Quarterly / Earnings Reports | Third Quarter (3Q) Update

Granite Oil Corp. Details Q3 2019 Results

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   |    Wednesday,November 06,2019

Granite Oil Corp. reports Q3 2019 results.

Highlights

Third-Quarter Highlights

Highlights from Granite’s News Release dated October 17, 2019, are reiterated below. For additional details, readers are encouraged to reference that News Release, which is available on the Company’s website.

Granite continued its focus on debt reduction during the third quarter of 2019, further decreasing net debt by $1.7 million to $41.1 million at the end of the quarter. The Company has successfully reduced net debt by approximately 14% over the first nine months of 2019, and is on-track to reduce it by a further ~4% by year end.

Capital expenditures for the quarter were $1.5 million, which funded the recompletion test described below, well workovers, and facility projects designed to reduce future operating costs. Estimated production was approximately 1,575 boe/d, which is principally the result of the Company electing to keep over 250 bbl/d of oil production from five re-pressurized wells originally slated to be brought on-stream during the quarter shut-in for a future recompletion program. Severe weather in Southern Alberta at the end of September prevented the Company from shipping its oil inventory for the final three days of the quarter. This impacted oil sales, which averaged approximately 1,511 bbl/d, and associated revenue for the quarter. Accordingly, these sales volumes and revenues were realized in October and reflected in the Company’s fourth-quarter results.

Granite continues to test new ways to improve both the efficiency at which it adds oil production and the ultimate, long-term oil recovery of its large, 100%-owned, early-life-cycle Bakken oil pool through its gas injection enhanced recovery scheme (‘EOR’) and other complementary strategies.

During the third quarter, Granite tested a recompletion program on a producing well originally completed in 2015 with average frac interval spacing of approximately 80 meters. The initial test was conducted on a well in the gas flood area which was under pressured, allowing for more accurate quantification of results, and has increased production by approximately three-times relative to the pre-frac production rate over an extended testing period.

The Company has identified 15 additional wells as recompletion candidates, with up to 12,000 meters of potential unstimulated lateral to be fracked. Of significant, compounding benefit is the Company’s ability to utilize its gas injection EOR scheme to increase reservoir pressure prior to future operations in order to enhance production rates following the recompletions. Accordingly, in anticipation of the test results, the Company elected to keep five wells shut-in in a re-pressurized area during the third quarter for a future recompletions program.

The Company will remain focused on its debt-reduction and efficiency goals through the remainder of 2019 and will commence a recompletion program in the first quarter of 2020. Granite is encouraged by the potential of future recompletions to accelerate its plans by strengthening the Company’s ability to add producing barrels through this relatively low-risk capital operation. With over 80 potential infill drilling locations that will serve as the backbone of future development of its Bakken pool, the recompletion strategy provides an additional mechanism by which Granite can increase shareholder value in the current energy environment.

Outlook

Granite continues to strengthen its balance sheet while successfully navigating a volatile and challenging market. As the Company continues to pay down debt, it is increasing its inventory of highly economic capital projects, reducing its already limited abandonment liability, and improving corporate and operational efficiencies. Granite has consistently proven its free-cash-flow-generating capability and the efficiency at which it adds producing barrels. At its current debt repayment rate, Granite is rapidly positioning itself to increasingly deploy a larger component of its free cash flow to growth projects and other available avenues to increase shareholder value.