Alberta news brief July 12: 7 Generations Energy on track to meet 2017 production guidance

Seven GenerationsAlso in this brief: Veresen merges with Pembina Pipeline Corporation, Canada is a net energy exporter

Calgary-based Seven Generations Energy Ltd. says it ended the first half of 2017 with record production volumes, demonstrating the underlying strength and long-term potential of the company’s liquids-rich Montney assets.

Seven GenerationsSeven Generations’ Q2 production averaged approximately 164,000 boe/d, while June’s production is estimated to be approximately 179,000 boe/d, based on field estimates. Production growth is on track to meet 2017 production guidance of 180,000 to 190,000 boe/d, which would constitute an increase of more than 50 per cent from 2016, the company said in a press release.

“First half performance is consistent with our expectations, and our strong activity levels in the first half will generate even more production growth in the second half of 2017,” said CEO Marty Proctor.

Annual production is on track despite an unplanned third-party facility outage for four days in May. This disruption was mitigated by diverting a portion of production to 7G’s other facilities.

“We had a very busy first half of 2017, operating an average of 13 rigs and three hydraulic fracturing spreads. We tied-in 23 wells in the second quarter and we are continuing to execute our robust drilling program for the remainder of the year,” said COO Glen Nevokshonoff.

Capital investment in the first half of 2017 was about $910 million and $550 million in Q2, about 60 per cent of planned 2017 capital investment of $1.5 billion to $1.6 billion.

Seven Generations is a low-cost, high-growth Canadian natural gas developer generating long-life value from its liquids-rich Kakwa River Project, located about 100 kilometres south of its operations headquarters in Grande Prairie, Albert. 7G’s corporate headquarters are in Calgary and its shares trade on the TSX under the symbol VII.

Veresen shareholders will receive 0.4287 of a common share of Pembina or $18.65 in cash

Veresen shareholders voted to approve the merger between Pembina Pipeline Corporation and Veresen Inc. that will create one of the largest energy infrastructure companies in Canada, according to a press release.

“We are very pleased with the overwhelming support of our shareholders to create a leading Canadian energy infrastructure business,” said Don Althoff, CEO of Veresen.

Greater than 99 per cent of common shares voted were in favour of merging, with approximately 62 per cent of Veresen’s outstanding common shares voting.

“We strongly believe that the combined company is greater than the sum of its parts and will be well positioned to compete for future investment opportunities in order to drive significant growth over the long term,” said Althoff.

Pembina will acquire all of the issued and outstanding common shares of Veresen in exchange for either 0.4287 of a common share of Pembina or $18.65 in cash.

“With increased size and scale, and the significant operational synergies we will realize, the integration supports our consolidated adjusted EBITDA growth and positions us for top-tier performance going forward,” said Mick Dilger, Pembina CEO.

“Immediately accretive to free cash flow, this transaction enhances each company’s successful strategy of integrated customer service offerings while supporting our focus on delivering sustainable dividend growth to our shareholders into the future.”

Closing of the Transaction remains subject to court approval, as well as certain regulatory and government approvals and other customary closing conditions.

Pembina and Veresen expect the transaction will close late in the third quarter or early in the fourth quarter of 2017.

Seven Generations

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Canada is a net exporter of crude oil, natural gas, propane and electricity

The prices for each commodity in Canada track U.S. benchmark prices, with differences primarily related to the cost of transportation and regional supply and demand dynamics, according to a press release from the NEB.

Crude oil and propane prices are generally quoted in U.S. dollars, whereas natural gas and electricity prices are often quoted in Canadian dollars due to their higher proportion of domestic retail sales.

Changes in the exchange rate affect revenue received for exports (or the cost of imports).

The table below shows Canadian and U.S. benchmark prices, with recent month-to-month and year-over-year comparisons.

Commodity Price Update
2017 2016
June May YTD avg. June May Avg.
Exchange Rate Canadian $ / U.S. $ 1.33 1.36 1.33 1.29 1.29 1.33
Crude Oil Prices
(US$/bbl)
West Texas Intermediate 45.86 48.38 50.12 48.76 46.71 43.14
Brent 47.08 51.36 52.06 48.25 46.74 43.55
Western Canadian Select 37.54 38.73 38.54 36.47 32.52 29.48
Natural Gas Prices
(CA$/GJ)
Henry Hub 3.70 4.04 3.83 3.12 2.34 3.13
Alberta NIT 2.39 2.85 2.60 1.78 1.17 2.07
Dawn, ON 3.71 4.11 4.01 3.05 2.48 3.26
Station 2, Westcoast Spectra, BC 1.97 2.35 2.27 1.67 0.90 1.67
Propane Prices
(US cents per gallon)
Edmonton 31.9 34.6 43.4 24.2 19.6 22.5
Sarnia 61.4 62.9 72.7 61.7 60.0 61.1
Mont Belvieu 59.3 64.2 67.4 50.0 53.1 48.2
Conway 56.0 61.1 62.7 47.2 49.2 44.7
Electricity Prices
(CA$/MW.h)
Alberta (AESO On-Peak) 19.30 24.50 22.80 16.79 17.05 19.70
Ontario (IESO On-Peak) 9.14 6.83 19.17 27.47 16.66 20.54
Ontario (IESO On-Peak + Global Adjustment) 115.66 134.59 116.18 122.97 124.16 118.05
Canada is a net exporter of crude oil, natural gas, propane and electricity.
The NEB regulates the exports of crude oil, refined petroleum products, natural gas, NGLs and electricity.
The NEB also regulates natural gas imports and collects statistics for electricity imports. The table below shows these commodity exports and imports, with recent month-to-month and year-over-year comparisons.
Trade Volumes Update
2017 2016
April March YTD avg. April March Avg.
Crude Oil
Volumes (Mb/d)
Exports 3,390 3,371 3,387 2,960 3,190 3,101
Refined Petroleum
Products
Volumes (Mb/d)
Exports 271 263 299 388 421 370
 Natural Gas
Volumes (Bcf/d)
Exports 7.97 8.97 8.79 8.04 7.62 8.17
Imports 2.64 3.08 3.05 2.14 2.59 2.12
Net Exports 5.32 5.89 5.74 5.91 5.03 6.05
Propane
Volumes (Mb/d)
Exports 101 139 146 102 119 114
Butanes
Volumes (Mb/d)
Exports 23 15 20 19 16 19
Electricity
(GW.h/month)
Exports 5,975 6,055 6,014 4,608 5,738 6,092
Imports 1,288 1,230 971 916 1,019 775
Net Exports 4,687 4,826 5,043 3,692 4,719 5,317

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