Spartan Energy Corp. Announces First Quarter Financial and Operating Results, Highlighted by Record Quarterly Production of 21,455 boe/d
Spartan Energy Corp. ("Spartan" or the "Company") (TSX:SPE) is pleased to report its financial and operating results for the three months ended March 31, 2017. Selected financial and operational information is set out below and should be read in conjunction with Spartan's March 31, 2017 interim financial statements and the related management's discussion and analysis, which are available for review at www.sedar.com or on the Company's website at www.spartanenergy.ca.
FIRST QUARTER FINANCIAL AND OPERATIONAL HIGHLIGHTS
Spartan's highlights for the first quarter include:
Spartan successfully executed one of the most active drilling programs in the Company's history in the first quarter of 2017, drilling 47 (39.8 net) development wells and 1.0 net strat test well. We brought 33 (28.4 net) wells on production in the quarter, 2.0 of which were drilled in 2016. Our drilling program consisted of 19 (16.5 net) open-hole Mississippian wells, 11 (8.0 net) frac Midale wells, 2 (0.8 net) Torquay wells and 15 (14.5 net) Viking wells. Of these, 5 (3.5 net) frac Midale, 2 (0.8 net) Torquay and 9 (9.0 net) Viking wells were drilled but not on production at the end of the quarter. The 3.0 net operated frac Midale wells were completed and brought on production in late April and the Viking wells are scheduled to be brought on production prior to the end of the second quarter. Total capital expenditures (excluding acquisitions, land and seismic) of $42.3 million in the quarter represented approximately 29% of our $145 million 2017 budget, in line with our internal forecast.
As previously reported, our first quarter drilling program delivered excellent results, with both open-hole and frac Midale wells significantly exceeding our internal type curves. Open-hole Frobisher wells brought on stream during the quarter had an average IP30 rate of 168 bbls/d and frac Midale wells had an average IP30 of 368 boe/d (238 bbls/d oil), each outperforming our internal type curves by greater than 70%. This outperformance, as well as the success of well workovers and optimizations on assets acquired in 2016, delivered production of 21,455 boe/d in the quarter, over 500 boe/d above our internal forecast despite 10.6 fewer net wells being brought on production in the quarter versus budget. Production has remained strong to begin the second quarter, with field estimated April production of approximately 22,200 boe/d exceeding our internal forecast by more than 1,000 boe/d.
Spartan reduced net G&A expenses to $1.07 per boe in the first quarter, a reduction of 46% from the first quarter of 2016. This reduction is a result of Spartan's continued emphasis on cost savings, as well as the strategic acquisition of assets focused in our southeast Saskatchewan core area which provide significant production additions with minimal incremental G&A expense. Operating costs in the quarter were $17.56 per boe, down from $17.96 per boe in the fourth quarter of 2016. Spartan proactively identified a number of well workovers and optimizations in respect of assets acquired in 2016 and completed several of these projects in the first quarter. These initiatives increased operating costs but also contributed to Spartan's production outperformance in the quarter. Spartan will continue to seek to drive operating costs lower through the remainder of the year as we complete fewer workovers and continue to integrate and reduce costs in respect of our acquired assets.
Spartan delivered record adjusted funds flow from operations in the quarter of $49.0 million ($0.09 per share), representing an increase of 470% (200% per share) over the first quarter of 2016. Adjusted funds flow from operations exceeded capital expenditures (excluding acquisitions, land and seismic) by approximately $6.7 million.
As previously stated, Spartan's intention is to utilize a portion of any excess funds flow to internally fund strategic acquisitions. To that end, in the first quarter we completed the acquisition of approximately 30 boe/d, 13.2 net sections of land prospective for drilling Ratcliffe and Torquay wells and 27.3 net sections of Ratcliffe/Torquay royalty acreage in the Oungre area of southeast Saskatchewan for total consideration of approximately $6.5 million. In addition to adding 13 net conventional Ratcliffe drilling locations in our core Oungre area, this acquisition included approximately 26 net unrisked Torquay drilling locations and increased our position in the emerging unconventional Torquay play to 34.5 net sections of land with 138 net unrisked drilling locations. There are no Torquay locations are booked in our year-end reserve report and we currently intend to drill 3 net Torquay wells in the second half of 2017.
Spring break-up conditions have been relatively mild in southeast Saskatchewan to date and Spartan anticipates resuming drilling ahead of schedule in mid to late May.
In 2016, Spartan took advantage of unique opportunities caused by the commodity price environment, completing five acquisitions that added almost 11,000 boe/d of production and created a light oil focused asset base capable of delivering attractive growth rates while generating excess cash flow. Our strategy in 2017 is to execute on the growth potential of our assets while deploying our free cash flow into value additive investments such as waterflood initiatives, land purchases and tuck-in acquisitions. Our current 2017 budget is designed to deliver 11% per share production growth while generating approximately $42 million of excess cash flow (assuming a US $50 WTI oil price). Spartan successfully executed on our strategy in the first quarter, as production and cash flow exceeded internal forecasts and generated excess cash flow that was invested in the acquisition of Ratcliffe and Torquay lands in our core Oungre area.
As we proceed with the execution of our business plan during the remainder of 2017, we maintain the flexibility to adjust our capital expenditures depending on the commodity price environment and the performance of our capital program. Production early in the second quarter has continued to exceed our budget and we intend to revisit our 2017 guidance following the completion of spring break-up conditions. We will also continue to seek out opportunities to increase shareholder returns through the investment of our excess cash flow.
Spartan has assembled a high quality asset base and has continually delivered superior operational results, however we believe that in the current environment our share price at times does not reflect the underlying value of our assets. As such, Spartan intends to make an application to implement a normal course issuer bid ("NCIB") through the facilities of the Toronto Stock Exchange and alternate Canadian trading platforms, pursuant to which Spartan would have an option to repurchase its common shares for cancellation. The NCIB will provide an additional option for the reinvestment of our excess cash flow to increase long-term total shareholder returns. As with all of our expenditures, Spartan will remain vigilant in ensuring we retain flexibility and liquidity on our balance sheet. Our net debt (exclusive of finance lease obligations) at the end of the quarter was approximately $215 million, representing 1.1x annualized first quarter adjusted funds flow from operations, and we will continue to target a ratio of approximately 1.0 to 1.5 times.
Spartan continues to believe that the quality of our asset base, characterized by highly economic light oil drilling locations and a moderate decline profile, and our balance sheet flexibility leave us well positioned to deliver long term value to shareholders in a variable commodity price environment. We thank our shareholders for their support and look forward to continuing to deliver on our program through the remainder of 2017.
Spartan Energy Corp. is an oil and gas company based in Calgary, Alberta. Spartan has operations in central Alberta and in southeast Saskatchewan and maintains a multi-year inventory of oil focused horizontal drilling opportunities. Spartan’s experienced management team has a track record of profitability and value creation and is committed to creating per share growth for our investors. The company trades on the Toronto Stock Exchange under the trading symbol (SPE).
SOURCE: Spartan Energy Corp
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