Advantage Boosts Liquids Output, Secures New Empress Contracts In Q2

Glacier gas plant. Image: Advantage Oil & Gas

Higher than planned liquids production and strong market diversification gains helped drive Advantage Oil & Gas Ltd.’s unofficial 2019 second quarter results.

Liquids production during the quarter was 2,580 bbls/d, primarily from bringing on two net condensate-rich middle-Montney wells at east Glacier. The wells averaged 84 bbls/mmcf during initial production. June liquids production exceeded 2,700 bbls/d.

Two new condensate-rich Valhalla wells were also brought on production at restricted rates. At the end of the quarter, there were five condensate-rich wells drilled but awaiting completion at Valhalla, and eight drilled and completed wells (six of which are condensate-rich) awaiting tie-in at Glacier. The wells are expected to be brought on production in the third quarter.

Total production for the quarter was 43,000 boe/d, despite the company shutting-in an average of 5,000 boe/d of dry gas during periods of low AECO pricing. On average, 30 mmcf/d of AECO-exposed dry gas was taken off-line over the quarter. As a result, gas sold at AECO accounted for 15 per cent of total production in the second quarter.

No further drilling activity is required to achieve Advantage’s 2019 liquids growth plan. Wells drilled in the second half of 2019 will contribute to 2020 production.

Its 2019 annual production guidance range remains between 43,500 and 46,500 boe/d, including liquids production between 2,900 and 3,200 bbls/d.

All gas production forecast to be sold outside of AECO by 2021

In June, Advantage secured an additional 76 mmcf/d of firm transportation capacity to Empress on the NGTL system. Contract terms are between four and 25 years, beginning with 52 mmcf/d in November 2020 and increasing to 76 mmcf/d in 2021. This new service, combined with an existing, diverse marketing portfolio, is designed to result in effectively all of Advantage’s forecast gas production being sold into markets outside of AECO by 2021.

The company plans to continue diversifying revenue streams, including increased liquids production.

For the third quarter of 2019, Advantage has fixed price hedges on 52 per cent of its estimated natural gas production at an average price of $2.12/mcf, with 19 per cent of gas production remaining exposed to AECO, and the balance being sold into Dawn and Midwest markets.

Marketing gains were $16 million in the second quarter of 2019, including $7 million from long-term market diversification gains outside of AECO, and $9 million from hedging gains.

Capital spending in second quarter

A total of $20 million in capital spending in Q2 focused on early Wembley facilities construction, and facilities work remaining from the company’s first-quarter program including the full commissioning of the Valhalla liquids hub.

In September 2019, Advantage’s 12-25 Pipestone/Wembley well is expected to be brought on production in conjunction with the planned start-up of the new Tidewater Pipestone Gas Plant.

The company’s 2019 net capital guidance range remains between $180 million and $200 million.

Advantage expects to release its audited second quarter results after markets close on or about Aug. 1, 2019.