- Balanced 2018 Budget: $140 million capital budget ($70 million in each of Light Oil and Thermal Oil) aligned to $145 million funds flow (US$55 WTI)
- Production Growth: 2018 production outlook of 38,500 – 41,000 boe/d (87% liquids), representing 11% per share growth year-over-year
- Sustainable Financial Position: 2017 year-end funding capacity of approximately $375 million and forecasted 2018 net debt to funds flow of 2.7x (US$55 WTI)
- Positioned for Improving Commodity Prices: Flexibility for additional activity with $80 million annual funds flow upside for $5/bbl WTI
Strategic Plan Update
Over the past three years, Athabasca has responded to challenging times by executing on its well-defined strategic plan and transforming the Company from early stage exploration to a funded intermediate oil-weighted producer.
Athabasca is uniquely positioned as an oil weighted producer with current production in excess of 40,000 boe/d (~90% liquids), a low corporate decline of ~10% and exposure to the top returning resource plays in Western Canada (Montney, Duvernay and oil sands). The Company is demonstrating consistent execution, supported by recent quarterly results, with strong underlying cash flow and margin growth. Athabasca is guided by a strategy that includes:
- Light Oil: Well Defined and Scalable Growth in the Montney and Duvernay
- Thermal Oil: Low Decline Assets Generating Free Cash Flow
- Financial: Balance Sheet Sustainability and Margin Growth
The Company is focused on maximizing profitability and shareholder returns. Athabasca maintains flexibility in its capital allocation decisions and is strategically positioned to generate strong free cash flow. The Company has protected its financial position through an active near-term hedging program while retaining exposure to significant upside in an improved oil commodity price environment. Athabasca also has significant strategic flexibility in the future to generate high returns for shareholders.
Corporate production in November averaged approximately 41,700 boe/d (87% liquids).
In the Light Oil division November production averaged 11,200 boe/d (50% liquids, field estimate).
At Placid, Athabasca recently tied in a four well Montney pad (surface location 7-33-60-20W5) with restricted average IP30s per well of approximately 1,100 boe/d (52% liquids), exceeding its previously increased management internal type curve of 1,000 boe/d.
At Kaybob West, Murphy recently tied-in a two well Duvernay pad (05-29-064-20W5 surface location) with an IP20 of 1,250 boe/d (82% liquids) and an IP18 of 1,000 boe/d (80% liquids) respectively.
In the Thermal Oil division November production averaged 30,500 bbl/d (field estimate). Activity is focused on capital efficient well optimizations (flow control devices and non-condensable gas injection) along with advancing long lead sustaining projects.
2018 Budget and Financial Outlook
Athabasca’s Board of Directors has approved a $140 million 2018 capital budget. Corporate production guidance is between 38,500 – 41,000 boe/d (87% liquids). The budget is aligned to forecasted funds flow of $145 million and positions the Company with 11% production per share growth year over year.
The base Light Oil budget is $70 million with production guidance between 10,500 – 11,500 boe/d (54% liquids), representing 45% production per share growth year over year.
In the Montney at Placid, planned activity includes completing a six well development pad and drilling six infill wells in Q1 2018. The Montney budget is $40 million net and predominately weighted to the first half. Activity levels will be reassessed mid-year and the asset is positioned for scalable growth with commodity price support.
In the Duvernay at Kaybob, 2018 joint venture plans are expected to include rig releasing 24 wells, completion operations on 27 wells and placing approximately 24 wells on production. Development plans are consistent with the joint development agreement and include significant delineation throughout the volatile oil window (approximately 80% of planned activity). The Duvernay budget is anticipated to be $357 million gross ($30 million net) and Athabasca retains a 30% working interest.
The base Thermal Oil budget is $70 million with production guidance between 28,000 – 29,500 bbl/d. This represents 2% production per share growth year over year, in line with the Company’s strategy to maintain base production with an optimized capital program.
Planned activity at Leismer includes the scheduled turnaround during May, the tie-in of four infill wells, continued production optimization activities and long lead items for future sustaining well pairs. Minimal capital expenditures are expected at Hangingstone as the project is still in ramp-up phase.
|2018 Guidance||Full Year|
|Production (boe/d)||38,500 – 41,000|
|Liquids Weighting (%)||~87%|
|Funds Flow from Operations ($MM)||~$145|
|LIGHT OIL (net)|
|Production (boe/d)||10,500 – 11,500|
|Operating Income ($MM)||~$115|
|Capital Expenditures ($MM)||$70|
|Bitumen Production (bbl/d)||28,000 – 29,500|
|Operating Income ($MM)||~$130|
|Capital Expenditures ($MM)||$70|
|Western Canadian Select (C$/bbl)||$52.25|
|AECO Gas (C$/mcf)||$1.90|
Financial Outlook and Risk Management
Athabasca has transformed its financial outlook by building scale and accelerating cash flow in both the Light Oil and Thermal Oil divisions. Light Oil is forecasted to account for approximately 50% of 2018 corporate operating income with netbacks of $28/boe. In Thermal Oil, the low decline nature of Company’s assets provides a strong base of free cash flow to fund future corporate investment and drive value for Athabasca’s shareholders.
The Company’s 2018 capital budget demonstrates Athabasca’s commitment towards financial sustainability and aligning capital spending with funds flow. The Company anticipates exiting 2017 with funding capacity of approximately $375 million including cash and equivalents, available credit facilities and the Duvernay capital carry balance. The Company’s $120 million credit facility was recently reaffirmed by Athabasca’s lenders at its mid-year review. Forecasted 2018 net debt to funds flow is 2.7x (US$55 WTI).
Athabasca’s risk management program is designed to provide near term balance sheet stability while preserving the Company’s upside to improving commodity prices in the medium term. In 2018, the Company intends to hedge up to 50% of 2018 production volumes, and has currently hedged 21,000 bbl/d for Q1 at ~C$48.50/bbl Western Canadian Select (heavy blend), 16,000 bbl/d for Q2 at ~C$48.75/bbl and 6,000 bbl/d for Q3 at ~C$48.50/bbl
The Company forecasts 2018 G&A of approximately $1.95/boe, which represents a 90% reduction from 2014 levels.
Board Renewal Process
As previously announced on November 17, Athabasca has engaged an international recruiting firm to fill a recent vacancy and assist in the ongoing board renewal process to ensure the Board of Directors represents the optimal skillset required to move forward with its existing strategic plan. The Company expects to provide shareholders with updates on this initiative in the coming months.
About Athabasca Oil Corporation
Athabasca Oil Corporation is a Canadian energy company with a focused strategy on the development of thermal and light oil assets. Situated in Alberta’s Western Canadian Sedimentary Basin, the Company has amassed a significant land base of extensive, high quality resources. Athabasca’s common shares trade on the TSX under the symbol “ATH”. For more information, visit www.atha.com.