CALGARY, ALBERTA–(Marketwired – Dec. 17, 2015) – Chinook Energy Inc. (TSX:CKE) (“our”, “we”, “us”, “Chinook” or the “Company”) today announced that its Board of Directors has approved a $13 million capital program for the first half of 2016. Chinook also announced its amended credit facility following the completion of the semi-annual review of its facility by its bank syndicate.
First Half 2016 Capital Program
Chinook’s capital program for the first half of 2016 includes $8 million to drill, complete, equip and tie-in four (3.5 net) Dunvegan oil wells at Albright in the Grande Prairie area commencing in the first quarter, with anticipated production by April or May 2016. These four wells were previously deferred from our 2015 capital program as we accelerated the development of our Montney program at Birley/Umbach. Chinook currently has an estimated inventory of over 55 (38 net) Dunvegan drilling locations in the Grande Prairie area. The balance of the capital program will be allocated towards the final costs associated with the completion of the 25 mmcf/d expansion of our Birley/Umbach facility, land sales and Chinook’s abandonment program. The start-up of the Birley/Umbach facility is expected to occur by the end of January 2016 with estimated initial throughput of 20 mmcf/d from five of six wells.
The Company realized material cost savings at Birley/Umbach in 2015 by conducting completion operations after spring break-up. In an effort to capture these seasonal cost savings, along with short term facility constraints associated with the high initial production rates from wells brought into our new facility in January, our Birley/Umbach drilling program will commence in the second half of 2016 with the approval of our remaining 2016 capital budget anticipated in March 2016. Natural gas pricing, specifically at Station 2 in BC, will be a key determinant in the amount of capital dedicated to our Birley/Umbach development. In 2015, we confirmed the scale of the Montney resource across our Birley/Umbach lands and are committed to developing this core asset prudently and efficiently during this period of depressed natural gas prices. We have set a preliminary capital program for the first six months of 2016 that addresses the need for flexibility in a challenging business environment. We continue to maintain one of the strongest balance sheets among our peers, which will allow us the optionality to quickly adjust our capital spending in response to market factors while still adding value to our shareholders by expanding the size of our resources with a selective drilling and completion program. We will continue to focus on capital discipline and cost control while maintaining our commitment to safety.
Amended Credit Facility
The Company’s amended credit facility provides a borrowing base of $50 million, down from $75 million, primarily as a result of significantly reduced commodity pricing and property dispositions. The credit facility is subject to re-determination on a semi-annual basis, with a maturity date of June 23, 2016, subject to further extension.
The amended credit facility provides Chinook with financial flexibility as we assess our capital program for the coming year. Chinook continues to be well positioned to advance the development of our existing core assets at Grande Prairie and Birley/Umbach at a practical pace given the current economic environment and to capitalize on consolidation/acquisition opportunities should they arise. The amended credit facility also allows us to realize costs savings related to a reduction in the associated stand-by fees.
Chinook is currently undrawn on its credit facility and exited the third quarter 2015 with a working capital surplus of $41.2 million. The Company anticipates exiting 2015 undrawn on its credit facility and with an estimated working capital surplus of between $25 million and $28 million. We expect to communicate preliminary guidance early in the first quarter of 2016 with additional guidance upon approval of our second half 2016 capital budget.