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Mittwoch, 07.02.2018 14:00 von PR Newswire | Aufrufe: 134

Perpetual Announces 2017 Exit Rate Growth of 54% and Provides Operations Update, Reports Year-End Reserves Replacing 248% of Production and Revises 2018 Capital Plan and Outlook

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PR Newswire

CALGARY, Feb. 7, 2018

CALGARY, Feb. 7, 2018 /PRNewswire/ - (TSX:PMT) – Perpetual Energy Inc. ("Perpetual", or the "Company") is pleased to announce its year-end 2017 production exit rate (average for the month of December) of 12,300 boe/d, attaining year-over-year exit rate growth of 54%. The Company invested $19.0 million in exploration and development activities during the fourth quarter of 2017 and grew production 14% quarter-over-quarter. Production and operating costs continued the positive trend established through 2017, averaging $3.45/boe for the fourth quarter and $4.52/boe for 2017, down 33% from full year 2016.

In 2017, Perpetual focused investment in its core producing assets at East Edson and Mannville, adding proved plus probable reserves to replace 248% of annual production and grow the value of proved plus probable reserves year-over-year, as reported by the independent engineering firm McDaniel and Associates Consultants Ltd. ("McDaniel"). The quality of Perpetual's assets and positive momentum to drive operational and execution excellence in its core operating areas are demonstrated by the highlights below:

Total proved plus probable reserves grew by 9% to 66.6 MMboe, up 5.3 MMboe after 2017 production of 3.6 MMboe. Importantly, the Company grew total proved reserves by 22% to 42.8 MMboe (64% of total proved plus probable reserves) and doubled its proved developed producing reserves to 15.9 MMboe. Proved plus probable developed producing reserves were 20.5 MMboe at December 31, 2017, 44% higher than year-end 2016.
Proved plus probable developed producing reserves were 20.5 MMboe at December 31, 2017, 44% higher than year-end 2016.
Exploration and development capital spending of $73.0 million in 2017 resulted in finding and development ("F&D") costs of $6.16/boe on a proved plus probable basis, and finding, development and acquisition costs ("FD&A") of $5.98/boe, both including changes in future development capital ("FDC"). Combining with a 2017 operating netback of $14.35/boe, the Company achieved a proved plus probable FD&A recycle ratio of 2.4:1.
The net present value ("NPV") of Perpetual's total proved plus probable reserves (discounted at 10%) before income tax, grew by 8% to $409.9 million (2016 - $380.7 million), despite a decrease in McDaniel's forecast for both oil and natural gas prices at year-end 2017.
Based on McDaniel's commodity price forecasts, Perpetual's reserve-based net asset value ("NAV") (discounted at 10%) at year-end 2017 is estimated at $336.5 million ($5.68 per share).

Finally, in active management of the recent decline in the forward market for near-term AECO natural gas prices, Perpetual today announces several important steps taken to maximize profitability, preserve the value of its reserves and manage risk:

Perpetual reduced its exposure to AECO natural gas prices through the market diversification contracts entered into during the third quarter of 2017 and has now secured fixed price forward sales contracts on its remaining expected 2018 AECO natural gas sales volumes, net of royalties.
Further, Perpetual's Board of Directors have approved a revised 2018 capital plan totaling $23 to $27 million, a 30% reduction to capital spending from the plan announced on November 10, 2017. The revised plan is designed to prudently defer development of the Company's East Edson natural gas asset to ensure maximum returns from development of the reserves and re-allocate capital to heavy oil prospects in its diversified portfolio of opportunities. At the current forward commodity price market, the revised capital spending plan is expected to result in 2018 adjusted funds flow in excess of capital spending and obligations, allowing for debt repayment and other opportunities.

OPERATIONS UPDATE

During the fourth quarter of 2017, capital spending totaled $19.0 million as previously forecast, more than 90% directed to the Company's liquids-rich gas property at East Edson. An additional $0.9 million was spent on well abandonment and reclamation work to reduce decommissioning obligations.

The single rig drilling program at East Edson continued through the fourth quarter, resulting in the drilling of three (3.0 net) wells, including a second extended reach horizontal ("ERH") well. A third ERH well will be rig released in the first quarter of 2018 to finish the East Edson drilling program. The first two ERH wells were completed and tied in during the fourth quarter while the remaining two wells were completed in January 2018. Completion operations for the third ERH well, originally scheduled for the first quarter of 2018, have been deferred to the fourth quarter of 2018, anticipating stronger future natural gas prices to maximize profitability.

The first ERH well at 4-23-51-16W5 represented the highest deliverability well drilled to date by Perpetual at East Edson with a thirty day average initial productivity ("IP30") of 15.6 MMcf/d of natural gas plus associated liquids based on field estimates, 75% higher than the length-adjusted type curve contained in the 2017 year-end McDaniel reserve report. The second ERH well, which is still under test and not optimized, appears to be below the length-adjusted type curve. The sum of the two wells is anticipated to exceed McDaniel's proven plus probable expectations.

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In the fourth quarter of 2017, compression was added at the 100% owned and operated West Wolf Lake 10-3 plant, to align compression and process capacity at the facility, bringing the plant capacity to 65 MMcf/d, and area capacity to 78 MMcf/d, including the 15% working interest capacity held at a third-party operated facility in Rosevear. This expansion was completed in December 2017 for $2.1 million, on budget and three months ahead of schedule, to accommodate the accelerated availability of increased firm transportation on TCPL to 78 MMcf/d from April 1, 2018 to December 17, 2017.

Eleven (11.0 net) of the wells drilled in 2017 had an average 1,700 meters horizontal length and pioneered a new monobore well design. This new design, coupled with lower service costs, reduced the total cost of a typical Edson well to $4.2 million (inclusive of drilling, completion, equipment and tie-in), driving capital efficiencies from an average $11,000 per boe/d during 2014 to 2016 to $8,600 per boe/d based on first 12-month average production as per McDaniel's proved developed producing forecast, despite operational difficulties on one well which had a significantly higher capital efficiency ratio. Two (2.0 net) additional wells drilled in 2017 were designed to test the application of ERH wells for future development of the Wilrich reserves and were successfully drilled to 2,460 meters and 3,489 meters in length, with the third ERH well rig released in the first quarter of 2018 at 2,953 meters. Preliminary results suggest that capital efficiencies will be further reduced through this development approach.

Capital spending on heavy oil projects in Mannville during the fourth quarter of 2017 included waterflood projects and well optimization activities with $1.0 million spent. In January, construction of additional water handling and disposal facilities are underway and the first of a four (4.0 net) well (10 multi-lateral legs) drilling program was spud on January 31, 2018.

Drilling activities in 2017 resulted in production from one new Sparky pool, and increased production in the I2I pool which has been under waterflood since late 2013. 2017 saw a marked reduction in base decline rates in heavy oil production at Mannville from an average of greater than 30% year-over-year declines in 2015 and 2016 to less than 10% through 2017 (excluding the impact of new drilling). This reduction in decline rates is attributable to successful waterflood performance, resulting in higher recovery of oil in place.

Fourth quarter 2017 operating expenses continued to trend downward to $3.45/boe. Reduced costs at both Mannville and East Edson improved area operating netbacks, and operating costs on a unit-of-production basis reached top decile performance at East Edson as production ramped up on a relatively fixed operating base.

2018 OUTLOOK

2018 Capital Spending

In response to material commodity market changes, Perpetual has revised its 2018 capital plan to preserve the value of its East Edson reserves by deferring any additional 2018 Wilrich formation development drilling and accelerate spending on highly economic heavy oil projects at Mannville, for a net reduction to the 2018 capital budget to $23 - $27 million. On November 10, 2017, the Company announced that the Board of Directors approved a capital spending program of $37 million for 2018, close to 75% concentrated in East Edson, developing natural gas reserves with liquids in the Wilrich formation, and 25% in Eastern Alberta, primarily targeting heavy oil development at Mannville. The forward average AECO and WTI prices for Calendar 2018 as of November 9, 2017 were $2.01 per GJ (US$3.09 per MMbtu NYMEX) and US$56.91 per bbl, respectively. The revised capital plan accounts for the wind down of gas focused drilling activities at East Edson and results in a modified capital plan with investment split more evenly between the two core operating areas and natural gas and oil commodities.

Although NYMEX natural gas prices have remained relatively steady as natural gas storage has been depleted through the winter to below historical levels driven by strong demand, the basis differential to Western Canada markets has widened and AECO forward natural gas prices have weakened materially over the same period. Perpetual's five year market diversification contracts that came into effect on November 1, 2017 have substantially mitigated the impact on adjusted funds flow of lower AECO prices, as the contracts appreciate in value with wider differentials to each of the five market price points. However, Perpetual measures economic returns for all new natural gas investments against current unhedged AECO strip pricing, as incremental volumes, net of royalties, would be effectively sold to this market. At the same time, the forward market for West Texas Intermediate oil has strengthened, translating into slightly stronger expected prices for Perpetual's blend of heavy oil, condensate and natural gas liquids ("NGL"). Currently, the forward average AECO and WTI prices for calendar 2018 as of February 6, 2018 are $1.35 per GJ and US$61.25 per bbl, respectively.

Perpetual's two core areas of operation provide a diversified portfolio of investment opportunities. The Company will remain nimble to reallocate spending between natural gas focused projects at East Edson and heavy oil projects depending on where the most profitable economics can be secured. For the first quarter, the one outstanding frac of the third ERH well at East Edson will be postponed until late in the third quarter of 2018. Perpetual will re-direct spending to its heavy oil development project of the Birch General Petroleum A pool in Mannville, including water handling and disposal facilities and a four well multi-lateral horizontal drilling program previously budgeted for the second half of 2018. Assuming continued weakness in AECO natural gas prices, the four-well East Edson drilling program previously planned for the third quarter of 2018 will be deferred pending stronger AECO natural gas prices. Three (2.3 net) development wells at Mannville are expected to proceed as planned in the third quarter, along with three to six (3.0 to 6.0 net) additional wells at Mannville to evaluate the future horizontal development potential of three undeveloped heavy oil pools.

The table below summarizes planned capital spending and drilling activities for the first and second half of 2018.

Exploration and Development Forecast Capital Expenditures

	H1 2018 $ millions	# of wells (gross/net)	H2 2018 $ millions	# of wells (gross/net)	Total 2018 $ millions	# of wells (gross/net)
West Central	8	1/1.0	3	0/0.0	11	1/1.0
				6 - 9/5.3 –		10 - 13/9.3 –
Eastern	6	4/4.0	6 - 10	8.3	12 - 16	12.3
				6-9/5.3 –		11 - 14/10.3 –
Total⁽¹⁾⁽²⁾	14	5/5.0	9 - 13	8.3	23 - 27	13.3

⁽¹⁾	Excludes abandonment and reclamation spending of $2.0 to $2.5 million in 2018.
⁽²⁾	Previous capital spending forecast released November 10, 2017 included forecast total exploration and development capital spending of $37 million. Please see news release dated November 10, 2017 for details.

Production Guidance

With the accelerated availability of increased firm transportation on TCPL, coupled with the capital re-allocation strategy to heavy oil, first quarter 2018 production is expected to average close to 13,300 boe/d, approximately 1,100 boe/d higher than previously forecast. Natural declines at East Edson will decrease natural gas and NGL production during the second and third quarters when AECO gas prices are expected to be at their lowest levels for the year. Then production will ramp up again with the planned late third quarter frac of the ERH well waiting on completion. Based on total exploration and development capital spending in 2018 of $23 to $27 million, Perpetual forecasts production to average approximately 11,500 boe/d for 2018 and forecasts to exit the year at approximately 10,700 boe/d (17% oil and NGL) as gas production at East Edson declines and Mannville heavy oil production ramps up driven by increased drilling and waterflood activity. While the growth in average daily production will be diminished from the original budget plan of 32%, year-over-year growth is still expected to be 17%, with a higher proportion of oil and NGL than previously forecast.

Marketing and Hedging Update

Concurrent with the sale of Perpetual's shallow gas properties on October 1, 2016, Perpetual entered into commodity price contracts whereby Perpetual was obligated to provide an AECO floor price of $2.58/GJ on 33,611 GJ/d through August 31, 2018. Perpetual's obligation has now been fixed at a cost of $8.5 million in 2018.

During the third quarter of 2017, Perpetual diversified its natural gas price exposure from AECO by entering into arrangements to effectively shift the sales point of 34.1 MMcf/d to a basket of five North American natural gas hub pricing points for a five year period commencing November 1, 2017, increasing to 39.0 MMcf/d commencing April 1, 2018. Based on current futures prices, these market diversification contracts will provide a significant premium over AECO prices in 2018 and provide significant diversification to Perpetual's natural gas pricing point exposure (net of royalties) as detailed below:

Market/Pricing Point
Natural gas		Estimated Proportion of 2018 Production⁽¹⁾
	AECO⁽¹⁾	0%
	AECO fixed price	27%
	Empress	5%
	Dawn	11%
	Michcon	7%
	Chicago	18%
	Malin	16%
Total natural gas		84%
Natural gas liquids - Condensate⁽¹⁾		3%
Natural gas liquids - Other⁽¹⁾		2%
Crude oil - Fixed⁽¹⁾		3%
Crude oil - Floating⁽¹⁾		8%
Total		100%

⁽¹⁾

Net of royalties.

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