CALGARY, Jan. 31, 2018 /CNW/ - OBSIDIAN ENERGY LTD.
(TSX/NYSE – OBE) ("Obsidian Energy", the "Company",
"we", "us" or "our") is pleased to announce
that we closed an agreement to dispose of a significant portion of
our non-core legacy assets, in exchange for the assumption of
abandonment and reclamation liabilities.
David French, President & CEO
commented, "This transaction is another important step forward for
Obsidian Energy. It demonstrates the continued refocusing of
the business only on assets where we can deliver distinctive
performance. Our team has been working many months to close this
deal, and when coupled with the solid momentum of our 2017
production results, we are off to a running start for 2018. Moving
these legacy assets out of the portfolio reduces our cost structure
and provides even greater financial flexibility for our second half
capital program and beyond."
Legacy Asset Transaction Streamlines Operations and Improves
Corporate Metrics
This legacy asset transaction demonstrates our commitment to
maximizing value on behalf of all shareholders. It reduces our
discounted decommissioning liabilities by approximately
$25 million, improves 2018 netbacks
by approximately $1.50/boe and
increases our corporate liquids weighting to approximately 65
percent. The transaction is accretive to Funds Flow from Operations
due to significant operating cost savings and high natural gas
weighted production.
Key 2017 metrics associated with the assets are as
follows(1):
Production
|
2,200
boe/d
|
Liquids
Weighting
|
25%
|
Operating
Cost
|
$25/boe
|
Field Netback
(loss)
|
($4)/boe
|
Wellbores(2)
|
650
|
Decommissioning
Liability(3)
|
$25MM
|
(1)
|
2017 figures are
preliminary
|
(2)
|
Includes producing,
non-producing and suspended wells
|
(3)
|
Inflated, discounted
future reclamation and abandonment costs that are expected to be
incurred over the life of the properties
|
The transaction is subject to standard regulatory approvals such
as license transfers.
2018 Guidance Update
We are revising our full year production and operating cost
guidance to reflect the impact of the disposition, assuming a
January 31, 2018 closing date:
2018 Annual
Guidance
|
Production
|
29,000 to 30,000 boe
per day
|
Production Growth
Rate (1)
|
5%
|
Operating
Costs
|
$13.00 - $13.50 per
boe
|
General &
Administrative
|
$2.00 - $2.50 per
boe
|
(1) Relative to full
year 2017 production, adjusted for all 2017 & 2018 A&D, of
28,000 boe per day
|
Non-GAAP Measures
Fund Flow from Operations, included in this press release, does
not have a standardized meaning prescribed by IFRS and therefore is
considered non-GAAP measures; accordingly, it may not be comparable
to similar measures provided by other issuers. Funds Flow from
Operations is cash flow from operating activities before changes in
non-cash working capital, decommissioning expenditures and office
lease settlements which also excludes the effects of financing
related transactions from foreign exchange contracts and debt
repayments/pre-payments and is representative of cash related to
continuing operations. Funds Flow from Operations is used to assess
the Company's ability to fund its planned capital programs.
Forward-Looking Statements
Certain statements contained in this document constitute
forward-looking statements or information (collectively
"forward-looking statements"). 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
particular, this document contains forward-looking statements
pertaining to, without limitation, the following: that this
transaction along with the solid momentum of our 2017 production
results creates a clearer line of sight to the potential of 2018;
moving the legacy assets out of our portfolio consolidates
resources on our 2018 development plans and provides additional
flexibility for the second half capital program; the expected
impact to corporate metrics and being accretive to Funds Flow from
Operations due to significant operating cost savings and high
natural gas weighted production; our updated expected full year
production; our expected production growth rate; and expected
ranges for 2018 operating costs and general and administrative
costs.
With respect to forward-looking statements contained in this
document, we have made assumptions regarding, among other things
that we do not dispose of any material producing properties; our
ability to execute our long-term plan as described herein and in
our other disclosure documents and the impact that the successful
execution of such plan will have on our Company and our
shareholders; that the current commodity price and foreign exchange
environment will continue or improve; future capital expenditure
levels; future crude oil, natural gas liquids and natural gas
prices and differentials between light, medium and heavy oil prices
and Canadian, WTI and world oil and natural gas prices; future
crude oil, natural gas liquids and natural gas production levels;
future exchange rates and interest rates; future debt levels; our
ability to execute our capital programs as planned without
significant adverse impacts from various factors beyond our
control, including weather, infrastructure access and delays in
obtaining regulatory approvals and third party consents; our
ability to obtain equipment in a timely manner to carry out
development activities and the costs thereof; our ability to market
our oil and natural gas successfully to current and new customers;
our ability to obtain financing on acceptable terms, including our
ability to renew or replace our syndicated bank facility and our
ability to finance the repayment of our senior notes on maturity;
and our ability to add production and reserves through our
development and exploitation activities.
Although we believe that the expectations reflected in the
forward-looking statements contained in this document, and the
assumptions on which such forward-looking statements are made, are
reasonable, there can be no assurance that such expectations will
prove to be correct. Readers are cautioned not to place undue
reliance on forward-looking statements included in this document,
as there can be no assurance that the plans, intentions or
expectations upon which the forward-looking statements are based
will occur. By their nature, forward-looking statements involve
numerous assumptions, known and unknown risks and uncertainties
that contribute to the possibility that the forward-looking
statements contained herein will not be correct, which may cause
our actual performance and financial results in future periods to
differ materially from any estimates or projections of future
performance or results expressed or implied by such forward-looking
statements. These risks and uncertainties include, among other
things: the possibility that we will not be able to continue to
successfully execute our long-term plan in part or in full, and the
possibility that some or all of the benefits that we anticipate
will accrue to our Company and our securityholders as a result of
the successful execution of such plans do not materialize; the
possibility that we are unable to execute some or all of our
ongoing asset disposition program on favourable terms or at all;
general economic and political conditions in Canada, the U.S. and globally, and in
particular, the effect that those conditions have on commodity
prices and our access to capital; industry conditions, including
fluctuations in the price of crude oil, natural gas liquids and
natural gas, price differentials for crude oil and natural gas
produced in Canada as compared to
other markets, and transportation restrictions, including pipeline
and railway capacity constraints; fluctuations in foreign exchange
or interest rates; unanticipated operating events or environmental
events that can reduce production or cause production to be shut-in
or delayed (including extreme cold during winter months, wild fires
and flooding); and the other factors described under "Risk Factors"
in our Annual Information Form and described in our public filings,
available in Canada at
www.sedar.com and in the United
States at www.sec.gov. Readers are cautioned that this list
of risk factors should not be construed as exhaustive.
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 any forward-looking statements. The
forward-looking statements contained in this document are expressly
qualified by this cautionary statement.
Obsidian Energy shares are listed on both the Toronto Stock
Exchange and New York Stock Exchange under the symbol "OBE". All
figures are in Canadian dollars unless otherwise stated.
SOURCE Obsidian Energy Ltd.