Big Gold Inc. press release
Paramount Resources Ltd. Announces Third Quarter 2017 Results; 2018 Production and Capital Guidance; October 2017 Sales Volumes Exceed 98,000 Boe/d
CSE - Canadian National Stock Exchange · Gold · Silver · Copper · Zinc · Canada
Canada NewsWire
CALGARY, Nov. 9, 2017
CALGARY, Nov. 9, 2017/CNW/ -
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OIL AND GAS OPERATIONS
Paramount completed two major transactions in the third quarter of 2017, acquiring Apache Canada Ltd. (ʺApache Canadaʺ) in August and completing a merger with Trilogy Energy Corp. (ʺTrilogyʺ) in September.
During October 2017, the first full month of operations for the combined entities, Paramount's estimated sales volumes averaged over 98,000 Boe/d (38 percent Liquids).
Average sales volumes for the fourth quarter are expected to exceed 95,000 Boe/d, with greater than 38 percent Liquids volumes.
Paramount's third quarter 2017 sales volumes averaged 49,023 Boe/d (40 percent Liquids).
In the Grande Prairie Region, the 2016/17 Karr-Gold Creekcapital program is wrapping up with the the final six wells of the 27-well Montneyprogram scheduled to be completed and brought on production before year-end 2017. Paramount expects fourth quarter production from the Grande Prairie Region to exceed 35,000 Boe/d (approximately 50 percent Liquids).
In the Kaybob Region, a total of seven wells were rig released and twelve wells were completed in the third quarter of 2017, including the completion and tie-in of a six (3.1 net) well pad at Kaybob South Duvernay in September. The Company expects fourth quarter production from the Kaybob Region to exceed 40,000 Boe/d (approximately 33 percent Liquids).
The Central Albertaand Other Region includes assets and production in the Northwest Territories, northeast British Columbia, northwest Alberta, and central Alberta. Drilling and completion activity in the Region during the third quarter took place at the Birch joint-venture in northeast British Columbia. Paramount expects fourth quarter production from the Central and Other Region to be approximately 20,000 Boe/d (30 percent Liquids).
Capital expenditures in the third quarter of 2017 totaled $122.0 million. The majority of the capital spending was directed towards the Karr-Gold Creek Montney development program in the Grande Prairie Region.
CORPORATE
Paramount's revolving bank credit facility (the ʺFacilityʺ) was increased from $300 millionto $700 millionin November 2017. At Paramount's request, the size of the Facility can be further increased by $300 millionto $1.0 billion.
Approximately $315 millionwas drawn on the Facility as of November 6, 2017.
Trilogy's $285 millionbank credit facility has been repaid and cancelled.
Third quarter 2017 funds flow from operations totaled $45.3 millioncompared to $3.8 millionin the third quarter of 2016.
Transition efforts are in full swing with a management team comprised of representation from all three companies. The Company has reorganized into three operating regions while also creating discipline-based leadership roles to facilitate project execution and best practices and to ensure integration across the organization.
Since October 1, 2017, Paramount has entered into hedges for 10,000 Bbl/d of Liquids for 2018 at an average WTI price of C$69.84/Bbl. For the remainder of 2017, the Company has 4,000 Bbl/d of Liquids hedged at an average WTI price of C$70.80/Bbl and 2,000 Bbl/d hedged at a WTI price of US$54.48/Bbl.
The Company has secured firm service transportation capacity for approximately 60,000 GJ/d of natural gas for delivery to the Dawn natural gas hub in Ontariofor sale to eastern natural gas markets.
OIL AND GAS OPERATIONS
In the third quarter of 2017 sales volumes averaged 49,023 Boe/d, including 40 percent Liquids volumes. This includes 46 days of production from the Apache Canada assets and 19 days of production from the Trilogy assets. For the full month of October, the Company's estimated monthly sales averaged over 98,000 Boe/d, including approximately 38 percent Liquids volumes. Average sales volumes for the fourth quarter of 2017 are expected to exceed 95,000 Boe/d, with 38 percent Liquids volumes.
Capital expenditures for the Company in the third quarter of 2017 were $122.0 million. Paramount estimates approximately $130 millionof capital will be spent in the fourth quarter, bringing total projected annual spending for 2017 to approximately $510 million, excluding land and property acquisitions.
Following the acquisition of Apache Canada (the ʺApache Canada Acquisitionʺ) and the merger with Trilogy (the ʺTrilogy Mergerʺ), Paramount has divided its oil and gas operating areas into three operating regions: i) the Grande Prairie Region; ii) the Kaybob Region and iii) the Central Albertaand Other Region.
In the third quarter of 2017 the combined entities rig released 11 wells, completed 16 wells, and had 12 wells in the process of being completed.
Grande Prairie Region
The focus within the Grande Prairie Region is the over-pressure liquids-rich Deep Basin Montney trend. In the third quarter Paramount added approximately 45,000 net acres to its land position through the Apache Canada Acquisition and increased its total land holding to approximately 147,000 net acres. In addition, the Company has a material position of Deep Basin Cretaceous rights of approximately 150,000 net effective acres targeting the Dunvegan, Falher, Gething and Wilrich formations.
Production for the quarter averaged 24,000 Boe/d with approximately 50 percent Liquids, despite a 20-day planned outage at a third-party gas processing plant. Paramount expects fourth quarter production from the Grande Prairie Region to continue to exceed 35,000 Boe/d, comprised of approximately 50 percent Liquids.
During the third quarter, a total of four wells were rig released, four wells were completed and brought on production, and 12 wells were in the process of being completed and brought on production.
The 2016/17 Karr Montney capital program is wrapping up with six wells in-progress and scheduled to be on production before year-end 2017. This will complete the successful 27 (27.0 net) well program, which delivered average sales volumes of around 26,600 Boe/d in October 2017, including approximately 52 percent Liquids volumes. Peak wellhead throughput in the month of October reached 30,500 Boe/d, with approximately 55 percent Liquids volumes.
The table below summarizes the average peak 30-day initial wellhead production rates for 21 of the 27 wells in the 2016/17 Karr Montney capital program:
| | | | | | | | Well | Pad | Peak 30 Day
Total (1)
(Boe/d) | Peak 30 Day
Condensate (1)
(Bbl/d) | % Condensate | Days on
Production | | 00/15-14-065-06W6/0 | 15-02 | 2,628 | 1,340 | 51 | 307 | | 00/04-07-065-05W6/0 | 04-19 | 2,550 | 1,815 | 71 | 266 | | 02/04-07-065-05W6/0 | 04-19 | 2,844 | 2,176 | 77 | 238 | | 02/01-12-065-06W6/0 | 04-19 | 2,633 | 1,795 | 68 | 229 | | 00/03-22-066-05W6/0 | 03-22 | 1,949 | 946 | 49 | 203 | | 00/01-12-065-06W6/0 | 04-19 | 2,218 | 1,532 | 69 | 196 | | 00/09-32-065-04W6/0 | 16-36 | 2,159 | 1,401 | 65 | 158 | | 00/16-32-065/04W6/0 | 16-36 | 2,122 | 1,263 | 60 | 143 | | 00/04-34-065-05W6/0 | 16-04 | 2,137 | 994 | 47 | 132 | | 00/01-33-065-05W6/0 | 16-04 | 1,912 | 805 | 42 | 127 | | 00/08-32-065-04W6/0 | 16-36 | 1,856 | 1,176 | 63 | 119 | | 02/16-24-066-05W6/0 | 13-07 | 1,341 | 694 | 52 | 94 | | 00/04-06-066-04W6/0 | 13-07 | 1,815 | 900 | 50 | 93 | | 02/04-06-066-04W6/0 | 13-07 | 2,050 | 1,414 | 69 | 91 | | 00/16-24-066-05W6/0 | 13-07 | 1,352 | 647 | 48 | 91 | | 00/03-06-066-04W6/0 | 13-07 | 1,839 | 942 | 51 | 89 | | 02/09-32-065-04W6/0 | 16-36 | 1,529 | 950 | 62 | 80 | | 00/13-14-065-06W6/0 | 15-02 | 1,723 | 1,072 | 62 | 56 | | 02/16-14-065-06W6/0 | 15-02 | 2,018 | 1,346 | 67 | 48 | | 02/14-14-065-06W6/0 | 15-02 | 1,702 | 1,003 | 59 | 30 | | 02/15-14-065-06W6/0 | 15-02 | 1,855 | 1,270 | 67 | 30 | | Average | | 2,011 | 1,212 | 59 | 134 |
| (1) | Peak 30 Day is the highest daily average production rate over a 30-day consecutive period for an individual well, measured at the wellhead. Natural gas sales volumes are approximately 10 percent lower and stabilized condensate sales volumes are approximately 15 percent lower due to shrinkage. The production rates and volumes shown are 30 day peak rates over a short period of time and, therefore, are not necessarily indicative of average daily production, long-term performance or of ultimate recovery from the wells. |
Drilling costs for the 21 wells averaged $3.7 millionper well ($622per meter of total depth or $1,281 per meter of lateral length) and completion costs averaged $7.1 millionper well ($103,000per stage or $1,032per tonne of proppant placed). Paramount increased the number of average fracs pumped per day from about five on the 04-19 pad to an average of more than 10 per day on the most recent pad, with as many as 17 frac stages pumped in a single 24-hour period.
The Karr 06-18 compression and dehydration facility (the ʺ06-18 Facilityʺ) produces to a nearby third party sour gas processing plant where Paramount has firm natural gas transportation on TCPL and downstream contracts for our condensate and NGLs volumes.
The 2016/17 delineation and land tenure program at the Wapiti Montney property is nearly complete, with two wells rig released and one well completed and tested in the third quarter of 2017. To date, the property has been delineated with nine wells that have tested three landing zones in the Middle and Lower Montney. A new third party sour gas processing plant, trunk lines, and compression nodes are at various stages of engineering, procurement and construction, with the first 150 MMcf/d of sour gas processing capacity scheduled to be commissioned in the spring of 2019.
In the Resthaven/Jayar area, the 2016/17 program of five (4.5 net) Cretaceous wells and one (1.0 net) Montneywell is near completion. In the third quarter, one well was rig released, four wells were completed and put on production, and one well is in the process of being completed, tested and brought on production.
The Montneywell at Resthaven was drilled, completed and tied-in during the third quarter with encouraging results. This Montneywell was completed with a similar design to those of the Karr Montney program and had a completed length of approximately 2,700 meters with 70 x 100 tonne frac stages for proppant loading intensity of about 2.6 tonnes per meter. The well continues to flow on cleanup and has achieved an initial 30-day production rate of approximately 1,314 Boe/d at the wellhead, about 33 percent condensate. Wellhead production rates over the first 30 days have increased day-over-day with the 30th day delivering approximately 1,780 Boe/d with 34 percent condensate. The Company plans to closely monitor the well's longer-term performance and may accelerate the development of the Montneyin this area.
All of the new Resthaven/Jayar production is being processed either in the 300 MMcf/d Pembina 08-11 deep cut gas plant where Paramount holds a 16 percent interest (54 MMcf/d net capacity), or the Resthaven 01-36 gas plant, where Paramount holds a 50 percent interest (10 MMcf/d net capacity). Paramount has firm service natural gas transportation on TCPL and downstream contracts for condensate and NGLs to handle egress for production from the Resthaven/Jayar area.
Kaybob Region
The focus in the Kaybob Region is Montneyoil at Kaybob and Ante Creek, Montneygas at Presley, liquids-rich Duvernayat Kaybob South and Smoky River and Gething oil. Paramount has added about 900,000 net acres of land at Kaybob as a result of the Apache Canada Acquisition and the Trilogy Merger, including approximately 88,000 net acres of tier one Montneyoil acreage, 122,000 net acres of liquids-rich Montneygas, and 136,000 net acres of Duvernayrights, more than half of which are in the liquids-rich trends. In addition to these Montneyand Duvernayland positions, Paramount added additional acreage in stacked Cretaceous plays within the Deep Basin at Kaybob.
Through the Apache Canada Acquisition and the Trilogy Merger, Paramount also added strategically owned and operated facilities including six natural gas processing plants and three oil batteries. The natural gas processing capacity totals greater than 150 MMcf/d and the oil batteries can process more than 40,000 Bbl/d of liquids.
During the third quarter, a total of seven wells were rig released and 12 wells completed in the Kaybob Region, including a six-well pad at Kaybob South Duvernay which tested completion intensities up to 4.5 tonnes per meter. Production for the Kaybob Region in the third quarter averaged approximately 13,500 Boe/d, approximately 31 percent Liquids volumes. Paramount expects fourth quarter 2017 production from the Kaybob Region to exceed 40,000 Boe/d, with about 33 percent Liquids volumes.
The Company has implemented a new completion design in the Kaybob Montney oil pool which on average has 45 percent more stages and 290 percent higher proppant loading than the original wells. The table below summarizes the average peak 30-day initial wellhead rates for wells with the new completion design.
| | | | | | | Well | Peak 30 Day
Total (1)
(Boe/d) | Peak 30 Day
Oil (1)
(Bbl/d) | % Oil | Days on
Production | | 02/05-06-064-18W5/0 | 2,301 | 1,928 | 84 | 299 | | 03/04-06-064-18W5/0 | 1,059 | 759 | 72 | 298 | | 02/04-06-064-18W5/0 | 1,202 | 1,082 | 90 | 270 | | 00/13-31-064-18W5/0 | 1,174 | 990 | 84 | 210 | | 02/13-31-064-18W5/0 | 811 | 605 | 75 | 208 | | 00/14-31-064-18W5/0 | 756 | 578 | 76 | 208 | | 00/14-12-064-19W5/2 | 539 | 475 | 88 | 198 | | 02/15-12-064-19W5/0 | 683 | 587 | 86 | 195 | | 03/15-12-064-19W5/0 | 754 | 620 | 82 | 157 | | 02/08-05-064-18W5/0 | 1,007 | 929 | 92 | 137 | | 03/09-05-064-18W5/0 | 815 | 758 | 93 | 136 | | 02/08-29-064-18W5/0 | 1,573 | 599 | 38 | 114 | | Average | 1,056 | 826 | 80 | 203 |
| (1) | Peak 30 Day is the highest daily average production rate over a 30 day consecutive period for an individual well, measured at the wellhead. Natural gas sales volumes are approximately 10 percent lower and stabilized oil sales volumes are approximately 15 percent lower due to shrinkage. The production rates and volumes shown are 30 day peak rates over a short period of time and, therefore, are not necessarily indicative of average daily production, long-term performance or of ultimate recovery from the wells. |
Drilling costs for the 17 wells that were completed in the Kaybob Region averaged $1.7 millionper well ($440per meter of total depth or $926per meter of lateral length), with completion costs averaging $0.9 millionper well ($29,233per stage or $1,500per tonne of proppant placed). Paramount will continue to operate a drilling rig through the fourth quarter on this play.
The Kaybob Montney oil asset produces through owned and operated sour natural gas processing and oil handling facilities that are coupled with firm transportation for the solution gas and downstream contracts for oil and NGLs volumes. The facilities are dually connected to both the TCPL and Alliance systems for natural gas volumes and the Pembina gathering system for crude oil.
During the quarter, the Company brought on a new six-well pad on its Kaybob South Duvernay lands and is excited by the results. The wells on this pad had an average daily wellhead production rate of approximately 1,600 Boe/d per well with about 51 percent condensate volumes over their first 30 days of production. The production rates from this new pad are over a brief period of time and not necessarily indicative of the long-term performance. The average drill cost was $4.6 millionper well ($842per meter of total depth or $2,030per meter of lateral length) and the average completion cost was $6.0 millionper well ($147,000per stage or $711per tonne of proppant placed). The six-well pad tested two proppant loading intensities at approximately 55-meter stage spacing and the Company is currently evaluating the results to determine the optimal proppant loading intensity.
The Kaybob South Duvernay asset produces through third party facilities under firm agreements, again coupled with firm transportation for natural gas and downstream contracts for condensate and NGLs volumes.
Central Albertaand Other Region
The Central Albertaand Other Region includes assets and production in the Northwest Territories, northeast British Columbia, northwest Alberta, and central Alberta. There are a number of material land and resource positions in the region including Willesden Green and East Shale Basin Duvernay. The following table summarizes the noteworthy positions in the region:
| | | | Description | Approximate Net Acres | | Willesden Green Duvernay | 63,000 | | East Shale Basin Duvernay | 30,000 | | Fee Simple Lands | 176,000 | | Cardium | 187,000 | | Glauconite | 76,000 | | Ellerslie | 95,000 |
During the third quarter, drilling and completion activity in the Central Albertaand Other Region took place at the non-operated Birch joint-venture lands in northeast British Columbia.
Production for the region for the third quarter averaged about 11,000 Boe/d (28 percent Liquids). Paramount expects fourth quarter 2017 production from the Central Albertaand Other Region to be approximately 20,000 Boe/d with approximately 30 percent Liquids.
2018 GUIDANCE AND OUTLOOK
Paramount's 2018 capital budget is focused on liquids-rich growth opportunities while maintaining a strong balance sheet. Paramount expects sales volumes to average approximately 100,000 Boe/d in 2018, including 40 percent Liquids volumes. The Company's sales volumes are expected to remain at this level until production at Wapiti begins to ramp up in the spring of 2019 when 150 MMcf/d of new third-party gas processing capacity is scheduled to come on-stream.
Capital expenditures for 2018 are expected to be approximately $600 millionincluding maintenance, optimization and exploration expenses, excluding acquisitions or divestitures. In addition, the Company intends to spend approximately $28 millionon abandonment and suspension activities in 2018.
Approximately 50 percent of the $130 millionof capital expenditures the Company expects to incur in the fourth quarter of 2017 are related to the planned 2018 development program and include lease construction, drilling operations and ordering of long-lead items.
The 2018 capital allocation is expected to be as follows: 68 percent liquids-rich Montney, 23 percent liquids-rich Duvernay, six percent for maintenance/optimization projects and three percent for other liquids-rich projects. Capital allocation by region is forecast to be about 54 percent Grande Prairie, 36 percent Kaybob and 10 percent Central/Other.
In 2018 the Company plans to drill between 70 and 75 net development wells and complete up to 55 of those net wells. The 55 net well completions will account for about 13 percent of Paramount's proved plus probable booked undeveloped locations (as at June 1, 2017). As the Company furthers the development of its plays, additional locations will be added to Paramount's reserves.
At an average drilling duration of 30 days and 270 operating days per year per drilling rig, Paramount's wholly-owned Fox Drilling fleet of seven rigs can accommodate approximately 1,900 of the up to 2,500 drilling days that may be required for these development wells. The remaining drilling days will be contracted out based on cost of service, availability, reliability and functionality of equipment.
In 2016/17 Paramount contracted pumping services for extended periods of up to 12 months, and plans to employ the same strategy in 2018 to ensure access to quality crews, equipment, and materials. Paramount has a water management team and greater than five million barrels of existing fresh water storage capacity in Wapiti, Karr and Kaybob.
During the period from late-2016 through to the present, Paramount has seen between 10 and 15 percent cost inflation in drilling and completion activities. These increases have been included in future development planning with any additional cost inflation anticipated to be offset by savings due to multi-well pad drilling, fresh water storage and economies of scale from the combined businesses.