CALGARY, Aug. 9, 2017 /CNW/ –
OIL AND GAS OPERATIONS
- Paramount’s second quarter 2017 sales volumes averaged 18,367 Boe/d (52 percent Liquids), including approximately 12,700 Boe/d (60 percent Liquids) from Karr-Gold Creek. Liquids sales revenue totaled $45.4 million in the second quarter of 2017, 74 percent of the Company’s total petroleum and natural gas sales revenue.
- Company sales volumes averaged approximately 22,000 Boe/d in June and 27,000 Boe/d (53 percent Liquids) in July as new wells were brought on at Karr-Gold Creek through the Company’s expanded 80 MMcf/d compression and dehydration facility (the “6-18 Facility”). During the last week of July, Paramount’s sales volumes averaged approximately 30,000 Boe/d (53 percent Liquids), with record sales volumes being achieved at Karr-Gold Creek.
- All 27 wells from the 2016/17 Karr-Gold Creek Montney development program have been drilled. A total of 21 wells have been completed and 17 have been brought on production to date. On average, these new wells have met or exceeded type curve expectations for the program.
- The Company continues to advance its completion techniques and well design at Karr-Gold Creek to further enhance well performance and generate higher returns.
- Principal Properties capital expenditures in the second quarter of 2017 totaled $112.0 million. The majority of spending was directed towards the Karr-Gold Creek development program.
- Paramount closed the sale of its oil and gas properties in the Valhalla area of Alberta for cash consideration of approximately $150 million at the end of May 2017. The properties had average sales volumes of approximately 1,400 Boe/d (8 percent Liquids) in 2017 prior to being sold.
CORPORATE
- In July 2017, Paramount entered into an agreement to acquire Apache Canada Ltd. (“Apache Canada”) for $459.5 million, plus working capital and other monetary adjustments (the “Apache Canada Acquisition”).
- In July 2017, Paramount also entered into an agreement to merge with Trilogy Energy Corp. (“Trilogy”) by way of an arrangement under the Business Corporations Act (Alberta). Pursuant to the arrangement, Paramount will acquire all of the common shares and non-voting shares of Trilogy not already owned by Paramount in exchange for Class A common shares of Paramount on the basis of one Paramount share for every 3.75 Trilogy shares (the “Merger”).
- At June 30, 2017, Paramount had $565.6 million of cash and cash equivalents and no indebtedness.
- Paramount’s revolving bank credit facility was increased from $100 million to $300 million following completion of the annual review. It is anticipated that further amendments will be made to the facility following closing of the Apache Canada Acquisition and the Merger.
- Second quarter 2017 funds flow from operations totaled $35.2 million.
- In April 2017, the Company hedged 10,000 MMBtu/d of natural gas (for May to October 2017) at an average NYMEX price of US$3.37/MMBtu and 20,000 MMBtu/d of natural gas (for May to December 2017) at an average NYMEX price of US$3.40/MMBtu.
REVIEW OF OPERATIONS
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”). Karr Program wells have been designed with longer horizontal laterals of approximately 3,000 meters, higher intensity completions, tighter frack spacing and different completion fluids compared to prior years. The new well design is expected to significantly increase well productivity and recoverable reserves compared to the previous designs.
The status of the Karr Program to date is as follows:
As of |
Aug 4/17 |
Dec 31/16 |
Wells Spud |
27 |
20 |
Wells Rig Released |
27 |
10 |
Wells Completed |
21 |
2 |
Wells Brought on Production |
17 |
1 |
All 27 wells from the Karr Program have now been drilled, with average per-well costs of approximately $3.8 million(approximately 5 to 10 percent higher than original estimates). A total of 21 Karr Program wells have been completed and 17 have been brought on production to date. Completion costs for Karr Program wells have averaged approximately 10 to 15 percent higher than original estimates of $5.7 million per-well (four-well pad) as a result of changes to completion techniques and well design modifications which are expected to further enhance well performance and returns. Cost inflation for materials and field services also resulted in higher than estimated completion costs. The remaining six wells in the Karr Program are expected to be completed later in 2017 and early 2018.
Paramount continues to target Karr Program well completions with proppant loading intensities of approximately 2.4 tonnes per meter and stage spacing of between 40 and 50 meters using a range of completion technologies. Paramount recently set a new Company record, completing 16 plug and perf stages with zipper fracturing techniques in one day. In addition, well design continues to evolve with the testing of perforating techniques and modifications to proppant types. The Company will continue to evaluate these technologies as the Karr Program progresses and additional well performance data are obtained.
The Company is currently constructing a 300,000 m3 permanent water storage reservoir at Karr-Gold Creek, which will provide a larger water storage solution for completion operations and reduce the need for tank rentals. In addition, Paramount recently re-completed a well for water disposal and tied the well into the Company’s wholly-owned 6-18 Facility. Both actions of these projects are part of the Company’s overall water management program that are expected to reduce costs over the long-term.
Paramount’s second quarter 2017 sales volumes averaged 18,367 Boe/d (52 percent Liquids), including approximately 12,700 Boe/d (60 percent Liquids) from Karr-Gold Creek.
In April 2017, Paramount completed the expansion of its wholly-owned 6-18 Facility, doubling capacity of the facility to 80 MMcf/d. Company sales volumes were reduced to approximately 12,000 Boe/d in April 2017 as the majority of production at Karr-Gold Creek was shut-in for a two-week period to complete commissioning of the expanded facility. Commissioning was accelerated to coincide with an outage at a downstream third-party processing facility (the “Third-party Facility”).
Following the 6-18 Facility expansion, Paramount brought-on additional new wells from the Karr Program, increasing total Company sales volumes to approximately 22,000 Boe/d in June and 27,000 Boe/d (53 percent Liquids) in July. During the last week of July, Paramount’s sales volumes averaged approximately 30,000 Boe/d (53 percent Liquids), with record sales volumes being achieved at Karr-Gold Creek. On average, wells brought-on production to date from the Karr Program have met or exceeded type curve expectations for the program.
Sales volumes in August 2017 will be impacted by scheduled outages at the Third-party Facility and a third-party natural gas pipeline that are expected to shut-in Karr-Gold Creek production for most of the month.
Production at Karr-Gold Creek is transported through a Company-owned gathering system and compressed and dehydrated at the 6-18 Facility. Volumes are then shipped via pipeline to the Third-party Facility under a long-term firm-service arrangement to provide sales specification natural gas, condensate and C3+. The 6-18 Facility has been equipped to facilitate the trucking out of Liquids so that volumes in excess of contracted capacity at the Third-party Facility can be transported for processing at alternate locations. Paramount expects the majority of Liquids production to be trucked until mid-2018, when a condensate stabilization capacity expansion at the Third-party Facility is completed. The Company has contracted a dedicated fleet of trucks and 24-hour logistical services over this period to provide uninterrupted egress for Liquids production.
Smoky/Resthaven
Paramount has drilled five (4.5 net) of six planned wells in its Cretaceous exploration and delineation program at Smoky/Resthaven to the end of July. Three of the wells have been completed to the end of July and completion operations for the remaining two wells are in-progress. These wells are expected to be brought on production later in the year. Drilling of the sixth well is planned for the fourth quarter of 2017 at a winter access location.
The Company has drilled one (1.0 net) new Montney well in the northern portion of its lands at Smoky/Resthaven and completion operations are scheduled for later in the third quarter of 2017. The well design for this new location is expected to be similar to the Karr Program, with a planned horizontal lateral length of approximately 3,000 meters, slickwater completion fluids, approximately 70 fracture stages and proppant loading of approximately 2.4 tonnes per meter.
Birch
A total of seven (3.5 net) Montney wells have been drilled to the end of July in the planned ten (5.0 net) well drilling program at the non-operated Birch property. The remaining three (1.5 net) wells are scheduled to be drilled in the third quarter.
Two of the wells have been completed and brought onto production to the end of July. All of the wells drilled in the 2017 Birch drilling program are expected to be completed by the end of the year, except for one well which was drilled for land retention.
The expansion of the Birch compression and dehydration facility to 40 MMcf/d (20 MMcf/d net) is progressing on schedule to be completed in the third quarter of 2017.
Non-Core Property Dispositions
In May 2017, the Company sold its oil and gas properties in the Valhalla area of Alberta for cash consideration of approximately $150 million. The properties encompassed approximately 94 (74 net) sections of land and had average sales volumes of approximately 1,400 Boe/d (8 percent Liquids) in 2017 prior to being sold.
APACHE CANADA ACQUISITION AND THE MERGER
In July 2017, Paramount entered into an agreement with certain subsidiaries of Apache Corporation to acquire all of the shares of Apache Canada Ltd. for $459.5 million, plus working capital and other monetary adjustments.
In July 2017, Paramount also entered into an agreement to merge with Trilogy by way of an arrangement under the Business Corporations Act (Alberta). Pursuant to the arrangement, Paramount will acquire all of the common shares and non-voting shares of Trilogy not already owned by Paramount in exchange for Class A common shares of Paramount on the basis of one Paramount share for every 3.75 Trilogy shares.
These strategic transactions are the next steps in Paramount’s transformation following the sale of the Company’s Musreau deep cut gas processing plant and properties in 2016 and the repayment of all debt then outstanding. The Company is redeploying its cash on hand and immediately increasing its production, cash flows, reserves and landholdings.
When the acquisition of Apache Canada and merger with Trilogy are completed, Paramount will become a Montney, Duvernay and Deep Basin focused intermediate exploration and production company with the financial strength to accelerate the development of a portfolio of top-tier resource plays and unlock the value of the underlying resources. The integration of the three companies will generate operational synergies, optimize cost structures, offer financial flexibility and provide economies of scale. Paramount’s diversified production base will be capable of delivering repeatable, low risk growth and generating free cash flow in a variety of price environments.
The Apache Canada Acquisition is not conditional on the completion of the Merger. Closing of the Apache Canada Acquisition is expected to occur in August 2017, subject to customary closing conditions. The Merger is conditional upon the completion of the Apache Canada Acquisition and the receipt of court, shareholder and regulatory approvals and other customary closing conditions and is targeted for completion in September 2017. A joint information circular for the special meetings of shareholders of Paramount and Trilogy to consider the Merger is expected to be mailed in August.
Additional information concerning the Apache Canada Acquisition and the Merger can be found in Paramount’s Press Release dated July 6, 2017 and Material Change Report dated July 14, 2017, both of which are available on SEDAR at www.sedar.com.
OUTLOOK
Following completion of the Apache Canada Acquisition and the Merger, Paramount’s fourth quarter 2017 sales volumes are expected to exceed 90,000 Boe/d, including approximately 35 percent Liquids. Paramount’s 2017 capital budget has been maintained at $385 million. The Company also expects to continue with the remaining portions of the Apache Canada and Trilogy capital programs subsequent to closing these transactions.
OPERATING AND FINANCIAL RESULTS (1) ($ millions, except as noted)
|
|||||||
Three months ended June 30 |
Six months ended June 30 |
||||||
2017 |
2016 |
% Change |
2017 |
2016 |
% Change |
||
Sales volumes – Ongoing Operations (2) |
|||||||
Natural gas (MMcf/d) |
53.0 |
46.3 |
14 |
52.2 |
49.7 |
5 |
|
Condensate & oil (Bbl/d) |
8,118 |
2,471 |
229 |
7,238 |
2,712 |
167 |
|
Other NGLs (Bbl/d) (3) |
1,414 |
1,042 |
36 |
1,335 |
805 |
66 |
|
Ongoing Operations (Boe/d) (2) |
18,367 |
11,236 |
63 |
17,271 |
11,803 |
46 |
|
Musreau Assets (Boe/d) (2) |
─ |
29,654 |
(100) |
─ |
33,723 |
(100) |
|
Total (Boe/d) |
18,367 |
40,890 |
(55) |
17,271 |
45,526 |
(62) |
|
Netback – Ongoing Operations (2) |
|||||||
Natural gas revenue |
15.6 |
6.6 |
136 |
32.0 |
17.2 |
86 |
|
Condensate and oil revenue |
42.8 |
11.6 |
269 |
78.1 |
22.2 |
252 |
|
Other NGLs revenue (3) |
2.6 |
0.4 |
550 |
5.3 |
0.9 |
489 |
|
Royalty and sulphur revenue |
0.3 |
0.4 |
(25) |
0.6 |
0.6 |
– |
|
Petroleum and natural gas sales |
61.3 |
19.0 |
223 |
116.0 |
40.9 |
184 |
|
Royalties |
(0.8) |
0.5 |
NM |
(2.8) |
(0.6) |
367 |
|
Operating expense |
(17.2) |
(12.3) |
40 |
(32.1) |
(26.5) |
21 |
|
Transportation and NGLs processing (4) |
(8.2) |
(6.2) |
32 |
(14.3) |
(10.0) |
43 |
|
Netback – Ongoing Operations (2) |
35.1 |
1.0 |
NM |
66.8 |
3.8 |
NM |
|
($/Boe) |
21.05 |
0.94 |
NM |
21.39 |
1.75 |
NM |
|
Exploration and Capital Expenditures – Ongoing Operations (2) |
|||||||
Wells and exploration |
103.0 |
4.1 |
232.4 |
10.6 |
|||
Facilities and gathering |
9.0 |
1.9 |
26.3 |
7.7 |
|||
Principal Properties Capital (5) |
112.0 |
6.0 |
258.7 |
18.3 |
|||
Strategic Investments |
0.7 |
4.2 |
1.6 |
19.8 |
|||
Other |
2.0 |
11.1 |
3.5 |
11.4 |
|||
Total |
114.7 |
21.3 |
263.8 |
49.5 |
|||
Net income (loss) |
45.3 |
(30.6) |
66.1 |
(76.5) |
|||
per share – diluted ($/share) |
0.42 |
(0.29) |
0.62 |
(0.72) |
|||
Funds flow from operations |
35.2 |
(4.9) |
63.2 |
17.5 |
|||
per share – diluted ($/share) |
0.33 |
(0.05) |
0.59 |
0.16 |
|||
Total assets |
2,051.8 |
2,158.1 |
|||||
Cash and cash equivalents |
565.6 |
11.6 |
|||||
Long-term debt |
─ |
1,244.6 |
|||||
Investments in other entities – market value (6) |
140.4 |
162.1 |
|||||
Common shares outstanding (thousands) |
106,200 |
106,241 |
(1) |
Readers are referred to the advisories concerning Non-GAAP Measures and Oil and Gas Measures and Definitions in the Advisories section of this document. |
||||||
(2) |
In 2016, the Company sold its natural gas processing facilities and the majority of its oil and gas properties in the Musreau/Kakwa area of west central Alberta. Disclosures of results for the three and six months ended June 30, 2016 for “Ongoing Operations” exclude amounts attributable to these sold facilities and oil and gas properties. |
||||||
(3) |
Other NGLs means ethane, propane and butane. |
||||||
(4) |
Includes downstream natural gas, NGLs and oil transportation costs and NGLs fractionation costs incurred by the Company. |
||||||
(5) |
Principal Properties Capital includes capital expenditures and geological and geophysical costs related to the Company’s Principal Properties and excludes land acquisitions. |
||||||
(6) |
Based on the period-end closing prices of publicly-traded investments and the book value of the remaining investments. |
||||||
(7) |
NM Not meaningful |
Paramount is an independent, publicly traded, Canadian energy company that explores 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”.
Paramount’s second quarter 2017 results, including Management’s Discussion and Analysis and the Company’s Consolidated Financial Statements can be obtained at:
http://files.newswire.ca/1509/PRL_Q2_Results.pdf
This information will also be made available shortly through Paramount’s website at www.paramountres.com and SEDAR at www.sedar.com.