Perpetual Energy increases funds flow
Perpetual Energy reported it's first quarter results on May6.It showed only a slight increase in production(up3%).But it's funds flow was up 27% over the same quarter in 2013.Oil and natural gas liquids (NGL) was consistent at 3451 bbl/day but heavy oil production was up.Overall netback was up because more heavy oil was produced which has a higher netback.And because the netback on natural gas has gone up since 2013.As a result the funds flow was $17 million or $.12 per share an increase of 82% over Q1 2013.And even a 34% increase over Q4 2013.Nevertheless Perpetual showed a net loss of $17 million because it took a loss on hedging.
Capital expenditures and exploration
The capital budget for 2014 will be $70 to $80 million.$31 million has already been spent in this quarter.About $48 million more is planned to be spent for the rest of the year.Most of it will be spent on their Mannville (heavy oil) and their Edson properties(NGL).There will be 11 new wells drilled at Mannville and 3 new wells at Edson.Some expenditures will be targeted towards tying in wells at Edson properties.Also there will be expenditures on new compression equipment at Edson for natural gas liquids.However this year some money will be dedicated to reactivating shallow gas wells.$1.4 million was spent on reactivating shallow gas wells in the first quarter and they got increased production of 6.2 MMcf/day.A further $5 million will be spent on shallow gas wells during the rest of the year.No estimate is provided for increased production but it is known that this is the last year of a 10 year shut-in production period for many wells.We might conservatively expect another 3.8 MMcf/day of new production.But the biggest capital expenditure will be at Mannville as they have already discovered 3 new pools here.There will probably be money spent on horizontal drilling and tie-ins.So it is very likely that oil production will be up for the year as new production comes onstream.
2014 Guidance
Perpetual says that capital expenditures will be between $70 to $80 million. Funds flow is expected to be about $80 to $90 million.Based on funds flow in the first quarter this seems about right.However it may be low depending on two factors.First is the increased production coming out of the new Mannville pools of heavy oil.That, of course, depends on how fast Perpetual can tie-in these new wells and how fast the new product can be delivered to market.Secondly can Perpetual get an increase in production from these shallow gas shut-in wells whose shut-in period has terminated?If these two factors are positive then total production will likely exceed guidance and so will positive funds flow.This might also mean increasing the capital budget but Perpetual just got an increase in their borrowing capacity from $110 to $130 million.We will see if Perpetual meets or beats guidance in 2014.
Capital expenditures and exploration
The capital budget for 2014 will be $70 to $80 million.$31 million has already been spent in this quarter.About $48 million more is planned to be spent for the rest of the year.Most of it will be spent on their Mannville (heavy oil) and their Edson properties(NGL).There will be 11 new wells drilled at Mannville and 3 new wells at Edson.Some expenditures will be targeted towards tying in wells at Edson properties.Also there will be expenditures on new compression equipment at Edson for natural gas liquids.However this year some money will be dedicated to reactivating shallow gas wells.$1.4 million was spent on reactivating shallow gas wells in the first quarter and they got increased production of 6.2 MMcf/day.A further $5 million will be spent on shallow gas wells during the rest of the year.No estimate is provided for increased production but it is known that this is the last year of a 10 year shut-in production period for many wells.We might conservatively expect another 3.8 MMcf/day of new production.But the biggest capital expenditure will be at Mannville as they have already discovered 3 new pools here.There will probably be money spent on horizontal drilling and tie-ins.So it is very likely that oil production will be up for the year as new production comes onstream.
2014 Guidance
Perpetual says that capital expenditures will be between $70 to $80 million. Funds flow is expected to be about $80 to $90 million.Based on funds flow in the first quarter this seems about right.However it may be low depending on two factors.First is the increased production coming out of the new Mannville pools of heavy oil.That, of course, depends on how fast Perpetual can tie-in these new wells and how fast the new product can be delivered to market.Secondly can Perpetual get an increase in production from these shallow gas shut-in wells whose shut-in period has terminated?If these two factors are positive then total production will likely exceed guidance and so will positive funds flow.This might also mean increasing the capital budget but Perpetual just got an increase in their borrowing capacity from $110 to $130 million.We will see if Perpetual meets or beats guidance in 2014.
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