CALGARY, March 6, 2017 /CNW/ – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Corporation“) (TSX: PPY) is pleased to announce updated 2017 capital budget and 2018 development plan details. Consistent with Painted Pony’s strategy of capital discipline and due to the recent decline in forward strip natural gas prices, the Corporation has decided to reduce the level of capital spending during 2017 and 2018 to ensure the Corporation maintains its current financial flexibility.
2017 Capital Budget
- Reduced 2017 capital spending to $288 million from previously announced capital budget of $319 million;
- Expect 2017 annual average daily production of approximately 260 MMcfe/d (43,000 boe/d), an 85% production per share increase over 2016 annual average daily production of 139.2 Mcfe/d (23,204 boe/d);
- Anticipate drilling 58 net wells and completing 51 net wells as part of the 2017 capital program.
2018 Development Plans
- Expect capital spending in 2018 of $216 million, down from previous 2018 capital spending indications of $385 million per Painted Pony’s previous 5-year plan;
- Anticipate annual average daily production in 2018 of 360 MMcfe/d (60,000 boe/d), a 40% production per share increase over expected 2017 annual average daily production of 260 MMcfe/d (43,000 boe/d), and;
- Expect to drill 37 net wells and complete 42 net wells in 2018.
Painted Pony believes that a reduction in the 2017 capital budget and a deeper reduction to the 2018 development plan is financially prudent based on the current commodity strip price outlook. Steps taken in prior periods to financially hedge approximately 75% of 2017 natural gas production volumes, combined with indexed physical contracts, affords Painted Pony the ability to withstand lower natural gas prices and still proceed with a reduced but strong organic growth capital program. The Corporation believes these program changes will result in Painted Pony delivering a cash flow capital program at February 1, 2017 strip pricing. Painted Pony believes these steps will help retain financial flexibility for the Corporation while delivering attractive production and cash flow per share growth.
During 2016, Painted Pony executed a capital program that produced organic year-over-year average daily production per share growth of 49%. The Corporation grew average annual daily production to 139.2 Mcfe/d (23,204 boe/d) in 2016 from 93.6 Mcfe/d (15,604 boe/d) in 2015. Painted Pony accomplished this while achieving a top-decile 2016 Proved Developed Producing recycle ratio of 2.0 times.
The 2017 revised capital budget of $288 million is approximately 10% or $31 million lower than the $319 million capital budget disclosed by Painted Pony in November 2016. The reduced capital budget is expected to deliver annual average daily production in 2017 of 260 MMcfe/d (43,000 boe/d) which is approximately 10% less than the 2017 annual average daily production of 288 MMcfe/d (48,000 boe/d) previously disclosed in November 2016. The 2018 revised capital plan of $216 million is 44% or $169 million less than the $385 million capital program originally contemplated by Painted Pony’s 5-year plan. The 2018 capital plan is expected to deliver annual average daily production of 360 MMcfe/d (60,000 boe/d), 40% higher than expected 2017 annual average daily production of 260 MMcfe/d (43,000 boe/d).
During 2016, through a combination of fixed price indexed contracts and market diversification, Painted Pony realized natural gas prices, before realized hedging gains, that represented a premium of 19% over the Station 2 average daily spot price and a discount of 6% to the AECO daily spot price. Painted Pony will continue to mitigate pricing risk by using market strategies to boost the Corporation’s average realized natural gas price.
Production levels from the reduced 2017 capital budget and 2018 development plan are expected to fulfill all of Painted Pony’s take-or-pay processing commitments.
Painted Pony is well-positioned to deliver another year of significant growth from the Corporation’s Montney assets and, similar to past years, expects to execute a 2017 capital program focused on capital efficiency and cost discipline.
Painted Pony is pleased to announce that it will be attending the GMP FirstEnergy East Coast Energy Symposium taking place March 9 and 10, 2017 at The Lotte New York Palace, located at 455 Madison Avenue in New York, NY.
The Corporation will be undertaking a series of meetings with institutional investors while at this conference as well as in additional cities during the week of March 6 â 10, 2017. Interested parties are invited to view the Corporation’s updated investor presentation on Painted Pony’s website, www.paintedpony.ca.
Boe Conversions: Barrel of oil equivalent (“boe“) amounts have been calculated by using the conversion ratio of six thousand cubic feet (6 Mcf) of natural gas to one barrel of oil (1 bbl). Boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Mcfe Conversions: Thousands of cubic feet of gas equivalent (“Mcfe“) amounts have been calculated by using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas. Mcfe amounts may be misleading, particularly if used in isolation. A conversion ratio of 1 bbl to 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of natural gas as compared to oil is significantly different from the energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may be misleading as an indication of value.
Forward-Looking Information: This press release contains certain forward-looking information within the meaning of Canadian securities laws. Forward-looking information relates to future events or future performance and is based upon the Corporation’s current internal expectations, estimates, projections, assumptions and beliefs. All information other than historical fact is forward-looking information. Words such as “plan”, “expect”, “intend”, “believe”, “anticipate”, “estimate”, “may”, “will”, “potential”, “proposed” and other similar words that indicate events or conditions may occur are intended to identify forward-looking information. In particular, this press release contains forward looking information relating to an expectation that AltaGas will expand the Townsend Facility in 2017, a expectation of 2017 average daily production; the 2017 capital budget; an expectation that cost efficiencies realized in 2016 will be realized in 2017 and 2018; the number of wells expected to be drilled and completed in 2017 and 2018; the expected capital to be spent and the number of wells to be drilled and completed in 2017 and 2018; expected increasing efficiencies and lower operated costs; and that market strategies will continue to mitigate pricing risks.
Forward-looking information is based on certain expectations and assumptions including but not limited to future commodity prices, currency exchange rates interest rates, royalty rates and tax rates; the state of the economy and the exploration and production business; the economic and political environment in which the Corporation operates; the regulatory framework; anticipate timing and results of capital expenditures; the sufficiency of budgeted capital expenditures to carryout planned operations; operating, transportation, marketing and general and administrative costs; drilling success, production rates, future capital expenditures and the availability of labor and services. With respect to future wells, a key assumption is the validity of geological and technical interpretations performed by the Corporation’s technical staff, which indicate that commercially economic volumes can be recovered from the Corporation’s lands. Estimates as to average annual and exit production assume that no material unexpected outages occur in the infrastructure the Corporation relies upon to produce its wells, that existing wells continue to meet production expectations and that future wells scheduled to come on production in 2016 and 2017 meet timing and production rate expectations.
Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations on which they are based will occur. Although the Corporation’s management believes that the expectations in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated. Forward-looking information necessarily involves both known and unknown risks associated with oil and gas exploration, production, transportation and marketing. There are risks associated with the uncertainty of geological and technical data, operational risks, risks associated with drilling and completions, environmental risks, risks of the change in government regulation of the oil and gas industry, risks associated with competition from others for scarce resources and risks associated with general economic conditions affecting the Corporation’s ability to access sufficient capital. Additional information on these and other risk factors that could affect operational or financial results are included in the Corporation’s most recent Annual Information Form and in other reports filed with Canadian securities regulatory authorities.
Forward-looking information is based on estimates and opinions of management at the time the information is presented. The Corporation is not under any duty to update the forward-looking information after the date of this press release to revise such information to actual results or to changes in the Corporation’s plans or expectations, except as required by applicable securities laws.
Any “financial outlook” contained in this press release, as such term is defined by applicable securities laws, is provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
ABOUT PAINTED PONY
Painted Pony is a publicly-traded natural gas Corporation based in Western Canada. The Corporation is primarily focused on the development of natural gas and natural gas liquids from the Montney formation in northeast British Columbia. Painted Pony’s common shares trade on the Toronto Stock Exchange under the symbol “PPY”.
SOURCE Painted Pony Petroleum Ltd.
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