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Enter Symbol
or Name
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CA



Perpetual Energy Inc (2)
Symbol PMT
Shares Issued 53,415,919
Close 2016-12-08 C$ 1.96
Market Cap C$ 104,695,201
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Perpetual sets 2017 capital budget at $65-million

2016-12-09 02:27 ET - News Release

Ms. Susan Riddell Rose reports

PERPETUAL ANNOUNCES 2017 CAPITAL SPENDING AND PRODUCTION GUIDANCE

Perpetual Energy Inc. has released its capital-spending plans and expects production growth for 2017.

Perpetual's success in advancing its strategic priorities in 2016, coupled with strengthening commodity prices, has established a foundation for strong growth in production and funds flow in 2017. The company's board of directors has approved an exploration and development capital-spending program of up to $65-million for 2017, continuing drilling activity beyond the previously announced capital-spending program for the fourth quarter of 2016.

Beginning in early December, drilling operations commenced at both Mannville and East Edson, with a single rig drilling program in each area. Prior to year-end 2016, the company expects to have one well rig released and a second well spudded on a two-well pad at East Edson, both targeting the Wilrich formation. Perpetual also expects to execute the drilling of up to five heavy oil wells at Mannville, as well as two horizontal wells, to evaluate its shallow shale gas play in the Viking and Colorado formations through December and January, taking advantage of synergies with the heavy oil drilling program. The fourth quarter 2016 capital program also includes expenditures for high-return conventional shallow gas workovers and recompletions, as well as water flood operations in the Mannville area.

In 2017, Perpetual will focus its capital spending on its core operating areas, with spending at East Edson representing close to 85 per cent of total forecast exploration and development expenditures. In the first quarter of 2017, the company plans to spend close to $23-million completing frack and tie-in operations on the two wells, which commenced drilling in the fourth quarter of 2016, and drilling up to four additional Wilrich horizontal wells. A total of five of the six new drills are forecast to be completed, tied in and on production prior to spring breakup. Subject to commodity prices, the company plans to recommence its one-rig drilling program after breakup to continue to increase production, at East Edson, with the drilling of up to an additional eight wells. Based on the type curve, the one-rig drilling program in East Edson is expected to re-establish throughput using company-owned infrastructure approaching the capacity of 75 million cubic feet per day plus associated liquids by the first quarter of 2018. The company also intends to continue completion and tie-in operations at Mannville during the first quarter of 2017, along with additional workovers and recompletions, to optimize conventional shallow gas production. Pending successful drilling results and commodity prices, four additional heavy oil wells are planned for the second half of 2017 in Mannville.

The attached capital expenditures table summarizes expected capital spending and drilling activities for the fourth quarter of 2016 and for the first and second half of 2017.

                                    CAPITAL EXPENDITURES

Exploration and development capital expenditures     Q4 2016, $ millions      Number of wells (gross/net)

East Edson liquids-rich gas                                          4.3                           1/1.0
Mannville heavy oil                                                  2.2                           2/2.0
Mannville gas                                                        1.3                           2/2.0
Other                                                                0.2                               -
Total capital spending (1)                                           8.0                           5/5.0

Exploration and development capital expenditures     H1 2017, $ millions      Number of wells (gross/net)

East Edson liquids-rich gas                                         21.6                           5/5.0
Mannville heavy oil                                                  2.5                           3/2.3
Mannville gas                                                        1.8                               -
Other                                                                0.1                               -
Total capital spending (1)                                          26.0                           8/7.3

Exploration and development capital expenditures     H2 2017, $ millions      Number of wells (gross/net)

East Edson liquids-rich gas                                         34.2                           8/8.0
Mannville heavy oil                                                  4.1                         4/(4.0)
Mannville gas                                                        0.7                               -
Other                                                                  -                               -
Total capital spending (1)                                          39.0                         12/12.0 
  
(1) Excludes budgeted abandonment and reclamation spending of
$500,000 in the fourth quarter of 2016 and up to $4-million 
in 2017.

Capital spending during the fourth quarter of 2016 and 2017 will be financed through a combination of funds flow and proceeds from the sale of assets as required.

Based on the total capital-spending program in 2017 of $65-million, Perpetual expects to exit 2017 at a production rate of 12,750 to 13,000 barrels of oil equivalent per day in December, 2017, with full-year 2017 production averaging between 10,750 and 11,000 boe per day (85 per cent natural gas). This represents growth in average daily production from fourth quarter 2016 to full-year 2017 of close to 30 per cent and an increase in exit rate based on average December production of approximately 60 per cent year over year.

Based on these assumptions and the current forward market for oil and natural gas prices, Perpetual forecasts 2017 funds flow of approximately $44-million (84 cents per share). Incorporating the current market value of the company's 1.85 million common shares of Tourmaline Oil Corp. of $36.78 per share, the company estimates year-end 2017 total net debt of approximately $65-million, with a corresponding ratio of debt to trailing 12-month funds flow of approximately 1.5.

Incorporating assumptions, the attached estimated 2017 forecast funds flow table shows Perpetual's estimated 2017 forecast funds flow using various commodity price sensitivities for the full year of 2017.

                        PROJECTED 2017 FUNDS FLOW (2)  
                                ($ millions)
                                             2017 AECO gas price ($/gj) (1)     
2017                              $2.50    $2.75    $3.00    $3.25    $3.50    $4.00
WTI price
(U.S.$/bbl) (1)
                        $42.50    $21.7    $26.4    $33.6    $41.5    $49.3    $64.8
                        $45.00     23.1     27.8     35.0     42.9     50.7     66.2
                        $47.50     24.7     29.5     36.6     44.5     52.3     67.8
                        $50.00     26.3     31.1     38.2     46.1     53.9     69.4
                        $55.00     29.0     33.8     40.9     48.7     56.5     72.0

(1) The current settled and forward average AECO and WTI prices for
calendar 2017 as of Dec. 8, 2016, were $3.14 per gigajoule and 
$54.10 (U.S.) per barrel, respectively.
(2) Funds flow is a non-generally accepted accounting principle
measure. Please refer to the non-GAAP measures section in Perpetual's 
management's discussion and analysis dated Nov. 8, 2016.          

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