CALGARY, Nov. 15, 2018 /CNW/ - OBSIDIAN ENERGY LTD. (TSX –
OBE, NYSE – OBE.BC) ("Obsidian Energy", the
"Company", "we", "us" or "our")
announces its 2019 outlook. Obsidian Energy will be hosting its
Investor Day Presentation later this morning to discuss the third
quarter results disclosed last week, plans for 2019, the potential
of our Cardium asset base and long-term strategy.
David French, President and CEO
commented, "Consistent with our approach to the fourth quarter
discussed last week, our 2019 plan is modest and built in reaction
to recent moves across the crude oil complex. The goal is to live
within our means and drive towards meaningful exit rate growth if
prices allow. We will closely monitor the cash generation of our
base production and forward development inventory. As such:
- we have poured a conservative 2019 capital program of
approximately $120 million, split
roughly 55 percent / 45 percent between the front half and back
half of the year respectively; and
- should we see pricing improvement toward the second half of the
year, we designed our second half program to allow for an
increase of $40 million of capital
spend through adding two additional rigs to the Cardium program,
which would bring our 2019 Total Capital spend to approximately
$160 million.
Assuming a base plan of $120
million of total capital, next year's program expects to
deliver three to six percent absolute production growth year over
year. Adding $40 million of capital
to the second half of the year raises year over year production
growth rates towards five to eight percent. The growth rates of
both scenarios reflect our disciplined plan to reduce exposure to
our negative cash flow legacy assets which we disclosed last
week.
The backbone of our development plans will continue to be the
Cardium, targeting ten percent production growth in that area. As
is prudent, we will continue to closely monitor the business and
have operational flexibility to match the macro environment. I look
forward to speaking with the investment community later this
morning to demonstrate the sound fundamentals of the underlying
business, why we believe our assets are unique, and why 2019 holds
promise for the Company."
2019 Outlook
Our 2019 plans are a disciplined approach to cash flow
generation, balancing profitable growth initiatives with balance
sheet preservation. Obsidian Energy is rapidly building the largest
inventory of drill ready primary Cardium locations in the Company's
history, which allows us to shift and increase capital as Canadian
commodity price scenarios improve.
Our planned 2019 capital investment of $120 million includes $92
million of development capital associated with drilling,
well licensing, lease preparation and existing wellbore
optimization. Total Capital also includes $28 million of maintenance capital, corporate
capital, operating cost reduction initiatives and decommissioning
expenditures as part of the Alberta Energy Regulator's Area-Based
Closure initiative.
Our development capital is approximately 80 percent weighted to
the Cardium. Our plans include 15 horizontal producers (gross
operated wells) in Willesden Green, with seven in the first half of
the year. We also expect to spend $5
million on surface lease acquisitions and minor
infrastructure projects. Included in the 2019 Cardium spend is the
completion costs for five 2018 Willesden Green wells not fracture
simulated by the end of this year.
The remaining 20 percent of our development capital will roughly
spread evenly between optimization of existing wellbores,
non-operated primary drilling activity and two (gross) Deep Basin
wells. The projected capital efficiency of our 2019 development
capital is approximately $15,000 per
boe per day, based on the 12-month forward production associated
with each project.
Capital Expenditure Details
Our 2019 Total Capital Expenditure guidance of $120 million is as follows:
|
Capital
Category
|
# of
Wells
|
Net
Capital
|
Cardium
|
15
Producers
|
$71
million
|
Deep Basin
|
2
Producers
|
$7 million
|
Non-Operated Primary
Drilling
|
2.5 net
Producers
|
$6 million
|
Existing Wellbore
Optimization
|
>25
Projects
|
$8 million
|
Total E&D
Capital Expenditures
|
|
$92
million
|
Maintenance,
Corporate &
Decommissioning Expenditures
|
|
$28
million
|
Total Capital
Expenditures
|
|
$120
million
|
Second half 2019 Capital has the flexibility to be increased by
approximately $40 million of Cardium
development (10 gross operated wells) if the outlook for crude oil
pricing improves. The decision on Total Capital spend will be made
by spring break-up.
Production and Cost Guidance
|
2019 Annual
Guidance
|
FY 2019
Production
|
28,000 to 29,000 boe
per day
|
FY 2019 Growth
Rate (1)
|
3%
-6%
|
Operating
Costs
|
$13.00 - $13.50 per
boe
|
General &
Administrative
|
$1.75 - $2.25 per
boe
|
|
|
(1)
|
Relative to projected
full year 2018 production (using midpoint of guidance), adjusted
for shut in volumes, of 27,250 boe per day
|
Production growth rates would increase by approximately two
percent if the Company elects to increase its Total Capital spend
to $160 million and add approximately
1,000 boe per day of Cardium production in Q4 2019.
Investor Day Presentation Webcast Details
Obsidian Energy Management will be giving a presentation via
webcast later this morning beginning at 9:00 am Mountain
Time (11:00 am Eastern Time).
This presentation will offer the investment community a
comprehensive discussion about our third quarter results disclosed
last week, plans for 2019, the potential of our Cardium asset base
and long-term strategy. The event will be held
in Calgary for analysts and sales representatives and
simultaneously webcast for the broader investment community. A copy
of the presentation will be available on the website after the
presentation. To access the webcast please use the following
URL:
https://event.on24.com/wcc/r/1850864/107BFCA7194ADB4B52B1FE66B4967F4E
Investors are invited to ask questions through the online
webcast portal throughout the presentation. A recording will be
available for replay following the conclusion of the presentation
on our website www.obsidianenergy.com, or directly at above
URL.
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 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: that the Company will host its Investor
Day and webcast later this morning to discuss third quarter
results, plans for 2019, the potential for our Cardium asset base
and long-term strategy and the presentation will be available on
the website after the presentation; that we plan to live within our
means and drive towards meaningful exit rate growth if prices
allow; that we will closely monitor the cash generation of our base
production and forward development inventory; that should pricing
improve towards the second half of the year, the second half
program can be increased by $40
million of capital spend thru adding two additional rigs to
the Cardium program, which would bring our 2019 total capital spend
to $160 million; our expectation for
absolute production growth on a year over year basis based under
both budget scenarios; that the backbone of our development plans
will continue to be within the Cardium, targeting at least ten
percent production growth in that area; that we will continue to
closely monitor the business and have operational flexibility to
match the macro environment; that our 2019 plans are a disciplined
approach to cash flow generation, balancing profitable growth
initiatives with balance sheet preservation; that we are rapidly
building the largest drill ready primary Cardium locations in the
Company's history which allows us to shift and increase capital as
Canadian commodity price scenarios improve; what our planned
capital investment includes under both budget scenarios; our
projected capital efficiency of our 2019 development capital; our
2019 annual guidance for production, growth rate, operating and
G&A cost ranges; and the impact to production growth rates if
the total capital spend is increased to $160
million and adds approximately 1,000 boe per day of Cardium
production in Q4 2019.
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.
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SOURCE Obsidian Energy Ltd.