Delphi Energy Corp. (“Delphi” or the “Company”) is pleased to
provide an operations update.
- Q4 2017 production up 29% from a year earlier
- Q4 2017 condensate production up 67% from a year earlier
- 2017 capital program executed within budget
- Q4 realized natural gas price estimated to be Cdn$3.53 per
mcf compared to AECO pricing of Cdn$1.69 per mcf
- Positive recent well results on frac innovations
- First West Bigstone well in six years now drilled
“Delphi is well-positioned for 2018,” said David
J. Reid, President and Chief Executive Officer. “With significant
excess contracted capacity on the Alliance pipeline, a healthy
balance sheet, and a large inventory of well-defined drilling
locations, Delphi maintains significant operating leverage and
upside potential.”
PRODUCTION UPDATE
Delphi produced approximately 9,200 barrels of
oil equivalent per day (“boe/d”) in the fourth quarter of 2017, a
29 percent increase over the comparative quarter in 2016. Field
condensate production increased 67 percent to 2,220 barrels per day
(“bbls/d”) in the fourth quarter of 2017, while natural gas and
natural gas liquids increased 20 percent over the comparative
quarter of 2016.
The Company averaged approximately 9,950 boe/d
in December 2017 based on field estimates, excluding 500 boe/d
curtailed due to temporary third party plant throughput
restrictions. The Company achieved year-over-year production growth
of 12 percent, averaging approximately 8,305 boe/d. As a result of
increased liquids production and favourable marketing arrangements,
Delphi expects that adjusted funds from operations will meet prior
2017 guidance of $35 million to $38 million, as anticipated on
November 8, 2017.
The Company has additional behind pipe
production volumes from its recently completed 15-19-59-23W5
(“15-19”) well awaiting start-up of the pipeline in March. Delphi
also has two wells with completion operations in progress. With an
early start to the winter 2018 drilling program, the Company
expects to have up to five new wells on production by early second
quarter.
The advancement of the Company’s well completion
design has resulted in higher condensate ratios and lower initial
decline profiles compared with earlier wells, though in some cases
lower initial overall rates.
MARKETING AND HEDGING
UPDATE
Delphi’s natural gas marketing strategy has
insulated the Company from the weakness in both AECO and Station 2
prices. Delphi has 57 million cubic feet of natural gas per day
(“mmcf/d”) of Alliance full path service to Chicago contracted on a
renewable 5 year term basis providing approximately 150 percent
coverage for its natural gas production marketing requirements. The
excess contracted service continues to generate funds from
operations through temporary assignment at a premium above cost or
through direct purchase of natural gas in Alberta or British
Columbia which is then sold in Chicago at premium prices. At
current 2018 basis differentials, the Company expects to generate
approximately $7 million of cash flow from its excess Alliance
transportation service in 2018. The value of the arbitrage between
AECO and Chicago prices available through all of Delphi’s Alliance
service is currently estimated at $40 million over the next four
years.
The Company sells over 90 percent of its natural
gas in Chicago and has approximately 63 percent of its current
Chicago natural gas sales volumes hedged with NYMEX swaps at an
average price of Cdn$3.85 per thousand cubic feet of natural gas
(“mcf”).
In the fourth quarter of 2017, Delphi’s
estimated realized natural gas price is Cdn$3.53 per mcf compared
to NYMEX pricing of Cdn$3.73 per mcf and AECO pricing of Cdn$1.69
per mcf. Net of applicable transportation costs the Company’s
realized natural gas price outperformed AECO pricing by
approximately 60 percent.
The Company also has approximately 50 percent of
its current condensate and NGL’s volumes hedged with WTI swaps at
an average price of Cdn$71.60 per barrel.
OPERATIONS UPDATE
Delphi executed its 2017 capital program within
budget and ahead of schedule. The 17 well drilling program in 2017
included five delineation wells and three pad operations as well as
continued well completion and innovative frac design changes
focused on increasing condensate recoveries. The Company also got
an early start to its 2018 winter program with the commencement of
drilling operations at two locations and the completion of one
additional well in December. Total capital for 2017 was
approximately $115 million including approximately $6 million
associated with the early start to the 2018 program.
Delphi is pleased to provide test results of the
Company’s fifth delineation well of the 2017 capital program.
The 15-19-59-23W5 well (“15-19”) was drilled to evaluate Delphi’s
central land block within the Bigstone Montney asset. It was
drilled to a total depth of 6,150 metres with an extended-reach
horizontal lateral in the Montney of 2,862 metres. 15-19 was
the second well (after 14-15-60-23W5) to be completed with the
Company’s Fifth Generation frac design through a 50-stage
liner. After a fracture stimulation and a partial clean-out
of the horizontal liner, the well was flowed on clean-up for a
total of five days. Over the final 24-hours of this clean-up,
prior to running production tubing, the well flowed at an average
rate of 7.6 mmcf/d of raw gas and 1,438 bbls/d of 44 degree API
field condensate (220 barrels per million cubic feet (“bbls/mmcf”)
of sales gas). Total sales production rate for 15-19 over
this 24-hour period was approximately 2,824 boe/d (61 percent
liquids), including an estimated plant natural gas liquids (“NGL”)
yield of 46 bbls/mmcf of sales gas. Pipeline construction to
this well has commenced and the well is expected to be on
production in March.
The first well completed with the Company’s
Fifth Generation frac design was an infill well at 14-15-60-23W5
(“14-15”) drilled between existing producers to evaluate the
effectiveness of frac design changes. It was drilled,
completed (with a 50-stage liner and sand concentration of
approximately 1,100 pounds per horizontal foot) and after cleaning
out the horizontal liner, the well was brought on production in the
fourth quarter of 2017. The direct offset at 13-15-60-23W5
(“13-15”) was drilled, completed (with a 40-stage liner and sand
concentrations of approximately 800 pounds per horizontal foot) and
brought on production in the first quarter of 2017. 14-15 has
been on production for just over a month and has exhibited a much
shallower decline with field condensate rates approximately 33
percent higher and gas rates approximately nine percent lower than
the direct offset at 13-15 after the same amount of time on
production.
Delphi has recently finished drilling its first
West Bigstone well in over six years. The 16-10-60-24W5
(“16-10”) well was drilled to a total depth of 5,994 metres in 23
days. A 65-stage hybrid liner was installed as part of the
Company’s Sixth Generation frac design utilizing 30 percent more
discrete stages and 30 percent more sand than used previously.
16-10 is two miles to the west of a recent two
well pad that came on production in late November 2017. The
two wells from this pad, 16-12-60-24W5 and 13-7-60-23W5, were
drilled to total depths of 6,061 metres and 5,969 metres
respectively, each with horizontal laterals in the Montney of
approximately 2,850 metres. Both wells were completed with
the Company’s Fourth Generation Frac design. Initial
production performance is also exhibiting shallower declines and
higher field condensate to natural gas yields than Bigstone Montney
wells to the east, averaging 300 and 245 bbls/mmcf of sales gas
over the first 30 days on production. Though natural gas
production rates (currently 1.7 mmcf/d and 2.0 mmcf/d raw
respectively) from these wells are lower than budgeted, field
condensate rates (currently 300 bbls/d and 320 bbls/d respectively)
are meeting budget assumptions.
Recent well results from certain pad drilling
resulted in production rates less than immediate offsetting wells.
The Company undertook remedial work to improve these results. After
completion operations and a subsequent offsetting frac, Delphi
cleaned out approximately 60 percent of the horizontal liner at
13-9-60-23W5 (“13-9”) in late 2017. After the
clean-out, the gas rate and field condensate rate increased by 54
percent and 115 percent respectively, bringing the production of
the well back in line with other wells in the area.
OUTLOOK
As the Company enters 2018, condensate
production continues to outpace natural gas production growth. The
Company’s natural gas marketing strategies and commodity risk
management program continue to mitigate commodity price
volatility. Given the successful delineation drilling in
2017, Delphi has a much larger inventory of drill-ready locations
from which to select for its 2018 program. The Company looks
forward to providing its 2018 guidance in mid-February 2018 and its
full 2017 financial results in March 2018.
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, abandonment
obligations 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.
A photo accompanying this announcement is available at
http://www.globenewswire.com/NewsRoom/AttachmentNg/52e1d1de-fb0e-4654-9635-29d12a93d738