CALGARY, Jan. 16, 2018 /CNW/ - Yangarra Resources
Ltd. ("Yangarra" or the "Company") (TSX:YGR) provides an
operations update, outlines 2018 guidance and provides a hedging
program update.
Operations Update
Production for 2017 averaged approximately 5,750 boe/d which is
a 91% increase on a production per share basis when compared to
2016. December 2017 production averaged approximately 7,500
boe/d (62% liquids) with fourth quarter 2017 production estimated
at 6,700 boe/d. The Company's base corporate decline rate for 2018
is forecast to be approximately 31%.
The Company drilled and completed sixteen (16) wells in the
bioturbated Cardium formation in 2017, five (5) wells were drilled
prior to spring breakup and 11 wells were drilled post breakup with
an additional two wells drilling over year-end. The first six
wells drilled after break-up now have more than 30 days of
production history and the IP-30 on those wells averaged 497 boe/d
(80% liquids).
Efforts to reduce drilling and completion costs during the
fourth quarter wells have been successful with costs declining to
$1,250/m (per lateral meter on 2 mile
wells) from $1,420/m in Q3 despite
the increased frack intensity. Frack stages continue to
increase with up to 80 stages per mile on recent wells with initial
results indicating support for the increased intensity. The
Company has also drilled two 1-mile wells and two 1.5-mile wells
which will provide the Company with an opportunity to compare the
economics of these wells to the 2-mile type curve.
The Company has 120 sections of Cardium land in Central Alberta and 940 gross (740 net) future
Cardium locations (based on 1-mile horizontal lengths).
Yangarra has increased its assumptions for original oil in
place ("OOIP") and original BOE in place ("OBOEIP") due to recent
exploitation of the bioturbated section below the traditional
Cardium sand. Yangarra's Cardium land base, according to internal
analysis and estimates, contains 886 gross (650 net) million
barrels of OOIP and 1,800 gross (1,265 net) million boe of OBOEIP
as at December 31, 2017.
The Company currently operates 96% of its production.
Capital Budget & Guidance
Fourth quarter capital is expected to be approximately
$30 million, bringing the total
capital spent in 2017 to approximately $83
million. Fourth quarter cash flow is expected to be
$15 million resulting in year-end net
debt of approximately $95 million and
a Q4 annualized debt to cash flow of 1.6 to 1.0.
The Company's Board of Directors has approved an initial capital
budget of $90 million for 2018.
The 2018 capital budget includes the drilling of seven (7)
new wells in the first quarter and fifteen (15) new wells in the
second half.
The budget is expected to increase the Company's annual 2018
production to 9,000 – 10,000 boe/d with cash flow from operations
estimated at $80 to $90 million.
The Company expects year-end 2018 net debt of $95 – $105 million
resulting in a debt to annual cash flow ratio of 1.1 – 1.3 to
1. The budget assumes an average price of US$55.00/bbl for WTI crude oil (CDN$63.75/bbl Edmonton par) and an average price of
$2.00/GJ for AECO natural gas.
The annual review of the bank syndicated facility is scheduled
for May 2018.
Hedging Program Update
The Company's oil hedge position for 2018 consists of 2,300
bbl/d at an average price of C$70.09/bbl for the first half of the year and
1,400 bbl/d at an average price of C$73.23/bbl for the second half of the
year. The Company has also hedged 200 bbl/d of propane at
US$32.34 for 2018.
Forward looking information
This press release contains forward-looking statements.
More particularly, this press release contains statements
concerning planned exploration and development activities, the
anticipated daily production average during 2017, the anticipated
profitability of the Company if commodity prices were to future
decline from the current levels and the planned corporate strategy
during the current commodity environment.
The forward-looking statements in this press release are
based on certain key expectations and assumptions made by Yangarra,
including expectations and assumptions concerning the success of
future drilling and development activities, the performance of
existing wells, the performance of new wells, the successful
application of technology, prevailing weather conditions, commodity
prices, royalty regimes and exchange rates and the availability of
capital, labour and services.
Although Yangarra believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because Yangarra can give no assurance
that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are
not limited to, risks associated with the oil and gas industry in
general (e.g., operational risks in development, exploration and
production; delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
reserves estimates; the uncertainty of estimates and projections
relating to production, costs and expenses; and health, safety and
environmental risks), uncertainty as to the availability of labour
and services, commodity price and exchange rate fluctuations,
unexpected adverse weather conditions, general business, economic,
competitive, political and social uncertainties, capital market
conditions and market prices for securities and changes to existing
laws and regulations. Certain of these risks are set out in
more detail in Yangarra's current Annual Information Form, which is
available on Yangarra's SEDAR profile at
www.sedar.com.
Forward-looking statements are based on estimates and
opinions of management of Yangarra at the time the statements are
presented. Yangarra may, as considered necessary in the
circumstances, update or revise such forward-looking statements,
whether as a result of new information, future events or otherwise,
but Yangarra undertakes no obligation to update or revise any
forward-looking statements, except as required by applicable
securities laws.
Any references in this press release to initial and/or final
raw test or production rates and/or "flush" production rates are
useful in confirming the presence of hydrocarbons, however, such
rates are not necessarily determinative of the rates at which such
wells will commence production and decline thereafter.
Additionally, such rates may also include recovered "load oil"
fluids used in well completion stimulation. While encouraging,
readers are cautioned not to place reliance on such rates in
calculating the aggregate production for the Corporation. The
initial production rate may be estimated based on other third party
estimates or limited data available at this time. In all cases in
this press release, initial production or test are not necessarily
indicative of long-term performance of the relevant well or fields
or of ultimate recovery of hydrocarbons.
Non-GAAP Financial Measures
This press release contains a reference to "net debt". Net
debt or adjusted working capital (deficit), which represent current
assets less current liabilities, excluding current derivative
financial instruments, are used to assess efficiency, liquidity and
the general financial strength of the Company. There is no IFRS
measure that is reasonably comparable to net debt or adjusted
working capital (deficit).
Barrels of Oil Equivalent
The term barrels of oil equivalent ("BOE") may be misleading,
particularly if used in isolation. Per boe amounts have been
calculated using a conversion ratio of six thousand cubic feet (6
mcf) of natural gas to one barrel (1 Bbl) of crude oil. The
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 crude oil as compared to natural gas is significantly
different from the energy equivalency of 6:1, utilizing a
conversion on a 6:1 basis may be misleading as an indication of
value.
Reserves Data/Oil and Gas Metric
Original Oil in Place (OOIP) and Original BOE in Place
(OBOEIP) are the equivalent to Total Petroleum Initially In Place
(TPIIP) for the purposes of this press release. TPIIP is
defined as quantity of petroleum that is estimated to exist
originally in naturally occurring accumulations. It includes that
quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations, prior to production, plus those
estimated quantities in accumulations yet to be
discovered. There is no certainty that it will be economically
viable or technically feasible to produce any portion of this TPIIP
except to the extent that it may subsequently be identified as
proved or probable reserves. Resources do not constitute, and
should not be confused with, reserves. "Internal analysis" means an
estimate that is derived by Yangarra's internal APEGA certified
Engineers, and Geologists and prepared in accordance with National
Instrument 51-101 - Standards of Disclosure for Oil and Gas
Activities.
All reference to $ (funds) are in Canadian dollars.
SOURCE Yangarra Resources Ltd.