Birchcliff upping 2019 drilling capital as others back off

Birchcliff Energy CEO Jeff Tonken. Image: Joey Podlubny/JWN

Natural gas and liquids producer Birchcliff Energy is going against the industry trend and increasing its capital program for 2019.

With strong Q2 results, including encouraging performance of new wells in the Pouce Coupe and Gordondale regions of the Montney play, Birchcliff announced on Wednesday that it will increase spending by approximately 19 percent.

The company now plans to spend $242 million on exploration and development, up by $38 million compared to previous guidance.

That will provide for drilling of an additional seven net horizontal wells, which are expected to be onstream by November 1, 2019.

The company has increased its production guidance for the year to 77,000 to 79,000 boe/d, up from 76,000 to 78,000 boe/d previously.

“Counter to much of the industry, Birchcliff is expanding its E&D capex program,” GMP FirstEnergy analyst Robert J. Fitzmartyn wrote in a research note on Thursday.

He said the move was “partially telegraphed” by Birchcliff investing 79 percent of its previously announced 2019 capital budget during the first half of the year.

“We think this will be notable for the market, given much of industry moving the other way in the current environment.”

Birchcliff production averaged 78,453 boe/d in the second quarter, which CEO Jeff Tonken said was ahead of the company’s internal budget, and a three percent increase from the previous year period.

He said that even with the spending increase, Birchcliff’s 2019 capital program is still expected to be significantly

less than its forecast of 2019 adjusted funds flow.

The company reported a net loss of $9.5 million during Q2/2019, down from net income of $6.4 million in Q2/2018.

Included in this quarter’s results is a loss on financial instruments of $35.7 million, partially offset by future income tax recovery of $18.9 million, from Alberta’s recently reduced corporate income tax rate.

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