Pengrowth transforms into thermal oil, Montney gas focused company

Pengrowth expects total thermal oil production to exceed 50,000 bbl per day

Pengrowth Energy Corporation announced its third quarter 2017 financial and operating results and the completion of its strategic objective of focusing its asset base to its two growth assets, Lindbergh and Groundbirch, according to a press release.

Pengrowth’s long-term development plan is centered on a concentrated asset portfolio with long-life reserves, reduced cost structures, reduced long-term liabilities and reduced infrastructure costs.

“Our company and teams have worked relentlessly this year to execute on our asset disposition program and to enable us to focus on our key growth assets,” said Derek Evans, president and CEO.

“The work that we have done has transformed Pengrowth into a leaner, focused company that is poised to deliver on its long-term development strategy, upon a sustained recovery in crude oil prices, resulting in significant growth in production and associated cash flow over the next five years.”

Underpinning the new Pengrowth is a focused portfolio consisting of two key long-term growth assets at Lindbergh and Groundbirch, with significant future development opportunities.

The substantial completion of the company’s disposition programs and the recent agreement with its lenders and noteholders along with the quality of its SAGD thermal oil and Montney assets has positioned Pengrowth to source less restrictive debt capital.

With success in obtaining less restrictive debt, and a sustained improvement in commodity prices to over US $55 per barrel West Texas Intermediate (WTI), Pengrowth expects to be in a better position to access financing to move forward with the sanctioning of Phase Two of Lindbergh.

The Phase Two expansion of Lindbergh which is projected to increase production capacity to approximately 40,000 barrels (bbl) per day has received all necessary regulatory approvals and could be on stream within 24 months of sanctioning.

The Lindbergh Phase Two expansion has been significantly de-risked by the success of Phase One and based on current assumptions, could deliver full cycle IRR’s of approximately 20 per cent at a WTI crude oil price of US $55 per barrel and a $0.75 Canadian dollar exchange rate.

In addition to Lindbergh, Pengrowth’s thermal portfolio includes inventory north of Lindbergh at Muriel Lake as well as the Selina project in which Pengrowth holds a 50 percent working interest.

Following the development of Lindbergh Phase Two, Selina is expected to produce approximately 12,500 (6,250 net) bbl per day when fully developed.

Pengrowth’s Groundbirch Montney asset is expected to offset and underpin the gas supply requirements of current and future expansion plans on the Company’s thermal portfolio.

With the full development Pengrowth expects its total thermal oil production to exceed 50,000 bbl per day, supplemented by natural gas production potential at Groundbirch that could reach 60 million cubic feet (MMcf) per day.

These key assets are expected to form the foundation of Pengrowth’s growth strategy over the next several years and are expected to position the company to deliver years of production and cash flow growth for the Company and its stakeholders.