Pengrowth announces $65 million 2018 capital budget with expected growth of 25 per cent in exit production
Pengrowth Energy Corporation today (Jan. 17) announced that the Company’s Board of Directors has approved a 2018 capital expenditure budget of $65 million. 2018 capital spending will be focused on adding production volumes at the Company’s two 100 percent owned and operated assets at Lindbergh and Groundbirch.
The 2018 capital budget is expected to grow production volumes through the course of the year from a December 2017 exit production rate of approximately 19,000 barrels of oil equivalent per day (boe/d), excluding the Quirk Creek production volumes, to an estimated 2018 exit rate of approximately 24,000 boe/d, representing approximately 25 per cent production growth in 2018. On an annual basis, the 2018 budget is expected to deliver average daily production of between 22,500 and 23,500 boe/d.
Derek Evans, President and Chief Executive Officer said, “Our 2018 capital budget continues our strategy of putting capital to work growing our production at Lindbergh, one of the most economic, long life thermal projects in Canada. Our 2018 and 2019 WCS differential hedging and apportionment protection in combination with our low operating cost structures are expected to provide us with strong, predictable netbacks for this growing production stream.” 2018 Capital Plan
The Company has allocated approximately $45 million towards continued development and maintenance activities at its Lindbergh thermal project. Lindbergh is Pengrowth’s primary oil asset and with continued development is expected to deliver long-term growth in production and cash flow to the Company.
2018 development plans at Lindbergh will focus on continued optimization activities, including the drilling of eight additional infill wells. Approximately $33 million of the Lindbergh capital has been allocated to the optimization and infill well program. The remaining capital will be allocated to maintenance and enhancement activities to support the continued production growth from existing operations.
The wells that were drilled in 2017 as part of the optimization program are now on production and are contributing to growth in Lindbergh production volumes, with production from the project expected to reach 16,000 bbl/d by the end of the first quarter 2018. The eight infill wells in the 2018 capital program are scheduled to be drilled in the second quarter of 2018 and are expected to be brought on stream in the fourth quarter of 2018, increasing Lindbergh production to approximately 18,000 bbl/d by the end of the year.
At Groundbirch, Pengrowth’s Montney property in north east British Columbia, $17 million of capital is being directed to the completion and tie-in of the four wells which where drilled in the fourth quarter of 2017. The completion of these wells is expected to increase natural gas production from Groundbirch from the current 9.0 million cubic feet per day (MMcf/d) to approximately 30 MMcf/d, with the initial volumes coming on by the end of April 2018. In addition to the drilling program, Pengrowth is working on the completion of a compression project which is expected to allow the Company to shift transportation of natural gas production at Groundbirch away from Station Two and onto the Nova system. Once production is on the Nova system, it is anticipated that the majority of the natural gas produced (approximately 87 percent) will be transported to Lindbergh where it will be used to support the energy requirements of that project.
The pace of development at Groundbirch will be dependent on the energy requirements for Lindbergh operations. It is the Company’s intention to utilize the majority of Groundbirch’s produced natural gas in its thermal operations and avoid having to export natural gas outside of the Western Canadian Sedimentary Basin.
An additional $3.0 million of capital has been allocated to Pengrowth’s remaining conventional assets as well as for general corporate purposes.