The Company plans to drill an additional three wells in East Bigstone prior to the end of 2013, with two of the three wells scheduled to be completed and on production by year-end. In what is expected to be a continuous one rig drilling program with up to eight wells in 2014, plans are to add a second rig to the program in the latter part of 2014.
The evolution of Delphi's drilling and completion plan to an extended-reach horizontal wellbore drilled across two sections and stimulated using a 30-stage frac design also enhances the economics of the project. When taking into consideration the incremental royalty credits earned by drilling across the second section and the incremental costs, Delphi is effectively developing the second section at minimal cost. Relative to general industry Montney drilling activity, one of Delphi's extended-reach wells is equivalent to two industry type wells.
In addition, the Company expects to commence drilling operations on the South Bigstone strat test and horizontal Montney well within the next month as part of the previously announced industry farm-in whereby Delphi will earn a 75 percent working interest in 32.5 sections of Montney lands. The well with a surface located at 5-8-59-22W5M will be completed, equipped and pipeline connected in 2014 as part of the planned 15 kilometre pipeline expansion from the 7-11 Delphi owned facility to the 5-8 wellsite.
In addition to cash flow to fund the capital program, the Company has recently entered into two arrangements to further support the 2013 and 2014 planned capital programs.
Delphi has entered into a Joint Venture Agreement on four Montney wells in East Bigstone. The Joint Venture Partner ("Partner") will contribute $2.5 million per well for a total of $10.0 million towards the Company's 2013 Montney capital program. In exchange for the capital contribution, the Partner will receive a 10 percent Gross Overriding Royalty ("GOR") on the Company's working interest revenue on the well until payout of the capital contribution. After payout the GOR will be reduced to 7.5 percent until a required rate of return is achieved on the pooled funds, at which time the GOR will be extinguished on all four wells. The Company has expressed interest in a similar arrangement with the Partner for the Company's 2014 Montney capital program at East Bigstone.
The Company has also entered into a commitment letter for $20.0 million with a leading Canadian energy and resource lender. The funding will be available in two tranches; $12.0 million available to be drawn down until July 15, 2013 and $8.0 million available for draw down until September 16, 2013. The debt will be secured by the Company's assets and be subordinate to the Company's senior credit facility, have a term of 18 months and be extendible at the option of Delphi for an additional six months. The subordinated debt will have an annual coupon rate of 8.5 percent with interest payable monthly. The parties are preparing final documentation with closing of the financing expected no later than July 12, 2013.
Delphi has successfully grown the Bigstone Montney land base from four sections to 108 sections in a relatively short period of time. The Company continues to pursue additional consolidation opportunities in the Bigstone/Fir area leveraging off of its control of critical infrastructure and advanced understanding of the Montney play in the area.
The refined drilling and completion techniques utilized on our recent wells have delivered a step change in the economics of the Montney play in the area which is positioning the Company for long term self-funded growth. The Company now has a current project inventory that will provide economic growth beyond a 10-year horizon.
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