Crew Energy Announces 2014 Capital Budget Focused on Long Term
Montney Growth
CALGARY, ALBERTA--(Marketwired - Dec 16, 2013) - Crew Energy
Inc. ("Crew" or the "Company") (TSX:CR) is pleased to announce that
its Board of Directors has approved a $246 million capital program
for 2014 focused on the development of liquids rich natural gas at
Septimus, British Columbia and light oil at Tower, British
Columbia. The program is designed to provide a platform for
long-term profitable growth and to further delineate Crew's
northeast British Columbia Montney resource with over 15 billion
boe of Total Petroleum Initially in Place ("TPIIP") assigned by
Crew's independent evaluator.
2014 Goals
- Invest in our Montney assets where drilling and completion
technology continues to evolve, generating robust and continuously
improving economic returns;
- Invest in Montney oil and gas infrastructure to accommodate
future production growth targeting corporate exit 2015 production
of over 40,000 boe per day;
- Evaluate the Montney potential at Crew's Attachie and
Groundbirch, British Columbia properties;
- Further evaluate the potential of the Mannville formation at
Princess, Alberta after encouraging results in 2013;
- Maintain aggregate production levels at our Deep Basin,
Lloydminster and Princess, Alberta properties with free funds from
operations to be distributed to our Montney growth
initiatives;
- Improve our corporate netback through reduced operating costs
and adding higher netback liquids to our production mix.
2014 Budget
Highlights
- Average Montney production is targeted at 11,500 boe per day, a
53% increase over 2013;
- $35 million is planned to be invested in infrastructure to
build an oil battery at Tower and start the construction of a
second 60 mmcf per day gas processing facility at Septimus which is
expected to be onstream in mid-2015;
- Crew will continue with the front-end engineering for its
previously disclosed facility at Groundbirch with a planned
start-up in 2016;
- Average production for 2014 is forecasted to be 29,500 to
30,500 boe per day (52% natural gas and 48% oil and ngl)
representing a forecasted 10% increase over 2013 while fourth
quarter 2014 average production is targeted to be 12% over 2013
levels at 31,500 to 32,500 boe per day;
- Crew plans to drill 62 net wells with 47 wells targeting oil
and 15 wells targeting liquids rich natural gas;
- Operating expenses are expected to decrease by 8% to $10.25 per
boe in 2014 as Septimus operating costs per unit continue to
decline;
- Funds from operations are forecasted to be $200 million, an
increase of approximately 18% over estimated 2013 funds from
operations;
- Funds from operations netbacks are expected to improve as
higher valued oil production comes onstream at Tower, natural gas
prices are forecasted to be higher than in 2013 and a greater
number of wells are drilled horizontally on Crown land at
Lloydminster and Princess attracting lower royalties.
2014 Capital Budget by
Area
Area-Product |
Wells |
$MM |
Northeast British Columbia Montney - Gas/ngl |
14 |
94 |
Tower
- Light Oil |
6 |
39 |
Alberta Kakwa - Gas/ngl |
1 |
10 |
Alberta Princess - Oil |
16 |
39 |
Alberta/Saskatchewan Lloydminster - Oil |
25 |
36 |
Other |
- |
28 |
Total |
62 |
246 |
2014 Capital Budget by
Category
Expenditure Type |
$MM |
% |
Drilling, Completion, Equip & Tie-in |
153 |
62 |
Facilities and Infrastructure |
55 |
22 |
Production, Seismic/Land/G&A/Environmental/Other |
24 |
10 |
Optimization |
14 |
6 |
Total |
246 |
100 |
2014 Capital
Program
Montney, British Columbia
The capital program in northeast British Columbia is our most
ambitious program since we started accumulating land in 2007. Our
enthusiasm for this play and this area stems from a long learning
curve where a number of drilling and completion techniques have
been employed and have now evolved resulting in superior long term
economics and growth visibility. Crew has drilled over 40 wells
targeting Montney liquids rich natural gas at Septimus with the
latest group of wells exhibiting significant increases in
production, liquids content and expected rates of return.
The Septimus gas plant expansion to 60 to 65 mmcf per day of
capacity has been completed four months ahead of schedule and with
the facility at capacity, production has increased in this area
from 6,000 boe per day in January 2013 to a current rate of
approximately 10,500 boe per day which represents a 75% increase.
Improved efficiencies in drilling and completions, pad development
and an area water management plan have contributed to reduced costs
leading to robust economics. With the drilling success at Septimus,
Crew is planning to construct a second 60 to 65 mmcf per day gas
facility allowing the Company to fully utilize its expanded
pipeline capacity. The expected onstream date is mid-2015.
Crew's 2014 program is expected to keep the existing Septimus
gas plant full at a capacity of 60 to 65 mmcf per day. A three (3.0
net) well pad that is currently being drilled and a seven (7.0 net)
well pad planned to be drilled and completed in 2014 are expected
to keep production volumes in the 10,000 to 11,000 boe per day
range. We plan to pre-drill four wells in 2014 in anticipation of
the second gas processing facility.
Crew plans to drill and test one (1.0 net) well at Attachie and
two (1.0 net) wells at Groundbirch. We have 49 sections of land at
Attachie and 57 sections of land at Groundbirch. With recent
success at Septimus, we now plan to develop Groundbirch in 2015 and
2016 with a planned start-up of a natural gas processing facility
in 2016. The size of this facility has not been finalized.
Tower, British Columbia
At Tower, we plan to drill six (6.0 net) wells from two pads and
construct an oil battery.
Mannville - Princess, Alberta
At Princess, 16 horizontal wells are planned to be drilled on
Crown lands targeting the Mannville following a successful 2013
drilling program. Crew has over 30 horizontal Mannville drilling
locations at Princess. Lower royalties from legacy lower rate
Pekisko wells on freehold land and lower royalties associated with
new wells drilled on Crown lands are expected to improve area
netbacks through the year.
Mannville - Lloydminster, Alberta/Saskatchewan
At Lloydminster, Crew plans to drill 14 horizontal and 11
vertical wells following our successful 2013 program where
production has increased 22% from 5,580 to 6,800 bbl of oil per
day. The horizontal wells will benefit from lower royalties and are
expected to improve operating netbacks.
Falher/Cardium - Kakwa, Alberta
At Kakwa, we plan to drill one step out well following our 2012
Falher discovery which has produced 3.4 bcf in 11 months and is
currently producing 10.0 mmcf per day (1,950 boe per day).
Risk
Management
For 2014, Crew has the following hedges in place;
- Natural Gas - 32,932 gj per day swapped at AECO floor of
$3.51/gj;
- Oil - 4,124 bbl per day swapped at C$ WTI $97.83;
- Oil Differential - 2,500 bbl per day swapped WCS-WTI
Differential at C$24.06.
2014
Guidance
Average production (boe/day) |
|
29,500 to 30,500 (48% liquids) |
Exit production (boe/day) |
|
31,500 to 32,500 (48% liquids) |
Capital Expenditures |
|
$246 million |
$U.S. Nymex Oil |
|
$94.57/bbl |
$CDN AECO |
|
$3.37/gj |
Fx ($US/$CDN) |
|
0.9475 |
WCS Differentials |
|
26% |
Funds from operations (1) |
|
$200 million |
Ending debt/Q4 annualized funds from operations(1) |
|
1.83 times |
Note: |
(1) |
Such
terms do not have a standardized meaning prescribed by
International Financial Reporting Standards. Refer to the
Cautionary Statements at the end of this news release. |
Crew is investing approximately $34 million in 2014 on the
construction of a new gas plant and pre-drilled wells anticipated
to begin production in the second half of 2015 that will not
contribute production or funds from operations in 2014. These
investments are expected to form the foundation of steady and
prolonged production growth from the Montney contributing to
corporate production targeting greater than 40,000 boe per day at
the end of 2015 based on Crew's long range strategic planning.
Our 2014 budget guidance and 2015 targets are best estimates
based on certain assumptions including, without limitation,
operating results, known fiscal regimes and commodity prices and
will be regularly monitored by management. Our objectives will be
to proactively manage our capital program as it relates to
operational success and fluctuating commodity prices with a
priority to maintain financial flexibility and achieve our
production guidance. Additional information regarding our 2014
budget can be found within the latest presentation on the Company's
website at www.crewenergy.com.
CAUTIONARY
STATEMENTS
Forward-looking information and statements
The Company anticipates remaining disciplined but flexible
with its 2014 exploration and development capital expenditures as
it monitors business conditions and commodity prices throughout the
fiscal year. Where deemed prudent, it may make adjustments to its
2014 capital budget. Actual spending may vary due to a variety of
factors, including drilling results, crude oil and natural gas
prices, economic conditions, prevailing debt and/or equity markets,
field services and equipment availability, and any future strategic
acquisitions or dispositions. The Company has flexibility to adjust
the level of its capital investments as circumstances
warrant.
This news release contains certain forward-looking
information and statements within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "forecast", "target", "may",
"will", "project", "should", "believe", "plans", "intends" and
similar expressions are intended to identify forward-looking
information or statements. In particular, but without limiting the
forgoing, this news release contains forward-looking information
and statements pertaining to the following: the Company's planned
2014 capital expenditure program, goals and drilling plans,
estimated, expected and targeted production levels in 2014 and 2015
and commodity mix; future commodity prices, the future differential
between WTI prices and WCS prices, future royalty rates, the future
exchange rate for the Canadian dollar to the US dollar, operating
costs and projected decreases in same, transportation costs,
general and administrative costs, interest costs, the Company's
cash flow from operations and anticipated improvements in funds
from operations netbacks, the Company's estimated 2014 year end
bank debt, future results from operations; future development and
exploration activities, infrastructure additions, expansions and
related capital expenditures, the timing thereof and adequacy of
anticipated methods of financing, the number of wells to be drilled
and completed and related production expectations; and the amount
and timing of capital projects.
Forward-looking statements or information are based on a
number of material factors, expectations or assumptions of Crew
which have been used to develop such statements and information but
which may prove to be incorrect. Although Crew believes that the
expectations reflected in such forward-looking statements or
information are reasonable, undue reliance should not be placed on
forward-looking statements because Crew can give no assurance that
such expectations will prove to be correct. In addition to other
factors and assumptions which may be identified herein, assumptions
have been made regarding, among other things: the impact of
increasing competition; the general stability of the economic and
political environment in which Crew operates; the timely receipt of
any required regulatory approvals; the ability of Crew to obtain
qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of
the projects in which Crew has an interest in to operate the field
in a safe, efficient and effective manner; the ability of Crew to
obtain financing on acceptable terms; field production rates and
decline rates; the ability to replace and expand oil and natural
gas reserves through acquisition, development and exploration; the
timing and cost of pipeline, storage and facility construction and
expansion and the ability of Crew to secure adequate product
transportation; future commodity prices; currency, exchange and
interest rates; regulatory framework regarding royalties, taxes and
environmental matters in the jurisdictions in which Crew operates;
the ability of Crew to successfully market its oil and natural gas
products; ability to improve upon historical recovery
factors.
The forward-looking information and statements included in
this news release are not guarantees of future performance and
should not be unduly relied upon. Such information and statement,
including the assumptions made in respect thereof, involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to defer materially from those anticipated
in such forward-looking information or statements including,
without limitation: changes in commodity prices; changes in the
demand for or supply of Crew's products; unanticipated operating
results or production declines; changes in tax or environmental
laws, royalty rates or other regulatory matters; changes in
development plans of Crew or by third party operators of Crew's
properties, increased debt levels or debt service requirements;
inaccurate estimation of Crew's oil and gas reserve and resource
volumes; limited, unfavourable or a lack of access to capital
markets; increased costs; a lack of adequate insurance coverage;
the impact of competitors; and certain other risks detailed from
time-to-time in Crew's public disclosure documents, (including,
without limitation, those risks identified in this news release and
Crew's Annual Information Form).
The forward-looking information and statements contained in
this news release speak only as of the date of this news release,
and Crew does not assume any obligation to publicly update or
revise any of the included forward-looking statements or
information, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws.
BOE equivalent
Barrel of oil equivalents or BOEs may be misleading,
particularly if used in isolation. A BOE conversion ratio of 6
mcf:1 bbl is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Given that the value ratio based
on the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a 6:1 conversion may be misleading as an indication of
value.
Resource Estimates
This news release contains references to estimates of oil
and gas classified as Total Petroleum Initially In Place ("TPIIP")
in the Montney region in northeastern British Columbia which are
not, and should not be confused with, oil and gas reserves. Such
estimates are based upon independent resource evaluations effective
as at April 30, 2013 and May 31, 2013, respectively, prepared in
accordance with the Canadian Oil and Gas Evaluation Handbook. Such
estimates are subject to a number of cautionary statements,
assumptions, risks, positive and negative factors relevant to the
estimates and contingencies, the details of which were set forth in
Crew's previously disseminated press release dated July 9, 2013.
Accordingly, readers are referred to and encouraged to review the
sections entitled "Montney Resource Evaluation", "Definitions of
Oil and Gas Resources and Reserves" and "Information Regarding
Disclosure on Oil and Gas Reserves, Resources and Operational
Information" in the July 9, 2013 press release for applicable
definitions, cautionary language, explanations and discussion of
resources estimated herein, all of which is incorporated herein by
reference.
Crew is a Calgary, Alberta based oil and gas exploration,
development and production company whose shares are traded on the
Toronto Stock Exchange under the trading symbol "CR".
Crew Energy Inc.Dale ShwedPresident and C.E.O.(403) 231-8850Crew
Energy Inc.John LeachSenior Vice President and C.F.O.(403)
231-8859Crew Energy Inc.Rob MorganSenior Vice President and
C.O.O.(403) 513-9628www.crewenergy.com
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