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CALGARY, Alberta, Dec. 18, 2017 (GLOBE NEWSWIRE) — GRANITE OIL CORP. (“Granite” or the “Company”) (TSX:GXO)(OTCQX:GXOCF) is pleased to announce its recent successful drilling results and kick off of the next phase of its drilling program in Pod 2.
Operations and Corporate Update
Granite has recently drilled and completed its ninth and final horizontal development well of 2017. The Company had not drilled a development well since July, 2017, reflecting the Company’s decision to slow development pace and shift focus to the next area of targeted development (Pod 2). The well was drilled on 200 metre offset spacing – the same spacing that allowed the Company to add producing reserves at top tier finding and development costs and recycle ratios in 2016 (see November 9, 2017 press release). Granite is pleased to report the well flowed at rates that are in-line with the successful and economically superior wells drilled in 2016. As well, over the recent months, the Company made adjustments to its drilling and completion (“D & C”) processes and was successful in keeping D & C costs for this well near historic lows of $1.25 million.
As the Company established the most efficient formula to recover reserves from Pod 1, representing less than 15% of its delineated pool, it has continued to prepare Pod 2 for development drilling in 2018 through the conversion of multiple producing wells to gas injection wells in 2017. Considering the recent well results, the Company is excited about its 2018 drilling program which will focus on development drilling on 200 m spacing within Pod 2. The Company has several wells ready to drill in Pod 2 and the next location is expected to spud on January 3rd, 2018.
As well, since having not drilled a development well since July of 2017 the Company was able to further evaluate the efficiency of its gas injection Enhanced Oil Recovery (“EOR”) Scheme on base declines. As anticipated, this has resulted in a shallower decline profile. The Company’s Gas Injection EOR scheme is proven technology with a history of significantly increasing oil recovery.
The Company is encouraged with these recent results, continuing to learn and advance towards its final development model.
Granite’s previously announced intent to sell a 60% working interest in non-core, non-Bakken assets has been adjusted to sell a higher working interest while still maintaining operatorship of this asset for an increase to the disposition price. All proceeds will be used for a non-permanent repayment of indebtedness under Granite’s existing credit facility, drawn to fund its various capital projects, and for general corporate purposes. The sale is expected to close in the first quarter of 2018.
Dividend Policy
Granite is committed to protecting its strong balance sheet and maximizing long-term value from its large, unique Bakken oil pool while funding the dividend income model through internally generated cash flow. With this in mind, Granite management along with its Board of Directors has decided to reduce its monthly dividend to $0.023 per common share commencing with the December 2017 dividend that will be paid on January 15, 2018 to shareholders of record on December 29th, 2017. This reduction in the monthly dividend rate from $0.035 to $0.023 per common share reduces Granite’s cash requirements by approximately $4.5 million annually and provides shareholders with a meaningful dividend yield of 9% at a $3.00 share price. This dividend has been designated as an eligible dividend for Canadian income tax purposes. This is the first time Granite has cut the dividend since the Company’s inception in May, 2015, and is a proactive, temporary measure to protect the balance sheet. The reduction provides the Company more flexibility in light of continued uncertainties in oil pricing, including the current widening of WTI-WCS price differentials.
2018 Hedging Contracts
The Company currently has the following hedges booked for 2018:
- Q1 – 1,300 bbl/d hedged
• 900 bbl/d at an average price of WTI $51.49 USD
• 400 bbl/d at an average price of WTI $72.77 CAD - Q2 – 1,100 bbl/d hedged
• 1000 bbl/d at an average price of WTI $52.56 USD
• 100 bbl/d at an average price of $73.90 CAD - Q3 and Q4 – 800 bbl/d hedged
• 600 bbl/d at an average price of WTI $52.05 USD
• 200 bbl/d at an average price of WTI $70.74 CAD
Granite will continue to add additional hedges for 2018 and beyond, as per the Company’s hedging strategy.
2018 Outlook
Granite continues to focus on maximizing long term value to its shareholders from its Bakken oil pool. The Company has been resilient through difficult times, achieving significant gains in efficiencies in adding producing barrels organically. With this formula and a deep drilling inventory Granite is well positioned to continue this strategy, and with more financial flexibility it has the opportunity to increase its pace of development if commodity prices and economic conditions warrant.
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