CALGARY, Dec. 14, 2015 /CNW/ – Journey Energy Inc. (JOY – TSX) (“Journey” or the “Company“) announces its capital plan and guidance for 2016 as well as the suspension of its quarterly dividend.
FOURTH QUARTER OPERATIONAL UPDATE
Journey has completed its fourth quarter drilling program with 4 (3.1 net) wells drilled. 3 (2.5 net) wells were drilled in Countess-Brooks and 1 (0.6 net) well was drilled in Matziwin. The results of these wells have exceeded our expectations. All wells are anticipated to be on production prior to the end of the year, at which time Journey forecasts production climbing to over 10,000 BOE/D (55% liquids).
2016 GUIDANCE
Given the extended downturn in both oil and natural gas prices, Journey has chosen to minimize its capital spending for 2016. This budget is designed to reduce our net debt below our currently projected 2015 exit level.
Journey’s guidance for 2016 is as follows:
Annual average production |
9,000 to 9,500 BOE/d (56% liquids) |
Capital program (excluding acquisitions) |
$25 million |
Cash flow |
$29 – $31 million |
Year end net debt |
$101 to $103 million |
Cash flow per basic, weighted average share |
$0.67 – $0.71 |
Journey’s 2016 capital program is currently forecast to yield annual production volumes in the 9,000 to 9,500 BOE/d range and includes an increase in liquids content from the 54% realized to date in 2015 to approximately 56% in 2016. The currently projected $25 million in capital will be allocated to drilling, completing, equipping and tieing-in 10 (9 net) wells in Brooks, Poplar Creek, Skiff, Cherhill and Matziwin, as well as waterflood expansion projects in Matziwin, Skiff and Herronton. Journey is increasing its emphasis on waterflood expansion due to recent favourable response indications from its current projects. These projects require longer lead times for production response, which in turn provide time for commodity prices to stabilize. In addition, the projects will contribute to the reduction in our corporate decline rate from the current 22% to approximately 18% by 2017.
With the planned capital program, Journey is forecasting cash flow from operations of $29-$31 million with net debt exiting the year between $101 and $103 million. These projections are based on the following average 2016 prices: WTI of US$47.50/bbl; AECO gas of C$2.45/mcf; and a foreign exchange rate of $0.75 US$/CDN$.
Journey will operate substantially all of its 2016 capital program with an average working interest of over 90%. Because of this, Journey can remain flexible with this budget, increasing or decreasing its spending should prices materially change. Management feels it prudent to not allow the debt to increase beyond current levels.
Journey has made great strides in 2015 to reduce its costs and will continue to do so in 2016. Operating expenses are anticipated to decrease by approximately $2.5 million in 2016 from 2015. In the head office, the Company incurred $19 million gross ($13 million net, after recoveries and capitalization) general and administrative costs (“G&A”) in 2014. Throughout 2015 the Company pursued staff count, as well as salary and consulting rate reductions. In 2016, Journey is projecting gross G&A of $14 million ($10 million net). Even with these G&A reductions Journey will be operating four times the number of wells and twice the production in 2016 than it did in 2012.
FOURTH QUARTER DIVIDEND
In response to an unprecedented decline in commodity prices, Journey’s Board of Directors has approved the suspension of the quarterly dividend. The suspension of the dividend will contribute to the preservation of Journey’s balance sheet and provide maximum flexibility. In addition, 2016 may present unique opportunities to deploy capital, which may not be available in future years and this may be more beneficial over the longer term than the distribution of capital to shareholders during this period of extremely low commodity prices. Journey will review a return to the dividend model as commodity prices improve.