Production for 2017 averaged approximately 5,750 boe/d which is a 91% increase on a production per share basis when compared to 2016. December 2017 production averaged approximately 7,500 boe/d (62% liquids) with fourth quarter 2017 production estimated at 6,700 boe/d. The Company’s base corporate decline rate for 2018 is forecast to be approximately 31%.
The Company drilled and completed sixteen (16) wells in the bioturbated Cardium formation in 2017, five (5) wells were drilled prior to spring breakup and 11 wells were drilled post breakup with an additional two wells drilling over year-end. The first six wells drilled after break-up now have more than 30 days of production history and the IP-30 on those wells averaged 497 boe/d (80% liquids).
Efforts to reduce drilling and completion costs during the fourth quarter wells have been successful with costs declining to $1,250/m (per lateral meter on 2 mile wells) from $1,420/m in Q3 despite the increased frack intensity. Frack stages continue to increase with up to 80 stages per mile on recent wells with initial results indicating support for the increased intensity. The Company has also drilled two 1-mile wells and two 1.5-mile wells which will provide the Company with an opportunity to compare the economics of these wells to the 2-mile type curve.
The Company has 120 sections of Cardium land in Central Alberta and 940 gross (740 net) future Cardium locations (based on 1-mile horizontal lengths). Yangarra has increased its assumptions for original oil in place (“OOIP”) and original BOE in place (“OBOEIP”) due to recent exploitation of the bioturbated section below the traditional Cardium sand. Yangarra’s Cardium land base, according to internal analysis and estimates, contains 886 gross (650 net) million barrels of OOIP and 1,800 gross (1,265 net) million boe of OBOEIP as at December 31, 2017.
The Company currently operates 96% of its production.
Capital Budget & Guidance
Fourth quarter capital is expected to be approximately $30 million, bringing the total capital spent in 2017 to approximately $83 million. Fourth quarter cash flow is expected to be $15 million resulting in year-end net debt of approximately $95 million and a Q4 annualized debt to cash flow of 1.6 to 1.0.
The Company’s Board of Directors has approved an initial capital budget of $90 million for 2018. The 2018 capital budget includes the drilling of seven (7) new wells in the first quarter and fifteen (15) new wells in the second half.
The budget is expected to increase the Company’s annual 2018 production to 9,000 – 10,000 boe/d with cash flow from operations estimated at $80 to $90 million.
The Company expects year-end 2018 net debt of $95 – $105 million resulting in a debt to annual cash flow ratio of 1.1 – 1.3 to 1. The budget assumes an average price of US$55.00/bbl for WTI crude oil (CDN$63.75/bbl Edmonton par) and an average price of $2.00/GJ for AECO natural gas.
The annual review of the bank syndicated facility is scheduled for May 2018.
Hedging Program Update
The Company’s oil hedge position for 2018 consists of 2,300 bbl/d at an average price of C$70.09/bbl for the first half of the year and 1,400 bbl/d at an average price of C$73.23/bbl for the second half of the year. The Company has also hedged 200 bbl/d of propane at US$32.34 for 2018.