Pengrowth launches strategic review, despite decent performance at Lindbergh
Pengrowth Energy has signed a letter of intent with Ironclad Energy Partners to fund and build a cogeneration plant at its Lindbergh oil sands facility. The cogen plant will provide enough steam and power to support expansion to 35,000 bbl/day by the end of 2023.
Ironclad will own the power plant, which will be operated by Pengrowth under a fee structure.
A DECENT 2018 AT LINDBERGH
Lindbergh is a steam-assisted gravity (SAGD) drainage facility located in the Lloydminster formation, south of Cold Lake. The facility produced over 18,000 bbl/day for the first two months of 2019, on the high end of previously announced guidance. The SAGD operation was hit by an unplanned power outage during the month of December, but exited the year at 19,256 bbl/day.
The plant's steam-to-oil ratio (SOR) declined over 8% in the fourth quarter to 2.74, thanks to production from new infill wells. The company expects SORs to continue falling as remaining infill wells reach full output. Lindbergh's cumulative SOR averaged 2.67 for the full year 2018.
Ex-energy, operating costs declined to $5.11 per barrel in Q4, down 26% from the fourth quarter of 2017. Lower oil prices led to a 47% drop in netbacks, falling to just $13.16/bbl.
Lindbergh is expected to average about 18,000 bbl/day this year, reflecting curtailment quotas from the Alberta government.
ALL OPTIONS ON THE TABLE
Despite the positive operating results, the company continues to bleed cash and has launched a "Strategic Review" to evaluate ways to best maximize the value of its Lindbergh and Groundbirch properties. Options on the table include a possible sale, merger or debt refinancing.
Pengrowth posted a net loss of $503 million in the fourth quarter, including a $355 million non-cash tax deferral charge and $91 million write-down on its Groundbirch natural gas property.
Total proved plus probable (2P) reserves were unchanged at 446.6 million barrels of oil equivalent at the end of 2018. Lindbergh accounts for about two-thirds of those barrels.
The company expects to spend about $45 million in capital this year, targeting an average production rate of about 23,000 boe/day. Pengrowth is also looking to extend the maturity date on its $30 million revolving bank credit facility.