|Bonanza Creek Energy Provides Operational Update, Announces Year-End 2017 Proved Reserves and 2018 Guidance|
“In 2017, we secured our strategically important leasehold position in
“In 2017, we reduced our annualized G&A and LOE by approximately
“Finally, in 2017, we began a dual-track process to secure permanent leadership for our Company and to consider strategic transactions. While the transaction with
“As we enter 2018, we are confident about our future, and thankful for the tireless efforts of our team and ongoing support of our shareholders. We look forward to more frequent and more detailed engagement with our shareholders as the year progresses.”
Fourth Quarter 2017 Operational Update
During the fourth quarter of 2017, the Company produced an average of 14.8 MBoe per day, exceeding the high-end of the Company’s previous guidance of 14.2 MBoe per day. This outperformance is primarily attributed to lower line pressures in the Company’s Rocky Mountain Infrastructure (“RMI”) system and better than expected performance from wells utilizing enhanced completion designs.
Midstream Contracts Provide Lower Line Pressure and Operational Flexibility
To ensure line pressures remain low as Bonanza Creek adds new wells to sales, the Company also recently entered into an agreement with
The agreement with Cureton is a 15-year gas gathering and processing contract under which Bonanza has dedicated approximately 22,000 net acres, or approximately 33% of its Wattenberg acreage. Based on the timetable in the agreement, the Company expects to commence gathering service with Cureton late in the second quarter of 2018 and to commence processing service at Cureton’s new 60 MMcf per day cryogenic gas plant in the second half of 2018. The agreement contains no minimum volume commitments and provides favorable netbacks compared to the Company’s other processing contracts.
“DUC” Wells Production Outperforming Type Curve
The Company continues to be encouraged by the production from its North Platte 44-13 standard reach lateral (“SRL”) wells, which were completed in
During the fourth quarter of 2017, Bonanza Creek completed five additional wells on its legacy acreage, consisting of three extended reach lateral (“XRL”) wells and two SRLs. These wells are located on the Company’s central legacy acreage and, with approximately 75 days of data, the early production, GOR, and tubing pressures are encouraging for wells with an enhanced completion design. One of these SRL wells tested a slick-water completion with 1,500 pounds of proppant per foot. Early production data from this slick-water test is particularly encouraging as its production results are significantly outperforming those from offsetting wells with gel completions and similar proppant loading.
Record Drilling and Completion Efficiencies
Bonanza Creek recently finished drilling the last of the eight XRL wells on its
Year-End 2017 Proved Reserves
As of year-end 2017, the Company reports preliminary proved reserves of 102.0 MMboe, a 13% increase from year-end 2016. The Company's year-end 2017 proved reserves were comprised of 52.9 MMBbls of oil, 22.8 MMBbls of NGLs, and 157.7 Bcf of natural gas and were 53% proved developed. Proved undeveloped reserves accounted for 48.1 MMBoe of the total proved reserves, a 20% increase in equivalent volumes from year-end 2016. The increase in proved undeveloped reserves is a combination of new PUD cases added during the year and improved production performance expectations for previously booked PUD wells due to the utilization of enhanced completion design. The Company reported all-in reserve replacement excluding price revisions of 202%. The PV-10 value using
Note: Totals may not foot due to rounding
2018 Capital and Production Guidance
In 2018, the Company plans to accelerate development while testing enhanced completion designs on large scale pads throughout the Company’s acreage position. The program contemplates running one rig in the first half of 2018 with a second rig added at mid-year to coincide with additional gas processing capacity from both Cureton and DCP.
The first rig is planned to drill large scale pads of up to nine wells throughout the legacy acreage position. Two of the pads drilled in the first half of the year will be completed using slick-water to further test and validate the improved performance from slick-water compared to historic gel completion designs. One of these pads is located in the western legacy acreage with the second pad located in the eastern legacy acreage. Data gathered from these tests will help inform completion design in the back half of the year. The addition of the second rig will provide additional data to inform completion techniques and development assumptions throughout the acreage position going forward.
Due to the large pads and anticipated third-quarter increase in activity, approximately 55% of the new drills for the year are expected to be turned online in 2019. The 2018 program is expected to grow Wattenberg annual production by approximately 20% in 2018 and annual production from this program is expected to grow by greater than 50% in 2019. Given that production growth is expected to be back-end-weighted in 2018, the Company is expecting unit costs for LOE, Midstream expense, and G&A to show sequential improvement throughout 2018 and into 2019 as greater production volumes are realized.
Allocated capital associated with this program is expected to be approximately
The 2018 program contemplates debt to EBITDAX leverage peaking at approximately 1.0x assuming
The table below provides production, capital and operating cost guidance for 2018. Production growth in 2018 is expected to be back-end-weighted due to tie-ins from our larger pads.
(3) Recurring cash G&A guidance is a non-GAAP measure that is defined as GAAP G&A expense less stock based compensation and anticipated costs for permanent CEO compensation. The Company does not guide to GAAP G&A expense as it has excessive uncertainty due to the stock based compensation portion of GAAP G&A. Please refer to the Non-GAAP disclosure at the end of this release for information regarding Recurring cash G&A.
An investor presentation with additional detail has also been posted to the IR section of the Company’s website at www. Bonanzacrk.com.
Fourth Quarter Earnings Release and Conference Call
The Company announces that it is scheduled to release its fourth quarter 2017 operating and financial results after market close on
The GAAP financial measure most directly comparable to pre-tax PV-10 is the standardized measure of discounted future net cash flows ("Standardized Measure"). Bonanza Creek is not yet able to provide a reconciliation of pre-tax PV–10 to Standardized Measure because the discounted future income taxes associated with the Company's reserves is not yet calculable. The Company expects to include a full reconciliation of pre-tax PV-10 to the GAAP financial measure of Standardized Measure in its Annual Report on Form 10-K for the year ended
Recurring Cash G&A
The Company defines recurring cash G&A as GAAP G&A after adjusting for the impact of non-cash stock compensation expense and non-recurring items. This non-GAAP measure is used by management and investors as additional information as noted above and is subject to the same limitations of analytical tools as noted above and should not be considered as a GAAP substitute for general and administrative expense.
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management’s experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words “will,” “potential,” “believe,” “estimate,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “plan,” “predict,” “project,” “profile,” “model” or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements include statements regarding development and completion expectations and strategy; decreasing operating and capital costs; impact of the Company's reorganization; and updated 2017 guidance. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, that may cause actual results to differ materially from those implied or expressed by the forward-looking statements, including the following: changes in natural gas, oil and NGL prices; general economic conditions, including the performance of financial markets and interest rates; drilling results; shortages of oilfield equipment, services and personnel; operating risks such as unexpected drilling conditions; ability to acquire adequate supplies of water; risks related to derivative instruments; access to adequate gathering systems and pipeline take-away capacity; and pipeline and refining capacity constraints. Further information on such assumptions, risks and uncertainties is available in the Company’s
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(2) Pricing assumes