Crew Energy Announces Successful Transition to Pure-Play Montney Producer

Source: www.gulfoilandgas.com 10/28/2021, Location: North America

Crew Energy Inc., a growth-oriented natural gas weighted producer operating exclusively in the world-class Montney play in northeast British Columbia, is pleased to confirm the Q3 sale of our Lloydminster heavy oil asset representing the final step of our strategic transition to a pure-play Montney producer, and provide an operational update highlighted by recent drilling success and production volumes of 30,000 boe1 per day based on net field sales estimates.

Sharpening our Focus on the Montney with the Sale of Lloydminster
Late in Q3, Crew completed the sale of our Lloydminster heavy oil operations (the “Transaction”) for gross cash proceeds of $10.3 million, representing the streamlining of our asset base. Through this Transaction, approximately 1,050 boe1 per day of primarily heavy oil production was divested from the portfolio. While the Lloydminster volumes represented approximately 4% of Crew’s total production volumes, they contributed approximately 19% to our corporate operating costs which are anticipated to decline by approximately $0.70 per boe and improve margins. Given Lloydminster previously represented Crew’s most emission-intensive asset, we will have removed 46% of Crew’s direct 2020 GHG emissions (Scope 1) and anticipate the Company’s total GHG emissions intensity will be reduced significantly going forward, putting Crew on a path to reach our emissions reduction goals earlier than anticipated. Divesting of these assets sets the stage for Crew to streamline operations and improve efficiencies going forward while reducing our overall Asset Retirement Obligation (“ARO”) liabilities by nearly 40%, representing approximately $34.5 million associated with 609 gross (539 net) wellbores.

This successful completion of the Transaction enables Crew to focus entirely on the world-class Montney play, and improves our environmental impact, positively contributing to the Company’s environmental, social and governance (“ESG”) goals. Our team is in a stronger position to enhance value as we focus Crew’s resources fully to the Montney, where we have the greatest potential to generate returns and secure long-term sustainability. With this divestment, Crew would like to thank the dedicated Lloydminster heavy oil team for their hard work and support over the past 10 years, and particularly through the sale process. We wish to recognize their contributions to Crew’s culture and leadership in upholding our commitment to safety, evidenced by achieving three years without a recordable injury at Lloydminster.

Natural Gas Production at New Highs
Crew is also very pleased to confirm that after the impact of the Lloydminster sale, our current production volumes have recently reached 30,000 boe1 per day with record net natural gas sales production of 149 mmcf per day based on field estimates. This level of natural gas production is the highest ever realized by the Company, being produced into a very strong commodity price environment, and reflects the success of Crew’s drilling program to date in 2021. This robust production performance is partly driven by volumes coming on stream from the seven wells on our 1-8 pad within the Greater Septimus area, along with our 4-17 land tenure retention pad at Groundbirch.

Positive Results at Groundbirch
At the 4-17 pad, three wells were completed during Q3,2021 and are currently producing at restricted rates of approximately 32 mmcf of raw gas per day. These wells have been producing for 18 days and will continue to clean-up prior to a two-week period during which volumes will be shut-in while permanent production facilities are installed. The successful validation of this test pad, along with the evaluation of two distinct zones within the Montney, represent strategically important milestones for Crew given that these drilling results are expected to be the foundation for development of a new core area at Groundbirch. Based on a combination of production and pressure test data, we believe that these wells have the potential to be the most prolific gas wells the Company has drilled to date. Crew owns over 70,000 net acres of contiguous land in the Greater Groundbirch area and has an additional five well authorization permits at the 4-17 pad to follow up on the success of the first three wells. We expect that at least two additional zones in the Montney are potentially prospective at Groundbirch and we are currently advancing plans to test those zones in the future.

Record Production at West Septimus
In addition to realizing positive drilling and field operations results, our West Septimus gas processing facility recently achieved a new throughput record of 125 mmcf per day with working interest sales of 115 mmcf per day (119 mmcf gross) and a nameplate capacity of 120 mmcf per day of sales gas. These strong volumes are a direct result of incremental production added from the Company’s new 1-8 pad along with our 4-17 pad at Groundbirch. Concurrent with these wells coming on-stream and in light of the West Septimus facility being close to capacity, Crew has made infrastructure modifications that allow volumes from the 4-17 pad to flow to, and be processed at, our Septimus gas processing facility, which currently has approximately 40 mmcf per day of excess capacity. This will accommodate new production from the five-well 4-21 pad at West Septimus that is scheduled to begin producing in mid-December.

Although we are drilling an additional five wells, Crew is maintaining previous capital expenditures guidance of $150 to $170 million and average production guidance of between 26,000 and 28,000 boe1 per day for 2021. We intend to build on the momentum realized to date, with plans to drill 26 and complete 21 wells (compared to our previous guidance of drilling and completing 21 wells) by the end of 2021, and to carry forward ten drilled and uncompleted wells into 2022. During the first quarter of 2022, we plan to complete and bring these ten wells onto production through the Septimus gas processing facility. In addition, Crew has available capacity on three major export pipelines to facilitate the transportation to markets of our growing natural gas production.


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