Delphi Energy Corp. (“Delphi” or the “Company”) provides an
operations update on recent positive well results, increasing
condensate yields, and ongoing cost reduction initiatives.
Drilling and Completion Operations
Successfully Delineating Delphi’s 167.5 section Bigstone
Area
Completion operations on the Company’s ninth,
tenth and eleventh wells of the 2017 program have concluded, with
two of the wells now on production and the third well expected to
be on production in late November. The 2017 drilling program, with
an increased focus on delineation drilling, has significantly
de-risked Delphi’s large undeveloped land position. The increase in
number of new well licenses by multiple industry competitors
directly offsetting Delphi’s land holdings will further assist in
delineating the Montney potential at Bigstone.
A PDF accompanying this announcement is available
at http://www.globenewswire.com/NewsRoom/AttachmentNg/11eb63b1-7bea-4443-ace1-33754dd430cc
The 13-10-59-23W5 well (“13-10”) is the
southern-most Montney well the Company has drilled to date.
It also marks the first significant step-out Montney well that
Delphi has drilled in over three years and has de-risked a large
portion of the Company’s Montney rights at Bigstone. 13-10
was drilled to a total depth of 5,908 metres with an extended-reach
horizontal lateral in the Montney of 2,848 metres and was completed
with the Company’s Fourth Generation frac design through a 40-stage
liner. The well was flowed on clean-up for 2.5 days,
recovering approximately 21 percent of the initial load frac
water. Over the last 24-hours prior to running production
tubing, the well flowed on clean-up at an average rate of 4.7
million cubic feet of natural gas per day (“mmcf/d”) of raw gas and
952 barrels per day (“bbls/d”) of 44 degree API field condensate
(237 bbls/mmcf of sales gas). Total sales production rate for
13-10 over this 24-hour period was approximately 1,805 barrels of
oil equivalent per day (“boe/d”) (63 percent liquids), including an
estimated plant natural gas liquids (“NGL”) yield of 46 bbls/mmcf
of sales gas. 13-10 has recently been brought on production
through the Central Foothills Gas Gathering System and the Repsol
operated Edson Gas Plant.
The 9-21-59-22W5 well (“9-21”) was drilled to
test the eastern edge of the Montney play at Bigstone. 9-21
was drilled to a total depth of 5,865 metres with an extended-reach
horizontal lateral in the Montney of 2,841 metres and was also
completed with the Company’s Fourth Generation frac design through
a 40-stage liner. The well was flowed on clean-up for 2.6
days, recovering approximately 16 percent of the initial load frac
water. Over the last 24-hours prior to running production
tubing, the well flowed on clean-up at an average rate of 6.8
mmcf/d of raw gas and 584 bbls/d of 48 degree API field condensate
(100 bbls/mmcf of sales gas). Total sales production rate for
9-21 over this 24-hour period was approximately 1,823 boe/d (47%
liquids), including an estimated plant NGL yield of 46 bbls/mmcf of
sales gas. The 9-21 well is expected to be brought on production in
late November.
The 16-08-60-23W5 infill well (“16-08”) was
drilled between the 15-08 and the recently drilled section 9
wells. 16-08 was drilled to a total depth of 5,656 metres
with an extended-reach horizontal lateral in the Montney of 2,574
metres and was also completed with the Company’s Fourth Generation
frac design through a 40-stage liner. The well was flowed on
clean-up for 3.1 days, recovering approximately 23 percent of the
initial load frac water. Over the last 24-hours prior to
running production tubing, the well flowed on clean-up at an
average rate of 4.7 mmcf/d of raw gas and 1,133 bbls/d of 42 degree
API field condensate (281 bbls/mmcf of sales gas). Total
sales production rate for 16-08 over this 24-hour period was
approximately 1,988 boe/d (66% liquids), including an estimated
plant NGL yield of 46 bbls/mmcf of sales gas. 16-08 has recently
been brought on production.
Delphi has finished drilling two additional
step-out pad wells at 13-7-60-23W5 and 16-12-60-24W5, which are the
western-most wells the Company has drilled to date.
Fracturing operations have commenced and are expected to be
finished by the end of October with on-production dates anticipated
in late November.
Field operations are back on track after two
separate early winter snow storms in the Bigstone area in September
and early October delayed overall drilling, completion and
pipelining operations. The drilling program is on schedule for the
planned 17 wells to be rig released in 2017, with an additional two
wells commencing drilling operations before year-end. The program
contemplates having 15 of those 17 wells completed and placed on
production by year-end. The Company’s two drilling rigs are
currently drilling an infill well at 14-15-60-23 W5M and another
step-out delineation well at 15-19-59-23 W5M.
A PDF accompanying this announcement is available
at http://www.globenewswire.com/NewsRoom/AttachmentNg/61abf6d1-85bd-4414-a518-70a72d3c39ea
Condensate Production Growth Continues
to Outpace Natural Gas
Condensate production growth remains on track
with fourth quarter 2017 production volumes expected to be nearly
double what they were one year earlier. In comparison, natural gas
and natural gas liquid volumes are expected to increase
approximately 40 percent from one year earlier.
Condensate as a percentage of the total product
mix has more than doubled to 32 percent on wells completed with the
3rd and 4th generation frac designs compared to 15 percent on the
original first generation frac design. Wells with higher field
condensate to gas ratios provide higher revenue combined with lower
operating and transportation costs per boe. Field condensate
has both lower operating and transportation costs compared to the
Company’s natural gas production.
A PDF accompanying this announcement is available
at http://www.globenewswire.com/NewsRoom/AttachmentNg/da861464-0a18-4609-8eb0-284d9c001d72
Facility Projects and Upgrades Target
Reduced Operating Costs While Increasing Capacity
Delphi recently performed a workover and has
commenced construction of additional storage and pumping capacity
at its water disposal facility located at 16-34-59-21W5
(“16-34”). The Company ordered the required equipment earlier
this year in anticipation of the increased field activity planned
for 2017 and beyond. Disposal capacity will be increased to
over 6,000 barrels per day of water from 2,200 barrels per day
currently. The increased activity experienced by the Company
since bringing in a second drilling rig late in 2016 and more
recently completing seven wells in late May through early September
resulted in greater volumes of produced and completion load water
being trucked further afield to third party disposal facilities.
The expansion at Delphi’s 16-34 water disposal facility enables the
Company to return to internally handling its water disposal
requirements with spare capacity potentially available for third
party volumes and associated revenues. The expansion is
scheduled to be completed in November.
Plans remain on-track for the construction and
commissioning of the Company’s amine project at the 7-11-60-23W5
compression and dehydration Montney facility. When brought
on-line in the second quarter of 2018, up to 17 mmcf/d of gross raw
sweetened Montney gas will be processed at the Repsol operated
Bigstone Gas Plant where the Company owns a 25% working
interest. This will significantly reduce operating costs for
the portion of Montney gas that gets processed at this plant.
Marketing Arrangements Mitigate Delivery
Curtailments and AECO Natural Gas Price Risk
Delphi has strategically mitigated key market
risks through its firm downstream transportation arrangements,
largely from selling approximately 90 percent of its natural gas
volumes directly into the Chicago market via the Alliance
pipeline. Over the past three months during significant AECO
natural gas price volatility, Delphi has been able to achieve a
realized natural gas price (excluding hedges) of approximately 2.4
times the average AECO price of $1.46 per mcf. The contracted
renewable firm Alliance Full Path Service to Chicago, with the
accompanying 25 percent preferred interruptible service, is
adequate for the projected growth of natural gas volumes into
2019.
A PDF accompanying this announcement is available
at http://www.globenewswire.com/NewsRoom/AttachmentNg/e47e6874-d64e-4239-80a4-c4b5bac7aa10
Delphi believes the current constraints on the
James River lateral of the NOVA system will be alleviated over
time. Accordingly, Delphi does have TCPL firm service contracted
starting April 2018 to augment its Alliance service and diversify
its long term natural gas market exposure.
With Delphi’s field condensate volumes having
almost doubled from the fourth quarter of 2016 and an overall
increase in industry activity, the Company has mitigated delivery
restrictions and significant wait times by contracting access to a
designated riser off-load for its field condensate
production. With priority access to this proximal delivery
point, Delphi has begun to realize reduced field condensate
transportation costs through shorter trucking distances and wait
times.
Commodity Hedging Strategy Continues to
Mitigate Downside Price Risk and Protect Return on
Capital
Delphi has also mitigated commodity price risks
through its hedging strategy. Including the impact of the
Company’s natural gas hedging program, Delphi further increased its
realized natural gas price by approximately $0.44/mcf over the past
three months. Delphi’s natural gas exposure remains well hedged
through 2018 and into 2019. The Company remains constructive on
long term condensate pricing, but has recently reduced its exposure
to spot pricing through to the middle of 2018, with WTI fixed
pricing equivalent to approximately US$53.35 per bbl.
Commodity Hedges |
Q4 2017 |
Q1 2018 |
Q2 2018 |
Q3 2018 |
Q4 2018 |
2019 |
|
Natural gas (mcf/d) |
65 |
% |
53 |
% |
52 |
% |
52 |
% |
47 |
% |
21 |
% |
Average hedge price ($/mcf) |
4.11 |
|
3.91 |
|
3.91 |
|
3.91 |
|
3.88 |
|
3.90 |
|
|
Crude oil (bbl/d) |
51 |
% |
37 |
% |
33 |
% |
14 |
% |
14 |
% |
14 |
% |
Average hedge price ($/bbl) |
66.37 |
|
66.78 |
|
67.06 |
|
70.00 |
|
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. |
Corporate Production Update
With field operations back on track after the
early snow and wet ground conditions, current production capability
has increased to approximately 10,800 boe/d (approximately 40
percent condensate and NGL’s). With four additional wells
(2.6 net) expected to be on-stream prior to year-end, the Company
is targeting production of 11,000 to 11,500 boe/d in the fourth
quarter of 2017, a 58% increase from the fourth quarter of 2016.
Annual 2017 production is expected to be slightly below the
9,000 to 9,500 boe/d forecast, due to less volumes than forecast
during the K3 turnaround in the second quarter, and third quarter
production of approximately 9,300 boe/d. Third quarter
production was negatively impacted by weather related operational
delays and curtailed production of 600 boe/d, more than half of
which was to mitigate the impact of offset well fracturing
operations from adjacent industry activity.
The Company’s primary focus remains on creating
significant value for its shareholders through its successful
development and delineation of the Bigstone Montney property, while
maintaining an adequate level of financial flexibility.
CONFERENCE CALL AND WEBCAST
A conference call and webcast to review third
quarter 2017 results is scheduled for 9:00 a.m. Mountain Time
(11:00 a.m. Eastern Time) on Thursday, November 9, 2017. The
conference call number is 1-844-358-8760. A brief presentation by
David J. Reid, President and CEO and Mark D. Behrman, CFO, will be
followed by a question and answer period. The conference call
will also be broadcast live on the internet and may be accessed
through Delphi’s website at www.delphienergy.ca or by entering
https://edge.media-server.com/m6/p/pw3mwudu in your web browser. A
rebroadcast will also be available on Delphi’s website or at
https://edge.media-server.com/m6/p/pw3mwudu on your web
browser.
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. |
2300 - 333 – 7th Avenue S.W. |
Calgary, Alberta |
T2P 2Z1 |
Telephone: (403) 265-6171 |
|
Facsimile: (403) 265-6207 |
Email:
info@delphienergy.ca |
|
Website: www.delphienergy.ca |
|
|
|
DAVID J. REID |
|
MARK D. BEHRMAN |
President & CEO |
|
CFO |
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. “IP” is an
abbreviation for “Initial Production” and represents average
production rates over the indicated time period in producing
days.
Non-GAAP Measures. The
release contains the terms “adjusted funds from operations”,
“adjusted funds from operations per share”, “net debt”, “net debt
to adjusted funds from operations ratio”, “operating netbacks”
“cash netbacks” and “netbacks” which are not recognized measures
under GAAP. 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 adjusted
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. Adjusted funds from operations is a non-GAAP 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
adjusted 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 adjusted 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 GAAP. The Company has defined net debt as the sum of
bank debt and senior secured notes 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. Operating netbacks
have been defined as revenue plus marketing income less royalties,
transportation and operating costs. Cash netbacks have been
defined as operating netbacks less interest on bank debt and senior
secured notes, general and administrative costs and cash costs
related to the Company’s restricted share units. Netbacks are
generally discussed and presented on a per boe basis.