CALGARY, Nov. 13, 2016 /CNW/ – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Corporation“) (TSX: PPY) is pleased to announce an expanded 2017 capital budget to accelerate 2017 production. The planned accelerated production, relative to the previously expected 2017 average annual production volumes, is due to a 100 MMcf/d expansion by AltaGas Ltd. (“AltaGas“) of the AltaGas Townsend Facility (“Townsend Facility“). Construction is expected to be complete and ready for incremental volumes of natural gas by the end of 2017.
- Planned accelerated expansion of the Townsend Facility and associated infrastructure by an incremental 100 MMcf/d in 2017;
- Estimated capital cost reductions for the Townsend Facility expansion are expected to reduce Painted Pony’s capital lease fee per Mcfe on the expansion by more than 30%;
- Increased expected 2017 year-end exit production volumes to 408 MMcfe/d (68,000 boe/d) with a 2017 capital budget of $319 million;
- Forecasted to deliver annual average daily production growth of approximately 110% through the drill bit, from forecasted 2016 annual average daily production volumes of 138 MMcfe/d (23,000 boe/d) to forecasted 2017 annual average daily production volumes of 288 MMcfe/d (48,000 boe/d); and
- Participated in the recent Spectra Energy Transmission (“Spectra“) open season for the Zone 3 Expansion on the T-North pipeline and secured an incremental 250 MMcf/d of firm transportation with an expected on-stream date in the fourth quarter of 2018.
Pat Ward, President and CEO of Painted Pony, commented “the production acceleration, increase in liquids focus in 2017, and upward revisions to Painted Pony’s 5-year plan will result in free cash flow in 2019 and 2020 with production expected to average 680 MMcfe/d (115,000 boe/d) in 2020.”
2017 CAPITAL BUDGET
Townsend Facility Expansion
Painted Pony has approved the construction by AltaGas of a 100 MMcf/d expansion to the Townsend Facility, expected to be completed and on-stream in October 2017. The Corporation previously expected that an expansion to the Townsend Facility would occur in 2018. The impact of this accelerated expansion is an expected 19% increase in fourth quarter 2017 exit production volumes to approximately 408 MMcfe/d (68,000 boe/d) from previous expectations of 342 MMcfe/d (57,000 boe/d). This will increase annual average daily production by 4% to 288 MMcfe/d (48,000 boe/d) from previously expected annual average daily production volumes of 276 MMcfe/d (46,000 boe/d). With the accelerated expansion of the Townsend Facility, Painted Pony now anticipates 2017 forecasted exit production volumes to be approximately 408 MMcfe/d (68,000 boe/d), a 19% increase in fourth quarter 2017 exit production volumes from previous expectations of 342 MMcfe/d (57,000 boe/d) and exit production growth of 70% when compared to 2016 forecasted exit production volumes of 240 MMcfe/d (40,000 boe/d).
The capital cost of this expansion is expected to be 30% – 35% less per MMcf/d of processing capacity than the first phase of the Townsend Facility which was commissioned in July of 2016. The reduced cost is anticipated to reduce the total capital lease fee per MMcf/d for the Townsend Facility by approximately 10%.
Decreased Well Costs
Due to ongoing efficiencies, including faster drill times and completions, total budgeted well costs, including drilling, completions, and equipping costs, have decreased to $4.55 million per well from the previously budgeted amount of $4.8 million per well. These cost savings positively impacted the 2016 capital program and the 2017 capital budget which Painted Pony now anticipates to be approximately $319 million which includes an expectation of drilling and completing 61 net wells. The 2017 capital budget is a 9% increase in capital spending, when compared to previously expected 2017 capital spending levels.
Increased Capital Efficiencies
Painted Pony’s ongoing cost efficiencies provided an ability to optimize field operations by accelerating the drilling of 6.0 net wells and the completion of 5.0 net wells in the fourth quarter of 2016 that were previously planned to occur in the first quarter of 2017. As a result, capital spending in 2016 is forecasted to increase by $14 million to $213 million and estimated capital spending in the first quarter of 2017, which includes drilling 22.0 net wells and completing 12.0 net wells, has been reduced from previous estimates by $23 million to $87 million.
Improved Cash Costs
Higher production volumes are anticipated to have a positive impact on Painted Pony’s 2017 field cash per Mcfe costs which are now budgeted to be approximately $0.85/Mcfe, a reduction of approximately $0.16/Mcfe or 16% compared to 2016 forecast field cash costs of $1.01/Mcfe. Painted Pony will continue to innovate and streamline field operations as production grows to achieve increasing levels of efficiency while delivering lower operating costs.
Lower field cash costs combined with lower capital expenditures per well will result in the Corporation’s leverage ratio improving to a forecasted 2017 year-end net debt to fourth quarter annualized funds flow ratio of 1.3 times, using November 1, 2016 strip commodity prices.
Increased Firm Transportation
Painted Pony recently took part in Spectra’s open season for the Zone 3 Expansion on the T-North pipeline and secured a long term transportation agreement for 250 MMcf/d. Construction of the Zone 3 Expansion is expected to be complete in December 2018.
This agreement, combined with previously announced firm transportation contracts, provide Painted Pony with approximately 570 MMcf/d of firm transportation. The Corporation believes this is sufficient egress capacity to support Painted Pony’s growth plans through 2019. Long-term firm transportation and natural gas processing agreements with key third-party service providers combine to underpin Painted Pony’s multi-year growth plans.
Painted Pony is pleased to announce that it will be participating in the GMP FirstEnergy Energy Growth Conference taking place on November 15 and 16, 2016 at The Ritz-Carlton Hotel located at 181 Wellington Street West, Toronto, Ontario. Mr. Pat Ward, President and CEO, will be presenting on Tuesday, November 15, 2016 at 9.40 am (ET) in Presentation Room A, Salon III.
Painted Pony will be undertaking a series of presentations to institutional investors while at this conference in addition to meetings with investors in the US prior to conference attendance. Interested parties are invited to view the updated Painted Pony investor presentation at: