ASSET DISPOSITION
Altura has agreed to amend the payment schedule in respect to the previously announced disposition to a private company and divested of a 0.6875% working interest for $437,500 on January 29, 2021. The payment schedule is as follows:
Stage |
Closing Dates |
Disposition Interest |
Cash Proceeds |
Stage 1 |
June 30, 2020 |
1.3750% |
$875,000 |
Stage 2 |
September 30, 2020 |
1.3750% |
$875,000 |
Stage 3a |
January 29, 2021* |
0.6875% |
$437,500 |
Stage 3b |
April 30, 2021* |
0.6875% |
$437,500 |
Stage 4 |
June 30, 2021 |
1.3750% |
$875,000 |
Total |
5.5000% |
$3,500,000 |
*Amended payment dates |
The cash proceeds from the asset sales strengthen the Corporation’s financial position and flexibility to continue development of the Rex pool at Leduc-Woodbend.
OPERATIONAL UPDATE
To date, Altura has drilled 17 horizontal wells, booked 41 (32 net) proved and probable drilling locations, and identified 66 (54 net) additional horizontal drilling opportunities on its large undeveloped heavy oil resource play at Leduc-Woodbend. This play is comprised of 69 (62 net) sections of land in central Alberta with year-round access. The Corporation has constructed and acquired infrastructure in the area and operates two multi-well oil batteries with up to 4,500 bbls per day of oil processing capacity, produced water disposal and a solution gas gathering system that is connected to two 3rd party gas processing facilities.
Fourth quarter 2020 production averaged 916 boe per day1, consistent with guidance of 900 to 1,000 boe per day and 2020 production averaged 880 boe per day2. 2020 production volumes were negatively impacted by capital restrictions due to low oil prices with no wells drilled after the first quarter of 2020, voluntary shut-ins in the second quarter of 2020 due to low oil prices and third-party processing restrictions. Altura restarted approximately 110 boe per day3 of production from one (0.9 net) well in mid-December that was shut-in since March 2020 due to low oil prices and third-party gas processing restrictions.
Altura continued with its Environmental, Social and Governance (“ESG”) initiatives in 2020. Starting in July 2020, oil field service contractors, on behalf of the Corporation, submitted applications under the Government of Alberta’s Site Rehabilitation Program (“SRP”) to accelerate the abandonment of wellbores and reclaim inactive wellsites for Altura. The government is administering the SRP in phases and providing funding directly to the service company providers to undertake the abandonment and reclamation work for operating oil and gas companies. Altura was approved for an abandonment and reclamation grant under the SRP. The Corporation utilized $213,000 of grant funding and in Q4 2020 abandoned five inactive wells (15% of the Corporation’s inactive gross well count) and finalized reclamation of three wells that were previously abandoned.
Altura continues to monitor the provincial and federal funding developments to accelerate the decommissioning of the Corporation’s asset retirement obligations where prudent, as well as new developments in programs where the Corporation is eligible for support. Altura’s undiscounted and un-escalated Asset Retirement Obligation at September 30, 2020 was $5.5 million ($1.7 million discounted at 10%) and the Corporation ended 2020 with a Liability Management Rating (“LMR”) of 5.68 with the Alberta Energy Regulator (January 2, 2021 LMR report).
Altura’s ESG Committee Mandate, Corporate Social Responsibility Policy and 2020 Sustainability Report is posted on its website at www.alturaenergy.ca.
2021 CAPITAL PROGRAM
The Corporation is well positioned to pursue immediate production optimization and growth in 2021. The board of directors of the Corporation has approved a capital budget of $6.0 million for 2021, funded with forecasted cash flow from operating activities, credit facilities, and the 2021 asset dispositions. The budget includes drilling two (1.8 net) Rex wells and completing three (2.7 net) Rex wells at Leduc-Woodbend.
The 2021 capital expenditure budget targets an annual average production rate of 1,100 to 1,150 boe per day4 compared to 880 boe per day5 in 2020, representing more than 25 percent growth on an absolute and per share basis.
In 2018, Altura completed two Rex wells with increased frac density and both wells continue to outperform previous type curve expectations. Encouraged with these results and with the recent strengthening in commodity prices, the Corporation is planning to complete its 102/16-14-049-26W4 well (90% working interest) (“16-14”) in February 2021. The well was drilled in February 2020 but not completed due to low commodity prices. The 16-14 well was designed with increased frac density of 74 intervals at 27 meter spacing compared to earlier wells completed with 47 intervals at 40 meter spacing. Pay out of the completion operation is estimated at seven months using current strip pricing6 and is expected to add approximately 130 boe per day7 to Altura’s 2020 annual production, commencing in March 2021.
Two (1.8 net) new wells at Leduc-Woodbend are planned to be drilled and completed in the summer of 2021 and are scheduled to commence production in July and October 2020, respectively. These wells are planned to be completed with increased frac density, consistent with 16-14.
Building on its existing high-quality, operated production in central Alberta, Altura intends to continue developing and optimizing its large asset base to provide shareholders with the unique opportunity to participate in the ongoing crude oil price recovery. In addition, the tightening of long-term Western Canada Select (“WCS”) heavy oil differentials and strengthening natural gas prices are encouraging and are expected to increase cashflows, netbacks and reserves values over time.
On behalf of the Board of Directors and the Altura management team, we would like to thank our shareholders for their patience and ongoing support as we weather the Covid-19 pandemic and global economic downturn.
ABOUT ALTURA ENERGY INC.
Altura is a junior oil and gas exploration, development and production company with operations in central Alberta. Altura predominantly produces from the Rex member in the Upper Mannville group and is focused on delivering per share growth and attractive shareholder returns through a combination of organic growth and strategic acquisitions.