Calgary, Alberta–(Newsfile Corp. – April 3, 2024) – Lycos Energy Inc. (TSXV: LCX) (“Lycos” or the “Company“) is pleased to provide an operations update, preliminary first quarter production results and an increase to guidance.
Q1 2024 production is expected to average in excess of 3,800 boe/d (99% crude oil) with forecasted Q2 2024 average production expected to exceed 4,500 boe/d (99% crude oil). Drilling operations will continue through break up with 7 to 9 wells expected to be drilled in Q2 2024.
Operations Update
Lycos executed on multiple acquisitions last year as part of a multi-year strategy to increase drillable inventory of multi-lateral/fishbone drilling locations. Currently, Lycos has more than 200 drillable multi lateral/fishbone locations representing more than seven years of drilling inventory.
In Q1 2024, Lycos drilled 6 gross (6 net) crude oil multi-lateral/fishbone, Mannville heavy oil wells on lands accumulated in 2023. Currently, 4 (4 net) have been placed on production, two of these wells have been on production for less than 30 days and both are showing excellent results with average current rates above type curve. The remaining two wells had excellent geological indications and will be placed on production imminently.
Wine Rack Drilling Results
The Company’s wine rack design uses multi-lateral drilling to develop two zones at once (Sparky and General Petroleum zones). To date, Lycos has drilled 5 (5 net) wine rack design multi-laterals. The first three wine rack wells came on in Q3 and Q4 of 2023 and are all anticipated to pay out in less than six months.
The following table highlights Lycos’ drilling results on the three wine rack wells drilled in the second half of 2023.
Well UWI | IP 30 (bbl/d) |
IP 60 (bbl/d) |
IP 90 (bbl/d) |
IP 180 (bbl/d) |
Cumulative Oil to Date (Mbbl) |
00/16-24-048-06W4 | 318 | 276 | 245 | 189 | 35,522 |
02/16-24-048-06W4 | 239 | 201 | 175 | 137 | 24,920 |
03/16-24-048-06W4 | 212 | 188 | 169 | N/A | 23,840 |
During Q1 2024, Lycos drilled an additional two wine rack wells with the following results:
Well UWI | IP 30 (bbl/d) |
Cummulative Oil to Date (Mbbl) |
04/09-30-048-05W4 | 402 | 23,032 |
02/14-30-048-05W4 | 301 | 14,458 |
The wine rack well results drilled by the Company to date have all substantially outperformed Lycos’ forecasted type curve expectations.
Guidance Increase
With the outperformance of drilling results as well as recent commodity price increases, the Lycos Board of Directors has approved an expansion of the Company’s 2024 capital budget from $61.0 million to $66.0 million (the “Updated 2024 Guidance“).
Prior 2024 Guidance (2) | Updated 2024 Guidance (3) | |||||
Year Ended | Year Ended | |||||
December 31, 2024 | December 31, 2024 | |||||
Annual average production (boe/d) | 4,700 boe/d (99% oil) | 4,800 boe/d (99% oil) | ||||
Average Q4 2024 production (boe/d) | 5,500 boe/d (99% oil) | 5,700 boe/d (99% oil) | ||||
Capital expenditures (1) | $ | 61.0 million | $ | 66.0 million | ||
Adjusted funds flow from operations(1) | $ | 61.0 million | $ | 65.8 million | ||
Adjusted working capital (net debt), end of year (1) | ($20.0) million | ($19.8) million | ||||
Net debt to adjusted funds flow from operations ratio, end of year (1) | 0.3X | 0.3X |
(1) See Non-IFRS Measures, Non-IFRS Financial Ratios and Capital Management Measures.
(2) Prior guidance as updated on February 1, 2024.
(3) 2024 Budget numbers are based on 2024 average pricing assumptions of: US$77.58 bbl WTI; (US$18.68) WCS differential; and $1.35 CAD/USD.
Saskatchewan Royalty Incentive
The Province of Saskatchewan announced a new royalty program titled “The Multi-Lateral Oil Well Program Regulations” (the “MLWP“) which is meant to incentivize development of multi-lateral heavy oil wells. The program specifically incentivizes multi-lateral and fishbone drilling. The incentive program has markedly increased the value and proposed pace of development on the Company’s Saskatchewan drilling inventory which represents 38% of Lycos’ currently identified 200 locations. As a result of this program, the Company’s single well before tax net present values at a 10% discount rate are expected to increase between 21% and 25% per location depending on type curve.
About Lycos
Lycos is an oil-focused, exploration, development and production company based in Calgary, Alberta, operating high-quality, heavy-oil, development assets in the Lloydminster, Greater Lloydminster area and Gull Lake, Saskatchewan.