CALGARY, AB – Crew Energy Inc. (TSX: CR) (“Crew” or the “Company“) is pleased to provide an update on the progress and achievements realized following the announcement of our innovative 2021 and 2022 asset development plan, released on Dec. 10, 2020. We are also pleased to provide production estimates for Q4/20 and full year 2020, along with current production levels and details on our recent drilling and completion activities.
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Crew Energy Operations
Crew’s pivotal two-year plan is designed to expand margins and significantly improve leverage metrics by efficiently calibrating our production volumes to match ongoing infrastructure and transportation commitments. During 2021, the Company plans to invest $120 to $145 million of capital, which is expected to drive average production of 26,000 to 28,000 boe per day1 representing a 21% to 30% increase over Q4/20 average production. With the execution of our two-year plan, Crew anticipates increasing average daily production over the next 24 months to a target range of 31,000 to 33,000 boe per day1 in 2022, which is targeted to generate meaningful free adjusted funds flow (“AFF”)2 of $35 to $65 million3.
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Strong Start to Crew’s Two-Year Plan
- Q4 Production Ahead: Q4/20 production estimated at 21,500 boe per day1 was ahead of guidance of 20,000 to 21,000 boe per day1. Full year 2020 production is estimated to average 21,900 boe per day1, at the high end of forecasts. Current production volumes, based on field estimates, are estimated at approximately 26,500 boe per day1, an increase of 23% over Q4/20, a result of the tie-in of the 9-5 pad in Q4/20. In 2021, Crew plans to drill 19 wells and complete 14 to 21 wells targeting the Montney formation in the Greater Septimus area of northeast British Columbia.
- Optimizing Commitments: Crew’s firm natural gas transportation utilization has increased to 120 million cubic feet (“mmcf”) per day currently from an average of approximately 95 mmcf per day in Q4/20, with commitments declining to approximately 210 mmcf per day in 2021, and to approximately 165 mmcf per day in 2022, from approximately 250 mmcf per day in 2020. Similarly, our processing requirements are expected to range between 120 and 165 mmcf per day in 2021 and between 150 and 200 mmcf per day in 2022, compared to Crew’s available processing capacity of 200 mmcf per day, greatly improving alignment between production and processing capacity.
Well Permits and Wells Drilled Summary
- Expanded Hedging: Through a very active hedging program, Crew has locked-in value from stronger commodities futures pricing. For 2021, we currently have approximately 50% of our targeted annual average natural gas volumes hedged with a floor price of $2.48/GJ AECO equivalent and approximately 50% of our anticipated annual average condensate volume hedged at CAD $58.60 per bbl.
- Crew’s 9-5 Pad Most Efficient in Company History: Seven wells on our 9-5 pad at Greater Septimus have been drilled, completed, equipped and tied-in with estimated per well costs averaging $5 million, 12% lower than the original $5.7 million budgeted. Wells on the pad are performing in-line with expectations, and after a short clean up period4, the wells have produced an average of 30 days, with an average per well raw gas rate of 8.2 mmcf per day, 170 bbls per day of condensate, and 139 bbls per day of NGLs5. This seven-well pad is currently flowing at restricted rates of approximately 50 mmcf per day of natural gas and 1,030 bbls per day of condensate. Crew’s 9-5 pad is on track to be the most efficient in our history with an expected payout6 in 9 to 11 months compared to the 11 to 14 months originally projected, reflecting lower costs and improved liquids pricing.
- Operational Execution a Prime Focus: Crew currently has two drilling rigs and one fracturing spread in operation. The first drilling rig is drilling the fourth well on Crew’s seven-well 1-8 pad, directly north of our 9-5 pad, on which the Company has just drilled and cased one of the longest wells in our history in under 11 days, with a total length of 20,360 feet and a lateral length of 13,471 feet. The second rig is drilling the first lease retention well at our three-well 4-17 pad at Groundbirch. The six-well 3-32 pad at Greater Septimus is currently being completed with initial production expected to come on-stream in Q2/21.
- Improving Leverage Metrics and Retaining Strategic Optionality: Crew has ample liquidity to complete our two-year plan, with leverage metrics expected to continually improve. Crew’s net debt6 to last twelve-month (“LTM”) EBITDA6 ratio is expected to improve from an estimated 5.5 to 6.0 times at the end of 2020 to a targeted 2.0 to 2.5 times at the end of 2022, with Free AFF6 targeted at $35 million to $65 million in 20227. Additionally, the Company has an option to dispose of an additional 11.43% working interest in our northeast B.C. facilities at Greater Septimus for incremental proceeds of up to $37.5 million. Crew can elect to exercise this option at any time between now and June of 2023 and has not included this amount in our estimates at this time.
- Focus on Environment, Social and Governance (“ESG”) Initiatives: In the summer of 2021, Crew anticipates the installation of a waste heat recovery system at our West Septimus facility, the impact of which will be reduced emissions and enhanced recoveries. The system is expected to reduce total greenhouse gas emissions from the facility by approximately 15%. In addition, we are in the process of developing our inaugural ESG report to stakeholders which is anticipated to be finalized and published by mid-2021.
The Board, management and our Crew team all remain excited about the Company’s two-year asset development plan. We have identified numerous opportunities within our portfolio to expand margins through efficient alignment of our production with infrastructure and transportation commitments. We are actively seeking new ways to reduce leverage metrics to more conservative levels through increased AFF and strategic dispositions which drive enhanced financial flexibility. Underpinning this is Crew’s unwavering focus on our commitment to ESG and being a safe and responsible operator and corporate citizen.
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