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NuVista Maintains 2015 Capex, Spending 40% in H2

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   |    Tuesday,August 11,2015

NuVista Energy Ltd. has announce results for the three and six months ended June 30, 2015 and provide an update on its future business plans.

Quick Read

Production

• Production Rate : 21,448 Boe/d (72% Wapiti Montney)
• Production Guidance For Q3-2015 : 21,250 to 22,000 Boe/d
• Production Guidance For Q4-2015 : 23,250 to 24,000 Boe/d
• Full/Annual Production Guidance (2015) : 22,500 to 24,000 Boe/d (Unchanged)

Well Activity

• Wells Drilled : 3 Net Wells

Capital Expenditure (Full Year 2015 Guidance)

• Capital Expenditure : $270 to $290 million.

Extension of the Elmworth and Bilbo Development Blocks as well as further delineation in the emerging Gold Creek Development Area.

NuVista has been active with three drilling rigs running until the onset of spring breakup, and the commencement of production from our new Elmworth compressor station on time and budget.

Significant Operating Highlights

• Achieved second quarter 2015 production of 21,448 Boe/d (72% Wapiti Montney), in line with second quarter guidance despite significant TCPL/Nova outages and service reductions which were greater than original projections. Company second quarter production was 7.5% less than first quarter production due to a planned outage for maintenance at the Keyera Simonette Gas Plant (approximately -800 Boe/d) and the impact of Nova outages (approximately -750 Boe/d);
• Successfully executed a second quarter capital program of $53.8 million as compared to $107.3 million in the first quarter of 2015. 
• The Company drilled 3 (3.0 net) wells in our Wapiti Montney condensate rich resource play, completed construction and commenced production from our Elmworth block compressor station and trunk lines;
• Continued to see steady progress on improving well results, reducing costs, and enhancing capital efficiency. In this reduced commodity price environment we are seeing an emerging benefit from reducing service costs, experiencing 10-20% reductions on many drilling and completions costs since resuming operations following spring breakup;
• Completed the disposition of certain producing and non-producing assets for net proceeds of $7.4 million. The production associated with the divested assets was approximately 70 Boe/d. Year to date proceeds including minor divestitures subsequent to the second quarter totaled $13.9 million with associated production of approximately 350 Boe/d;
• Exited the second quarter of 2015 with bank borrowings of $153.4 million on a current facility of $300 million. Net debt was $169.4 million, resulting in second quarter net debt to annualized cash flow ratio of 1.4x;
• Successfully issued 11.5 million common shares and 2.5 million flow through common shares for net proceeds of approximately $107.0 million;
• Completed the annual renewal of our bank borrowing facility and maintained the facility at $300 million due to increased producing reserves offset by a reduction in the commodity price assumptions used by the lenders; and
• Achieved several new Wapiti Montney IP30 well results as shown below. These results highlight significant advancement of delineation and positive development progress from Elmworth to Bilbo, as well as material headway towards defining a typecurve for our emerging Gold Creek development area.

• A total of three new wells are currently producing which create a new emerging development area southwest of the Elmworth Development Block. One of these wells has a previously reported IP30 at 9.1 MMcf/d and 247 Bbls/d condensate
• The two latest wells (#38 and #42), with IP30 data reported in this press release, are particularly encouraging in that they have proven condensate yields are not systematically reducing to the southwest, and that drilling costs (depth) and H2S concentrations are similar to Elmworth Block. A typecurve will be established for this development area with continued monitoring of well performance and additional delineation results. The production from this area is tied-in to our Elmworth compressor station gas gathering system.

Bilbo Block Extension

• Well #40 in the table above is a significant stepout well, not only expanding the Bilbo block to the southwest to now include all NuVista Bilbo lands, but with powerful results. The IP30 for this well represents the second strongest of all NuVista Wapiti Montney wells drilled to date despite being produced under restricted rates. The well-produced almost 1,000 Bbls/d of condensate and over 2,100 Boe/d in total for the 30 day period. 
• Well #41 in the Bilbo development block continues the trend we have been observing where wells below the average raw gas typecurve of the block tend to exhibit higher condensate gas ratios (CGR), and wells below the average CGR tend to produce above the raw gas typecurve. This results in favorable total condensate production results which are similar to typecurve, in both cases with robust resulting economics.

Emerging Development Area in Gold Creek

• A total of five wells are now on production in the Gold Creek area. In addition, 2 wells with strong tests are standing waiting on tie-in. The delineation program in this area has been successful in proving that the condensate-rich Montney resource being developed in Elmworth and Bilbo extends throughout the Gold Creek area. IP30 condensate yields range from 55 to 181 Bbls/MMcf, while IP30 raw gas rates can exceed 7 MMcf/d. Two new additional IP30 rates have been achieved as reported above (Wells #37 and 39). A typecurve for the area will be established through additional drilling with continued refinement of completion design, and monitoring of existing well performance. Production from this area is also tied-in to our Elmworth compressor station gas gathering system.
• The delineation wells in the table above, which offset the Elmworth development block, continue to demonstrate the significant upside and diversity of NuVista's Wapiti landbase. The results in this area are very encouraging; however, additional wells are required prior to establishing a new reliable typecurve.

Elmworth Compressor Station Production Commenced

• During the quarter, NuVista completed construction and commenced production on our new Elmworth compressor station with a current capacity of 40 MMcf/d. The station has an ultimate raw natural gas design capacity of 80 MMcf/d with the incremental capacity being added in modular stages as needed to serve previously announced processing contracts plus potential future contracts. This operated project commenced production ahead of schedule and on budget in June of 2015. SemCAMS ULC has completed the North Wapiti pipeline loop project and has commenced the transportation of gas from the station to the SemCAMS K3 gas plant for processing. We look forward to ramping up production volumes in these new facilities through the third and fourth quarter of 2015 as the TCPL/Nova outage issues subside as planned in the fall, and as our increased firm TCPL/Nova Transportation contracts come into effect during the fourth quarter.

2015 Guidance and Outlook

• NuVista has elected to maintain our 2015 capital budget unchanged in the range of $270 to $290 million. Spending for the second half of 2015 is expected to be approximately 40% of the annual total. We remain flexible to scale spending up or down further depending on industry conditions. In this low commodity price environment we are witnessing a significant reduction in service costs. We have experienced 10-20% reductions on many drilling and completions costs since resuming operations following spring breakup, and we expect this trend to carry into 2016 as we continue to realize the efficiencies of working on a play of this scale. 
• Subsequent to the information in our press release issued Friday, August 7th, we have received an update from Alliance Pipeline on the continuing outage affecting production for many operators. The pipeline has been shut in entirely, causing the need to shut down the remainder of production from our 3-36 Bilbo compressor station. The total daily production impact to NuVista is currently a curtailment of approximately 13,000 Boe/d. Alliance currently estimates that they may be able to restore production onto the pipeline by Wednesday, August 12th. If this were to occur, then the total production impact to NuVista's third quarter volumes will be approximately 1,000 Boe/d.
• We anticipate production in the range of 21,250 to 22,000 Boe/d for the third quarter of 2015 inclusive of the assumption of an impact of -1,000 Boe/d due to the Alliance outage. For the fourth quarter of 2015, we anticipate production in the range of 23,250 to 24,000 Boe/d. The Nova/TCPL issues have also already been accounted for in this guidance, and have been imputed to impact each of the third and fourth quarters by 1,500 Boe/d, with the issues being alleviated in mid fourth quarter as our next tranche of increased firm TCPL/Nova capacity comes into effect as part of our long term growth plan.
• There is no change to our 2015 annual production guidance range of 22,500 to 24,000 Boe/d despite the significant outages in downstream takeaway capacity, and the sale of assets in 2015 with associated production of approximately 350 Boe/d. However we anticipate that as a result of the downstream issues noted, annual production will be near the lower end of the guidance range.
• We re-affirm that our current 2015 and 2016 production estimates in this commodity price environment are forecast to be sufficient to fulfill substantially all Take-or-Pay (TOP) obligations with midstream companies due to the flexible terms which we have put in place previously. Despite reduced spending in this environment, our short term growth and our long term plans for 2016 and beyond remain solid and intact.