PetroBakken Energy Ltd. (TSX:PBN), has announced that average production for the month of December 2012, was 53,200 barrels of oil equivalent (BOE) per day based on field estimates. We are also pleased to announce a $675 million capital plan in 2013 that is expected to result in an 8- to 12% percent growth in average annual production.
Operational Update
PetroBakken had a successful year in 2012. Early in the year we completed certain initiatives to strengthen our financial position and increase balance sheet liquidity. This included terming-out our debt through the issuance of US$900 million of high yield notes and disposing of approximately 4,200 boepd of non-core properties. The asset dispositions allowed us to expand our capital program during the second half of the year and more than replace the disposed production. The 2012 December average production of 53,200 BOE per day represented a 6% increase over our 2011 December average (a 16% increase post dispositions) and was comprised of over 21,500 BOE per day from the company's Bakken business unit, over 22,500 BOE per day from PetroBakken's Cardium business unit, and the remainder from the company's Saskatchewan conventional and AB/BC business units.
In the fourth quarter, PetroBakken drilled 79 net wells, completed 106 net wells and brought 99 net wells on production, exiting the year with 21 net wells in inventory. The company drilled a total of 217 net wells and completed 234 net wells in 2012.
PetroBakken's inventory of 14 net wells in the Cardium, one well in the Bakken, four net wells in southeast Saskatchewan, and two net wells in new plays partly reflects the advancement of capital from 2013 into 2012 and will contribute to production volumes in the first quarter of 2013. The company expects the first quarter of 2013 to be our busiest of the year, and it currently has 16 drilling rigs operating: six in southeast Saskatchewan, seven in the Cardium and three in Alberta/British Columbia emerging plays.
In the Swan Hills resource play the company drilled three horizontal wells at Deer Mountain. Two of the three net wells at Deer Mountain were completed and put on production and we are encouraged by initial results. The company's capital plan for 2013 includes 12 (10 net) horizontal wells to be drilled on our Swan Hills play, of which eight (eight net) will be drilled at Deer Mountain and four (two net) will be drilled on farm-in land.
2013 Capital Plan
The execution of this plan began in late 2012, when we accelerated the spending of $100 million of capital from 2013 to the end of 2012. The accelerated capital should allow us to minimize field operation interruptions and make efficient use of oil field services during the active winter drilling season in order to add new production in the first quarter of 2013. This initial accelerated capital, together with projected 2013 capital of $675 million, is expected to allow us to grow our average annual production by 8% to 12% while targeting relatively flat year-over-year exit production.
It is anticipated 71% ($480 million) of 2013 capital will be directed to drilling, completion and tie-in activities with an additional $140 million being spent on facilities, optimization, workover capital and sustaining capital. The 2013 capital plan is expected to deliver an average daily production rate of 46,000 to 48,000 BOE per day and exit 2013 production of approximately 49,000 to 52,000 BOE per day, with an 85% liquids weighting. The initial capital plan is materially lower than previous years. The capital plan may be adjusted throughout the year to take into account changes to realized prices and service costs.
From a capital allocation standpoint, the company will focus on continuing to grow our production in the Cardium which, like the company's Bakken and conventional business units, should become cash flow positive in 2013. The Cardium development program will focus on pad-drilling in Brazeau, Lochend and West Pembina, to shorten on-stream cycle times and reduce capital costs for surface leases, drilling, completions, equipping and tie-ins. The company will also continue to invest in cash flow positive assets in the Bakken and Southeast Saskatchewan. The Bakken program balances facilities and infrastructure spending with cluster development drilling to maintain strong capital efficiencies and a low operating cost structure. PetroBakken has also allotted capital for the commercial expansion of EOR pilots to build upon the encouraging results to date.
It is expected that corporate declines for 2013 will be in the range of 39% for the year. This is higher than the decline in 2012 primarily as a result of the late year production additions from our expanded capital program in the second half of the year. Due to the typical horizontal well production profile, corporate production in 2013 is expected to have higher initial declines during the first half of the year followed by notably lower declines during the second half of the year. With a balanced approach to 2013 capital plans resulting in a more active Q1 drilling program, followed by a load leveled Q3 and Q4 program, the company anticipates the 2014 corporate decline rate will be in the range of 30-35%.
The company says it is well-positioned for the coming year with over 2,250 potential drilling locations, over one million acres of undeveloped land and balance sheet flexibility that allows us to actively develop our resources and respond to changing industry conditions.