CALGARY, Alberta, July 18, 2018 (GLOBE NEWSWIRE) — Delphi Energy Corp. (“Delphi” or the “Company”) is pleased to provide an update on operations and guidance for the second half of 2018.
Delphi is among the most liquid-rich gas producers in the Montney, with field condensate and natural gas liquids (“NGLs”) comprising approximately 42 percent of production from its Bigstone Montney property on a barrel of oil equivalent (“boe”) basis. Delphi is currently generating approximately 70 percent of its revenue from its condensate and natural gas liquids production and remains well positioned to benefit from the improved outlook for crude oil prices.
Delphi’s production through the second quarter of 2018 was consistent with its previously released guidance, with the more valuable field condensate production trending to the upper end of the guidance range, while natural gas and associated liquids have trended to the lower end of the range. Field and plant condensate represented approximately 72 percent of the total liquids production during the second quarter.
|Field condensate (bbls/d)||2,800 – 2,900||2,860||2,472||16|
|NGLs (bbls/d)||1,550 – 1,650||1,575||1,418||11|
|Natural gas (mmcf/d)||37.0 – 39.0||37.0||33.7||10|
|Average production (boe/d)||10,600 – 11,000||10,600||9,515||11|
|Percent liquids (%)||41||42||41|
The 16-10-60-24W5 (“16-10”) well at West Bigstone was brought on production in May through Delphi’s 100 percent owned Negus sweet gas plant in West Bigstone. Over the first 30 full days on production (IP30), the well flowed at an average rate of 3.2 million cubic feet of natural gas per day (“mmcf/d”) of raw gas and 913 barrels per day (“bbls/d”) of 41 degree API field condensate (310 bbls/mmcf of sales gas). Total sales production rate for 16-10 over this time period was approximately 1,434 barrels of oil equivalent per day (“boe/d”) (66 percent liquids), including current estimated plant natural gas liquid (“NGL”) yield of 10 bbls/mmcf of sales gas through the Negus plant. 16-10 has been on production for two months and has produced 44,600 barrels of field condensate.
The 15-19-59-23W5 (“15-19”) well at West Bigstone was brought on production in February through the Company’s 7-11-60-23W5 field compression and dehydration facility (“7-11 facility”). Over the first 90 full days on production (IP90), the well flowed at an average rate of 3.8 mmcf/d of raw gas and 605 bbls/d of 44 degree API field condensate (183 bbls/mmcf of sales gas). Total sales production rate for 15-19 over this time period was approximately 1,300 boe/d (58 percent liquids), including an estimated plant NGL yield of 44 bbls/mmcf of sales gas.
The IP30 field condensate rate of 16-10 and IP90 field condensate rate of 15-19 are both more than double the average field condensate rate over the same respective time periods for Delphi’s other ten most recent wells. The performance of these two wells are a result of Delphi’s continued innovation of its completion design as well as delineation of the western portion of the Company’s acreage.
Delphi is pleased to announce it has entered into a fluids disposal agreement with Catapult Environmental Inc. (“Catapult”) whereby Catapult will drill a disposal well(s) near the Company’s Bigstone Montney development and will pipeline connect it to the 7-11 facility at Catapult’s risk and expense. In exchange, Delphi has agreed to direct disposal fluid, excluding disposal fluid reused by Delphi for hydraulic fracturing operations and disposal fluid injected into disposal wells owned by Delphi, to their facility in the project area for a prescribed fee. The fee is lower than the Company’s current water trucking costs alone and will have a positive impact to the Montney operating costs. The proximity of the Catapult disposal well and facility to the Company’s Montney development is also expected to have a favorable impact to completions costs. Delphi estimates a decrease in completion flow-back trucking and disposal costs by over 50 percent. The Company has retained its 65 percent interest in the 16-34-59-21W5 disposal well. The Catapult disposal well and facility is expected to be commissioned in the first quarter of 2019.
Second Half 2018 Outlook
Delphi has commenced its second half drilling program and expects to drill and complete four (2.6 net) wells in the second half of 2018 spending approximately 75 to 85 percent of the planned expenditures on the new wells, with the remaining capital focused on infrastructure and production optimization projects.
The following table highlights Delphi’s guidance for the second half and full year of 2018.
Half Guidance (1)
|2018 Full Year
|Net capital program ($ million)||$29 – $33||$75 – $80|
|Well count drilled||4 (2.6 net) – 5 (3.3 net)||8 (5.2 net)|
|Well count on production||4 (2.6 net)||11 (7.2 net)|
|Average production (boe/d)||10,000 – 10,400||10,000 – 10,200|
|Natural gas (mmcf/d)||37.0 – 37.5||36.0 – 36.5|
|Field condensate (bbls/d)||2,500 – 2,650||2,600 – 2,650|
|NGLs (bbls/d)||1,400 – 1,500||1,450 – 1,500|
|Percent liquids (%)||40 – 41||40|
|Adjusted funds flow (“AFF”) ($ million)||$25 – $27||$50 – $54|
|Net debt (2)||$160 – $166||$160 – $166|
|Net debt / AFF (annualized)||3.1||3.1|
(1) Based on WTI crude oil price of $68 per barrel, NYMEX Henry Hub natural gas price of $2.95 per mmbtu and FX of 1.327 CAD per USD.
(2) Net debt is defined as the sum of bank debt, senior secured notes and the long term portion of unutilized take-or-pay contract plus (minus) the working capital deficit (surplus) excluding the current portion of the fair value of the financial instruments.
As a result of the successful delineation drilling this past winter and production performance of the new wells brought on-stream over the past twelve months, Delphi currently has eight multi-well pads and another five delineation wells in various stages of licensing. This drill-ready inventory provides the optionality to expand the current program depending on realized commodity prices through the second half of 2018 and into 2019. The four (2.6 net) new wells being drilled and completed in the second half of 2018 will not have a significant impact on the Company’s production until the fourth quarter as highlighted in the table below, due to the scheduled on-stream dates.
|Average production (boe/d)||10,600 – 10,900||9,588||12|
|Natural gas (mmcf/d)||38.5 – 39.0||35.4||9|
|Field condensate (bbls/d)||2,700 – 2,900||2,374||18|
|NGLs (bbls/d)||1,450 – 1,500||1,315||12|
|Percent liquids (%)||40||38||—|
|Adjusted funds flow (including hedges) ($ million)||$14.5 – $15.0||$14.1||5|
|Adjusted funds flow (excluding hedges) ($ million)||$18.0 – $18.5||$13.0||40|
The Company continues to maintain an active commodity risk management program. Delphi will more fully benefit from the improving WTI oil price outlook in the second half of 2018 and into 2019 as the existing WTI hedge positions expire. The Company continues to benefit from its contracted Alliance full path service to Chicago providing premium natural gas pricing. Delphi’s excess Alliance service continues to generate additional revenue offsetting the Company’s AECO exposure.
|Commodity Hedges||Q1 2018||Q2 2018||Q3 2018||Q4 2018||2019|
|Natural gas (mcf/d)||20.0||21.0||21.0||17.4||10.2|
|Average hedge price (C$/mcf)(2)||3.62||3.61||3.62||3.64||3.41|
|Crude oil (bbl/d)||2,256||2,500||2,100||2,100||798|
|Average hedge price (C$/bbl)||70.50||71.20||72.41||72.41||72.91|
(1) Assumes an FX of 1.327 CAD per USD for the second half of 2018 and 2019.
(2) Includes the impact of NYMEX HH natural gas – Chicago basis hedges.
Delphi advises that Luminus Energy Partners Master Fund Ltd. (“Luminus”) has filed on SEDAR that it has acquired additional common shares through exempt market purchases and that it now owns 21.23 percent of the outstanding shares (on a non-diluted basis) of the Company. Luminus was the principal investor in the $65 million debt and equity financing by the Company in June 2017 to fund an expanded capital program. Upon closing of the financing in 2017, Luminus owned 16.72 percent of the outstanding common shares of the Company.
The Company looks forward to providing a more detailed review of second quarter operations in its second quarter 2018 report to be released on August 8, 2018 after close of market.
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.