CALGARY, Alberta, Jan. 20, 2021 (GLOBE NEWSWIRE) — Birchcliff Energy Ltd. (“Birchcliff” or the “Corporation”) (TSX: BIR) is pleased to announce its 2021 capital program and updated five year plan.
“Our priorities over the next five years are to maximize free funds flow generation and strengthen our balance sheet. We believe this strategy will provide us with the most optionality to maximize long-term shareholder returns and take advantage of future opportunities. In furtherance of these priorities, our board of directors has approved an F&D capital budget of $210 million to $230 million for 2021, which targets an annual average production rate of 78,000 to 80,000 boe/d. This targeted annual average production is expected to generate approximately $360 million of adjusted funds flow and free funds flow of $130 million to $150 million in 20211. Free funds flow will be used primarily to strengthen our balance sheet. We are targeting to reduce our total debt at year end 2021 by up to $130 million from December 31, 2020 based on our anticipated F&D capital spending, annual average production and free funds flow in 2021,” commented Jeff Tonken, President and Chief Executive Officer of Birchcliff.
Birchcliff Pouce Coupe Gas Plant 03-22-078-12W6
Jeff Tonken continued: “In alignment with the above priorities, our board of directors has approved an updated five year plan which provides for potential cumulative free funds flow of approximately $960 million by the end of the five years based on our targeted F&D capital spending, annual average production and adjusted funds flow over the period2. Free funds flow generated during the course of the five year plan will be prioritized towards debt reduction. In the first two years of the plan, our F&D capital spending will be focused on maintaining a relatively flat production profile in order to strengthen our balance sheet. In the last three years of the plan, we intend to focus on fully utilizing the available processing capacity of our existing infrastructure, which is expected to increase our free funds flow, drive down our per unit costs and maximize our operational efficiencies.”
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RELEASE OF UNAUDITED RESULTS FOR 2020 – FEBRUARY 10, 2021
In Q4 2020, Birchcliff achieved average production of approximately 78,500 boe/d3 (based on field estimates), which was the mid-point of its guidance of 78,000 to 79,000 boe/d. In 2020, Birchcliff achieved annual average production of approximately 76,500 boe/d4 (based on field estimates), which was the mid-point of its guidance of 76,000 to 77,000 boe/d. Birchcliff expects to release its unaudited financial and operational results and reserves highlights for the year ended December 31, 2020 on February 10, 2021.
Birchcliff Well Permits & Wells Spud Since 2017
2021 CAPITAL PROGRAM
Overview
Birchcliff’s 2021 capital program (the “2021 Capital Program”) marks the first year of its five year plan for 2021 to 2025 (the “Five Year Plan”) and is focused on maximizing free funds flow generation and strengthening Birchcliff’s balance sheet. Birchcliff’s 2021 F&D capital budget of $210 million to $230 million targets an annual average production rate of 78,000 to 80,000 boe/d, with a production commodity mix of approximately 76% natural gas and 24% liquids. None of Birchcliff’s production is currently subject to fixed price commodity hedges, which will allow it to capitalize on strengthening commodity prices. This, coupled with Birchcliff’s efficient execution and low-cost structure, will allow the Corporation to maximize free funds generation and strengthen its balance sheet.
The 2021 Capital Program builds off the technical and operational knowledge Birchcliff gained from its 2020 capital program, which will help it to continue to refine its drilling and completions operations and improve well performance. Furthermore, Birchcliff’s focused drilling activities and large-scale well pad designs are expected to result in improved capital efficiencies.
Adjusted funds flow of approximately $360 million is expected to be generated in 2021 based on the mid-point of the Corporation’s 2021 annual average production guidance range, with free funds flow of approximately $130 million to $150 million which will be used primarily to strengthen the balance sheet. The Corporation is targeting to reduce its total debt at year end 2021 by up to $130 million from December 31, 2020 based on its anticipated F&D capital spending, annual average production and free funds flow in 2021.
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Highlights of the 2021 Capital Program
The key highlights of Birchcliff’s 2021 Capital Program are as follows:
F&D Capital Spending and Production
Total F&D capital expenditures are estimated to be $210 million to $230 million, which represents a 23%5 reduction from 2020 mainly as the result of one-time facilities and infrastructure projects completed by Birchcliff in 2020.
Annual average production in 2021 is expected to be in the range of 78,000 to 80,000 boe/d.
Production in the first half of 2021 is anticipated to average approximately 74,000 boe/d6. In order to minimize frac-driven interaction associated with offset drilling and completions activities, Birchcliff plans to protect its existing wells by proactively shutting-in some production in the first half of 2021. In addition, Birchcliff has scheduled a turn-around in the first half of 2021 at part of its 100% owned and operated natural gas processing plant in Pouce Coupe (the “Pouce Coupe Gas Plant”).
Production in the second half of 2021 is expected to average approximately 84,000 boe/d7, with production expected to ramp up in Q3 and Q4 as the majority of Birchcliff’s new 2021 wells are planned to be brought on production in the second half of the year. Bringing on the majority of wells later in 2021 will allow Birchcliff to take advantage of stronger expected natural gas prices that are typically seen in the winter months.
Birchcliff Map of Wells & Facility Permits Since 2017
Capital Activities and Allocation
- Approximately 73%8 of the program is directed towards drilling, completions, equipping and tie-in (“DCCET”) activities, with a total of 27 (27.0 net) wells expected to be drilled and 33 (33.0 net) wells expected to be brought on production in 2021.
- Birchcliff’s 2021 drilling program is focused on developing its low-cost natural gas and liquids-rich production in Pouce Coupe and Gordondale.
- Approximately 12%8 of the program is directed towards facilities and infrastructure.
- As a result of the completion of various one-time projects in 2020, Birchcliff’s facilities and infrastructure spending in 2021 is expected to decrease by approximately 65%, from approximately $75 million in 2020 to approximately $25 million in 2021. Facilities and infrastructure spending in 2021 will be directed towards various facility optimization projects in order to improve the production performance of Birchcliff’s existing wells.
- In 2020, Birchcliff completed an inlet-liquids handling facility at its Pouce Coupe Gas Plant and the addition of natural gas compression and a significant trunk line in Gordondale. These long lifespan infrastructure projects have helped Birchcliff to improve its efficiencies and netbacks, which has further enhanced Birchcliff’s free funds flow generating capacity.
- The program is weighted towards the first half of the year, with the majority of F&D capital expected to be spent by the end of Q2 2021.
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