Source:
https://www.dailyoilbulletin.com/article/2014/1/24/lightstream-take-cardium-approach-swan-hills/
Lightstream To Take Cardium Approach At Swan Hills
BY PAT ROCHE – JAN. 24, 2014 – VIEW ISSUE
Lightstream Resources Ltd. will take the same approach in developing its emerging Swan Hills play as it did with the Cardium, a conference heard on Thursday.
Lightstream (formerly PetroBakken Energy Ltd.) is currently producing more than 20,000 boe a day (70-75 per cent light oil and natural gas liquids) from the Cardium play, said chief financial officer Peter Scott.
The Cardium stretches across west and central Alberta. In early 2010 Lightstream entered the light oil play, which is currently its largest business unit by production, Scott told a CIBC World Markets investor conference in Whistler, British Columbia.
With about 580 drilling locations, Lightstream believes it has “a few years of growth still left in the Cardium play,” he said.
Based on four wells per section, Lightstream can probably build its Cardium production to 25,000-30,000 boe a day, Scott said.
“And what’s significant for us in the Cardium play is actually we turned it into a net cash generator for us,” the CFO said. “What I mean by that is revenue less royalties, less all op costs, less capital. [The play in] 2013 actually generated some surplus cash on an operating basis.”
North of Lightstream’s Cardium business unit is its emerging play area where the company plans to spend roughly $90 million this year.
The majority of that $90 million will be spent on drilling, completions and tie-ins in the Swan Hills play, though it also includes roughly $30 million for a battery being installed in the area during the first quarter, he said. “I think through the next several years you’ll see us spend more money in the Swan Hills area.”
Asked about Lightstream’s Swan Hills results and approach, Scott said: “We’re liking the results that we’re getting from the Swan Hills. Results have been at or above our type curve for the play.”
He added: “A good analogy is the Cardium. When we first entered the Cardium back in 2010, operators at that time weren’t having great success with the play. … What we were focusing on in the Cardium at that time was areas that hadn’t been developed. … We see the same thing in the Swan Hills as well -- making sure you’re getting those areas that haven’t seen some depletion.”
Referring to the Cardium, Scott said: “We were the company to bring slickwater fracs to that play, which reduced costs [and] improved results.”
In the Swan Hills play, Lightstream is “using the latest drilling techniques to bring down costs…. And then on the completions side, we are using acid and proppant [in the same completion] and we think we’ve been able to make that work and get better results,” he said.
“So in terms of making that play work, I think you need to pay attention to where you’re drilling. You need to be, like any play, controlling those costs. We’re looking to be in the $5-million range. And the type curve that we have, we see getting our money back in two years, or less.”
He declined to be more specific about the Swan Hills, citing competitive advantage.
Last fall Lightstream announced a major restructuring, halving its dividend, cutting planned 2014 spending by a quarter from 2013 and vowing to sell $600 million worth of assets (DOB, Nov 21, 2013).
“We’re looking at doing at least $600 million worth of deals of non-core properties over the next 24 months. We’ll use all those proceeds to repay debt and improve our debt-to-cash flow levels,” Scott said Thursday.
He said falling decline rates enable the company to keep production flat while spending significantly less capital.
Asked if any assets are not on the table for potential disposition, the CFO said: “We’ve always said at the right price we’ll sell any asset.”
But the assets currently on the block include producing and non-producing non-core properties, including a package of royalty-interests in southeast Saskatchewan.