CALGARY, AB – Advantage Oil & Gas Ltd. (“Advantage” or the “Corporation”) is pleased to announce a modest increase in 2020 capital guidance, as a result of continued strengthening of the Corporation’s outlook. Spending for 2020 is now projected to be between $147 million and $162 million, an increase of approximately $17 million, primarily to accelerate a four-well pad into Q4 2020 and augment natural gas production through the winter season.
- The four additional wells are to be drilled at Glacier (two D4 Montney and two Upper Montney); all four of these wells are expected to be onstream during the first quarter of 2021
- Six Glacier wells have been drilled to date in the second half of 2020 (all D1 Montney); all six of these wells are expected to be onstream prior to year-end 2020
- All 10 wells in the program are expected to have payouts within one year of spud date
- Production will be processed using existing capacity at Advantage’s 400 mmcf/d Glacier Gas Plant, incurring minimal incremental operating costs and low carbon-intensity
Advantage’s 2021 production is expected to grow between 5% and 10%, with exceptional growth anticipated in adjusted funds flow(a) (“AFF”) based on current natural gas futures pricing. Directionally, Advantage expects that 2021 net capital expenditures will be approximately 75% of AFF, and that net debt to AFF(a) ratio will approach 1x by year-end 2021. The Corporation plans to provide formal 2021 guidance during the fourth quarter of 2020.
As a part of our annual planning strategy, Advantage has completed detailed analysis to establish a baseline for “sustaining capital”, defined as the estimated net capital expenditures required annually to keep corporate production flat over a sustained three-year period. For the period of 2021 to 2023, Advantage’s sustaining capital is estimated to be under $80 million per year, as a result of prolific Montney assets and a corporate base decline rate of approximately 23%.
Based on our current commodity price outlook for 2021, Advantage anticipates spending roughly three-quarters of capital on Glacier drilling with the remainder to be used to advance our oil and liquids developments at Valhalla, Progress and Pipestone/Wembley. Advantage has maintained the flexibility to reallocate capital between assets should prices swing in favor of liquids development.
Non-GAAP Measure which may not be comparable to similar non-GAAP measures used by other entities. Please see Advisory for reconciliations to the nearest measure calculated in accordance with GAAP.
Advantage has hedged approximately 51% of its natural gas production for the second half of 2020. The Corporation continues to increase its hedging position in 2021 and currently has 31% of forecast natural gas production hedged between Henry Hub, Chicago and Dawn at an average price of US$2.51/mmbtu. Advantage has hedged 33% of its crude oil and condensate production for the second half of 2020 with WTI swaps at an average price of US$55.44/bbl.
2020 Guidance Update
Advantage’s 2020 capital guidance range will now be $147 million to $162 million versus the previous range of $130 million to $145 million. There are no other changes to the Corporation’s previous 2020 guidance.