Athabasca Oil Corporation's (TSX: ATH) ("Athabasca" or "the Company") Board of Directors has approved an initial 2015 capital budget of $266 million which includes $58 million of carryover from the 2014 budget. Athabasca's capital budget aligns with its strategic priorities, including delivering near-term production and cash flow growth from its cornerstone Kaybob Duvernay and Hangingstone assets and maintaining a strong balance sheet with flexibility to respond to economic cycles. The 2015 capital program is fully funded, with Athabasca anticipating an ending 2014 funding position of approximately $1.3 billion, including cash, undrawn credit facilities and promissory notes receivable.
Light Oil Division
Maintaining balance sheet strength is a key priority and Athabasca views its balance sheet as a competitive asset. As a result, and in the context of the current commodity price environment Athabasca has approved an initial Light Oil capital budget of $167 million which is primarily comprised of drilling and completion activities for the remainder of the 2014/15 winter program. The program includes a total of 11 Duvernay wells (nine horizontals) and two Montney appraisal wells at Placid. Five rigs are currently active in the field with four targeting the Duvernay. Initial well results are anticipated towards the end of the first quarter of 2015. Light Oil activity levels for the balance of 2015 will be set following an assessment of the winter drilling results and prevailing commodity prices.
The primary objectives of this program are to add near term production and cash flow at Saxon and Kaybob West and to retain Duvernay lands that are prospective for commercial development into the intermediate term. Approximately 95 percent of Athabasca's core 200,000 acre Duvernay land position at Kaybob will be held into intermediate term at the end of the winter drilling program. As the winter drilling program meets all of the Company's near term land retention objectives, Athabasca has significant flexibility to adapt its Light Oil capital plans during the remainder of the year to respond to market conditions and technical learnings.
Thermal Oil Division
In the Thermal Oil division, Athabasca has approved a capital budget of $93 million with $63 million focused on the commissioning and ramp-up of Hangingstone Project 1. This project remains on track with targeted timelines and the sanctioned budget. The Company will continue to advance pre-engineering internally for Hangingstone Project 2A, an 8,000 bbl/d incremental debottleneck project. Sanctioning of expansion phases will only be considered following a successful ramp-up of Hangingstone Project 1 and after assessing broader market conditions.
Preliminary 2015 Guidance
Recognizing that Athabasca's 2014/15 winter drilling program will not have a material contribution to production until the second half of 2015, first quarter guidance is approximately 5,000 boe/d largely reflecting base declines. Assuming no additional spending beyond the winter program the Company's exit guidance for 2015 is between 7,000 to 8,000 boe/d and only incorporates production from seven of the 11 Duvernay wells. Four of the wells, which are land retention wells, are not included in the exit guidance (two verticals and two horizontals). The Company will provide further details on capital plans and production guidance for the balance of the year in the first quarter of 2015.
Hangingstone Project 1 first steam remains on track for the end of the first quarter of 2015 with a production ramp-up starting approximately mid-year and trending into 2016. The Company forecasts a 2015 production exit rate between 3,000 – 6,000 bbls/d from Hangingstone.