Will Pengrowth pay a dividend in Q2 or Q3?
On January 21,2016 Pengrowth Oil and Gas gave a press release announcing it's capital budget,operational budget and the temporary suspension of it's dividend.They announced that the dividend would be reviewed each quarter to see if it will be reinstated.But the main piece of news is that Pengrowth (PGF) will have a capital budget of $60 to $70 million this year;this compares with a capital budget of about $190 million last year.They also announced that they expect production of 59,000 to 61,000 boe/day which compares to 71,400 boe/day in 2015.And that the capital program will focus on maintenance operations only; there will be no exploratory drilling.
Last year
In 2015 average annual production was 71,400 boe/day so they are expecting a reduction of about 10,000 boe/day this year.They gave guidance of $15.50 per barrel for operating expenses but in actuality they were $14.28 per barrel.This however only counts 9 months of expenses for Lindberg but there will be increased production in 2016 to spread them over.Consequently this blog expects this cost to be the same or a little higher for 2016.They sold off $263 million of non-core assets in 2015 and there is another $40 million of pending sales.But they lost 9100 boe/day of production resulting from the sale of assets.Furthermore they expect to have another $600 million of asset sales in 2016.They add that their breakeven price of oil is $29 a barrel so with luck there will be a positive contribution from each barrel sold(on average) in 2016.
The 2016 Capital Program
Their capital program is based on an average price of $30 a barrel of oil and $2.40 per mcf for natural gas.This blog believes that $30 a barrel and hence their capital program is sustainable.There will be almost $15 million set out to advance long term projects such as Lindberg and Bernadet.Bernadet is a new discovery that little is yet known about but this blog believes that it is a light oil play perhaps in the Swan Hills project.
Lindberg has advanced in 2015;it only started in commercial production in Q2.Production moved from 10,500 barrels per day to 16,500 barrels per day.It's production costs are less than that for all other wells of PGF.Money will be spent on pre-engineering for Phase II although they still need regulatory approval for this phase.Production in the next phase will be reach 30,000 barrels per day.
Maintenance Capital Expenses
PGF expects to spend $46 million on what it is referring to as maintenance capital.This will include two turnarounds - one at their Olds property and one at their Swan Hills property.Also they will optimize the pressure in their legacy properties to increase production.PGF is lucky here as their decline rates are one of the lowest in the Alberta basin.
The goals of their capital program are to get Lindberg in or close to being in Phase II.Also they should have their Bernadet discovery in production by the end of Q3.They will also continue with their asset disposition program and sell up to $600 million of assets.This was used to pay down debt in 2015 and will continue to do so in 2016.
Conclusions from their Program
Pengrowth expects production to be at 60,000 boe/day.This will include lost production from asset sales and increased production from legacy assets, Lindberg and maybe Bernadet.The operating cost will likely be close to $14.50 per barrel with lower production expected.The wild card will be how quick they get regulatory approval for Phase II and how quick they ramp up to 30,000 barrels per day.So in answer to the question posed at the outset PGF will not likely reinstate their dividend in Q2or Q3. They have to aim for increased production from Lindberg and Bernadet for Q4 and the price of oil hitting $40 per barrel by mid-year.This combination of factors may result in their dividend for Q4.
use Blogdaleupsome for analysis of resource stocks;see analysis of resource stocks in Blogdaleupsome
Last year
In 2015 average annual production was 71,400 boe/day so they are expecting a reduction of about 10,000 boe/day this year.They gave guidance of $15.50 per barrel for operating expenses but in actuality they were $14.28 per barrel.This however only counts 9 months of expenses for Lindberg but there will be increased production in 2016 to spread them over.Consequently this blog expects this cost to be the same or a little higher for 2016.They sold off $263 million of non-core assets in 2015 and there is another $40 million of pending sales.But they lost 9100 boe/day of production resulting from the sale of assets.Furthermore they expect to have another $600 million of asset sales in 2016.They add that their breakeven price of oil is $29 a barrel so with luck there will be a positive contribution from each barrel sold(on average) in 2016.
The 2016 Capital Program
Their capital program is based on an average price of $30 a barrel of oil and $2.40 per mcf for natural gas.This blog believes that $30 a barrel and hence their capital program is sustainable.There will be almost $15 million set out to advance long term projects such as Lindberg and Bernadet.Bernadet is a new discovery that little is yet known about but this blog believes that it is a light oil play perhaps in the Swan Hills project.
Lindberg has advanced in 2015;it only started in commercial production in Q2.Production moved from 10,500 barrels per day to 16,500 barrels per day.It's production costs are less than that for all other wells of PGF.Money will be spent on pre-engineering for Phase II although they still need regulatory approval for this phase.Production in the next phase will be reach 30,000 barrels per day.
Maintenance Capital Expenses
PGF expects to spend $46 million on what it is referring to as maintenance capital.This will include two turnarounds - one at their Olds property and one at their Swan Hills property.Also they will optimize the pressure in their legacy properties to increase production.PGF is lucky here as their decline rates are one of the lowest in the Alberta basin.
The goals of their capital program are to get Lindberg in or close to being in Phase II.Also they should have their Bernadet discovery in production by the end of Q3.They will also continue with their asset disposition program and sell up to $600 million of assets.This was used to pay down debt in 2015 and will continue to do so in 2016.
Conclusions from their Program
Pengrowth expects production to be at 60,000 boe/day.This will include lost production from asset sales and increased production from legacy assets, Lindberg and maybe Bernadet.The operating cost will likely be close to $14.50 per barrel with lower production expected.The wild card will be how quick they get regulatory approval for Phase II and how quick they ramp up to 30,000 barrels per day.So in answer to the question posed at the outset PGF will not likely reinstate their dividend in Q2or Q3. They have to aim for increased production from Lindberg and Bernadet for Q4 and the price of oil hitting $40 per barrel by mid-year.This combination of factors may result in their dividend for Q4.
use Blogdaleupsome for analysis of resource stocks;see analysis of resource stocks in Blogdaleupsome
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