May 18, 2022
Kiwetinohk Energy Corp. Drill to Fill - Increasing 2022 Guidance
Our view: KEC provided an intra-quarter operations update which featured a +30% capital increase, driving an increase to our volume outlook of 12% and 17% in 2022 and 2023, respectively. Key drivers are a focus on filling spare facility capacity at Simonette, combined with commodity price tailwinds. KEC remains well positioned from a balance sheet perspective, supporting the increase. For more company details please see our note from last week here and our initiation here.
Key points:
2022 guidance - upstream capital up +32%; power generation unchanged.
KEC increased its 2022 upstream capital guidance to $265-290 million (+32% at the mid-point). This results in a 30% increase to the total 2022 budget (power generation capital guidance unchanged), now at $280-310 million. Production guidance was increased to 15,000-17,000 boe/d (up 1,500 boe/d from 13,500-15,500 boe/d previously) on increased spending and strong YTD results.
Operations - scope of incremental activity. Simonette remains the focus of the 2022 budget, as KEC continues to ramp up production and fill spare processing capacity. Field operations remain in good shape, with incremental capital directed toward tighter drilling schedule, which results in an accelerated tie-in of 6 wells and addition of 5 new Duvernay wells to the 2022 drilling program. Production impact of the newly added wells will be largely 2023-weighted.
Increasing estimates. Our production estimates increase by 12% and 17% in 2022 and 2023, respectively, which is reflective of the strong YTD results and increased spending. As a result of higher volumes and stronger margins, our CFPS estimate increase by 14% and 16% in 2022 and 2023, respectively.