CALGARY, Alberta, Aug. 08, 2019 (GLOBE NEWSWIRE) — (PIPE – TSX-V) Pipestone Energy Corp. (“Pipestone Energy” or the “Company”) is pleased to report its Q2 2019 financial and operational results and provide a progress report on its 2019 development program. The Company has filed its unaudited financial statements and related management’s discussion and analysis (“MD&A”) for the quarter ended June 30, 2019 on SEDAR. A conference call has been scheduled for Thursday, August 8 at 9:00 a.m. Mountain Daylight Time (11:00 a.m. Eastern Daylight Time) for interested investors, analysts, brokers and media representatives.
“We are extremely proud of the operational performance of our team over the past few months. As of this news release, we have completed substantially all the capital projects required to achieve our corporate guidance of increasing production 10-fold to between 14,000 and 16,000 boe/d by the end of 2019. During June and July, we completed an additional 7 wells on our 3-1 pad for an average estimated cost of $4.0 million. This is a significant savings compared to both our development budget of $5.1 million, and from our previous 15-14 pad completion costs of $4.5 million per well. Pipestone Energy is reviewing the results on our 3-1 pad and applying advanced technologies to further improve our completion design and execution. The objective is to reduce costs while improving well productivity” stated Paul Wanklyn, Pipestone Energy President and Chief Executive Officer. “Additionally, the midstream transaction we entered into with Tidewater Midstream in late July will allow us to delineate two Montney zones in three previously drilled wells in the Northeastern portion of our acreage. We plan to utilize high intensity fracs and the transaction will also fund the necessary infrastructure to produce from that area, further enhancing the value proposition of Pipestone Energy to investors.”
SECOND QUARTER 2019 CORPORATE HIGHLIGHTS
- Pipestone Energy successfully completed 7 wells (7 net) at the 03-01 pad-site for an average estimated final cost of $4.0 million per well, which is approximately 22 percent less than Pipestone Energy’s type well budget of $5.1 million. These wells were completed utilizing high intensity plug and perf designs and will be brought on-stream later this fall;
- Subsequent to the end of Q2, Pipestone Energy entered into a $30 million midstream transaction with Tidewater Midstream and Infrastructure Ltd. (“Tidewater”), which will provide the capital required to construct the East Battery (05-14-071-07W6); the initial $14 million of capital to be received by Pipestone Energy in mid-August from Tidewater pursuant to this transaction will be deployed to accelerate a three-well completion program at the 09-14-071-07W6 (“9-14”) pad into late Q3 2019; the approximately $16 million remaining balance will be funded by Tidewater in installments as construction of the East Battery progresses into 2020;
- During Q2, the Company spent a total of $14.6 million on the fabrication, and substantial completion of on-site production facilities at its 15-14 pad-site, 03-01 pad-site, and other production facilities in preparation to bring these pads into production later this fall;
- Pipestone Energy invested $7.6 million to substantially complete construction of its major 17.5 km infield gathering system, oriented north / south along the primary development corridor through its western acreage. As at the date of this press release the gathering system is substantially complete and is ready to be commissioned;
- Legacy Blackbird production from South of the Wapiti river was re-started in early April 2019 as the third party owned and operated Gold Creek gas plant came back online. During Q2, including minor interruptions, production from this area averaged 1,407 boe/d; and
- Pipestone Energy continued to implement its robust commodity price risk management program, which is primarily designed to reduce cash flow volatility, enhance certainty regarding funding availability for the Company’s capital expenditure program, and service debt.
Pipestone Energy Corp. – Financial and Operating Highlights
|Three months ended June 30,
||Six months ended June 30,
|($ thousands, except per unit and per share amounts)||2019||2018||2019||2018|
|Sales of liquids and natural gas||$||5,457||$||598||$||5,917||$||1,569|
|Cash used in operating activities||(777||)||(180||)||(13,562||)||(17||)|
|Funds flow from (used in) operations (1)||(2,423||)||132||(11,086||)||612|
|Per share, basic and diluted (2)||(0.01||)||0.00||(0.06||)||0.01|
|Per share, basic and diluted (2)||0.03||(0.01||)||0.00||(0.02||)|
|Working capital (deficit) (end of period)||(8,026||)||(2,630||)|
|Bank debt (end of period)||115,754||30,992|
|Shareholders’ equity (end of period)||383,843||87,010|
|Available funding (end of period) (3)||$||46,033||$||24,606|
|Shares outstanding (end of period) (2)||189,627||52,782|
|Weighted-average basic shares outstanding (2)||189,624||52,782||187,096||52,782|
|Weighted-average diluted shares outstanding (2)||189,625||52,782||187,116||52,782|
|Condensate and crude oil (bbls/d)||595||106||340||146|
|Natural gas liquids (NGL) (bbls/d)||88||–||53||–|
|Natural gas (Mcf/d)||4,341||–||2,340||–|
|Total (boe/d) (4)||1,407||106||783||146|
|Condensate-gas ratio (CGR) (bbls/MMcf)||137||–||145||–|
|Crude oil – WTI (C$/bbl)||$||79.98||$||79.52||$||76.47||$||83.62|
|Condensate – Edmonton Condensate (C$/bbl)||73.69||80.30||71.20||83.37|
|Natural gas – AECO 5A (C$/GJ)||1.04||1.24||1.75||1.66|
|Average realized prices (5)|
|Condensate and crude oil (per bbl)||71.83||61.94||68.34||59.50|
|NGL (per bbl)||29.24||–||28.55||–|
|Natural gas (per Mcf)||3.37||–||3.39||–|
|Revenue (per boe)||42.62||61.94||41.75||59.50|
|Royalties (per boe)||(2.15||)||(3.08||)||(2.11||)||(4.19||)|
|Operating expenses (per boe)||(13.83||)||(7.61||)||(15.26||)||(6.95||)|
|Transportation (per boe)||(5.72||)||–||(9.85||)||–|
|Operating netback (per boe) (3)||20.92||51.25||14.53||48.36|
|Funds flow netback (per boe) (3)||$||(18.93||)||$||13.50||$||(78.22||)||$||23.19|
Note: All defined terms referenced in quotations below refer to terms or notes found within the Pipestone Energy Corp. Q2 2019 MD&A.
(1) See “Additional subtotal – Funds flow from operations” under “Critical Accounting Judgments, Estimates and Policies”.
(2) The number of common shares has been adjusted retrospectively to reflect the 10:1 share consolidation, as well as the 0.5996 exchange ratio, as part of the corporate acquisition transaction completed on January 4, 2019 when Pipestone Oil Corp. and Blackbird Energy Inc. (“Blackbird”) amalgamated to form Pipestone Energy Corp..
(3) See “Non-GAAP measures”.
(4) For a description of the boe conversion ratio, see “Basis of Barrel of Oil Equivalent”.
(5) Before hedging.
(6) IFRS 16, Leases, was adopted on January 1, 2019 using the modified retrospective approach; therefore, comparative information was not restated. See “Critical Accounting Judgments, Estimates and Policies”.
(7) NMN – not meaningful number at this time as Pipestone Energy is at a pre-production stage.
2019 CAPITAL PROGRAM AND OPERATIONS UPDATE
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/8476f2ec-e60a-4b06-8906-4de19d7a79b3
To date, Pipestone Energy’s 2019 capital program execution has been exceptional. Projects have been completed as scheduled and have come in at or below budgeted cost. Based on the work completed to date, and the combined savings achieved, Pipestone is reducing its 2019 net capital guidance to a range of $145 – $155 million, for a reduction to the top-end of previous guidance of $10 million. As at the date of this press release, approximately 75% of the expected 2019 net capital program has been completed with the bulk of the remaining 2019 spend focused on drilling 9 new wells at the 6-24 and 6-30 pads and on the accelerated three-well completion program at its 09-14-pad. All of these wells will be brought on production in 2020, and as such the required drilling, completion and infrastructure capital to achieve our 2019 exit production guidance of 14,000 to 16,000 boe/d has already been incurred.
Pipestone Energy Montney Operated Horizontal Well Status Summary
|Sept 30, 2019
|Dec 31, 2019
|North of Wapiti River (1)
(Keyera Wapiti & Tidewater Pipestone Processing Facilities)
|Drilled + Completed||23||26||26|
|Tied-In / Available for Production||20||20|
|South of Wapiti River (1)
(CNRL Gold Creek Processing Facility)
|Drilled + Completed||9||9||9|
|Tied-In / On-Production||8||8||8|
(1) Tied-In / Available for Production is a subset of the Drilled + Completed category which is a subset of the Drilled category.
Drilling & Completions
Pipestone Energy successfully completed 7 wells on the 03-1 pad site during Q2 2019 utilizing a high intensity plug and perf fracture program and up to approximately 8,500 tonnes per well. The average estimated final completion cost for these seven wells is $4.0 million, a $1.1 million (22%) cost savings per well from the budgeted development frac cost of $5.1 million. These wells will be brought on production during fall 2019. The Company is preparing to complete the three wells on the 9-14 pad during September 2019 utilizing a similar high intensity plug and perf fracture program to the 3-1 pad.
Pipestone Energy has completed the construction of the 6-24 pad, which will ultimately accommodate up to 24 wells and associated wellsite facilities. The Company has contracted a rig, which will commence drilling six new wells on this pad beginning in mid-August.
Infrastructure & 3rd Party Processing
Pipestone Energy’s infield gathering infrastructure is substantially complete and ready to be commissioned for production start-up into the Keyera and Tidewater natural gas processing facilities this fall. The Company has completed the equipping and tie-in on the 15-14 pad (10 wells) and the equipping of the 3-1 pad (9 wells) is expected to be finished in September 2019. A single well on the 6-24 pad, drilled and completed during 2017, will also be equipped and tied-in for production later during fall 2019.
As disclosed previously, Phase 1 of the Keyera Wapiti Gas Plant is now operational and processing third party volumes. Pipestone Energy has 60 MMcf/d of raw priority one firm service at the Keyera plant with an option to expand to 90 MMcf/d with the completion of Phase 2. Construction of Phase 2 at the Keyera facility has begun and is expected to be commissioned by mid-2020, taking the plant’s gas processing capacity to 300 MMcf/d with 25,000 barrels per day of condensate handling capacity. The Keyera compressor station (at 08-15-70-08W6 and Pipestone Energy operated) and gathering system connecting to the Wapiti gas plant is expected to be complete by late Q3 2019, and is on-track for a Q4 2019 production ramp-up. The Tidewater Pipestone Sour Gas Plant (at 12-34-70-09W6) and associated gathering system remains on track to be commissioned in late Q3 2019.
Gold Creek Production – Legacy Production South of the Wapiti River
Pipestone Energy produced into the 3rd party Gold Creek processing facility with an ~90% on-stream time during Q2 2019. The Company averaged 4.3 MMcf per day of sales natural gas and 683 bbl/d of condensate and natural gas liquids (87% condensate) during the quarter.
Since closing the successful merger with Blackbird on January 4, 2019, the Company has met its critical development and capital expenditure milestones to achieve its 2019 exit production guidance of 14,000 to 16,000 boe per day for December 2019.
The Company’s 2019 net capital investment program continues to be on-track, on-time, and either on or underbudget resulting in a reduced net capital guidance range for 2019 of $145 million to $155 million. The 2019 capital program is focused on drilling, completing, and tying-in condensate-rich Montney wells, and on the build-out of the required infrastructure that will enable Pipestone Energy to grow efficiently in future years.
Pipestone Energy is in the initial stage of executing a multi-year development strategy that meets its full-cycle investment return requirements and cashflow generation hurdles based on a flat future price deck of US$55 per bbl WTI crude oil and $1.40 per GJ AECO natural gas. Given its current outlook on commodity prices, and the actions taken to capture these prices through its hedging program, Pipestone Energy is confident it can meet its future development objectives.
EMPLOYEE SHARE PURCHASE PLAN
Pipestone Energy has implemented an employee share purchase plan (“ESPP”) to provide its employees with an opportunity to purchase common shares in the capital of the Company (“Shares”), thereby encouraging share ownership and enhancing Pipestone Energy’s ability to attract, retain and motivate its employees. Employees may direct up to 10% of their salary for the purchase of Shares under the ESPP at the 5-day volume weighted average trading price of the Shares on the TSXV, and the Company will match such personal contributions 100%. Under the terms of the ESPP, Shares may be acquired by the plan administrator on the open market or issued from treasury. 1,750,000 Shares have been reserved for issuance pursuant to the ESPP.
|Conference Call August 8, 2019|
|9:00 a.m. MT (11:00 a.m. ET)|
|Pipestone Energy will host a conference call on August 8, 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 2595762 when prompted.
An archived recording of the conference call will be available shortly after the event and will be available until August 15, 2019. To access the replay please dial toll free in North America (855) 859-2056 or International (404) 537-3406 and enter 2595762 when prompted. The conference call will also be archived on Pipestone Energy’s website at www.pipestonecorp.com.