Pengrowth doubles capital budget from 2016
Pengrowth announces third year without conventional drilling, but doubles budget from 2016
By Deborah Jaremko
Jan. 18, 2017, 5:46 p.m.
For the third year in a row announcing its annual capital budget, Pengrowth Energy Corp. is not planning any development drilling at its conventional oil and gas assets.
However, the company has increased its interim spending plan to $125 million, up from $60-$70 million budgeted for 2016.
The budget is considered interim because it could change based on Pengrowth’s ongoing divestiture process, the company said Wednesday.
The majority of the 2017 spend will be at Pengrowth’s Lindbergh SAGD project in the Cold Lake region, which continues to exceed design expectations. The project was built with nameplate capacity of 12,500 bbsl/d and a design steam-oil ration of 3.6:1, but ended 2016 at 15,654 bbls/d with an SOR of 2.48:1, thanks in part to optimization activities.
“We are excited to put further capital dollars to work at Lindbergh in order to optimize Phase One,” CEO Derek Evans said in a statement, adding that optimization activities are projected to generate pad-specific returns ranging from approximately 30 to 50 percent at a WTI price of US$45/bbl and approximately 55 to 90 percent at a WTI price of US$55/bbl.
The company will also invest in the second phase at Lindbergh, a 17,500 bbl/d expansion that received regulatory approval in spring 2016.
Here’s a snapshot of Pengrowth’s $125 million 2017 capital budget:
- $80 million total at Lindbergh, including $60 million on optimization work that is expected to bring production to 18,000 bbls/d by the end of this year.
- This includes drilling seven new well pairs, two infill wells, and expanding the associated infrastructure.
- The $80 million also includes $10 million at Lindbergh on engineering and design for the Phase Two expansion. By the end of the year, Pengrowth expects the design work to be approximately 70 percent complete and to be ready to execute on Phase Two as funds become available.
- The remaining $10 million at Lindbergh will be spent on maintenance at Phase One, including a planned plant turnaround in the third quarter of the year.
- Approximately $42 million allocated towards safety, asset integrity and maintenance programs on Pengrowth’s conventional assets, directed towards maintenance of infrastructure and integrity initiatives to support ongoing operations across Pengrowth’s conventional asset portfolio.
The interim 2017 capital budget is expected to support annual average daily production of between 50,000 and 52,000 boe/d before any potential dispositions, Pengrowth says.