CALGARY, ALBERTA–(Marketwired – Dec. 16, 2013) – Crew Energy Inc. (“Crew” or the “Company”) (TSX:CR) is pleased to announce that its Board of Directors has approved a $246 million capital program for 2014 focused on the development of liquids rich natural gas at Septimus, British Columbia and light oil at Tower, British Columbia. The program is designed to provide a platform for long-term profitable growth and to further delineate Crew’s northeast British Columbia Montney resource with over 15 billion boe of Total Petroleum Initially in Place (“TPIIP”) assigned by Crew’s independent evaluator.
2014 Goals
- Invest in our Montney assets where drilling and completion technology continues to evolve, generating robust and continuously improving economic returns;
- Invest in Montney oil and gas infrastructure to accommodate future production growth targeting corporate exit 2015 production of over 40,000 boe per day;
- Evaluate the Montney potential at Crew’s Attachie and Groundbirch, British Columbia properties;
- Further evaluate the potential of the Mannville formation at Princess, Alberta after encouraging results in 2013;
- Maintain aggregate production levels at our Deep Basin, Lloydminster and Princess, Alberta properties with free funds from operations to be distributed to our Montney growth initiatives;
- Improve our corporate netback through reduced operating costs and adding higher netback liquids to our production mix.
2014 Budget Highlights
- Average Montney production is targeted at 11,500 boe per day, a 53% increase over 2013;
- $35 million is planned to be invested in infrastructure to build an oil battery at Tower and start the construction of a second 60 mmcf per day gas processing facility at Septimus which is expected to be onstream in mid-2015;
- Crew will continue with the front-end engineering for its previously disclosed facility at Groundbirch with a planned start-up in 2016;
- Average production for 2014 is forecasted to be 29,500 to 30,500 boe per day (52% natural gas and 48% oil and ngl) representing a forecasted 10% increase over 2013 while fourth quarter 2014 average production is targeted to be 12% over 2013 levels at 31,500 to 32,500 boe per day;
- Crew plans to drill 62 net wells with 47 wells targeting oil and 15 wells targeting liquids rich natural gas;
- Operating expenses are expected to decrease by 8% to $10.25 per boe in 2014 as Septimus operating costs per unit continue to decline;
- Funds from operations are forecasted to be $200 million, an increase of approximately 18% over estimated 2013 funds from operations;
- Funds from operations netbacks are expected to improve as higher valued oil production comes onstream at Tower, natural gas prices are forecasted to be higher than in 2013 and a greater number of wells are drilled horizontally on Crown land at Lloydminster and Princess attracting lower royalties.
2014 Capital Budget by Area
| Area-Product | Wells | $MM |
| Northeast British Columbia Montney – Gas/ngl | 14 | 94 |
| Tower – Light Oil | 6 | 39 |
| Alberta Kakwa – Gas/ngl | 1 | 10 |
| Alberta Princess – Oil | 16 | 39 |
| Alberta/Saskatchewan Lloydminster – Oil | 25 | 36 |
| Other | – | 28 |
| Total | 62 | 246 |
2014 Capital Budget by Category
| Expenditure Type | $MM | % |
| Drilling, Completion, Equip & Tie-in | 153 | 62 |
| Facilities and Infrastructure | 55 | 22 |
| Production, Seismic/Land/G&A/Environmental/Other | 24 | 10 |
| Optimization | 14 | 6 |
| Total | 246 | 100 |
2014 Capital Program
Montney, British Columbia
The capital program in northeast British Columbia is our most ambitious program since we started accumulating land in 2007. Our enthusiasm for this play and this area stems from a long learning curve where a number of drilling and completion techniques have been employed and have now evolved resulting in superior long term economics and growth visibility. Crew has drilled over 40 wells targeting Montney liquids rich natural gas at Septimus with the latest group of wells exhibiting significant increases in production, liquids content and expected rates of return.
The Septimus gas plant expansion to 60 to 65 mmcf per day of capacity has been completed four months ahead of schedule and with the facility at capacity, production has increased in this area from 6,000 boe per day in January 2013 to a current rate of approximately 10,500 boe per day which represents a 75% increase. Improved efficiencies in drilling and completions, pad development and an area water management plan have contributed to reduced costs leading to robust economics. With the drilling success at Septimus, Crew is planning to construct a second 60 to 65 mmcf per day gas facility allowing the Company to fully utilize its expanded pipeline capacity. The expected onstream date is mid-2015.
Crew’s 2014 program is expected to keep the existing Septimus gas plant full at a capacity of 60 to 65 mmcf per day. A three (3.0 net) well pad that is currently being drilled and a seven (7.0 net) well pad planned to be drilled and completed in 2014 are expected to keep production volumes in the 10,000 to 11,000 boe per day range. We plan to pre-drill four wells in 2014 in anticipation of the second gas processing facility.
Crew plans to drill and test one (1.0 net) well at Attachie and two (1.0 net) wells at Groundbirch. We have 49 sections of land at Attachie and 57 sections of land at Groundbirch. With recent success at Septimus, we now plan to develop Groundbirch in 2015 and 2016 with a planned start-up of a natural gas processing facility in 2016. The size of this facility has not been finalized.
Tower, British Columbia
At Tower, we plan to drill six (6.0 net) wells from two pads and construct an oil battery.
Mannville – Princess, Alberta
At Princess, 16 horizontal wells are planned to be drilled on Crown lands targeting the Mannville following a successful 2013 drilling program. Crew has over 30 horizontal Mannville drilling locations at Princess. Lower royalties from legacy lower rate Pekisko wells on freehold land and lower royalties associated with new wells drilled on Crown lands are expected to improve area netbacks through the year.
Mannville – Lloydminster, Alberta/Saskatchewan
At Lloydminster, Crew plans to drill 14 horizontal and 11 vertical wells following our successful 2013 program where production has increased 22% from 5,580 to 6,800 bbl of oil per day. The horizontal wells will benefit from lower royalties and are expected to improve operating netbacks.
Falher/Cardium – Kakwa, Alberta
At Kakwa, we plan to drill one step out well following our 2012 Falher discovery which has produced 3.4 bcf in 11 months and is currently producing 10.0 mmcf per day (1,950 boe per day).
Risk Management
For 2014, Crew has the following hedges in place;
- Natural Gas – 32,932 gj per day swapped at AECO floor of $3.51/gj;
- Oil – 4,124 bbl per day swapped at C$ WTI $97.83;
- Oil Differential – 2,500 bbl per day swapped WCS-WTI Differential at C$24.06.
2014 Guidance
| Average production (boe/day) | 29,500 to 30,500 (48% liquids) | |
| Exit production (boe/day) | 31,500 to 32,500 (48% liquids) | |
| Capital Expenditures | $246 million | |
| $U.S. Nymex Oil | $94.57/bbl | |
| $CDN AECO | $3.37/gj | |
| Fx ($US/$CDN) | 0.9475 | |
| WCS Differentials | 26% |