CALGARY, Alberta, Nov. 08, 2017 (GLOBE NEWSWIRE) — Delphi Energy Corp. (“Delphi” or the “Company”) is pleased to announce its financial and operational results for the quarter ended September 30, 2017.
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/a18f72e7-0a6f-446d-b086-224cc2bd70ea
Third Quarter 2017 Highlights
- Drilled four successful delineation wells and one successful in-fill well in the Company’s Bigstone Montney property, as part of a five gross (3.3 net) well drilling program;
- Produced 9,313 barrels of oil equivalent per day (“boe/d”), a 13 percent increase over the comparative quarter in 2016;
- Realized a natural gas price of $3.93 per thousand cubic feet (“mcf”) compared to an AECO price of $1.46 per mcf as a result of selling approximately 90 percent of Delphi’s natural gas in the Chicago market utilizing full-path transportation service on Alliance and a hedging gain of $0.44 per mcf;
- Commenced expansion of the Company’s water disposal facility to eliminate or significantly reduce third-party water disposal fees;
- Reduced operating costs to $8.42 per barrel of oil equivalent (“boe”), a 34 percent reduction compared to the second quarter of 2017;
- Secured a dedicated condensate delivery point to reduce wait times, decrease trucking distances and reduce condensate trucking rates of approximately 40 percent; and
- Maintained a strong financial position with only $18.5 million (including outstanding letters of credit) drawn on its $80 million senior secured credit facility with a syndicate of Canadian banks.
|Three months ended September 30||Nine months ended September 30|
|2017||2016||% Change||2017||2016||% Change|
|($ thousands, except per share)|
|Oil and natural gas revenues||25,107||20,331||24||70,940||48,589||46|
|Adjusted funds from operations(1)||7,865||9,403||(16||)||23,049||21,745||6|
|Per share – basic and diluted(1)||0.04||0.06||(33||)||0.14||0.14||–|
|Net earnings (loss)||(3,741||)||(2,274||)||65||9,189||(15,653||)||–|
|Per share – basic and diluted||(0.02||)||(0.01||)||100||0.05||(0.10||)||–|
|Capital expenditures, net of dispositions||22,798||15,364||48||75,659||27,253||178|
|Weighted average shares (000s)|
|Three months ended September 30||Nine months ended September 30|
|2017||2016||% Change||2017||2016||% Change|
|(boe conversion – 6:1 basis)|
|Field condensate (bbls/d)||2,012||1,667||21||1,831||1,478||24|
|Natural gas liquids (bbls/d)||1,367||1,251||9||1,229||1,203||2|
|Natural gas (mcf/d)||35,603||31,923||12||29,652||28,799||3|
|Average realized sales prices, before financial instruments|
|Field condensate ($/bbl)||51.08||49.78||3||56.93||46.05||24|
|Natural gas liquids ($/bbl)||33.11||19.42||70||31.12||17.55||77|
|Natural gas ($/mcf)||3.49||3.60||(3||)||3.93||3.05||29|
|Crude oil and natural gas revenues||29.30||26.81||9||32.47||23.71||37|
|Realized gain (loss) on financial instruments||2.31||4.84||(52||)||0.90||7.65||(88||)|
|Revenue, after realized financial instruments||31.61||31.65||–||33.84||31.36||8|
|General and administrative expenses||(1.33||)||(1.69||)||(21||)||(1.89||)||(2.09||)||(10||)|
|Paid out restricted share units||–||(0.13||)||–||–||(0.14||)||–|
|Cash netback (1)||9.18||12.41||(26||)||10.54||10.61||(1||)|
(1) Refer to non-GAPP measures
MESSAGE TO SHAREHOLDERS
Delphi continued to successfully execute its 2017 capital program in the third quarter with an emphasis on delineation drilling. The Company drilled four successful delineation wells as part of a five gross (3.3 net) well program thereby de-risking a significant portion of the Company’s 167.5 sections of Montney lands. Including the 13 gross (8.4 net) wells drilled in the nine months of 2017, Delphi is on track to drill a total of 17 gross wells and complete 15 gross wells in 2017.
Production in the quarter averaged 9,313 boe/d representing an increase of 13 percent over the comparative period in 2016 though production was negatively impacted by weather related delays in drilling and completion operations and temporary production curtailments principally due to offset well fracturing operations by other industry operators.
Delphi continues to benefit from its full-path transportation service on Alliance and sold approximately 90 percent of its natural gas into the Chicago market in the third quarter of 2017, realizing an average price $3.93 per mcf including a hedging gain of $0.44 per mcf, compared to an AECO price of $1.46 per mcf.
The record level of development activity undertaken by the Company on its Bigstone Montney asset in 2017, along with cost reduction initiatives commenced in the year, attractive natural gas marketing arrangements and a strong hedge book are expected to position the Company for continued growth and attractive returns on capital in 2018.
Summary of Results
Delphi continued an active development program at its Bigstone Montney property in the third quarter of 2017 drilling five gross (3.3 net) wells, performing completion operations on two gross (1.3 net) wells and undertaking various infrastructure upgrade and expansion projects.
Capital expenditures in the third quarter were $22.8 million of which $15.1 million was for drilling and completion operations and $5.8 million was for facilities. The relatively high portion of spending on facilities principally relates to expansion of the 5-8 compression and dehydration facility, expansion of the 16-34 water disposal facility and procurement of equipment for the 7-11 amine project. These projects are expected to facilitate production growth and reduce operating costs relating to existing production.
Production volumes in the third quarter of 2017 averaged 9,313 boe/d, a 13 percent increase over the comparative quarter in 2016. Underlying the overall production growth was the growth in field condensate of 21 percent over the comparative period in 2016. Third quarter production was negatively impacted by weather related delays in drilling and completion operations and by temporarily curtailed production averaging 600 boe/d, more than half of which was to mitigate the impact of offset well fracturing operations from adjacent industry activity.
Delphi’s realized prices before hedging gains in the third quarter were $3.49 per mcf for natural gas, $51.08 per barrel (“bbl”) for condensate and $33.11 per bbl for natural gas liquids. Hedging gains increased the realized price of natural gas by $0.44 per mcf and the realized price of field condensate by $2.81 per bbl. Delphi’s natural gas exposure remains well hedged through 2018 and into 2019. The Company remains constructive on long term condensate pricing, but has recently reduced its exposure to spot pricing through 2018.
|Commodity Hedges||Q4 2017||Q1 2018||Q2 2018||Q3 2018||Q4 2018||2019|
|Natural gas (mcf/d)||21.7||17.7||17.5||17.5||15.8||7.2|
|Average hedge price ($/mcf)||4.11||3.91||3.91||3.91||3.88||3.90|
|Crude oil (bbls/d)||1,100||1,100||1,000||600||600||300|
|Average hedge price ($/bbl)||66.37||67.85||68.15||70.35||70.35||70.00|
|* Based on average 2017 production of 33.5 mmcf/d of natural gas and 2,150 bbls/d of field condensate.|
The Company generated revenue of $25.1 million in the third quarter, a 24 percent increase over the comparative period in 2016, and adjusted funds from operations of $7.9 million, a 16 percent decrease from the comparative period in 2016. The decrease in adjusted funds from operations is principally due to higher operating and transportation costs. Delphi has undertaken various initiatives to reduce costs and improve operating netbacks.
With a significantly higher level of activity in the first nine months of 2017, 13 gross wells (8.4 net) versus three gross wells (2.4 net) in the first nine months of 2016, Delphi experienced higher operating and transportation costs on a boe basis as the Company worked through issues related to the trucking and disposal of frac load water and the trucking of additional condensate, both of which were exacerbated by higher industry activity levels in the Bigstone area affecting access to third party water disposal facilities and condensate terminals. Delphi has undertaken various initiatives, such as expanding its water disposal facility, contracting a dedicated delivery point for condensate, and re-contracting trucking arrangements for condensate, in order to reduce these costs. The benefit of these initiatives has started to be realized in the third quarter of 2017. Operating costs in the third quarter of 2017 were reduced by 34 percent compared to the second quarter of 2017, on a boe basis. Further reductions in operating costs due to the completion of the 7-11 amine sweetening project are expected in the second quarter of 2018. This project will reduce third-party processing costs as it allows the Company to divert approximately 17 million cubic feet per day (“mmcf/d’) gross (11 mmcf/d net) of raw natural gas to the under-utilized Bigstone West Gas Plant in which it owns a 25 percent working interest.
As at December 31, 2017 Delphi had $18.5 million (including outstanding letters of credit) drawn on its $80 million senior secured credit facility with a syndication of Canadian chartered banks. The Company expects to have its semi-annual review completed by November 30, 2017.
Subsequent to the operations update provided on October 25, Delphi has finished fracturing operations at the 16-12-60-24W5 (“16-12”) and 13-7-60-23W5 (“13-7”) wells, the western most Montney wells the Company has drilled and completed with slickwater fracs to date. Both wells were completed with the Company’s fourth generation frac design over 40 stages. The wells were drilled to test two separate Montney layers in a reduced spacing “wine rack” configuration. While completion operations are still ongoing at the 13-7 well, the western-most well at 16-12 was flowed on clean-up for 4.4 days, recovering approximately 25 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 4.2 mmcf/d of raw natural gas and 697 bbls/d of 42 degree API field condensate (191 bbls/mmcf of sales gas). Total sales production rate for 16-12 over this 24-hour period was approximately 1,471 boe/d (59 percent liquids), including an estimated plant natural gas liquids yield of 46 bbls/mmcf of sales gas. The preliminary flow back results are consistent with the Company’s model of overall well productivity, increased condensate yields and decreasing H2S content on the Company’s western lands. Decreasing H2S content to 0.02 percent H2S at 16-12 to zero H2S at the 9-4 Montney well further west, from 0.8 percent on the eastern edge of the Company’s lands significantly enhances the value of the western lands as a result of lower sweet natural gas processing costs. Following successful delineation and testing of the 16-12 well, Delphi has licensed and began lease construction for a horizontal Montney well more than two miles west of the 16-12 well. The Company expects to spud this well in the first quarter of 2018 and utilize its fifth generation frac design to complete the well.
Drilling operations have concluded at the Company’s 14th and 15th wells of the 2017 capital program at 14-15-60-23W5 and 15-19-59-23 (“15-19”). Completion operations are expected to commence prior to the end of the year on both wells where the Company will employ its fifth generation frac design. 15-19 marks another step-out drill in the 2017 program supporting Delphi’s effort in delineating the Montney play at Bigstone. The final two wells of the 2017 program will spud during the month of November with completion operations commencing in the first quarter of 2018.
Delphi will continue its drilling program through to spring breakup in 2018 utilizing its current two rigs under contract, resulting in the drilling of up to five wells and the completion and tie-in of five to six wells in the first half of 2018. The full year 2018 capital program will be finalized and guidance will be released in the first quarter of 2018, giving the Company adequate time to evaluate the ongoing delineation drilling program.
Average production in 2017 is now expected to be in the range of 8,600 to 8,900 boe/d with adjusted funds from operations of $35 to $38 million. Total capital spending in the year is expected to be in the range of $105 to $110 million, slightly lower than planned, resulting in bank debt and working capital deficiency at the end of the year of $37 to $42 million.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support.
CONFERENCE CALL AND WEBCAST
A conference call and webcast to review third quarter 2017 results is scheduled for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Thursday, November 9, 2017. The conference call number is 1-844-358-8760. A brief presentation by David J. Reid, President and CEO and Mark D. Behrman, CFO, will be followed by a question and answer period. The conference call will also be broadcast live on the internet and may be accessed through Delphi’s website at www.delphienergy.ca or by entering https://edge.media-server.com/m6/p/pw3mwudu in your web browser. A rebroadcast will also be available on Delphi’s website or at https://edge.media-server.com/m6/p/pw3mwudu on your web browser.
About Delphi Energy Corp.
Delphi Energy Corp. is an industry-leading producer of liquids-rich natural gas. The Company has achieved top decile results through the development of our high quality Montney property, uniquely positioned in the Deep Basin of Bigstone, in northwest Alberta. Delphi continues to outperform key industry players by improving operational efficiencies and growing our dominant Bigstone land position in this world-class play. Delphi is headquartered in Calgary, Alberta and trades on the Toronto Stock Exchange under the symbol DEE.