Birchcliff Energy Ltd. (“
Birchcliff” or the
“
Corporation”) (TSX: BIR) is pleased to announce
its Q3 2022 financial and operational results.
“Birchcliff continued to deliver exceptional
results in the third quarter, highlighted by quarterly average
production of 78,079 boe/d, which resulted in record Q3 adjusted
funds flow(1) of $267.4 million ($1.01 per basic common share(2)),
record Q3 free funds flow(1) of $182.0 million ($0.69 per basic
common share(2)) and record quarterly net income to common
shareholders of $244.6 million ($0.92 per basic common share),”
commented Jeff Tonken, Chief Executive Officer of Birchcliff.
Mr. Tonken continued: “As previously announced
on October 13, 2022, Birchcliff paid a special cash dividend of
$0.20 per share to our common shareholders on October 28, 2022.
Additionally, we have commenced the execution of our 2023 capital
program, which we expect will result in annual average production
of 81,000 to 83,000 boe/d in 2023, a 5% increase over 2022(3).
After the payment of Birchcliff’s targeted 2023 annual common share
dividend of $0.80 per share ($0.20 per share quarterly), we are
forecasting that we will have a cash surplus(4) of approximately
$295 million to $325 million at December 31, 2023(5). We are
maintaining our 2022 guidance and preliminary 2023 guidance that we
provided on October 13, 2022 and we expect to announce the details
of our 2023 capital program and updated five year plan for 2023 to
2027 on January 18, 2023.”
Q3 2022 HIGHLIGHTS
- Achieved quarterly average production of 78,079 boe/d, an 8%
decrease from Q3 2021. Liquids accounted for 19% of Birchcliff’s
total production in Q3 2022, consistent with Q3 2021.
- Generated record Q3 adjusted funds flow of $267.4 million, or
$1.01 per basic common share, a 59% and 60% increase, respectively,
from Q3 2021. Quarterly cash flow from operating activities was
$273.0 million, a 75% increase from Q3 2021.
- Delivered record Q3 free funds flow of $182.0 million, or $0.69
per basic common share, a 21% and 23% increase, respectively, from
Q3 2021.
- Earned record quarterly net income to common shareholders of
$244.6 million, or $0.92 per basic common share, each a 77%
increase from Q3 2021.
- F&D capital expenditures were $85.3 million in Q3 2022,
which included drilling 8 (8.0 net) wells and bringing 19 (19.0
net) wells on production.
- Achieved an operating netback(2) of $32.31/boe, a 37% increase
from Q3 2021.
- Achieved adjusted funds flow per boe(2) of $37.22, a 73%
increase from Q3 2021.
- Realized an operating expense(6) of $3.50/boe, an 18% increase
from Q3 2021.
- Redeemed all of its issued and outstanding cumulative
redeemable preferred shares, Series A and Series C on September 30,
2022 for an aggregate redemption price of $88.2 million.
- Significantly reduced total debt(7) at September 30, 2022 to
$186.1 million, a reduction of $451.8 million (71%) from September
30, 2021 and $80.8 million (30%) from June 30, 2022. The
Corporation retired approximately $169.0 million of total debt and
preferred shares in Q3 2022.
- In Q3 2022, Birchcliff returned $10.3 million to common
shareholders through dividends and purchases under its normal
course issuer bid (the “NCIB”), including the
purchase of 525,400 common shares under the NCIB at an average
price of $9.44 per share (before fees). In the first nine months of
2022, Birchcliff returned $67.7 million to common shareholders
through dividends and the purchase of 6,040,192 common shares under
the NCIB at an average price of $9.00 per share (before fees).
(1) Non-GAAP financial measure. See “Non-GAAP
and Other Financial Measures”.(2) Non-GAAP ratio. See “Non-GAAP and
Other Financial Measures”. (3) Based on an annual average
production rate of 78,000 boe/d in 2022 and 82,000 boe/d in 2023,
which is the mid-point of Birchcliff’s preliminary annual average
production guidance range for 2023.(4) Equivalent to “total
surplus”, which is a capital management measure. See “Non-GAAP and
Other Financial Measures”.(5) See “Outlook and Guidance –
Preliminary 2023 Guidance” and “Advisories – Forward-Looking
Statements” for further information regarding Birchcliff’s
preliminary 2023 guidance and its commodity price and exchange rate
assumptions.(6) Supplementary financial measure. See “Non-GAAP and
Other Financial Measures”.(7) Capital management measure. See
“Non-GAAP and Other Financial Measures”.
Birchcliff’s unaudited interim condensed
financial statements for the three and nine months ended September
30, 2022 and related management’s discussion and analysis will be
available on its website at www.birchcliffenergy.com and on SEDAR
at www.sedar.com.
This press release contains forward-looking
statements within the meaning of applicable securities laws. For
further information regarding the forward-looking statements
contained herein, see “Advisories – Forward-Looking Statements”.
With respect to the disclosure of Birchcliff’s production contained
in this press release, see “Advisories – Production”. In addition,
this press release uses various “non-GAAP financial measures”,
“non-GAAP ratios”, “supplementary financial measures” and “capital
management measures” as such terms are defined in National
Instrument 52-112 – Non-GAAP and Other Financial Measures
Disclosure (“NI 52-112”). Non-GAAP financial
measures and non-GAAP ratios are not standardized financial
measures under GAAP and might not be comparable to similar
financial measures disclosed by other issuers where similar
terminology is used. For further information regarding the non-GAAP
and other financial measures used in this press release, see
“Non-GAAP and Other Financial Measures”.
Q3 2022 FINANCIAL AND OPERATIONAL
SUMMARY
|
|
Three months endedSeptember
30, |
|
Nine months endedSeptember
30, |
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
OPERATING |
|
|
|
|
| Average production |
|
|
|
|
|
Light oil (bbls/d) |
2,254 |
|
2,878 |
|
2,159 |
|
2,998 |
|
|
Condensate (bbls/d) |
4,601 |
|
5,990 |
|
4,631 |
|
5,844 |
|
|
NGLs (bbls/d) |
7,593 |
|
6,889 |
|
7,305 |
|
7,750 |
|
|
Natural gas (Mcf/d) |
381,788 |
|
415,005 |
|
371,174 |
|
371,175 |
|
|
Total (boe/d) |
78,079 |
|
84,924 |
|
75,957 |
|
78,454 |
|
|
Average realized sales price(CDN$)(1)(2) |
|
|
|
|
|
Light oil (per bbl) |
115.94 |
|
83.52 |
|
121.49 |
|
75.28 |
|
|
Condensate (per bbl) |
115.84 |
|
88.04 |
|
125.06 |
|
81.65 |
|
|
NGLs (per bbl) |
38.18 |
|
35.13 |
|
43.04 |
|
28.01 |
|
|
Natural gas (per Mcf) |
6.83 |
|
4.46 |
|
6.95 |
|
3.86 |
|
|
Total (per boe) |
47.26 |
|
33.70 |
|
49.18 |
|
30.00 |
|
|
|
|
|
|
|
| NETBACK AND
COST ($/boe)(2) |
|
|
|
|
|
Petroleum and natural gas revenue(1) |
47.26 |
|
33.71 |
|
49.18 |
|
30.00 |
|
|
Royalty expense |
(6.04 |
) |
(2.50 |
) |
(6.05 |
) |
(2.23 |
) |
|
Operating expense |
(3.50 |
) |
(2.96 |
) |
(3.46 |
) |
(3.09 |
) |
|
Transportation and other expense(3) |
(5.41 |
) |
(4.73 |
) |
(5.58 |
) |
(5.22 |
) |
|
Operating netback(3) |
32.31 |
|
23.52 |
|
34.09 |
|
19.46 |
|
|
G&A expense, net |
(0.98 |
) |
(0.70 |
) |
(1.08 |
) |
(0.83 |
) |
|
Interest expense |
(0.44 |
) |
(0.92 |
) |
(0.48 |
) |
(1.10 |
) |
|
Realized gain (loss) on financial instruments |
6.33 |
|
(0.32 |
) |
2.99 |
|
(1.46 |
) |
|
Other cash income (expense) |
- |
|
(0.07 |
) |
- |
|
0.09 |
|
|
Adjusted funds flow(3) |
37.22 |
|
21.51 |
|
35.52 |
|
16.16 |
|
|
Depletion and depreciation expense |
(7.48 |
) |
(7.31 |
) |
(7.49 |
) |
(7.42 |
) |
|
Unrealized gain on financial instruments |
15.30 |
|
9.02 |
|
9.26 |
|
3.93 |
|
|
Other (expense) income(4) |
(0.39 |
) |
0.05 |
|
(0.28 |
) |
0.03 |
|
|
Dividends on preferred shares |
(0.24 |
) |
(0.22 |
) |
(0.25 |
) |
(0.25 |
) |
|
Deferred income tax expense |
(10.36 |
) |
(5.34 |
) |
(8.59 |
) |
(2.91 |
) |
|
Net income to common shareholders |
34.05 |
|
17.71 |
|
28.17 |
|
9.54 |
|
|
|
|
|
|
|
|
FINANCIAL |
|
|
|
|
|
Petroleum and natural gas revenue ($000s)(1) |
339,531 |
|
263,348 |
|
1,019,822 |
|
642,600 |
|
|
Cash flow from operating activities ($000s) |
272,965 |
|
155,606 |
|
700,828 |
|
319,227 |
|
| Adjusted funds
flow ($000s)(5) |
267,350 |
|
168,076 |
|
736,584 |
|
346,084 |
|
|
Per basic common share ($)(3) |
1.01 |
|
0.63 |
|
2.78 |
|
1.30 |
|
| Free funds
flow ($000s)(5) |
182,020 |
|
150,050 |
|
478,725 |
|
151,331 |
|
|
Per basic common share ($)(3) |
0.69 |
|
0.56 |
|
1.80 |
|
0.57 |
|
| Net income to common
shareholders ($000s) |
244,582 |
|
138,367 |
|
584,229 |
|
204,387 |
|
|
Per basic common share ($) |
0.92 |
|
0.52 |
|
2.20 |
|
0.77 |
|
|
End of period basic common shares (000s) |
265,877 |
|
265,573 |
|
265,877 |
|
265,573 |
|
| Weighted average basic common
shares (000s) |
265,298 |
|
266,547 |
|
265,422 |
|
266,258 |
|
|
Dividends on common shares ($000s) |
5,317 |
|
1,330 |
|
13,285 |
|
3,993 |
|
|
Dividends on preferred shares ($000s) |
1,730 |
|
1,717 |
|
5,162 |
|
5,188 |
|
|
F&D capital expenditures ($000s)(6) |
85,330 |
|
18,026 |
|
257,859 |
|
194,753 |
|
| Total capital
expenditures ($000s)(5) |
86,485 |
|
18,622 |
|
260,759 |
|
196,407 |
|
| Long-term
debt ($000s) |
196,989 |
|
648,327 |
|
196,989 |
|
648,327 |
|
| Total
debt ($000s)(7) |
186,064 |
|
637,905 |
|
186,064 |
|
637,905 |
|
(1) Excludes the effects of financial
instruments but includes the effects of physical delivery
contracts.(2) Average realized sales prices and the component
values of netback and cost set forth in the table above are
supplementary financial measures unless otherwise indicated. See
“Non-GAAP and Other Financial Measures”. (3) Non-GAAP ratio. See
“Non-GAAP and Other Financial Measures”.(4) Includes non-cash items
such as compensation, accretion, amortization of deferred financing
fees and other gains.(5) Non-GAAP financial measure. See “Non-GAAP
and Other Financial Measures”.(6) See “Advisories – F&D Capital
Expenditures”. (7) Capital management measure. See “Non-GAAP and
Other Financial Measures”.
Q3 2022 FINANCIAL AND OPERATIONAL
RESULTS
Production
Birchcliff’s production averaged 78,079 boe/d in
Q3 2022, an 8% decrease from 84,924 boe/d in Q3 2021. The decrease
was primarily due to the timing of new wells brought on production
in Q3 2022 as compared to Q3 2021, which resulted from scheduling
differences in Birchcliff’s drilling and completions program
year-over-year. During Q3 2022, the Corporation brought a total 19
wells on production, which included the 10-well 04-04 pad brought
onstream in August 2022 and the 9-well 06-35 pad brought onstream
in late September 2022, as compared to 22 wells in Q3 2021, the
majority of which were brought on production earlier in that
quarter. Production was positively impacted by incremental
production volumes from new Montney/Doig wells brought on
production since September 30, 2021, partially offset by natural
production declines.
Liquids accounted for 19% of Birchcliff’s total
production in Q3 2022, consistent with Q3 2021, with a
liquids-to-gas ratio in Q3 2022 of 37.8 bbls/MMcf (47% high-value
light oil and condensate).
Adjusted Funds Flow and Cash Flow From
Operating Activities
Birchcliff achieved record Q3 adjusted funds
flow of $267.4 million, or $1.01 per basic common share, in Q3
2022, a 59% and 60% increase, respectively, from $168.1 million and
$0.63 per basic common share in Q3 2021. Birchcliff’s cash flow
from operating activities was $273.0 million in Q3 2022, a 75%
increase from $155.6 million in Q3 2021. The increases were
primarily due to higher petroleum and natural gas revenue and a
realized gain on financial instruments of $45.5 million in Q3 2022
as compared to a realized loss on financial instruments of $2.5
million in Q3 2021, partially offset by a higher royalty expense in
Q3 2022. The increases in petroleum and natural gas revenue and
royalty expense were largely the result of a 40% increase in the
average realized sales price received for Birchcliff’s production
in Q3 2022 as compared to Q3 2021. The Corporation’s average
realized sales price in Q3 2022 benefited from significant
increases in benchmark oil and natural gas prices as compared to Q3
2021. See “Q3 2022 Financial and Operational Results – Commodity
Prices”.
Free Funds Flow
Birchcliff delivered record Q3 free funds flow
of $182.0 million, or $0.69 per basic common share, in Q3 2022, a
21% and 23% increase, respectively, from $150.1 million and $0.56
per basic common share in Q3 2021. The increases were primarily due
to higher adjusted funds flow, partially offset by higher F&D
capital expenditures in Q3 2022 as compared to Q3 2021.
Net Income to Common
Shareholders
Birchcliff earned record quarterly net income to
common shareholders of $244.6 million, or $0.92 per basic common
share, in Q3 2022, each a 77% increase from $138.4 million and
$0.52 per basic common share in Q3 2021. The increases were
primarily due to higher adjusted funds flow and a higher unrealized
mark-to-market gain on financial instruments. Birchcliff recorded
an unrealized mark-to-market gain on financial instruments of
$109.9 million in Q3 2022 as compared to a $70.5 million in Q3
2021. Net income to common shareholders was negatively impacted by
an increase in deferred income tax expense of $32.6 million in Q3
2022.
Operating Netback and Selected Cash
Costs
In Q3 2022, Birchcliff’s operating netback was
$32.31/boe, a 37% increase from $23.52/boe in Q3 2021. The increase
was primarily due to higher per boe petroleum and natural gas
revenue, partially offset by a higher per boe royalty expense, both
of which were largely impacted by a 40% increase in the average
realized sales price received for Birchcliff’s production in Q3
2022.
The following table sets forth Birchcliff’s
selected cash costs for the periods indicated:
|
|
Three months endedSeptember
30, |
|
|
($/boe) |
2022 |
2021 |
% Change |
|
| Royalty expense(1) |
6.04 |
2.50 |
142 |
% |
| Operating expense(1) |
3.50 |
2.96 |
18 |
% |
| Transportation and other
expense(2) |
5.41 |
4.73 |
14 |
% |
| G&A expense, net(1) |
0.98 |
0.70 |
40 |
% |
|
Interest expense(1) |
0.44 |
0.92 |
(52 |
%) |
(1) Supplementary financial measure. See
“Non-GAAP and Other Financial Measures”.(2) Non-GAAP ratio. See
“Non-GAAP and Other Financial Measures”.
Royalty expense per boe increased by 142% from
Q3 2021, primarily due to the increase in the average realized
sales price received for Birchcliff’s liquids and natural gas
production in Q3 2022.
Operating expense per boe increased by 18% from
Q3 2021, primarily due to inflationary pressures on power and other
fuel supply costs, which together increased by 71% on a per boe
basis. Operating expense per boe was also negatively impacted by
higher municipal property taxes and regulatory fees.
Transportation and other expense per boe
increased by 14% from Q3 2021, primarily due to higher liquids
transportation costs as a result of inflationary pressures that
increased liquids-handling costs in Q3 2022 and higher
fractionation processing fees and take-or-pay commitments.
Net G&A expense per boe increased by 40%
from Q3 2021, primarily due to higher employee-related expenses,
higher corporate costs due to the easing of Birchcliff’s COVID-19
restrictions and higher general business expenditures due to
inflationary pressures.
Interest expense per boe decreased by 52% from
Q3 2021, primarily due to a lower average outstanding balance under
the Corporation’s extendible revolving credit facilities (the
“Credit Facilities”) in Q3 2022.
Debt and Credit Facilities
Total debt at September 30, 2022 was $186.1
million, a decrease of 71% from $637.9 million at September 30,
2021. At September 30, 2022, Birchcliff had long-term debt under
the Credit Facilities of $197.0 million (September 30, 2021: $648.3
million) from available Credit Facilities of $850.0 million
(September 30, 2021: $850.0 million), leaving the Corporation with
$648.9 million of unutilized credit capacity after adjusting for
outstanding letters of credit and unamortized deferred financing
fees. This unutilized credit capacity provides Birchcliff with
significant financial flexibility and additional capital resources
to fund its working capital requirements, capital expenditure
programs and dividend payments if required in the future. The
Credit Facilities do not contain any financial maintenance
covenants and do not mature until May 11, 2025.
Commodity Prices
The following table sets forth the average
benchmark commodity index prices and exchange rate for the periods
indicated:
|
|
Three months endedSeptember
30, |
|
|
|
2022 |
2021 |
% Change |
|
| Light oil – WTI
Cushing (US$/bbl) |
91.55 |
71.06 |
29 |
% |
| Light oil – MSW (Mixed
Sweet) (CDN$/bbl) |
116.82 |
83.32 |
40 |
% |
| Natural gas – NYMEX
HH (US$/MMBtu)(1) |
8.20 |
4.01 |
104 |
% |
| Natural gas – AECO 5A
Daily (CDN$/GJ) |
3.95 |
3.41 |
16 |
% |
| Natural gas – AECO 7A Month
Ahead (US$/MMBtu)(1) |
4.46 |
2.83 |
58 |
% |
| Natural gas – Dawn Day
Ahead (US$/MMBtu)(1) |
7.37 |
4.07 |
81 |
% |
| Natural gas – ATP 5A Day
Ahead (CDN$/GJ) |
3.96 |
4.01 |
(1 |
%) |
| Exchange rate (CDN$ to
US$1) |
1.3054 |
1.2504 |
4 |
% |
|
Exchange rate (US$ to CDN$1) |
0.7660 |
0.7997 |
(4 |
%) |
(1) See “Advisories – MMBtu Pricing
Conversions”.
Marketing and Natural Gas Market
Diversification
Birchcliff’s physical natural gas sales exposure
primarily consists of the AECO, Dawn and Alliance markets. In
addition, the Corporation has various financial instruments
outstanding that provide it with exposure to NYMEX HH pricing.
The following table details Birchcliff’s
effective sales, production and average realized sales price for
natural gas and liquids for Q3 2022, after taking into account the
Corporation’s financial instruments:
|
Three months ended September 30, 2022 |
|
|
Effectivesales(CDN$000s) |
Percentage of total sales(%) |
Effectiveproduction(per day) |
Percentage oftotal natural gas
production(%) |
Percentage oftotal corporate
production(%) |
Effective average realizedsales
price(CDN$) |
|
Market |
|
|
|
|
|
|
|
AECO(1)(2)(3) |
33,527 |
8% |
82,571 Mcf |
22% |
18% |
4.41/Mcf |
|
Dawn(4) |
148,258 |
36% |
160,526 Mcf |
42% |
34% |
10.04/Mcf |
|
NYMEX HH(1)(2)(5) |
125,342 |
31% |
138,691 Mcf |
36% |
29% |
9.82/Mcf |
|
Total natural gas(1) |
307,127 |
75% |
381,788 Mcf |
100% |
81% |
8.74/Mcf |
|
Light oil |
24,037 |
6% |
2,254 bbl |
|
3% |
115.94/bbl |
|
Condensate |
49,031 |
12% |
4,601 bbl |
|
6% |
115.84/bbl |
|
NGLs |
26,673 |
7% |
7,593 bbl |
|
10% |
38.18/bbl |
|
Total liquids |
99,741 |
25% |
14,448 bbls |
|
19% |
75.04/bbl |
|
Total corporate(1) |
406,868 |
100% |
78,079 boe |
|
100% |
56.64/boe |
(1) Effective sales and effective average
realized sales price are non-GAAP financial measures and non-GAAP
ratios, respectively, as identified in the above table. See
“Non-GAAP and Other Financial Measures”. (2) AECO sales and
production that effectively received NYMEX HH pricing under
Birchcliff’s long-term physical NYMEX HH/AECO 7A basis swap
contracts have been included as effective sales and production in
the NYMEX HH market. Birchcliff sold physical NYMEX HH/AECO 7A
basis swap contracts for 5,000 MMBtu/d at an average contract price
of NYMEX HH less US$1.205/MMBtu during Q3 2022.(3) Birchcliff has
short-term physical sales agreements with third-party marketers to
sell and deliver into the Alliance pipeline system. All of
Birchcliff’s short-term physical Alliance sales and production
during Q3 2022 received AECO premium pricing and have therefore
been included as effective sales and production in the AECO market.
(4) Birchcliff has agreements for the firm service transportation
of an aggregate of 175,000 GJ/d of natural gas on TransCanada
PipeLines’ Canadian Mainline, whereby natural gas is transported to
the Dawn trading hub in Southern Ontario.(5) NYMEX HH sales and
production include financial and physical NYMEX HH/AECO 7A basis
swap contracts for 152,500 MMBtu/d at an average contract price of
NYMEX HH less US$1.227/MMBtu during Q3 2022. Birchcliff’s effective
average realized sales price for NYMEX HH of CDN$9.82/Mcf
(US$6.77/MMBtu) was determined on a gross basis before giving
effect to the average NYMEX HH/AECO 7A fixed contract basis
differential price of CDN$1.76/Mcf (US$1.23/MMBtu). After giving
effect to the NYMEX HH/AECO 7A basis contact price, Birchcliff’s
effective average realized net sales price for NYMEX HH was
CDN$8.06/Mcf (US$5.54/MMBtu) in Q3 2022.
The following table sets forth Birchcliff’s
sales, production, average realized sales price, transportation
costs and natural gas sales netback by natural gas market for the
periods indicated, before taking into account the Corporation’s
financial instruments:
|
Three months ended September 30, 2022 |
|
|
Natural
gassales(1)(CDN$000s) |
Percentage of natural gas sales(%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realizednatural gas
salesprice(1)(2)(CDN$/Mcf) |
Natural gas transportation
costs(2)(3)(CDN$/Mcf) |
Natural gas sales netback(2)(4)(CDN$/Mcf) |
|
AECO |
83,550 |
35% |
203,296 |
53% |
4.50 |
0.39 |
4.11 |
|
Dawn |
148,258 |
62% |
160,526 |
42% |
10.04 |
1.42 |
8.61 |
|
Alliance(5) |
7,965 |
3% |
17,966 |
5% |
4.82 |
- |
4.82 |
|
Total |
239,773 |
100% |
381,788 |
100% |
6.83 |
0.81 |
6.02 |
|
Three months ended September 30, 2021 |
|
|
Natural
gassales(1)(CDN$000s) |
Percentage of natural gas sales(%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realizednatural gas
salesprice(1)(2)(CDN$/Mcf) |
Natural gas transportation
costs(2)(3)(CDN$/Mcf) |
Natural gas sales netback(2)(4)(CDN$/Mcf) |
|
AECO |
65,886 |
39% |
186,718 |
45% |
3.87 |
0.43 |
3.44 |
|
Dawn |
78,554 |
46% |
158,631 |
38% |
5.38 |
1.48 |
3.90 |
|
Alliance(5) |
26,001 |
15% |
69,656 |
17% |
4.06 |
- |
4.06 |
|
Total |
170,441 |
100% |
415,005 |
100% |
4.46 |
0.76 |
3.70 |
(1) Excludes the effects of financial
instruments but includes the effects of physical delivery
contracts.(2) Supplementary financial measure. See “Non-GAAP and
Other Financial Measures”.(3) Reflects costs to transport natural
gas from the field receipt point to the delivery sales trading
hub.(4) Natural gas sales netback denotes the average realized
natural gas sales price less natural gas transportation costs.(5)
Birchcliff has short-term physical sales agreements with
third-party marketers to sell and deliver into the Alliance
pipeline system. Alliance sales are recorded net of transportation
tolls.
Capital Activities and
Investment
F&D capital expenditures were $85.3 million
in Q3 2022, which included drilling 8 (8.0 net) wells and bringing
19 (19.0 net) wells on production. In addition, the Corporation
participated in the drilling and completion of 2 (0.375 net)
Charlie Lake horizontal oil wells in Pouce Coupe. See “Operations
Update”.
OPERATIONS UPDATE
2022 Capital Program Update
Birchcliff has successfully drilled and brought
on production all of the wells under its initial 2022 capital
program. During Q3 2022, the Corporation brought 19 (19.0 net)
wells on production, with strong natural gas and condensate rates
and an average payout of less than a year, driven by efficient
execution and robust commodity prices.
The following table sets forth the wells that
were drilled and brought on production as part of the Corporation’s
2022 capital program:
|
|
|
Total # of wells drilled under initial 2022 capital
program |
|
Total # of wells brought on production under initial 2022
capital program |
|
|
|
|
|
|
|
POUCE COUPE |
|
|
|
|
|
|
|
|
|
|
|
|
|
13-29 pad |
Basal Doig/Upper Montney |
|
0 |
|
2 |
|
|
|
Montney D1 |
|
1 |
|
4 |
|
|
|
Total |
|
1 |
|
6(1) |
|
|
|
|
|
|
|
|
|
|
01-08 pad |
Basal Doig/Upper Montney |
|
4 |
|
4 |
|
|
|
Montney D1 |
|
5 |
|
5 |
|
|
|
Montney C |
|
1 |
|
1 |
|
|
|
Total |
|
10 |
|
10 |
|
|
|
|
|
|
|
|
|
|
04-04 pad |
Basal Doig/Upper Montney |
|
6 |
|
6 |
|
|
|
Montney D1 |
|
3 |
|
3 |
|
|
|
Montney C |
|
1 |
|
1 |
|
|
|
Total |
|
10 |
|
10 |
|
GORDONDALE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06-35 pad |
Montney D2 |
|
5 |
|
5 |
|
|
|
Montney D1 |
|
4 |
|
4 |
|
|
Total |
|
9 |
|
9 |
|
|
|
|
|
|
|
|
TOTAL |
|
30 |
|
35(1)(2) |
(1) Includes 5 wells that were drilled and rig
released in Q4 2021. (2) Does not include the 2 (0.375 net) Charlie
Lake horizontal oil wells that the Corporation participated in
during Q3 2022. See “Q3 2022 Financial and Operational Results –
Capital Activities and Investment”.
Pouce Coupe Area
6-well pad (13-29-77-12W6)
Birchcliff’s 13-29 pad was brought on production
in Q1 2022. The initial 30 and 60 day production rates for the
wells from this pad were disclosed in the Corporation’s press
release dated May 11, 2022. The performance of this pad continues
to exceed the Corporation’s expectations, with strong natural gas
and condensate production rates.
10-well pad (01-08-78-13W6)
Birchcliff’s 01-08 pad was drilled and brought
on production in Q2 2022. The initial 30 and 60 day production
rates for the wells from this pad were disclosed in the
Corporation’s press release dated August 10, 2022. The performance
of this pad continues to be in-line with the Corporation’s
expectations, with strong natural gas and condensate production
rates.
10-well pad (04-04-78-13W6)
During Q3 2022, the Corporation brought all 10
wells on its 04-04 pad on production through Birchcliff’s owned and
operated infrastructure. The wells from this pad have now been
producing for over 60 days and have produced ahead of the
Corporation’s expectations, with strong natural gas and condensate
production rates. The outperformance of this pad is significant as
it demonstrates both the economical and technical success of a
modified completions technique being used to target brownfield
reservoir areas in the Upper and Lower Montney. During the initial
30 and 60 days of production, the pad was flowing inline
post-fracture condensate, raw natural gas and frac water. The
production rates of the wells are stabilized and the frac water
flowing back to surface continues to diminish over time. The
following table summarizes the aggregate and average production
rates for the 10 wells from the 04-04 pad:
|
|
IP 30(1) |
IP 60(1) |
|
Aggregate production
rate (boe/d) |
11,655 |
10,020 |
|
|
Aggregate natural gas production rate (Mcf/d) |
66,880 |
57,565 |
|
|
Aggregate condensate production rate (bbls/d) |
509 |
425 |
|
Average per well production
rate (boe/d) |
1,166 |
1,002 |
| |
Average
per well natural gas production rate (Mcf/d) |
6,688 |
5,757 |
|
|
Average per well condensate production rate (bbls/d) |
51 |
43 |
|
Condensate-to-gas
ratio (bbls/MMcf) |
8 |
7 |
(1) Represents the cumulative volumes for each
well measured at the wellhead separator for the 30 or 60 days (as
applicable) of production immediately after each well was
considered stabilized after producing fracture treatment fluid back
to surface in an amount such that flow rates of hydrocarbons became
reliable. See “Advisories – Initial Production Rates”.
Gordondale Area
9-well pad (06-35-77-11W6)
Birchcliff’s 06-35 pad was drilled in Q2 and Q3
2022 and brought on production in late September 2022. The wells
from this pad have now been producing for over 30 days and have
produced in-line with the Corporation’s expectations. As these
wells have not yet produced for over 60 days, Birchcliff
anticipates providing further details regarding the results of
these wells with the release of its Q4 2022 results.
2023 Capital Program
Acceleration
As previously announced on October 13, 2022,
Birchcliff’s board of directors approved an additional $80 million
of F&D capital expenditures to commence the execution of the
Corporation’s 2023 capital program. It is expected that the
accelerated capital expenditures will result in Birchcliff drilling
14 (14.0 net) wells in 2022 of the 36 (36.0 net) total wells
planned for the Corporation’s 2023 capital program, and bringing 6
(6.0 net) of those wells on production in late December 2022.
Accelerating Birchcliff’s 2023 capital program will result in
incremental production early in 2023, allowing the Corporation to
take advantage of stronger expected natural gas prices that are
typically seen in the winter months. It has also allowed Birchcliff
to significantly decrease the risks related to the price and
availability of drilling and other oilfield services during a
period of very tight supply. In addition, the Corporation has
secured multi-year contracts with its key service providers to
ensure the efficient execution of its medium and long-term
plans.
The following table summarizes the additional 14
wells expected to be drilled and 6 wells to be brought on
production in 2022:
|
Area |
2023 Capital Program Acceleration |
|
Wells to be drilled in 2022 |
Wells to be brought on production in
2022 |
|
Pouce Coupe |
|
|
|
|
Montney D1 horizontal natural gas wells |
7 |
3 |
| |
Montney
D2 horizontal natural gas wells |
5 |
3 |
| |
Montney
C horizontal natural gas wells |
2 |
0 |
|
TOTAL – POUCE COUPE |
14 |
6 |
As of the date hereof, Birchcliff has completed
the drilling of 6 (6.0 net) Montney/Doig horizontal wells in Pouce
Coupe on its 6-well 03-06 pad. Completion operations are scheduled
for this pad during November 2022 and all 6 wells are expected to
be brought on production in late December 2022.
Birchcliff’s two drilling rigs are currently
drilling 6 (6.0 net) Montney/Doig horizontal wells in Pouce Coupe
on its 6 well 14-06 pad, which are expected to be completed and
brought on production in Q1 2023.
Birchcliff also plans to drill 1 (1.0 net) well
and 3 (3.0 net) surface holes on each of the Corporation’s two
4-well pads in Pouce Coupe (15-27 and 04-23) in 2022. These
additional wells are expected to be completed and brought on
production in the first half of 2023.
For additional details on Birchcliff’s 2022 and
2023 capital programs, see “Outlook and Guidance”.
OUTLOOK AND GUIDANCE
Birchcliff is maintaining its guidance for 2022
and its preliminary guidance for 2023, both as previously disclosed
on October 13, 2022.
2022 Guidance
Birchcliff is on track to achieve its 2022
annual average production guidance of 78,000 boe/d, which is
expected to generate approximately $1.02 billion of adjusted funds
flow and $655 million to $665 million of free funds flow, based on
the assumptions set forth herein. The Corporation anticipates
F&D capital expenditures to be between $355 million and $365
million, which includes $80 million being spent to prepare for the
efficient execution of the Corporation’s 2023 capital program. The
following table sets forth Birchcliff’s guidance and commodity
price assumptions for 2022, as well as its free funds flow
sensitivity:
2022 Guidance and Commodity Price
Assumptions
|
|
2022 guidance and assumptions(1) |
|
Production |
|
|
Annual average production (boe/d) |
78,000 |
|
% Light oil |
3% |
|
% Condensate |
6% |
|
% NGLs |
10% |
|
% Natural gas |
81% |
|
Q4 average production (boe/d) |
81,000 – 83,000 |
|
|
|
|
Average Expenses ($/boe) |
|
|
Royalty(2) |
6.70 – 6.80 |
|
Operating(2) |
3.40 – 3.50 |
|
Transportation and other(3) |
5.40 – 5.50 |
|
Interest(2) |
0.40 – 0.50 |
|
|
|
|
Adjusted Funds Flow (millions)(4) |
$1,020 |
|
|
|
|
F&D Capital
Expenditures (millions)(5) |
$355 – $365 |
|
|
|
|
Free Funds Flow (millions)(4) |
$655 – $665 |
|
|
|
|
Common Share Dividends (millions)(6) |
$72 |
|
|
|
|
Excess Free Funds Flow (millions)(4)(6) |
$585 – $595 |
|
|
|
|
Total Debt at Year End (millions)(7) |
$60 – $70 |
|
|
|
|
Natural Gas Market Exposure |
|
|
AECO exposure as a % of total natural gas production |
15% |
|
Dawn exposure as a % of total natural gas production |
42% |
|
NYMEX HH exposure as a % of total natural gas production |
38% |
|
Alliance exposure as a % of total natural gas production |
5% |
|
|
|
|
Commodity Prices |
|
|
Average WTI price (US$/bbl) |
95.00 |
|
Average WTI-MSW differential (CDN$/bbl) |
2.50 |
|
Average AECO price (CDN$/GJ) |
5.25 |
|
Average Dawn price (US$/MMBtu) |
6.35 |
|
Average NYMEX HH price (US$/MMBtu) |
6.85 |
|
Exchange rate (CDN$ to US$1) |
1.30 |
Forward Three Months’ Free Funds Flow
Sensitivity(8)
|
Forward three months’ sensitivity |
Estimated change to 2022 free funds
flow (millions) |
|
Change in WTI US$1.00/bbl |
$1.0 |
|
Change in NYMEX HH US$0.10/MMBtu |
$1.3 |
|
Change in Dawn US$0.10/MMBtu |
$1.8 |
|
Change in AECO CDN$0.10/GJ |
$1.2 |
|
Change in CDN/US exchange rate CDN$0.01 |
$1.3 |
(1) For further information regarding the risks
and assumptions relating to the Corporation’s guidance, see
“Advisories – Forward-Looking Statements”.(2) Supplementary
financial measure. See “Non-GAAP and Other Financial Measures”. (3)
Non-GAAP ratio. See “Non-GAAP and Other Financial Measures”. (4)
Non-GAAP financial measure. See “Non-GAAP and Other Financial
Measures”. (5) Birchcliff’s estimate of F&D capital
expenditures excludes any net potential acquisitions and
dispositions and the capitalized portion of annual cash incentive
payments that have not been approved by Birchcliff’s board of
directors. See “Advisories – F&D Capital Expenditures”. (6)
Assumes that a dividend of $0.02 per common share is paid for the
quarter ending December 31, 2022 and that there are 266 million
common shares outstanding. The declaration of dividends is subject
to the approval of the board of directors and is subject to change.
See “Advisories – Forward-Looking Statements”.(7) Capital
management measure. See “Non-GAAP and Other Financial Measures”.
The estimate of total debt at December 31, 2022 is expected to be
comprised of any amounts outstanding under the Credit Facilities
and adjusted working capital, which is expected to be largely
comprised of cash, accounts receivable and accounts payable and
accrued liabilities at the end of the year. (8) Illustrates the
expected impact of changes in commodity prices and the CDN/US
exchange rate on the Corporation’s estimate of free funds flow for
2022 of $655 million to $665 million, holding all other variables
constant. The sensitivity is based on the commodity price and
exchange rate assumptions set forth in the table above. The
calculated impact on free funds flow is only applicable within the
limited range of change indicated. Calculations are performed
independently and may not be indicative of actual results. Actual
results may vary materially when multiple variables change at the
same time and/or when the magnitude of the change increases.
Preliminary 2023 Guidance
Birchcliff is currently targeting F&D
capital expenditures of $240 million to $270 million in 2023, which
will allow the Corporation to bring approximately 30 wells on
production in 2023. With the addition of the 6 wells that will be
brought on production in late December 2022, the Corporation
expects to deliver annual average production of 81,000 to 83,000
boe/d in 2023, a 5% increase over 2022. Birchcliff is currently
forecasting approximately $855 million of adjusted funds flow and
$585 million to $615 million of free funds flow in 2023, based on
the assumptions set forth herein.
Birchcliff’s preliminary guidance for 2023 is
based on its preliminary planning and takes into account expected
increases in materials, labour and services costs as compared to
the current year. Birchcliff continues to work through its plans
for 2023 and expects to announce the details of its 2023 capital
program and updated five year plan for 2023 to 2027 on January 18,
2023.
Preliminary 2023 Guidance and Commodity
Price Assumptions
|
|
Preliminary 2023 guidance and assumptions(1) |
|
Annual Average Production (boe/d) |
81,000 – 83,000 |
|
|
|
|
Average Expenses ($/boe) |
|
|
Royalty(2) |
4.95 – 5.15 |
|
Operating(2) |
3.40 – 3.60 |
|
Transportation and other(3) |
5.20 – 5.40 |
|
Interest(2) |
negligible |
|
Current income tax(2) |
1.55 – 1.75 |
|
|
|
|
Adjusted Funds Flow (millions)(4) |
$855 |
|
|
|
|
F&D Capital
Expenditures (millions)(5) |
$240 – $270 |
|
|
|
|
Free Funds Flow (millions)(4) |
$585 – $615 |
|
|
|
|
Common Share Dividends (millions)(6) |
$213 |
|
|
|
|
Excess Free Funds Flow (millions)(4)(6) |
$370 – $400 |
|
|
|
|
Total Surplus at Year End (millions)(7) |
$295 – $325 |
|
|
|
|
Natural Gas Market Exposure |
|
|
AECO exposure as a % of total natural gas production |
23% |
|
Dawn exposure as a % of total natural gas production |
41% |
|
NYMEX HH exposure as a % of total natural gas production |
36% |
|
|
|
|
Commodity Prices |
|
|
Average WTI price (US$/bbl) |
80.00 |
|
Average WTI-MSW differential (CDN$/bbl) |
5.00 |
|
Average AECO price (CDN$/GJ) |
4.80 |
|
Average Dawn price (US$/MMBtu) |
5.30 |
|
Average NYMEX HH price (US$/MMBtu) |
5.55 |
|
Exchange rate (CDN$ to US$1) |
1.35 |
Forward Twelve Months’ Free Funds Flow
Sensitivity(8)
|
Forward twelve months’ sensitivity |
Estimated change to 2023 free funds
flow (millions) |
|
Change in WTI US$1.00/bbl |
$4.0 |
|
Change in NYMEX HH US$0.10/MMBtu |
$7.5 |
|
Change in Dawn US$0.10/MMBtu |
$7.7 |
|
Change in AECO CDN$0.10/GJ |
$3.3 |
|
Change in CDN/US exchange rate CDN$0.01 |
$7.7 |
(1) Birchcliff’s preliminary 2023 guidance for
its adjusted funds flow, free funds flow, excess free funds flow,
total surplus and natural gas market exposure in 2023 is based on
an annual average production rate of 82,000 boe/d, which is the
mid-point of Birchcliff’s preliminary annual average production
guidance range for 2023. For further information regarding the
risks and assumptions relating to the Corporation’s guidance, see
“Advisories – Forward-Looking Statements”.(2) Supplementary
financial measure. See “Non-GAAP and Other Financial Measures”. (3)
Non-GAAP ratio. See “Non-GAAP and Other Financial Measures”. (4)
Non-GAAP financial measure. See “Non-GAAP and Other Financial
Measures”. (5) Birchcliff’s estimate of F&D capital
expenditures excludes any net potential acquisitions and
dispositions and the capitalized portion of annual cash incentive
payments that have not been approved by Birchcliff’s board of
directors. See “Advisories – F&D Capital Expenditures”. (6)
Assumes that an annual common share dividend of $0.80 per share is
paid in 2023 and that there are 266 million common shares
outstanding. The declaration of dividends is subject to the
approval of the board of directors and is subject to change. See
“Advisories – Forward-Looking Statements”.(7) Capital management
measure. See “Non-GAAP and Other Financial Measures”. The estimate
of total surplus at December 31, 2023 is expected to be comprised
of adjusted working capital, which is expected to be largely
comprised of cash, accounts receivable and accounts payable and
accrued liabilities at the end of the year. Birchcliff previously
referred to total surplus as “surplus”. (8) Illustrates the
expected impact of changes in commodity prices and the CDN/US
exchange rate on the Corporation’s estimate of free funds flow for
2023 of $585 million to $615 million, holding all other variables
constant. The sensitivity is based on the commodity price and
exchange rate assumptions set forth in the table above. The
calculated impact on free funds flow is only applicable within the
limited range of change indicated. Calculations are performed
independently and may not be indicative of actual results. Actual
results may vary materially when multiple variables change at the
same time and/or when the magnitude of the change increases.
Forecast Royalties, Taxes and
Fees
Birchcliff currently forecasts that total
royalties and other taxes and fees to be paid to the Province of
Alberta in 2022 and 2023 will be in the amount of approximately
$206 million and $168 million, respectively. Royalties are
comprised of payments in respect of production and revenue from
Birchcliff’s oil and natural gas wells producing in Alberta. Other
taxes and fees primarily include municipal property taxes,
regulatory compliance and administration fees, surface and mineral
lease rentals and land sale bonuses paid to acquire development
rights in the Province.
Birchcliff currently forecasts that corporate
income taxes to be paid to the Federal Government in 2023 will be
in the amount of approximately $49 million. The Corporation expects
to have sufficient tax pools available to offset taxable income in
2022 and therefore no corporate income taxes are expected to paid
in 2022.
ABBREVIATIONS
|
AECO |
benchmark price for natural gas determined at the AECO ‘C’ hub in
southeast Alberta |
|
ATP |
Alliance Trading Pool |
|
bbl |
barrel |
|
bbls |
barrels |
|
bbls/d |
barrels per day |
|
boe |
barrel of oil equivalent |
|
boe/d |
barrel of oil equivalent per day |
|
condensate |
pentanes plus (C5+) |
|
F&D |
finding and development |
|
G&A |
general and administrative |
|
GAAP |
generally accepted accounting principles for Canadian public
companies, which are currently International Financial Reporting
Standards as issued by the International Accounting Standards
Board |
|
GJ |
gigajoule |
|
GJ/d |
gigajoules per day |
|
HH |
Henry Hub |
|
IP |
initial production |
|
Mcf |
thousand cubic feet |
|
Mcf/d |
thousand cubic feet per day |
|
MMBtu |
million British thermal units |
|
MMBtu/d |
million British thermal units per day |
|
MMcf |
million cubic feet |
|
MPa |
megapascal |
|
MSW |
price for mixed sweet crude oil at Edmonton, Alberta |
|
NGLs |
natural gas liquids consisting of ethane (C2), propane (C3) and
butane (C4) and specifically excluding condensate |
|
NYMEX |
New York Mercantile Exchange |
|
OPEC |
Organization of the Petroleum Exporting Countries |
|
WTI |
West Texas Intermediate, the reference price paid in U.S. dollars
at Cushing, Oklahoma, for crude oil of standard grade |
|
000s |
thousands |
|
$000s |
thousands of dollars |
NON-GAAP AND OTHER FINANCIAL
MEASURES
This press release uses various “non-GAAP
financial measures”, “non-GAAP ratios”, “supplementary financial
measures” and “capital management measures” (as such terms are
defined in NI 52-112), which are described in further detail below.
These measures facilitate management’s comparisons to the
Corporation’s historical operating results in assessing its results
and strategic and operational decision-making and may be used by
financial analysts and others in the oil and natural gas industry
to evaluate the Corporation’s performance.
Non-GAAP Financial Measures
NI 52-112 defines a non-GAAP financial measure
as a financial measure that: (i) depicts the historical or expected
future financial performance, financial position or cash flow of an
entity; (ii) with respect to its composition, excludes an amount
that is included in, or includes an amount that is excluded from,
the composition of the most directly comparable financial measure
disclosed in the primary financial statements of the entity; (iii)
is not disclosed in the financial statements of the entity; and
(iv) is not a ratio, fraction, percentage or similar
representation. The non-GAAP financial measures used in this press
release are not standardized financial measures under GAAP and
might not be comparable to similar measures presented by other
companies where similar terminology is used. Investors are
cautioned that non-GAAP financial measures should not be construed
as alternatives to or more meaningful than the most directly
comparable GAAP measures as indicators of Birchcliff’s performance.
Set forth below is a description of the non-GAAP financial measures
used in this press release.
Adjusted Funds Flow, Free Funds Flow and
Excess Free Funds Flow
Birchcliff defines “adjusted funds flow” as cash
flow from operating activities before the effects of
decommissioning expenditures and changes in non-cash operating
working capital. Birchcliff eliminates settlements of
decommissioning expenditures from cash flow from operating
activities as the amounts can be discretionary and may vary from
period to period depending on its capital programs and the maturity
of its operating areas. The settlement of decommissioning
expenditures is managed with Birchcliff’s capital budgeting process
which considers available adjusted funds flow. Changes in non-cash
operating working capital are eliminated in the determination of
adjusted funds flow as the timing of collection and payment are
variable and by excluding them from the calculation, the
Corporation believes that it is able to provide a more meaningful
measure of its operations and ability to generate cash on a
continuing basis. Adjusted funds flow can also be derived from
petroleum and natural gas revenue less royalty expense, operating
expense, transportation and other expense, net G&A expense,
interest expense and any realized losses (plus realized gains) on
financial instruments and plus any other cash income and expense
sources. Management believes that adjusted funds flow assists
management and investors in assessing Birchcliff’s financial
performance after deducting all operating and corporate cash costs,
as well as its ability to generate the cash necessary to fund
sustaining and/or growth capital expenditures, repay debt, settle
decommissioning obligations, buy back common shares and pay
dividends.
Birchcliff defines “free funds flow” as adjusted
funds flow less F&D capital expenditures. Management believes
that free funds flow assists management and investors in assessing
Birchcliff’s ability to generate shareholder returns through a
number of initiatives, including but not limited to, debt
repayment, common share buybacks, the payment of dividends and
acquisitions.
Birchcliff defines “excess free funds flow” as
free funds flow less common share dividends paid. Management
believes that excess free funds flow assists management and
investors in assessing Birchcliff’s ability to further enhance
shareholder returns after the payment of common share dividends,
which may include special dividends, increases to the Corporation’s
base dividend, common share buybacks, acquisitions and other
opportunities that would complement or otherwise improve the
Corporation’s business and enhance long-term shareholder value.
The following table provides a reconciliation of
cash flow from operating activities, as determined in accordance
with GAAP, to adjusted funds flow, free funds flow and excess free
funds flow for the periods indicated:
|
|
Three months endedSeptember
30, |
|
Nine months endedSeptember
30, |
|
Twelve months endedDecember
31, |
|
|
($000s) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
2021 |
|
|
Cash flow from operating activities |
272,965 |
|
155,606 |
|
700,828 |
|
319,227 |
|
515,369 |
|
|
Change in non-cash operating working capital |
(6,448 |
) |
12,305 |
|
33,581 |
|
25,416 |
|
21,161 |
|
|
Decommissioning expenditures |
833 |
|
165 |
|
2,175 |
|
1,441 |
|
3,203 |
|
|
Adjusted funds flow |
267,350 |
|
168,076 |
|
736,584 |
|
346,084 |
|
539,733 |
|
|
F&D capital expenditures |
(85,330 |
) |
(18,026 |
) |
(257,859 |
) |
(194,753 |
) |
(230,479 |
) |
|
Free funds flow |
182,020 |
|
150,050 |
|
478,725 |
|
151,331 |
|
309,254 |
|
|
Dividends on common shares |
(5,317 |
) |
(1,330 |
) |
(13,285 |
) |
(3,993 |
) |
(6,639 |
) |
|
Excess free funds flow |
176,703 |
|
148,720 |
|
465,440 |
|
147,338 |
|
302,615 |
|
Birchcliff has disclosed full year 2022 and 2023
guidance for adjusted funds flow, free funds flow and excess free
funds flow, which are forward-looking non-GAAP financial measures.
See “Outlook and Guidance”. The most directly comparable financial
measure for these measures, as disclosed in the Corporation’s
financial statements, is cash flow from operating activities. The
table above provides a reconciliation of the equivalent historical
non-GAAP financial measures from cash flow from operating
activities, as determined in accordance with GAAP, for the twelve
months ended December 31, 2021. Birchcliff anticipates the
forward-looking non-GAAP financial measures to exceed their
respective historical amounts for the twelve months ended December
31, 2021, primarily due to higher anticipated benchmark oil and
natural gas prices which are expected to increase the average
realized sales prices the Corporation receives for its production.
The commodity price assumptions on which the Corporation’s 2022 and
preliminary 2023 guidance are based are set forth in the tables
under the heading “Outlook and Guidance”.
Total Capital Expenditures
Birchcliff defines “total capital expenditures”
as F&D capital expenditures, plus acquisition, less
dispositions and plus administrative assets. Management believes
that total capital expenditures assist management and investors in
assessing Birchcliff’s overall capital cost structure associated
with its petroleum and natural gas activities. The following table
provides a reconciliation of F&D capital expenditures, as
determined in accordance with GAAP, to total capital expenditures
for the periods indicated:
|
|
Three months ended |
Nine months ended |
|
|
September 30, |
September 30, |
|
($000s) |
2022 |
2021 |
2022 |
|
2021 |
|
F&D capital expenditures(1) |
85,330 |
18,026 |
257,859 |
|
194,753 |
|
Acquisitions |
848 |
228 |
2,348 |
|
228 |
|
Dispositions |
- |
- |
(315 |
) |
- |
|
Administrative assets |
307 |
368 |
867 |
|
1,426 |
|
Total capital expenditures |
86,485 |
18,622 |
260,759 |
|
196,407 |
(1) Disclosed as exploration and development
expenditures in the financial statements.
Transportation and Other
Expense
Birchcliff defines “transportation and other
expense” as transportation expense plus marketing purchases less
marketing revenue. Birchcliff may enter into certain marketing
purchase and sales arrangements with the objective of reducing any
available transportation and/or fractionation fees associated with
its take-or-pay commitments. Management believes that
transportation and other expense assists management and investors
in assessing Birchcliff’s total cost structure related to
transportation activities. The following table provides a
reconciliation of transportation expense, as determined in
accordance with GAAP, to transportation and other expense for the
periods indicated:
|
|
Three months endedSeptember
30, |
|
Nine months endedSeptember
30, |
|
|
($000s) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
Transportation expense |
39,379 |
|
37,960 |
|
117,071 |
|
113,809 |
|
|
Marketing purchases |
2,124 |
|
8,840 |
|
8,337 |
|
12,621 |
|
|
Marketing revenue |
(2,613 |
) |
(9,861 |
) |
(9,890 |
) |
(14,553 |
) |
|
Transportation and other expense |
38,890 |
|
36,939 |
|
115,518 |
|
111,877 |
|
Operating Netback
Birchcliff defines “operating netback” as
petroleum and natural gas revenue less royalty expense, operating
expense and transportation and other expense. Management believes
that operating netback assists management and investors in
assessing Birchcliff’s operating profits after deducting the cash
costs that are directly associated with the sale of its production,
which can then be used to pay other corporate cash costs or satisfy
other obligations. The following table provides a breakdown of
Birchcliff’s operating netback for the periods indicated:
|
|
Three months endedSeptember
30, |
|
Nine months endedSeptember
30, |
|
|
($000s) |
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
Petroleum and natural gas revenue |
339,531 |
|
263,348 |
|
1,019,822 |
|
642,600 |
|
|
Royalty expense |
(43,379 |
) |
(19,500 |
) |
(125,547 |
) |
(47,819 |
) |
|
Operating expense |
(25,155 |
) |
(23,164 |
) |
(71,798 |
) |
(66,200 |
) |
|
Transportation and other expense |
(38,890 |
) |
(36,939 |
) |
(115,518 |
) |
(111,877 |
) |
|
Operating netback – Corporate |
232,107 |
|
183,745 |
|
706,959 |
|
416,704 |
|
Effective Sales – Total Corporate, Total
Natural Gas, AECO Market and NYMEX HH Market
Birchcliff defines “effective sales” in the AECO
market and NYMEX HH market as the sales amount received from the
production of natural gas that is effectively attributed to the
AECO and NYMEX HH market pricing, respectively, and does not
consider the physical sales delivery point in each case. Effective
sales in the NYMEX HH market includes realized gains and losses on
financial instruments and excludes the notional fixed basis costs
associated with the underlying financial contract in the period.
Birchcliff defines “effective total natural gas sales” as the
aggregate of the effective sales amount received in each natural
gas market. Birchcliff defines “effective total corporate sales” as
the aggregate of the effective total natural gas sales and the
sales amount received from the production of light oil, condensate
and NGLs. Management believes that disclosing effective sales for
each natural gas market assists management and investors in
assessing Birchcliff’s natural gas diversification and commodity
price exposure to each market. The following table provides a
reconciliation of natural gas sales, as determined in accordance
with GAAP, to effective total natural gas sales and effective total
corporate sales for the periods indicated:
|
|
Three months endedSeptember
30, |
|
|
($000s) |
2022 |
2021(1) |
|
|
Natural gas sales |
239,773 |
170,441 |
|
|
Realized gain (loss) on financial instruments |
45,490 |
(2,469 |
) |
|
Notional fixed basis costs(2) |
21,864 |
23,262 |
|
|
Effective total natural gas sales |
307,127 |
191,234 |
|
|
Light oil sales |
24,037 |
22,112 |
|
|
Condensate sales |
49,031 |
48,517 |
|
|
NGLs sales |
26,673 |
22,267 |
|
|
Effective total corporate sales |
406,868 |
284,130 |
|
(1) Prior period amounts have been adjusted to
include the aggregate notional fixed basis cost for comparison
purposes.(2) Reflects the aggregate notional fixed basis cost
associated with Birchcliff’s financial and physical NYMEX HH/AECO
7A basis swap contracts in the period.
Non-GAAP Ratios
NI 52-112 defines a non-GAAP ratio as a
financial measure that: (i) is in the form of a ratio, fraction,
percentage or similar representation; (ii) has a non-GAAP financial
measure as one or more of its components; and (iii) is not
disclosed in the financial statements of the entity. The non-GAAP
ratios used in this press release are not standardized financial
measures under GAAP and might not be comparable to similar measures
presented by other companies where similar terminology is used. Set
forth below is a description of the non-GAAP ratios used in this
press release.
Adjusted Funds Flow Per
Boe and Adjusted Funds Flow Per Basic Common
Share
Birchcliff calculates “adjusted funds flow per
boe” as aggregate adjusted funds flow in the period divided by the
production (boe) in the period. Management believes that adjusted
funds flow per boe assists management and investors in assessing
Birchcliff’s financial profitability and sustainability on a cash
basis by isolating the impact of production volumes to better
analyze its performance against prior periods on a comparable
basis. The Corporation previously referred to adjusted funds flow
per boe as “adjusted funds flow netback”.
Birchcliff calculates “adjusted funds flow per
basic common share” as aggregate adjusted funds flow in the period
divided by the basic common shares outstanding at the end of the
period. Management believes that adjusted funds flow per basic
common share assists management and investors in assessing
Birchcliff’s financial strength on a per common share basis.
Free Funds Flow Per Basic Common
Share
Birchcliff calculates “free funds flow per basic
common share” as aggregate free funds flow in the period divided by
the basic common shares outstanding at the end of the period.
Management believes that free funds flow per basic common share
assists management and investors in assessing Birchcliff’s
financial strength and its ability to generate shareholder returns
on a per common share basis.
Transportation and Other Expense Per
Boe
Birchcliff calculates “transportation and other
expense per boe” as aggregate transportation and other expense in
the period divided by the production (boe) in the period.
Management believes that transportation and other expense per boe
assists management and investors in assessing Birchcliff’s cost
structure as it relates to its transportation and marketing
activities by isolating the impact of production volumes to better
analyze its performance against prior periods on a comparable
basis.
Operating Netback Per Boe
Birchcliff calculates “operating netback per
boe” as aggregate operating netback in the period divided by the
production (boe) in the period. Management believes that operating
netback per boe assists management and investors in assessing
Birchcliff’s operating profitability and sustainability by
isolating the impact of production volumes to better analyze its
performance against prior periods on a comparable basis.
Effective Average Realized Sales Price –
Total Corporate, Total Natural Gas, AECO Market and NYMEX HH
Market
Birchcliff calculates “effective average
realized sales price” as effective sales, in each of total
corporate, total natural gas, AECO market and NYMEX HH market, as
the case may be, divided by the effective production in each of the
markets during the period. Management believes that disclosing
effective average realized sales price for each natural gas market
assists management and investors in comparing Birchcliff’s
commodity price realizations in each natural gas market on a per
unit basis.
Supplementary Financial
Measures
NI 52-112 defines a supplementary financial
measure as a financial measure that: (i) is, or is intended to be,
disclosed on a periodic basis to depict the historical or expected
future financial performance, financial position or cash flow of an
entity; (ii) is not disclosed in the financial statements of the
entity; (iii) is not a non-GAAP financial measure; and (iv) is not
a non-GAAP ratio. The supplementary financial measures used in this
press release are either a per unit disclosure of a corresponding
GAAP measure, or a component of a corresponding GAAP measure,
presented in the financial statements. Supplementary financial
measures that are disclosed on a per unit basis are calculated by
dividing the aggregate GAAP measure (or component thereof) by the
applicable unit for the period. Supplementary financial measures
that are disclosed on a component basis of a corresponding GAAP
measure are a granular representation of a financial statement line
item and are determined in accordance with GAAP.
The supplementary financial measures used in
this press release include: operating expense per boe; average
realized sales price per bbl, Mcf and boe; petroleum and natural
gas revenue per boe; royalty expense per boe; G&A expense, net
per boe; interest expense per boe; realized gain (loss) on
financial instruments per boe; other cash income (expense) per boe;
depletion and depreciation expense per boe; unrealized gain on
financial instruments per boe; other (expense) income per boe;
dividends on preferred shares per boe; deferred income tax expense
per boe; net income to common shareholders per boe; average
realized natural gas sales price per Mcf; natural gas
transportation costs per Mcf; and natural gas sales netback per
Mcf.
Capital Management Measures
NI 52-112 defines a capital management measure
as a financial measure that: (i) is intended to enable an
individual to evaluate an entity’s objectives, policies and
processes for managing the entity’s capital; (ii) is not a
component of a line item disclosed in the primary financial
statements of the entity; (iii) is disclosed in the notes to the
financial statements of the entity; and (iv) is not disclosed in
the primary financial statements of the entity. Set forth below is
a description of the capital management measures used in this press
release.
Total Debt and Total
Surplus
Birchcliff calculates “total debt (surplus)” as
the amount outstanding under the Corporation’s Credit Facilities
(if any) plus working capital deficit (less working capital
surplus) plus the fair value of the current asset portion of
financial instruments less the fair value of the current liability
portion of financial instruments and less capital securities (if
any) at the end of the period. Management believes that total debt
(surplus) assists management and investors in assessing
Birchcliff’s overall liquidity and financial position at the end of
the period. The following table provides a reconciliation of the
amount outstanding under the Credit Facilities, as determined in
accordance with GAAP, to total debt for the periods indicated:
|
As at, ($000s) |
September 30, 2022 |
|
June 30, 2022 |
|
December 31, 2021 |
|
September 30, 2021 |
|
|
Revolving term credit facilities |
196,989 |
|
276,030 |
|
500,870 |
|
648,327 |
|
|
Working capital deficit (surplus)(1) |
(80,650 |
) |
18,633 |
|
53,312 |
|
16,058 |
|
|
Fair value of financial instruments – asset(2) |
69,725 |
|
13,099 |
|
69 |
|
17,565 |
|
|
Fair value of financial instruments – liability(2) |
- |
|
(2,663 |
) |
(16,586 |
) |
(5,717 |
) |
|
Capital securities |
- |
|
(38,205 |
) |
(38,268 |
) |
(38,328 |
) |
|
Total debt(3) |
186,064 |
|
266,894 |
|
499,397 |
|
637,905 |
|
(1) Current liabilities less current assets.(2)
Reflects the current portion only.(3) Total debt can also be
derived from the amounts outstanding under the Corporation’s Credit
Facilities plus accounts payable and less cash, accounts receivable
and accrued liabilities and prepaid expenses and deposits at the
end of the period.
ADVISORIES
Unaudited Information
All financial and operational information
contained in this press release for the three and nine months ended
September 30, 2022 and 2021 is unaudited.
Currency
Unless otherwise indicated, all dollar amounts
are expressed in Canadian dollars and all references to “$” and
“CDN$” are to Canadian dollars and all references to “US$” are to
United States dollars.
Boe Conversions
Boe amounts have been calculated by using the
conversion ratio of 6 Mcf of natural gas to 1 bbl of oil. Boe
amounts may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Given that the
value ratio based on the current price of crude oil as compared to
natural gas is significantly different from the energy equivalency
of 6:1, utilizing a conversion on a 6:1 basis may be misleading as
an indication of value.
MMBtu Pricing Conversions
$1.00 per MMBtu equals $1.00 per Mcf based on a
standard heat value Mcf.
Oil and Gas Metrics
This press release contains metrics commonly
used in the oil and natural gas industry, including netbacks. These
oil and gas metrics do not have any standardized meanings or
standard methods of calculation and therefore may not be comparable
to similar measures presented by other companies where similar
terminology is used. As such, they should not be used to make
comparisons. Management uses these oil and gas metrics for its own
performance measurements and to provide investors with measures to
compare Birchcliff’s performance over time; however, such measures
are not reliable indicators of Birchcliff’s future performance,
which may not compare to Birchcliff’s performance in previous
periods, and therefore should not be unduly relied upon. For
additional information regarding netbacks, see “Non-GAAP and Other
Financial Measures”.
Production
With respect to the disclosure of Birchcliff’s
production contained in this press release: (i) references to
“light oil” mean “light crude oil and medium crude oil” as such
term is defined in National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities (“NI
51-101”); (ii) references to “liquids” mean “light crude
oil and medium crude oil” and “natural gas liquids” (including
condensate) as such terms are defined in NI 51-101; and (iii)
references to “natural gas” mean “shale gas”, which also includes
an immaterial amount of “conventional natural gas”, as such terms
are defined in NI 51-101. In addition, NI 51-101 includes
condensate within the product type of natural gas liquids.
Birchcliff has disclosed condensate separately from other natural
gas liquids as the price of condensate as compared to other natural
gas liquids is currently significantly higher and Birchcliff
believes presenting the two commodities separately provides a more
accurate description of its operations and results therefrom.
Initial Production Rates
Any references in this press release to initial
production rates or other short-term production rates are useful in
confirming the presence of hydrocarbons; however, such rates are
not determinative of the rates at which such wells will continue to
produce and decline thereafter and are not indicative of the
long-term performance or the ultimate recovery of such wells. In
addition, such rates may also include recovered “load oil” or “load
water” fluids used in well completion stimulation. Readers are
cautioned not to place undue reliance on such rates in calculating
the aggregate production for Birchcliff. Such rates are based on
field estimates and may be based on limited data available at this
time.
With respect to the production rates for the
Corporation’s 10-well 04-04 pad in Pouce Coupe disclosed herein,
such rates represent the cumulative volumes for each well measured
at the wellhead separator for the 30 and 60 days (as applicable) of
production immediately after each well was considered stabilized
after producing fracture treatment fluid back to surface in an
amount such that flow rates of hydrocarbons became reliable
(between 0 and 4 days), divided by 30 or 60 (as applicable), which
were then added together to determine the aggregate production
rates for the 10-well pad and then divided by 10 to determine the
per well average production rates. The production rates excluded
the hours and days when the wells did not produce. Approximate
tubing pressures for the 10 wells were stabilized between 3.5 and
4.1 MPa for IP 30 production rates and between 3.5 and 3.8 MPa for
IP 60 production rates. Approximate casing pressures for the 10
wells were stabilized between 8.6 and 13.5 MPa for IP 30 production
rates and between 8.1 and 13.2 MPa for IP 60 production rates.
To-date, no pressure transient or well-test
interpretation has been carried out on any of the wells. The
natural gas volumes represent raw natural gas volumes as opposed to
sales gas volumes.
F&D Capital
Expenditures
Unless otherwise stated, references in this
press release to “F&D capital expenditures” denotes exploration
and development expenditures determined in accordance with GAAP.
Management believes that F&D capital expenditures assists
management and investors in assessing Birchcliff capital cost
outlay associated with its exploration and development activities
for the purposes of finding and developing its reserves.
Forward-Looking Statements
Certain statements contained in this press
release constitute forward‐looking statements and forward-looking
information (collectively referred to as “forward‐looking
statements”) within the meaning of applicable Canadian
securities laws. The forward-looking statements contained in this
press release relate to future events or Birchcliff’s future plans,
strategy, operations, performance or financial position and are
based on Birchcliff’s current expectations, estimates, projections,
beliefs and assumptions. Such forward-looking statements have been
made by Birchcliff in light of the information available to it at
the time the statements were made and reflect its experience and
perception of historical trends. All statements and information
other than historical fact may be forward‐looking statements. Such
forward‐looking statements are often, but not always, identified by
the use of words such as “seek”, “plan”, “focus”, “future”,
“outlook”, “position”, “expect”, “project”, “intend”, “believe”,
“anticipate”, “estimate”, “forecast”, “guidance”, “potential”,
“proposed”, “predict”, “budget”, “continue”, “targeting”, “may”,
“will”, “could”, “might”, “should”, “would”, “on track”,
“maintain”, “deliver” and other similar words and expressions.
By their nature, forward-looking statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward‐looking statements. Accordingly,
readers are cautioned not to place undue reliance on such
forward-looking statements. Although Birchcliff believes that the
expectations reflected in the forward-looking statements are
reasonable, there can be no assurance that such expectations will
prove to be correct and Birchcliff makes no representation that
actual results achieved will be the same in whole or in part as
those set out in the forward-looking statements.
In particular, this press release contains
forward‐looking statements relating to the following:
-
Birchcliff’s plans and other aspects of its anticipated future
financial performance, results, operations, focus, objectives,
strategies, opportunities, priorities and goals, including: that
the execution of its 2023 capital program will result in annual
average production of 81,000 to 83,000 boe/d in 2023, a 5% increase
over 2022; that after the payment of Birchcliff’s targeted 2023
annual common share dividend of $0.80 per share ($0.20 per share
quarterly), it will have a cash surplus of approximately $295
million to $325 million at December 31, 2023; that the Corporation
expects to announce the details of its 2023 capital program and
updated five year plan for 2023 to 2027 on January 18, 2023; and
that the unutilized credit capacity under the Corporation’s Credit
Facilities provides it with significant financial flexibility and
additional capital resources to fund its working capital
requirements, capital expenditure programs and dividend payments if
required in the future;
-
the information set forth under the heading “Operations Update”
regarding Birchcliff’s capital programs and exploration and
development activities and the timing thereof, including: that the
wells brought on production in Q3 2022 have an average payout of
less than a year, driven by efficient execution and robust
commodity prices; that Birchcliff anticipates providing further
details regarding the results of the 9 wells on its 06-35 pad with
the release of its Q4 2022 results; estimates of capital
expenditures; that it is expected that the accelerated capital
expenditures approved by the Corporation’s board of directors will
result in Birchcliff drilling 14 (14.0 net) wells in 2022 of the 36
(36.0 net) total wells planned for the Corporation’s 2023 capital
program, and bringing 6 (6.0 net) of those wells on production in
late December 2022; that accelerating its 2023 capital program will
result in incremental production early in 2023, allowing the
Corporation to take advantage of stronger expected natural gas
prices that are typically seen in the winter months and allowing it
to significantly decrease the risks related to the price and
availability of drilling and other oilfield services during a
period of very tight supply; and the timing of the drilling,
completions activities and bringing on production of the additional
14 wells and targeted production types;
-
the information set forth under the heading “Outlook and Guidance –
2022 Guidance” and elsewhere in this press release as it relates to
Birchcliff’s outlook and guidance for 2022, including: estimates of
annual and Q4 average production, production commodity mix, average
expenses, adjusted funds flow, F&D capital expenditures, free
funds flow, common share dividends, excess free funds flow, total
debt at year end and natural gas market exposure and the expected
impact of changes in commodity prices and the CDN/US exchange rate
on Birchcliff’s estimate of free funds flow; that the estimate of
total debt at December 31, 2022 is expected to be comprised of any
amounts outstanding under the Credit Facilities and adjusted
working capital, which is expected to be largely comprised of cash,
accounts receivable and accounts payable and accrued liabilities at
the end of the year; that the Corporation is on track to achieve
its 2022 annual average production guidance of 78,000 boe/d, which
is expected to generate approximately $1.02 billion of adjusted
funds flow and $655 million to $665 million of free funds flow,
based on the assumptions set forth herein; and that the Corporation
anticipates F&D capital expenditures to be between $355 million
and $365 million, which includes $80 million being spent to prepare
for the efficient execution of the Corporation’s 2023 capital
program;
-
the information set forth under the heading “Outlook and Guidance –
Preliminary 2023 Guidance” and elsewhere in this press release as
it relates to Birchcliff’s preliminary outlook and guidance for
2023, including: estimates of annual average production, average
expenses, adjusted funds flow, F&D capital expenditures, free
funds flow, common share dividends, excess free funds flow, total
surplus at year end and natural gas market exposure and the
expected impact of changes in commodity prices and the CDN/US
exchange rate on Birchcliff’s estimate of free funds flow; that the
estimate of total surplus at December 31, 2023 is expected to be
comprised of adjusted working capital, which is expected to be
largely comprised of cash, accounts receivable and accounts payable
and accrued liabilities at the end of the year; that Birchcliff is
currently targeting F&D capital expenditures of $240 million to
$270 million in 2023, which will allow the Corporation to bring
approximately 30 wells on production in 2023; that with the
addition of the 6 wells that will be brought on production in late
December 2022, the Corporation expects to deliver annual average
production of 81,000 to 83,000 boe/d in 2023, a 5% increase over
2022; that Birchcliff is currently forecasting approximately $855
million of adjusted funds flow and $585 million to $615 million of
free funds flow in 2023, based on the assumptions set forth herein;
and that Birchcliff continues to work through its plans for 2023
and expects to announce the details of its 2023 capital program and
updated five year plan for 2023 to 2027 on January 18, 2023;
-
the information set forth under the heading “Outlook and Guidance –
Forecast Royalties, Taxes and Fees”, including: that Birchcliff
currently forecasts that total royalties and other taxes and fees
to be paid to the Province of Alberta in 2022 and 2023 will be in
the amount of approximately $206 million and $168 million,
respectively; that Birchcliff currently forecasts that corporate
income taxes to be paid to the Federal Government in 2023 will be
in the amount of approximately $49 million; and that the
Corporation expects to have sufficient tax pools available to
offset taxable income in 2022 and therefore no corporate income
taxes are expected to paid in 2022; and
-
the performance and other characteristics of Birchcliff’s oil and
natural gas properties and expected results from its assets.
With respect to the forward‐looking statements
contained in this press release, assumptions have been made
regarding, among other things: the degree to which the
Corporation’s results of operations and financial condition will be
disrupted by circumstances attributable to the COVID-19 pandemic;
prevailing and future commodity prices and differentials, exchange
rates, interest rates, inflation rates, royalty rates and tax
rates; the state of the economy, financial markets and the
exploration, development and production business; the political
environment in which Birchcliff operates; the regulatory framework
regarding royalties, taxes, environmental, climate change and other
laws; the Corporation’s ability to comply with existing and future
environmental, climate change and other laws; future cash flow,
debt and dividend levels; future operating, transportation, G&A
and other expenses; Birchcliff’s ability to access capital and
obtain financing on acceptable terms; the timing and amount of
capital expenditures and the sources of funding for capital
expenditures and other activities; the sufficiency of budgeted
capital expenditures to carry out planned operations; the
successful and timely implementation of capital projects and the
timing, location and extent of future drilling and other
operations; results of operations; Birchcliff’s ability to continue
to develop its assets and obtain the anticipated benefits
therefrom; the performance of existing and future wells; reserves
volumes and Birchcliff’s ability to replace and expand reserves
through acquisition, development or exploration; the impact of
competition on Birchcliff; the availability of, demand for and cost
of labour, services and materials; the approval of the board of
directors of future dividends; the ability to obtain any necessary
regulatory or other approvals in a timely manner; the satisfaction
by third parties of their obligations to Birchcliff; the ability of
Birchcliff to secure adequate processing and transportation for its
products; Birchcliff’s ability to successfully market natural gas
and liquids; the results of the Corporation’s risk management and
market diversification activities; and Birchcliff’s natural gas
market exposure. In addition to the foregoing assumptions,
Birchcliff has made the following assumptions with respect to
certain forward-looking statements contained in this press
release:
-
With respect to Birchcliff’s 2022 guidance (as updated on October
13, 2022):
-
The following commodity prices and exchange rate are assumed: an
average WTI price of US$95.00/bbl; an average WTI-MSW differential
of CDN$2.50/bbl; an average AECO price of CDN$5.25/GJ; an average
Dawn price of US$6.35/MMBtu; an average NYMEX HH price of
US$6.85/MMBtu; and an exchange rate (CDN$ to US$1) of 1.30. These
commodity price and exchange rate assumptions are based on
anticipated full-year averages, which include settled benchmark
commodity prices and exchange rate for the period from January 1,
2022 to September 30, 2022 and forward strip benchmark commodity
prices and CDN/US exchange rate as of October 5, 2022 for the
period from October 1, 2022 to December 31, 2022.
-
Birchcliff’s production guidance for 2022 assumes that: the 2022
capital program will be carried out as currently contemplated; no
unexpected outages occur in the infrastructure that Birchcliff
relies on to produce its wells and that any transportation service
curtailments or unplanned outages that occur will be short in
duration or otherwise insignificant; the construction of new
infrastructure meets timing and operational expectations; existing
wells continue to meet production expectations; and future wells
scheduled to come on production meet timing, production and capital
expenditure expectations.
-
Birchcliff’s estimate of capital expenditures for 2022 assumes that
the 2022 capital program will be carried out as currently
contemplated. The amount and allocation of capital expenditures for
exploration and development activities by area and the number and
types of wells to be drilled and brought on production is dependent
upon results achieved and is subject to review and modification by
management on an ongoing basis throughout the year. Actual spending
may vary due to a variety of factors, including commodity prices,
economic conditions, results of operations and costs of labour,
services and materials.
-
Birchcliff’s estimates of adjusted funds flow, free funds flow and
excess free funds flow for 2022 assume that: the 2022 capital
program will be carried out as currently contemplated and the level
of capital spending for 2022 set forth herein will be achieved; and
the targets for production, production commodity mix, expenses and
natural gas market exposure and the commodity price and exchange
rate assumptions set forth herein are met. Birchcliff’s estimate of
adjusted funds flow takes into account the effects of its physical
and financial basis swap contracts outstanding as at October 13,
2022 and excludes annual cash incentive payments that have not been
approved by Birchcliff’s board of directors.
-
Birchcliff’s estimate of total debt at December 31, 2022 assumes
that: (i) any free funds flow remaining after the payment of
dividends, asset retirement obligations and other amounts for
administrative assets, financing fees and capital lease obligations
is allocated towards debt reduction in 2022; (ii) there are 266
million common shares outstanding, with no further buybacks of
common shares occurring during 2022; (iii) a dividend of $0.02 per
common share is paid for the quarter ending December 31, 2022, with
no further special dividends paid during 2022; (iv) no significant
acquisitions or dispositions are completed by the Corporation and
there is no repayment of debt using the proceeds from equity
issuances during 2022; (v) there are no further proceeds received
from the exercise of stock options or performance warrants during
2022; (vi) the 2022 capital program will be carried out as
currently contemplated with F&D capital expenditures of $355
million to $365 million; and (vii) the targets for production,
production commodity mix, adjusted funds flow, free funds flow and
natural gas market exposure and the commodity price and exchange
rate assumptions set forth herein are met. Birchcliff’s estimate of
total debt at December 31, 2022 excludes annual cash incentive
payments that have not been approved by Birchcliff’s board of
directors.
-
Birchcliff’s guidance regarding its natural gas market exposure for
2022 assumes: (i) 175,000 GJ/d being sold on a physical basis at
the Dawn price; (ii) 22,040 GJ/d being sold at Alliance on a
physical basis at the AECO 5A price plus a premium; and (iii)
152,500 MMBtu/d being contracted on a financial and physical basis
at an average fixed basis differential price between AECO 7A and
NYMEX HH of approximately US$1.23/MMBtu.
-
With respect to Birchcliff’s preliminary guidance for 2023 (as
provided on October 13, 2022):
-
The following commodity prices and exchange rate are assumed: an
average WTI price of US$80.00/bbl; an average WTI-MSW differential
of CDN$5.00/bbl; an average AECO price of CDN$4.80/GJ; an average
Dawn price of US$5.30/MMBtu; an average NYMEX HH price of
US$5.55/MMBtu; and an exchange rate (CDN$ to US$1) of 1.35. These
commodity price and exchange rate assumptions are based on
anticipated full-year averages, which include forward strip
benchmark commodity prices and CDN/US exchange rate as of October
5, 2022 for the period from January 1, 2023 to December 31,
2023.
-
Birchcliff’s preliminary production guidance for 2023 is subject to
similar assumptions set forth herein for Birchcliff’s 2022
production guidance.
-
Birchcliff’s estimate of F&D capital expenditures for 2023
assumes that Birchcliff’s 2023 capital program will be carried out
as currently contemplated.
-
Birchcliff’s estimates of adjusted funds flow, free funds flow and
excess free funds flow for 2023 assume that: Birchcliff’s 2023
capital program will be carried out as currently contemplated and
the level of capital spending for 2023 set forth herein will be
achieved; and the targets for production, expenses and natural gas
market exposure and the commodity price and exchange rate
assumptions set forth herein are met. Birchcliff’s estimate of
adjusted funds flow takes into account the effects of its physical
and financial basis swap contracts outstanding as at October 13,
2022 and excludes annual cash incentive payments that have not been
approved by Birchcliff’s board of directors.
-
Birchcliff’s estimate of total surplus at December 31, 2023 assumes
that: (i) any free funds flow remaining after the payment of
dividends, asset retirement obligations and other amounts for
administrative assets, financing fees and capital lease obligations
is allocated towards full debt repayment in 2023; (ii) there are
266 million common shares outstanding, with no buybacks of common
shares occurring during 2023; (iii) an annual common share dividend
of $0.80 per share is paid in 2023, with no special dividends paid
during 2023; (iv) no significant acquisitions or dispositions are
completed by the Corporation and there is no repayment of debt
using the proceeds from equity issuances during 2023; (v) there are
no proceeds received from the exercise of stock options or
performance warrants during 2023; (vi) the 2023 capital program
will be carried out as currently contemplated with F&D capital
expenditures of $240 million to $270 million; and (vii) the targets
for production, adjusted funds flow, free funds flow and natural
gas market exposure and the commodity price and exchange rate
assumptions set forth herein are met. Birchcliff’s estimate of
total surplus at December 31, 2023 excludes annual cash incentive
payments that have not been approved by Birchcliff’s board of
directors.
-
Birchcliff’s guidance regarding its natural gas market exposure for
2023 assumes: (i) 175,000 GJ/d being sold on a physical basis at
the Dawn price; and (ii) 152,500 MMBtu/d being contracted on a
financial and physical basis at an average fixed basis differential
price between AECO 7A and NYMEX HH of approximately
US$1.23/MMBtu.
-
Birchcliff’s forecasts of royalties to be paid in 2022 and 2023 are
based on the current royalty regime in Alberta and Birchcliff’s
forecast of taxes to be paid in 2023 is based on the current tax
regimes in the Province of Alberta and in Canada. In addition, such
forecasts are based on the Corporation’s guidance and commodity
price assumptions for 2022 and 2023 as set forth herein.
-
With respect to statements of future wells to be drilled and
brought on production, such statements assume: the continuing
validity of the geological and other technical interpretations
performed by Birchcliff’s technical staff, which indicate that
commercially economic volumes can be recovered from Birchcliff’s
lands as a result of drilling future wells; and that commodity
prices and general economic conditions will warrant proceeding with
the drilling of such wells.
Birchcliff’s actual results, performance or
achievements could differ materially from those anticipated in the
forward-looking statements as a result of both known and unknown
risks and uncertainties including, but not limited to: the risks
posed by pandemics (including COVID-19), epidemics and global
conflict (including the Russian invasion of Ukraine) and their
impacts on supply and demand and commodity prices; actions taken by
OPEC and other major producers of crude oil and the impact such
actions may have on supply and demand and commodity prices; the
uncertainty of estimates and projections relating to production,
revenue, costs, expenses and reserves; the risk that any of the
Corporation’s material assumptions prove to be materially
inaccurate (including the Corporation’s commodity price and
exchange rate assumptions for 2022 and 2023); the potential for
changes to the Corporation’s preliminary estimate of F&D
capital expenditures for 2023, which could impact the Corporation’s
other preliminary 2023 guidance; general economic, market and
business conditions which will, among other things, impact the
demand for and market prices of Birchcliff’s products and
Birchcliff’s access to capital; volatility of crude oil and natural
gas prices; risks associated with increasing costs, whether due to
high inflation rates, supply chain disruptions or other factors;
fluctuations in exchange and interest rates; stock market
volatility; loss of market demand; an inability to access
sufficient capital from internal and external sources on terms
acceptable to the Corporation; risks associated with Birchcliff’s
Credit Facilities, including a failure to comply with covenants
under the agreement governing the Credit Facilities and the risk
that the borrowing base limit may be redetermined; fluctuations in
the costs of borrowing; operational risks and liabilities inherent
in oil and natural gas operations; the occurrence of unexpected
events such as fires, severe weather, explosions, blow-outs,
equipment failures, transportation incidents and other similar
events; an inability to access sufficient water or other fluids
needed for operations; uncertainty that development activities in
connection with Birchcliff’s assets will be economic; an inability
to access or implement some or all of the technology necessary to
operate its assets and achieve expected future results; the
accuracy of estimates of reserves, future net revenue and
production levels; geological, technical, drilling, construction
and processing problems; uncertainty of geological and technical
data; horizontal drilling and completions techniques and the
failure of drilling results to meet expectations for reserves or
production; uncertainties related to Birchcliff’s future potential
drilling locations; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the
accuracy of cost estimates and variances in Birchcliff’s actual
costs and economic returns from those anticipated; incorrect
assessments of the value of acquisitions and exploration and
development programs; changes to the regulatory framework in the
locations where the Corporation operates, including changes to tax
laws, Crown royalty rates, environmental laws, climate change laws,
carbon tax regimes, incentive programs and other regulations that
affect the oil and natural gas industry; actions by government
authorities, including those with respect to the COVID-19 pandemic;
an inability of the Corporation to comply with existing and future
environmental, climate change and other laws; the cost of
compliance with current and future environmental laws; political
uncertainty and uncertainty associated with government policy
changes; dependence on facilities, gathering lines and pipelines;
uncertainties and risks associated with pipeline restrictions and
outages to third-party infrastructure that could cause disruptions
to production; the lack of available pipeline capacity and an
inability to secure adequate and cost-effective processing and
transportation for Birchcliff’s products; an inability to satisfy
obligations under Birchcliff’s firm marketing and transportation
arrangements; shortages in equipment and skilled personnel; the
absence or loss of key employees; competition for, among other
things, capital, acquisitions of reserves, undeveloped lands,
equipment and skilled personnel; management of Birchcliff’s growth;
environmental and climate change risks, claims and liabilities;
potential litigation; default under or breach of agreements by
counterparties and potential enforceability issues in contracts;
claims by Indigenous peoples; the reassessment by taxing or
regulatory authorities of the Corporation’s prior transactions and
filings; unforeseen title defects; third-party claims regarding the
Corporation’s right to use technology and equipment; uncertainties
associated with the outcome of litigation or other proceedings
involving Birchcliff; uncertainties associated with counterparty
credit risk; risks associated with Birchcliff’s risk management and
market diversification activities; risks associated with the
declaration and payment of future dividends, including the
discretion of Birchcliff’s board of directors to declare dividends
and change the Corporation’s dividend policy; the failure to obtain
any required approvals in a timely manner or at all; the failure to
complete or realize the anticipated benefits of acquisitions and
dispositions and the risk of unforeseen difficulties in integrating
acquired assets into Birchcliff’s operations; negative public
perception of the oil and natural gas industry and fossil fuels;
the Corporation’s reliance on hydraulic fracturing; market
competition, including from alternative energy sources; changing
demand for petroleum products; the availability of insurance and
the risk that certain losses may not be insured; breaches or
failure of information systems and security (including risks
associated with cyber-attacks); risks associated with the ownership
of the Corporation’s securities; and the accuracy of the
Corporation’s accounting estimates and judgments.
While Birchcliff anticipates approval by the
board of directors of the proposed increase to the annual common
share dividend to $0.80 per share in 2023, the payment of such
dividend remains subject to the approval of the board of directors.
In addition, the proposed increase to the common share dividend in
2023 is subject to commodity prices. The declaration and payment of
any future dividends are subject to the discretion of the board of
directors and may not be approved or may vary depending on a
variety of factors and conditions existing from time to time,
including commodity prices, free funds flow, current and forecast
commodity prices, fluctuations in working capital, financial
requirements of Birchcliff, applicable laws (including solvency
tests under the Business Corporations Act (Alberta) for the
declaration and payment of dividends) and other factors beyond
Birchcliff’s control. The payment of dividends to shareholders is
not assured or guaranteed and dividends may be reduced or suspended
entirely. In addition to the foregoing, the Corporation’s ability
to pay dividends now or in the future may be limited by covenants
contained in the agreements governing any indebtedness that the
Corporation has incurred or may incur in the future, including the
terms of the Credit Facilities. The agreement governing the Credit
Facilities provides that Birchcliff is not permitted to make any
distribution (which includes dividends) at any time when an event
of default exists or would reasonably be expected to exist upon
making such distribution, unless such event of default arose
subsequent to the ordinary course declaration of the applicable
distribution.
Readers are cautioned that the foregoing lists
of factors are not exhaustive. Additional information on these and
other risk factors that could affect results of operations,
financial performance or financial results are included in
Birchcliff’s most recent Annual Information Form under the heading
“Risk Factors” and in other reports filed with Canadian securities
regulatory authorities.
This press release contains information that may
constitute future-orientated financial information or financial
outlook information (collectively, “FOFI”) about
Birchcliff’s prospective financial performance, financial position
or cash flows, all of which is subject to the same assumptions,
risk factors, limitations and qualifications as set forth above.
Readers are cautioned that the assumptions used in the preparation
of such information, although considered reasonable at the time of
preparation, may prove to be imprecise or inaccurate and, as such,
undue reliance should not be placed on FOFI. Birchcliff’s actual
results, performance and achievements could differ materially from
those expressed in, or implied by, FOFI. Birchcliff has included
FOFI in order to provide readers with a more complete perspective
on Birchcliff’s future operations and management’s current
expectations relating to Birchcliff’s future performance. Readers
are cautioned that such information may not be appropriate for
other purposes. FOFI contained herein was made as of the date of
this press release. Unless required by applicable laws, Birchcliff
does not undertake any obligation to publicly update or revise any
FOFI statements, whether as a result of new information, future
events or otherwise.
Management has included the above summary of
assumptions and risks related to forward-looking statements
provided in this press release in order to provide readers with a
more complete perspective on Birchcliff’s future operations and
management’s current expectations relating to Birchcliff’s future
performance. Readers are cautioned that this information may not be
appropriate for other purposes.
The forward-looking statements contained in this
press release are expressly qualified by the foregoing cautionary
statements. The forward-looking statements contained herein are
made as of the date of this press release. Unless required by
applicable laws, Birchcliff does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
ABOUT BIRCHCLIFF:
Birchcliff is a Calgary, Alberta based
intermediate oil and natural gas company with operations focused on
the Montney/Doig Resource Play in Alberta. Birchcliff’s common
shares are listed for trading on the Toronto Stock Exchange under
the symbol “BIR”.
|
For further information, please contact: |
|
Birchcliff Energy Ltd.Suite 1000, 600 – 3rd Avenue
S.W. Calgary, Alberta T2P 0G5Telephone: (403) 261-6401Email:
info@birchcliffenergy.comwww.birchcliffenergy.com |
|
Jeff Tonken – Chief Executive OfficerChris
Carlsen – President and Chief Operating
OfficerBruno Geremia – Executive Vice President
and Chief Financial Officer |
Birchcliff Energy (TSX:BIR)
과거 데이터 주식 차트
부터 10월(10) 2024 으로 11월(11) 2024
Birchcliff Energy (TSX:BIR)
과거 데이터 주식 차트
부터 11월(11) 2023 으로 11월(11) 2024
