CALGARY, ALBERTA–(Marketwired – Oct. 11, 2016) – NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is pleased to announce the strategic acceleration of our 2017 and 5 year growth plan, a Wapiti area processing agreement for additional capacity commencing in 2019, and $90.0 million bought deal equity financing.
Well results in the Gold Creek and Pipestone areas of Wapiti have continued to mature to the point that we now have the confidence to declare both areas as development blocks. The early development wells in Gold Creek are already on production, and facility planning for full development of both blocks is now underway. Coupled with the strong performance of our pre-existing blocks in Elmworth and Bilbo, these four development areas provide the inventory and line of sight to step up our Wapiti area growth to the next level of scale. The requisite cost reduction efficiencies and our previously announced success on five extended reach horizontal wells in the Bilbo block provide strong visibility into the continued improvement of superior economics across all NuVista blocks in the Wapiti area.
NuVista has determined that the appropriate conditions now exist to accelerate our growth plans and commit to additional future processing capacity. This is based upon the continuing improvement in our costs and well results, the de-risking of our plays in recent years, the need for additional processing capacity in 2019 to allow the valuable Gold Creek and Pipestone blocks to accelerate our production growth, and our assessment of the economic environment.
New Gas Processing Agreement
NuVista is pleased to announce that it has entered into an agreement as anchor tenant with SemCAMS ULC (“SemCAMS”) for firm processing of an additional 120 MMcf/d of raw gas from our condensate rich Montney play in the Wapiti area of Alberta. The processing capacity will be added in three incremental steps of 40 MMcf/d, commencing in 2019, 2020, and 2021 respectively. The agreement is underpinned by take-or-pay terms for a period of 15 years, and the 80% take-or-pay terms provide flexibility to produce above or below these firmly contracted amounts. The capacity will be provided via the new 200 MMcf/d gas plant at Gold Creek which was previously announced by SemCAMS in August of 2016. With this agreement, NuVista and SemCAMS have moved past Final Investment Decision. Both parties have received all board approvals needed to proceed with construction of the AER licensed gas plant. NuVista will supply gas to this contract from the Gold Creek, Pipestone, Elmworth, and surrounding areas. Bilbo and adjacent Southern lands will continue to be processed at the Keyera Simonette gas plant. When added to our existing capacity, this agreement will expand NuVista’s total Wapiti area firm processing capacity to approximately 277 MMcf/d of raw gas by 2021.
NuVista now possesses the well location inventory and the processing capacity to provide profitable and predictable growth surpassing 60,000 Boe/d by the year 2021. In conjunction with the opportunities described above, NuVista plans to accelerate the pace of spending and growth in our five year plan including additional development and delineation wells across all four blocks. In addition we will be adding Gold Creek trunk pipelines and water handling, and Pipestone compression and gathering facilities in 2017 and 2018.
It is anticipated that the increased scale of activity will bring NuVista continued savings in all areas from larger pad capital efficiencies through to operating cost reductions. Importantly, with the placement of the new SemCAMS gas plant in close proximity to NuVista’s Gold Creek block, long distance compression and transportation of NuVista volumes feeding the plant is not required. It is anticipated this will reduce overall operating costs for NuVista volumes entering the new SemCAMS plant by approximately $1.50 – $2.50/Boe. This represents an important planned step to increase volumes while blending ever downwards NuVista’s overall corporate operating costs.
Outlook: Accelerating through 2017
Effective immediately, we are increasing our 2016 capital guidance to a range of $200 to $215 million. These funds are being allocated to drilling two incremental wells, additional Gold Creek pilot spending designed to test increased frac intensity and well length, and early water and trunkline infrastructure spending towards future growth. Although the 2017 capital budget will not be finalized and approved until the fourth quarter of 2016, we anticipate spending in the range of $260 to $300 million depending on commodity prices and other factors. Capital spending for 2018 is anticipated to increase 10-15% over 2017 levels. Production is expected to average approximately 28,000 – 31,000 Boe/d for 2017 despite the planned 5-year cycle maintenance outages at Keyera Simonette and SemCAMS K3 gas plants in 2017 causing a total negative annualized impact of approximately 2,000 Boe/d. Based on our preliminary 2017 capital spending plans, the fourth quarter of 2017 is targeted to average 32,500 – 35,000 Boe/d after the mid 2017 plant maintenance work is complete. Production levels are forecast to reach 40,000 Boe/d in the latter half of 2018. Production capacity exceeds 60,000 Boe/d within the next 5 years, while maintaining a net debt to funds from operations ratio below approximately 1.5x in the current strip environment, after consideration of the current bought deal equity financing. This represents a compound annual growth rate of 15 to 20%. Please refer to the following link for a graph depicting our firm and TOP contracted capacity.
To view the figure associated with this release, please visit the following link: http://media3.marketwire.com/docs/NuVista-Chart.pdf.
Bought Deal Equity Financing
NuVista is pleased to announce that it has entered into an agreement with a syndicate of underwriters led by RBC Capital Markets and Peters & Co. Limited, pursuant to which the underwriters have agreed to purchase, on a bought deal basis, 13,140,000 common shares (the “Common Shares”) at a price of $6.85 per Common Share for aggregate gross proceeds of approximately $90.0 million (the “Offering”). The Company has granted the underwriters an option to purchase up to an additional 15% of the common shares at the same price and commission. The option is exercisable in whole or in part, at any time until and including 30 days following closing of the Offering, at the sole discretion of the underwriters, for the purpose of covering over-allotments, if any, and for market stabilization purposes.
Total net proceeds to NuVista, after estimated expenses, will be approximately $86.0 million. The net proceeds of the Offering will initially be used by NuVista to pay down bank indebtedness and then redrawn to accelerate development spending in our 2016-2017 Wapiti Montney capital program.
The Offering is scheduled to close on or about October 28, 2016 and is subject to customary regulatory approvals including the approval of the Toronto Stock Exchange (the “TSX”). Following the closing of the Offering NuVista will have approximately 170.4 million Common Shares outstanding before the exercise of the option.
With this funding NuVista is confident we can deliver our long term growth plan while maintaining financial flexibility. Given a top quality and concentrated asset base coupled with a management team focused upon relentless improvement, NuVista will continue to grow value while carefully managing the volatile commodity price environment. These strategic steps combine to accelerate our progress along the path of profitable growth and the growing efficiencies of scale. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their guidance and support as we build an ever more valuable future for NuVista.
This release is not an offer of securities of the Company for sale in the United States. The Common Shares of the Company have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and the Common Shares may not be offered or sold in the United States except pursuant to an applicable exemption from such registration. No public offering of securities is being made in the United States.