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    Canada’s Birchcliff Energy Sets 5-Year Capital Strategy

Summary

Priority will be on reducing debt.

by: Dale Lunan

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Canada’s Birchcliff Energy Sets 5-Year Capital Strategy

Canadian producer Birchcliff Energy revealed a five-year capital plan January 20 that it said would strengthen its balance sheet and maximise free cashflow (FCF).

Its 2021 capital budget calls for finding and development (F&D) expenditures of C$210-$230mn (US$166-$182mn), designed to maintain annual average production of 78,000-80,000 barrels of oil equivalent/day (boe/d) and generate C$360mn of adjusted cashflow and FCF of C$130mn-$150mn.

By the end of the five-year plan in 2025, cumulative FCF is expected to reach C$960mn, which will be prioritised towards debt reduction, CEO Jeff Tonken said.

“In the first two years of the plan, our F&D capital spending will be focused on maintaining a relatively flat production profile in order to strengthen our balance sheet,” he said. “In the last three years of the plan, we intend to focus on fully utilising the available processing capacity of our existing infrastructure, which is expected to increase our free funds flow, drive down our per unit costs and maximise our operational efficiencies.”

In 2025, Birchcliff is projecting annual average production of 91,000 boe/d (78% natural gas), annual adjusted funds flow of C$500mn and annual FCF of $275mn.

Production in the first half this year is expected to average 74,000 boe/d, reflecting proactive shut-ins and a scheduled turn-around of Birchcliff’s 100% Pouce Coupe gas processing plant. Second half production is expected to average 84,000 boe/d as the majority of new wells are brought on production to take advantage of stronger anticipated natural gas commodity prices later in the year.

About 73% of the 2021 capital plan is targeted to drilling, completions and tie-in activities, with 27 net wells drilled and 33 net wells brought on production.

The focus of the drilling will be on developing low-cost, liquids-rich natural gas assets in the Pouce Coupe and Gordondale regions of Alberta’s Montney fairway. Birchcliff has three rigs working this year, which have so far drilled two Pouce Coupe wells and two Gordondale wells.