Birchcliff Energy Ltd. (“
Birchcliff” or the
“
Corporation”) (TSX: BIR) is pleased to announce
its 2025 budget and guidance and its updated five-year outlook and
capital allocation strategy for 2025 to 2029.
Chris Carlsen, Birchcliff’s President and Chief
Executive Officer, commented: “Our 2024 capital program
successfully delivered on our strategy to improve our capital
efficiency through enhanced well performance, as well as to reduce
our costs through strong operational execution and strategic
optimization initiatives. Our strategy for 2025 builds off of the
operational momentum from 2024, maintaining our focus on capital
efficiency improvements and further driving down costs. Our F&D
capital budget for 2025 of $260 million to $300 million is expected
to deliver annual average production of 76,000 to 79,000 boe/d and
has been designed to ensure that our capital is strategically
deployed throughout the year. This will provide us with the
flexibility to adjust our capital spending if necessary in response
to the commodity price volatility we expect during 2025, including
as a result of the potential for U.S. tariffs and the start-up of
LNG Canada.(1)
Over the last few years, our industry faced
depressed natural gas prices driven by several factors, including
constrained natural gas egress and a challenging political
environment, during which time we limited growth, maintained a
relatively flat production profile and focused on shareholder
returns, paying approximately $390 million ($1.47 per common
share(2)) to our shareholders through common share dividends. With
the landscape for natural gas demand significantly improving and
given our strong asset performance in 2024, we believe that it is
in the best interests of the Corporation to shift our capital
allocation strategy to focus on investing in and profitably growing
our business, strengthening our balance sheet and providing a base
dividend that is more sustainable through commodity price cycles.
We believe that this strategy will allow us to deliver significant
shareholder value.
To that end, we have updated our five-year plan
for 2025 to 2029 and made the decision to reduce our annual base
dividend to $0.12 per common share, which will allow us to invest
in our world-class asset base, profitably grow our production and
strengthen our balance sheet, which will improve our financial
flexibility. Our updated five-year plan allocates capital towards
fully utilizing our existing infrastructure and firm transportation
capacity to reach production of 87,500 boe/d in the second half of
2027, achieving production growth of approximately 14%(3) over the
next three years. This plan will allow us to improve our operating
margins and netbacks and enhance the free funds flow generated by
our business. In addition, Birchcliff forecasts that its total
debt(4) will be reduced to approximately $175 million by the end of
2029, significantly reducing our interest costs and enhancing our
flexibility to pursue other opportunities to create additional per
share value, including further investment in our Pouce Coupe or
Elmworth areas or through strategic acquisitions.”(5)
This press release contains forward-looking
statements and forward-looking information within the meaning of
applicable securities laws. For further information regarding the
forward-looking statements and forward-looking information
contained herein, see “Advisories – Forward-Looking Statements”.
With respect to the disclosure of Birchcliff’s production contained
in this press release, all production volumes have been disclosed
on a “gross” basis as such term is defined in National Instrument
51-101 – Standards of Disclosure for Oil and Gas Activities
(“NI 51-101”), meaning Birchcliff’s working
interest (operating or non-operating) share before the deduction of
royalties and without including any royalty interests of
Birchcliff. For further information regarding the disclosure of
Birchcliff’s production contained herein, see “Advisories –
Production”. In addition, this press release uses various “non-GAAP
financial measures”, “non-GAAP ratios” 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. For further information regarding the non-GAAP and other
financial measures used in this press release, see “Non-GAAP and
Other Financial Measures”.
KEY HIGHLIGHTS
-
Flexible F&D capital budget for 2025 of $260 million to $300
million, which is expected to deliver annual average production of
76,000 to 79,000 boe/d.
-
Birchcliff expects to generate adjusted funds flow(6) of $445
million in 2025, which represents a 93% increase from its estimated
adjusted funds flow of approximately $230 million in 2024.
-
Birchcliff expects to generate free funds flow(6) of $145 million
to $185 million in 2025. For every $0.10 change in each of the
AECO, Dawn and NYMEX HH markets for natural gas, Birchcliff’s
estimated free funds flow for 2025 changes by approximately $19.2
million (in aggregate).(7)
-
Birchcliff expects to exit 2025 with total debt of $410 million to
$450 million, which will result in a total debt to annual adjusted
funds flow ratio(8) of less than 1.0 times, in line with
management’s long-term target.
-
Annual base dividend for 2025 of $0.12 per common share
(approximately $33 million in aggregate(9)), which will be declared
and paid quarterly at the rate of $0.03 per common share, at the
discretion of Birchcliff’s board of directors (the
“Board”). This annual base dividend will be paid
entirely out of internally generated free funds flow based on the
Corporation’s commodity price assumptions.
-
Updated five-year outlook forecasts that Birchcliff will reach
production of approximately 87,500 boe/d in the second half of
2027.
-
Updated five-year outlook forecasts cumulative free funds flow of
approximately $635 million and cumulative excess free funds flow(6)
(after the payment of cumulative dividends of approximately $165
million(9)) of $470 million at the end of the five-year
period.
________________________
(1) See “2025 Outlook and Guidance” and
“Advisories – Forward-Looking Statements” for further information
regarding the Corporation’s 2025 guidance and the commodity price,
exchange rate and other assumptions underlying such guidance.(2)
Based on the cumulative dividends declared and paid during 2022 to
2024.(3) As compared to 2024 and based on an estimated annual
average production rate of 76,500 boe/d in 2024.(4) Capital
management measure. See “Non-GAAP and Other Financial Measures”.
(5) See “Updated Five-Year Outlook” and “Advisories –
Forward-Looking Statements” for further information regarding the
Corporation’s updated five-year outlook for 2025 to 2029 and the
commodity prices, exchange rates and other assumptions underlying
such outlook.(6) Non-GAAP financial measure. See “Non-GAAP and
Other Financial Measures”.(7) Holding all other variables
constant.(8) Non-GAAP ratio. See “Non-GAAP and Other Financial
Measures”. Based on total debt at year end 2025 of $430 million,
which is the mid-point of Birchcliff’s total debt guidance range
for 2025.(9) Assumes that an annual base dividend of $0.12 per
common share is paid during 2025 or over the five-year period, as
the case may be, and that there are 271.5 million common shares
outstanding, with no special dividends paid. The declaration of
future dividends is subject to the approval of the Board and is
subject to change.
ANNUAL BASE DIVIDEND RATE AND DECLARATION
OF Q1 2025 QUARTERLY DIVIDEND
-
The Board has approved an annual base dividend of $0.12 per common
share for 2025. This annual base dividend will be declared and paid
quarterly at the rate of $0.03 per common share, at the discretion
of the Board.
-
In connection therewith, the Board has declared a quarterly cash
dividend of $0.03 per common share for the quarter ending March 31,
2025. The dividend will be payable on March 31, 2025 to
shareholders of record at the close of business on March 14, 2025.
The dividend has been designated as an eligible dividend for the
purposes of the Income Tax Act (Canada).
2025 F&D CAPITAL BUDGET
Overview
-
The Board has approved a flexible F&D capital budget for 2025
of $260 million to $300 million. The following table sets forth
details regarding Birchcliff’s expected capital spending allocation
in 2025:
|
Classification |
Capital (millions) |
|
DCCET(1) |
$185 – $215 |
| Facilities and
infrastructure |
$35 – $40 |
| Maintenance and
optimization |
$18 – $20 |
| Land and seismic(2) |
$5 |
|
Other(3) |
$17 – $20 |
|
Total F&D Capital Expenditures(4) |
$260 – $300 |
(1) On a DCCET basis, the average well cost in 2025 is estimated
to be approximately $7.2 million. These costs can vary depending on
factors such as the size of the associated multi-well pads,
horizontal well length, the costs of construction, the existence of
pipelines and other infrastructure and the distance to existing or
planned pipelines and other infrastructure.(2) Land and seismic
includes capital for crown sales and rental payments but does not
include other property acquisitions and dispositions.(3) Other
primarily includes capitalized G&A.(4) Net property
acquisitions and dispositions have not been included in the table
above as these amounts are generally unbudgeted. See “Advisories –
F&D Capital Expenditures” and “Advisories – Forward-Looking
Statements”.
Drilling and Completions
-
Birchcliff’s 2025 capital program contemplates the bringing on
production of 27 (27.0 net) wells and the drilling of 26 (26.0 net)
wells in 2025.
-
The program is designed to target high rate-of-return wells with
attractive paybacks and strong capital efficiency metrics. Two
drilling rigs will be utilized to deliver a level-loaded capital
program focused on efficient execution, with optimized capital
spending throughout the year. Benefitting from learnings gained
from its 2024 capital program, the wells from Birchcliff’s 2025
capital program are expected to yield strong production, using the
Corporation’s latest wellbore design, which incorporates longer
lateral lengths, reduced stage spacing and increased proppant
loading where appropriate.
-
In Pouce Coupe, Birchcliff plans to drill 22 (22.0 net) wells and
bring 23 (23.0 net) wells on production, targeting wells placed in
the Lower Montney. The Corporation expects that two pads (8 wells
in total) will be brought on production in Q1 2025, two pads (9
wells total) will be brought on production in Q2 2025 and the last
pad (6 wells) will be brought on production in Q4 2025.
-
In Gordondale, Birchcliff plans to drill and bring 4 (4.0 net)
wells on production from one pad, targeting wells placed in the
Lower Montney. These wells are expected to be brought on production
in Q2 2025.
-
In Elmworth, Birchcliff plans to complete a horizontal land
retention well in Q1 2025 that was drilled by Birchcliff in Q3
2024. This well will undergo a short flow test to continue a number
of sections of Montney lands in the area and is not currently
planned to be tied in.
-
In order to prepare for the efficient execution of the
Corporation’s capital program in 2026, Birchcliff’s 2025 F&D
capital budget also includes the capital for the drilling of 4 (4.0
net) wells in Pouce Coupe in late Q4 2025, which are expected to be
completed and brought on production in Q1 2026, and the drilling of
various surface holes and pad-site construction activities in Q4
2025.
Facilities and
Infrastructure
-
Birchcliff anticipates allocating $35 million to $40 million to
facilities and infrastructure. This includes the capital for the
completion of a large gas gathering infrastructure project for
approximately $12 million and a planned facility turnaround in
Pouce Coupe for approximately $12 million, which is expected to be
completed in Q2 2025.
2025 OUTLOOK AND GUIDANCE
-
Birchcliff remains bullish on the long-term outlook for natural gas
and anticipates structural improvement in natural gas prices over
the course of 2025 due to the anticipated increase in demand from
the start-up of various North American LNG projects and gas-fired
power generation. However, Birchcliff believes that AECO prices
will continue to be volatile in 2025 as a result of the dynamics
surrounding the start-up of LNG Canada and the potential for U.S.
tariffs to be imposed on energy and other goods exported from
Canada, with AECO prices anticipated to be relatively weak for the
first half of the year and strengthening in the second half.
-
Birchcliff expects to generate adjusted funds flow of $445 million
in 2025, which represents a 93% increase from its estimated
adjusted funds flow of approximately $230 million in 2024.
-
Birchcliff expects to capitalize on strengthening commodity prices
outside the AECO sales market in 2025 as a result of its natural
gas market diversification, with approximately 76% of its total
natural gas production anticipated to be effectively sold in the
NYMEX HH and Dawn sales markets where prices are forecasted to be
significantly higher than AECO prices in 2025. For every
US$0.10/MMBtu change in the NYMEX HH and Dawn benchmark prices,
Birchcliff’s estimated free funds flow for 2025 changes by
approximately $15.8 million (in aggregate).(10)
-
Birchcliff expects to strengthen its balance sheet in 2025, with
excess free funds flow (after the payment of dividends) anticipated
to be allocated primarily towards debt reduction. Birchcliff
expects to exit 2025 with total debt of $410 million to $450
million, which represents a significant reduction from its expected
total debt at year end 2024. Should commodity prices be higher than
its current assumptions, Birchcliff has the flexibility to adjust
its capital spending in 2025 in order to accelerate growth.
-
The following tables set forth Birchcliff’s guidance, commodity
price assumptions and free funds flow sensitivity for 2025:
|
|
2025 guidance and assumptions(1) |
|
Production |
|
|
Annual average production (boe/d) |
76,000 – 79,000 |
|
% Light oil |
3% |
|
% Condensate |
6% |
|
% NGLs |
9% |
|
% Natural gas |
82% |
|
|
|
|
Average Expenses ($/boe) |
|
|
Royalty |
$2.10 – $2.30 |
|
Operating |
$2.90 – $3.10 |
|
Transportation and other(2) |
$5.75 – $5.95 |
|
|
|
|
Adjusted Funds Flow (millions)(3) |
$445 |
|
|
|
|
F&D Capital Expenditures (millions) |
$260 – $300 |
|
|
|
|
Free Funds Flow (millions)(3) |
$145 – $185 |
|
|
|
|
Total Debt at Year End (millions)(4) |
$410 – $450 |
|
|
|
|
Natural Gas Market Exposure |
|
|
AECO exposure as a % of total natural gas production |
23% |
|
Dawn exposure as a % of total natural gas production |
41% |
|
NYMEX HH exposure as a % of total natural gas production |
35% |
|
Alliance exposure as a % of total natural gas production |
1% |
|
|
|
|
Commodity Prices(5) |
|
|
Average WTI price (US$/bbl) |
$70.15 |
|
Average WTI-MSW differential (CDN$/bbl) |
$4.70 |
|
Average AECO price (CDN$/GJ) |
$2.00 |
|
Average Dawn price (US$/MMBtu) |
$3.30 |
|
Average NYMEX HH price (US$/MMBtu) |
$3.60 |
|
Exchange rate (CDN$ to US$1) |
1.43 |
|
Forward twelve months’ free funds flow
sensitivity(5)(6) |
Estimated change to 2025 free funds flow
(millions) |
|
Change in WTI US$1.00/bbl |
$3.5 |
|
Change in NYMEX HH US$0.10/MMBtu |
$7.3 |
|
Change in Dawn US$0.10/MMBtu |
$8.5 |
|
Change in AECO CDN$0.10/GJ |
$3.4 |
|
Change in CDN/US exchange rate CDN$0.01 |
$4.8 |
(1) Birchcliff’s guidance for its production
commodity mix, adjusted funds flow, free funds flow, total debt and
natural gas market exposure in 2025 is based on an annual average
production rate of 77,500 boe/d in 2025, which is the mid-point of
Birchcliff’s annual average production guidance range for 2025.
Changes in assumed commodity prices and variances in production
forecasts can have an impact on the Corporation’s forecasts of
adjusted funds flow and free funds flow and the Corporation’s other
guidance, which impact could be material. In addition, any
acquisitions or dispositions completed over the course of 2025
could have an impact on Birchcliff’s 2025 guidance and assumptions
set forth herein, which impact could be material. For further
information regarding the risks and assumptions relating to the
Corporation’s guidance, see “Advisories – Forward-Looking
Statements”.(2) Non-GAAP ratio. See “Non-GAAP and Other Financial
Measures”. (3) Non-GAAP financial measure. See “Non-GAAP and Other
Financial Measures”. (4) Capital management measure. See “Non-GAAP
and Other Financial Measures”. (5) Birchcliff’s commodity price and
exchange rate assumptions and free funds flow sensitivity for 2025
are based on anticipated full-year averages using the Corporation’s
anticipated forward benchmark commodity prices and the CDN/US
exchange rate as of January 13, 2025.(6) Illustrates the expected
impact of changes in commodity prices and the CDN/US exchange rate
on the Corporation’s forecast of free funds flow for 2025, 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.
________________________
(10) Holding all other variables constant.
UPDATED FIVE-YEAR
OUTLOOK(11)
-
The Board has approved an updated five-year plan for 2025 to 2029,
which is designed to deliver significant long-term shareholder
value through:
-
achieving profitable production growth by fully utilizing the
Corporation’s existing infrastructure and firm transportation
capacity, which will allow Birchcliff to improve its operating
margins and netbacks and enhance the free funds flow generated by
its business;
-
strengthening the Corporation’s balance sheet to improve its
financial flexibility and resiliency; and
-
providing a base dividend to shareholders that is sustainable
through commodity price cycles.
-
Birchcliff’s updated five-year outlook forecasts potential
cumulative adjusted funds flow of $2.2 billion, cumulative free
funds flow of approximately $635 million and cumulative excess free
funds flow (after the payment of dividends) of $470 million at the
end of the five-year period. This potential excess free funds flow,
combined with a strong balance sheet, is anticipated to provide
Birchcliff with significant flexibility, allowing it to focus on
further enhancing long-term shareholder value.
-
While excess free funds flow will initially be prioritized towards
reducing indebtedness, consideration will be given to opportunities
that would complement or otherwise improve the Corporation’s
business and enhance long-term shareholder value, such as further
investment in the Corporation’s Pouce Coupe or Elmworth areas,
strategic acquisitions and increasing shareholder returns. Such
considerations will take into account commodity prices, debt levels
and the amount of excess free funds flow available in future
years.
-
Should commodity prices be higher or lower than the commodity price
assumptions underlying its five-year plan, Birchcliff has the
flexibility to accelerate or decelerate its capital spending and
production profile over the next five years accordingly.
-
Profitable Production Growth
-
Birchcliff’s updated five-year plan reflects the confidence that it
has in its asset base. Building off of its strong asset performance
and improved capital efficiency achieved in 2024, its updated
five-year outlook provides for profitable production growth of
approximately 14% over the next three years, commensurate with the
increased drilling necessary to fully utilize its existing
infrastructure and firm transportation capacity, reaching
production of 87,500 boe/d in the second half of 2027. Thereafter,
annual average production levels are expected to remain relatively
stable at approximately 87,500 in 2028 and 2029.
-
Birchcliff’s updated five-year outlook contemplates F&D capital
spending of approximately $260 million to $300 million annually in
each of 2025 and 2026. F&D capital spending is forecast to
increase to approximately $325 million to $375 million in each of
2027 and 2028 in order to drill the necessary wells to fully
utilize the Corporation’s existing infrastructure in the second
half of 2027 and keep such infrastructure at or near capacity in
2028. F&D capital spending is then forecast to decrease to
approximately $300 million to $325 million in 2029, as less wells
are required to maintain production due to reduced base production
declines compared to 2027 and 2028.
-
Profitably growing its production to fully utilize its existing
infrastructure and firm transportation capacity will allow the
Corporation to improve its operating margins and netbacks and
reduce its per boe costs, which will further drive its ability to
generate free funds flow.
-
In addition to the production growth currently contemplated in its
five-year year plan, the Corporation holds the additional
transportation required to further grow its production by expanding
its 100% owned and operated natural gas plant in Pouce Coupe and/or
constructing a new gas processing facility in its Elmworth area.
These are not currently contemplated in the updated five-year
plan.
-
Strengthening the Balance Sheet and Improving Financial
Resiliency and Flexibility
-
The Corporation is focused on strengthening its balance sheet and
is continuing to target a total debt to annual adjusted funds flow
ratio of less than 1.0 times in the long-term. By the end of 2029,
Birchcliff forecasts that its total debt will be reduced to
approximately $175 million.
-
Birchcliff believes that reducing its indebtedness will reduce the
risks to its business, save the Corporation significant interest
costs and enhance its flexibility to pursue other opportunities to
create additional per share value, including further investment in
Birchcliff’s world-class asset base.
-
Under its updated five-year outlook, Birchcliff anticipates that it
will not be required to pay any material Canadian income taxes
during the period.
-
Sustainable Shareholder Returns
-
Birchcliff’s updated five-year plan contemplates that Birchcliff
will pay shareholders a base common share dividend that is
sustainable through commodity price cycles that will be paid
entirely out of internally generated free funds flow based on its
commodity price assumptions.
-
Birchcliff expects its base dividend to grow with the business over
time.
-
Birchcliff will continue to evaluate opportunistic share buybacks
under its normal course issuer bid.
________________________
(11) For illustrative purposes only and should not
be relied upon as indicative of future results. The internal
projections, expectations and beliefs underlying Birchcliff’s
five-year outlook for 2025 to 2029 are subject to change in light
of ongoing results and prevailing economic and industry conditions.
Birchcliff’s F&D capital budgets for 2026 to 2029 have not been
finalized and are subject to approval by the Board. Accordingly,
the levels of F&D capital expenditures set forth herein are
subject to change, which could have an impact on the forecasted
production, adjusted funds flow, free funds flow, excess free funds
flow and other metrics set forth herein. Changes in assumed
commodity prices and variances in production forecasts can have an
impact on the Corporation’s forecasts of adjusted funds flow and
free funds flow and the Corporation’s other metrics for the
five-year plan, which impact could be material. In addition, any
acquisitions or dispositions completed over the course of the
five-year plan could have an impact on Birchcliff’s forecasts and
assumptions set forth herein, which impact could be material. For
further information regarding the risks and assumptions relating to
the Corporation’s five-year outlook, see “Advisories –
Forward-Looking Statements”.
OPERATIONAL UPDATE
-
In 2024, Birchcliff achieved a significant year-over-year
improvement in capital efficiency(12) for our wells of
approximately 23% compared to 2023. This improvement was driven by
optimized field development strategies, including increased
completion intensities and tighter cluster spacing, which resulted
in strong well performance and production rates that exceeded
internal forecasts. These results, supported by continuous
improvement and advancements in operational execution and a focus
on cost control, highlight the Corporation’s commitment to
operational excellence.
-
Based on preliminary field estimates, Birchcliff anticipates that
its average production for 2024 will be approximately 76,500 boe/d,
which is on the higher end of its previous guidance range of 75,000
to 77,000 boe/d.
-
Birchcliff anticipates that its F&D capital expenditures for
2024 will be approximately $270 million(13) as compared to its
previous guidance range of $250 million to $270 million. As a
result of its strong operational execution and associated savings
throughout the year, Birchcliff was able to drill three additional
wells at its 5-well 04-05 pad in Q4 2024 as part of its 2024
capital program. This pad is currently undergoing completion
operations, as described in further detail below.
-
During Q4 2024, the Corporation completed a strategic acquisition
that included the purchase of several Montney sections and
associated roads and infrastructure. The production from the lands
acquired is approximately 250 boe/d. The total cash consideration
for such acquisition was approximately $8 million (before customary
closing adjustments).
-
Birchcliff expects to release its unaudited financial and
operational results for the year ended December 31, 2024 on
February 12, 2025.
________________________
(12) See “Advisories – Capital Efficiency”.(13)
Birchcliff’s estimated F&D capital expenditures for 2024
includes the capitalized portion of cash incentive payments accrued
in 2024.
Update on 2024 Capital
Program
-
As part of its 2024 capital program, Birchcliff brought 11 wells on
production in Q4 2024, delivering strong production results for the
quarter and into 2025.
-
Birchcliff turned the wells on its 6-well 16-15 pad over to
production through Birchcliff’s permanent facilities in October
2024. This pad targeted liquids-rich natural gas wells in the Lower
Montney. The following table summarizes the aggregate and average
production rates for the wells from the pad:
6-Well 16-15 Pad IP Rates
|
|
Wells: IP 30(1) |
Wells: IP 60(1) |
|
Aggregate production rate (boe/d) |
7,217 |
6,591 |
|
|
Aggregate natural gas production rate (Mcf/d) |
39,654 |
36,690 |
|
|
Aggregate condensate production rate (bbls/d) |
626 |
476 |
|
Average per well production rate (boe/d) |
1,203 |
1,099 |
|
|
Average per well natural gas production rate (Mcf/d) |
6,594 |
6,115 |
|
|
Average per well condensate production rate (bbls/d) |
104 |
79 |
|
Condensate-to-gas ratio (bbls/MMcf) |
16 |
13 |
(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. The natural gas volumes represent raw natural gas volumes
as opposed to sales gas volumes. See “Advisories – Initial
Production Rates”.
-
Birchcliff turned the wells on its 5-well 10-22 pad over to
production through Birchcliff’s permanent facilities in November
2024. This pad targeted high-rate natural gas wells in the Lower
Montney. The following table summarizes the aggregate and average
production rates for the wells from the pad:
5-Well 10-22 Pad IP Rates
|
|
Wells: IP 30(1) |
Wells: IP 60(1) |
|
Aggregate production rate (boe/d)(2) |
5,374 |
4,867 |
|
|
Aggregate natural gas production rate (Mcf/d) |
32,228 |
29,191 |
|
Average per well production rate (boe/d)(2) |
1,075 |
973 |
|
|
Average per well natural gas production rate (Mcf/d) |
6,446 |
5,838 |
(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. The natural gas volumes represent raw natural gas volumes
as opposed to sales gas volumes. See “Advisories – Initial
Production Rates”. (2) Condensate volumes are
insignificant.
Update on 2025 Capital
Program
-
The Corporation successfully completed drilling its 5-well 04-05
pad in Pouce Coupe in December 2024. Completions operations are
currently underway on the pad, with the wells scheduled to come on
production in February 2025. The pad was drilled in the Lower
Montney targeting condensate-rich natural gas.
-
Drilling operations at Birchcliff’s 3-well 07-10 pad in Pouce Coupe
commenced in January 2025, with completions operations scheduled to
begin in February 2025. The pad is targeting high-rate natural gas
wells in the Lower Montney. The wells are anticipated to be brought
on production in Q2 2025.
-
Drilling operations at Birchcliff’s 4-well 02-27 pad in Gordondale
commenced in January 2025, with completions operations scheduled to
begin in February 2025. The pad is targeting liquids-rich natural
gas wells in the Lower Montney. The wells are anticipated to be
brought on production in Q2 2025.
ABBREVIATIONS
|
AECO |
benchmark price for natural gas determined at the AECO ‘C’ hub in
southeast Alberta |
|
bbl |
barrel |
|
bbls/d |
barrels per day |
|
bbls/MMcf |
barrels per million cubic feet |
|
boe |
barrel of oil equivalent |
|
boe/d |
barrel of oil equivalent per day |
|
condensate |
pentanes plus (C5+) |
|
DCCE |
drill, case, complete and equip |
|
DCCET |
drill, case, complete, equip and tie-in |
|
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 |
|
LNG |
liquefied natural gas |
|
Mcf |
thousand cubic feet |
|
Mcf/d |
thousand cubic feet per day |
|
MMBtu |
million British thermal units |
|
MMBtu/d |
million British thermal units per day |
|
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 |
|
Q |
quarter |
|
WTI |
West Texas Intermediate, the reference price paid in U.S. dollars
at Cushing, Oklahoma, for crude oil of standard grade |
|
$000s |
thousands of dollars |
NON-GAAP AND OTHER FINANCIAL
MEASURES
This press release uses various “non-GAAP
financial measures”, “non-GAAP ratios” and “capital management
measures” (as such terms are defined in NI 52-112), which are
described in further detail below.
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. Investors are cautioned that non-GAAP financial measures
should not be construed as alternatives to or more meaningful than
the most directly comparable GAAP financial 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, retirement benefit payments 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.
Birchcliff eliminates retirement benefit payments from cash flow
from operating activities as such payments reflect costs for past
service and contributions made by eligible executives under the
Corporation’s post-employment benefit plan, which are not
indicative of the current period. 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.
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 value and returns
through a number of initiatives, including but not limited to, debt
repayment, common share buybacks, the payment of common share
dividends, acquisitions and other opportunities that would
complement or otherwise improve the Corporation’s business and
enhance long-term shareholder value.
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 value and returns after the payment of common share
dividends, which may include debt repayment, acquisitions, special
dividends, increases to the Corporation’s base common share
dividend, common share repurchases and other opportunities that
would complement or otherwise improve the Corporation’s business
and enhance long-term shareholder value.
The most directly comparable GAAP financial
measure to adjusted funds flow, free funds flow and excess free
funds flow is cash flow from operating activities. The following
table provides a reconciliation of cash flow from operating
activities to adjusted funds flow, free funds flow and excess free
funds flow for the twelve months ended December 31, 2023:
|
($000s) |
Twelve months endedDecember 31,
2023 |
|
Cash flow from operating activities |
320,529 |
|
Change in non-cash operating working capital |
(19,477) |
|
Decommissioning expenditures |
3,775 |
|
Retirement benefit payments |
2,000 |
|
Adjusted funds flow |
306,827 |
|
F&D capital expenditures |
(304,637) |
|
Free funds flow |
2,190 |
|
Dividends on common shares |
(213,344) |
|
Excess free funds flow |
(211,154) |
Birchcliff has disclosed in this press release
forecasts of adjusted funds flow, free funds flow and excess free
funds flow for the period from 2025 to 2029, which are
forward-looking non-GAAP financial measures. The equivalent
historical non-GAAP financial measures are adjusted funds flow,
free funds flow and excess free funds flow for the twelve months
ended December 31, 2023. Birchcliff anticipates that, on an
annualized basis, the forward-looking non-GAAP financial measures
for adjusted funds flow, free funds flow and excess free funds flow
disclosed herein will generally exceed their respective historical
amounts primarily due to higher anticipated benchmark oil and
natural gas prices and higher annual average production over the
relevant periods. The forward-looking non-GAAP financial measure
for excess free funds flow disclosed herein is also anticipated to
exceed its historical amount as a result of a lower annual base
common share dividend rate forecast during 2025 to 2029. The
commodity price assumptions on which the Corporation’s 2025
guidance is based are set forth under the heading “2025 Outlook and
Guidance” and the commodity price assumptions on which the
Corporation’s updated five-year outlook is based are set forth
under the heading “Advisories – Forward-Looking 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
unused transportation or fractionation fees associated with its
take-or-pay commitments and/or increasing the value of its
production through value-added downstream initiatives. Management
believes that transportation and other expense assists management
and investors in assessing Birchcliff’s total cost structure
related to transportation and marketing activities. The most
directly comparable GAAP financial measure to transportation and
other expense is transportation expense. The following table
provides a reconciliation of transportation expense to
transportation and other expense for the twelve months ended
December 31, 2023:
|
($000s) |
Twelve months ended December 31,
2023 |
|
Transportation expense |
152,828 |
|
Marketing purchases |
34,772 |
|
Marketing revenue |
(30,521) |
|
Transportation and other expense |
157,079 |
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. Set forth below is a description of
the non-GAAP ratios used in this press release.
Total Debt to Annual Adjusted Funds
Flow
Birchcliff calculates “total debt to annual
adjusted funds flow” as total debt at the end of the year divided
by annual adjusted funds flow in that year. Management believes
that total debt to annual adjusted funds flow assists management
and investors in assessing Birchcliff’s overall debt position in
respect of its cash generated in the year and the strength of the
Corporation’s balance sheet. Birchcliff uses this ratio in its
capital allocation decisions, including capital spending levels,
returns to shareholders and other financial considerations.
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.
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 measure used in this press
release.
Total Debt
Birchcliff calculates “total debt” at the end of
the period as the amount outstanding under the Corporation’s
extendible revolving credit facilities 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 the
current portion of other liabilities discounted to the end of the
period. The current portion of other liabilities has been excluded
from total debt as these amounts have not been incurred and reflect
future commitments in the normal course of operations. Management
believes that total debt 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 Corporation’s
credit facilities, as determined in accordance with GAAP, to total
debt as at December 31, 2023:
|
($000s) |
As at December 31, 2023 |
|
Revolving term credit facilities |
372,097 |
|
Working capital deficit(1) |
13,084 |
|
Fair value of financial instruments – asset(2) |
3,588 |
|
Fair value of financial instruments – liability(2) |
(1,394) |
|
Other liabilities(2) |
(5,069) |
|
Total debt |
382,306 |
(1) Current liabilities less current
assets. (2) Reflects the current portion only.
ADVISORIES
Currency
Unless otherwise indicated, all dollar amounts
are expressed in Canadian dollars, all references to “$” 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. 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. 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.
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 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.
With respect to the disclosure of Birchcliff’s
production contained in this press release, all production volumes
have been disclosed on a “gross” basis as such term is defined in
NI 51-101, meaning Birchcliff’s working interest (operating or
non-operating) share before the deduction of royalties and without
including any royalty interests of Birchcliff.
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 6-well 16-15 and 5-well 10-22 pads disclosed herein,
such rates represent the cumulative volumes for each well on the
respective pad 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, divided by 30 or 60 (as applicable). The wells on each
pad were then added together to determine the aggregate production
rates for the pad and then divided by 6 or 5, respectively, to
determine the per well average production rates. The production
rates excluded the hours and days when the wells did not produce.
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
“F&D capital expenditures” denotes
exploration and development expenditures as disclosed in the
Corporation’s financial statements in accordance with GAAP, and is
primarily comprised of capital for land, seismic, workovers,
drilling and completions, well equipment and facilities and
capitalized G&A costs and excludes any acquisitions,
dispositions, administrative assets and the capitalized portion of
cash incentive payments that have not been approved by the Board.
Management believes that F&D capital expenditures assists
management and investors in assessing Birchcliff’s capital cost
outlay associated with its exploration and development activities
for the purposes of finding and developing its reserves.
Capital Efficiency
Birchcliff calculates “capital efficiency” on an
average well basis as DCCE capital expenditures divided by the
IP365 boe/d for the appliable well(s). Birchcliff defines “IP365
boe/d” as the estimated average daily field production in the first
365 days a well is on-stream. Where field production data is not
available for a well, Birchcliff uses the forecasted production
data for that well. Capital efficiency is determined at the
individual well level and then aggregated and averaged for the
year. This measure does not have a standardized meaning or standard
method of calculation and therefore may not be comparable to
similar measures presented by other companies. Management believes
that capital efficiency assists management and investors in
assessing Birchcliff’s asset performance, execution and ability to
generate shareholder value.
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:
-
Birchcliff’s plans and other aspects of its anticipated future
financial performance, results, operations, focus, objectives,
strategies, opportunities, priorities and goals, including: that
the Corporation’s strategy for 2025 builds off of the operational
momentum from 2024, maintaining its focus on capital efficiency
improvements and further driving down costs; Birchcliff’s belief
that, with the landscape for natural gas demand significantly
improving and given its strong asset performance in 2024, it is in
the best interests of the Corporation to shift its capital
allocation strategy to focus on investing in and profitably growing
its business, strengthening its balance sheet and providing a base
dividend that is more sustainable through commodity price cycles;
Birchcliff’s belief that this strategy will allow it to deliver
significant shareholder value; and that the Corporation’s updated
five-year plan for 2025 to 2029 and the decision to reduce its
annual base dividend to $0.12 per common share will allow it to
invest in its world-class asset base, profitably grow its
production and strengthen its balance sheet, which will improve its
financial flexibility;
-
dividends, including: that Birchcliff’s annual base dividend for
2025 of $0.12 per common share (approximately $33 million in
aggregate) will be declared and paid quarterly at the rate of $0.03
per common share, at the discretion of the Board; that this annual
base dividend will be paid entirely out of internally generated
free funds flow based on the Corporation’s commodity price
assumptions; and that Birchcliff expects its base dividend to grow
with the business over time;
-
the information set forth under the headings “2025 F&D Capital
Budget”, “2025 Outlook and Guidance” and “Operational Update” and
elsewhere in this press release as it relates to Birchcliff’s 2025
capital program and its exploration, production and development
activities and the timing thereof, including: the focus of, the
objectives of, the anticipated results from and expected benefits
of the 2025 capital program; estimates of F&D capital
expenditures and average well costs and statements regarding
capital allocation; the anticipated number, types and timing of
wells and pads to be drilled and brought on production and targeted
product types; that Birchcliff’s flexible F&D capital budget
for 2025 of $260 million to $300 million is expected to deliver
annual average production of 76,000 to 79,000 boe/d and has been
designed to ensure that its capital is strategically deployed
throughout the year, providing it with the flexibility to adjust
its capital spending if necessary in response to the commodity
price volatility Birchcliff expects during 2025, including as a
result of the potential for U.S. tariffs and the start-up of LNG
Canada; that the program is designed to target high rate-of-return
wells with attractive paybacks and strong capital efficiency
metrics; that two drilling rigs will be utilized to deliver a
level-loaded capital program focused on efficient execution, with
optimized capital spending throughout the year; that benefitting
from learnings gained from the Corporation’s 2024 capital program,
the wells from Birchcliff’s 2025 capital program are expected to
yield strong production, using the Corporation’s latest wellbore
design, which incorporates longer lateral lengths, reduced stage
spacing and increased proppant loading where appropriate; that in
Elmworth, Birchcliff plans to complete a horizontal land retention
well in Q1 2025 that was drilled by Birchcliff in Q3 2024, which
will undergo a short flow test to continue a number of sections of
Montney lands in the area and is not currently planned to be tied
in; and that Birchcliff’s facilities and infrastructure capital
includes the capital for the completion of a large gas gathering
infrastructure project and a planned facility turnaround in Pouce
Coupe, which is expected to be completed in Q2 2025;
-
the information set forth under the headings “2025 Outlook and
Guidance” and “Operational Update” and elsewhere in this press
release as it relates to Birchcliff’s guidance for 2024, including
estimates of adjusted funds flow, annual average production and
F&D capital expenditures in 2024;
-
the information set forth under the heading “2025 Outlook and
Guidance” and elsewhere in this press release as it relates to
Birchcliff’s guidance for 2025, including: forecasts of annual
average production, production commodity mix, average expenses,
adjusted funds flow, F&D capital expenditures, free funds flow,
total debt at year end, natural gas market exposure and the
expected impact of changes in commodity prices and the CDN/US
exchange rate on Birchcliff’s forecast of free funds flow; that
Birchcliff expects to generate adjusted funds flow of $445 million
in 2025, which represents a 93% increase from its estimated
adjusted funds flow of approximately $230 million in 2024; that for
every $0.10 change in each of the AECO, Dawn and NYMEX HH markets
for natural gas, Birchcliff’s estimated free funds flow for 2025
changes by approximately $19.2 million (in aggregate); that
Birchcliff expects to exit 2025 with total debt of $410 million to
$450 million, which will result in a total debt to annual adjusted
funds flow ratio of less than 1.0 times, in line with management's
long-term target; that Birchcliff remains bullish on the long-term
outlook for natural gas and anticipates structural improvement in
natural gas prices over the course of 2025 due to the anticipated
increase in demand from the start-up of various North American LNG
projects and gas-fired power generation; Birchcliff’s belief that
AECO prices will continue to be volatile in 2025 as a result of the
dynamics surrounding the start-up of LNG Canada and the potential
for U.S. tariffs to be imposed on energy and other goods exported
from Canada, with AECO prices anticipated to be relatively weak for
the first half of the year and strengthening in the second half;
that Birchcliff expects to capitalize on strengthening commodity
prices outside the AECO sales market in 2025 as a result of its
natural gas market diversification, with approximately 76% of its
total natural gas production anticipated to be effectively sold in
the NYMEX HH and Dawn sales markets where prices are forecasted to
be significantly higher than AECO prices in 2025; that for every
US$0.10/MMBtu change in the NYMEX HH and Dawn benchmark prices,
Birchcliff’s estimated free funds flow for 2025 changes by
approximately $15.8 million (in aggregate); that Birchcliff expects
to strengthen its balance sheet in 2025, with excess free funds
flow (after the payment of dividends) anticipated to be allocated
primarily towards debt reduction; that Birchcliff expects to exit
2025 with total debt of $410 million to $450 million, which
represents a significant reduction from its expected total debt at
year end 2024; and that should commodity prices be higher than its
current assumptions, Birchcliff has the flexibility to adjust its
capital spending in 2025 in order to accelerate growth;
-
the information set forth under the heading “Updated Five-Year
Outlook” and elsewhere in this press release as it relates to
Birchcliff’s updated five-year outlook and plan for 2025 to 2029,
including: forecasts of production, production growth, F&D
capital expenditures, adjusted funds flow, free funds flow, excess
free funds flow and dividends over the five-year period; that
Birchcliff’s updated five-year plan allocates capital towards fully
utilizing its existing infrastructure and firm transportation
capacity to reach production of 87,500 boe/d in the second half of
2027, achieving production growth of approximately 14% over the
next three years; that this plan will allow it to improve its
operating margins and netbacks and enhance the free funds flow
generated by its business; that Birchcliff forecasts that its total
debt will be reduced to approximately $175 million by the end of
2029, significantly reducing its interest costs and enhancing its
flexibility to pursue other opportunities to create additional per
share value, including further investment in its Pouce Coupe or
Elmworth areas or through strategic acquisitions; that Birchcliff’s
updated five-year plan for 2025 to 2029 is designed to deliver
significant long-term shareholder value through achieving
profitable production growth by fully utilizing its existing
infrastructure and firm transportation capacity, which will allow
the Corporation to improve its operating margins and netbacks and
enhance the free funds flow generated by its business,
strengthening the Corporation’s balance sheet to improve its
financial flexibility and resiliency and providing a base dividend
to shareholders that is sustainable through commodity price cycles;
that the potential excess free funds flow, combined with a strong
balance sheet, is anticipated to provide Birchcliff with
significant flexibility, allowing it to focus on further enhancing
long-term shareholder value; that while excess free funds flow will
initially be prioritized towards reducing indebtedness,
consideration will be given to opportunities that would complement
or otherwise improve the Corporation’s business and enhance
long-term shareholder value, such as further investment in the
Corporation’s Pouce Coupe or Elmworth areas, strategic acquisitions
and increasing shareholder returns; that, should commodity prices
be higher or lower than the commodity price assumptions underlying
its five-year plan, Birchcliff has the flexibility to accelerate or
decelerate its capital spending and production profile over the
next five years accordingly; that Birchcliff’s updated five-year
outlook provides for profitable production growth of approximately
14% over the next three years, commensurate with the increased
drilling necessary to fully utilize its existing infrastructure and
firm transportation capacity, reaching production of 87,500 boe/d
in the second half of 2027; that after 2027, annual average
production levels are expected to remain relatively stable at
approximately 87,500 boe/d in 2028 and 2029; that Birchcliff’s
updated five-year outlook contemplates F&D capital spending of
approximately $260 million to $300 million annually in each of 2025
and 2026; that F&D capital spending is forecast to increase to
approximately $325 million to $375 million in each of 2027 and 2028
in order to drill the necessary wells to fully utilize the
Corporation’s existing infrastructure in the second half of 2027
and keep such infrastructure at or near capacity in 2028; that
F&D capital spending is then forecast to decrease to
approximately $300 million to $325 million in 2029, as less wells
are required to maintain production due to reduced base production
declines compared to 2027 and 2028; that profitably growing its
production to fully utilize its existing infrastructure and firm
transportation capacity will allow the Corporation to improve its
operating margins and netbacks and reduce its per boe costs, which
will further drive its ability to generate free funds flow; that in
addition to the production growth currently contemplated in its
five-year year plan, the Corporation holds the additional
transportation required to further grow its production by expanding
its 100% owned and operated natural gas plant in Pouce Coupe and/or
constructing a new gas processing facility in its Elmworth area;
that the Corporation is focused on strengthening its balance sheet
and is continuing to target a total debt to annual adjusted funds
flow ratio of less than 1.0 times in the long-term; Birchcliff’s
belief that reducing its indebtedness will reduce the risks to its
business, save the Corporation significant interest costs and
enhance its flexibility to pursue other opportunities to create
additional per share value, including further investment in
Birchcliff’s world-class asset base; that Birchcliff anticipates
that it will not be required to pay any material Canadian income
taxes during the five-year period; that Birchcliff’s updated
five-year plan contemplates that Birchcliff will pay shareholders a
base common share dividend that is sustainable through commodity
price cycles that will be paid entirely out of internally generated
free funds flow based on its commodity price assumptions; and that
Birchcliff will continue to evaluate opportunistic share buybacks
under its normal course issuer bid;
-
that Birchcliff will release its unaudited financial and
operational results for the year ended December 31, 2024 on
February 12, 2025; and
-
Birchcliff’s anticipation that, on an annualized basis, the
forward-looking non-GAAP financial measures for adjusted funds
flow, free funds flow and excess free funds flow disclosed herein
will generally exceed their respective historical amounts primarily
due to higher anticipated benchmark oil and natural gas prices and
higher annual average production over the relevant periods; and
that the forward-looking non-GAAP financial measure for excess free
funds flow disclosed herein is also anticipated to exceed its
historical amount as a result of a lower annual base common share
dividend rate forecast during 2025 to 2029.
With respect to the forward-looking statements
contained in this press release, assumptions have been made
regarding, among other things: 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 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 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 2025 guidance, such guidance is based
on the commodity price, exchange rate and other assumptions set
forth under the heading “2025 Outlook and Guidance”. In addition:
-
Birchcliff’s production guidance assumes that: the 2025 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 forecast of F&D capital expenditures assumes that
the 2025 capital program will be carried out as currently
contemplated and excludes any potential acquisitions, dispositions
and the capitalized portion of cash incentive payments that have
not been approved by the Board. 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 forecasts of adjusted funds flow and free funds flow
assume that: the 2025 capital program will be carried out as
currently contemplated and the level of capital spending for 2025
set forth herein is met; and the forecasts of 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 forecast of adjusted funds flow takes
into account its financial basis swap contracts outstanding as at
January 13, 2025 and excludes cash incentive payments that have not
been approved by the Board.
-
Birchcliff’s forecasts of year end total debt and total debt to
annual adjusted funds flow ratio assume that: (i) the forecasts of
adjusted funds flow and free funds flow are achieved, with the
level of capital spending for 2025 met and the payment of an annual
base dividend of approximately $33 million; (ii) 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; (iii) there are no buybacks of common shares during
2025; (iv) there are no significant acquisitions or dispositions
completed by the Corporation during 2025; (v) there are no equity
issuances during 2025; and (vi) there are no further proceeds
received from the exercise of stock options during 2025. The
forecast of total debt excludes cash incentive payments that have
not been approved by the Board.
-
Birchcliff’s forecast of its natural gas market exposure assumes:
(i) 175,000 GJ/d being sold on a physical basis at the Dawn price;
(ii) 147,500 MMBtu/d being contracted on a financial basis at an
average fixed basis differential price between AECO 7A and NYMEX HH
of approximately US$1.09/MMBtu; and (iii) 1,400 GJ/d being sold at
Alliance on a physical basis at the AECO 5A price plus a premium.
Birchcliff’s natural gas market exposure takes into account its
financial basis swap contracts outstanding as at January 13,
2025.
-
With respect to Birchcliff’s updated five-year outlook for 2025 to
2029, such outlook assumes the following commodity prices and
exchange rate: an average WTI price of US$70.15/bbl in 2025 and
US$65.00/bbl in 2026 to 2029; an average WTI-MSW differential of
CDN$4.70/bbl in 2025 and CDN$4.50/bbl in 2026 to 2029; an average
AECO price of CDN$2.00/GJ in 2025 and CDN$3.00/GJ in 2026 to 2029;
an average Dawn price of US$3.30/MMBtu in 2025 and US$3.40/MMBtu in
2026 to 2029; an average NYMEX HH price of US$3.60/MMBtu in 2025
and US$3.70/MMBtu in 2026 to 2029; and an exchange rate (CDN$ to
US$1) of 1.43 in 2025 and 1.38 in 2026 to 2029. In addition,
Birchcliff’s updated five-year outlook and plan is based on the
following assumptions:
-
Birchcliff’s forecast production estimates are subject to similar
assumptions set forth herein for Birchcliff’s 2025 production
guidance.
-
Birchcliff’s forecasts of F&D capital expenditures assume that
the Corporation’s capital programs will be carried out as currently
contemplated and exclude any potential acquisitions, dispositions
and the capitalized portion of cash incentive payments that have
not been approved by the Board. Birchcliff’s five-year outlook also
forecasts that approximately 170 to 180 wells will be brought on
production over the five-year period, which forecast is subject to
similar assumptions regarding wells drilled and brought on
production as set forth herein. 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 five-year period. 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 forecasts of adjusted funds flow and free funds flow
assume that: the Corporation’s capital programs will be carried out
as currently contemplated and the level of capital spending for
each year set forth herein is met; and the forecasts of 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 forecasts of adjusted funds flow take
into account its financial basis swap contracts outstanding as at
January 13, 2025 and exclude cash incentive payments that have not
been approved by the Board.
-
Birchcliff’s forecast of excess free funds flow assumes that: the
forecast of free funds flow is achieved for the five-year period;
and an annual base dividend of $0.12 per common share is paid
during the five-year period and there are 271.5 million common
shares outstanding, with no special dividends paid.
-
Birchcliff’s forecasts of total debt and total debt to annual
adjusted funds flow ratio assume that: (i) the forecasts of
adjusted funds flow and free funds flow are achieved, with the
level of capital spending for each year met and the payment of an
annual base dividend of approximately $33 million each year; (ii)
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; (iii) there are no buybacks of common shares during
the five-year period; (iv) there are no significant acquisitions or
dispositions completed by the Corporation during the five-year
period; (v) there are no equity issuances during the five-year
period; and (vi) there are no further proceeds received from the
exercise of stock options during the five-year period. The forecast
of total debt excludes cash incentive payments that have not been
approved by the Board.
-
Birchcliff’s updated five-year outlook disclosed herein supersedes
its previous five-year outlook for 2024 to 2028 (the
“Previous Plan”) as disclosed by the Corporation
on January 17, 2024. Primarily as a result of a lower commodity
price forecast, Birchcliff’s updated five-year outlook now
forecasts lower adjusted funds flow and free funds flow over a
five-year period. Primarily as a result of a lower annual base
common share dividend rate forecast during 2025 to 2029,
Birchcliff’s updated five-year outlook now forecasts higher excess
free funds flow over the period. The forecasts of F&D capital
expenditures under the Corporation’s updated five-year outlook are
slightly higher in 2025 and 2026 as compared to the Previous Plan,
with comparable F&D capital expenditures in 2027 and 2028. The
Corporation’s forecasted average annual production under its
updated five-year outlook is generally comparable to the forecasted
production in the Previous Plan.
-
With respect to Birchcliff’s expectation that it will not be
required to pay any material Canadian income taxes during 2025 to
2029, such expectation is based on the current tax regime in
Canada, the Corporation’s current available income tax pools and
the commodity price assumptions set forth herein. In addition, this
expectation is based on Birchcliff’s updated five-year outlook and
assumes, among other things, that the estimated levels of spending
and production are achieved. Changes to any of the foregoing
factors could result in the Corporation paying income taxes earlier
or later than currently forecast.
-
With respect to statements regarding future wells to be drilled or
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: 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; an
inability of Birchcliff to generate sufficient cash flow from
operations to meet its current and future obligations; 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 risk
that weather events such as wildfires, flooding, droughts or
extreme hot or cold temperatures forces the Corporation to shut-in
production or otherwise adversely affects the Corporation’s
operations; the occurrence of unexpected events such as fires,
explosions, blow-outs, equipment failures, transportation incidents
and other similar events; an inability to access sufficient water
or other fluids needed for operations; the risks associated with
supply chain disruptions; 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; 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 uncertainty of
estimates and projections relating to production, revenue, costs
and reserves; 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; the risks posed by pandemics,
epidemics and global conflict (including the Russian invasion of
Ukraine and the Israel-Hamas conflict) 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; stock market volatility;
loss of market demand; 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 (including uncertainty with
respect to the interpretation of Bill C-59 and the related
amendments to the Competition Act (Canada)); political uncertainty
and uncertainty associated with government policy changes,
including the risk of U.S. tariffs on goods exported from Canada;
actions by government authorities; an inability of the Corporation
to comply with existing and future laws and the cost of compliance
with such laws; 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 the Board to declare dividends and change the
Corporation’s dividend policy and the risk that the amount of
dividends may be less than currently forecast; 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; the accuracy of the
Corporation’s accounting estimates and judgments; and 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 2025 to 2029).
The declaration and payment of any future
dividends are subject to the discretion of the Board 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 Corporation’s
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 Birchcliff’s results of
operations, financial performance or financial results are included
in Birchcliff’s annual information form and annual management’s
discussion and analysis for the financial year ended December 31,
2023 under the heading “Risk Factors” and in other reports filed
with Canadian securities regulatory authorities.
This press release contains information that may
constitute future-oriented 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.
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 and FOFI
contained in this press release are expressly qualified by the
foregoing cautionary statements. The forward-looking statements and
FOFI 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 or FOFI, whether as a result of new
information, future events or otherwise.
ABOUT BIRCHCLIFF:
Birchcliff is an intermediate oil and natural
gas company based in Calgary, Alberta 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:
birinfo@birchcliffenergy.com www.birchcliffenergy.com |
|
Chris Carlsen –
President and Chief Executive OfficerBruno Geremia
– Executive Vice President and Chief Financial Officer |
Birchcliff Energy (TSX:BIR)
과거 데이터 주식 차트
부터 1월(1) 2025 으로 2월(2) 2025
Birchcliff Energy (TSX:BIR)
과거 데이터 주식 차트
부터 2월(2) 2024 으로 2월(2) 2025
