NuVista Energy Ltd. ("NuVista" or the "Company") (TSX:NVA) is pleased to announce results for the three months ended March 31, 2017 and provide an update on its future business plans. NuVista had another strong quarter of growth with continued development drilling program success. Funds flow from operations and netbacks continued to improve primarily as a result of increased condensate production and improved commodity prices.
NuVista is continuing to deliver on our accelerated 2017 drilling program. We possess a material position in the condensate-rich Wapiti Montney play which is delivering strong financial returns to shareholders now and will do so over the long term. These features become more evident with the improving results from each passing quarter. With our prudent focus on balance sheet strength, we maintain flexibility to adjust capital spending and pace of growth commensurate with the business environment while adhering to our long term growth and profitability objectives.
Significant Operating Highlights
The Bilbo development block has now reached the free-cashflow turning point, where significantly more funds from operations are generated than required for drilling to maintain full facility capacity. The average expected payback period for new wells at Bilbo is now approximately one year. The Bilbo compressor station and dehydration facility is now at capacity with production exceeding 20,000 Boe/d. We are continually encouraged with completion execution and well performance, with four high-fracture intensity ("HiFi") and one regular intensity well reaching IP30 in the first quarter. Both the IP30 condensate and total Boe/d production rates of these five wells have averaged upwards in comparison to our historical results and typecurve. The average IP30 flowrate for the condensate portion alone exceeded 1,000 Bbl/d per well, while flowing at restricted rates, more than 40% higher than the historical Bilbo average. We look forward to continued positive indications as these wells move towards IP180 and as subsequent new wells are brought onto production, providing deeper insight into the shape and base decline of the production curve associated with our HiFi wells. The drilling of our 6-well pad at northeast Bilbo is proceeding as planned, with drilling to finish and completions to begin late in the second quarter pending weather. With 10 Bilbo wells containing a total of 275 stages of fracture in various phases of drilling, completing, and being tied in, we anticipate maintaining the Bilbo facility comfortably at full capacity. We will provide more insight into the base decline, anticipated capital efficiencies and magnitude of free cashflow generation from the Bilbo development block as we shape our 2018 budget throughout the next 6 months.
The Elmworth production facility has reached a new production record of 12,500 Boe/d, including the Gold Creek production which is presently flowing through the Elmworth facility. Only one new well was brought onto production, reaching IP30 during the quarter. Initial production from this well at 12-33 is at a record level of over 2,700 Boe/d including over 550 Bbl/d of condensate. This well has manageable sand cut which permits higher than normal initial flowrates, suggesting superior long term performance. Elmworth production is expected to grow rapidly upon resumption of activity after the spring breakup period, with 9 wells with over 230 planned total stages of fracture in various phases of drilling, completing, and being tied in.
Gold Creek Block
Our three-well extended reach horizontal ("ERH") pad has been drilled successfully at Gold Creek and is waiting on completion pending weather. This pad contains wells ranging from 2,900 m to our record 3,850 m in horizontal length, and we plan to fracture up to 160 stages in these wells in total. These wells will be tied in to our Elmworth compressor and dehydration facility after completion. We plan to spud an additional well in Gold Creek later in the second quarter towards delineation of the north end of the block.
Pipestone stakeholder and development planning is proceeding well to underpin our future growth in this area which has continued to see exciting offsetting industry activity. We plan to spud our first well in Pipestone this summer.
NuVista has recently licensed the drilling of our first Lower Montney horizontal well at Bilbo. We look forward to spudding this test well late in 2017 in this new emerging layer of the Montney formation.
Commodity Risk Management
NuVista continues to benefit from the discipline of our strong hedging program during this period of volatile commodity prices. We currently possess hedges which in aggregate cover 61% of remaining 2017 projected liquids production at a floor WTI price of C$66.30/Bbl, and 64% of remaining 2017 projected gas production at a price of C$3.18/Mcf. Both of these percentage figures relate to production net of royalty volumes. Due to this and our export pipeline volumes, NuVista has less than 5% of our natural gas volumes exposed to spot AECO prices in 2017.
2017 Outlook: Annual Guidance Reaffirmed
In accordance with our 2017 plan, NuVista has recently reduced activity to three rigs drilling in the Wapiti Montney area. Depending on spring weather we anticipate reducing to two rigs at some point in the second quarter. We have significant flexibility to adjust the capital program quickly if desired, commensurate with our views on commodity pricing and the business environment. At this time we have no plans to alter the program from our original budget, and re-affirm our projected 2017 capital spending in the range of $280-300 million.
As previously stated, production through the middle quarters of 2017 is expected to be choppy due to the major 5-year-cycle planned maintenance outages at SemCAMS K3 and Keyera Simonette midstream gas plants in the second and third quarters, respectively. Although we experienced an unscheduled 3rd party plant outage in April which reduced second quarter production by approximately 2,000 Boe/d, production levels have subsequently exceeded 33,000 Boe/d in recent weeks due to strong new well production. As a result, we re-affirm our second quarter and full year 2017 guidance ranges of 26,000 to 29,000 and 28,000 - 31,000 Boe/d respectively.
Given top quality assets and a management team focused upon relentless improvement, NuVista will continue to optimize well results, improve margins, and grow our production profitably toward our 2021 goal of 60,000 Boe/d. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their guidance and support as we build an ever more valuable future for NuVista.
NuVista is an oil and natural gas company actively engaged in the exploration for, and the development and production of, oil and natural gas reserves in the Western Canadian Sedimentary Basin. Our primary focus is on the scalable and repeatable condensate-rich Montney formation in the Alberta Deep Basin (Wapiti Montney).
SOURCE: NuVista Energy Ltd.
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