Market Overview

Delphi Energy Reports First Quarter 2017 Results


CALGARY, Alberta, May 10, 2017 (GLOBE NEWSWIRE) -- Delphi Energy Corp. ("Delphi" or the "Company") is pleased to announce its financial and operational results for the quarter ended March 31, 2017.

First Quarter 2017 Highlights

  • Generated adjusted funds from operations of $8.2 million and realized net earnings of $8.4 million;
  • Produced an average of 8,198 barrels of oil equivalent per day ("boe/d") weighted 40 percent to field condensate and natural gas liquids;
  • Increased production from the Bigstone Montney by 14 percent to 7,050 boe/d compared to 6,196 boe/d in the fourth quarter of 2016, as a result of a 33 percent or 773 barrels per day ("bbls/d") increase in field condensate and natural gas liquids ("NGL") production while natural gas volumes remained relatively flat;
  • Increased Montney field condensate and NGL yields to 130 barrels per million cubic feet ("bbls/mmcf") in the first quarter of 2017 compared to 99 bbls/mmcf in the fourth quarter of 2016;
  • Montney field and plant condensate yield averaged 91 bbls/mmcf or 70 percent of the total 130 bbls/mmcf of Montney liquids yield;
  • Generated operating netback of $17.07 per boe before risk management contracts, up 150 percent from $6.82 for the same period in 2016;
  • Successfully drilled four gross (2.6 net) wells as part of the Company's capital program and completed, tied-in and brought on production four gross (2.5 net) Montney wells in Bigstone;
  • Continued the two rig drilling program through spring break up that will result in an inventory of five gross (3.2 net) wells drilled and ready for completion operations as ground conditions improve;
  • Commenced the expansion of the existing Montney field dehydration and compression capacity at East and South Bigstone.


Operational Highlights

    Three Months Ended March 31
Production       2017 2016 % Change
Field condensate (bbls/d)       1,933 1,700 14  
Natural gas liquids (bbls/d)       1,302 1,335 (2 )
Crude oil (bbls/d)       7 5 40  
Total crude oil and natural gas liquids (bbls/d)     3,242 3,040 7  
Natural gas (mcf/d)       29,737 32,127 (7 )
Total (boe/d)       8,198 8,395 (2 )

Financial Highlights  ($ thousands except per unit amounts)
    Three Months Ended March 31
        2017   2016   % Change
Crude oil and natural gas sales       25,671   17,316   48  
  Realized sales price per boe       34.17   30.47   12  
Funds from operations       8,166   8,190   -  
  Per boe       11.08   10.72   3  
  Per share – Basic and diluted       0.05   0.05   -  
Net earnings       8,352   5,259   59  
  Per boe       11.32   6.89   64  
  Per share – Basic and diluted       0.05   0.03   67  
Capital invested       (30,297 ) 16,658   82  
Disposition of properties       (46 ) (4,583 ) (99 )
Net capital invested       30,251   12,075   151  

    March 31, 2017 December 31, 2016 % Change
Net debt (1) 108,367 85,945 26
Total assets   325,607 303,625 7
Shares outstanding (000's)        
  Basic   156,898 155,994 1
  Diluted(2)   182,915 180,752 1

(1)  Defined as the sum of bank debt and Senior Secured Notes plus (minus) the working capital deficit (surplus) excluding the current portion of the fair value of the financial instruments.

(2) Represents the full dilution of all outstanding options and warrants.


Delphi continues to execute the accelerated development plan of its liquids-rich Montney property ("Bigstone Montney") located at Bigstone in northwest Alberta, with two drilling rigs continuing to operate through spring break up on separate pad locations. The Company was able to execute on its entire planned first quarter capital program, and will be in a position to complete five (3.2 net) additional Montney wells as wet weather and spring break up conditions subside.

Production in the first quarter of 2017 averaged 8,198 boe/d, weighted 40 percent to field condensate and natural gas liquids, compared to 8,395 boe/d during the first quarter of 2016. The Bigstone Montney production represented 86 percent or 7,050 boe/d of the Company's corporate production during the first quarter of 2017. As a result of the successful drilling program, four gross (2.5 net) Montney wells were brought on-stream during the quarter, increasing corporate production during April 2017 to average approximately 10,000 boe/d. Current production capability remains at the upper end of our 2017 annual production guidance of 9,000 to 9,500 boe/d.

The 14 percent or 854 boe/d increase in Bigstone Montney production to 7,050 boe/d in the first quarter of 2017 compared to the fourth quarter of 2016 was largely a result of a 33 percent or 773 bbls/d increase in field condensate and natural gas liquids production. Montney field and plant condensate yields averaged 91 bbls/mmcf of the total 130 bbls/mmcf liquids yield. Increased condensate yields are a result of continued frac innovations and delineation of the Bigstone Montney westward with the new wells being drilled.

The Company's successful operating margin growth is a result of the high quality Bigstone Montney asset base, majority ownership in strategic infrastructure, firm take away capacity and proven expertise in developing this liquids-rich asset. The Company generated an operating netback of $17.07 per boe before risk management contracts, up 150 percent from $6.82 per boe during the comparative quarter of 2016.

During the first quarter of 2017, the Company invested gross field capital of $30.3 million. Net of carry capital costs of $9.1 million associated with the Partner Transaction already accounted for at December 31, 2016, the program was executed on budget. Delphi spent 78 percent of field capital on drilling, completing and equipping four gross (2.5 net) Montney wells at Bigstone. A pipeline loop was installed to the 7-11 facility to handle increased volumes being produced from the new wells that are extending the Montney development westward. In addition, the Company incurred costs to secure a 20 mmcf/d amine processing package and compressor for its amine project scheduled for commissioning in the first quarter of 2018.

Drilling activity on the Company's Bigstone Montney asset continues with operations largely complete on the 14-09-60-23W5 ("14-09") well (62 percent working interest).  The 14-09 horizontal Montney well was drilled from spud to a total depth of 5,908 metres in a Company record 25 days.  Innovations to the drilling program have resulted in decreased drilling times, on this most recent well, by 14 percent compared to the average well in 2016.  These innovations will allow Delphi to absorb service cost inflation and maintain targeted drilling costs.  A 40 stage completion liner was installed in the 2,863 metre horizontal lateral.  Drilling operations continue in the horizontal lateral at the 16-18-59-23W5 ("16-18") well (65 percent working interest) and are expected to be finished in the next two weeks.  The 14-09 and 16-18 wells are both the second wells drilled from each of their respective wellsite pads.  Completion operations on these two pads in addition to the 15-09-60-23W5 well (62 percent working interest) are scheduled to commence after spring break up utilizing the Company's third and fourth generation frac designs.

Adjusted funds from operations in the first quarter of 2017 were $8.2 million or $0.05 per basic and diluted share, unchanged from the comparative quarter of 2016. Realized cash netbacks during the first quarter of 2017 were $11.08 per boe, including a $(0.62) per boe loss on risk management contracts.  This compares to $10.72 per boe, including a $7.80 per boe realized gain on risk management contracts during the first quarter of 2016. Cash costs were higher in the first quarter due to a combination of non-recurring crown royalty, operating and general administrative charges, as well as higher crown royalty rates as a result of higher commodity prices, and additional pro-rated operating costs for the scheduled SemCAMS K3 processing plant turnaround in the second quarter of 2017.

At March 31, 2017, the Company had bank debt of $32.0 million and a working capital deficit of $23.1 million. Including the Senior Secured Notes, the Company had total net debt of $108.4 million. As at March 31, 2017, Delphi had $42.2 million (net of outstanding letters of credit) available to be drawn on its $80 million senior credit facility.

Risk Management

The Company has approximately 22 million cubic feet per day ("mmcf/d"), or 65% of its remainder of 2017 forecast natural gas production hedged at an average price of CDN$4.20 per million British thermal units ("mmbtu") and approximately 900 bbls/d of condensate hedged at an average WTI price of CDN$66.67 per barrel. Delphi has mitigated the persistent widening of the AECO and Station 2 basis differentials by contracting most of its gas into the Chicago market where pricing has materially outperformed local western Canada pricing, even with the incremental transportation costs.

Natural Gas Q2 – Q4/17   2018     2019  
Percent Hedged *   65 %   54 %   21 %
Hedge Price (CDN $/mmbtu) $ 4.20   $ 3.92   $ 3.89  

Crude Oil Q2 – Q4/17   2018  
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