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Kaybob

The Kaybob area accounted for approximately 94 percent of Trilogy’s production and 98 percent of its capital expenditures in 2015 and will be allocated a similar percentage of Trilogy’s 2016 capital. Trilogy’s large portfolio of tight oil and gas assets in Kaybob lends itself to low-cost development and optimization using horizontal drilling and multi-stage completion technology. Activity in this area will provide Trilogy with the opportunity to grow production and replace produced reserves on economic plays with a low risk profile when crude oil and natural prices improve.  Trilogy also expects it will be able to leverage off of its substantial investment in infrastructure in the area to minimize production disruptions and reduce operating costs.

Trilogy’s Kaybob area production fell 20 percent to 26,191 Boe/d in 2015 as compared to 32,894 Boe/d in 2014. Trilogy was exposed to numerous sales gas pipeline outages and restrictions through the third and fourth quarters that reduced production in the second half of the year by approximately 2,000 Boe/d.   Trilogy has contracted an additional 50 MMcf/d of firm TCPL capacity which is expected to be in-service April 2016 to mitigate future interruptions on the main line.

In Kaybob, Trilogy’s 2015 capital expenditures before acquisitions and dispositions totaled approximately $80 million. Trilogy drilled 20 (8.5 net) wells in the area during the year as compared to 83 (51.7 net) wells in the prior year.  The decrease in drilling activity reflects Trilogy’s strategy to reduce capital spending while still participating in strategic joint venture opportunities to preserve long term value of its assets.  Much of the horizontal drilling in the Kaybob area has been focused on the Gething, Montney and Duvernay formations.  However, Trilogy has also participated for its working interest in a number of third party operated horizontal wells that were drilled to evaluate the Bluesky, Falher and Cardium formations.