CALGARY, ALBERTA–(Marketwired – Feb. 16, 2017) –
**Not for distribution to United States News Services or Dissemination in the United States**
Delphi Energy Corp. (TSX:DEE) (“Delphi” or the “Company“) is pleased to provide the following update regarding its ongoing capital program focused entirely on its Bigstone Montney asset where the Company holds over 147 gross sections of land, significant key infrastructure and a rapidly growing condensate-rich Montney production base.
Delphi’s planned drilling program in 2017 more than doubles the 2016 program with the addition of a second drilling rig that commenced activity in December 2016. The 2017 development plan contemplates the drilling of 13 gross (8.4 net) Bigstone Montney horizontal wells and the completion, tie-in and well site equipping of 14 gross (9.0 net) wells. It is anticipated that the 2017 development plan will grow production by year-end 2017 to approximately 11,500 barrels per oil equivalent (“boe”), an anticipated growth increase of 60 percent over 2016.
Field Operations Update
Results from the Company’s ongoing drilling and completion operations are meeting or exceeding expectations. The combination of new development moving further west on the Company’s Bigstone Montney property, along with Delphi’s third generation frac design, has shown significant improvements to field condensate to natural gas rate yields.
Delphi has several new wells in various stages of operations:
- Wells four and five of the 2016 program were brought on at the end of December 2016 and have now recorded 30 days of production;
- The sixth well of the 2016 program was completed in January 2017 and brought on production in early February;
- The first and second wells of the 2017 program have been drilled to total depth and are ready for completion operations that are scheduled to commence at the end of February 2017; and,
- Delphi’s two drilling rigs are currently drilling wells number three and four of the 2017 program, with plans to remain drilling through spring break-up. Four additional wells from two separate pads will be ready for completion in early summer.
The Company is pleased to report initial production results on the 16-9-60-23W5 (“16-9”) (61.8 percent working interest) and 14-21-60-23W5 (“14-21”) (59.3 percent working interest) wells. Over the first 30 days on production, the 16-9 well averaged a total of 1,161 boe/d with a field condensate to sales gas ratio of 121 barrels per million cubic feet (“bbl/mmcf”). Total liquid production, including estimated gas plant recovered natural gas liquids of 46 bbl/mmcf sales, accounted for 50 percent of the total sales production rate. The average initial production over the first 30 days of the 14-21 well was 1,606 boe/d. This production rate is 24 percent higher than the immediate offset at 15-21, showing how Delphi’s enhancements in frac design have improved performance of these wells. In addition, the field condensate rate at 14-21 over the first 30 days averaged 737 barrels per day (“bbls/d”), which is the highest field condensate rate of all Delphi horizontal Montney wells at Bigstone to date. This condensate rate equates to a yield of 180 bbl/mmcf sales.
Completion operations at the Company’s sixth well of the 2016 program, 16-21-60-23W5 well (“16-21”) (59.3 percent working interest), have concluded and the well was brought on production in early February 2017. The 16-21 well was drilled to a total depth of 5,832 metres with an extended-reach horizontal lateral in the Montney of 2,858 metres and was completed through a 40-stage slickwater frac design. The well was flowed on clean-up for three days, recovering approximately 18 percent of the initial load frac water. Over the last 24-hours prior to running production tubing and being brought on production, the well flowed on clean-up at an average rate of 8.7 mmcf/d of raw gas and 1,276 bbls/d of field condensate (170 bbls/mmcf of sales gas). Total sales production for 16-21 over this 24-hour period was approximately 2,873 boe/d, including an estimated plant natural gas liquids (“NGL”) yield of 46 bbls/mmcf of sales gas.
The Company has concluded drilling operations on its first and second wells of the 2017 capital program at 15-8-60-23W5 (“15-8”) (65 percent working interest) and 15-11-60-23W5 (“15-11”) (65 percent working interest) in late January 2017. The 15-8 well was drilled to a total depth of 5,906 metres with a horizontal lateral in the Montney of 2,740 metres. The 15-11 well was drilled to a total depth of 5,970 metres with a horizontal lateral in the Montney of 2,866 metres. A 40-stage frac completion liner was installed in each well with fracturing operations scheduled to commence in the coming weeks. Both wells are expected to be brought on production prior to spring break-up.
Delphi commenced drilling its third and fourth wells of the 2017 capital program at 13-15-60-23W5 (“13-15”) (65 percent working interest) and 15-9-60-23W5 (“15-9”) (61.8 percent working interest). Both wells are follow-up locations to recent successes of ongoing field operations.
Alliance Firm Service Transportation
The Company currently transports 90 percent of its natural gas production on the Alliance pipeline with full path firm service to Chicago and has the required Alliance capacity to handle 100 percent of forecasted 2017 natural gas production growth. The contracted Alliance service with its incremental priority interruptible service, together with the existing and incremental 2018 contracted firm service on TransCanada Pipeline Limited, will provide the Company with sufficient firm service to handle Delphi’s growth plans beyond 2017.
Bigstone Montney Infrastructure
Delphi is currently expanding pipeline and inlet liquids separation capacity at the Bigstone 7-11 facility (65 percent working interest) to handle growing production volumes from the western side of Bigstone. The project is expected to be completed in early March 2017 and will allow for significant condensate growth as drilling moves westward and will reduce elevated pipeline pressures curtailing existing production.
To handle the Company’s growing production volumes beyond 2017, Delphi is working to efficiently expand its existing Montney field dehydration and compression capacity at East and South Bigstone. Through this effort, Delphi has secured a 20 mmcf/d amine processing equipment package to sweeten a portion of the Montney production for processing at the under-utilized Partner operated Bigstone sweet gas plant located at 14-28-59-22W5, where the Company owns a 25 percent working interest.
As the Company moves Montney development further west, the production turns from sour to sweet. Commensurate with plans to exploit the West Bigstone asset, a 15 mmcf/d expansion of Delphi’s 100 percent owned and operated Negus gas plant at 11-3-60-25W5 is planned for the second half 2018. Delphi has already secured certain long lead time equipment to expand the sweet processing plant to 30 mmcf/d.
Risk Management Program
Delphi continues to maintain a strong risk management position on both volumes and pricing. The Company has approximately 60 percent or 20 million cubic feet per day (“mmcf/d”) of its 2017 forecast natural gas production hedged at an average price of CDN$4.21 per million British thermal units (“mmbtu”) and approximately 47 percent or 1,000 bbls/d of condensate hedged at an average WTI price of CDN$66.70 per barrel (“bbl”).
Grant of Incentive Stock Options
The Board of Directors of the Company has approved the granting of incentive stock options (“Options”) under its stock option plan (the “Plan”) to its directors and officers to acquire up to an aggregate of 1,900,000 common shares (“Common Shares”) of the Company and the granting of Options to its employees to acquire up to an aggregate of 1,040,000 Common Shares.
These 2,940,000 new Options, to acquire Common Shares to eligible participants under the Plan, were granted effective February 5, 2017 with an exercise price equal to the volume-weighted average trading price of the Company’s common shares on the Toronto Stock Exchange, over the five days preceding that date, being $1.50 per share. The Options are exercisable for a period of five years and will vest as to one-third on each of the first three anniversaries of the effective date. This grant follows the expiry of 1,609,500 Options on January 31, 2017, with further 2,235,000 Options expected to expire or be exercised on or before May 15, 2017.
Delphi’s production growth profile through 2017 is largely weighted to the second half of the year, with fourth quarter of 2017 production expected to average approximately 11,000 to 11,500 barrels of oil equivalent per day (“boe/d”), representing approximately 60 percent growth (absolute and per share) over production in the fourth quarter of 2016. Condensate production is forecast to more than double in the fourth quarter of 2017 as compared to the fourth quarter of 2016. Increased condensate yields on new wells, combined with higher forecast condensate prices in 2017 have the compound result of doubling revenue per boe and increasing unhedged field operating netbacks per boe by a factor of three times to 2016 netbacks.
Delphi is positioned to achieve significant production, cash flow and reserve growth to the benefit of all our stakeholders having secured the necessary natural gas takeaway capacity and infrastructure capacity, along with a substantial drilling inventory on its 147 sections of Montney lands.