CALGARY, Alberta, May 10, 2017 (GLOBE NEWSWIRE) — Delphi Energy Corp. (“Delphi” or the “Company”) is pleased to announce its financial and operational results for the quarter ended March 31, 2017.
First Quarter 2017 Highlights
- Generated adjusted funds from operations of $8.2 million and realized net earnings of $8.4 million;
- Produced an average of 8,198 barrels of oil equivalent per day (“boe/d”) weighted 40 percent to field condensate and natural gas liquids;
- Increased production from the Bigstone Montney by 14 percent to 7,050 boe/d compared to 6,196 boe/d in the fourth quarter of 2016, as a result of a 33 percent or 773 barrels per day (“bbls/d”) increase in field condensate and natural gas liquids (“NGL”) production while natural gas volumes remained relatively flat;
- Increased Montney field condensate and NGL yields to 130 barrels per million cubic feet (“bbls/mmcf”) in the first quarter of 2017 compared to 99 bbls/mmcf in the fourth quarter of 2016;
- Montney field and plant condensate yield averaged 91 bbls/mmcf or 70 percent of the total 130 bbls/mmcf of Montney liquids yield;
- Generated operating netback of $17.07 per boe before risk management contracts, up 150 percent from $6.82 for the same period in 2016;
- Successfully drilled four gross (2.6 net) wells as part of the Company’s capital program and completed, tied-in and brought on production four gross (2.5 net) Montney wells in Bigstone;
- Continued the two rig drilling program through spring break up that will result in an inventory of five gross (3.2 net) wells drilled and ready for completion operations as ground conditions improve;
- Commenced the expansion of the existing Montney field dehydration and compression capacity at East and South Bigstone.
Operational Highlights
Three Months Ended March 31 | |||||||
Production | 2017 | 2016 | % Change | ||||
Field condensate (bbls/d) | 1,933 | 1,700 | 14 | ||||
Natural gas liquids (bbls/d) | 1,302 | 1,335 | (2 | ) | |||
Crude oil (bbls/d) | 7 | 5 | 40 | ||||
Total crude oil and natural gas liquids (bbls/d) | 3,242 | 3,040 | 7 | ||||
Natural gas (mcf/d) | 29,737 | 32,127 | (7 | ) | |||
Total (boe/d) | 8,198 | 8,395 | (2 | ) |
Financial Highlights ($ thousands except per unit amounts) | |||||||||
Three Months Ended March 31 | |||||||||
2017 | 2016 | % Change | |||||||
Crude oil and natural gas sales | 25,671 | 17,316 | 48 | ||||||
Realized sales price per boe | 34.17 | 30.47 | 12 | ||||||
Funds from operations | 8,166 | 8,190 | – | ||||||
Per boe | 11.08 | 10.72 | 3 | ||||||
Per share – Basic and diluted | 0.05 | 0.05 | – | ||||||
Net earnings | 8,352 | 5,259 | 59 | ||||||
Per boe | 11.32 | 6.89 | 64 | ||||||
Per share – Basic and diluted | 0.05 | 0.03 | 67 | ||||||
Capital invested | (30,297 | ) | 16,658 | 82 | |||||
Disposition of properties | (46 | ) | (4,583 | ) | (99 | ) | |||
Net capital invested | 30,251 | 12,075 | 151 |
March 31, 2017 | December 31, 2016 | % Change | ||
Net debt (1) | 108,367 | 85,945 | 26 | |
Total assets | 325,607 | 303,625 | 7 | |
Shares outstanding (000’s) | ||||
Basic | 156,898 | 155,994 | 1 | |
Diluted(2) | 182,915 | 180,752 | 1 |
(1) Defined as the sum of bank debt and Senior Secured Notes plus (minus) the working capital deficit (surplus) excluding the current portion of the fair value of the financial instruments.
(2) Represents the full dilution of all outstanding options and warrants.
MESSAGE TO SHAREHOLDERS
Delphi continues to execute the accelerated development plan of its liquids-rich Montney property (“Bigstone Montney”) located at Bigstone in northwest Alberta, with two drilling rigs continuing to operate through spring break up on separate pad locations. The Company was able to execute on its entire planned first quarter capital program, and will be in a position to complete five (3.2 net) additional Montney wells as wet weather and spring break up conditions subside.
Production in the first quarter of 2017 averaged 8,198 boe/d, weighted 40 percent to field condensate and natural gas liquids, compared to 8,395 boe/d during the first quarter of 2016. The Bigstone Montney production represented 86 percent or 7,050 boe/d of the Company’s corporate production during the first quarter of 2017. As a result of the successful drilling program, four gross (2.5 net) Montney wells were brought on-stream during the quarter, increasing corporate production during April 2017 to average approximately 10,000 boe/d. Current production capability remains at the upper end of our 2017 annual production guidance of 9,000 to 9,500 boe/d.
The 14 percent or 854 boe/d increase in Bigstone Montney production to 7,050 boe/d in the first quarter of 2017 compared to the fourth quarter of 2016 was largely a result of a 33 percent or 773 bbls/d increase in field condensate and natural gas liquids production. Montney field and plant condensate yields averaged 91 bbls/mmcf of the total 130 bbls/mmcf liquids yield. Increased condensate yields are a result of continued frac innovations and delineation of the Bigstone Montney westward with the new wells being drilled.
The Company’s successful operating margin growth is a result of the high quality Bigstone Montney asset base, majority ownership in strategic infrastructure, firm take away capacity and proven expertise in developing this liquids-rich asset. The Company generated an operating netback of $17.07 per boe before risk management contracts, up 150 percent from $6.82 per boe during the comparative quarter of 2016.
During the first quarter of 2017, the Company invested gross field capital of $30.3 million. Net of carry capital costs of $9.1 million associated with the Partner Transaction already accounted for at December 31, 2016, the program was executed on budget. Delphi spent 78 percent of field capital on drilling, completing and equipping four gross (2.5 net) Montney wells at Bigstone. A pipeline loop was installed to the 7-11 facility to handle increased volumes being produced from the new wells that are extending the Montney development westward. In addition, the Company incurred costs to secure a 20 mmcf/d amine processing package and compressor for its amine project scheduled for commissioning in the first quarter of 2018.
Drilling activity on the Company’s Bigstone Montney asset continues with operations largely complete on the 14-09-60-23W5 (“14-09”) well (62 percent working interest). The 14-09 horizontal Montney well was drilled from spud to a total depth of 5,908 metres in a Company record 25 days. Innovations to the drilling program have resulted in decreased drilling times, on this most recent well, by 14 percent compared to the average well in 2016. These innovations will allow Delphi to absorb service cost inflation and maintain targeted drilling costs. A 40 stage completion liner was installed in the 2,863 metre horizontal lateral. Drilling operations continue in the horizontal lateral at the 16-18-59-23W5 (“16-18”) well (65 percent working interest) and are expected to be finished in the next two weeks. The 14-09 and 16-18 wells are both the second wells drilled from each of their respective wellsite pads. Completion operations on these two pads in addition to the 15-09-60-23W5 well (62 percent working interest) are scheduled to commence after spring break up utilizing the Company’s third and fourth generation frac designs.
Adjusted funds from operations in the first quarter of 2017 were $8.2 million or $0.05 per basic and diluted share, unchanged from the comparative quarter of 2016. Realized cash netbacks during the first quarter of 2017 were $11.08 per boe, including a $(0.62) per boe loss on risk management contracts. This compares to $10.72 per boe, including a $7.80 per boe realized gain on risk management contracts during the first quarter of 2016. Cash costs were higher in the first quarter due to a combination of non-recurring crown royalty, operating and general administrative charges, as well as higher crown royalty rates as a result of higher commodity prices, and additional pro-rated operating costs for the scheduled SemCAMS K3 processing plant turnaround in the second quarter of 2017.
At March 31, 2017, the Company had bank debt of $32.0 million and a working capital deficit of $23.1 million. Including the Senior Secured Notes, the Company had total net debt of $108.4 million. As at March 31, 2017, Delphi had $42.2 million (net of outstanding letters of credit) available to be drawn on its $80 million senior credit facility.
Risk Management
The Company has approximately 22 million cubic feet per day (“mmcf/d”), or 65% of its remainder of 2017 forecast natural gas production hedged at an average price of CDN$4.20 per million British thermal units (“mmbtu”) and approximately 900 bbls/d of condensate hedged at an average WTI price of CDN$66.67 per barrel. Delphi has mitigated the persistent widening of the AECO and Station 2 basis differentials by contracting most of its gas into the Chicago market where pricing has materially outperformed local western Canada pricing, even with the incremental transportation costs.
Natural Gas | Q2 – Q4/17 | 2018 | 2019 | ||||||
Percent Hedged * | 65 | % | 54 | % | 21 | % | |||
Hedge Price (CDN $/mmbtu) | $ | 4.20 | $ | 3.92 | $ | 3.89 |
Crude Oil | Q2 – Q4/17 | 2018 | 2019 | ||||||
Percent Hedged * | 42 | % | 14 | % | 14 | % | |||
Hedge Price (WTI CDN $/bbl) | $ | 66.67 | $ | 70.00 | $ | 70.00 |
* Based on average 2017 production of 33.5 mmcf/d of natural gas and 2,150 bbls/d of field condensate.
Outlook
The Company continues to forecast absolute and per share growth across all measures during 2017, while maintaining balance sheet strength. The 2017 guidance is highlighted by a significant increase in drilling activity.
Delphi has secured the required firm service transportation for 100 percent of forecasted 2017 natural gas production growth. The contracted Alliance full path service to Chicago with its incremental priority interruptible service handles approximately 95 percent of the Company’s natural gas sales, and together with the existing and incremental 2018 contracted firm TCPL service, will provide the Company with firm service to handle accelerated growth plans beyond 2017. Delphi’s Bigstone Montney field compression and dehydration facilities are also sufficient for the forecasted growth in 2017.
Delphi will have five (3.2 net) Montney wells ready to complete and bring on production over the next two months as spring break up conditions subside and has plans to drill an additional five (3.3 net) wells during the second half of 2017.
To handle the Company’s growing production volumes beyond 2017, Delphi is working to cost effectively expand its existing Montney field dehydration and compression capacity at East and South Bigstone. Delphi is well positioned to achieve increased production, cash flow and reserve growth over the near and long term to the benefit of all our stakeholders.
The existing Board of Directors looks forward to the addition of Mr. Glenn A. Hamilton, Mr. Peter T. Harrison, and Mr. Ian Wild to the Board of Directors. “Glenn, Peter and Ian bring tremendous depth to our Board with their extensive experience in oil and gas accounting, finance, banking and investment,” said David J. Reid, President and CEO. “And together with the Company’s new CFO, Mr. Mark Behrman, we have significantly strengthened our team to continue to successfully pursue ambitious growth plans”.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support.
CONFERENCE CALL AND WEBCAST
A conference call and webcast to review first quarter 2017 results is scheduled for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Thursday, May 11, 2017. The conference call number is 1-844-358-8760. A brief presentation by David J. Reid, President and CEO and Mark D. Behrman, CFO, will be followed by a question and answer period. The conference call will also be broadcast live on the internet and may be accessed through Delphi’s website at www.delphienergy.ca or by entering http://edge.media-server.com/m/p/qmudsd6g in your web browser. A rebroadcast will also be available on Delphi’s website or at http://edge.media-server.com/m/p/qmudsd6g on your web browser.
This news release does not constitute an offer to sell or a solicitation of any offer to buy the securities in the United States. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended and will not be offered or sold in the United States absent an exemption from the registration requirements thereof.
The Company also announces that its Annual General Meeting (“AGM”) will be held on Thursday, May 18, 2017 at 3:00pm (MST) in the Devonian Room at the Calgary Petroleum Club (319 – 5 Avenue S.W.). Shareholders are encouraged to attend.
This news release does not constitute an offer to sell or a solicitation of any offer to buy the securities in the United States. The securities offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended and will not be offered or sold in the United States absent an exemption from the registration requirements thereof.
About Delphi Energy Corp.
Delphi Energy Corp. is an industry-leading producer of liquids-rich natural gas. The Company has achieved top decile results through the development of our high quality Montney property, uniquely positioned in the Deep Basin of Bigstone, in northwest Alberta. Delphi continues to outperform key industry players by improving operational efficiencies and growing our dominant Bigstone land position in this world-class play. Delphi is headquartered in Calgary, Alberta and trades on the Toronto Stock Exchange under the symbol DEE.