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Crew Energy Brings Down West Septimus Well Costs

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   |    Thursday,July 23,2015

Crew Energy has announced an operational update following the BC Montney asset swap.

Operations Update

Production

• Crew's second quarter production exceeded the upper end of our budget averaging approximately 17,600 boe per day based on field estimates. Production for the quarter was impacted by the planned shut-down of the McMahon gas processing facility which took approximately 2,500 boe per day of non-Montney gas production off-line for 25 days. Despite this down time we were able to exceed our budgeted volumes due to better than expected performance from new West Septimus wells that were completed and tested during the quarter. Crew continues to benefit significantly from the dual connectivity of our Septimus gas plant which can simultaneously access both the Spectra and Alliance pipeline systems as constrained natural gas take-away capacity has continued to impact prices and producer volumes in the northeast BC and northwest Alberta region. This dual connectivity has enabled Crew to capture the best available pricing option for our NE BC gas. Over the last three quarters, Crew has realized a net benefit of approximately $6.8 million from term fixed differential sales and a net benefit of over $2 million due to our ability to divert gas to multiple pipelines.

Drilling and Completions

• Crew remains in a strong position, with a current inventory of 30 Montney wells drilled, 22 of which are in various stages of completion and tie-in. 
• strong>We currently have two drilling rigs working with one drilling the fourth well on a five well pad at West Septimus and the other drilling the third well of a five well pad at Septimus. At West Septimus the drilling results have progressively improved with the latest subset of wells exhibiting significantly higher than forecasted gas flow rates, condensate rates and pressures. 
• On the most recent six well pad in West Septimus, the first three wells drilled have tested significantly higher than our initial wells at West Septimus and demonstrated an average per well rate of 7.8 mmcf per day, 586 bbls per day of condensate (75/bbls per mmcf) with an average flowing casing pressure of 1,740 psi following a five day flow period. Our previous West Septimus wells were assigned average proved plus probable reserves in our year end 2014 independent reserve evaluation of 2.8 Bcf of natural gas and 83 mbbls of natural gas liquids (59% condensate), which was based on an initial production rate of 2.5 mmcf per day with 17 bbls per mmcf of condensate. We expect to communicate flow test data from all six wells on this pad by the release of our second quarter results on August 6th, 2015. Given these recent well results we believe there is significant upside potential to outperform the ultimate recoveries assigned at West Septimus in the 2014 reserve evaluation.
• strong>Drilling and completion optimization and an improving cost structure have helped reduce per well costs to between $4.0 to $4.5 million, which when combined with higher gas and condensate rates has resulted in much improved capital efficiencies at current commodity prices compared to our historical Septimus wells.

Facilities and Infrastructure

• Throughout the second quarter Crew has remained active finalizing the construction of our new 60 mmcf per day West Septimus processing facility, which remains on schedule with final testing to be completed in July followed by commissioning in the first half of August 2015. With our highly successful drilling program at West Septimus Crew is evaluating the merits of expanding this facility to 120 mmcf per day. The Company has also begun the installation of the new condensate pipeline connection at our Septimus facility which is planned for completion concurrent with the commissioning of the new West Septimus facility. This small but critical infrastructure project will eliminate the trucking of condensate from the Septimus area resulting in an anticipated increase in the area's condensate netbacks by $3 to $4 per barrel.

Guidance

• Crew's 2015 exploration and development capital expenditure budget remains at $185 million, which is net of the recovery of 50% of the cost of the West Septimus plant construction from Crew's infrastructure partner. Our annual average production guidance remains at 20,000 to 22,000 boe per day. Our year-end exit production forecast remains at 24,000 to 25,000 boe per day, which is approximately 29% higher than our first quarter 2015 volumes, as a result of an estimated 6,000 boe per day of incremental production coming on-stream with the new facility being commissioned in the third quarter. The Company looks forward to reporting our second quarter financial and operating results after market close on Thursday, August 6, 2015.