Last year, the company’s production topped 60,000 barrels of oil equivalent per day, primarily from its Kakwa River Montney natural gas project in northwestern Alberta.
Seven Generations Energy Ltd. may buy gas from rival companies to meet future shipping commitments after it cut capital spending by nearly 20 per cent this year, its chief executive officer says.
Seven Generations this week said it would increase production levels in 2016 despite chopping its development budget by $200-million. It plans to pump between 100,000 to 110,000 barrels of oil equivalent a day (boe/d), in part by drawing on an inventory of 60 wells already under construction.
Barclays PLC analysts said the strategy could leave the company with less capacity to meet future transportation commitments on the liquids-rich Alliance Pipeline system. Seven Generations has contracts in place to ship roughly 350 million cubic feet of gas a day on the Alberta-to-Chicago pipeline this year, rising to 500 million cubic feet in late 2018.
In an interview, chief executive officer Pat Carlson said the company may opt to buy gas from rival producers to meet those obligations, should low prices persist.
The move shows companies are taking unusual steps to weather the commodity rout, which this week saw oil prices crater to 12-year lows. U.S. and Canadian natural gas prices, meanwhile, have slumped to multiyear lows as warmer winter weather saps demand and inventories remain swollen.
"We have one of the lowest-cost supplies, but if there's gas that's already been drilled and the owner of the gas would be willing to produce it, perhaps even at a loss to the developer, then that may be, under certain circumstances, the best option for us," he said Wednesday.
Under its revised spending plan, Seven Generations has trimmed its budget to $900-million from $950-million this year, a reduction of 18 per cent from previous expectations and 30 per cent below levels a year ago.
The company went public in November, 2014. Its Toronto-listed shares are down about 16 per cent in the past 52 weeks. Last year, the company's production topped 60,000 boed/d, primarily from its Kakwa River Montney natural gas project in northwestern Alberta.