Armed with more natural gas processing capacity and strong results from longer laterals, Bonanza Creek Energy Inc. plans to accelerate development in the Rocky Mountains, with an eye on increasing production by 20% this year and 50%-plus in 2019.

The Denver-based independent, which was on a bit of a rocky road following the industry downturn, hit 14,800 boe/d in 4Q2017, the top end of previous guidance of 14,200 boe/d, while proved reserves jumped 13% year/year to 102 million boe.

The outperformance primarily was attributed to lower line pressures in the company’s Rocky Mountain Infrastructure (RMI) system and better-than-expected performance from wells using enhanced completion designs. 

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

The company last year secured a “strategically important leasehold position” within the French Lake area in Weld County, CO. This year, “we will delineate this key acreage position with enhanced completions and lay the groundwork for its future development.”

Under consideration is expanding the core footprint in the Denver-Julesburg (DJ) Basin and selling off noncore assets, Vaughn said. In all things, it’s about efficiencies, as general, administrative and lease operating expenses combined were down by $20 million last year from 2016.

“Further efficiency improvements will continue to be a focus for the company, with our per-unit costs benefiting from production growth in 2018 and beyond,” Vaughn said.

A potential merger with SandRidge Energy Inc. was scuttled late last year, but the producer is not looking back. The process provided “significant insights regarding the quality of our team, our assets and the desires of our shareholders,” he said.

Now it’s all about securing takeaway to ensure Rockies natural gas has a home. A connection was secured in November with third-party gas processor Sterling Energy Investments LLC. Since then, Bonanza has moved about 13% of its total Wattenberg field gross gas production to the processor.

The connection, combined with added compression, reduced line pressures in the RMI system by up to 40%, resulting in improved production from new and existing wells. To ensure line pressures remain low as more wells are tied to sales, the producer also secured a 15-year gas gathering and processing contract with Cureton Front Range LLC. About 22,000 net acres were dedicated to the Cureton system, or about 33% of its Wattenberg acreage.

Based on the timetable in the agreement, gathering services should begin by June with processing service to Cureton’s new 60 MMcf/d cryogenic gas plant to begin in the second half of 2018. The agreement contains no minimum volume commitments.

Subject to the contractual obligations, three separate processors and eight offtake points from the RMI system are expected to allow flexibility to move gas “to the most advantageous locations, providing additional production flow assurance,” Vaughn said.

As far as exploration and development, Bonanza plans to run one rig through the first six months, with a second rig planned at mid-year to coincide with the additional gas processing capacity.

Capital allocated for the Rockies program is estimated at $280-320 million this year, which is designed to support drilling 90 gross wells and turning 55 to sales.

The management team also is encouraged by production results from the North Platte 44-13 standard reach lateral (SRL) wells completed last summer. Average estimated ultimate recovery of the wells is 500,000 boe per 4,100-foot SRL well. Five additional wells were completed on legacy acreage in 4Q2017, including three extended-reach laterals (XRL) and two SRLs.

The last of the eight XRL wells recently were completed on the 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 the eight wells has been recently turned online and the other seven should be turned to sales by mid-year, management said.

In its western legacy acreage, an eight-well SRL State North Platte F-26 pad also was completed, with a new SRL drilling record of 3.4 days from spud to total depth. The company pumped 336 stages in 24 days, including five days of pumping 18 stages and one day that achieved a company record of 20 stages. All eight wells were recently turned online.

Bonanza said its year-end 2017 proved reserves are 53% developed and include 52.9 million bbl of oil, 157.7 Bcf of natural gas and 22.8 million bbl of natural gas liquids. Proved undeveloped reserves accounted for 48.1 million boe of the total, a 20% increase in equivalent volumes from year-end 2016.

Fourth quarter results are scheduled to be issued on March 14.