PMT is growing again in 2017/18
Perpetual sets 2017 capital budget at $65-million
2016-12-09 02:27 ET - News Release
Ms. Susan Riddell Rose reports
PERPETUAL ANNOUNCES 2017 CAPITAL SPENDING AND PRODUCTION GUIDANCE
Perpetual Energy Inc. has released its capital-spending plans and expects production growth for 2017.
Perpetual's success in advancing its strategic priorities in 2016, coupled with strengthening commodity prices, has established a foundation for strong growth in production and funds flow in 2017. The Company's Board of Directors has approved an exploration and development capital spending program of up to $65 million for 2017, continuing drilling activity beyond the previously announced capital spending program for the fourth quarter of 2016.
Beginning in early December, drilling operations commenced at both Mannville and East Edson, with a single rig drilling program in each area. Prior to year-end 2016, the Company expects to have one well rig released and a second well spud on a two well pad at East Edson, both targeting the Wilrich formation. Perpetual also expects to execute the drilling of up to five heavy oil wells at Mannville as well as two horizontal wells to evaluate its shallow shale gas play in the Viking and Colorado formations through December and January, taking advantage of synergies with the heavy oil drilling program. The fourth quarter 2016 capital program also includes expenditures for high return conventional shallow gas workovers and recompletions as well as waterflood operations in the Mannville area.
In 2017, Perpetual will focus its capital spending on its core operating areas, with spending at East Edson, representing close to 85 percent of total forecast exploration and development expenditures. In the first quarter of 2017, the Company plans to spend close to $23 million completing frac and tie-in operations on the two wells which commenced drilling in the fourth quarter of 2016, and drilling up to four additional Wilrich horizontal wells. A total of five of the six new drills are forecast to be completed, tied in and on production prior to spring break up. Subject to commodity prices, the Company plans to recommence its one rig drilling program after break up to continue to grow production, at East Edson, with the drilling of up to an additional eight wells. Based on the type-curve, the one rig drilling program in East Edson is expected to re-establish throughput using Company-owned infrastructure approaching the capacity of 75 MMcf/d plus associated liquids by the first quarter of 2018. The Company also intends to continue completion and tie-in operations at Mannville during the first quarter of 2017 along with additional workovers and recompletions to optimize conventional shallow gas production. Pending successful drilling results and commodity prices, four additional heavy oil wells are planned for the second half of 2017 in Mannville.
The table below summarizes expected capital spending and drilling activities for the fourth quarter of 2016 and for the first and second half of 2017.
Exploration and development capital expendituresQ4 2016 $ millions# of wells (gross/net) East Edson liquids-rich gas 4.3 1/1.0 Mannville heavy oil 2.2 2/2.0 Mannville gas 1.3 2/2.0 Other 0.2 - Total capital spending(1) 8.0 5/5.0 Exploration and development capital expendituresH1 2017 $ millions# of wells (gross/net) East Edson liquids-rich gas 21.6 5/5.0 Mannville heavy oil 2.5 3/2.3 Mannville gas 1.8 - Other 0.1 - Total capital spending(1) 26.0 8/7.3 Exploration and development capital expendituresH2 2017 $ millions# of wells (gross/net) East Edson liquids-rich gas 34.2 8/8.0 Mannville heavy oil 4.1 4/(4.0) Mannville gas 0.7 - Other - - Total capital spending(1) 39.0 12/12.0 (1) Excludes budgeted abandonment and reclamation spending of $0.5 million in the fourth quarter of 2016 and up to $4 million in 2017.
Capital spending during the fourth quarter of 2016 and 2017 will be funded through a combination of funds flow and proceeds from the sale of assets as required.
Based on the total capital spending program in 2017 of $65 million, Perpetual expects to exit 2017 at a production rate of 12,750 to 13,000 boe/d in December 2017, with full year 2017 production averaging between 10,750 to 11,000 boe/d (85% natural gas). This represents growth in average daily production from Q4 2016 to full year 2017 of close to 30 percent and an increase in exit rate based on average December production of approximately 60 percent year over year.
Based on these assumptions and the current forward market for oil and natural gas prices, Perpetual forecasts 2017 funds flow of approximately $44 million ($0.84 per share). Incorporating the current market value of the Company's 1.85 million common shares of Tourmaline Oil Corp. ("TOU Shares") of $36.78 per share, the Company estimates year end 2017 total net debt of approximately $65 million, with a corresponding debt to trailing twelve months funds flow ratio of approximately 1.5.
Incorporating the assumptions outlined above, the following table shows Perpetual's estimated 2017 forecast funds flow using various commodity price sensitivities for the full year of 2017:
Projected 2017 funds flow(2) ($ millions)2017 AECO gas price ($/GJ)(1) 2017 WTI price (US$/bbl)(1) $2.50 $2.75 $3.00 $3.25 $3.50 $4.00 $42.5021.7 26.4 33.6 41.5 49.3 64.8 $45.0023.1 27.8 35.0 42.9 50.7 66.2 $47.5024.7 29.5 36.6 44.5 52.3 67.8 $50.0026.3 31.1 38.2 46.1 53.9 69.4 $55.0029.0 33.8 40.9 48.7 56.5 72.0 (1) The current settled and forward average AECO and WTI prices for calendar 2017 as of December 8, 2016 were $3.14 per GJ and US$54.10 per bbl, respectively. (2) Funds flow is a non-GAAP measures. Please refer to "Non-GAAP Measures" in Perpetual's Management Discussion and Analysis dated November 8, 2016.
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