Deals - Acquisition, Mergers, Divestitures | Capital Markets | Capital Expenditure | Drilling Activity | Capital Expenditure - 2021

Spartan Delta Revises 2021 Guidance; Details Winter Drilling Program

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Spartan Delta Corp. reported an operational and corporate update with revised guidance for 2021.

Highlights:

• Early results of Spartan’s drilling program are positive with fourth-quarter production exceeding guidance.
• Executing on consolidation strategy, including three small but strategic acquisitions in Spartan’s focus development areas.
• Continued operational and financial performance results in upward revision to 2021 Adjusted Funds Flow guidance.

Winter Drilling Program  

Spartan’s winter drilling program of six Spirit River locations is progressing ahead of schedule and budget. The first two well pad was drilled, completed and on production as of mid-December, 2020 and a three well pad is in the final stages of drilling. Wells drilled to date are consistent with expectations with payout forecasted to be less than twelve months and yielding greater than 100% internal rate of return on current strip commodity pricing. Spartan expects to accelerate into the first quarter the drilling of two wells previously scheduled for the fall of 2021, including a two-mile well into the Cardium formation.

Fourth Quarter Production

Average production for the fourth quarter was maintained in line with third quarter production levels at approximately 26,000 BOE/d despite a base decline of 19% on Spartan’s asset base. Production is 5% ahead of Spartan’s mid-range guidance for the fourth quarter. This reflects the continued success of the Company’s production optimization activities in the field and earlier than expected production contribution from two new wells in the second half of December.

Acquisitions Update

Spartan has closed one acquisition and executed definitive agreements for two additional strategic acquisitions in its target development areas for total consideration of $7.1 million (comprised of $0.9 million cash and the issuance of 2,002,584 common shares of Spartan) and the assumption of minimal abandonment liability. The acquisitions add 28 sections of land in the Montney play fairway along with 105 BOE/d of production (60% natural gas). The two additional strategic acquisitions are expected to close on or about January 15, 2021. Expected pro-forma contribution from the assets to be acquired is included in the revised corporate guidance for 2021, set out below.

Operational and Financial Improvements

Spartan continues to execute on the implementation of organic operational measures and strategic initiatives with industry partners. The Company expects 2021 operating expense of $5.10/BOE, which is 16% lower than third quarter of 2020 operating expense and 15% lower than previously announced 2021 guidance. As a result of both operational and financial improvements, Spartan expects 2021 Adjusted Funds Flow of $92.5 million, an increase of 40% from prior guidance, and Free Funds Flow of $49.5 million, an increase of 102% from prior guidance.