2021 Production increase for CrewSharing some quick and dirty analysis from the Q3 2020 Report, please provide comments for discussion.
The Company forecasts annual 2020 exploration and development expenditures of $85 to $90 million ($27 to $37 million net of dispositions), with fourth quarter capital spending projected to be $40 to $45 million. Drilling and completion of the seven wells on the 9-5 pad at West Septimus will continue through the fourth quarter of 2020, with production anticipated to begin before year-end 2020. The Company will also continue to advance its plan to increase production to match processing and transportation capacity and to improve margins with the drilling of five wells at the 3-32 pad in the West Septimus ultra-condensate rich area. The Company will also continue to advance its plan to increase production to match processing and transportation capacity At Septimus I believe the processing capacity is approximately 180 Mmcf/day. Q3 gas production was 86 Mmcf/day. If Crew is going to increse production to match processing capacity then they need to bring on approximately 90 Mmcf/day. To achieve this then they will need to double their current gas production.
How can they do this? They are now drilling 7 additional wells at UCR for a total of 14 new wells plus 1 DUC well for 15 new wells. ( 2 other additional wells are drilling suspended status and may be added). So 90 Mmcf/day/15 wells = 6 Mmcf/day well. The 7 well pad shows ist year average of 4.8 Mmcf/day and the 8 UCR wells will be lower at say 4 Mmcf/day, so 2021 production increase may average 65.6 Mmcf/day for 2021, but it will be higher when these wells are first placed on stream.
Crew also mentions: At the beginning of November 2020, Crew’s commitments on the Alliance pipeline have been reduced from 100 mmcf per day to 65 mmcf per day with the Company retaining annual renewal rights.
In the Q3 2020 Report Crew states that in 2021 they are reducing Alliance markets to 40% of their portfolio. So if 65 Mmcf/day on Alliance = 40% then 100% of total company production = 162.5 Mmcf/day. 162.5 Mmcf/day - 90 Mmcf/day (current production) = 72.5 Mmcf/day production add. This fits within the range that I have been estimating especially if they drill the 2 other wells that are drill ready.
In addition,I noticed this table on page 26 of the Q3 2020 Report that transportation and processing obligations take a significant jump from $14.8 million in 2020 to a whopping $54.2 million in 2021. This increase probably reflects the new gas coming on stream.
| | 2020 | 2021 | |
| Firm transportation agreements | $10,864,000 | $36,701,000 | |
| Firm processing agreements | $3,914,000 | $15,536,000 | |
| Total | $14,778,000 | $52,237,000 | |
So to summerize: Look for a freakin huge production bump from this company in the next 60-90 days. If they don't say anything about it don't worry, they have been keeping their plans a secret for some unknown reason.