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CALGARY, ALBERTA--(Marketwired - Mar 16, 2016) - Delphi Energy Corp. (TSX:DEE) ("Delphi" or the "Company") is pleased to announce its financial and operational results for the year ended December 31, 2015.
|Three Months Ended December 31||Twelve Months Ended December 31|
|Production||2015||2014||% Change||2015||2014||% Change|
|Field condensate (bbls/d)||1,606||1,639||(2||)||1,440||1,421||1|
|Natural gas liquids (bbls/d)||1,414||2,020||(30||)||1,433||1,669||(14||)|
|Crude oil (bbls/d)||7||53||(87||)||27||171||(84||)|
|Total crude oil and natural gas liquids||3,027||3,712||(18||)||2,900||3,261||(11||)|
|Natural gas (mcf/d)||34,719||49,939||(30||)||39,416||43,729||(10||)|
|Financial Highlights ($ thousands except per unit amounts)|
|Three Months Ended December 31||Twelve Months Ended December 31|
|2015||2014||% Change||2015||2014||% Change|
|Crude oil and natural gas sales||18,601||35,534||(48||)||80,275||163,870||(51||)|
|Realized sales price per boe||37.09||33.75||10||31.43||40.23||(22||)|
|Funds from operations||13,317||15,869||(16||)||42,893||65,159||(34||)|
|Per share - Basic||0.09||0.10||(10||)||0.28||0.42||(33||)|
|Per share - Diluted||0.09||0.10||(10||)||0.28||0.41||(32||)|
|Net earnings (loss)||(23,084||)||(25,588||)||(10||)||(42,525||)||(7,263||)||486|
|Per share - Basic||(0.15||)||(0.16||)||(6||)||(0.27||)||(0.05||)||440|
|Per share - Diluted||(0.15||)||(0.16||)||(6||)||(0.27||)||(0.05||)||440|
|Disposition of properties||(13,712||)||(651||)||2,006||(67,578||)||(16,615||)||307|
|Net capital invested||2,471||16,201||(85||)||(10,128||)||84,236||(112||)|
|Acquisition of undeveloped properties||-||-||-||-||8,800||-|
|Acquisition of developed properties||-||8,858||-||-||8,858||-|
|Total capital invested||2,471||25,059||(90||)||(10,128||)||101,894||(110||)|
|December 31, 2015||December 31, 2014||% Change|
|Net debt (1)||121,664||173,655||(30||)|
|Shares outstanding (000's)|
(1) Defined as the sum of long term and subordinated debt plus (minus) the working capital deficit (surplus) excluding the current portion of the fair value of financial instruments.
MESSAGE TO SHAREHOLDERS
The commodity price environment continued to be very challenging with West Texas Intermediate ("WTI") crude oil prices averaging US $42.17 per barrel during the fourth quarter of 2015, down 42 percent from the comparative quarter of the previous year. Average WTI crude oil prices for the year were down 48 percent compared to the previous year. NYMEX natural gas prices averaged US $2.24 per mmbtu in the fourth quarter, down 42 percent from the comparative quarter of 2014. NYMEX natural gas prices averaged US $2.63 per mmbtu in 2015, down 38 percent from the previous year.
Delphi's commodity price risk management program continues to be an integral part of its financial strategy to protect funds from operations during periods of price volatility. Despite the drop in crude oil prices, the Company received $65.06 per barrel for its condensate production in the fourth quarter of 2015, including a realized risk management gain of $18.01 per barrel for maturing contracts in the period. Delphi's realized natural gas price for the fourth quarter of 2015 was $5.60 per mcf, an increase of 51 percent from the comparative period of 2014. The Company's realized natural gas price was positively influenced by its risk management program and includes a gain of $0.91 per mcf for maturing contracts in the period and $1.85 per mcf on the unwinding of certain natural gas risk management contracts for the period January 1, 2017 to December 31, 2019.
Production volumes in the fourth quarter of 2015 averaged 8,814 boe/d, a 27 percent decrease over the comparative quarter in 2014. Production volumes primarily decreased due to the disposition of the Company's Wapiti assets in the third quarter of 2015 and the disposition of its Greater Hythe assets in the fourth quarter of 2015. Delphi commenced shipping the majority of its natural gas production into the Chicago market, effective December 1, 2015, through its Alliance pipeline full path firm service agreement. Natural declines and disposition volumes in the quarter were partially offset by the start-up of two gross (1.8 net) Montney wells which were brought on production in the fourth quarter.
Delphi's field condensate weighting as a percentage of fourth quarter of 2015 production volumes increased to 18 percent, up 29 percent, from 14 percent in the comparative quarter of 2014. The Company`s Montney natural gas liquids and field condensate yields increased to 97 barrels per million cubic feet in 2015, up from 95 bbls/mmcf in 2014. Field and plant condensate yield averaged 65 bbls/mmcf or 67 percent of the total 97 bbls/mmcf.
Funds from operations in the fourth quarter of 2015 were $13.3 million or $0.09 per basic and diluted share, compared to $15.9 million or $0.10 per basic and diluted share in the comparative quarter of 2014. The decrease in funds from operations in the fourth quarter of 2015 as compared to the same quarter in 2014 is primarily due to lower production volumes partially offset by a higher cash netback for the quarter. Delphi's cash netback increased 15 percent in the fourth quarter of 2015, to $16.41 per boe versus $14.33 per boe in the comparative quarter of 2014. The increase in the cash netback is due to higher realized revenue of $3.34 per boe (a ten percent increase) from the gains on the realization of risk management contracts and lower operating costs of $1.78 per boe (19 percent decrease) partially offset by higher costs for G&A of $1.44 per boe (203 percent increase), which includes $1.07 per boe for termination costs related to staff reductions and transportation costs of $1.65 per boe (50 percent increase). The reduction in operating costs is largely as a result of the major property dispositions completed during 2015. The increase in transportation costs is partially due to the shipping of the Company's natural gas production through the Alliance pipeline to Chicago, effective December 1.
During the fourth quarter of 2015, Delphi invested $16.2 million primarily on drilling and completions. Delphi drilled two gross (1.7 net) wells and performed completion operations on two gross (1.8 net) wells in its Bigstone area. The Company also completed its water disposal facility which was commissioned in October. In the fourth quarter, the Company closed the disposition of its Greater Hythe assets for net proceeds of $11.4 million. In addition, Delphi received proceeds of $4.6 million in exchange for a gross overriding royalty on two gross wells completed during the quarter as part of its latest five well gross overriding royalty arrangement.
At December 31, 2015, the Company had $94.2 million outstanding in the form of bankers` acceptances under its senior credit facility, $14.0 million outstanding under its subordinated credit facility and a working capital deficiency of $13.5 million for net debt of $121.7 million and was in compliance with all covenants of the credit facilities. Total net debt has decreased by $52.0 million from $173.7 million at the end of the previous year, primarily from the disposition of the Company's Wapiti and Greater Hythe assets for net proceeds of $60.2 million. At December 31, 2015, the Company's net debt to funds from operations ratio was 2.3:1.
Delphi has continued to innovate drilling and completion techniques to drive costs lower, improving year over year capital efficiencies. Drilling and completion costs for the six wells drilled in 2015 averaged $8.1 million, with the most recent three wells drilled and completed for $7.0 million, a 33 percent reduction from the 2014 average costs of $10.4 million.
Delphi has recently brought on production the 13-21-60-23W5M ("13-21") well (0.66 net), the western most Montney well drilled and completed with slickwater fracs by the Company to date. The 13-21 well was fraced over 37 stages with the largest sand tonnage and slickwater volumes for Delphi Montney wells to date. Although the 13-21 has been on production for less than two weeks, initial production results are encouraging. Initial production has been restricted to flow up the tubing only in an effort to understand the impact to field condensate and natural gas production. Preliminary data indicate field condensate yields more than double that of the well producing 800 metres to the east at 15-21-60-23W5M, which came on production in February of 2014. Average production rates over the first 30 days will be reported as the production data becomes available.
The 14-27-60-23W5M ("14-27") infill well that was drilled at the end of 2015 and completed in early January, utilizing a 37 stage slickwater frac design, has achieved the highest NGL yield during its first 30 days of production of all wells drilled to date in Bigstone. With condensate being the most valuable product of the Company's natural gas and NGL commodity mix, higher condensate yields are a key driver to increase revenue per boe. In 2015, the realized condensate price before hedging gains was $54.71 per barrel compared to Edmonton light oil reference pricing of $57.11 per barrel and WTI pricing of US$48.76 per barrel.
Innovation of the Company's frac design continues to deliver encouraging results. With higher field condensate yields Delphi will be increasing its drilling activity to the west of the current development trend at Bigstone. Additionally, tighter inter-well spacing is currently being evaluated to distances as low as 200 metres from the current approximate 400 metres.
The following table has been updated to reflect new well production data since it was previously released and continues to illustrate the significant impact the slickwater fracturing technique has had on well performance at Bigstone in comparison to smaller conventional frac methods.
To view the Initial Production (IP) Rate Well Performance table, please visit the following link:
The Company continues to pursue opportunities to reduce operating costs at its Bigstone property. Delphi estimates $6.5 million in reduced operating costs in 2016 over 2015, as the more efficient Montney production replaces the lower netback properties disposed of in 2015. A new fuel gas pipeline accessing higher quality fuel gas has been installed and the 7-11 compression and dehydration facility has been expanded with an owned compressor replacing two existing rental compressors resulting in reduced maintenance and rental costs as well as increased throughput capacity. In addition, with the disposition of the lower netback properties, the Company has reduced its staff from 36 to 24 (33 percent), resulting in expected general and administrative savings of $2.0 - $2.5 million.
Addressing and optimizing the Company's overall cost structure continues to be a primary focus to maximize profitability. Reduced capital costs and lower operating costs combined with a superior asset has enabled the Company to continue to deploy capital to its Montney play and continue to provide high return on investment. Targeting reductions of 30 percent for capital costs, operating costs and general and administrative costs will enable the company to grow and profit in the current environment.
On December 1, 2015, Delphi began delivering the majority of its natural gas production on its Alliance pipeline firm capacity into the Chicago market rather than the AECO market. Well in advance of commencement of these deliveries, the Company continued execution of its successful risk management strategy to protect its revenue stream into the Chicago market through NYMEX, Chicago basis and Cdn/US foreign exchange rate contracts. As a result, the Company is protected through 2016 with approximately 75 percent of its natural gas production hedged at an average price of Cdn. $4.43 per mcf (excluding transportation costs). For 2017, the Company has approximately 50 percent of its natural gas production contracted at an average price of Cdn $4.24 per mcf (excluding transportation costs). Delphi also has approximately 43 percent of its condensate volumes contracted at a floor price of $76.49 per barrel. The table below summarizes the Company's current commodity price risk management contracts for 2016 and future years.
|Natural Gas (Cdn)||2016||2017|
|% Hedged (1)||8%||7%|
|Hedge Price (Cdn $/mcf) (2)||$3.84||$3.96|
|Strip Price (Cdn $/mcf)||$1.83||$2.63|
|Natural Gas (US)||2016||2017||2018||2019|
|% Hedged (1)||67%||43%||14%||6%|
|Hedge Price (US $/mmbtu)||$3.50||$3.23||$2.79||$2.81|
|Strip Price (US $/mmbtu)||$2.20||$2.71||2.78||$2.82|
|% Hedged in Cdn $ (3)||99%||113%||99%||100%|
|Hedge Price (Cdn $/mmbtu) (4)||$4.50||$4.28||$3.70||$4.02|
|% Hedged (1)||43%|
|Floor Price (WTI Cdn $/bbl)||$78.50|
|Ceiling Price (WTI Cdn $/bbl) (5)||$85.00|
|Strip Price (WTI Cdn $/bbl)||$53.99|
|(1)||Percent hedged is based on expected 2016 average natural gas production of 35 mmcf/d and 1,850 bbls/d of condensate and C5+, consistent with guidance.|
|(2)||Before deduction of transportation costs to ship production to AECO on the TCPL pipeline.|
|(3)||Percent of US $hedge value locked in with Cdn/US FX hedges.|
|(4)||Before deduction of transportation costs to ship production to Chicago on the Alliance pipeline.|
|(5)||400 bbls/d have upside to a ceiling price of $85.00 per barrel at a deferred cost of $4.02 per barrel.|
Delphi has reduced its natural gas price expectations in light of the current warm winter in North America reducing the demand for natural gas for heating purposes. Delphi's 2016 guidance now incorporates a NYMEX natural gas price of US $2.00 per mmbtu reducing cash flow only slightly due to the Company's significant natural gas hedge position. The Company still expects to drill 4-5 gross wells on lower capital expenditures as evidenced by our most recent three wells. In the current environment, quarterly production will be managed in the context of the Company's Alliance Pipeline commitments and risk management position. The table below summarizes the Company's current guidance for 2016.
|Average Annual Production (boe/d)||8,300 - 8,800|
|Exit Production Rate (boe/d)||8,500 - 9,500|
|NYMEX Natural Gas Price (US $ per mmbtu)||$2.00|
|WTI Oil Price (US $ per bbl)||$38.00|
|Natural Gas Liquids Price (Cdn $ per bbl)||$16.50|
|Foreign Exchange Rate (US/Cdn)||1.35|
|Well Count||4.0 - 5.0|
|Net Capital Program ($ million)||$33.0 - $38.0|
|Funds from Operations ("FFO") ($ million)||$32.0 - $37.0|
|Net Debt at December 31 ($ million)||$121.0 - $126.0|
|Net Debt / Q4 FFO (annualized)||3.0 - 3.5|
Delphi continues to navigate this very challenging low commodity price environment with a singular focus on its core Bigstone Montney asset. This focused effort is successfully improving foundational cash generating efficiencies that will be more fully recognized as the rate of capitalization and production growth accelerates into the recovery phase of this commodity price cycle.
The Company continues to manage its production volumes in the context of its risk management program, contracted processing and transportation arrangements and new well "slow-back" production practices. Delphi expects the first quarter 2016 to average approximately 8,400 boe/d (65 percent natural gas), with current production capability estimated at approximately 9,300 boe/d.
Continued innovation of our well design, driving costs lower, while maintaining full ownership and control of our infrastructure are both paramount in our continued effort towards top decile capital and cash generating efficiencies. Generating margin growth trumps production growth in the current environment. The Company's significant risk management position through 2016 and 2017, protects both the equity account and the balance sheet, while contributing to a meaningful capital program of four to five wells in 2016. Delphi's significant drilling inventory is immediately accessible to deliver production growth into a strengthening commodity price environment.
On behalf of the Board of Directors and all the employees of Delphi, we would like to thank our shareholders for their continued support.
CONFERENCE CALL AND WEBCAST
A conference call and webcast to review 2015 results is scheduled for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Thursday, March 17, 2016. The conference call number is 1-800-355-4959. A brief presentation by David Reid, President and CEO and Brian Kohlhammer, Senior VP Finance & CFO, will be followed by a question and answer period. The conference call will also be broadcast live on the internet and may be accessed through the Delphi Energy website at www.delphienergy.ca.
A taped rebroadcast will be available until 6:00 p.m. Mountain Time, Thursday, March 24, 2016. To access the rebroadcast, dial 1-800-408-3053 or 905-694-9451. The passcode is 8832194. It will also be available on Delphi's website. Delphi's annual and fourth quarter 2015 financial statements and management's discussion and analysis are available on Delphi's website at www.delphienergy.ca and SEDAR at www.SEDAR.com.
Delphi Energy is a Calgary-based company that explores, develops and produces oil and natural gas in Western Canada. The Company is managed by a proven technical team. Delphi trades on the Toronto Stock Exchange under the symbol DEE.
Forward-Looking Statements . The release contains forward-looking statements and forward-looking information within the meaning of applicable Canadian securities laws. These statements relate to future events or the Company's future performance and are based upon the Company's internal assumptions and expectations. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "should", "believe", "intends", "forecast", "plans", "guidance", "budget" and similar expressions.
More particularly and without limitation, this release contains forward-looking statements and information relating to petroleum and natural gas production estimates and weighting, projected crude oil and natural gas prices, future exchange rates, expectations as to royalty rates, expectations as to transportation and operating costs, expectations as to general and administrative costs and interest expense, expectations as to capital expenditures and net debt, planned capital spending, future liquidity and Delphi's ability to fund ongoing capital requirements through operating cash flows and its credit facilities, supply and demand fundamentals for oil and gas commodities, timing and success of development and exploitation activities, cash availability for the financing of capital expenditures, access to third-party infrastructure, treatment under governmental regulatory regimes and tax laws and future environmental regulations.
Furthermore, statements relating to "reserves" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitable in the future.
The forward-looking statements and information contained in this release are based on certain key expectations and assumptions made by Delphi. The following are certain material assumptions on which the forward-looking statements and information contained in this release are based: the stability of the global and national economic environment, the stability of and commercial acceptability of tax, royalty and regulatory regimes applicable to Delphi, exploitation and development activities being consistent with management's expectations, production levels of Delphi being consistent with management's expectations, the absence of significant project delays, the stability of oil and gas prices, the absence of significant fluctuations in foreign exchange rates and interest rates, the stability of costs of oil and gas development and production in Western Canada, including operating costs, the timing and size of development plans and capital expenditures, availability of third party infrastructure for transportation, processing or marketing of oil and natural gas volumes, prices and availability of oilfield services and equipment being consistent with management's expectations, the availability of, and competition for, among other things, pipeline capacity, skilled personnel and drilling and related services and equipment, results of development and exploitation activities that are consistent with management's expectations, weather affecting Delphi's ability to develop and produce as expected, contracted parties providing goods and services on the agreed timeframes, Delphi's ability to manage environmental risks and hazards and the cost of complying with environmental regulations, the accuracy of operating cost estimates, the accurate estimation of oil and gas reserves, future exploitation, development and production results and Delphi's ability to market oil and natural gas successfully to current and new customers. Additionally, estimates as to expected average annual production rates assume that no unexpected outages occur in the infrastructure that the Company relies on to produce its wells, that existing wells continue to meet production expectations and any future wells scheduled to come on in the coming year meet timing and production expectations.
Commodity prices used in the determination of forecast revenues are based upon general economic conditions, commodity supply and demand forecasts and publicly available price forecasts. The Company continually monitors its forecast assumptions to ensure the stakeholders are informed of material variances from previously communicated expectations.
Financial outlook information contained in this release about prospective results of operations, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that such financial outlook information contained in this release should not be used for purposes other than for which it is disclosed.
Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, it can give no assurance that such expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent known and unknown risks and uncertainties. Delphi's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits Delphi will derive therefrom. Should one or more of these risks or uncertainties materialize, or should assumptions underlying forward-looking statements prove incorrect, actual results may vary materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production, delays or changes in plans with respect to exploration or development projects or capital expenditures, the uncertainty of estimates and projections relating to production rates, costs and expenses, commodity price and exchange rate fluctuations, marketing and transportation, environmental risks, competition from others for scarce resources, the ability to access sufficient capital from internal and external sources, changes in governmental regulation of the oil and gas industry and changes in tax, royalty and environmental legislation. Additional information on these and other factors that could affect the Company's operations or financial results are included in the Company's most recent Annual Information Form and other reports on file with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
Readers are cautioned that the foregoing list of factors is not exhaustive. Furthermore, the forward-looking statements contained in this release are made as of the date of this release for the purpose of providing the readers with the Company's expectations for the coming year. The forward-looking statements and information may not be appropriate for other purposes. Delphi undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The forward-looking statements contained in this release are expressly qualified in their entirety by this cautionary statement.
Basis of Presentation . For the purpose of reporting production information, reserves and calculating unit prices and costs, natural gas volumes have been converted to a barrel of oil equivalent (boe) using six thousand cubic feet equal to one barrel. A boe conversion ratio of 6:1 is based upon an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. This conversion conforms with the Canadian Securities Administrators' National Instrument 51-101 when boes are disclosed. Boes may be misleading, particularly if used in isolation.
As per CSA Staff Notice 51-327 initial test results and initial production performance should be considered preliminary data and such data is not necessarily indicative of long-term performance or of ultimate recovery.
Non-IFRS Measures . The release contains the terms "funds from operations", "funds from operations per share", "net debt", "net debt to funds from operations ratio", "operating netbacks" "cash netbacks" and "netbacks" which are not recognized measures under IFRS. The Company uses these measures to help evaluate its performance. Management considers netbacks an important measure as it demonstrates its profitability relative to current commodity prices and costs of production. Management uses funds from operations to analyze performance and considers it a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investments and to repay debt. Funds from operations is a non-IFRS measure and has been defined by the Company as cash flow from operating activities before accretion on long term and subordinated debt, decommissioning expenditures and changes in non-cash working capital from operating activities. The Company also presents funds from operations per share whereby amounts per share are calculated using weighted average shares outstanding consistent with the calculation of earnings per share. Delphi's determination of funds from operations may not be comparable to that reported by other companies nor should it be viewed as an alternative to cash flow from operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS. The Company has defined net debt as the sum of long term debt and subordinated debt plus/minus working capital excluding the current portion of the fair value of financial instruments. Net debt is used by management to monitor remaining availability under its credit facilities. Net debt to funds from operations ratio is defined as net debt to annualized quarterly funds from operations, based on the most recently completed quarter. This ratio is used to calculate the Company's compliance with its net debt to funds from operations ratio covenant. Operating netbacks have been defined as revenue less royalties, transportation and operating costs. Cash netbacks have been defined as operating netbacks less interest and general and administrative costs. Netbacks are generally discussed and presented on a per boe basis.
For the calculation of finding, development and acquisition costs, recycle ratio and net asset value per share, refer to the Company's press release of crude oil and natural gas reserves information dated February 29, 2016.
Delphi Energy Corp.
David J. Reid
President & CEO
Delphi Energy Corp.
Brian P. Kohlhammer
Senior V.P. Finance & CFO
Delphi Energy Corp.
300, 500 - 4 Avenue S.W.