CALGARY, Alberta, May 01, 2019 (GLOBE NEWSWIRE) — GRANITE OIL CORP. (“Granite” or the “Company”) (TSX:GXO)(OTCQX:GXOCF) is pleased to provide material test results from its well drilled and completed in the second quarter of 2019, preliminary first-quarter results including significant debt repayment, and advancements in operational and Corporate efficiencies.
In April, Granite successfully drilled and completed one development well in the Western portion of its Alberta Bakken property. The Company recently completed a four-day flow test, during which the well produced a cumulative oil volume of 1,992 bbls and 1,450 mcf of reservoir gas over a 96 hour period. Over the final 24 hours of the test, the well flowed at a rate of 838 bbl/d of oil and 418 mcf/d of reservoir gas. The well was drilled to a total measured depth of 3,715 meters and was completed with 61 fracture stages averaging 10 tons of proppant per stage. The well is currently being equipped for production and is expected to be brought on-stream during the first week of May.
This is the first well Granite has drilled since May 2018 and is Granite’s fourth consecutive well which tested a higher frac density. The three previous wells were drilled and completed in 2018, and all together have produced at the highest combined average oil rate over the first year of production compared to the average rates of the three prior years’ development wells. Granite still has over 80 potential Bakken infill drilling locations on 200 m offset spacing remaining on its lands.
Granite continues to advance its gas injection EOR project in its large, early-life Bakken oil pool. The Company utilized the period of highly depressed crude oil prices in the fourth quarter of 2018 to initiate a rotational re-pressurization process. The results have exceeded the Company’s expectations in improving overall pool declines and lowering producing gas-to-oil ratios (GORs). This represents another positive step forward in the evolution of its gas injection EOR scheme and the optimization of the oil-recovery process intended to maximize the long-term value of the pool. The Company’s gas injection EOR scheme is proven technology, and with three consecutive years of top-tier recycle ratios, continues to demonstrate its effectiveness in converting barrels in the ground to developed producing reserves.
In addition to its oil-recovery optimization efforts, Granite has also aggressively pursued long-term initiatives to reduce operating costs and increase the overall efficiency of the scheme. The Company recently obtained approval to store both reservoir and make-up gas in an up-hole formation above its Bakken pool, and is also installing a CO2-removal facility that will allow the Company to utilize its produced gas as fuel-gas for its facilities. Both of these items are significant steps in reducing both costs and cost-variability associated with the long-term management of the EOR scheme. The gas storage facility will primarily allow Granite to purchase larger volumes of gas during periods of favorable pricing, store it, and draw-down when required, while the CO2-removal facility will ensure a reliable, ‘off-grid’ fuel-gas supply required for its processing facilities. Both of these items are expected to be brought on-line in the third quarter of 2019, with cost-savings realized immediately upon installation.
Granite has met its goal of significantly reducing its debt position in the first quarter of 2019. With its solid production base, the Company was able to minimize capital expenditures, maintain production, and apply most of its cash flow towards debt repayment. During the first quarter of 2019 and based on internal estimates, Granite spent approximately $0.8 million in capital, achieved funds from operations of approximately $4.3 million, and reduced its net debt to approximately $43.7 million at the end of the quarter from $47.7 million at year-end 2018. Production averaged approximately 1,585 BOE/d (98% oil) for the quarter, but as commodity pricing improved throughout the quarter, the Company increased its production and exited the quarter at the significantly higher rate of approximately 1,700 BOE/d (100% oil), demonstrating the flexibility of its gas injection EOR scheme and the rotational re-pressurization process. The Company will report its results for the first quarter of 2019 on or about May 9, 2019.
On May 1, 2019, Gail Hannon resigned as Granite’s Chief Financial Officer (‘CFO’) to pursue other opportunities. Ms. Hannon served as the CFO for Granite since its inception in 2015, and was the CFO for Granite’s predecessor Company, DeeThree Exploration Ltd., from 2009. The Company and its Board of Directors would like to thank Ms. Hannon for her 10 years of exceptional service to the Company, and wishes her the best in her future endeavours.
Following Ms. Hannon’s resignation, the Company is pleased to announce it has appointed John (Jack) Smith as Interim CFO. Mr. Smith has previously served as the CFO for a number of Canadian junior energy companies, including Temple Energy Inc., Silverback Energy Ltd., and New Star Energy Ltd.
In keeping with its goal of reducing costs and improving operational efficiency, Granite has reduced its executive team to three members: Mike Kabanuk, President and CEO, Devon Griffiths, COO, and Jack Smith, Interim CFO.
Granite’s budget for 2019 is conservative and prioritizes debt repayment and capital efficiency. While the Company evaluates the results of its recent development well, it is forecasting average oil production of approximately 1,650 bbl/d for the year, with total capital expenditures of approximately $6.1 million, providing for total funds from operations of approximately $17.6 million, and exit net debt of approximately $36 million. The budget assumes average West Texas Intermediate (‘WTI’) pricing of approximately $60 USD/bbl, an average Western Canada Select (‘WCS’) differential to WTI of approximately $16 USD/bbl, and a foreign exchange rate of $1.33 CAD per USD for the remainder of 2019.
Following an exceptionally challenging end to 2018 for the Canadian energy industry, Granite has reduced its total net debt by over 8% during the first quarter of improved pricing. With positive results from its recent development well and continued optimization of its gas injection EOR scheme, along with sustained improvement in Canadian commodity pricing through the beginning of the year, Granite has established a strong footing to execute its plans for 2019. Having incurred a total of approximately $1.7 million in total capital expenditures over the three quarters ending March 31, 2019, the Company has prudently managed its spending and will continue to focus on cost reduction, operational efficiencies and debt reduction through the remainder of the year.