CALGARY, ALBERTA–(Marketwired – Dec. 29, 2015) – Delphi Energy Corp. (TSX:DEE) (“Delphi” or the “Company”) provides the following update.
Delphi is now singularly focused on its Bigstone assets where it holds 139.5 gross sections (118.1 net) of Montney rights and 81.5 gross sections (60.0 net) of contiguous shallow Cretaceous rights. The Bigstone Montney now represents 87 percent of corporate production.
While the oil and gas industry remains in a very challenging environment, Delphi’s accomplishments during 2015 have transformed the Company, positioning it to successfully navigate through this prolonged low commodity price environment. Several of these accomplishments include:
|•||Achievement of the Company’s 2015 annual and exit production guidance;|
|•||Successful drilling of six extended-reach Montney horizontal wells in Bigstone reducing the number of days from spud to total depth from 32 days to 28 days;|
|•||Reducing drilling and completion costs from $10.2 million in the first quarter of 2015, to a Company record low of $6.5 million in the fourth quarter of 2015 through innovative design changes, improved efficiencies and lower cost of services;|
|•||Closed on the disposition of its non-core lower netback assets at Wapiti and Hythe, Alberta for total gross proceeds of $62 million; and|
|•||Reduced net debt by 33 percent to an expected $122 -124 million at the end of the year, from a high of approximately $181 million at the end of the first quarter, with an expected net debt to annualized fourth quarter funds from operations ratio of approximately 2.6 – 2.8.|
The Company’s fifth well of the 2015 program, located at 14-24-60-23W5 (0.83 net), commenced production in late December. Delphi has also completed the drilling of its sixth horizontal Montney well of 2015 at 14-27-60-23W5. Completion operations, utilizing the Company’s newly optimized slickwater frac design over a 37 stage liner, are scheduled to commence in January 2016. The first well of Delphi’s 2016 capital program in the Montney formation at 13-21-60-23W5 (“13-21”) in the Bigstone area has commenced drilling. The 13-21 well is the first of two wells expected to be drilled in Bigstone this winter.
On December 1, 2015, the Company began transporting most of its natural gas under its Alliance full path firm service agreement, eliminating exposure to production curtailments and Alberta based natural gas price weakness.
Delphi estimates $6.0 – $7.0 million in reduced operating costs in 2016 over 2015, as the more efficient Montney production replaces the lower netback properties disposed of in 2015. In addition, with the disposition of the lower netback properties, the Company has reduced its staff from 36 to 24 (34 percent), resulting in expected general and administrative savings of $2.0 – $2.5 million.
Reduced capital costs and lower operating costs, combined with a superior asset has enabled the Company to continue to deploy capital to its Montney play with a high return on investment.
With crude oil and natural gas prices below U.S. $40.00 per barrel and U.S. $2.05 per million British thermal units (“mmbtu”), respectively, a strong risk management program heading into 2016 will be critical to ensuring a reasonable level of cash flow to support the Company’s capital program. Delphi remains well hedged through 2016 and into 2017 with most of its natural gas hedge position focused on the Chicago market rather than AECO market. The Company has approximately 82 percent of its natural gas volumes fixed at a price of $4.38 per mcf (excluding transportation costs) for 2016 and approximately 53 percent of its condensate volumes hedged at a floor price of $79.12 per barrel. The table below summarizes the Company’s current commodity price risk management contracts.
|Natural Gas (Cdn)||Dec 2015||2016||2017|
|% Hedged (1)||15%||9%||8%|
|Fixed Price (Cdn $/mcf)||$3.95||$3.84||$3.96|
|Dec 23 Strip Price (Cdn $/mcf)||–||$2.34||$2.81|
|Natural Gas (US)||Dec 2015||2016||2017|
|% Hedged (1)||70%||73%||23%|
|Fixed Price (US $/mmbtu)||$3.34||$3.50||$3.66|
|Dec 23 Strip Price (US $/mmbtu)||–||$2.28||$2.72|
|% US Revenue Hedged||59%||83%||136%|
|US/Cdn FX Hedge Rate||$1.242||$1.263||$1.284|
|Condensate (Cdn)||Dec 2015||2016|
|% Hedged (1)||81%||53%|
|Floor Price (WTI Cdn $/bbl)||$80.00||$78.50|
|Ceiling Price (WTI Cdn $/bbl) (2)||–||$85.00|
|Dec 23 Strip Price (WTI Cdn $/bbl)||–||$56.94|
|Volume hedged (1)||84%||76%||24%|
|(1)||Percent hedged is based on average natural gas production of 32 mmcf/d and 1,500 bbls/d of condensate and C5+.|
|(2)||400 bbls/d have upside to a ceiling price of $85.00 per barrel at a deferred cost of $4.02 per barrel.|
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 (“Plan”) to its directors and officers to acquire up to an aggregate of 1,330,000 common shares (“Common Shares”) of the Company and the granting of Options to its employees to acquire up to an aggregate of 920,000 Common Shares.
The new grants, totaling 2,250,000 options, to acquire common shares to eligible participants under the Plan, were granted effective December 24, 2015 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 $0.81 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.
In connection with Tony Angelidis, the Company’s Senior VP of Exploration leaving the Company at the end of the year, Delphi also announces that Mr. Angelidis has resigned from the Company’s Board of Directors effective December 30, 2015. The Board thanks Mr. Angelidis for his contribution and wishes him well in his future endeavours.
Delphi continues to navigate this very challenging lower commodity price environment with a singular focus on its core Bigstone Montney asset, complemented with the significant strategic non-core dispositions undertaken in 2015. This focused effort is successfully improving well productivity, driving down capital costs, grinding operating costs lower, alleviating TCPL transportation issues and creating greater financial flexibility. All of these successes are contributing to a sustainable economic business, even in a “lower for longer” commodity price environment.
The Company remains committed to a conservative approach to its capital spending plans into 2016 to preserve financial flexibility. Capital spending remains dependent upon realized commodity prices and the level of service cost reductions. Delphi expects to communicate 2016 guidance early in the first quarter of 2016.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support.
Delphi Energy is a Calgary-based company that explores, develops and produces oil and natural gas in Western Canada. The Company is managed by a proven technical team. Delphi trades on the Toronto Stock Exchange under the symbol DEE.