CALGARY, ALBERTA–(Marketwired – Sept. 13, 2016) – Delphi Energy Corp. (TSX:DEE) (“Delphi” or the “Company“) is pleased to provide an operational update in relation to the Company’s continued success of its ongoing operations at its Bigstone Montney property. The Company has announced that it expects to ramp up production capability to approximately 9,100 barrels of oil equivalent per day (“boe/d”) in the coming weeks, remaining on target to achieve its 2016 exit production target.
Delphi is also pleased to announce its attendance and participation at the Peters & Co. 20th Annual Energy Conference in Toronto on September 13 and 14, 2016. An updated corporate presentation is now available on the Company’s website at www.delphienergy.ca.
David J. Reid, President and CEO commented, “Delphi continues to achieve targets within cash flow to accelerate our 2017 growth with increased liquidity.” Mr. Reid added, “Since we began the development of our Bigstone Montney project, the Company has continued to replace PDP reserves with higher netback boe’s than are being produced, effectively turning every $1 into $2 over the life of the project. The Delphi team remains confident in our targeted 10 to 20 percent production per share growth over our 2015 exit rate, based on an exceptional 2016 capital program that is largely funded with cash flow generated over the year.”
The Company concluded drilling operations on its third well of the 2016 capital program at 14-11-60-23W5 (“14-11”) (75 percent working interest) in mid-August. The well was drilled to a total depth of 5,927 metres in 30 days with a horizontal lateral in the Montney of 2,846 metres. A 42 stage frac completion was recently performed with sand concentrations per horizontal metre being 14 percent higher than any other Delphi Montney well to date. After fracturing operations, 14-11 was flowed on clean-up for three days recovering approximately 16 percent of the initial load frac water. Over the last 24 hours prior to running production tubing, the well flowed on clean-up at an average rate of 6.5 million cubic feet per day (“mmcf/d”) of raw natural gas and 427 barrels per day (“bbls/d”) of field condensate (76 bbls/mmcf of sales gas). Total sales production for the 14-11 well over this 24-hour period was approximately 1,582 boe/d, including an estimated plant natural gas liquids (“NGL”) yield of 40 bbls/mmcf of sales gas. Initial average production rates over the first 30 days will be reported in due course. Capital costs continue to improve with drilling and completion capital for the 14-11 well estimated at $7.0 million. This compares to average drilling and completion costs of $10.4 million in 2014 and $8.3 million in 2015. 14-11 is expected to be brought on production at restricted rates in late September.
Delphi recently completed a successful re-frac of its 16 – 30 – 60 – 22W5 well (“16-30”) (100 percent working interest). 16-30 was Delphi’s first horizontal Montney well drilled in late 2011 at Bigstone. After re-fracturing operations were completed, 16-30 was flowed on clean-up for three days recovering approximately 20 percent of the initial load frac water. Over the last 24 hours prior to running production tubing, the well flowed on clean-up at an average rate of 3.9 mmcf/d of raw gas and 313 bbls/d of field condensate (93 bbls/mmcf of sales gas). Total sales production for the 16-30 well over this 24 hour period was approximately 1,009 boe/d, including an estimated plant natural gas liquids (“NGL”) yield of 40 bbls/mmcf of sales gas. 16-30 was brought on production at a restricted rate in late August and has averaged 474 boe/d with a field condensate yield averaging 136 bbls/mmcf of sales gas over the first 14 days on production. Continued evolution of re-frac operations and evaluation of results will lead to numerous identified re-frac candidates at Bigstone.
The drilling rig for the fourth well of the 2016 program at 16-09-60-23W5 (“16-09”) (82.5 percent working interest) will be moving in the next few days and is expected to spud later this week. 16-09 follows recent success at the western edge of the Company’s current Montney development at Bigstone. The 13-21-60-23W5 (“13-21”) well was drilled and completed in the first quarter of 2016 and was brought on production in early March. The wells initial average production over the first 90 producing days (“IP90”) was 1,077 boe/d with a field condensate ratio of 194 bbls/mmcf of sales gas. The closest Delphi horizontal Montney well to the 13-21 is approximately 800 metres to the east at 15-21-60-23W5 (“15-21”). Over the first 90 days on production, the 15-21 well averaged 1,053 boe/d with a field condensate to gas yield of 110 bbls/mmcf of sales gas. The 13-21 field condensate yield is 75 percent higher than the 15-21 well. 13-21 is the fourth well to utilize Delphi’s third generation frac design and the Company continues to learn and evolve its completion techniques to access the rich, high quality hydrocarbon content of the Montney at Bigstone.
The combination of new development moving further to the west on the Company’s Bigstone Montney property along with Delphi’s third generation frac design has made a marked improvement on field condensate to gas rate yields. The four wells utilizing the Company’s third generation frac techniques, with production history of at least 90 days, have seen an average increase in field condensate yields, compared to the offset wells, of 36 percent on IP30 and 22 percent on IP90.
Delphi continues to be active in managing its commodity price risk, having recently executed additional natural gas contracts to lock in a greater percentage of volumes for Q4-2016 and Q1-2017 with minimal change to the average hedge price. As a result, the Company is protected through the remainder of 2016 with approximately 78 percent of its natural gas production hedged at an average price of Cdn $4.44 per mcf (excluding transportation costs). For 2017, the Company has approximately 63 percent of its natural gas production contracted at an average price of Cdn $4.23 per mcf (excluding transportation costs). Delphi also has approximately 49 percent of its condensate volumes contracted at a floor price of Cdn $76.44 per barrel. The table below summarizes the Company’s current commodity price risk management position for 2016 through 2019.
|Hedge Price (1) (Cdn $/mmbtu)||$4.44||$4.28||$4.21||$3.77||$3.89|
|Floor Price (2) (WTI Cdn $/bbl)||$76.44||$60.00||$60.00|
|Ceiling Price (2) (WTI Cdn $/bbl)||$85.00||$60.00||$60.00|
|(1) Before deduction for transportation costs to either Chicago on Alliance or AECO on TCPL.|
|(2) 44% of hedged volumes in 2016 have upside to $85.00 at a deferred cost of $4.02 per barrel|
The Company continues to manage its production growth in the context of its cash generating capability. Economic returns on the new capital deployed remain very attractive as a result of the improving cash generating efficiencies from superior Chicago-based natural gas pricing, increased condensate yields, lower cost structures and a successful long term risk management program. Favorable recycle ratios in excess of 1.4 times continue to be generated as a result of the strong realized netbacks combined with efficient 2015 Montney proved producing finding and development costs of $10.12 per boe. Drilling and completion costs in the first half of 2016 were down a further 18 percent from the 2015 averages.
Continued innovation of our well design, driving costs lower, while maintaining full ownership and control of our infrastructure are paramount in our continued effort towards top decile capital and cash generating efficiencies. The Company’s significant risk management position through 2016 to 2019 protects both funds from operations and the balance sheet, enabling a meaningful capital program and growth in 2016.
Delphi continues to navigate this commodity price environment with a focus of protecting the equity value of its significant Bigstone Montney asset. The Company has invested approximately $300 million capturing 140 gross Montney sections, constructing 65 mmcf/d of 100 percent owned infrastructure and drilling 26 gross wells over the past four years. The Company continues to target production growth to 22,000 boe/d in 2019 utilizing existing major infrastructure, for an increase of 160 percent. Through this early stage of innovation and economic optimization of the project, in this part of the commodity price cycle, it is important to note the Company has consumed only a small fraction of the significant drilling inventory identified on the 140 gross sections. Delphi is currently the largest landowner at Bigstone.
The Company has managed its capital structure over the past four years without dilution to equity holders and reduced total debt by over 30 percent and bank debt by over $100 million in the past 15 months through asset dispositions and the successful issuance of $60 million in five-year notes.
Delphi’s focused effort in protecting shareholder value will be more fully recognized as the rate of capitalization and production growth accelerates through 2017 and 2018. The Company continues to pursue its strategic relationships and opportunities to further accelerate these future drilling and infrastructure plans within its Bigstone Montney core asset.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support.