6:1 is based upon an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
This conversion conforms to the Canadian Securities Administrators’
National Instrument 51-101 when boes are disclosed. Boes may
be misleading, particularly if used in isolation.
As per CSA Staff Notice 51-327 initial test results and initial
production performance should be considered preliminary data and
such data is not necessarily indicative of long-term performance or
of ultimate recovery.
Non-IFRS Measures. The
release contains the terms “funds from operations”, “funds from
operations per share”, “net debt”, “net debt to funds from
operations ratio”, “operating netbacks” “cash netbacks” and
“netbacks” which are not recognized measures under IFRS. The
Company uses these measures to help evaluate its performance.
Management considers netbacks an important measure as it
demonstrates its profitability relative to current commodity prices
and costs of production. Management uses funds from operations to
analyze performance and considers it a key measure as it
demonstrates the Company’s ability to generate the cash necessary
to fund future capital investments and to repay debt. Funds from
operations is a non-IFRS measure and has been defined by the
Company as cash flow from operating activities before accretion on
long term and subordinated debt, decommissioning expenditures and
changes in non-cash working capital from operating activities. The
Company also presents funds from operations per share whereby
amounts per share are calculated using weighted average shares
outstanding consistent with the calculation of earnings per share.
Delphi’s determination of funds from operations may not be
comparable to that reported by other companies nor should it be
viewed as an alternative to cash flow from operating activities,
net earnings or other measures of financial performance calculated
in accordance with IFRS. The Company has defined net debt as
the sum of long term debt and subordinated debt plus/minus working
capital excluding the current portion of the fair value of
financial instruments. Net debt is used by management to monitor
remaining availability under its credit facilities. Net debt to
funds from operations ratio is defined as net debt to annualized
quarterly funds from operations, based on the most recently
completed quarter. This ratio is used to calculate the
Company’s compliance with its net debt to funds from operations
ratio covenant. Operating netbacks have been defined as
revenue less royalties, transportation and operating costs.
Cash netbacks have been defined as operating netbacks less interest
and general and administrative costs. Netbacks are generally
discussed and presented on a per boe basis.