Market Overview

Paramount Resources Ltd. Reports First Quarter 2018 Results

Share:

Paramount Resources Ltd. Reports First Quarter 2018 Results

Canada NewsWire

CALGARY, May 9, 2018 /CNW/ -

OIL AND GAS OPERATIONS

  • Paramount's sales volumes averaged 92,203 Boe/d in the first quarter of 2018 compared to 16,163 Boe/d in the first quarter of 2017. Third-party outages, due to unscheduled downtime and extremely cold weather conditions, impacted production by approximately 6,000 Boe/d in the quarter.

  • Montney wells at Karr are maintaining higher condensate rates for longer periods after initial start-up. To maximize cash flows, the Company is prioritizing condensate production and fully utilizing liquids handling capacity, which resulted in natural gas production at Karr being curtailed by approximately 2,400 Boe/d in the first quarter of 2018.

  • Liquids sales volumes increased to 33,689 Bbl/d in the first quarter of 2018 compared to 7,603 Bbl/d in the first quarter of 2017. Liquids revenue was $183.9 million, 68 percent of total revenue.

  • Adjusted funds flow was $97.6 million in the first quarter of 2018 compared to $28.0 million in the first quarter of 2017.

  • In the Grande Prairie Region, activities focused on Paramount's Montney developments, with drilling operations carried out at two five-well pads at Karr and an eleven-well pad at Wapiti.

  • In the Kaybob Region, development activities focused on drilling operations for a four-well Smoky Duvernay pad, a five-well South Duvernay pad and six Montney Oil wells drilled on two pads.

  • In the Central Alberta and Other Region, a new Duvernay well was drilled at Willesden Green.

  • Exploration and development capital for the first quarter of 2018 totaled $131.6 million, primarily related to drilling and completion programs and facilities projects in the Grande Prairie and Kaybob Regions.

  • First quarter 2018 capital spending included $42.1 million related to 2019 projects at Wapiti and Karr. The Wapiti growth play will add material production and cash flows in mid-2019.

  • As a result of liquids handling constraints at Karr, delays in the anticipated startup of new Kaybob wells, the deferral of new production at the non-operated Birch property and unplanned third-party outages in the first quarter, the Company expects sales volumes to average approximately 92,500 Boe/d (37 percent liquids) in 2018.

  • Sales volumes are anticipated to be three to five percent lower in the second and third quarters of 2018 compared to the first quarter, primarily due to processing facility outages. Sales volumes will increase in the fourth quarter as facility constraints are alleviated and new wells are brought on production.
  • The Company's 2018 capital budget remains unchanged at $600 million.

CORPORATE

  • In April 2018, the Company redeemed all $300 million principal amount of its 7.25% senior unsecured notes. The redemption was funded from the Company's expanded $1.2 billion bank credit facility.

  • In December 2017, Paramount implemented a normal course issuer bid. To date, the Company has purchased and cancelled 1,454,100 common shares under the program at a total cost of $27.4 million.

  • The Company has commenced a disposition process for its fee simple and royalty lands in southern Alberta and expects the disposition to be completed in the third quarter of 2018. The Company continues to pursue other non-core dispositions.

REVIEW OF OPERATIONS

Paramount's sales volumes averaged 92,203 Boe/d in the first quarter of 2018 compared to 16,163 Boe/d in the first quarter of 2017, with liquids volumes increasing to 33,689 Bbl/d compared to 7,603 Bbl/d in the same period in 2017. Production in the quarter was impacted by liquids production management at Karr and production disruptions due to third-party outages resulting from unscheduled downtime and extremely cold weather conditions.

Paramount's netback was $134.5 million in the first quarter of 2018, over four times the first quarter 2017 netback of $31.7 million. Adjusted funds flow was $97.6 million compared to $28.0 million in the same quarter in 2017.

The Company's cost structure is comparable to other liquids-focused producers in western Canada. As a liquids-focused producer, Paramount's operating costs include liquids handling expenses that are not applicable to dry natural gas production. Operating costs were $11.12 per Boe in the first quarter due to maintenance work and lower sales volumes. The Company is continuing to streamline its field operations, including consolidating field offices, optimizing field staff and contract operators and rationalizing software and service contracts.

Exploration and development capital for the first quarter of 2018 totaled $131.6 million, primarily related to the 2018 drilling and completion programs and facilities projects in the Grande Prairie and Kaybob Regions. Approximately $42.1 million or 32 percent of first quarter capital spending was related to projects at Wapiti and Karr that will add new production in 2019.

GRANDE PRAIRIE REGION

Sales volumes in the Grande Prairie Region in the first quarter of 2018 averaged 28,398 Boe/d, 51 percent of which were liquids. In addition to a 2,400 Boe/d curtailment of natural gas volumes at Karr to maximize condensate production, unplanned third-party facility and pipeline outages reduced Grande Prairie Region sales volumes by approximately 2,000 Boe/d in the first quarter.

Exploration and development capital in the Grande Prairie Region was $74.3 million in the first quarter of 2018. Development activities focused on drilling operations at two five-well pads at Karr (the 1-2 and 4-24 pads) and an eleven-well pad at Wapiti (the 9-3 pad). First quarter capital expenditures include approximately $11 million of additional costs as a result of difficulties encountered with a well completion at Karr.

Karr

Condensate to gas ratios, and wellhead condensate rates, from Montney wells at Karr continue to exceed expectations. New wells are maintaining higher condensate rates for longer periods after initial start-up, which resulted in higher than expected per-well condensate production in the first quarter of 2018. To maximize cash flows, the Company is prioritizing condensate production at the Company's 6-18 dehydration and compression facility (the ʺ6-18 Facilityʺ), fully utilizing liquids handling capacity and managing natural gas production by applying a low drawdown (choke management) to the wellhead. This resulted in the curtailment of approximately 2,400 Boe/d of natural gas production in the first quarter of 2018.

Wells from the 2016/2017 capital program are being produced at restricted rates and in some cases shut-in as the Company pursues a number of liquids handling debottlenecking initiatives. Production volumes from the existing production base and the new 1-2 pad, which is scheduled to be brought on production in the third quarter, are expected to continue to fully utilize Karr area liquids handling capacity for the remainder of the year. As a result, the Company is deferring the completion and startup of the five wells on the new 4-24 pad until 2019.

Paramount is adding liquids handling expansion projects to the 2018 Karr capital program to debottleneck liquids processes at the 6-18 Facility and add incremental liquids gathering capacity. This will allow additional liquids volumes to be delivered to the downstream third-party facility (the ʺSimonette Facilityʺ) that processes Company production volumes. The Company is also installing additional liquids loading equipment at the 6-18 Facility and at pad sites upstream to increase trucking capacity. These projects are expected to be completed by the end of 2018 at a cost of approximately $10 million.

The Company has also added a water disposal well and related facilities to the 2018 Karr capital program, at a cost of approximately $9 million. This project will provide operating cost savings by reducing water trucking and disposal costs.

The expansion of the 6-18 Facility from 80 MMcf/d to 100 MMcf/d is proceeding on schedule. The compression and dehydration equipment for the expansion has been installed and the expansion will be tied in and commissioned as the liquids handling debottlenecking projects are completed and the incremental natural gas capacity is required. This incremental natural gas capacity, together with the Company's liquids handling enhancements, will enable the Company to further increase overall production in 2019.

Production at Karr was shut-in for approximately three days at the beginning of May 2018 for the tie-in of a condensate stabilizer expansion at the Simonette Facility.   

To support growth at Karr, the Company has sanctioned the construction of a Company-owned processing facility to be built alongside the current 6-18 dehydration and compression facility. The project will add 50 MMcf/d of natural gas processing capacity and 30,000 Bbl/d of condensate stabilization capacity. This new processing facility is scheduled to be commissioned in the second half of 2020.

Sales volumes and netbacks at Karr are summarized as follows:

Karr



Q1 2018

Q1 2017

Change %

Sales volumes






Natural gas (MMcf/d)


63.1

23.9

164


Condensate and oil (Bbl/d)


11,399

5,231

118


Other NGLs (Bbl/d)


1,192

428

179


Total (Boe/d)


23,105

9,642

140


% liquids


54%

59%


Netback


$/Boe

($ millions)

$/Boe

($ millions)

Change %

($ millions)


Petroleum and natural gas sales


43.97

91.4

44.19

38.3

139


Royalties


(1.27)

(2.6)

(1.45)

(1.3)

100


Operating expense


(8.19)

(17.0)

(8.55)

(7.4)

130


Transportation and NGLs processing


(4.17)

(8.7)

(4.44)

(3.8)

View Comments and Join the Discussion!
 
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com