Advantage Oil & Gas Ltd. is pleased to provide an operational update, including a step change in well productivity combined with reduced capital costs. All development in the second half of 2020 was focused on the foundational Glacier asset, using existing infrastructure and owned plant capacity, with a focus on highest internal rate of return wells.
Development Program Highlights from the Second Half of 2020:
- Drilled 13 wells with exceptional execution. Average penetration rates for the program increased by 27% compared to the previous two Glacier programs, and average total drill costs (including fixed costs) were reduced by 10%. For the last seven wells, spud to rig-release time was only 9 days.
- Completed and tied-in 6 wells incorporating progressive frac design and geological targeting. Average frac count was increased 13% and total sand placed increased by 8%, using locally sourced sand and a revised fluid design.
- Post clean-up, IP30 of the first 5 wells averaged 10.5 mmcf/d at an average pressure of 9.1MPa. This exceeded the 2017 to 2019 results by approximately 87%. All wells were choked back to minimize erosional risks and impacts on preexisting wells; after 1.5 months of production none of the wells had begun declining. The sixth well tested similarly but has remained shut in because the local gathering line is at capacity.
- Total drill, complete and tie-in costs (normalized to tonnes of sand placed) decreased by 10%.
- Average non-productive time from conclusion of testing to permanent production was reduced to 3 days from approximately 21 days.
- During the first quarter of 2021, 8 wells are planned to be completed. Building on the success of the prior 6 wells these wells will receive increased frac intensity with approximately 50% more sand loading.
- Estimated 2020 production was 44,900 boe/d (243 mmcf/d natural gas, 2,380 bbls/d crude oil and condensate, 2,020 bbls/d NGLs), an increase of 1.3% over 2019. Fourth quarter 2020 production was estimated at 43,500 boe/d (234 mmcf/d natural gas, 2,330 bbls/d crude oil and condensate, 2,180 bbls/d NGLs), lower than third quarter as a result of a third-party facility outage and minor equipment delays. December production was over 45,800 boe/d.
- Estimated 2020 liquid production was 4,400 bbls/d (54% condensate/oil), an increase of 63% over 2019.
- Fourth quarter 2020 liquids production was estimated at 4,510 bbls/d (52% condensate/oil), an increase of 49% over fourth quarter 2019.
- At year end, there were eight new Glacier wells drilled but not completed plus one shut in well awaiting pipeline capacity.
- Corporate decline rate is under 23%, driving low sustaining capital of less than $80 million/year.
- At Wembley, Advantage benefited from improved 3rd party on-time and capacity during November and December, driving production 30% higher than the prior 7 months.
- At Progress, production continues to exceed expectations. Cumulative production through restricted facilities has exceeded 2.7 bcf and 250,000 bbls of liquids over 11 months in 2020.
Advantage remains on track to deliver strong growth in adjusted funds flow, based on current natural gas futures pricing. The recent operational achievements will increase Advantage's capital flexibility and establish a strong position to achieve production and debt reduction targets. For 2021, free cash flow, debt reduction and modest production growth remain key priorities.
Approximately three-quarters of 2021 capital will be allocated to Glacier gas-weighted development with one quarter directed towards future development initiatives, including oil and liquids developments at Valhalla, Progress and Pipestone/Wembley. Advantage has maintained the flexibility to reallocate capital between assets should prices swing in favor of liquids development.