CALGARY, April 6, 2016 /CNW/ – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Corporation“) (TSX: PPY) is pleased to announce further capital cost reductions which will reduce forecast 2016 capital spending. Additionally, Painted Pony has hedged incremental production volumes through 2016 and 2017 to reduce the impact of commodity price volatility as part of our active risk management program. AltaGas Ltd. (“AltaGas“) has confirmed that the AltaGas Townsend Facility (the “Facility“) is approximately 85% complete and ahead of schedule.
2016 Capital Program
The updated 2016 capital program is expected to deliver previously forecasted production volumes targets, including a 2016 exit production rate anticipated to be in excess of 240 MMcfe/d (40,000 boe/d), for total spending of approximately $179 million. This represents a reduction of approximately $36 million (17%) from 2016 capital spending guidance of $215 million released in November 2015 and a reduction of approximately $18 million (9%) from 2016 capital spending guidance of $197 million released in January 2016. Drilling, completion and equipping costs have been further reduced by 19% to $4.8 million per well from $5.9 million per well as budgeted in November of 2015. These additional costs savings are the result of ongoing efficiencies achieved in Painted Pony’s capital operations. The Corporation will continue to implement operational efficiencies to ensure any additional capital cost savings are identified and captured.
During the first quarter of 2016, Painted Pony entered into additional financial hedges to provide commodity price risk mitigation. Total hedges now cover approximately 61% of forecast 2016 annual average natural gas production volumes. For the first three quarters of 2016, hedges consist of AECO fixed-price swaps at an average price of $3.30/Mcf on 61 MMcf/d of forecast average natural gas production volumes of approximately 100 MMcf/d. For the fourth quarter of 2016, Painted Pony has entered into Station 2 fixed price hedges on 55 MMcf/d of natural gas production at an average price of $2.09/Mcf. These Station 2 hedges are in addition to AECO fixed price hedges during the fourth quarter of 2016 on 78 MMcf/d of natural gas production at an average price of $3.30/Mcf of forecast fourth quarter average natural gas production volumes of approximately 215 MMcf/d.
Financial hedges for 2017 cover approximately 49% of forecast 2017 annual average natural gas production volumes. These 2017 hedges consist of AECO fixed price hedges on 58 MMcf/d of average natural gas production at an average price of $3.33/Mcf and Station 2 fixed price hedges on approximately 65 MMcf/d of average natural gas production at an average price of $2.09/Mcf.
Painted Pony is well protected in this low commodity price environment with existing hedges and anticipates continuing to mitigate commodity price risk by hedging incremental production volumes to provide downside price risk protection and reduce future cash flow volatility.
To date, Painted Pony’s three drilling rigs have drilled 13 (13.0 net) wells. All of the wells necessary to meet the initial commitment at the Facility have been drilled and rig-released.
Completion crews have finished 9 (9.0 net) completions to date. Painted Pony has planned for a total of 14 (14.0 net) completions during the first half of 2016 which is expected to ensure the volume commitment for the Facility is met. The 2016 capital program anticipates a total of 30 (30.0 net) completions which, in addition to meeting volume commitments at the Facility, will provide production growth momentum into 2017.
AltaGas Townsend Facility
Construction of the Facility is now approximately 85% complete and continues to progress ahead of schedule. AltaGas expects the Facility to begin commissioning operations mid-year 2016. Recent photos and aerial videos of the construction site illustrating the ongoing progress can be viewed on the Painted Pony website at http://paintedpony.ca/investors/Media-Gallery/default.aspx
Based on field estimates, Painted Pony averaged approximately 99 MMcfe/d (16,500 boe/d) during the first quarter of 2016, inclusive of approximately 3 MMcfe/d (500 boe/d) of price-driven, shut-in production volumes. Painted Pony anticipates production volumes to average 93 – 99 MMcfe/d (15,500 – 16,500 boe/d) during the second quarter of 2016, inclusive of any further price-driven shut-in production volumes.
Investor Conference Participation
Painted Pony is pleased to announce that it will be participating in the Raymond James Canadian Energy Investor Day and the Canadian Association of Petroleum Producers (“CAPP“) Scotiabank Investment Symposium. The Raymond James Canadian Energy Investor Day is taking place on April 8, 2016 at the Le Meridien Hotel San Francisco located at 333 Battery Street in San Francisco, California. The CAPP Scotiabank Investment Symposium is taking place on April 13, 2016 at the Delta Hotel located at 75 Lower Simcoe Street in Toronto, Ontario. Mr. Patrick Ward, President & CEO, will present on the “NE B.C. Gas Markets – Outlook for Realized Prices” panel scheduled for 4:00 pm (EST) in the Soco Ballroom.
In addition to Mr. Ward’s presentation and panel participation, the Corporation will be undertaking a series of presentations to institutional investors while at these conferences. Interested parties are invited to view the updated Corporate Presentation on Painted Pony’s website, www.paintedpony.ca.