"DELPHI ENERGY CORP. PROVIDES OPERATIONS UPDATE" Re: Delphi Energy Corp. (DEE:TSX; delphienergy.ca) "News"
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Graeme
President | Colwell Capital Corp.
Tel: 403-561-8989
Email: graeme@colwellcapital.com | Web: colwellcapital.com
______________________________________________________
Mr. David Reid reports
DELPHI ENERGY CORP. PROVIDES OPERATIONS UPDATE ON SUCCESSFUL WINTER PROGRAM AND PARTICIPATION AT CAPP SCOTIABANK INVESTMENT SYMPOSIUM
Delphi Energy Corp. has provided an operations update on the winter program at its Bigstone Montney property. The success of the program has increased current corporate production to average over 10,000 barrels of oil equivalent per day ("boe/d") for the past two weeks. The Company reconfirms its production guidance to exit 2017 between 11,000 and 12,000 boe/d.
Delphi is also pleased to announce that it will be attending and participate at the CAPP Scotiabank Investment Symposium in Toronto, Ontario on April 11 and 12, 2017.
OPERATIONS HIGHLIGHTS
Corporate production has averaged over 10,000 boe/d during the past two weeks based on field estimates with field condensate and natural gas liquids contributing 41 percent of the total;
Six (3.8 net) wells from the winter program, of which three (1.8 net) wells were from the 2016 program, have been brought on production since late December 2016;
Delphi has two rigs currently drilling wells number five and six of the 2017 program, with plans to remain drilling through spring break-up. An additional well from each of the current drilling pads will be drilled totaling five (3.2 net) wells ready for completion after spring break up.
OPERATIONS UPDATE
Delphi's planned drilling program in 2017 will more than double the number of wells drilled under the 2016 program with the addition of a second drilling rig that commenced activity in December 2016. The 2017 development plan contemplates the drilling of 13 gross (8.4 net) Bigstone Montney horizontal wells and the completion, tie-in and well site equipping of 14 gross (9.0 net) wells. Recent success of the Company's winter drilling program has reconfirmed confidence in the 2017 development plan to grow year-end exit production for 2017 to between 11,000 and 12,000 boe/d, an anticipated growth increase of approximately 60 percent over 2016 exit production, while increasing leverage to condensate materially.
Results from the Company's Montney drilling and completion operations are meeting or exceeding expectations. The combination of new development moving further west on the Company's Bigstone Montney property, along with Delphi's third generation frac design, has shown significant improvements to field condensate to natural gas yields as demonstrated by the current corporate production weighting increase to 41 percent liquids.
The Company is pleased to report the first three (2.0 net) wells of the 2017 program have recently been brought on production. Initial results of the 15-08-60-223W5 ("15-08"), 15-11-60-23W5 and 13-15-60-23W5 wells have all met or exceeded Delphi's expectations. Over the first 20 days on production 15-08 (65 percent working interest), averaged a total of 1,326 boe/d with a field condensate to sales gas ratio of 238 barrels per million cubic feet ("bbl/mmcf"). Total liquid production, including estimated natural gas liquids of 46 bbl/mmcf sales, accounted for 63 percent of the total sales production rate. Delphi will report initial production results of the other two wells when the data becomes available. Delphi's fourth well of the 2017 program at 15-9-60-23W5 (61.8 percent working interest) was drilled to a total depth of 5,912 metres with a horizontal lateral in the Montney of 2,864 metres. A 40 stage completion liner was installed with fracturing operations scheduled to commence after spring break-up.
In early March, the Company commenced drilling its fifth and sixth wells of the 2017 capital program at 13-17-59-22W5 (65 percent working interest) and 13-9-60-23W5 (61.8 percent working interest). An additional well will be drilled from each of these pad sites, resulting in Delphi having a total of five (3.2 net) additional Montney wells ready for completion operations after spring break-up.
Production for the first quarter of 2017 is estimated from field data to be slightly ahead of internal forecasts at 8,000 boe/d, representing a 13 percent increase from the fourth quarter of 2016, while field condensate production is estimated to have increased 46 percent to approximately 1,950 barrels per day ("bbls/d"), well ahead of expectations. Natural gas production for the first quarter of 2017 is estimated to have marginally increased by four percent, or approximately 1.2 million cubic feet per day ("mmcf/d"). With the most recent three wells being brought on-stream, production over the past two weeks has exceeded 10,000 boe/d with field condensate production estimated to be approximately 2,650 bbls/d, a 100 percent increase from the fourth quarter of 2016. Total condensate and natural gas liquids currently represent approximately 41 percent of the total current production volumes up from 35 percent in 2016 and 30 percent in 2015. Production in the second quarter of 2017 will be impacted by the planned maintenance turnaround at the SemCAMS operated Kaybob South #3 gas processing plant but mitigation plans have been put in place to re-direct some natural gas production to the SemCAMS operated Kaybob Amalgamated gas processing plant during the outage. As a result, the Company continues to forecast average production volumes to be relatively flat at approximately 8,000 boe/d over the first six months of 2017, with significant second half growth forecast given the current production capability, the five wells expected to be brought on production during the third quarter of 2017, and the continued drilling program in the second half of the year.
RISK MANAGEMENT
Delphi has continued to add to its strong risk management position. The Company believes that reducing commodity price volatility through an active and strategic hedging program both reduces downside cash flow risk while protecting the economics of new capital being deployed. Protecting simple payouts for new wells of approximately one year through a strategic hedging program ensures the ability to effectively reinvest post-payout free cash flow. The Company now has approximately 22 mmcf/d, or 65% of its remainder of 2017 forecast natural gas production hedged at an average price of CDN$4.20 per mmbtu and approximately 900 bbls/d of condensate hedged at an average WTI price of CDN$66.67 per barrel). Delphi has mitigated the persistent widening of the AECO and Station 2 basis differentials by contracting most of its gas into the Chicago market where pricing has materially outperformed local western Canada pricing, even with the incremental transportation costs.
Natural Gas Q2 - Q4/17 2018 2019
Percent Hedged * 65 % 46 % 21 %
Hedge Price (CDN $/mmbtu) $ 4.20 $3.88 $3.89
Crude Oil Q2 - Q4/17 2018 2019
Percent Hedged * 42 % 14 % 14 %
Hedge Price (WTI CDN $/bbl) $ 66.67 $70.00 $70.00
* Based on average 2017 production of 33.5 mmcf/d of natural gas and 2,150 bbls/d of field condensate.
OUTLOOK
The Company continues to forecast absolute and per share growth across all measures during 2017, while maintaining balance sheet strength. 2017 guidance is highlighted by a significant increase in drilling activity funded in part by the $20.0 million carry capital costs relating to the transaction previously announced with its industry partner.
Delphi has secured the required firm service transportation for 100 percent of forecasted 2017 natural gas production growth. The contracted Alliance full path service to Chicago with its incremental priority interruptible service handles approximately 95 percent of the Company's natural gas sales, and together with the existing and incremental 2018 contracted firm TCPL service, will provide the Company with sufficient firm service to handle accelerated growth plans beyond 2017. Delphi's Bigstone Montney field compression and dehydration facilities are also sufficient for the forecasted growth in 2017.
To handle the Company's growing production volumes beyond 2017, Delphi is working to expand its existing Montney field dehydration and compression capacity at East and South Bigstone. Through this effort, Delphi has secured a 20 mmcf/d amine processing equipment package to sweeten a portion of the Montney production for processing at the under-utilized Bigstone sweet gas plant located at 14-28-59-22W5, where the Company owns a 25 percent working interest.
Delphi is now well positioned to achieve increased production, cash flow and reserve growth over the near and long term to the benefit of all our stakeholders.
This news release does not constitute an offer to sell or a solicitation of any offer to buy the securities in the United States. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended and will not be offered or sold in the United States absent an exemption from the registration requirements thereof.
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.