CALGARY, Alberta – Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) is pleased to announce its 2022 capital budget, corporate guidance and a Michichi operational update.
MESSAGE TO SHAREHOLDERS
Tony Berthelet, President & Chief Executive Officer, commented: “The 2022 development plan builds on 2021’s successful drilling programs and waterflood results in our core assets. This budget continues to support our overall strategy of increasing shareholder value through a combination of short cycle drilling opportunities and long-term sustainable cash flow generation and low-cost reserve development through waterflood investment. 2022 will see the Company continue to expand waterflood operations in Michichi and Evi and focus on inventory development in all areas.”
2022 BUDGET HIGHLIGHTS
- Fully-funded capital budget set at $18 million (before capitalized general and administrative (“G&A”) expenses and asset retirement obligations (“ARO”)), expected to generate average production between 4,350 – 4,600 boe per day. Based on this capital budget and production forecast, we anticipate achieving annual average production growth of approximately 5% over 2021, while spending within forecast adjusted EBITDAX.
- The Company plans to invest in infrastructure upgrades in Michichi in support of full field waterflood development, building on the previously announced waterflood pilot success. The waterflood expansion will include the conversion of 3 horizontal wells to injection in the northern part of the field.
- 2022 adjusted EBITDAX(1)(2) is forecast at $33.5 – 36.4 million, assuming average WTI at US$70/bbl. This represents an increase of approximately 70% over 2021. Increase in average WTI by US$1/bbl is expected to increase adjusted EBITDAX by $0.6 million.
- 2022 operating expenses are projected to be $34.2 million. This represents a 13% reduction from 2021. Operational efficiency improvements identified by management will drive cost reductions in four key areas of well servicing, labour and vehicle, repair & maintenance and fuel and power.
- Development capital is expected to be evenly weighted to the first and third quarters of 2022, with approximately 30% and 41% invested in the first and third quarters, respectively.
(1) Adjusted EBITDAX is a non-GAAP financial measure that does not have a standardized meaning under International Financial Reporting Standards (IFRS), and may not be comparable to similar financial measures disclosed by other issuers. See “Non-GAAP Financial Measures” below for more information.
(2) Forecast price assumptions: WTI – US$70/bbl; WCS differential – US$16.02/bbl; MSW differential – $US5.27/bbl; AECO – C$3.90/mcf & CAD/USD exchange rate – $0.79.
CAPITAL BUDGET OVERVIEW BY CORE AREA (1)
|Core Area||Budget ($millions)||% of Total||Activity Description|
|Michichi Area||$7.7||33%||• Drill 2.0 gross (2.0 net) wells
• Per well DCE&T (1) costs of $2.3 – 2.5 million
• $1.8 million Michichi waterflood facility expansion
|Princess Area||$7.6||33%||• Drill 3.0 gross (3.0 net) wells
• Per well DCE&T (1) costs of $2.2 – $2.4 million
|Evi Area||$0.2||1%||• Injector conversion|
|Land, Seismic, ARO & Optimization||$6.5||28%||• $4 million ARO spending (3)
• $2 million Optimization & Maintenance capital
(1) See “Forward-looking statements” below.
(2) Drill, complete, equip and tie-in (“DCE&T”).
(3) The $4.0 million of budgeted ARO expenditures are incremental to the Company’s capital budget (before ARO and capitalized G&A) of $18 million. Budgeted ARO spending does not include spend expected to be covered by grants under the government-sponsored site rehabilitation program.
2022 BUDGET AND GUIDANCE SUMMARY (1)
|Production guidance||4,350 – 4,600 boe/d|
|Liquids weighting (2)||65 – 69%|
|Capital expenditures (excluding ARO expenditures and capitalized G&A)||$18 million|
|Operating expense||$20.50 – 22.50/boe|
|Operating netback (3)||$27.04 – 31.21/boe|
|2022 year-end long-term debt (net of cash collateralized for letters of credit)||$121 – 124 million|
|Natural gas (AECO)||C$3.90/mcf|
|Edmonton Light/WTI differential||US$5.27|
|USD/CAD foreign exchange||0.79|
(1) See “Forward-looking statements” below.
(2) Based on forecasted 2022 production of 2,000 bbl/d of light and medium crude oil, 725 bbl/d of heavy crude oil, 125 bbl/d of natural gas liquids and 9,000 Mcf/d of conventional natural gas.
(3) Operating netback is a non-GAAP financial measure that does not have a standardized meaning under International Financial Reporting Standards (IFRS) and may not be comparable to similar financial measures disclosed by other issuers. See “Non-GAAP Financial Measures” below for more information.
MICHICHI OPERATIONAL UPDATE
The Company completed the drilling and completions operations of the two gross (2.0 net) new Michichi Area Banff Formation wells ahead of schedule. The wells are currently being tied in and are expected to be brought on production in early March. The wells were targeted in the Lower Banff to maximize recovery. The program also saw the first 1.5 mile horizontal well drilled in the Michichi Area for Prairie Provident.
NON-CORE DISPOSITION UPDATE
Prairie Provident has engaged Energy Advisors Group (“EAG”) to market its Central Alberta assets in the producing properties of Wheatland, Craigmyle East, Drumheller, Willdunn, Provost, Hayter and Coutts. The assets are characterized by a large acreage holding of ~93,000 net acres and over 1,070 boe/d, underwritten by behind-pipe exploitation targets, waterflood expansion and low risk development drilling. Historical base production and cash flow growth has been driven by proven stacked pay zones from the Sparky, Banff, Cummings, Detrital, Dina, Lloyd, McLaren formations and more.
For additional information on the divestiture or to ask questions about the process, please visit the EAG website linked below. Evaluation materials are available, following the signing of a Confidentiality Agreement. Offers are to be submitted by March 23, 2022, with an effective date of April 1, 2022.
Effective March 31, 2022, Mimi Lai will be retiring from Prairie Provident as EVP Finance & CFO and Director to pursue new opportunities. We wish to extend our thanks to Mimi for all her contributions to PPR and wish her the best in her future endeavours. The Company is currently underway with a CFO search process and is targeting early Q2 2022 to have a replacement on seat.