CALGARY, Jan. 9, 2019 /CNW/ – Crew Energy Inc. (TSX: CR) (“Crew” or the “Company”) is pleased to announce an operations update that builds on our 2019 budget release issued on December 10th, 2018. The Company’s $95 to $105 million budget is expected to approximate annual estimated Funds From Operations (“FFO”) which is designed to preserve balance sheet strength and financial flexibility.
- Strong December Production: Based on field estimates, December 2018 average production is estimated at 24,200 boe per day (70% natural gas) as a result of higher production rates from Ultra Condensate Rich (“UCR”) wells and a portion of shut-in production being restored as differentials improved through the month. Average production in Q4 2018 is estimated at 22,400 boe per day as approximately 1,300 boe per day of natural gas and 700 bbls per day of heavy oil was shut-in for the majority of the quarter due to low pricing. Annual production is estimated at 23,850 boe per day, which is within guidance of 23,500 to 24,500 boe per day.
- Focus on UCR Drilling: Crew has two drilling rigs currently working in Northeast B.C. One rig is drilling the last well on a six well pad (at the 4-21 location) directly south of our recently completed 15-20 wells in the UCR area. This rig will then be moved to drill a four well UCR pad directly north of the 15-20 location at 3-32; where lateral lengths are planned at over 3,000 metres. The second rig is drilling a lease retention well at Attachie before moving to drill an exploratory horizontal well approximately 18 kilometers northwest of Crew’s UCR area, to delineate Crew’s liquids rich play in the area. The Company has continued to refine a number of variables in our drilling operations to improve efficiencies and we have seen a 35% reduction in costs per metre of lateral length drilled. Crew continues to trial different lateral lengths, fluid systems, drill bits and downhole assemblies in order to optimize efficiencies.
- Increased Lateral Lengths: Crew now has production data from its three recently completed, extended reach wells in the UCR area that are exceeding Company forecasts. The wells were drilled with lateral lengths of 2,500 to 2,700 metres versus previous average lateral lengths of 1,840 metres in this area.
- Enhanced Completions Design: Crew has used a new completion design which has the following characteristics:
- Perf and plug completions were used to allow for the effective stimulation of these longer laterals by more evenly distributing fractures and proppant along their lengths;
- New frac fluids were used to enhance frac geometry, improve proppant placement, and optimize water usage;
- The number of fracture initiation points were increased four-fold;
- Inter-well spacing within the same zone was decreased to 250 metres from 400 metres to improve liquids recovery; and
- Microseismic data was recorded to understand the effectiveness and impact of variations within the completion design.
- 15-20 Pad Shows Positive Initial Results: The three 15-20 wells produced for 25 days in December before being shut-in to accommodate offsetting fracture operations of adjacent wells in early January. The three wells were producing at a combined sales rate of 4,584 boe per day (61% liquids), for an average per well rate of 1,528 boe per day comprised of 3.6 mmcf (599 boe per day) of sales gas, 776 bbls per day of condensate and 153 bbls per day of natural gas liquids (“NGLs”). The condensate gas ratio averaged 216 bbls per mmcf. Since flowback began in mid November, the three wells have produced over 75,000 bbls of condensate.
- 2019 Fracture Operations: Crew has begun frac operations on the remaining two wells on the 15-20 pad. One well was drilled in the same “B” zone as the first three completed wells and the other was drilled in the “C” zone. Following the completion of the 15-20 pad, Crew plans on fracture treating four wells on the 4-21 pad directly south of the 15-20 pad.
TRANSPORTATION AND RISK MANAGEMENT
- Crew’s 2019 natural gas sales exposure is currently expected to be approximately 43% to Chicago City Gate, 16% to NYMEX, 15% to Dawn, 10% to Alliance ATP, 8% to Malin, 4% to Station 2 and 4% to AECO 5A.
- Approximately 30% of our budgeted 2019 volumes are hedged at $2.59 per GJ or approximately $2.74 per mcf, which increases to approximately $3.22 per mcf after adjusting for Crew’s higher heat content natural gas. Natural gas hedges currently include 22,500 mmbtu per day of Chicago City Gate gas at C$3.54 per mmbtu, 5,000 mmbtu per day of Dawn gas at C$3.56 per mmbtu and 7,500 mmbtu per day of NYMEX gas at US$2.98 per mmbtu.
- 1,874 barrels per day of WTI are hedged at an average price of C$75.99 per barrel for 2019 and 500 barrels per day of WCS hedged for the first half of 2019 at an average price of C$52.93 per bbl. In addition, Crew has 250 bbls per day of WCS differential hedged at C$25.75 per bbl for the first half of 2019.
Crew is scheduled to report our fourth quarter and year end 2018 results on March 4, 2019 after market close.