Copyright of the Daily Oil Bulletin 2017
Several Operators Shift Capex From Q1 2018 To Q4 2017
Some producers who updated capital plans during the third quarter reporting season have added to 2017 capex by shifting planned spending from the first quarter of 2018 to the fourth quarter of 2017.
In terms of overall figures for 2017, 65 companies tracked by the DOB now have $30.73 billion in capital plans, up from original expectations of $28.54 billion. In terms of early capital guidance for 2018, $15.33 billion is being planned by 19 companies. One producer—Whitecap Resources Inc. — has already announced a hike in capital spending to $430-$450 million post the Weyburn acquisition from $370-$390 million.
Producers including Kelt Exploration Ltd., Tamarack Valley Energy Ltd. and Bonterra Energy Corp. all announced plans to accelerate capital to this year to take advantage of more favourable service costs or availability issues.
Bonterra will drill five (4.5 net) additional wells in November and December of this year so as to mitigate against service company availability issues anticipated during the first quarter of 2018.
As such, the company anticipates its 2017 capital spending to be about $73 million to accommodate these wells originally scheduled for next year’s budget. Crews will complete and tie-in the additional wells before year-end 2017, which will positively impact Bonterra’s exit production rate.
Management anticipates production levels of approximately 13,000 to 13,200 boe/d through Q4, which should result in annual production of roughly 12,900 boe/d.
Kelt's board of directors increased its 2017 capital expenditures budget to $226 million ($115 million net after dispositions), up 12 per cent from its previous budget of $202 million ($91 million net after dispositions). The increase will allow the company to move certain drilling projects, originally planned for the first quarter of 2018, forward to the fourth quarter of 2017, giving Kelt the ability to take advantage of favourable service costs that could potentially be higher in the first quarter of 2018.
The increased budget includes $15.6 million of development drilling and completion capital expenditures that the company has committed to incur prior to Dec. 31, 2017, pursuant to a CDE flow-through private placement.
Tamarack intends to accelerate $10-$15 million of first quarter 2018 capital into its fourth quarter program, which when combined with the company’s tuck-in acquisitions, will result in an increased full-year 2017 capital program of $195-$198 million.
“We’re going to drill a few wells at the end of the quarter. We probably won’t frac them—we’ll probably frac them early in the new year and we’ll get the cost down per well. But I think more importantly that gives us a lot of production momentum into 2018,” Brian Schmidt, president and CEO, said in a recent interview.
Crew Energy Inc. anticipates that challenges experienced in the first quarter of 2017 related to services procurement and cost escalation will be encountered again in the first quarter of 2018.
“To mitigate these challenges and take advantage of the favourable operating environment, Crew has elected to proceed with certain planned first quarter 2018 activity in the fourth quarter of 2017 resulting in an increase in our 2017 exploration and development capital budget to $235 million,” the company said.
“This $35 million expansion to the capital program is forecasted to approximate fourth quarter funds from operations and will afford optimized capital and operating efficiencies, allowing for maximum flexibility to achieve our strategic goal of having physical connection to the three major pipelines in [northeast B.C.] and at the same time provide a range of growth options for 2018 and beyond as commodity prices allow.”
Factors for increased 2017 spending include favourable weather conditions which allowed the company to complete more projects in Q3 in a lower price cycle, an increased focus on condensate-rich wells that require higher sand loading, and ongoing infrastructure projects including the West Septimus facility expansion, the West Septimus to Saturn pipeline project and the installation of a pipeline to debottleneck the gathering system in the Septimus area.
Capital expenditures for Paramount Resources Ltd. in the third quarter of 2017 were $122 million. Paramount estimates approximately $130 million of capital will be spent in the fourth quarter, bringing total projected annual spending for 2017 to approximately $510 million, excluding land and property acquisitions.
Approximately 50 per cent of the $130 million of capital expenditures the company expects to incur in the fourth quarter of 2017 are related to the planned 2018 development program and include lease construction, drilling operations and ordering of long-lead items.
Yangarra Resources Ltd. has increased the syndicated senior credit facility to $120 million.
The banking syndicate is led by Alberta Treasury Branches and includes Canadian Imperial Bank of Commerce and National Bank of Canada.
The facility is now comprised of a $110 million extendible revolving term credit facility and a $10 million operating facility. All other commercial terms remain the same with the next borrowing base review scheduled for May 31, 2018.
The increased facility allows Yangarra to shift capital spending, as necessary, from Q1 2018 into Q4 2017 to efficiently take advantage of drilling and completion services.