Spartan Energy Corp. has been going hard with multiple drilling rigs in southeast Saskatchewan. The company reports its third quarter results in a press release on Nov. 9.
The company achieved record average production of 22,630 barrels of oil equivalent per day (boepd) (91 per cent oil and liquids), representing an 82 per cent increase (14 per cent per share) over the third quarter of 2016.
It reduced operating and transportation expenses to $17.28 per boe, a decrease of 5 per cent from the third quarter of 2016 and a decrease of 6 per cent from the second quarter of 2017.
Spartan had three rigs actively drilling across our southeast Saskatchewan asset base during the third quarter. The company drilled 39 (28 net) development wells in the quarter and brought 37 (27.2 net) wells on production, with 12 (8.0 net) wells drilled and waiting to be brought on production at the end of the quarter. To date in 2017 Spartan has drilled 105 (84.5 net) wells and brought 93 (76.5 net) wells on production.
Total development capital expenditures (total capital expenditures excluding land, seismic, waterflood capital and acquisitions) were $35.1 million in the third quarter and $104.7 million year to date, leaving $35.3 million of the company鈥檚 $140 million budget remaining to be spent in the fourth quarter.
As previously disclosed, production from wells on their conventional Frobisher and frac Midale plays have continued to outperform our internal type curves, Spartan said in a release Nov. 9. The success of their drilling program has resulted in Spartan increasing its annual production guidance twice in 2017, with current guidance of 22,000 boepd representing 16 per cent per share production growth over 2016. The company has remained active on its Frobisher and frac Midale assets in the fourth quarter with two rigs drilling continuously across these plays.
In the third quarter, Spartan commenced its first Ratcliffe drilling program on the core Oungre asset acquired from ARC Resources Ltd. in 2016. To date, in 2017 Spartan has drilled a total of 12 (6.5 net) Ratcliffe wells. The average initial 30-day production rate from the first eight Ratcliffe wells brought on production was 111 barrels per day, 39 per cent above the company鈥檚 internal type curve. Spartan has continued to add to our Ratcliffe land position in 2017 and have identified over 100 net Ratcliffe drilling locations.
Spartan delivered adjusted funds flow from operations of $41.1 million in the third quarter and excess adjusted funds flow from operations (adjusted funds flow from operations less total development capital expenditures) of $6.0 million. Spartan invested a portion of this excess funds flow on a tuck-in acquisition at Oungre, where it acquired a 10.7 per cent interest in the Oungre unit from its joint venture partners for cash consideration of $4.4 million. This acquisition is strategic to Spartan as it gives the company a 100 per cent working interest in the Oungre unit and allows it to accelerate its waterflood project in the unit. The first phase of this project, which includes eight horizontal producers, one new injector and 15 injector conversions, is scheduled for the fourth quarter of 2017 and first half of 2018.
Outlook
Through three quarters of 2017, Spartan said it has delivered on its business plan of 鈥済enerating top tier organic growth while spending within funds flow. We grew our third quarter production by 14 per cent per share over 2016 on year to date development capital spending that represented only 77 per cent of our adjusted funds flow from operations. Our oil focused, unhedged production base provides a large upside to increases in commodity prices, generating the opportunity for significant excess funds flow growth. We will continue to invest excess cash flow on projects that will deliver long term value to our shareholders, including strategic land and asset acquisitions, advancement of our waterflood projects, drilling on emerging plays and/or repurchasing shares pursuant to our normal course issuer bid.鈥�
