 | Painted Pony Petroleum Ltd. - PPY.t is engaged in the exploration, development and production of petroleum and natural gas resources. The Company focuses on light oil in southeast Saskatchewan and central Alberta and natural gas in northeast British Columbia. |  |
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2016 Capital Program
The updated 2016 capital program is expected to deliver previously forecasted production volumes targets, including a 2016 exit production rate anticipated to be in excess of 240 MMcfe/d (40,000 boe/d), for total spending of approximately $179 million . This represents a reduction of approximately $36 million (17%) from 2016 capital spending guidance of $215 million released in November 2015 and a reduction of approximately $18 million (9%) from 2016 capital spending guidance of$197 million released in January 2016 . Drilling, completion and equipping costs have been further reduced by 19% to $4.8 million per well from $5.9 million per well as budgeted in November of 2015. These additional costs savings are the result of ongoing efficiencies achieved in Painted Pony's capital operations. The Corporation will continue to implement operational efficiencies to ensure any additional capital cost savings are identified and captured.
Updated Hedging
During the first quarter of 2016, Painted Pony entered into additional financial hedges to provide commodity price risk mitigation. Total hedges now cover approximately 61% of forecast 2016 annual average natural gas production volumes. For the first three quarters of 2016, hedges consist of AECO fixed-price swaps at an average price of $3.30 /Mcf on 61 MMcf/d of forecast average natural gas production volumes of approximately 100 MMcf/d. For the fourth quarter of 2016, Painted Pony has entered into Station 2 fixed price hedges on 55 MMcf/d of natural gas production at an average price of $2.09 /Mcf. These Station 2 hedges are in addition to AECO fixed price hedges during the fourth quarter of 2016 on 78 MMcf/d of natural gas production at an average price of $3.30 /Mcf of forecast fourth quarter average natural gas production volumes of approximately 215 MMcf/d.
Financial hedges for 2017 cover approximately 49% of forecast 2017 annual average natural gas production volumes. These 2017 hedges consist of AECO fixed price hedges on 58 MMcf/d of average natural gas production at an average price of $3.33 /Mcf and Station 2 fixed price hedges on approximately 65 MMcf/d of average natural gas production at an average price of $2.09 /Mcf.
Painted Pony is well protected in this low commodity price environment with existing hedges and anticipates continuing to mitigate commodity price risk by hedging incremental production volumes to provide downside price risk protection and reduce future cash flow volatility.
Operational Update
To date, Painted Pony's three drilling rigs have drilled 13 (13.0 net) wells. All of the wells necessary to meet the initial commitment at the Facility have been drilled and rig-released.
Completion crews have finished 9 (9.0 net) completions to date. Painted Pony has planned for a total of 14 (14.0 net) completions during the first half of 2016 which is expected to ensure the volume commitment for the Facility is met. The 2016 capital program anticipates a total of 30 (30.0 net) completions which, in addition to meeting volume commitments at the Facility, will provide production growth momentum into 2017.
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