CALGARY, ALBERTA--(Marketwire - March 14, 2012) - Delphi Energy Corp. (TSX:DEE) ("Delphi" or the "Company") is pleased to announce its financial and operational results for the quarter and year ended December 31, 2011.
2011 Highlights
- achieved record average production in 2011 with volumes of 8,870 barrels of oil equivalent per day (boe/d), an increase of ten percent compared to 2010;
- increased the liquids percentage of production to approximately 29 percent crude oil and natural gas liquids in 2011, up from 20 percent in 2010 and offsetting a two percent decline in natural gas production;
- generated funds from operations of $66.9 million, an increase of 11 percent from the previous year;
- achieved a cash flow netback of $20.65 per boe, unchanged from the prior year;
- reduced operating costs by an additional eight percent to $6.84 per boe in 2011 from 7.44 per boe in 2010;
- increased total proved reserves by ten percent to 25.1 million boe and increased total proved plus probable reserves by 16 percent to 40.2 million boe;
- drilled 30 (23.8 net) wells with a success rate of 100 percent;
- achieved average finding, development, acquisitions and dispositions costs of $18.28 per proved boe and $12.37 per proved plus probable boe;
- generated a recycle ratio of 2.0 times on an operating netback of $24.25 per boe;
- increased the Company's credit facilities to $145.0 million in May of 2011; and
- reduced net debt per boe at December 31, 2011 on a proved and proved plus probable basis for the fifth year in a row to $3.81 and $2.38 per boe, respectively.
Operational Highlights
|
Three Months Ended
December 31 |
Year Ended December 31 |
|
| Production |
2011 |
2010 |
% Change |
2011 |
2010 |
% Change |
|
| Natural gas (mcf/d) |
38,973 |
38,918 |
- |
37,992 |
38,816 |
(2 |
) |
| Crude oil (bbls/d) |
1,436 |
1,147 |
25 |
1,321 |
950 |
39 |
|
| Natural gas liquids (bbls/d) |
1,405 |
906 |
55 |
1,217 |
667 |
82 |
|
| Total (boe/d) |
9,337 |
8,539 |
9 |
8,870 |
8,086 |
10 |
|
|
|
|
|
|
|
|
|
Financial Highlights ($ thousands except per unit amounts) |
|
Three Months Ended
December 31 |
|
Year Ended December 31 |
|
|
2011 |
|
2010 |
|
% Change |
|
2011 |
|
2010 |
|
% Change |
|
| Petroleum and natural gas sales |
33,115 |
|
29,729 |
|
11 |
|
126,887 |
|
113,772 |
|
12 |
|
|
Per boe |
38.55 |
|
37.92 |
|
2 |
|
39.19 |
|
38.55 |
|
2 |
|
| Funds from operations |
17,081 |
|
17,868 |
|
(4 |
) |
66,872 |
|
60,412 |
|
11 |
|
|
Per boe |
19.89 |
|
22.74 |
|
(13 |
) |
20.65 |
|
20.46 |
|
1 |
|
|
Per share - Basic |
0.14 |
|
0.16 |
|
(13 |
) |
0.57 |
|
0.56 |
|
2 |
|
|
Per share - Diluted |
0.14 |
|
0.16 |
|
(13 |
) |
0.56 |
|
0.56 |
|
- |
|
| Net earnings (loss) |
825 |
|
1,744 |
|
(53 |
) |
11,602 |
|
(16,984 |
) |
- |
|
|
Per boe |
0.96 |
|
2.22 |
|
(57 |
) |
3.58 |
|
(5.77 |
) |
- |
|
|
Per share - Basic |
0.01 |
|
0.02 |
|
(50 |
) |
0.10 |
|
(0.16 |
) |
- |
|
|
Per share - Diluted |
0.01 |
|
0.02 |
|
(50 |
) |
0.10 |
|
(0.16 |
) |
- |
|
| Capital invested |
37,282 |
|
18,195 |
|
105 |
|
114,477 |
|
104,950 |
|
9 |
|
| Disposition of properties |
(4,835 |
) |
- |
|
- |
|
(12,873 |
) |
(246 |
) |
5,133 |
|
| Net capital invested |
32,447 |
|
18,195 |
|
78 |
|
101,604 |
|
104,704 |
|
(3 |
) |
| Acquisition of properties |
56 |
|
(369 |
) |
- |
|
273 |
|
18 |
|
1,417 |
|
| Total capital invested |
32,503 |
|
17,826 |
|
82 |
|
101,877 |
|
104,722 |
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
December 31, 2010 |
% Change |
|
| Debt plus working capital deficiency (1) |
95,632 |
|
108,054 |
(11 |
) |
| Total assets |
447,073 |
|
386,737 |
16 |
|
| Shares outstanding (thousands) |
|
|
|
|
|
|
Basic |
131,000 |
|
112,825 |
16 |
|
|
Diluted |
141,591 |
|
120,601 |
17 |
|
|
|
|
|
|
|
(1) excludes fair value of financed instruments.
MESSAGE TO SHAREHOLDERS
2011 was another solid year for Delphi, as the Company achieved record operational results and strong financial results in an environment where increased oil and natural gas liquids ("NGL's") pricing offset a 17 percent reduction in natural gas prices.
The Company achieved production growth of ten percent, while cash flow increased 11 percent and reserves were up 16 percent. Light oil and NGL production growth in 2011 of 57 percent more than offset a two percent decrease in natural gas production. Both light oil and NGL production have tripled over the past three years while natural gas production has only grown 14 percent. Corporate average NGL yields have increased to over 35 bbls/mmcf in 2011 compared to 12.5 bbls/mmcf just three years ago. Continued cost structure improvements also contributed to the eleven percent increase in cash flow and another year of top quartile cash netbacks. Solid operating efficiencies are critical to maintaining sufficient cash generating capability to execute an economic growth plan.
Year in Review
The Company's concentrated high working interest, mostly operated asset base strategically supported by ownership in significant gathering and processing infrastructure continues to deliver growth achieving 100 percent drilling success on a 30 well (23.8 net) drilling program in 2011. Strong reserve additions from the capital program replaced production in 2011 by 2.75 times and increased the Company's reserve life index to 12.4 years. Total proved reserves increased in 2011 by 10 percent, with total proved plus probable reserves increasing by 16 percent.
Delphi achieved top quartile finding, development and net acquisition cost ("FD&A") for 2011 on proved and probable reserve additions, inclusive of future development capital ("FDC") of $12.37 per boe. Operating netbacks were $24.25 per boe in 2011, generating a recycle ratio of 2.0 times. Delphi's recycle ratio continues to be a reliable measure of the Company's economic growth defined by superior netbacks and top quartile finding and development costs. The future drilling locations booked in Delphi's year end 2011 GLJ Engineering Report (the "GLJ Report") increased from 43 locations to 48, with FDC increasing approximately six percent to $143.1 million. Future drilling locations associated with the Company's Bigstone Montney play in the GLJ Report consisted of only two gross (1.7 net) wells.
Financial results in 2011 are highlighted again by a high quality revenue stream and an efficient cost structure, yielding continued growth in cash flow. Revenue increased by 12 percent as a result of increased light oil and NGL production coupled with higher prices and offset by marginally lower natural gas production and 17 percent lower realized natural gas prices. Cash flow increased in 2011 to $66.9 million with hedging gain contributions decreasing to 12 percent of cash flow compared to 27 percent in 2010.
Corporate cash netbacks, including hedging, remained relatively flat at $20.65 per boe compared to $20.46 per boe in 2010. The successful growth of the Company's cash generating capabilities through commodity mix change and cost structure improvements continues to successfully displace less predictable hedging gains as a material component of historically solid cash netbacks in a low natural gas price environment. However, the Company's past track record of $20.00 per boe cash netbacks is expected to be under pressure in 2012 given the much weaker current and anticipated natural gas price environment.
The capital program in 2011 was $114.8 million with net capital expenditures of $101.9 million after taking into account $12.9 million of non-core dispositions.
At December 31, 2011, unutilized credit available on the Company's $145.0 million banking facilities was nearly $50 million (34 percent of available bank facilities), providing support for our Q1 2012 capital program which historically is the quarter in which the majority of Delphi's capital expenditures are incurred.
Delphi's undeveloped land position at December 31, 2011, which is a reliable measure of its future growth prospect inventory, remained relatively flat at 239,186 net acres (374 sections). The Company has regulatory approval to drill up to four natural gas wells per pool per section on its lands at its three core properties of Bigstone, Hythe and Wapiti. Delphi also increased its land holdings in 2011 on its Bigstone Montney play to 45 gross (41.5 net) sections.
Delphi has a number of initiatives in the ongoing capital program that we believe will provide continued growth of our light oil, condensate, and NGL production and reserves.
Bigstone Montney Program
The Company has now successfully drilled and completed three gross (2.75 net) horizontal wells on its Montney lands in Bigstone. All three wells have been drilled using "extended-reach" drilling techniques with horizontal lengths as long as 3,005 metres and completed using multi-stage fracturing technology.
The previously released results of the first Bigstone East 16-30 well with a surface location at 1-19-60-22 W5M, flow tested at an average rate of 12.5 million cubic feet per day of natural gas over the final 24 hours of the four day flow period with approximately 770 barrels per day of condensate (62 bbls/mmcf) at the end of the test. Shallow-cut plant recoveries of NGL's are expected to yield an additional 30 to 35 bbls/mmcf. On a subsequent multi-rate flow test with the well producing at a restricted rate of 2.75 mmcf/d, the wellhead condensate yield increased to 152 bbls/mmcf. These initial flow test results have exceeded Delphi's expectations.
A second Bigstone East 4-2 well, located three miles (five kilometres) south west of the first well is currently on flow test, with initial flow data indicating another favourable result. Flow test results are expected to be released within the next two weeks. After testing operations and well site facility construction is completed, the drilling rig will move back on to the 4-2 surface location to commence drilling operations on the next "extended-reach" Montney well at Bigstone East.
The 100 percent Delphi owned gathering system and 30 mmcf/d facility at Bigstone East is expected to be commissioned for start-up by mid-April.
The results of the 16-4 horizontal well located on the Bigstone West land block remain confidential at this time.
Bigstone Gething Program
The first Gething horizontal well at 13-16 has also been drilled and completed with a 10 stage fracture program successfully placed over an 879 metre horizontal section. The well is currently on flow test, with results also expected to be released within the next two weeks. The pipeline tie-in to Delphi's existing sweet natural gas infrastructure is expected to be completed by mid-April. The well is expected to produce NGL yields of approximately 25 bbls/mmcf based on existing Gething production in the area.
Wapiti Nikanassin / Multi-zone Program
The development of multiple Cretaceous targets utilizing vertical wells has continued through the first quarter of 2012. Two wells were drilled and will be completed after spring break-up. The Wapiti area production has increased from 300 boe/d at the time of acquisition in 2009, to a current rate of almost 3,000 boe/d today with an average NGL yield of 80 bbls/mmcf. The application of horizontal drilling and multi-stage fracturing technology to the producing formations at Wapiti is a natural progression of the development at Wapiti as the delineation of the targets are matured with vertical wells. Operational success with the Bigstone Gething program will also assist with a horizontal Wapiti program.
Outlook
The continued softening of the natural gas price environment cannot be ignored and is expected to have a significant effect on the Company's natural gas revenues in 2012. Our track record of finding and developing oil and gas reserves in the deep basin at top quartile input costs, yielding solid cash netbacks gives confidence to our sustainable growth model. In this environment, however, aggressive growth plans must give way to conservative cash flow and balance sheet management.
Delphi is presently not in a position to provide 2012 guidance due to the current lack of production performance data available for both the Bigstone Montney and Bigstone Gething programs. Some production history is required to appropriately forecast both natural gas production performance and wellhead condensate yields.
Delphi continues to rationalize certain non-core assets with proceeds being redeployed into the 2012 capital program. During the first quarter of 2012, the Company completed the sale of non-core producing assets for net proceeds of $11.5 million and is targeting a further $25.0 million to $35.0 million in dispositions by the end of 2012. The Company is targeting net debt at December 31, 2012 to be between $105.0 million and $115.0 million.
Also, the Company has hedged approximately 20 percent of its 2012 natural gas production at $3.03 per mcf, potentially generating gains of $3.2 million and increasing the cash netback by approximately $1.00 per boe.
The Company expects to maintain 2012 net capital expenditures to within $10.0 million of cash flow. Historically, Delphi executes a winter capital program in excess of first quarter cash flow followed by at least one quarter of minimal activity prior to returning to the field with an active fall program. With the success of the Montney program thus far, the current plan is to continue drilling through spring break-up then reassess the environment, the disposition program and Montney well results prior to making firm plans with respect to a second half of 2012 capital program.
Delphi has never been in a better position to deliver long term sustainable growth with a production mix that yields a high quality revenue stream. The Company's low cost structure maximizes cash generating margins to re-invest into our significant inventory of drilling opportunities. In this weak natural gas price environment, the Wapiti and Bigstone Montney programs offer significant inventory to grow the Company's condensate and NGL production far beyond the current yield of 35 bbls/mmcf, while Hythe offers further light oil opportunities.
We believe the low-cost reserve additions achieved over the past three years are repeatable on our existing large undeveloped and under-developed contiguous land bases within our core areas. Our growing natural gas liquids and light oil production base is providing a natural hedge against low natural gas prices.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support as we move forward with confidence and enthusiasm.