​Peyto drops 2018 capital spending outlook by $200 million on low natural gas prices

Image: Peyto Exploration

Peyto Exploration has significantly reduced its capital spending plan for this year as a result of a reduced outlook for natural gas pricing.

In November 2017, when the 2018 price forecast for natural gas was C$2.02/GJ AECO, Peyto announced a capital program of $300 million and $450 million. On Friday, with the forecast reduced to C$1.35 AECO, the capital program was slashed to $200 million to $250 million.

“As always, investment will be directed toward the highest return opportunities within Peyto’s vast inventory of drilling locations, now with particular focus on the most liquids rich portions of the Company’s Deep Basin assets,” the company said in a statement.

“Although Peyto can still generate positive returns on its well economics at these prices, the returns are significantly improved merely by delaying investments until higher natural gas prices on the future strip, or lower development costs, can be realized.”

For example, the company said it plans to invest in its underdeveloped Cardium resource – where yields are up to 60 percent natural gas liquids – using newly designed horizontal wells and higher density fracture treatments.

Overall capital spending will include drilling, completing and connecting approximately 50 to 60 net wells, installing a new 20 MMCF/d gas plant in the Whitehorse area, and adding new drilling inventory through new land purchases, Peyto said.

“Much of this activity will be scheduled in the latter half of the year to ensure new, flush production is coming on-stream into next winter’s higher natural gas prices.”

The reduced program is expected to add approximately 25,000 boe/d of new production by year-end to the existing production base, which is anticipated to decline at approximately 35 percent throughout the year. Average production for the year 2018 is expected to be 2 percent lower than 2017, which Peyto exited at 115,000 boe/d.