Calgary-based Obsidian Energy Ltd. said Tuesday it is setting aside C$35 million ($27 million) in capital expenditures (capex) for a drilling program and C$5 million ($4 million) in decommissioning expenditures for the first half of 2021.

The exploration and production company plans to drill up to eight wells at the Cardium development in Willesden Green in Central Alberta.

“Our 2020 drilling program resulted in some of the best wells we’ve seen in the history of our Cardium program,” said CEO Stephen Loukas. “Our first half 2021 program will build on these results with most of the wells adjacent to or very near our 2020 wells, which produced excellent production rates at very low operating costs.”

Obsidian’s 2020 capex was C$56 million ($44 million) while its production guidance on the year was 25,300-25,500 boe/d.

Obsidian, known as Penn West Petroleum Ltd. until June 2017, has assets in three plays in the Western Canadian province of Alberta — Cardium, Peace River and the Viking prospect.

The company focuses on manufacturing repeatable low-decline and high-netback light oil wells in the Cardium.

One drilling rig is being utilized in the initial seven-well program at Cardium, with five wells set to be brought on stream through June. Two more wells are scheduled to be completed as soon as weather and ground conditions allow. An eighth well also could be added to the mix, Obsidian said.

The company expects to maintain average production through June at 2020 exit levels, while generating incremental free cash flow for debt repayment. If West Texas Intermediate oil prices remain near US$50/bbl, management anticipates utilizing two drilling rigs in the second half of 2021.  

Obsidian abandoned 99 net wells in 4Q2020 supported through participation in the Alberta Site Rehabilitation Program (ASRP), leading to a reduction of more than C$3 million ($2.4 million) to the company’s inactive decommissioning liability. 

This grant program provides funding for abandonment and reclamation work on oil and gas sites in Alberta.

ASRP activity is to be expanded this year, with anticipated deployment of nearly $10 million of grants. Supported by the program, the company expects to abandon an additional 422 net wells by the end of 2022.