Trilogy Energy Corp. (TSX:TET) ("Trilogy") is pleased to announce its financial and operating results for the quarter-ended March 31, 2017.
Financial and Operating Highlights
Operations Update for the First Quarter 2017
Trilogy's first quarter 2017 production was 25,133 Boe/d (38 percent oil and natural gas liquids), an increase of 11 percent from fourth quarter 2016 production of 22,565 Boe/d (32 percent oil and natural gas liquids). The increase in first quarter production reflects the impact of new horizontal Montney and Duvernay wells drilled and completed in the fourth quarter 2016 and first quarter 2017. Three wells drilled late in the fourth quarter of 2016 were fracture stimulated in January and on production in February 2017. Trilogy drilled 6 horizontal Montney oil wells during the first quarter, of which 3 were completed and on production in late March.
Funds flow from operations was $36.4 million and net capital expenditures were $41.0 million for the first quarter. Second quarter capital spending is estimated to be between $20-$25 million, depending on weather and ground conditions during the quarter.
Subsequent to the end of the first quarter, Trilogy announced that it has agreed to sell certain assets located in the Grande Prairie area of Alberta for cash consideration of $50 Million (before customary adjustments). The transaction is conditional upon the purchaser's receipt of the Alberta Energy Regulator ("AER") approvals for the transfer of the wells, pipelines and facilities. The assets being sold consist of approximately 44,427 net acres of mineral rights (including approximately 11,500 net acres of Montney/Doig mineral rights) in the Valhalla area along with current net production of approximately 1,100 Boe/d (16 percent oil and natural gas liquids) net to Trilogy, estimated Total Proved Developed Producing reserves of approximately 1,800 MBoe and Total Proved plus Probable reserves of approximately 5,500 MBoe, each as at December 31, 2016, net of Q1 2017 production.
The sale is effective May 1, 2017 and is expected to be completed before the end of May 2017, provided the purchaser receives the above mentioned AER approvals. Proceeds from the sale will be applied to reduce Trilogy's indebtedness under its revolving credit facility.
Montney Oil Pool
The shift from hydrocarbon-based to water-based fracture stimulations in early 2016 reduced completion costs and allowed the Company to economically increase proppant volume and decrease stage spacing, thereby better distributing proppant along the length of the lateral wellbore. Trilogy varied sand volumes from 10 tonnes per stage in the Company's original horizontal Montney oil wells to as much as 20 tonnes per stage in recent wells. At the same time, stage spacing was reduced from 75 meters per stage in the original wells to 50 to 65 meters in recent wells. In addition, completion pump rates have increased substantially, resulting in increased fracture complexity. All of these factors combined have contributed to higher initial well productivity as compared to the Company's first generation Montney oil wells.
Trilogy has allocated approximately $60 million towards further development of its Montney oil pool in 2017. The majority of the capital will be allocated to drill 15 wells and complete 18 wells in the pool, incorporating the efficiencies from the Company's 2016 Montney drilling and completion program. To date, 6 wells have been drilled in the first quarter with plans to drill at least 9 additional horizontal wells through the second half of 2017. Trilogy also intends to allocate capital to a water disposal project, an enhanced recovery gas reinjection pilot project and to the construction of pad sites and pipelines intended for future development of the pool.
Presley Montney Gas Development
Trilogy's 2017 budget provided approximately $30 million to develop 6 (6.0 net) wells in the Presley Montney liquids-rich gas pool. Trilogy drilled 3 (3.0 net) extended length horizontal wells (each approximately 2 miles in lateral length) into the pool in the first quarter and is currently drilling a 3-well pad (1 mile laterals) through the second quarter. One of the extended reach lateral wells was fracture stimulated in April and is expected to be on production in early May. The remaining 2 wells are expected to be completed in mid-May and on production in mid-June once break up is over. The 3-well pad currently being drilled is expected to be completed and tied in during the third quarter. Trilogy plans to continue to prepare drilling locations and evaluate infrastructure alternatives for the Montney gas pool as well as operated Duvernay production in the Presley area, so as to be prepared for full field development when commodity prices increase.
Trilogy did not have any Duvernay spending in the first quarter but is preparing to build on the success of the Company's recent wells and will be monitoring industry drilling, completion and production results adjacent to its Duvernay acreage. The 2 horizontal Duvernay wells Trilogy drilled in 2016 were drilled and completed on single well pads at a cost of approximately $10.2 million per well. Trilogy expects to realize significant reduction in costs relative to previous Duvernay wells once multi-well pad development begins.
Trilogy has allocated approximately $35 million towards Duvernay projects in the second half of 2017. The decision to execute this portion of the capital budget will be made later in the year.
Trilogy may consider monetizing a portion of its Duvernay acreage to help fund the development of the remaining Duvernay acreage. This could potentially include a joint venture arrangement, external sources of funding to accelerate the commercial development of some of this acreage or a sale of a portion of the Company's Duvernay acreage. Trilogy has processing capacity in place to produce volumes from its Duvernay development plan for the initial two to three year development period; however, to produce Trilogy's longer term Duvernay development plan, Trilogy will require access to additional operated and non-operated natural gas processing and NGL handling infrastructure.
Trilogy plans to execute a 2017 capital spending budget that is within anticipated 2017 funds flow from operations based on Trilogy's 2017 production expectations and forecasted pricing for the year. The level of capital spending in the second half of the year will depend on commodity prices and will primarily impact the Duvernay projects later in 2017.
Given the encouraging production results to date, which is expected to offset the impact of the aforementioned Grande Prairie disposition, Trilogy continues to reaffirm its 2017 annual guidance as follows:
Trilogy's financial and operating results for the first quarter of 2017, including Management's Discussion and Analysis and the Company's Unaudited Interim Consolidated Financial Statements and related Notes as at and for the quarter-ended March 31, 2017 can be obtained at http://media3.marketwire.com/docs/Q1-2017REPORT.pdf. These reports will also be made available through Trilogy's website at www.trilogyenergy.com and SEDAR at www.sedar.com.
Trilogy is a petroleum and natural gas-focused Canadian energy corporation that actively develops, produces and sells natural gas, crude oil and natural gas liquids. Trilogy's geographically concentrated assets are primarily, high working interest properties that provide abundant low-risk infill drilling opportunities and good access to infrastructure and processing facilities, many of which are operated and controlled by Trilogy. Trilogy's common shares are listed on the Toronto Stock Exchange under the symbol "TET".
SOURCE: Trilogy Energy Corp.
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