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EXHIBIT 99.1
Synergy Resources Corporation Provides an Operations Update, Estimating 100%
Year-Over-Year Production Growth, and a Revised Fiscal 2015 Capital Forecast
PLATTEVILLE, CO -- (Marketwired) -- 12/18/14 -- Synergy Resources Corporation
(NYSE MKT: SYRG) ("Synergy", the "Company"), a U.S. oil and gas exploration and
production company with operations focused in the Greater Wattenberg Area in the
D-J Basin, announces that its Fiscal 2015 capital forecast now includes the $75
million cash payment for the recently closed Wattenberg Field acquisition and
incorporates changes in the completion design for future wells. Excluding the
acquisition capital, the Company anticipates completing 20% more net wells for
less capital than originally forecasted. The Company's drilling budget is 97%
focused on the core Wattenberg acreage, with the remaining 3% for drilling and
de-risking its assets in the Wattenberg NE Extension Area and Nebraska.
Operations Update
Synergy's focus on achieving industry leading economics is producing attractive
rates of return on its operated horizontal wells in the Wattenberg Field. The
first five horizontal wells drilled by Synergy reached pay out in approximately
14 calendar months, the first five Phelps wells have paid back over 77% in the
first six months of production, and the six wells on the Union pad have paid
back 70% in the first five months of production.
The following are average daily production rates for standard length horizontal
wells on recent pads:
Name of Pad # of Wells Average # of Days on Average
Frac Stages Production BOED/well
Phelps 5 26 180 290
Union 6 20 180 352
Eberle 4 26.5 90 452
Kelly Farms 4 26 90 402
Weld 152 6 25.5 30 450
The mid-length lateral Codell and Niobrara wells on the Eberle pad averaged
1,031 and 746 BOED respectively for the first thirty days after the remaining
stages were successfully completed in October. The mid-length Codell well was
completed with 43 stages, while the mid-length Niobrara well was completed
utilizing 47 stages.
Midstream processing and gathering systems remain an operating challenge,
particularly in the northern section of the Wattenberg Field, where line
pressures have been consistently over 300 psi. These high line pressures are
impacting the initial production rates on our Weld 152 pad that was brought into
production in November. The Kelly Farms pad is still producing into a 4-inch
gathering line and has been waiting on a new 8-inch line that has been delayed
for several months. But any potential benefit from this increased takeaway
capacity may be mitigated by offset operator activity.
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Drilling operations are ahead of schedule and the Company anticipates the
drilling phase of 29 total gross wells (27 net) on the Wiedeman, Kiehn/Weis and
Geis pads will conclude in January. Four of the eight wells on the Wiedeman pad
are 9,000 foot Extended Reach Laterals. Due to drilling efficiencies, Synergy
needs only two rigs to finish its fiscal 2015 drilling program. The Company
plans on utilizing one of those two rigs to drill the horizontal Greenhorn
prospect in the NE Wattenberg Extension Area in March, while the other rig will
remain in the core Wattenberg.
On its Nebraska acreage the Company expects its operating partner will commence
operations in January. The operating partner has received drilling title
opinions on 8 locations. These will be vertical wells targeting the oil bearing
Lansing/Kansas City group of the upper Pennsylvanian formation. The drilling and
completion costs of the first well are budgeted for $638,000, of which Synergy
will pay 37.5% for a 50% working interest.
Revised Fiscal 2015 Capital Expenditure Drilling Budget
The Company's original budget anticipated a maximum of $200 million for 40 net
operated and non-operated wells to be drilled and completed in the Wattenberg
Field during fiscal 2015. The revised budget estimates $180 million will be
spent on drilling and completing a total of 48 net operated and non-operated
wells. The Company believes it will be able to accomplish drilling 20% more net
wells for less capital through a combination of efficient operations and
modifying its completion design.
Specifically, the Company plans to complete future standard length horizontal
wells with an average of 20-22 frac stages (approximately 170-190 foot spacing)
but will increase the sand concentration per stage compared to recent wells that
have averaged 26 stages with less sand. This reduced stage count should save
approximately $200,000-$300,000 per well. By utilizing this new completion
design, the Company estimates the twenty five standard length wells currently in
the drilling phase will have total drilling and completion costs of $3.4-$3.6
million per well.
Given the current low commodity price environment, the Company is going to phase
in the completion of the twenty nine wells in progress over several months
beginning in February, rather than completing them all concurrently.
For the remaining wells in its fiscal 2015 drilling program that will spud after
February, the Company estimates total drilling and completion costs will range
between $3 million to $3.3 million per well. Part of the savings is attributed
to moving to a day rate contract for the rigs versus the current turn-key
contract pricing. The Company has hired Brandon Lorenz to oversee its drilling
program going forward. Brandon has ten years of experience with Ensign United
States Drilling, Inc. most recently as a Drilling Manager of six rigs operating
in the Wattenberg Field, including three for Synergy.
With these anticipated lower costs, if oil prices range from $50-$70 per barrel
and natural gas ranges between $3.50/mcf and $4.50/mcf, and assuming an average
EUR of 325,000 BOE per well, these wells should pay back in 10-30 months and
generate an IRR between 25%-120% (not including lease acquisition costs).
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Synergy's current production mix from its operated wells consists of
approximately 63% oil, 7% NGLs and 30% natural gas.
Additionally, the Company has entered into asset swaps with several public and
private companies. The objective is to increase the Company's working interest
in our operated wells where we realize the highest capital efficiencies and
reduce the capital required for non-operated wells.
With the combined lower costs and increased working interests, the Company
expects its revised fiscal 2015 capital budget to be as follows:
Overall Fiscal 2015 Capital Budget
Category Old Estimate MM New Estimate MM
Operated Wells $150-$160 $165
Non-operated Wells $30-$40 $15
Land Leasing $10-$15 $10
NE Extension and Nebraska $10 $ 5
Acquisition NA $75
Total $200-$225 $270
Successfully executing this revised program should enable the Company's fiscal
2015 production growth to exceed 100%. Including approximately 1,200 BOED
contribution from the recent acquisition, the Company believes production in the
fiscal second quarter ending February 28, 2015 will range between 8,800 and
9,400 BOED and exit August 2015 with a production rate of over 13,000 BOED.
With this increased production and an underleveraged balance sheet, the Company
believes it will sustain a strong growth profile going into fiscal 2016
beginning September 1, 2015.
Management Comments
Ed Holloway, co-CEO commented "In Bill Scaff's and my 33 years of operating in
the Wattenberg Field we have been through several downturns in commodity pricing
and, in each instance, we have emerged in a stronger position. We see the
potential to repeat this scenario for Synergy and its shareholders through a
continued disciplined approach to costs and opportunistically adding strategic
assets to our footprint."
About Synergy Resources Corporation
Synergy Resources Corporation is a domestic oil and natural gas exploration and
production company. Synergy's core area of operations is in the Wattenberg Field
of the Denver-Julesburg Basin. The Denver-Julesburg Basin encompasses parts of
Colorado, Wyoming, Kansas, and Nebraska. The Wattenberg field in the D-J Basin
ranks as one of the most productive fields in the U.S. The company's corporate
offices are located in Platteville, Colorado. More company news and information
about Synergy Resources is available at www.SYRGinfo.com.
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Important Cautions Regarding Forward Looking Statements
This press release may contain forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995. The use of words such as
"believes", "expects", "anticipates", "intends", "plans", "estimates", "should",
"likely" or similar expressions, indicates a forward-looking statement. These
statements are subject to risks and uncertainties and are based on the beliefs
and assumptions of management, and information currently available to
management. The actual results could differ materially from a conclusion,
forecast or projection in the forward-looking information. Certain material
factors or assumptions were applied in drawing a conclusion or making a forecast
or projection as reflected in the forward-looking information. The
identification in this press release of factors that may affect the company's
future performance and the accuracy of forward-looking statements is meant to be
illustrative and by no means exhaustive. All forward-looking statements should
be evaluated with the understanding of their inherent uncertainty. Factors that
could cause the company's actual results to differ materially from those
expressed or implied by forward-looking statements include, but are not limited
to: the success of the company's exploration and development efforts; the price
of oil and gas; worldwide economic situation; change in interest rates or
inflation; willingness and ability of third parties to honor their contractual
commitments; the company's ability to raise additional capital, as it may be
affected by current conditions in the stock market and competition in the oil
and gas industry for risk capital; the company's capital costs, which may be
affected by delays or cost overruns; costs of production; environmental and
other regulations, as the same presently exist or may later be amended; the
company's ability to identify, finance and integrate any future acquisitions;
and the volatility of the company's stock price.
Investor Relations Contact:
Jon Kruljac
Synergy Resources Corporation
jkruljac@syrginfo.com
Tel (303) 840-8166
Source: Synergy Resources Corporatio