CALGARY, Jan. 7, 2019 /CNW/ - Yangarra Resources
Ltd. ("Yangarra" or the "Company") (TSX:YGR) provides an
operations update and outlines 2019 guidance.
Operations Update
Production for 2018 averaged approximately 9,400 boe/d which is
a 64% increase on a production per share basis when compared to
2017, with fourth quarter 2018 production estimated at 12,200
boe/d.
The Company drilled 36 horizontal (HZ) Cardium wells during
2018. Due to wide Edmonton par
differentials in the fourth quarter, six of those wells were not
completed ("DUCs") and three additional wells that were completed
in the fourth quarter of 2018 were not put on production until
January 2019 when differentials
improved significantly. In addition, seven wells that were
shut in by Yangarra during 2018, due to excessively high
third-party processing fees, will be placed on stream in
January 2019 through Company owned
infrastructure.
Yangarra has now drilled 60 HZ wells into the bioturbated
section of the Cardium zone. Well results continue to improve as
the Company refines the drilling and completions processes. Wells
#41-50 recently achieved 30 days of initial production ("IP-30")
data and have the best results to date with average operating day
IP-30s of 752 boe/d, which is 55% better than the average operating
day IP-30 from wells #1-40.
Yangarra further accelerated its infrastructure build-out in the
fourth quarter improving its operating cost advantage from prior
years with most of Yangarra's gas gathered and compressed through
Company owned infrastructure rather than third party facilities.
Additional trucks were added to the fluid hauling fleet, largely
eliminating higher priced third-party trucking. The pressure
pumping and crew truck division was expanded during the year, again
reducing the use of higher priced third-party providers. As
industry conditions deteriorated in the second half of 2018,
Yangarra reduced drilling and completion costs by replacing those
service providers with more cost-effective options.
Several key initiatives, including, adoption of new technology
for operations, advances in communications, SCADA, and better
software implementation for production accounting have resulted in
Yangarra being able to manage much higher levels of production
while maintaining static head count in the Calgary office. Yangarra's strategy of
geographic and geological concentration in the Central Alberta
Cardium allows the Company to maintain a very low G&A burden
while leading the industry in drilling and completion operations,
all while maintaining best in class operating costs.
The Medicine Hat shallow gas
field was shut-in during 2018 due to the poor economics of dry
natural gas. The 53 wells in the field were abandoned and the
surplus equipment repurposed into Central
Alberta operations. The Company expects payout for the
abandonment operations in less than two years with savings on
property taxes, lease rentals and recovery of equipment.
The Company added 35 gross sections of Cardium land in
Central Alberta during 2018,
accelerating land purchases into the fourth quarter as historically
wide Edmonton par differentials
forced further capital reductions by industry. Yangarra now has 155
sections in the halo Cardium in Central
Alberta. This land base provides more than 15 years of
drilling inventory utilizing two rigs year-round. During 2018,
Yangarra added five future locations for every location drilled
during the year at reasonable land metrics which position's the
Company to maintain leading full-cycle rates of return.
Capital Budget & Guidance
The Company limited hedging for 2019 and adopted a strategy that
will adjust the drilling program to match cashflow to capital
spending, completions will be halted completely at WTI prices below
USD$45/bbl and drilling will be
stopped at WTI prices below USD$40/bbl. Yangarra does not have any take or
pay obligations that force the Company to continue operations that
are not economic.
The Company's Board of Directors has approved an initial
capital budget of $100 million for
2019, which includes the drilling of 24 wells. The budget is
expected to increase the Company's annual 2019 production to 13,000
– 14,000 boe/d with cash flow from operations estimated at
$95 to $105
million.
The budget assumes an average price of CDN$65.00/bbl for Edmonton par and an average price of
CDN$1.75/GJ for AECO natural gas.
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 2018,
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.
All reference to $ (funds) are in Canadian dollars.
SOURCE Yangarra Resources Ltd.