2021 GUIDANCE SUMMARY
Average Daily Production |
|
Crude oil (bbls/d) (1) |
5,850 – 6,350 |
Natural gas (mcf/d) |
3,800 |
Barrels of oil equivalent (boe/d) (2) |
6,500 – 7,000 |
Fourth quarter 2021 daily production (boe/d) (2) |
8,000 – 8,500 |
Pricing |
|
Crude oil – WTI ($US/bbl) |
45.00 |
Crude oil – WCS ($Cdn/bbl) |
40.40 |
Exchange rate ($Cdn/$US) |
0.78 |
Natural gas – AGT ($US/mmbtu) (3) |
4.45 |
Key Assumptions |
|
Cash costs ($/boe) (4) |
19.00 – 20.00 |
Funds flow netback ($/boe) (4) |
19.50 – 20.50 |
Financial Summary ($millions) |
|
Capital expenditures |
85 – 90 |
Funds flow from operations (4) |
48 – 52 |
Exit working capital surplus |
45 |
Capital Expenditures ($millions) |
|
Producing wells |
35 |
Injection/source wells |
26 |
Facility infrastructure |
20 – 25 |
Land, seismic, and other |
4 |
Total |
85 – 90 |
(1) |
Expected to be comprised of 100% medium crude oil. |
(2) |
See “Barrels of Oil Equivalent”. |
(3) |
The AGT price is the average for the winter producing months in the McCully field which include January – March 2021 and November – December 2021. |
(4) |
See “Non-IFRS measures”. |
2021 Outlook
2021 is anticipated to be a defining year for the Company as we embark on an exploration and development capital program in the Marten Hills area of $85 – $90 million that is expected to result in the drilling of 24 8-leg multi-lateral wells, 25 injector wells and 3 source wells.
Core Area Development
Preparation for the first quarter of 2021 activities are well underway. It is anticipated that 4 drilling rigs will be operational in early January. The budget contemplates expenditures of approximately $35 million in the first quarter inclusive of 10 to 12 producing wells, 3 stratigraphic test/saline source wells in addition to 5 injection wells and some preliminary facilities construction.
Development activities in the core area are expected to recommence in September with the drilling of an additional 8 to 10 producing wells, 20 injection wells and the construction commencement of our 15,000 bbls/d oil processing facility. The oil processing facility construction will take several months with the expectation to commission the facility in March of 2022.
Exploration Expenditures
The budget contemplates drilling 4 to 5 exploration wells which, depending on access, is expected to commence in September. The exploration targets exist as a combination of follow up locations to historical Cenovus successful exploration wells in addition to some new play concepts.
Enhanced Oil Recovery
Enhanced Oil Recovery (“EOR”) has the potential to materially increase recovery factors and is an important part of the Headwater business plan. The first 5 injection wells, drilled in the first quarter, are anticipated to have injection commence during the third quarter of 2021. The source water wells being drilled are expected to provide sufficient saline water volumes for our first phase of injection. The learnings from our first pilot phase are then expected to be applied to phase one of our full field EOR development. Phase one of our full scale EOR is expected to be on-stream with the commissioning of our facility in March of 2022.
Beyond 2021
The first quarter of 2022 will see the completion of our infrastructure spend allowing the majority of our production volumes to be pipeline connected. This spend is expected to reduce corporate transportation costs by $3.50 – $4.00/boe in addition to allowing phase two and three of the development and waterflood implementation to occur with nominal future infrastructure expenditures.
As we look further into the future, the projected EOR development is expected to moderate corporate declines to the low double-digit level. When combined with the strong capital efficiencies of the Clearwater play, we expect to have meaningful steady free cashflow in 2023 and beyond.
About Headwater Exploration Inc.
Headwater Exploration Inc. is a Canadian publicly traded resource company engaged in the exploration for and development and production of petroleum and natural gas in Canada. Headwater currently has high quality oil production, reserves, and lands in the prolific Clearwater play in the Marten Hills area of Alberta as well as low decline natural gas production and reserves in the McCully Field near Sussex, New Brunswick. Headwater is focused on providing superior corporate level returns by focusing on sustainability, asset quality, social responsibility, and balance sheet strength.
Additional corporate information can be found in our corporate presentation on our website at www.headwaterexp.com or on www.sedar.com.