CALGARY, Feb. 15, 2017 /CNW/ -
HIGHLIGHTS
- Paramount's fourth quarter 2016 sales volumes averaged
approximately 12,000 Boe/d (35 percent liquids), including about
5,500 Boe/d (40 percent liquids) from Karr-Gold Creek.
- In late-January 2017, total
Company sales volumes increased to over 15,000 Boe/d (50 percent
liquids), including approximately 10,000 Boe/d from Karr-Gold Creek
(60 percent liquids), as wells from the new 4-19 pad at Karr-Gold
Creek were brought on production.
- The four wells on the 4-19 pad have produced a total of
approximately 105,000 Bbl of condensate since first production from
the pad in late-December 2016.
- Capital expenditures in the fourth quarter totaled
approximately $80 million, with the
majority of spending directed towards the Company's Karr-Gold Creek
development.
- Paramount's 2017 capital program is expected to total
approximately $325 million, with
approximately $200 million directed
towards Karr-Gold Creek.
- The expansion of the 6-18 compression facility at Karr-Gold
Creek (the "6-18 Facility") is on-schedule for completion in the
second quarter, doubling capacity to 80 MMcf/d.
- Sales volumes in 2017 are projected to average approximately
20,000 Boe/d, with the majority of growth to occur in the second
half of 2017 following completion of the 6-18 Facility expansion.
Sales volumes are expected to average over 30,000 Boe/d in the
fourth quarter of 2017.
- Paramount redeemed the remaining $286.6
million outstanding principal amount of its 2019 Notes in
December 2016.
- In the fourth quarter, the Company sold 5.0 million of its
Seven Generations Energy Ltd. common shares ("7Gen Shares") for net
cash proceeds of $148.5 million. In
January 2017, Paramount distributed
its remaining 3.8 million 7Gen Shares to shareholders by way of
dividend.
- In December 2016, Paramount's
wholly-owned subsidiary, Cavalier Energy, sold a royalty on its oil
sands properties for $100 million
cash.
- Paramount exited 2016 with cash and cash equivalents of
approximately $620 million, no
indebtedness and an undrawn $100
million bank credit facility.
- The Company has calendar 2017 hedges in place for 30,000
MMBtu/d of natural gas at an average price of US$3.57/MMBtu, 2,000 Bbl/d of liquids at an
average WTI price of C$70.43/Bbl and
1,000 Bbl/d of liquids at a WTI price of US$54.50/Bbl.
OPERATIONAL UPDATE
Karr-Gold Creek
Development activities at Karr-Gold Creek are currently focused
on a 27 (27.0 net) well horizontal Montney drilling and completion program that
commenced in mid-2016 (the "Karr Program") and the expansion of the
6-18 Facility to double its capacity to 80 MMcf/d. The status of
the Karr Program to date is as follows:
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As of Feb
14/17
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As of Dec
31/16
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Wells
Spudded
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20
|
20
|
Wells Rig
Released
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16
|
10
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Wells
Completed
|
6
|
2
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Wells
Producing
|
5
|
1
|
|
|
|
Paramount plans to spud an additional seven wells at Karr-Gold
Creek in 2017. By the end of 2017, the Company expects to have
completed up to 22 of the 27 wells, with the remaining wells to be
completed in 2018. The Karr Program wells are expected to be
brought on production through 2017 and 2018 to fill the expanded
6-18 Facility.
The new wells at Karr-Gold Creek are being drilled with lateral
lengths of approximately 3,000 meters and completed with
slick-water completion fluids and higher intensities of proppant.
The first well in the Karr Program, the 15-14 well, was brought on
production at controlled rates in September
2016. Four new wells on the 4-19 pad were completed in
December 2016 and January 2017 and are currently flowing back on
cleanup at restricted rates. Production data from the wells are
shown in the table below:
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|
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15-02
PAD
|
4-19
PAD
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WELLS
|
15-14
|
4-7
|
02/4-7
|
1-12
|
02/1-12
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Completion
Details
|
|
|
|
|
|
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Completion
Stages
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50
|
70
|
75
|
73
|
58
|
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Proppant
(tonnes)
|
5,000
|
7,000
|
7,500
|
7,300
|
5,800
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Proppant
intensity (tonnes / meter)
|
1.7
|
2.3
|
2.5
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2.4
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1.9
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Production -
Cumulative
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|
|
|
|
|
|
Natural
gas(1) (MMcf)
|
997
|
135
|
45
|
9
|
25
|
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Wellhead
liquids(1) (Bbl)
|
161,479
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64,318
|
30,338
|
3,365
|
6,484
|
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CGR(2)
(Bbl/MMcf)
|
162
|
477
|
675
|
380
|
258
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|
Days of
flowback
|
152
|
45
|
16
|
11
|
13
|
Production -
Last 7 Producing Days
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|
|
|
|
|
|
Natural
gas(1) (MMcf/d)
|
5.0
|
4.8
|
3.7
|
|
|
|
Wellhead
liquids(1) (Bbl/d)
|
754
|
1,915
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2,261
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n/a(3)
|
n/a(4)
|
|
CGR(2)
(Bbl/MMcf)
|
152
|
403
|
607
|
|
|
Production -
Last 24 Producing Hours
|
|
|
|
|
|
|
Natural
gas(1) (MMcf/d)
|
5.4
|
4.7
|
3.4
|
4.1
|
|
|
Wellhead
liquids(1) (Bbl/d)
|
832
|
1,766
|
1,824
|
1,945
|
n/a(4)
|
|
CGR(2)
(Bbl/MMcf)
|
153
|
380
|
536
|
474
|
|
(1)
|
Volumes to February
13, 2017. Production volumes are the gross volumes measured at the
wellhead separator for the specified period of: (i)
cumulative volumes produced to February 13, 2017 ("Cumulative");
(ii) the most recent 168 producing hours ("Last 7 Producing Days");
or (iii) the last 24 producing hours ("Last 24 Producing Hours").
Excludes hours and days when the well did not produce. 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 over a short
period of time and, therefore, are not necessarily indicative of
long-term performance or of ultimate recovery.
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(2)
|
The condensate to
natural gas ratio ("CGR") was calculated by dividing total wellhead
separator liquids volumes by total wellhead separator natural gas
volumes.
|
(3)
|
Plugs were recently
drilled out on the 1-12 well. The well has not produced post
drill-out of plugs for 7 producing days.
|
(4)
|
Plugs are currently
being drilled out on the 02/1-12 well. The well has not produced
post drill-out of plugs.
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|
|
Paramount continues to evaluate the performance of the higher
intensity completions on the 4-19 pad. Early results indicate that
initial liquid yields are higher than the 15-14 well and that the
higher intensity completions have contacted a greater area of the
reservoir.
Paramount is investigating alternative production liner
technologies to further enhance well results. The Company is also
recycling flow-back water for re-use in completions to frack
multiple wells, which is expected to provide incremental capital
and operational efficiencies and environmental benefits.
Site work continues to progress at the 6-18 Facility expansion,
which is on-schedule to be completed in the second quarter of 2017.
The total cost of this expansion is estimated to be approximately
$35 million, of which $20 million had been incurred to December 31, 2016. The
accompanying photograph of the 6-18 Facility as of
February 6, 2017 shows the progress
made to date on the expansion.
Other Areas
Smoky/Resthaven: Paramount is executing a six-well exploration
and delineation program in 2017 targeting various Cretaceous zones.
The first well, a 1.4 mile horizontal Falher well, has been rig released and is
scheduled to be completed later in February. Two additional wells
are currently being drilled, with drilling operations for the next
well scheduled to commence later in February.
Valhalla: The Company recently
completed the 14-22 exploratory Montney well at Valhalla with a high intensity frack, placing
approximately 2,000 tonnes of proppant over 20 stages in the 1,300
meter lateral (1.5 tonnes per meter). The well was brought on
production in January 2017 and
initial performance has been encouraging. The Valhalla lands are prospective in the
Montney (lower, middle and upper)
and lower Doig formations where Paramount has an inventory of
drilling locations to support future development. The Company is
evaluating the potential economics of the opportunity based on the
results of this initial high intensity well completion, results
from offsetting operators and various alternatives to access
natural gas processing infrastructure.
Birch: Four (2.0 net) horizontal Montney wells have been drilled to date in the
2016/2017 winter drilling season at Birch. Two (1.0 net) of these
wells have been completed and are scheduled to be brought on
production later in the first quarter of 2017. Paramount and its
partner plan to drill up to an additional five (2.5 net) wells in
total at Birch in 2017 and expand the existing 20 MMcf/d
compression facility at Birch to 40 (20 net) MMcf/d.
Willesden Green: A total of five Duvernay wells have been drilled on
Paramount's lands to date, with three of the wells completed and on
production as of December 31,
2016. A fourth well, the 102/13-5 well, was completed in the
fourth quarter of 2016. The well was fracked using
slick-water and 4,600 tonnes of proppant placed over 26 stages (2.3
tonnes per meter) in the 2,000 meter lateral wellbore.
Following completion, the well was flow-tested over an extended
timeframe to obtain data for analysis of long-term reservoir
performance. The Company continues to evaluate further
development of the Duvernay
formation at Willesden Green, including the preparation of a
full-field development plan.
Paramount has launched a sales process for various non-core
properties in Alberta and
British Columbia through CB
Securities Inc. Current production from these properties totals
approximately 800 Boe/d.
CORPORATE
In 2016, Paramount realized net cash proceeds of approximately
$860 million through the sale of 29.7
million of the 7Gen Shares it received through the third quarter
Musreau/Kakwa disposition. In January
2017, the Company distributed its remaining 3.8 million 7Gen
Shares to shareholders by way of dividend.
Paramount redeemed the remaining $286.6
million outstanding principal amount of its 7⅝ percent
senior unsecured notes due 2019 (the "2019 Notes") in December 2016.
In December 2016, Cavalier Energy
sold a royalty to an unrelated third party on its oil sands
properties for cash consideration of $100
million. The royalty agreement does not impose any
development commitments on Cavalier Energy in respect of its
properties, nor does it impose any terms or conditions on the use
of the consideration paid for the royalty.
In the fourth quarter of 2016, the Company closed dispositions
of non-core properties for aggregate cash proceeds of approximately
$17 million. Third quarter 2016
production for these properties was approximately 500 Boe/d.
Paramount implemented a normal course issuer bid in October 2016 under which it may purchase up to
5.4 million Common Shares for cancellation. To date, the Company
has purchased 622,900 Common Shares for cancellation at a total
cost of $9.7 million.
Hedging Program
Paramount has the following financial commodity contracts in
place for 2017:
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Instruments
|
Aggregate
Notional
|
Average
Fixed
Price
|
Term
|
Natural
Gas:
|
|
|
|
Sale
|
NYMEX
Swaps
|
40,000
MMBtu/d
|
US$3.44/MMBtu
|
January 2017 –
December 2017
|
Purchase
|
NYMEX Swap
|
10,000
MMBtu/d
|
US$3.04/MMBtu
|
January 2017 –
December 2017
|
|
Net Gas
Hedges
|
30,000
MMBtu/d
|
US$3.57/MMBtu
|
January 2017 –
December 2017
|
Oil:
|
|
|
|
|
Sale
|
NYMEX WTI
Swaps
|
2,000
Bbl/d
|
CDN$70.43/Bbl
|
January 2017 –
December 2017
|
Sale
|
NYMEX WTI
Swap
|
1,000
Bbl/d
|
US$54.50/Bbl
|
January 2017 –
December 2017
|
OUTLOOK
Paramount's 2017 capital program is expected to total
approximately $325 million, excluding
land acquisitions, with approximately $200
million directed towards Karr-Gold Creek and the balance
directed towards Smoky/Resthaven, Birch, and other areas.
Activities at Karr-Gold Creek will focus on the expansion of the
6-18 Facility, finishing the 27 well Montney drilling program and completing a
portion of those wells to fill the expanded 6-18
Facility. At Smoky/Resthaven, Paramount plans to drill and
complete six horizontal wells targeting various Cretaceous
formations. At Birch, the Company plans to drill and complete
a total of nine (4.5 net) wells and double compression and
dehydration capacity to 40 MMcf/d (20 MMcf/d net).
Sales volumes in 2017 are projected to average approximately
20,000 Boe/d, with the majority of growth to occur in the second
half of 2017 following completion of the 6-18 Facility
expansion. Sales volumes are expected to average over 30,000
Boe/d in the fourth quarter of 2017. In September 2017, Karr-Gold Creek sales volumes are
anticipated to be impacted by the planned shut-down of a third
party gas processing plant for the majority the month.
Annual operating costs for 2017 are anticipated to average
approximately $10.00 per Boe.
Fourth quarter 2017 operating costs are expected to be lower than
in the first part of the year because of the ramp-up in production
volumes at Karr-Gold Creek.
* * * * *
Paramount is an independent, publicly traded, Canadian energy
company that explores for and develops unconventional and
conventional petroleum and natural gas prospects, including
long-term unconventional exploration and pre-development projects,
and holds a portfolio of investments in other entities. The
Company's principal properties are primarily located in
Alberta and British Columbia. Paramount's Class A Common
Shares are listed on the Toronto Stock Exchange under the symbol
"POU".
Advisories
Forward Looking Information
Certain statements in this document constitute forward-looking
information under applicable securities legislation.
Forward-looking information typically contains statements with
words such as "anticipate", "believe", "estimate", "will",
"expect", "plan", "schedule", "intend", "propose", or similar words
suggesting future outcomes or an outlook. Forward-looking
information in this document includes, but is not limited to:
- projected sales volumes (and the growth and timing
thereof);
- exploration, development, and associated operational plans and
strategies (including planned drilling and completions programs,
well tie-ins, and facility expansions) and the anticipated timing
and costs of such activities;
- forecast capital expenditures (including the targeted areas for
such expenditures) and operating costs;
- anticipated third-party processing constraints; and
- general business strategies and objectives.
Such forward-looking information is based on a number of
assumptions which may prove to be incorrect. Assumptions have been
made with respect to the following matters, in addition to any
other assumptions identified in this document:
- future natural gas and Liquids (as defined below) prices;
- royalty rates, taxes and capital, operating, general &
administrative and other costs;
- foreign currency exchange rates and interest rates;
- general business, economic and market conditions;
- the ability of Paramount to obtain the required capital to
finance its exploration, development and other operations and meet
its commitments and financial obligations;
- the ability of Paramount to obtain equipment, services,
supplies and personnel in a timely manner and at an acceptable cost
to carry out its activities;
- the ability of Paramount to secure adequate product processing,
transportation, de-ethanization, fractionation, and storage
capacity on acceptable terms;
- the ability of Paramount to market its natural gas and Liquids
successfully to current and new customers;
- the ability of Paramount and its industry partners to obtain
drilling success (including in respect of anticipated production
volumes, reserves additions, Liquids yields and resource
recoveries) and operational improvements, efficiencies and results
consistent with expectations;
- the timely receipt of required governmental and regulatory
approvals; and
- anticipated timelines and budgets being met in respect of
drilling programs and other operations (including well completions
and tie-ins and the construction, commissioning and start-up of new
and expanded facilities).
Although Paramount believes that the expectations reflected in
such forward-looking information are reasonable, undue reliance
should not be placed on them as Paramount can give no assurance
that such expectations will prove to be correct. Forward-looking
information is based on expectations, estimates and projections
that involve a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated by
Paramount and described in the forward-looking information. The
material risks and uncertainties include, but are not limited
to:
- fluctuations in natural gas and Liquids prices;
- changes in foreign currency exchange rates and interest
rates;
- the uncertainty of estimates and projections relating to future
revenue, future production, reserve additions, Liquids yields
(including condensate to natural gas ratios), resource recoveries,
royalty rates, taxes and costs and expenses;
- the ability to secure adequate product processing,
transportation, de-ethanization, fractionation, and storage
capacity on acceptable terms;
- operational risks in exploring for, developing and producing,
natural gas and Liquids;
- the ability to obtain equipment, services, supplies and
personnel in a timely manner and at an acceptable cost;
- potential disruptions, delays or unexpected technical or other
difficulties in designing, developing, expanding or operating new,
expanded or existing facilities (including third-party
facilities);
- processing, pipeline, de-ethanization, and fractionation
infrastructure outages, disruptions and constraints;
- risks and uncertainties involving the geology of oil and gas
deposits;
- the uncertainty of reserves estimates;
- general business, economic and market conditions;
- the ability to generate sufficient cash flow from operations
and obtain financing to fund planned exploration, development and
operational activities and meet current and future commitments and
obligations (including product processing, transportation,
de-ethanization, fractionation and similar commitments and debt
obligations);
- changes in, or in the interpretation of, laws, regulations or
policies (including environmental laws);
- the ability to obtain required governmental or regulatory
approvals in a timely manner, and to enter into and maintain leases
and licenses;
- the effects of weather;
- the timing and cost of future abandonment and reclamation
obligations and potential liabilities for environmental damage and
contamination;
- uncertainties regarding aboriginal claims and in maintaining
relationships with local populations and other stakeholders;
- the outcome of existing and potential lawsuits, regulatory
actions, audits and assessments; and
- other risks and uncertainties described elsewhere in this
document and in Paramount's other filings with Canadian securities
authorities.
The foregoing list of risks is not exhaustive. For more
information relating to risks, see the section titled "RISK
FACTORS" in Paramount's current annual information form. The
forward-looking information contained in this document is made as
of the date hereof and, except as required by applicable securities
law, Paramount undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a
result of new information, future events or otherwise.
Oil and Gas Measures and Definitions
This press release contains disclosures expressed as "Boe" and
"Boe/d". All oil and natural gas equivalency volumes have been
derived using the ratio of six thousand cubic feet of natural gas
to one barrel of oil. Equivalency measures may be misleading,
particularly if used in isolation. A conversion ratio of six
thousand cubic feet of natural gas to one barrel of oil is based on
an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the well
head. During the year ended December 31,
2016, the value ratio between crude oil and natural gas was
approximately 27:1. This value ratio is significantly different
from the energy equivalency ratio of 6:1. Using a 6:1 ratio would
be misleading as an indication of value. The term "Liquids" is used
to represent oil, condensate and Other NGLs. NGLs consist of
condensate and Other NGLs. The term "condensate" means pentane and
heavier hydrocarbons. "Other NGLs" means ethane, propane and
butane.
Unaudited Financial and Operational
Information
Certain financial and operational information included in this
press release for the quarter and year-ended December 31,
2016, such as sales volumes and capital expenditures are based on
estimated unaudited financial results and estimated operational
results for the quarter and year then ended, and are subject to the
same limitations as discussed under "Forward-Looking Information".
These estimated amounts may change upon the completion of audited
financial statements for the year-ended December 31,
2016, and such changes could be material. Estimated
volumes for January 2017 are based on
field estimates and are subject to change.
SOURCE Paramount Resources Ltd.