Advantage Oil & Gas Ltd. (ticker: AAV) released Q4 2017 and year-end 2017 results today. The company added reserves, increased annual production by 16% and spent $249 million in 2017.
Growing reserves
PDP reserves increased 27% due to the recognition of 27 new Glacier wells that were brought on production through 2017 and higher reserves assignments on historical producing wells due to stronger performance than previously forecasted by the company.
1P reserves increased 20% resulting from technical revisions which accounted for 45% of the 1P reserve additions. The remaining reserve additions resulted from the conversion of probable locations to the proved reserves category and the booking of new proven undeveloped locations.
2P reserves increased 13% through the addition of 56 new wells and locations (40 Glacier and 16 Valhalla). Of the 56 new wells and locations, 30 were proved undeveloped locations. A total of 337 undeveloped locations were booked in the 2017 reserve report. Advantage said that more than 1,200 Montney locations remain undrilled at Glacier and Valhalla.
Since Advantage’s Montney development program began in 2008, 2P reserves have grown at an average CAGR of 13% per year to 2.49 Tcfe (413.8 MMBoe) with a 2P and 1P reserve net present value of $2.55 billion and $1.77 billion, respectively as of December 31, 2017 (with a 10% discount factor on a pre-tax basis).
Advantage’s 1P reserve life index is 21 years and its 2P reserve life index is 28 years based-on the corporation’s average fourth quarter 2017 production rate of approximately 245 MMcfe/d.
40,000 barrels equivalent per day average Q4 production rate
Advantage had a record fourth quarter production rate of 245 MMcfe/d (40,857 BOEPD) and increased annual production by 16% (14% per share) to a record of 236 MMcfe/d (39,315 BOEPD).
Advantage’s annual cash flow increased 10% to $183 million, this was supported by a 50% increase in liquids revenue and the corporation’s market diversification and hedging initiatives.
Advantage’s 2017 operating activities included liquids rich drilling successes, the acquisition of 37 sections of additional liquids rich Montney lands and an expansion of the company’s 100% owned Glacier gas plant.
Q4/YE 2017 CapEx
In Q4 2017, Advantage said it spent $74 million. For 2017, the company spent $249 million.
Capital expenditures in 2017 were $7 million higher than the previously announced guidance range due to the decision to add two incremental process equipment units as part of the Glacier plant expansion and the rig release of four additional wells, as drilling times were faster than scheduled on the company’s year-end well pad.
One of the process units added was an electric power generator, which will provide surplus electricity sales (2.4 MW) into the Alberta grid and the other process unit is a gas exchanger which will provide more flexibility and efficiency in the plant operation.
