Year to date, we have been producing at the high end of our guidance range while maintaining cost discipline. Additionally, we have decided to accelerate the completion of eight North Dakota oil wells at a cost of $60 million. This activity is underpinned by strong economics and is expected to provide increased funds flow and reduced leverage ratios in 2015 and 2016.
As a result of the combination of operational success and the additional completions, we are increasing our 2015 annual average production guidance range to 97,000 – 103,000 BOE per day, and our crude oil and natural gas liquids to 43 – 45% of the production mix.
- We are revising our 2015 annual average production guidance upwards from 93,000 – 100,000 BOE per day to 97,000 – 103,000 BOE per day.
- We are increasing our 2015 capital budget by $60 million from $480 million to $540 million.
- The additional completions are underpinned by robust economics. The average expected rate of return for the completions (excluding the drilling capital already spent), using a flat West Texas Intermediate oil price of US$60 per barrel, is approximately 60%. The average expected payout period for the completions is less than two years under a flat WTI oil price of US$60 per barrel.
- We expect to utilize our $1 billion bank facility, which was approximately 4% drawn at May 31st2015, to fund the additional $60 million in capital spending. The well completions are expected to improve our 2015 and 2016 debt to funds flow ratios as a result of accelerating funds flow.
- We have added additional crude oil hedge positions in the fourth quarter of 2015 and for the full year in 2016 to help support the economics of the accelerated well completions. Our total crude oil hedge position in the fourth quarter of 2015, through a combination of fixed price swaps and option structures, is now 44% of forecasted net production after royalties, at a weighted average floor price of US$80.09 per barrel. Our total crude oil hedge position in 2016, through a combination of fixed price swaps and option structures, now covers 31% of forecasted net production after royalties, at a weighted average floor price of US$64.48 per barrel. With respect to natural gas hedges for the second half of 2015, we have NYMEX swaps in place for 49% of our forecasted net production after royalties at a weighted average price of US$3.82 per Mcf.
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