Bonanza Creek report

Bonanza Creek's upcoming drilling plans apparently don't include its South Arkansas fields.

Bonanza Creek Energy, Inc., has announced a number of developments regarding its preliminary fourth quarter operational results and its 2018 budget.

All of the news issued by the company on Monday made no mention of Bonanza Creek’s operations in the Dorcheat-Macedonia Field of Columbia County. Information focused on the company’s Colorado oil and gas fields.

Jack Vaughn, chairman of the Board of Directors, said, “Much has been accomplished since Bonanza Creek exited from bankruptcy last spring. In 2017, the results of our first enhanced completions exceeded our expectations. In 2018, we will accelerate and expand this learning process with additional slick-water tests and by applying enhanced completions to our northern and eastern acreage.

“In 2017, we secured our strategically important leasehold position in French Lake. In 2018, we will delineate this key acreage position with enhanced completions and lay the ground work for its future development. We will also consider the sale of non-core assets and will focus any potential acquisition activity on expanding our core footprint in the DJ Basin.

“In 2017, we reduced our annualized G&A and LOE by approximately $20 million. Further efficiency improvements will continue to be a focus for the Company, with our per-unit costs benefitting from production growth in 2018 and beyond. During the year, we also took important steps to improve our access to gas processing in the DJ Basin. We believe these steps will result in improved costs, greater reliability, and greater optionality than available to many other operators in the basin while enhancing the value of our Rocky Mountain Infrastructure system.

“Finally, in 2017, we began a dual-track process to secure permanent leadership for our company and to consider strategic transactions. While the transaction with SandRidge Energy was unsuccessful, this process has provided significant insights regarding the quality of our team, our assets, and the desires of our shareholders. We remain dedicated to maximizing shareholder value and are focused on securing permanent leadership in the coming months.

SandRidge Energy called off its proposed acquisition of Bonanza Creek following objections for activist investor Carl Ichan.

During the fourth quarter of 2017, the company produced an average of 14.8 MBoe per day, exceeding the high-end of the Company’s previous guidance of 14.2 MBoe per day. The performance is primarily attributed to lower line pressures in the company’s Rocky Mountain Infrastructure (“RMI”) system and better than expected performance from wells utilizing enhanced completion designs.

On November 11, the company completed the previously announced connection with third-party gas processor Sterling Energy Investments, LLC. Since that time, the Company has moved approximately 13 percent of its total Wattenberg gross gas production to Sterling. This connection, combined with added compression, reduced line pressures in the Company’s RMI system by up to 40 percent, resulting in improved production from both new and existing wells.

The company continues to be encouraged by the production from its North Platte 44-13 standard reach lateral (“SRL”) wells, which were completed in July 2017. The performance of these wells continues to exceed type curve projections and they are now forecast to produce an average EUR of 500 MBoe per 4,100 foot SRL well. An updated investor presentation on the Company website compares the performance of these four West SRL wells to an offset pad that utilized a legacy completion design and a legacy West SRL type curve.

During the fourth quarter of 2017, Bonanza Creek completed five additional wells on its legacy acreage, consisting of three extended reach lateral (“XRL”) wells and two SRLs. These wells are located on the Company’s central legacy acreage and, with approximately 75 days of data, the early production, GOR, and tubing pressures are encouraging for wells with an enhanced completion design. One of these SRL wells tested a slick-water completion with 1,500 pounds of proppant per foot. Early production data from this slick-water test is particularly encouraging as its production results are significantly outperforming those from offsetting wells with gel completions and similar proppant loading.

Bonanza Creek recently finished drilling the last of the eight XRL wells on its French Lake acreage with one well setting a company record drill time of fewer than 4.5 days from spud to total depth. The first of these eight French Lake wells has been recently turned online. The remaining seven French Lake wells are expected to be completed and turned online in the first half of 2018.

As of year-end 2017, the company reports preliminary proved reserves of 102.0 MMboe, a 13 percent increase from year-end 2016. The company’s year-end 2017 proved reserves were comprised of 52.9 MMBbls of oil, 22.8 MMBbls of NGLs, and 157.7 Bcf of natural gas and were 53 percent proved developed.

Proved undeveloped reserves accounted for 48.1 MMBoe of the total proved reserves, a 20 percent increase in equivalent volumes from year-end 2016. The increase in proved undeveloped reserves is a combination of new PUD cases added during the year and improved production performance expectations for previously booked PUD wells due to the utilization of enhanced completion design.

In 2018, the company plans to accelerate development while testing enhanced completion designs on large scale pads throughout the company’s acreage position. The program contemplates running one rig in the first half of 2018 with a second rig added at mid-year to coincide with additional gas processing capacity from both Cureton and DCP.

Plans for drilling operations in the Dorcheat-Macedonia field weren’t mentioned.

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