Quarterly / Earnings Reports | Debt | Second Quarter (2Q) Update | Capital Markets | Capital Expenditure | Drilling Program
Spartan Energy Corp Lowers Spending, Adds Wells
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Spartan Energy Corp. has reported its financial and operating results for the three and six months ended June 30, 2015.
Highlights:
- Achieved average production of 8,710 boe/d, comprised of 94% oil and liquids, a 36 % increase over the second quarter of 2014.
- Reduced production costs to $16.13 per boe from $18.23 in the second quarter of 2014 and $18.82 in the first quarter of 2015.
- Following the completion of spring break-up, drilled 4 (3.1 net) wells, 1 (1.0 net) of which was on production prior to the end of the quarter.
- Maintained our balance sheet strength, with net debt at the end of the quarter of approximately $80.6 million, down from $96.1 million at the end of the first quarter.
- Spartan's 2015 capital budget, which was released early in the first quarter, contemplated a capital program of $105 million. This program was designed to be cash flow neutral based on a WTI oil price of $65 US, with flexibility to reduce or increase spending levels depending on commodity prices.
- In response to the prolonged commodity price downturn, the Company has therefore elected to amend our 2015 capital expenditures from $105 million to $85 million.
- The amended capital program results in a revision to our annual production guidance from 9,200 boe/d to 8,700 boe/d and in our exit rate production guidance from 9,900 boe/d to 9,100 boe/d. Our oil weighted production is highly leveraged to oil prices, and we anticipate that a five dollar change to the WTI price would impact annualized cash flow by approximately $15 million. Our capital program remains flexible with the ability to quickly respond to changes in commodity prices.
- Our capital program in the second half of the year will continue to focus on our low risk, high return conventional open-hole wells in southeast Saskatchewan. We intend to drill an additional 27.9 net open-hole wells in the third and fourth quarters, bringing our annual total to 44.8 net wells.
- In addition, we plan to drill 2.9 net additional frac Midale wells at Pinto, for a 2015 total of 4.8 net wells, and 12.0 net Viking wells in the Dodsland area of west central Saskatchewan. Spartan reduced drilling costs in the first half of the year through efficiency gains and service cost deflation, and we will pursue additional savings throughout our second half program.
- Spartan's second quarter was relatively quiet operationally due to spring break-up conditions in the field. We re-commenced our drilling program by activating one rig in early June and drilled 4 (3.1 net) wells prior to the end of the quarter.
- The wells drilled in the second quarter consisted of 2 (1.2 net) open-hole wells in the Winmore area of southeast Saskatchewan, of which 1 (1.0 net) was on production prior to the end of the quarter.
- In addition, we drilled 2 (1.9 net) frac Midale wells on our Pinto lands, both of which were brought on production early in the third quarter. Spartan has recently activated a second rig in southeast Saskatchewan, with both rigs scheduled to drill continuously through the remainder of the year.
- Subsequent to the end of the second quarter, the Company completed an annual borrowing base review with its lending syndicate of six Canadian Chartered banks. Based on this review the syndicate confirmed that the Company's lending value remained unchanged at $250 million. However, as part of our ongoing cost reduction initiatives, Spartan has voluntarily elected to reduce the credit facility to $150 million effective July 29, 2015. Spartan continues to focus on prudent and conservative management of our balance sheet, and we are of the view that the $250 million limit provided excess capacity that is not currently required by the Company. By reducing the facility to $150 million, which continues to provide sufficient liquidity for the execution of our business plan, Spartan will save excess standby and commitment fees in the amount of approximately $600,000 per year. Spartan is comfortable that the incremental lending value up to the $250 million limit will be made available by our lenders should the Company require an additional source of financing for acquisitions or capital expenditures.
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