Spartan Spartan Energy Corp. moved up to the next level in 2016, from a junior producer to an intermediate producer. On March 16 it released its 2016 year end results.
Spartan completed five consolidating acquisitions in their southeast Saskatchewan operating area in 2016, representing approximately 10,930 barrels of oil equivalent (boepd) of production, 32.5 MMboe of proved developed producing reserves, 43.3 MMboe of total proved reserves, 63.3 MMboe of proved plus probable reserves and 223,000 net acres of land, for an aggregate purchase price of approximately $864.8 million, net of closing adjustments. The five acquisitions added 718 net drilling locations in the Frobisher, Midale, Tilston and Ratcliffe light oil plays in southeast Saskatchewan.
Spartan completed three equity financings of 246.2 million common shares for gross proceeds of approximately $719.6 million. The company achieved average production of 11,748 boepd in 2016 (92 per cent oil and liquids), representing a 33 per cent increase over 2015 (13 per cent per debt adjusted share).
Spartan Drilled 62 (53.7 net) development wells and brought 69 (59.6 net) development wells on production in 2016.
Spartan drilled 42.9 net open-hole Frobisher wells in 2016 (90 per cent success rate), with initial 90 day oil production rates (“IP 90”) exceeding their type well by over 30 per cent. At Alameda, they brought a total of 7 net wells on production in 2016 following the acquisition of Wyatt Oil and Gas Inc. in June 2016. These wells achieved an average IP90 oil rate of 159 barrels of oil per day, approximately 23 per cent above their frac Midale type curve.
The company continued to reduce drilling costs, with drill, complete and equip costs for single leg open-hole horizontal wells drilled after the first quarter of 2016 averaging approximately $600,000.
Spartan’s press release noted, “The outperformance of our wells and continued costs savings allowed Spartan to deliver organic production growth within cash flow despite depressed commodity prices experienced during the year. Total capital expenditures (excluding acquisitions) of $75.8 million were less than adjusted funds flow from operations of $76.7 million. Excluding amounts spent on land and seismic, total capital expenditures represented approximately 82 per cent of adjusted funds flow from operations.”
Spartan has had an active first quarter in the field, with three rigs operating in southeast Saskatchewan and an additional rig drilling their 2016 Viking program in west central Saskatchewan. First quarter activity levels have been in line with budget, and they anticipated drilling 16.9 net open hole, 8.0 net frac Midale and 14.5 net Viking wells in the quarter. All wells were scheduled to be on production prior to the end of the quarter, with the exception of 9.5 net Viking wells and 3.0 net frac Midale wells which are scheduled to be completed and brought on production in the second quarter.
Spartan said they had “a very successful drilling program in 2016, with both open-hole Frobisher wells and frac-Midale wells brought on production during the year exceeding internal type curves. Early results from our first quarter program indicate that this outperformance is continuing, with open-hole wells at Queensdale and Winmore and frac Midale wells at Alameda currently ahead of budgeted type curves.”
Spartan has been a company on the hunt. Its released noted, “The commodity price challenges experienced by the energy industry in 2016 created unique acquisition opportunities, and Spartan was able to capitalize on these opportunities to significantly enhance our asset portfolio.”
Transforming from a junior producer to into an intermediate producer in 2016, Spartan added almost 11,000 boepd of production, while also significantly adding to their inventory of economic drilling locations. The company noted it improved the quality of their reserve base, lowered corporate production decline from 30 per cent to 24 per cent and maintained the strength of their balance sheet.
Spartan said it is on track to meet or exceed their 2017 annual average production guidance of 21,080 boepd, representing 11 per cent annual per share growth, adding, “Based on a 2017 average WTI price of US$50, we anticipate free cash flow (in excess of forecast drilling and maintenance capital) of approximately $42 million in 2017.”
The company is budgeting to allocate up to $15 million of excess cash flow to discretionary investments such as the initiation and expansion of waterflood projects and the acquisition of additional land and seismic data. The remainder of their free cash flow will be used to further strengthen our balance sheet and drive additional growth by pursuing acquisition opportunities in their core operating areas.
