New Cardium 2-mile Type Curve
Yangarra has analyzed the results from its most recent 10 well program to develop a type curve for future 2-mile Cardium wells on the Company’s land base. The wells drilled in the bioturbated zone exhibit better initial flow rates, higher pressures and lower than expected declines.
The type curve has IP30 rates of 490 boe/d (390 bbl/d of oil), IP90 rates of 425 boe/d (295 bbl/d of oil) and twelve month declines of 48% on a boe basis. At US$47.50/bbl WTI pricing, the type curve generates a half cycle internal rate of return of 132%, has a payout of 10 months and an NPV10 of $5.5 million (the full assumption list and sensitivities can be found in the updated corporate presentation).
Using the new type curve the Company projects annual production per share growth for 2017 of 85% when compared to 2016.
Capital Budget & Guidance
The Company’s Board of Directors has approved an increased 2017 capital budget of $70 million. The revised capital budget projects drilling an additional 12 extended reach horizontal Cardium wells, annual 2017 production of 5,500 – 6,000 boe/d and cash flow from operations of $47.5 to $52.5 million.
The Company expects year-end 2017 net debt of $77.5 – $82.5 million resulting in a debt to annual cash flow ratio of 1.5x – 1.7x and fourth quarter annualized debt to cash flow approaching 1.1x. The budget assumes an average price of US$47.50/bbl for WTI crude oil (down from US$55.00/bbl in the previous budget), C$61.65/bbl Edmonton par and an average price of $2.75/GJ for AECO natural gas (down from $3.00/GJ in the previous budget).
Five new 2-mile Cardium wells, have been licensed and two multi-well pads have been constructed. The Company plans to spud the first well as soon as weather permits. Yangarra continues its strategy of building multi-well pads, completing a tie-in at that location to facilities to handle the associated gas, while drilling only a single well on the pad. In a future development phase these locations will allow the Company to drill several additional from the existing pad with minimal additional cost.
Based on previous performance, Yangarra expects to execute the balance of the 2017 drilling program with one rig.
The Company plans to commence construction at its 2-4 oil handling facility to connect an oil sales pipeline, as well as add to storage and blending facilities in the third quarter.
The Company’s hedge position for the balance of 2017 provides coverage for 40% of projected oil volumes at an average price of C$72.75/bbl and 30% of projected natural gas volumes at an average price of $3.07/GJ.
An updated corporate presentation is available on the Company’s website www.yangarra.ca