Calgary, Alberta – OBSIDIAN ENERGY LTD. (TSX: OBE) (OTCQX: OBELF) (“Obsidian Energy“, the “Company“, “we“, “us” or “our“) is pleased to provide an operational update on our second half 2021 development program with all drilling activity completed on schedule. We expect our full year 2021 average production to be approximately at the low end of the range of our guidance (24,600 boe/d to 24,800 boe/d) based on preliminary estimates, which reflects a minor delay in the closing of our previously announced acquisition of the remaining 45 percent interest in the Peace River Oil Partnership (“PROP“) (approximately 70 boe/d annualized impact). Preliminary estimates for our December production, representing the first full month post-acquisition, is 27,260 boe/d, which includes contribution from six new wells brought on production mid-month. An additional seven drilled wells are expected to be on production in the first quarter of 2022.
“We are pleased with the execution of our 2021 development program, allowing us to exit the year in a very strong position,” commented Stephen Loukas, Obsidian Energy’s Interim President and CEO. “Our technical and operating teams have continued to deliver top tier drilling results and solid production from our substantial asset base. We are also excited to have resumed drilling our Pembina and Peace River assets in the second half of 2021 to further unlock the potential of these areas.”
With an improved economic environment, funds flow from operations (“FFO“) for the first nine months of 2021 ($137.9 million) exceeded the full year of 2020 ($117.8 million). Combined with production increases from the success of our 2021 development program, we are in a strong position to execute our future development plan and deliver further debt reduction in 2022. We expect to announce our full-year 2022 guidance on January 24, 2022.
2021 DEVELOPMENT PROGRAM UPDATE AND EARLY 2022 ACTIVITY
We are pleased to have successfully completed our 2021 development program, which included drilling 35 high working interest wells across our broad, high quality asset base in the Willesden Green, Pembina and Peace River areas.
Operated Wells Rig Released Gross (net) |
Operated Wells On Production Gross (net) |
|
Q1 2021 | 6 (6.0) | 3 (3.0)1 |
Q2 2021 | 3 (3.0) | 6 (6.0) |
Q3 2021 | 11 (10.2) | 3 (3.0) |
Q4 2021 | 15 (14.6) | 17 (16.0) |
TOTAL | 35 (33.8)2 | 29 (28.0)2 |
(1) On stream count includes one well rig-released in 2020. | ||
(2) Seven wells (6.8 net) drilled in 2021 are expected to be on production in the first quarter of 2022. |
An update to our recent drilling results and planned activity is as follows:
- Willesden Green: During the fourth quarter of 2021, the Company continued our area development by rig-releasing six wells (6.0 net) and bringing seven wells (7.0 net) on production, utilizing a single drilling rig that worked continuously into mid-December. The final three wells (3.0 net) in the 2021 program are expected to be brought on production in early February. Our program continues into 2022, starting with the Faraway 8-3 pad well, which spud in early January and is expected to be placed on production in March 2022.Results for our wells commissioned in the fourth quarter of 2021 are as follows, shown as an average per well (100 percent working interest):
- Crimson 3-3 pad (two wells):
- IP30 of 495 boe/d (70 percent light oil)
- IP60 of 433 boe/d (61 percent light oil)
- Mannville 2-18 pad (one well):
- IP30 of 834 boe/d (11 percent field condensate)
- IP60 of 757 boe/d (12 percent field condensate)
- Faraway 6-22 pad (four wells):
- IP10 of 266 boe/d (95 percent light oil)
- Pembina: The Company successfully returned to development drilling in the Pembina area in the fourth quarter of 2021, drilling five wells (4.6 net) and bringing seven wells (6.0 net) on production. The final three wells (2.8 net) in the 2021 program are expected to be brought on production in early February. During January, we will drill two additional wells (1.8 net) on our 2-15 pad site, seamlessly transitioning into our 2022 program.Results for our remaining completed second half 2021 wells are as follows, shown as an average per well (on a gross basis):
- PCU#9 7-17 pad (three wells):
- IP30 of 182 boe/d (61 percent light oil; impacted by pump issues)
- Last seven days of 214 boe/d (57 percent light oil)
- PCU#9 2-15 pad (two wells):
- IP10 of 152 boe/d (85 percent light oil; impacted by frac fluid recovery)
- Last seven days of 342 boe/d (65 percent light oil)
- Deeper vertical drills (two wells):
- IP30 of 269 boe/d (95 percent light oil)
- IP60 of 245 boe/d (96 percent light oil)
- Peace River: In conjunction with our acquisition of the remaining 45 percent interest in our Peace River Operating Partnership, we resumed development drilling in the fourth quarter of 2021 with a four-well program (4.0 net) targeting the Bluesky formation from two of our existing pads at 6-31 (three wells) and 14-25 (one well). The 6-31 wells were brought on stream in late December and, as expected, are currently recovering drilling water in advance of first oil production. The fourth well is expected to be on stream in early January.
ALBERTA SITE REHABILITATION PROGRAM
With additional support from the Alberta Site Rehabilitation Program (“ASRP“) received through Periods 7 and 8 allocation, total support from the ASRP increased to over $35 million of grants and allocations. In the fourth quarter of 2021, we abandoned an additional 53 net wells, bringing our 2021 totals to 292 wells and 184 km of pipelines (net). We remain on pace to decommission a total of approximately 600 net wells and 700 net km of pipelines during the 2021-2022 period.
HEDGING UPDATE
The Company has the following financial oil and gas contracts in place on a weighted average basis:
Term | Notional Volume | Pricing (CAD) |
Oil – WTI | ||
October 2021 | 7,750 bbl/d | $92.59/bbl |
November 2021 | 7,300 bbl/d | $100.61/bbl |
December 2021 | 1,250 bbl/d | $99.46/bbl |
January 2022 | 5,790 bbl/d | $97.87/bbl |
February 2022 | 500 bbl/d | $98.40/bbl |
Natural Gas – AECO | ||
October 2021 | 23,695 mcf/d | $2.70/mcf |
November 2021 – March 2022 | 25,591 mcf/d | $4.63/mcf |
Additionally, the Company has the following physical contracts in place:
Notional Volume | Term | Pricing (USD) | |
Heavy Oil Differential1 – USD | |||
550 bbl/d | Oct – Nov 23 2021 | ($26.00)/bbl | |
1,000 bbl/d | Nov 24 – Dec 2021 | ($26.00)/bbl | |
1,350 bbl/d | Jan 2022 | ($31.50)/bbl | |
1,150 bbl/d | Feb – Mar 2022 | ($31.50)/bbl | |
(1) Hedged on a USD basis and inclusive of WCS differential, quality, and transportation charges. |
In addition, PROP Energy 45 Limited Partnership, our wholly owned limited recourse subsidiary that purchased 45 percent of the PROP units from a third party on November 24, 2021, entered into the following financial hedges in conjunction with the acquisition financing:
Term | Notional Volume | Pricing (USD) |
Oil – WTI | ||
December 2021 | 1,576 bbl/d | $67.06/bbl |
Q1 2022 | 1,502 bbl/d | $66.24/bbl |
Q2 2022 | 1,121 bbl/d | $65.11/bbl |
Q3 2022 | 593 bbl/d | $63.26/bbl |
Q4 2022 | 606 bbl/d | $62.30/bbl |
Heavy Oil – WCS Differential | ||
Q1 2022 | 939 bbl/d | ($17.45)/bbl |
Q2 2022 | 801 bbl/d | ($15.43)/bbl |