Peyto Exploration & Development says it is “putting profitability before growth” with its decision to delay completions on some Deep Basin wells in the first quarter to avoid the cost inflation that has come with increased drilling activity.
“This prudent decision left Peyto with an unusually high number of drilled but uncompleted (DUC) wells at the end of the quarter. As activity levels moderate, these completions and tie-ins are expected to begin, coinciding with the traditionally lower cost summer months,” the company said on Tuesday.
As a result of the new completions schedule, Peyto has also delayed the expansion of its Brazeau gas plant to the third quarter.
Peyto currently has an inventory of 15 DUC wells with estimated production of at least 6,000 boe/d and six completed wells with tested production totaling 4,000 boe/d awaiting tie in.
Of the six tested wells waiting on tie-in, three may be delayed until the end of the year as they are located in a new emerging area for Peyto and require a new infrastructure solution, the company says.
“The bullish commodity outlook last fall which drove aggressive drilling programs in Western Canada this past winter has since softened. This should help relieve some of the inflationary pressures on the service industry and allow Peyto to resume its 2017 capital program of $550-600 million at the expected capital efficiency and with maximum return on invested capital,” the company says.
Peyto currently has four drilling rigs working intermittently through breakup. Activity levels will remain weather dependent though the balance of May and into June, the company says.
“The return of normal conditions, expected in June, will enable Peyto to ramp back up to 9 drilling rigs, and associated completion operations, across the Greater Sundance and Brazeau areas.”
Peyto averaged production of 101,093 boe/d in the first quarter of 2017, flat with production of 101,546 boe/d in the first quarter of 2016 despite deploying nine rigs versus ten the previous year.
The company recorded earnings of $40.26 million in the first quarter of 2017, compared to earnings of $41.94 million in the first quarter of 2016.