Canada’s Peyto Hits Drilling Milestone in Q3
Canadian Deep Basin producer Peyto Exploration & Development said November 10 it drilled its milestone 1,000th horizontal well at the end of Q3 2020, making it the most active horizontal driller in the basin.
The milestone well was drilled by a rig that has worked for Peyto, without a lost-time incident, for more than a decade. And it set a new pace record for the company, drilling to a measured depth of 4,250 m with a horizontal leg of 1,832 m in just 6.5 days.
Also in Q3, Peyto reported funds from operations (FFO) declined by 28% from Q3 2019, to C$49.2mn (US$37.5mn), but were 49% higher than in Q2 2020 on the strength of higher commodity prices. The company had a net loss in the quarter of C$11.3mn against earnings in the year ago period of C$6.3mn.
Natural gas production in Q3 edged slightly higher, to 401.7mn ft3/day from 396.3mn ft3/day, while oil and natural gas liquids production averaged 11,263 b/d, up from 10,650 b/d in Q3 2019.
Although Peyto’s realised commodity price for gas increased to C$2.62/’000 ft3 in Q3 2020 from C$2.17/’000 ft3 in Q3 2019, gas market diversification costs, partially offset by hedging gains, reduced its effective product price for natural gas to C$1.64/’000 ft3 from C$1.84/’000 ft3.
“Moving forward, the company expects to continue to market more of its gas at hubs outside of Aeco but expects that market diversification costs will be significantly reduced over time,” the company said.
While Peyto – like many of its peers – cut 2020 capital expenditure plans early in the spring with the emergence of the Covid-19 pandemic, it’s now anticipating a higher capital program in 2021 that will be funded entirely from free cash flow.
With specifics yet to be finalised, it’s contemplating capital expenditures of between C$300mn and C$350mn in 2021, up from the revised 2020 program of C$200-$250mn set in April. Capital expenditures through September this year stood at C$167.45mn.
“While this proposed capital program will be funded entirely from available free cashflow, it should result in production, cashflow and earnings growth, as well as bring total leverage metrics in line, allowing Peyto to exit its covenant relief period with lenders earlier than originally contemplated,” the company said. “As always, Peyto will ensure any capital plans will be nimble with the ability to react to changes in commodity prices and the global economic environment, both of which continue to be volatile and uncertain.”