CALGARY, Alberta, March 20, 2019 (GLOBE NEWSWIRE) — (PIPE – TSX-V) Pipestone Energy Corp. (“Pipestone Energy” or the “Company”) is pleased to provide an operational update as well as updated reserves and resources information effective as of January 4, 2019, which was the closing date of the amalgamation (the “Amalgamation”) of Pipestone Oil Corp. (“Pipestone Oil”) and Blackbird Energy Inc. (“Blackbird”). A conference call has been scheduled for Wednesday, March 20th at 9:00 a.m. Mountain Daylight Time (11:00 a.m. Eastern Daylight Time) for interested investors, analysts, brokers and media representatives.
“Pipestone Energy continues to successfully execute on its development program in 2019, which includes the construction of an integrated in-field gathering and third-party compression system, capable of supporting approximately 33,000 boe/d of sales production. We recently completed drilling the final well of a 7 well program on our 3-1 pad and are preparing to complete these wells in late spring. We have been extremely pleased with the drilling performance on this pad over the past few months as we have set several new operational milestones, including a new performance pacesetter on our final well. Pipestone Energy is well positioned to meet our 2019 exit production guidance of 14,000 – 16,000 boe/d,” stated Paul Wanklyn, Pipestone Energy President and Chief Executive Officer. “The capital efficiencies we achieved during the most recent drilling and completions activities in Q4 2018 and Q1 2019 has resulted in an 11% decrease in our well costs from $9.7 million to $8.6 million. With our large contiguous land position in the condensate-rich Pipestone Montney, committed access to processing infrastructure, product egress, and a strong balance sheet, we expect to deliver strong shareholder value.”
- Increased the net present value before tax, discounted at 10% (“NPV10%”) of Pipestone Energy’s Proved (“1P”) reserves from $554 million to $839 million, an increase of 51% since August 1, 2018
- Increased the NPV10% of Pipestone Energy’s Proved + Probable (“2P”) reserves from $1,170 million to $1,394 million, an increase of 19% since August 1, 2018
- Development program to achieve 2019 exit production of 14,000 – 16,000 boe/d is on-track and on-budget
- Average final 24 hour test rate on all wells completed north of the Wapiti River of ~1,790 boe/d (45% condensate) based on raw gas and wellhead condensate production (excludes natural gas liquids) (1)
- Infield operated gathering infrastructure project is 95% complete
(1)Based on the latest test results (16 tests) for each well as available (excludes initial test if the well has been subsequently retested)
2019 CAPITAL PROGRAM UPDATE
Due to weather-related delays in Q4 2018, Pipestone Energy spent ~$10 million less than expected causing a shift of the capital expenditure program into Q1 2019. As a result, Pipestone Energy plans to spend between $145 – $165 million on the 2019 capital program. The Company recently finished drilling its fourth and final well for Q1 and expects to drill 9 additional wells in H2 2019. Pipestone Energy is planning to complete 7 wells in 2019 and will have a balance of 12 wells drilled but uncompleted (“DUC”) at year end 2019. The Company may elect to accelerate the completion of 3 additional DUCs into Q4 2019 depending on prevailing market conditions.
Pipestone Energy 5 Quarter Capital Program Overview (Q4 2018 – Q4 2019)
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/7d553745-2590-490d-a278-eedf782201b6
Pipestone Montney Operated Horizontal Well Status Summary
|Sept 30, 2019
|Dec 31, 2019
|South of Wapiti River (1)
(CNRL Gold Creek Processing Facility)
|Drilled + Completed||9||9||9|
|Tied-In / On-Production||8||8||8|
|North of Wapiti River (1)
(Keyera Wapiti & Tidewater Pipestone Processing Facilities)
|Drilled + Completed||16||23||23|
|Tied-In / Available for Production||–||20 – 21||20 – 21|
|(1) Tied-In / Available for Production is a subset of the Drilled + Complete category which is a subset of the Drilled category.|
Completions and Well Test Results
During Q4 2018 and Q1 2019, the Company completed 6 wells on its 15-14-70-8W6 (“15-14”) pad using high intensity plug & perf (“P&P”) completions. Following the completion of these 6 wells, the 15-14 pad now has a total of 10 completed wells, which will be equipped and tied-in during H2 2019. Pipestone Energy achieved an average completion cost of ~$4.5 million ($710 per tonne) on the six wells completed during Q4 2018, a savings of ~22% from the internally budgeted cost of $5.8 million, as a result of more efficient program execution.
|15-14 Pad Completion Details:|
|Well ID||Lateral Length
|Stages / Entry Points (1)
|0/12-22-70-8W6||2,691||31 / 213||6,811|
|2/12-22-70-8W6||2,599||30 / 205||6,560|
|2/13-22-70-8W6||2,476||30 / 199||6,400|
|3/13-22-70-8W6||2,335||27 / 185||5,824|
|0/14-22-70-8W6||2,435||29 / 196||6,049|
|0/14-18-70-7W6||2,197||26 / 172||5,568|
|(1) The 6 recent wells on the 15-14 pad were completed using P&P technology. In P&P operations, an entry point refers to an individual “perforation cluster” within a wellbore. Multiple perforation clusters (i.e. entry points) generally make up a single frac stage.|
The Company is pleased with the test results from the recently completed six wells that were all tested on flow-back at restricted rates based on regulatory flare permit constraints. Testing provided a preliminary view of the rates, pressures and composition, as well as removed a portion of the frac water prior to production start-up in Q4 2019.
Given the large volume of water being pumped in each of these fracs, which averaged 24,500 m3 per well on the 15-14 pad, and the limited allowable flowback time, the initial test results may not be indicative of ultimate productivity and condensate ratios. Historically, Pipestone Energy has observed substantial improvements in both total production rates and condensate to gas ratios (“CGRs”) through providing “soak” time to wells by allowing them to sit for 6 – 12 months after completion or flow back on an extended basis. In the 6 wells that Pipestone has had the opportunity to re-test, the average final 24-hour daily condensate production rates have increased by 200%, along with 60% improved CGRs. Post testing the 15-14 pad, during January 2019, Pipestone Energy re-tested the 3-27-71-7W6 well, which exhibited a 222% improvement in its daily condensate rate and a 29% improvement in its CGR as compared to the initial flowback test during March 2018.
|Recent Final 24-Hour Test Details:|
|Well ID||Montney Layer||Total Production
Lower Montney Test Result
Pipestone Energy completed and tested its first Lower Montney well at 14-18-70-7W6 (“14-18”) located on the 15-14 pad. Due to H2S levels of ~10%, the well had to be restricted significantly to manage regulatory allowances related to flaring sour gas. During the final 24-hours of testing, the 14-18 well averaged 2.8 MMcf/d of natural gas, 85 bbl/d of wellhead condensate, and 805 bbl/d of flowback water at a flowing casing pressure of 13,059 kPa prior to installing a downhole choke to mitigate hydrate formation in the wellbore. Only a small amount of load fluid was recovered (6%), which may have impacted the condensate recovery. This well will be put on production once facilities are available in late 2019, at which point longer production tests will provide more indicative results on CGRs and productivity. Pipestone Energy’s in-field gathering system and pad facilities are designed to handle up to 8% H2S and Pipestone Energy will blend this gas with lower concentration H2S wells on the same pad site as required.
The Company is very encouraged by the strong initial clean-up performance of this first Lower Montney well and anticipates that the majority of its 148 net section acreage position is prospective for future development, subject to ongoing delineation work. Plans are in-place to drill a second Lower Montney evaluation well prior to year-end 2020.
The Company has recently completed drilling the final well of a new 7 well pad at 03-01-71-8W6 (“3-1”) pad, with the seventh well achieving a new operational performance benchmark for Pipestone Energy. The anticipated average drilling cost for the seven wells, including the cost for rig mobilization and de-mobilization, is ~$2.4 million, or ~5% below the average budgeted cost per well on this pad of $2.6 million.
Pipestone Energy is well underway with the construction of its in-field raw gas and condensate gathering system and pad site production facilities to be production ready in Q4 2019. Third party custom compression and natural gas processing is currently under construction by Keyera Corp. (“Keyera”) and Tidewater Midstream and Infrastructure Limited (“Tidewater”). South bound natural gas and condensate will be processed at the Keyera 03-19-067-07W6 plant with sales products being delivered to the TransCanada Corporation meter station and pipeline system (“TCPL”) and Pembina Pipeline Corporation’s Peace mainline system (“Pembina”). A key piece of the Keyera infrastructure includes the bore and pipeline pull under the Wapiti River, which has now been completed. East-bound natural gas and condensate will be processed at the Tidewater 12-35-70-9W6 Pipestone gas plant with sales products shipped to TCPL, Alliance Pipeline (“Alliance”), and Pembina. Additional marketing optionality is afforded through physical connection to the Tidewater Dimsdale Gas Storage.
Gold Creek Production – Legacy Blackbird Production
Since late November 2018, the Canadian Natural Resources (“CNRL”) Gold Creek processing facility has not been available to Pipestone Energy for production while modifications to their gas plant and processing system are underway. As a result, Pipestone Energy is not anticipated to have any significant production volumes during Q1 2019. The Company currently anticipates the resumption of production in Q2 of this year. Importantly, the lack of production has no material impact on liquidity or availability of capital, and Pipestone Energy is not revising full year 2019 or exit 2019 production guidance.
Natural Gas Transportation
During Q1 2019, the Company entered into a contract swap with a 3rd party, allowing Pipestone Energy to swap 15 MMcf/d of additional firm transportation on the TCPL system from November 1, 2021 to November 1, 2019 at the Gold Creek West meter station, which is connected to the Keyera Wapiti Gas Plant. The Company’s total firm gas transportation at the Gold Creek West meter station is now capable of handling all of PIPE’s contracted and under-option processing capacity with Keyera.
UPDATED MCDANIEL RESERVE AND RESOURCE EVALUATION
Pipestone Energy is pleased to announce its inaugural reserves and resources evaluation (the “McDaniel Report”) performed by McDaniel & Associates Consultants Ltd. (“McDaniel”) with an effective date of January 4, 2019, to coincide with the creation of Pipestone Energy Corp., which was formed pursuant to the Amalgamation of Pipestone Oil and Blackbird.
The previously disclosed pro forma combined reserves and resources for Pipestone Energy, with an effective date of August 1, 2018, were created through the mechanical addition of Pipestone Oil and Blackbird reserve and resource evaluations. The following summary is based on the McDaniel Report and a revised development program that reflects a singular development program for the combined asset base.
- Increased 1P reserve volumes by 11.7 MMboe to 90.8 MMboe (~15% increase)
- Increased 1P NPV10% by $284 million to $839 million (~51% increase)
- Increased 2P NPV10% by $223 million to $1,394 million (~19% increase)
- Implied 2P NAV per share (excluding unbooked land value) of ~$6.78 per share utilizing a three consultants (GLJ Petroleum Consultants, McDaniel, and Sproule) average January 1st, 2019 price forecast and ~$3.19 per share utilizing March 14th, 2019 forward strip prices.
|January 4, 2019||August 1, 2018||Change|
|Proved + Probable Reserves (“2P”)||Amount||Weight||Amount||Weight|
|Oil / Condensate||(Mbbls)||57,062||35||%||59,619||36||%||(2,557||)|
|Proved + Probable Reserves|
|Reserves Before Tax NPV10%|
|Total Proved + Probable||($MM)||1,394||100||%||1,170||100||%||223|
|2P Net Asset Value(1)||($MM)||1,429|
|2P Net Asset Value per share(2)||($/share)||6.78|
|Best Estimate Contingent Resources – Risked (“2C”)||(Mboe)||218,227||221,258||(3,031||)|
|Risked 2C Before Tax NPV10%||($MM)||836||810||26|
|(1) 2P Net Asset Value (excluding the value of unbooked land) is calculated as: (2P Reserves NPV10% – abandonment liabilities PV10%– net debt + proceeds from dilutive securities, including publicly traded warrants).|
|(2) 2P Net Asset Value per share is calculated as: 2P Net Asset Value / fully diluted shares outstanding.|
|WTI Crude Oil (US$/bbl)||AECO Natural Gas (C$/MMbtu)|
|January 4th, 2019 Evaluation||August 1st, 2018
|January 4th, 2019
|August 1st, 2018
Summary of Reserves
|Oil / Condensate
|Total Proved + Probable||57,062||17,971||533,422||163,936||1,394|
Reserves Future Development Capital – As of January 4th, 2019
|Total Proved ($MM) (1)||Total Proved + Probable ($MM) (2)|
|Total FDC, Undiscounted (3)(4)||860||1,375|
|Total FDC, Discounted at 10%||681||937|
|(1) The Undiscounted Future Development Capital for Total Proved in the August 1, 2018 Pro Forma evaluation was $1,004 MM.|
|(2) The Undiscounted Future Development Capital for Total Proved + Probable in the August 1, 2018 Pro Forma evaluation was $1,739 MM.|
|(3) The Undiscounted Future Development Capital is escalated at ~2% per year starting in 2020.|
|(4) Totals may not add due to rounding.|
Pre-Tax Net Asset Value – Excludes Unbooked Land Value
|In $MM unless otherwise stated||As of January 4th, 2019|
|McDaniel Price Forecast||Strip Pricing (Mar. 14, 2019)|
|2P Reserves, Before-Tax NPV10%||1,394||638|
|(-) Abandonment Obligations – unaudited (1)||(1)||(1)|
|(-) Mark-to-Market of Hedges (2)||(3)||(3)|
|(-) Net Debt – unaudited (3)||(26)||(26)|
|(+) Proceeds from Dilutive Securities (4)||65||65|
|= Implied Net Asset Value||1,429||673|
|Fully Diluted Shares Outstanding (millions) (5)||211||211|
|Net Asset Value per Share ($/share)||6.78||3.19|
|Note: The Net Asset Value excludes any additional land value for 102 net sections of undeveloped land.|
|(1) The net present value of decommissioning obligations included above is incremental to the amount included in the present value of 2P Reserves as evaluated by McDaniel & Associates.|
|(2) Hedges include floating-to-fixed interest rate swaps on the term loan.|
|(3) Net debt represents bank debt net of working capital.|
|(4) Assumes the 175 million listed warrants (unconsolidated) and the 35 million Blackbird options (unconsolidated) are exercised for cash proceeds.|
|(5) 190 million basic shares outstanding plus the full dilutive impact of the 175 million listed warrants (17.5 million Pipestone Energy shares) and 35 million Blackbird options (3.5 million Pipestone Energy shares).|
FINANCIAL RESULTS UPDATE
Pipestone Energy also announces that in accordance with the requirements of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”) it expects to file the audited financial statements for its predecessor, Pipestone Oil, for the year ended December 31, 2018 on or before March 29, 2019. As Pipestone Energy was the “reverse takeover acquirer” (as defined in NI 51-102) of Blackbird in the amalgamation of Pipestone Oil and Blackbird pursuant to a series of steps under a plan of arrangement under section 193 of the Business Corporations Act (Alberta) completed on January 4, 2019 (the “Arrangement”), Pipestone Energy is required to make this historical filing.
For clarity, the reporting period of Q1 2019 will be the first quarter that the combined entity financial statements of Pipestone Energy and the accompanying Managements Discussion & Analysis will be published. The Q1 2019 financial results of the amalgamated Pipestone Energy are expected to be publicly released and filed on SEDAR on or about May 15, 2019.
Pipestone Energy will host a conference call to discuss the operational update and updated reserves and resources evaluation. The details of the conference call are below. An updated corporate presentation is also available on Pipestone Energy’s website at www.pipestonecorp.com.
|Conference Call March 20, 2019
9:00 a.m. MT (11:00 a.m. ET)
|Pipestone Energy will host a conference call on March 20, 2019, starting at 9:00 a.m. MT (11:00 a.m. ET). To participate please dial toll free in North America (866) 953-0776 or International (630) 652-5852 and enter 2673739 when prompted.
An archived recording of the conference call will be available shortly after the event and will be available until March 27, 2019. To access the replay please dial toll free in North America (855) 859-2056 or International (404) 537-3406 and enter 2673739 when prompted. The conference call will also be archived on Pipestone Energy’s website at www.pipestonecorp.com.