Completion operations on the Company’s first three
The first two wells of the 2020 drilling program were the 13-12-60-24W5 (“13-12”) & 14-12-60-24W5 (“14-12”)
Both wells were drilled to a total depth of approximately 6,000 metres with an extended reach horizontal lateral in the
Over the last 24 hours prior to running production tubing,
- the 13-12 well flowed on clean-up at an average rate of 3.9 million cubic feet of natural gas per day (“mmcf/d”) of raw gas and 1,205 barrels per day (“bbls/d”) of 47 degree API field condensate (357 bbls/mmcf of sales gas). Total sales production rate for 13-12 over this 24 hour period was approximately 1,907 barrels of oil equivalent per day (“boe/d”) (70 percent liquids), including an estimated plant natural gas liquids (“NGL”) yield of 41 bbls/mmcf of sales gas;
- the 14-12 well flowed on clean-up at an average rate of 3.9 mmcf/d of raw gas and 1,204 bbls/d of 47 degree API field condensate (359 bbls/mmcf of sales gas). Total sales production rate for 14-12 over this 24 hour period was approximately 1,901 boe/d (70% liquids), including an estimated plant NGL yield of 41 bbls/mmcf of sales gas.
The third
Capital Costs Significantly Reduced
The average timing from spud to total depth and spud to rig release was 12.8 days and 17.2 days, respectively, for the three
The completion operations conducted on the three wells also realized significant cost savings due to better planning of sand and water management logistics, improved wellsite layout and supervision, a revised procurement process and improved execution. This resulted in more efficient pumping times with less down time. Although actual costs from the three wells are not yet finalized, current field estimates would indicate completion costs are within a range of
Historical Drilling and Completions Performance Overview
On Production Year | Well Count | Spud to RR (days) | Drill Days | Stage Count | Total Sand (tonnes) | Drilling Cost ( | Completions Cost ( | Total ( | |||
2015 & Prior | 24 | 42 | 35 | 29 | 2,007 | ||||||
2016 | 6 | 33 | 28 | 39 | 3,918 | ||||||
2017 | 15 | 33 | 28 | 40 | 4,634 | ||||||
2018 | 12 | 31 | 25 | 49 | 4,291 | ||||||
2019 | 4 | 33 | 27 | 60 | 4,771 | ||||||
2020 | 3 | 17.2 | 12.8 | 63 | 5,467 |
Delphi remains strongly encouraged by these recent capital cost reductions and strong flowback results and sees further optimization opportunities going forward. Drilling cost of
Hedging
Delphi’s realized prices for condensate and NGL in 2020 are well protected by WTI crude oil swap contracts for an average volume of 1,021 barrels per day (“bbl/d”) at an average price of
The Company’s realized price for natural gas in 2020 is protected by NYMEX HH natural gas swap contracts for an average volume of 5,600 million British thermal units per day (“mmbtu/d”) at an average price of
Hedging contracts in place for 2020 protect the realized price for approximately 40 percent of
Delphi’s commodity risk management contracts were valued at
Corporate Update/Outlook
First quarter capital spending is now forecast to be approximately
The continued success of Delphi’s new well results, now achievable at 25 to 30 percent lower costs, further highlights the underlying potential value of the 147 gross sections of
The Company will take the next several months through spring breakup to assess the second half 2020 capital spending levels within the context of volatile and uncertain commodity prices. As part of the Transaction, Delphi has
Delphi also continues to pursue initiatives to enhance the underlying value of the assets for the benefit of all of its stakeholders. The current environment presents its own unprecedented challenges, however the continued high level of engagement in pursuit of value enhancing initiatives gives credibility to the attractiveness of the Company’s Bigstone Montney asset base.
The Company reports that Mr.
The Company has also made significant positive changes to its corporate structure and culture over the past six months, beginning with a reconstituted Board of Directors, followed by several changes to the leadership team and operations personnel. A 25 percent reduction in the
Delphi also announces that it intends to rely on exemptive relief recently granted by Canadian securities regulatory authorities that allows it to delay the filing of its annual information form required by section 6.2 of National Instrument 51-102 and its statement of reserves data and other information required by section 2.1 of National Instrument 51-101 (collectively, the “2019 AIF”) by
On behalf of the Board of Directors, the Company would like to take this opportunity to thank all Delphi’s
About
FOR FURTHER INFORMATION PLEASE CONTACT:
2300 - 333 – 7th Avenue S.W.
T2P 2Z1
Telephone: (403) 265-6171 Facsimile: (403) 265-6207
Email: info@delphienergy.ca Website: www.delphienergy.ca
President & CEO
Forward-Looking Statements. This news release contains forward-looking statements and forward-looking information within the meaning of applicable Canadian securities laws. These statements relate to future events or the Company’s future performance and are based upon the Company’s internal assumptions and expectations. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “should”, “believe”, "intends”, “forecast”, “plans”, “guidance”, “budget” and similar expressions.
More particularly and without limitation, this release contains forward-looking statements and information relating to the Company’s expected AIF filing date, petroleum and natural gas production estimates and weighting, projected crude oil and natural gas prices, future exchange rates, expectations as to royalty rates, expectations as to transportation and operating costs, expectations as to general and administrative costs and interest expense, expectations as to capital expenditures and net debt, planned capital spending, future liquidity and Delphi’s ability to fund ongoing capital requirements through operating cash flows and its credit facilities, supply and demand fundamentals for oil and gas commodities, timing and success of development and exploitation activities, cash availability for the financing of capital expenditures, access to third-party infrastructure, treatment under governmental regulatory regimes and tax laws and future environmental regulations.
Furthermore, statements relating to “reserves” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitable in the future.
The forward-looking statements and information contained in this release are based on certain key expectations and assumptions made by Delphi. The following are certain material assumptions on which the forward-looking statements and information contained in this release are based: satisfaction of all conditions to completion of the Recapitalization Transaction; the timely receipt of required regulatory, shareholder, noteholder, lender and other approvals; the stability of the global and national economic environment, the stability of and commercial acceptability of tax, royalty and regulatory regimes applicable to Delphi, exploitation and development activities being consistent with management’s expectations, production levels of Delphi being consistent with management’s expectations, the absence of significant project delays, the stability of oil and gas prices, the absence of significant fluctuations in foreign exchange rates and interest rates, the stability of costs of oil and gas development and production in
Commodity prices used in the determination of forecast revenues are based upon general economic conditions, commodity supply and demand forecasts and publicly available price forecasts. The Company continually monitors its forecast assumptions to ensure the stakeholders are informed of material variances from previously communicated expectations.
Financial outlook information contained in this release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management’s assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this release should not be used for purposes other than for which it is disclosed.
Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent known and unknown risks and uncertainties. Delphi’s actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits Delphi will derive therefrom. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition from others for scarce resources, the ability to access sufficient capital from internal and external sources, changes in governmental regulation of the oil and gas industry and changes in tax, royalty and environmental legislation. Additional information on these and other factors that could affect the Company’s operations or financial results are included in the Company’s most recent Annual Information Form and other reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
Readers are cautioned that the foregoing list of factors is not exhaustive. Furthermore, the forward-looking statements contained in this release are made as of the date of this release for the purpose of providing the readers with the Company’s expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. Delphi undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements contained in this release are expressly qualified in their entirety by this cautionary statement.
Basis of Presentation. For the purpose of reporting production information, reserves and calculating unit prices and costs, natural gas volumes have been converted to a barrel of oil equivalent (boe) using six thousand cubic feet equal to one barrel. A boe conversion ratio of 6:1 is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Administrators’ National Instrument 51-101 when boes are disclosed. Boes may be misleading, particularly if used in isolation.
As per CSA Staff Notice 51-327 initial test results and initial production performance should be considered preliminary data and such data is not necessarily indicative of long-term performance or of ultimate recovery. “IP” is an abbreviation for “Initial Production” and represents average production rates over the indicated time period in producing days.
Non-GAAP Measures. The release contains the terms “adjusted funds flow”, “adjusted funds flow per share”, “net debt”, “net debt to adjusted funds flow ratio”, “marketing income”, “operating netbacks”, “total cash revenues”, “cash netbacks,” and “netbacks” which are not recognized measures under GAAP. The Company uses these measures to help evaluate its performance. Management considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices and costs of production. Management uses adjusted funds flow to analyze performance and considers it a key measure as it demonstrates the Company’s ability to generate the cash necessary to fund future capital investments, abandonment obligations and to repay debt. Adjusted funds flow is a non-GAAP measure and has been defined by the Company as cash flow from operating activities before decommissioning expenditures and changes in non-cash working capital from operating activities. The Company also presents adjusted funds flow per share whereby amounts per share are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. Delphi’s determination of adjusted funds flow may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with GAAP. Delphi has defined total cash revenues as the sum of crude oil and natural gas revenues, marketing revenue (excluding Permanent Assignment Transaction) and realized gains on risk management contracts. Management uses this measure to assess the revenues from operations and risk mitigation activities. The Company has defined net debt as the sum of bank debt, senior secured notes and the long term portion of unutilized take-or-pay contract and leases plus/minus working capital deficit/surplus excluding the current portion of the fair value of financial instruments. Net debt is used by management to monitor remaining availability under its credit facilities. Marketing income is defined as the margin earned on the sale of purchased third party natural gas volumes and premiums received on the assignment of a portion of committed capacity on the Alliance pipeline system to a third party. Management considers marketing income important measures of the Company’s ability to mitigate the cost of excess committed capacity. Operating netbacks have been defined as revenue plus marketing income less royalties, transportation and operating costs. Cash netbacks have been defined as operating netbacks less interest on bank debt and senior secured notes, finance charges associated with lease obligations, general and administrative costs and cash costs related to the Company’s restricted share units. Netbacks are generally discussed and presented on a per boe basis.
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