Low natural gas prices have slammed the 2019 planning budget for a natural gas export terminal on Canada’s east coast, with spending on the Goldboro project cut by 56% by sponsor Pieridae Energy Ltd.
Spending for the liquefied natural gas (LNG) project has been reduced to C$20 million ($15 million) from previous guidance of up to $45 million ($33.8 million).
Pieridae is developing the Goldboro LNG project on the Atlantic coast of Nova Scotia.
“Volatile natural gas prices in Alberta impacted Pieridae’s bottom line” during the second quarter “as prices were lower than they were in 1Q2019,” management said. “The company has taken steps to mitigate this impact, shutting in certain higher cost wells and implementing a hedging program to help blunt the current gas price environment.”
With low gas prices resulting in production shut-ins, guidance has been reduced for the year, with expectations it will average 13,000-17,000 boe/d from 16,000-18,000 boe/d.
Pieridae reported a 2Q2019 loss of C$19.53 million (minus 23 cents/share), compared with a year-ago loss of $2.73 million (minus 5 cents). The U.S. equivalent loss for 2Q2019 was $14.77 million (minus 17 cents/share), versus a 2Q2018 loss of $2.06 million (3.78 cents).
The financial picture could improve, said management, if it completes a third quarter target to buy C$190 million ($142 million) of legacy assets in southern Alberta from a unit of Royal Dutch Shell plc.
The agreement with Shell Canada includes 28,623 boe/d, three deep cut sour gas processing plants Jumping Pound, Caroline and Waterton; and 1,700 kilometers of pipelines in the southern Alberta Foothills region.
“We continue to make solid progress in working to close our deal with Shell Canada,” said CEO Alfred Sorensen. “This asset acquisition will mean we would have the majority of the natural gas needed to supply the first facility or train at Goldboro. And when the deal closes, Pieridae will be the largest gas producer in the southern Alberta foothills.”
Pieridae’s 2019 upstream capital program has been curtailed and is now expected to be C$2-5 million as opposed to previous guidance of $8-10 million. With the focus now being on the completion of the Shell acquisition, management has reduced expected spending on Goldboro development activities to $20 million from previous guidance of up to $45 million.
In other Pieridae news, CFO Melanie Litoski has resigned effective Friday. In the interim, Senior Vice President Rob Dargewitcz, who handles finance and risk, has been tapped.
In July, the Calgary-based operator indicated the European sales contract deadline for a firm construction commitment had been postponed until the end of September 2020.
The extension gives Pieridae more time to consider whether to sanction the project, Sorenson said at the time.