Operations

“Significant Well Location Inventory and Industry Leading Low Costs & Capital Efficiencies”

The company is focused on development and delineation of its world class Montney natural gas and liquids resource at Glacier, Wembley, Valhalla and Progress, Alberta. Advantage holds a total of 200 net sections (128,000 net acres) of Doig/Montney rights with 110 of those sections being outside of Glacier in the Valhalla/Progress/Wembley areas that have potential for liquids-rich and multi-layer development. Since 2008, production has grown to approximately 275 mmcfe/d (45,833 boe/d) and 2P reserves have increased to 2.5 Tcfe at December 31, 2017. Upper, Middle & Lower Montney wells generate strong half-cycle rates of return at $2.00/mcf Cdn AECO prices and $60 US/bbl WTI pricing, and have low break-even prices. Future investment will target increasing liquids content and moderating gas growth. Glacier Gas Plant Expansion RenderingClick the image for a rendering of the Glacier Gas Plant at 400 MMscfd

Current Production:
275 mmcfe/d (45,833 Boe/d)
95% natural gas
5% light oil & NGLs
P+P Reserves Life Index: ~27 years

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Three Year Development Plan (2019 through 2021)
Advantage’s Board of Directors has approved a three year development plan (the “Plan”) including the Corporation’s 2019 capital and operating budget. This Plan is expected to be internally funded through redeploying surplus cash generated by our Glacier asset, growing liquids revenue and existing credit facilities. Advantage’s Plan is based on current annual average 2019 through 2021 strip prices for natural gas of $1.78/mcf AECO and oil of WTI $65.50 U.S./bbl and the Corporation’s hedging and market diversification positions.

Advantage’s Plan is strategically designed to:

  • Continue strengthening our solid business foundation by increasing our premium C5+ / light oil production mix to further diversify and enhance the Corporation’s revenue sources making Advantage even stronger through and beyond 2021
  • Preserve balance sheet strength and develop additional operational and infrastructure optionality by optimizing infrastructure investment, leveraging efficiencies in our existing owned process capacity and utilization of third party processing capacity
  • Strengthen netbacks while maintaining Advantage’s industry leading low cash cost structure
  • Increase flexibility to optimize capital allocation by development of Advantage’s vast multi-zone liquids potential while retaining torque to its extensive and ultra-low cost natural gas resource
Key Anticipated/Estimated highlights of our Plan are:

  • Increases annual liquids production 700% to an exit rate of over 14,000 bbls/d and an annual average of 11,370 bbls/d in 2021 representing over 22% of total production and approximately 60% of total revenue
  • Increases premium C5+ / light oil content from currently 67% to 82% of total liquids
  • Increases total annual average production by 25% or 8% compound annual growth rate (“CAGR”) to 52,300 boe/d (314 mmcfe/d) in 2021 over estimated 2018 annual production
  • Further diversifies Advantage’s revenue exposure with natural gas accounting for approximately 14% AECO, 13% Dawn and 14% mid-west U.S. by 2021
  • Increases adjusted funds flow by 15% to $0.99/share in 2019, 26% to $1.25/share in 2020 and 34% to $1.67/share in 2021 over each prior annual period
  • Increases adjusted funds flow per boe by 58% to $16.56/boe ($2.76/mcfe)
  • Preserves financial flexibility with year-end total debt to trailing adjusted funds flow ratios of 1.6, 1.2 and 0.6 for 2019, 2020 and 2021, respectively. Significant cash flow growth results in cumulative cash of $735 million as compared to a capital investment of $690 million over the three years
  • Maintains Advantage’s industry leading low total cash costs averaging $7.92/boe ($1.32/mcfe) over the three years
  • Requires only 96 new Montney wells to achieve the objectives of our Plan while retaining a significant high quality inventory of over 1,200 future Montney locations for development beyond 2021
  • Enhances operational and financial optionality through utilization of third party processing capacity for our initial Pipestone/Wembley development with options to expand. This efficiently manages infrastructure capital requirements, provides more processing flexibility and accommodates growth from Advantage’s other assets and third party processing revenue at our 100% owned Glacier gas plant. The Corporation continues to work on and retains future optionality to construct a Wembley to Glacier pipeline

We look forward to reporting on our progress as we continue development of our world class Montney resource with financially disciplined and full-cycle returns based approach that focuses on per share value generation.

Glacier
At Glacier Advantage holds 90 sections of contiguous Doig/Montney rights. The property is located adjacent to the provincial boundary between Alberta and British Columbia and is between the cities of Grande Prairie, Alberta and Dawson Creek, British Columbia.

Montney-Layers-ImageClick to enlarge

The total thickness of the Montney at Glacier is approximately 300 metres and lends itself to multiple layers of development which contributes to an inventory of >1,000 future well locations within this resource play.

Since the spud of the first horizontal well in July 2008, as of September 30, 2018, Advantage has drilled & completed approximately 210 horizontal wells. While our original focus was on the Upper and Lower Montney, Advantage has continued with its program to delineate the Glacier land block by drilling and testing wells in the liquids rich Middle Montney formation. To date, a total of 36 horizontal wells and 3 vertical recompletions have been tested and or produced, confirming the presence of liquids across Glacier with liquid yields up to 83 bbls/mmcf in the eastern half of the land block. Advantage’s Middle Montney wells at Glacier are continuing to demonstrate strong production performance and extended our liquids rich fairway across the entire land block. Well performance improvements from frac design technology changes on more recent drilling programs will be applied to high liquids rich areas and reservoir layers within our Montney lands.

Advantage owns and operates a 100% working interest gas plant located at 5-02-76-12W6. The Glacier gas plant was recently expanded to a throughput capacity of 400 MMcf/d of raw gas including 6,800 bbls/d of C3+ liquid extraction. The expansion provides sufficient capacity to accommodate our growth plans over the next number of years and provide opportunities to process additional third party gas at our facility. All gas is sold through Advantage’s 100% owned sales pipeline into the TransCanada pipeline system. Combined operating costs at our Glacier field and plant are the lowest among the Montney producers at approximately $0.25/mcfe.

Gas-PlantClick to enlarge
Wembley
At Wembley Advantage holds 31 sections of contiguous Montney rights. Our first delineation well was drilled in 2017 to a lateral length of 2,254 meters and was fracture stimulated with 38 stages. The well was tested over a total of 17 days at restricted rates due to regulatory flaring limitations. At the conclusion of our production test period, our well demonstrated an average flow rate of 1,312 boe/d consisting of 2.9 mmcf/d of gas and 819 bbls/d of hydrocarbon liquids. The wellhead condensate/oil rate was 624 bbls/d with an additional 195 bbls/d of C3+ liquids based on a shallow cut extraction process. Industry drilling adjacent to our lands have targeted multiple Montney layers with results demonstrating liquids-rich gas accumulations in all layers to date.

Valhalla
At Valhalla Advantage holds 40 sections of contiguous Doig/Montney rights. We are building an initial facility installation which includes 40 mmcf/d of compression and 2,000 bbls/d of liquids handling to collect and transport natural gas and liquids for processing at our 100% owned Glacier gas plant. The facility is expandable to accommodate future liquids rich production growth and could also be utilized as a hub where future production from Wembley and Progress could be collected and transported to our Glacier gas plant. This facility is scheduled to be completed late in the fourth quarter of 2018.

In 2017, a 4 well Montney pad was drilled as a follow-up to 3 wells that were placed on production in 2016. This new 4 well pad demonstrated a combined initial production test rate of 6,410 boe/d comprised of 32 mmcf/d gas and 1,075 bbls/d of liquids (based on Glacier gas plant shallow cut extraction process). Individual well C3+ liquid yields of 20 bbls/mmcf to in-excess of 80 bbls/mmcf. Industry drilling adjacent to our lands have targeted multiple Montney layers with results demonstrating liquids-rich gas accumulations in all layers to date.

Progress
At Progress Advantage holds approximately 39 sections of contiguous Doig/Montney rights. Our first delineation well was drilled in 2017 to a lateral length of 2,313 meters and was fracture stimulated with 44 stages. The well was production tested over a 6 day period and was drawn down to less than 40% of the reservoir pressure while flowing up production casing. At the conclusion of the test, the well was producing at an average rate of 624 boe/d consisting of 2.7 mmcf/d of gas and 172 bbls/d of hydrocarbon liquids. Industry drilling adjacent to our lands have targeted multiple Montney layers with results demonstrating liquids-rich gas accumulations in all layers to date.

Click to enlarge Operating-CostsClick to enlarge Montney-Well-PerformanceClick to enlarge
F&D-CostsClick to enlarge 2P-Reserves-ReportClick to enlarge Completion-CostsClick to enlarge