Mr. David Reid reports
DELPHI ENERGY CORP. ANNOUNCES EXTENSION OF CREDIT FACILITY
Delphi Energy Corp.'s annual borrowing base redetermination of its senior credit facility has been finalized.
The amended credit facility has a borrowing base of $100.0-million, reducing to $90.0-million upon the earlier of Sept. 30, 2019, and the completion of the sale of excess Alliance pipeline transportation service for $11.9-million, which was previously announced on June 17, 2019. The revolving period of the senior credit facility has been extended to Nov. 28, 2019, with the maturity date extended to Nov. 29, 2020. Under the amended credit facility, capital spending until Nov. 30, 2019, is limited to $4.0-million other than as financed by the issuance of new equity or senior secured notes.
Upon closing the sale of the excess Alliance service, expected to be on or about Sept. 3, 2019, Delphi expects to have bank debt net of working capital of approximately $70-million.
In the second quarter of 2019, the company brought on production the four wells from its multiwell pad with a surface location of 13-34-59-24W5 (13-34), directly offsetting the company's delineation wells drilled in West Bigstone at 16-10-60-24W5 and 15-10-60-24W5 (16-10 and 15-10). Delphi has a 65-per-cent working interest in the 13-34 pad and the 16-10 and 15-10 wells. The four extended-reach wells on the 13-34 pad were drilled in the fourth quarter of 2018 and the first quarter of 2019 with an average horizontal length in the Montney of 2,850 metres, efficiently developing two full sections at a time. Delphi successfully finished completion operations on the four-well pad at West Bigstone in the first quarter. The two easternmost wells on the 13-34 pad were completed with a hybrid completion consisting of 50 fracs pumped using a ball-drop liner and 30 individual fracs placed using plug and perf for a total of 80 discrete fracs. This is a similar design as was used at 16-10 and 15-10, where 65 fracs were placed. On the two westernmost wells on the pad, an extreme limited entry fracturing technique was used consisting of 40 stages with five clusters per stage for a total of 200 clusters or fracture initiations. Observing the 13-34 pad's well performance over the first 90 to 180 days will be important to determining the impacts of the increased fracture intensity and number of fracture initiations compared with the 65 stages placed in the two offset wells. This will be important in optimizing overall capital efficiencies on the future multiwell pads.
Facility upgrades, including provisions for gas lift of wells in the area, were completed to handle the increased volumes from this and future pads at West Bigstone. A 14-kilometre dedicated pipeline constructed back to the 7-11 facility in East Bigstone now connects West Bigstone to the primary fluid and natural gas handling infrastructure in East Bigstone. The new pipeline allows for continued growth in West Bigstone without impacting performance of legacy wells and future development in East Bigstone.
Over the first 30 days on production, the four wells on the 13-34 pad flowed at an average rate of 2.0 million cubic feet per day (mmcf/d) of raw natural gas and 590 barrels per day (bbl/d) of 42-degree API field condensate (343 barrels per million cubic feet (bbl/mmcf) of sales gas). Total sales production rate over this time period averaged approximately 949 barrels of oil equivalent per day (boe/d) (70 per cent liquids), including current estimated plant natural gas liquids yield of 42 bbl/mmcf of sales gas. In the month of June, total production from the pad was approximately 2,840 boe/d gross, consisting of 59 per cent liquids. Combined with the 16-10 and 15-10 wells, total estimated production from the two sections in which these six wells are drilled was 3,825 boe/d gross or 2,486 boe/d net, accounting for approximately 27 per cent of Delphi's corporate production in the month.
Based on field estimates, second quarter 2019 production averaged approximately 9,200 boe/d (44 per cent liquids), meeting expectations of 9,000 to 9,500 boe/d on higher-than-forecast liquids volumes offset by lower natural gas volumes. Field condensate production averaged 2,800 bbl/d, an increase of 21 per cent over the first quarter of 2019 and marking the first time in a quarter that field condensate production accounted for more than 30 per cent of the company's production.
With the drilling success in West Bigstone, the company expects its condensate production to continue to grow disproportionately to its natural gas production over the next three to five years. The impact of the company's condensate growth, product marketing advantages, cost reductions and hedging strategy continue to demonstrate a strong cash generating business model in a volatile commodity price environment.
Hedging contracts in place for 2019 protect the realized price for approximately 85 per cent of Chicago natural gas sales and approximately 85 per cent of field condensate and NGL sales combined, based on production in the fourth quarter of 2018. Delphi's 2019 and 2020 hedging contracts have a current mark to market value of approximately $14.6-million, compared with current future commodity prices.
In this current commodity price, equity capital markets and banking environment, the company is focused on delivering a cash flow growth model primarily through increased condensate yields, while using free cash flow generated in excess of its capital program and non-core asset dispositions to reduce bank debt.
About Delphi Energy Corp.
Delphi Energy is an industry-leading producer of liquids-rich natural gas. The company has achieved top-decile results through the development of its high-quality Montney property, uniquely positioned in the Deep basin of Bigstone in northwest Alberta. Delphi continues to outperform key industry players by improving operational efficiencies and growing its dominant Bigstone land position in this world-class play. Delphi is headquartered in Calgary, Alta., and trades on the Toronto Stock Exchange under the symbol DEE.
We seek Safe Harbor.
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