Paramount Resources Ltd. is pleased to provide an update on its operations and 2020 guidance.
- The Company is accelerating $60 million of development activities at Karr and Wapiti from 2021 into the second half of 2020.
- Sales volumes are now expected to average between 62,500 and 67,500 Boe/d in the second half of 2020, reflecting the impact of the previously announced unscheduled outage at the third-party natural gas processing facility at Wapiti (the "Wapiti Plant").
- The Wapiti Plant is currently anticipated to be operational the week of September 21, 2020.
- Operating costs are expected to average approximately $12/Boe in the second half of 2020 as a result of the Company's efforts in sustainably improving its cost structure.
- Five wells on the 2-1 pad at Karr have been brought on production with encouraging results.
- Paramount has executed additional 2020 and 2021 liquids and natural gas hedges.
The Company recently brought onstream all five wells on the 2-1 pad at Karr. Production continues to ramp up as wells unload completion fluids. Over the last seven days, the wells have averaged 914 Bbl/d per well of raw wellhead liquids (1,686 Boe/d raw wellhead total), resulting in an average condensate to gas ratio of 198 Bbl/MMcf.(1) All-in lease construction, drilling, completion, equip and tie-in (collectively, "DCET") costs are estimated at $7.5 million per well. This represents a 37 percent reduction compared with average DCET costs for all Karr wells in 2018 and 2019. Paramount continues to make excellent progress in reducing DCET costs while not compromising on completion effectiveness.
In addition, the Company continues to focus on sustainable improvements in its operating cost structure and now anticipates corporate unit operating costs to average approximately $12/Boe for the second half of 2020.
At Wapiti, production continues to be shut-in due to the unplanned outage at the Wapiti Plant. The operator of the Wapiti Plant has advised Paramount that repairs are expected to be complete and the plant operational the week of September 21, 2020. The impact of this outage is estimated at approximately 2,500 Boe/d for the second half of 2020.
Paramount has undertaken an active hedging program and, since the second quarter, has added several additional hedges to provide greater funds flow certainty and further protect the Company's capital program.
The Company's current commodity hedging position is summarized below:
Rest of 2020 ~71,000 MMBtu/d at US$2.27/MMBtu
~81,100 GJ/d at CDN$2.02/GJ
2021 ~67,500 MMBtu/d at US$2.73/MMBtu
~60,000 GJ/d at CDN$2.54/GJ
Rest of 2020 ~15,500 Bbl/d at US$47.57/Bbl (1)
2021 5,000 Bbl/d at US$44.10/Bbl
REVISED 2020 GUIDANCE
Paramount is accelerating activities at Karr and Wapiti and increasing its 2020 capital guidance to $225 million from $165 million. The additional capital spending will grow 2021 Montney production at Karr and Wapiti, with the acceleration enabling the Company to continue to maximize capital efficiencies, drive down per unit operating costs and increase adjusted funds flow. Paramount now expects higher production in 2021 to drive adjusted funds flow at recent strip pricing in excess of anticipated 2021 capital spending, reducing the Company's debt levels and strengthening leverage metrics. Paramount expects to finalize its 2021 capital budget in the first quarter of 2021.
The following development projects at Karr are being accelerated:
- Completion operations on the five-well 5-16 West pad, initially scheduled for 2021, have recently commenced with all five wells anticipated to come onstream late this year.
- Drilling operations on the six-well 3-10 pad are scheduled to commence in September with the Company planning to complete, tie-in and bring on production all six wells in the first half of 2021.
- Lease construction for the five-well 7-18 pad, initially scheduled for 2021, has commenced. Drilling will commence in December 2020.
The following additional development projects are anticipated at Wapiti:
- Completion operations on the five-well 5-3 West pad are scheduled to commence in October with all five wells anticipated to be on production by early 2021.
- The remaining six wells on the eight-well 6-4 pad will be drilled in late 2020 with the Company planning to complete, tie-in and bring on production all eight wells in mid-2021.
The Company continues to retain the flexibility to adjust its plans depending on prevailing market conditions.
As a result of the impact of the unscheduled outage at the Wapiti Plant, including the time required to restore shut-in Wapiti volumes to full production, Paramount expects sales volume to average between 62,500 and 67,500 Boe/d in the second half of 2020, broken out by quarter as follows:
- 60,000 to 62,000 Boe/d for the third quarter;
- 67,000 to 72,000 Boe/d for the fourth quarter.
Assuming realized pricing of $28/Boe, operating costs of $12/Boe, and the midpoint of the production guidance range, Paramount expects that capital spending will exceed adjusted funds flow by approximately $40 million for the second half of 2020. The outspend will be funded with available capacity under the Company's senior secured revolving bank credit facility.