CALGARY, Feb. 15, 2017 /CNW/ –
HIGHLIGHTS
- Paramount’s fourth quarter 2016 sales volumes averaged approximately 12,000 Boe/d (35 percent liquids), including about 5,500 Boe/d (40 percent liquids) from Karr-Gold Creek.
- In late-January 2017, total Company sales volumes increased to over 15,000 Boe/d (50 percent liquids), including approximately 10,000 Boe/d from Karr-Gold Creek (60 percent liquids), as wells from the new 4-19 pad at Karr-Gold Creek were brought on production.
- The four wells on the 4-19 pad have produced a total of approximately 105,000 Bbl of condensate since first production from the pad in late-December 2016.
- Capital expenditures in the fourth quarter totaled approximately $80 million, with the majority of spending directed towards the Company’s Karr-Gold Creek development.
- Paramount’s 2017 capital program is expected to total approximately $325 million, with approximately $200 million directed towards Karr-Gold Creek.
- The expansion of the 6-18 compression facility at Karr-Gold Creek (the “6-18 Facility”) is on-schedule for completion in the second quarter, doubling capacity to 80 MMcf/d.
- Sales volumes in 2017 are projected to average approximately 20,000 Boe/d, with the majority of growth to occur in the second half of 2017 following completion of the 6-18 Facility expansion. Sales volumes are expected to average over 30,000 Boe/d in the fourth quarter of 2017.
- Paramount redeemed the remaining $286.6 million outstanding principal amount of its 2019 Notes in December 2016.
- In the fourth quarter, the Company sold 5.0 million of its Seven Generations Energy Ltd. common shares (“7Gen Shares”) for net cash proceeds of $148.5 million. In January 2017, Paramount distributed its remaining 3.8 million 7Gen Shares to shareholders by way of dividend.
- In December 2016, Paramount’s wholly-owned subsidiary, Cavalier Energy, sold a royalty on its oil sands properties for $100 million cash.
- Paramount exited 2016 with cash and cash equivalents of approximately $620 million, no indebtedness and an undrawn $100 million bank credit facility.
- The Company has calendar 2017 hedges in place for 30,000 MMBtu/d of natural gas at an average price of US$3.57/MMBtu, 2,000 Bbl/d of liquids at an average WTI price of C$70.43/Bbl and 1,000 Bbl/d of liquids at a WTI price of US$54.50/Bbl.
OPERATIONAL UPDATE
Karr-Gold Creek
Development activities at Karr-Gold Creek are currently focused on a 27 (27.0 net) well horizontal Montney drilling and completion program that commenced in mid-2016 (the “Karr Program”) and the expansion of the 6-18 Facility to double its capacity to 80 MMcf/d. The status of the Karr Program to date is as follows:
As of Feb 14/17 |
As of Dec 31/16 |
|
Wells Spudded |
20 |
20 |
Wells Rig Released |
16 |
10 |
Wells Completed |
6 |
2 |
Wells Producing |
5 |
1 |
Paramount plans to spud an additional seven wells at Karr-Gold Creek in 2017. By the end of 2017, the Company expects to have completed up to 22 of the 27 wells, with the remaining wells to be completed in 2018. The Karr Program wells are expected to be brought on production through 2017 and 2018 to fill the expanded 6-18 Facility.
The new wells at Karr-Gold Creek are being drilled with lateral lengths of approximately 3,000 meters and completed with slick-water completion fluids and higher intensities of proppant. The first well in the Karr Program, the 15-14 well, was brought on production at controlled rates in September 2016. Four new wells on the 4-19 pad were completed in December 2016 and January 2017 and are currently flowing back on cleanup at restricted rates. Production data from the wells are shown in the table below:
15-02 PAD |
4-19 PAD |
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WELLS
|
15-14 |
4-7 |
02/4-7 |
1-12 |
02/1-12 |
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Completion Details |
|||||||
Completion Stages |
50 |
70 |
75 |
73 |
58 |
||
Proppant (tonnes) |
5,000 |
7,000 |
7,500 |
7,300 |
5,800 |
||
Proppant intensity (tonnes / meter) |
1.7 |
2.3 |
2.5 |
2.4 |
1.9 |
||
Production – Cumulative |
|||||||
Natural gas(1) (MMcf) |
997 |
135 |
45 |
9 |
25 |
||
Wellhead liquids(1) (Bbl) |
161,479 |
64,318 |
30,338 |
3,365 |
6,484 |
||
CGR(2) (Bbl/MMcf) |
162 |
477 |
675 |
380 |
258 |
||
Days of flowback |
152 |
45 |
16 |
11 |
13 |
||
Production – Last 7 Producing Days |
|||||||
Natural gas(1) (MMcf/d) |
5.0 |
4.8 |
3.7 |
||||
Wellhead liquids(1) (Bbl/d) |
754 |
1,915 |
2,261 |
n/a(3) |
n/a(4) |
||
CGR(2) (Bbl/MMcf) |
152 |
403 |
607 |
||||
Production – Last 24 Producing Hours |
|||||||
Natural gas(1) (MMcf/d) |
5.4 |
4.7 |
3.4 |
4.1 |
|||
Wellhead liquids(1) (Bbl/d) |
832 |
1,766 |
1,824 |
1,945 |
n/a(4) |
||
CGR(2) (Bbl/MMcf) |
153 |
380 |
536 |
474 |
|||
(1) |
Volumes to February 13, 2017. Production volumes are the gross volumes measured at the wellhead separator for the specified period of: (i) cumulative volumes produced to February 13, 2017 (“Cumulative”); (ii) the most recent 168 producing hours (“Last 7 Producing Days”); or (iii) the last 24 producing hours (“Last 24 Producing Hours”). Excludes hours and days when the well did not produce. Natural gas sales volumes are approximately 10 percent lower and stabilized condensate sales volumes are approximately 15 percent lower due to shrinkage. The production rates and volumes shown are over a short period of time and, therefore, are not necessarily indicative of long-term performance or of ultimate recovery. |
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(2) |
The condensate to natural gas ratio (“CGR”) was calculated by dividing total wellhead separator liquids volumes by total wellhead separator natural gas volumes. |
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(3) |
Plugs were recently drilled out on the 1-12 well. The well has not produced post drill-out of plugs for 7 producing days. |
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(4) |
Plugs are currently being drilled out on the 02/1-12 well. The well has not produced post drill-out of plugs. |
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Paramount continues to evaluate the performance of the higher intensity completions on the 4-19 pad. Early results indicate that initial liquid yields are higher than the 15-14 well and that the higher intensity completions have contacted a greater area of the reservoir.
Paramount is investigating alternative production liner technologies to further enhance well results. The Company is also recycling flow-back water for re-use in completions to frack multiple wells, which is expected to provide incremental capital and operational efficiencies and environmental benefits.
Site work continues to progress at the 6-18 Facility expansion, which is on-schedule to be completed in the second quarter of 2017. The total cost of this expansion is estimated to be approximately $35 million, of which $20 million had been incurred to December 31, 2016. The accompanying photograph of the 6-18 Facility as of February 6, 2017 shows the progress made to date on the expansion.
Other Areas
Smoky/Resthaven: Paramount is executing a six-well exploration and delineation program in 2017 targeting various Cretaceous zones. The first well, a 1.4 mile horizontal Falher well, has been rig released and is scheduled to be completed later in February. Two additional wells are currently being drilled, with drilling operations for the next well scheduled to commence later in February.
Valhalla: The Company recently completed the 14-22 exploratory Montney well at Valhalla with a high intensity frack, placing approximately 2,000 tonnes of proppant over 20 stages in the 1,300 meter lateral (1.5 tonnes per meter). The well was brought on production in January 2017 and initial performance has been encouraging. The Valhalla lands are prospective in the Montney (lower, middle and upper) and lower Doig formations where Paramount has an inventory of drilling locations to support future development. The Company is evaluating the potential economics of the opportunity based on the results of this initial high intensity well completion, results from offsetting operators and various alternatives to access natural gas processing infrastructure.
Birch: Four (2.0 net) horizontal Montney wells have been drilled to date in the 2016/2017 winter drilling season at Birch. Two (1.0 net) of these wells have been completed and are scheduled to be brought on production later in the first quarter of 2017. Paramount and its partner plan to drill up to an additional five (2.5 net) wells in total at Birch in 2017 and expand the existing 20 MMcf/d compression facility at Birch to 40 (20 net) MMcf/d.
Willesden Green: A total of five Duvernay wells have been drilled on Paramount’s lands to date, with three of the wells completed and on production as of December 31, 2016. A fourth well, the 102/13-5 well, was completed in the fourth quarter of 2016. The well was fracked using slick-water and 4,600 tonnes of proppant placed over 26 stages (2.3 tonnes per meter) in the 2,000 meter lateral wellbore. Following completion, the well was flow-tested over an extended timeframe to obtain data for analysis of long-term reservoir performance. The Company continues to evaluate further development of the Duvernay formation at Willesden Green, including the preparation of a full-field development plan.
Paramount has launched a sales process for various non-core properties in Alberta and British Columbia through CB Securities Inc. Current production from these properties totals approximately 800 Boe/d.
CORPORATE
In 2016, Paramount realized net cash proceeds of approximately $860 million through the sale of 29.7 million of the 7Gen Shares it received through the third quarter Musreau/Kakwa disposition. In January 2017, the Company distributed its remaining 3.8 million 7Gen Shares to shareholders by way of dividend.
Paramount redeemed the remaining $286.6 million outstanding principal amount of its 7⅝ percent senior unsecured notes due 2019 (the “2019 Notes”) in December 2016.
In December 2016, Cavalier Energy sold a royalty to an unrelated third party on its oil sands properties for cash consideration of $100 million. The royalty agreement does not impose any development commitments on Cavalier Energy in respect of its properties, nor does it impose any terms or conditions on the use of the consideration paid for the royalty.
In the fourth quarter of 2016, the Company closed dispositions of non-core properties for aggregate cash proceeds of approximately $17 million. Third quarter 2016 production for these properties was approximately 500 Boe/d.
Paramount implemented a normal course issuer bid in October 2016 under which it may purchase up to 5.4 million Common Shares for cancellation. To date, the Company has purchased 622,900 Common Shares for cancellation at a total cost of $9.7 million.
Hedging Program
Paramount has the following financial commodity contracts in place for 2017:
Instruments |
Aggregate Notional |
Average Fixed Price |
Term |
|
Natural Gas: |
||||
Sale |
NYMEX Swaps |
40,000 MMBtu/d |
US$3.44/MMBtu |
January 2017 – December 2017 |
Purchase |
NYMEX Swap |
10,000 MMBtu/d |
US$3.04/MMBtu |
January 2017 – December 2017 |
Net Gas Hedges |
30,000 MMBtu/d |
US$3.57/MMBtu |
January 2017 – December 2017 |
|
Oil: |
||||
Sale |
NYMEX WTI Swaps |
2,000 Bbl/d |
CDN$70.43/Bbl |
January 2017 – December 2017 |
Sale |
NYMEX WTI Swap |
1,000 Bbl/d |
US$54.50/Bbl |
January 2017 – December 2017 |
OUTLOOK
Paramount’s 2017 capital program is expected to total approximately $325 million, excluding land acquisitions, with approximately $200 million directed towards Karr-Gold Creek and the balance directed towards Smoky/Resthaven, Birch, and other areas.
Activities at Karr-Gold Creek will focus on the expansion of the 6-18 Facility, finishing the 27 well Montney drilling program and completing a portion of those wells to fill the expanded 6-18 Facility. At Smoky/Resthaven, Paramount plans to drill and complete six horizontal wells targeting various Cretaceous formations. At Birch, the Company plans to drill and complete a total of nine (4.5 net) wells and double compression and dehydration capacity to 40 MMcf/d (20 MMcf/d net).
Sales volumes in 2017 are projected to average approximately 20,000 Boe/d, with the majority of growth to occur in the second half of 2017 following completion of the 6-18 Facility expansion. Sales volumes are expected to average over 30,000 Boe/d in the fourth quarter of 2017. In September 2017, Karr-Gold Creek sales volumes are anticipated to be impacted by the planned shut-down of a third party gas processing plant for the majority the month.
Annual operating costs for 2017 are anticipated to average approximately $10.00 per Boe. Fourth quarter 2017 operating costs are expected to be lower than in the first part of the year because of the ramp-up in production volumes at Karr-Gold Creek.
* * * * *
Paramount is an independent, publicly traded, Canadian energy company that explores for and develops unconventional and conventional petroleum and natural gas prospects, including long-term unconventional exploration and pre-development projects, and holds a portfolio of investments in other entities. The Company’s principal properties are primarily located in Alberta and British Columbia. Paramount’s Class A Common Shares are listed on the Toronto Stock Exchange under the symbol “POU”.