Pinecrest Energy (PRY-V) budgets $136-million in 2013 capex
Feb 6, 2013 - News Release
Pinecrest Energy Inc. has released its 2013 capital budget, has made water flood scheme progress, has increased its credit facility, has in place hedging programs and has made a management change.
Capital budget 2013
The board of directors of Pinecrest has approved a 2013 capital budget of $136-million, focused on drilling, completion, equipping, tie-in and water flooding the Slave Point light oil resource play in the company's Greater Red Earth core area.
The capital and operating assumptions used in the $136-million budget are as follows:
- Thirty to 34 Slave Point wells, pipelines, facilities, land, water flood and maintenance;
- Production exit rate: 6,000 barrels of oil per day (more than 98 per cent light oil);
- Price assumption: $85 (U.S.) WTI per barrel;
- Exchange rate: $1 (U.S.) to $1 (Canadian);
- Average crude quality: 39-degree API;
- Royalty rate: about 8.6 per cent;
- Operating and transportation costs: $14 per barrel.
The budget is to be financed with a combination of cash flow and the company's expanded credit facility, resulting in projected year-end 2013 net debt of $136-million and a debt to forward cash flow ratio of approximately 1.0.
Water floods
The positive results of Pinecrest's joint water flood and the historical water floods in the Greater Red Earth area provided the company with sufficient confirmatory data to proceed with several water flood schemes. In an effort to accelerate the company's ability to implement fully developed horizontal well water flood schemes in 2013, Pinecrest elected to drill 12 gross (12.0 net) infill horizontal wells in the third and fourth quarters of 2012. These wells were drilled on three sections of land at eight horizontal wells per section with 1,400-metre laterals.
Evi project No. 2
Initial results from the company's first 100-per-cent-operated water flood scheme have been very encouraging and in accordance with company expectations. Uninterrupted water injection commenced on Dec. 20, 2012, and early results have seen oil production from the offset wells increase from 95 barrels per day to 280 barrels per day.
Pinecrest has received ERCB approval for four additional 100-per-cent-operated water floods (Loon project No. 1, Red Earth project No. 1, Evi project No. 3 and Otter project No. 1). Loon project No. 1 is scheduled for injection mid-February, 2013, and the other three through second quarter and third quarter 2013. An additional two schemes have been applied for, with approvals anticipated to be obtained within the next four to five weeks, after which all of these projects are scheduled to be phased in throughout the second and third quarters of 2013. The locations of the seven water flood schemes are dispersed throughout the Greater Red Earth area, encompassing the Evi, Otter, Loon and Red Earth fields. All of the proposed water flood schemes will utilize existing wells and similar capital costs resulting in the same or better capital efficiencies as the initial Evi project No. 1 water flood.
Credit facility
Pinecrest has received an increase to its credit facility from its Canadian chartered bank. With the recent drilling success and corresponding increase in production, the facility has been increased to $155-million from the previous $125-million. This increase reflects the nature of the company's high-quality, long-life Slave Point light oil assets and its extensive opportunity base.
Hedging
Cash flow management is an integral part of the company's overall business strategy. The risk exposure inherent in fluctuations in the price of crude oil and natural gas, the U.S./Canadian-dollar exchange rate, and interest rates is monitored by the company's management and its board of directors. A hedging policy has been established to mitigate these risks. At present, the company has hedges in place.
Looking forward, the company will continue to monitor prices and strategically hedge up to 50 per cent of its volumes (after royalties) at prices above long-term commodity and budget levels.
Management change
Effective Feb. 6, 2013, Bill Turko, vice-president of engineering, has stepped down for personal reasons. Pinecrest would like to thank Mr. Turko for his many contributions to Pinecrest since inception.
Effective immediately, Darrin Drall has been appointed to the position of vice-president of engineering. Mr. Drall comes to Pinecrest with 30 years of experience, with 12 years in senior management positions in junior and intermediate oil and gas companies. Mr. Drall will be a strong addition to the Pinecrest management team.
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