CALGARY, Alberta, June 17, 2019 (GLOBE NEWSWIRE) — Delphi Energy Corp. (“Delphi” or the “Company”) announces the sale of a portion of its Alliance Service and an extension to its senior credit facility.
SALE OF A PORTION OF EXCESS ALLIANCE FIRM TRANSPORTATION SERVICE
Delphi has entered into a binding agreement to sell and permanently assign 16 mmcf/d (approximately 35 percent) of its firm full-path service to the Chicago area on the Alliance pipeline system for $11.9 million. The transaction is expected to close on or about September 3, 2019 subject to approval by Alliance Pipeline Limited Partnership and Alliance Pipeline L.P. Upon closing, the net proceeds and reduction of Delphi’s outstanding letters of credit associated with the Alliance service will increase liquidity by approximately $13.3 million. The transaction more closely aligns the future natural gas transportation needs of the Company with its natural gas production growth projections, given the increased focus on the ultra-rich condensate product mix being developed in West Bigstone. Given the high level of interest in the Company’s excess Alliance service, Delphi is considering selling additional excess service.
Delphi sells its natural gas in both the Chicago and AECO markets. Delphi is retaining approximately 29.8 mmcf/d of firm service and 7.5 mmcf/d of priority interruptible service on the Alliance pipeline system after the transaction, in addition to approximately 22 mmcf/d of firm service on NGTL. Delphi expects the proportion of gas sold in Chicago will remain at about 60 percent until the Alliance lateral pipeline at the Bigstone sweet natural gas plant is reactivated in 2020, at which time it will increase to approximately 90 percent.
SENIOR CREDIT FACILITY
The Company’s syndicate of lenders, led by Alberta Treasury Branches and including The Bank of Nova Scotia and Bank of Montreal, has extended the term out date of the Company’s $105 million senior secured credit facility to July 12, 2019 in order to complete the annual borrowing base redetermination.
Upon closing of the sale of the 16 mmcf/d of excess Alliance service, Delphi expects to have bank debt net of working capital of approximately $68 million.
The Company expects its condensate production to continue to grow disproportionately to its natural gas production over the next three to five years. The impact of the Company’s condensate growth, product marketing advantages, cost reductions and hedging strategy continue to demonstrate a strong cash generating business model in a volatile commodity price environment.
Hedging contracts in place for 2019 protect the realized price for approximately 85 percent of Chicago natural gas sales and approximately 85 percent of field condensate and NGL sales combined, based on production in the fourth quarter of 2018. Delphi’s 2019 and 2020 hedging contracts have a current mark to market value of approximately $23 million, compared to current future commodity prices.
In this current commodity price and capital markets environment, the Company is focused on delivering a cash flow growth model primarily through increased condensate yields, while reducing bank debt utilizing free cash flow generated in excess of its capital program and non-core asset dispositions such as the Company’s excess Alliance service and under-utilized salt water disposal well facility. Drilling plans and guidance for the second half 2019 is not anticipated to be released until the summer when performance of the four well pad is better understood and the senior credit facility is finalized.
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.