RE:RE:Patiently waiting for earning release MESSAGE TO SHAREHOLDERS
Enhancing excess adjusted funds flow while maintaining production has been our focus in 2018. In the first six months of this year, we have produced on average 70,304 boe per day while spending only 57% of adjusted funds flow on our exploration and development (E&D) program. This has resulted in $51.5 million of surplus funds, net of dividends, available to allocate to total net debt reduction, realizing 65% of our annual target year-to-date. We remain on track to produce between 69,000 and 71,000 boe per day in 2018 and meaningfully reduce total debt throughout the year.
Significant maintenance on NOVA Gas Transmission Ltd. (NGTL), and an active facility turnaround season led to a modest development program in the second quarter, drilling only six wells and completing one well. Notwithstanding the curtailment of approximately 2,400 boe per day due to these interruptions, production averaged 68,214 boe per day in the quarter.
A second quarter highlight of our E&D program was a significant infrastructure project at Strachan. Completed in June, this project enables the start-up of our five-well liquids-rich development program in the second half of 2018 through a low-cost processing facility. We will remain focused on leveraging our low-cost structure and liquids-rich drilling inventory to enhance adjusted funds flow for the remainder of the year.
Operational and financial accomplishments for the second quarter of 2018 include:
Generated adjusted funds flow of $65.7 million, which was 18% ahead of budget largely due to stronger natural gas, oil and natural gas liquids (NGL) prices relative to forecast.
Executed an E&D capital spending program of $33.1 million, equal to 50% of adjusted funds flow, to drill six (5.8 net) wells and complete one well. With one well on production, the remaining five wells drilled will be brought on production late in the third quarter.
Production averaged 68,214 boe per day for the quarter, which was modestly ahead of our budget. This includes an impact of approximately 3,500 boe per day of curtailed production resulting from facility turnarounds, ethane (C2) rejection at midstream facilities and significant NGTL maintenance. Current production is approximately 68,000 boe per day.
Allocated $29.0 million of excess adjusted funds flow to debt repayment, reducing long-term debt, net of adjusted working capital, by four percent to $826.6 million relative to the same prior year period.
Improved NGL benchmark and contracted pricing in Q2 resulted in a 17% improvement in realized pricing relative to the same prior year period.
Reduced payments to service our long-term debt with interest expense decreasing by 16% relative to the same prior year period.
Realized cash costs of $9.47 per boe, up six percent over the prior year period, primarily reflecting an increase in transportation costs associated with access to the Dawn market and unutilized NGTL firm transportation service.
Protected adjusted funds flow through the summer season with our commodity hedge portfolio having 227,000 mcf per day hedged at an AECO price of $2.92 per mcf and 75,000 mcf per day diversified beyond AECO for full protection against daily AECO volatility.