CALGARY,
AB, Aug. 3, 2023 /CNW/ - Highwood Asset
Management Ltd. ("Highwood" or the "Company") (TSXV:
HAM) is pleased to announce that, further to the Company's press
releases dated July 5, 2023,
July 10, 2023, and July 27, 2023 it has completed the acquisitions
of each of Castlegate Energy Ltd. ("Castlegate"), Boulder
Energy Ltd. ("Boulder") and Shale Petroleum Ltd.
("Shale") (collectively, the "Acquisitions"). The
cash portion of the purchase price was funded through the net
proceeds of the Company's previously announced $35 million equity financing (the
"Offering"), which included at $10
million participation by HR Exploration & Energy Gmbh
("HR Exploration"), the Private Placement by 1080766
Alberta Ltd., a company controlled by Joel
MacLeod ("1080766") as discussed below, and proceeds
from a credit facility with Royal Bank of Canada and ATB Financial. The Offering was
conducted pursuant to an agency agreement with a syndicate of
agents led by RBC Capital Markets, Echelon Wealth Partners Inc.
and Raymond James Ltd. (the "Agents").
Concurrently with the completion of the Acquisitions, in
accordance with their terms, each subscription receipt of the
Company issued pursuant to the Offering will be exchanged effective
August 3, 2023, for one common share
of the Company (a "Common Share") and one-half of one Common
Share purchase warrant (each full warrant, a "Warrant") with
each Warrant exercisable into one Common Share (each a "Warrant
Share") at an exercise price of $7.50 per Warrant Share until August 3, 2026. The net proceeds of
approximately $32.7 million were
released from escrow to fund a portion of the purchase price of the
Acquisitions. Holders of subscription receipts are not required to
take any action in order to receive the underlying Common Shares
and Warrants, and the subscription receipts are expected to be
halted and subsequently de-listed from trading on the TSX Venture
Exchange on August 3, 2023.
Commenting on the Acquisitions, Joel
MacLeod , Executive Chairman of Highwood said "We are
grateful for the institutional equity and shareholder support on
our financing and encouraged by the approximate $10/bbl
improvement in oil price since the announcement of the
acquisitions. We remain excited about the opportunity to acquire
high quality, low ARO (asset retirement obligation) assets with
significant depth of inventory with sub 12-month payouts at a
combined 2.2x EV to NTM Field NOI1 purchase
multiple. Further, we believe having a clean capital structure with
a advantaged cost and structure of debt financing supported by a
$100 million credit facility from
Canadian financial institutions is a significant advantage for
Highwood as we look to grow Highwood to 30,000+ boe/d. With an
estimated initial leverage of approximately 1.2x on 2024E Adjusted
EBITDA2 and spending approximately 60% of
anticipated cash flow to grow production over 20% while
de-leveraging to approximately 0.9x by year-end 20242,
we feel Highwood will be in a strong position to grow free cash
flow per share over the next three to five years. These
acquisitions are expected to provide a strong production and cash
flow base as a platform for further consolidation of conventional
oil and gas assets in the Western Canadian Sedimentary Basin. The
assets bring highly economic multi-lateral drilling inventory with
anticipated relatively quick payback periods, which are expected to
drive near-term growth while generating free cash flow. We look
forward to commencing our capital program in approximately 30-60
days and expect to increase production approximately 20% over the
next 6-8 months to approximately 5,000 boe/d. We remain committed
to de-leveraging to approximately 0.9x by year-end 2024."
__________
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1
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NTM field net operating
income (NTM Field NOI) is forecasted for the twelve-month period
commencing July 1, 2023 at an average production of 4,500 boe/d.
Based on Management's projections (not forecasts set forth in the
Acquisition Reserves Reports) and applying the following pricing
assumptions: WTI: US$70.00/bbl; WCS Diff: US$14.00/bbl; MSW Diff:
US$3.50/bbl; AECO: C$2.75/GJ; 0.74 CAD/USD. See "Non-GAAP and
other Specified Financial Measures".
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2
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Based on Management's
projections (not IQRE forecasts) and applying the following
pricing assumptions: WTI: US$70.00/bbl; WCS Diff:
US$14.00/bbl; MSW Diff: US$3.50/bbl; AECO: C$2.75/GJ; 0.74
CAD/USD. Management projections are used in place of IQRE
forecasts as Management believes it provides investors with
valuable information concerning the liquidity of the Company.
Cash flow figures assume completion of the Acquisitions on July
1, 2023 and illustrative hedges for total of 65% of net after
royalty Proved Developed Producing reserves production. See
"Caution Respecting Reserves Information" and "Non-GAAP and
other Specified Financial Measures".
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Acquisitions
The final consideration for the Shale Acquisition was 1,277,025
Common Shares. The final consideration for the Castlegate
Acquisition was comprised of $37.6
million in cash. The final consideration for the
Boulder Acquisition was $75.1 million
in cash, the issuance of 1,500,000 common shares in the capital of
the Company ("Common Shares") and a $14 million note payable to the Boulder
shareholder (the "Boulder Note"). The
Boulder Note matures on July 1, 2025
and provides for payments, equal to $3,500,000, commencing October 1, 2024 and thereafter on January 1,
2025, April 1, 2025 and July 1, 2025, with the outstanding principal (if
any) due in full on maturity. The Boulder Note will pay interest
at 13% per annum payable quarterly on October 1, 2024, January
1, 2025, April 1, 2025 and
July 1, 2025; all payments/repayments (of both principal and
interest) under the Boulder Note are subject to certain terms and
conditions under the New Credit Facilities discussed below. All
obligations under the Boulder Note are fully and unconditionally
personally guaranteed by Joel MacLeod, the Executive Chairman of
the Company, in an amount limited to $3
million, plus costs and expenses of enforcement plus
interest (the "Guarantee").
New Credit Facilities
In connection with the Acquisitions, the Company entered into a
new senior secured extendible revolving credit facilities in the
aggregate principal amount of up to $100
million (the "New Credit Facilities"). The New Credit
Facilities are comprised of extendible revolving credit facilities
consisting of a $10 million operating facility and an up to $90
million syndicated loan facility.
The New Credit Facilities have a revolving period of 364 days,
extendible annually at the request of the Company, subject to
approval of the lenders thereunder. If not extended, the New
Credit Facilities are anticipated to automatically convert to a
term loan and all outstanding obligations will be repayable one
year after the expiry of the revolving period. The borrowing base
for the New Credit Facilities is $100 million, and to be subject
to semi-annual redeterminations, based upon the Company's annual
report of the Company's independent qualified reserves evaluator or
updates thereto. The New Credit Facilities are secured by a first
fixed and floating charge over all the Company's assets. The New
Credit Facilities include operating restrictions on the Company,
including (among other things), limitations on acquisitions,
distributions, dividends and hedging arrangements.
Board Updates
In connection with the completion of the Acquisitions, the
Company has added David Gardner and
Garrett Ulmer to the Board of
Directors.
Mr. Gardner has over 30 years of experience in the global oil
and gas industry, initially as a geologist with Exxon; and after
completing an MBA, progressed his commercial career to the
corporate executive level with a growing focus on general
management, strategy, business development and M&A. He spent
nearly 17 years with BP, including in BP's corporate center and
M&A group, and leading Exploration new access globally and
Upstream business development across Europe and Africa. From 2014, Mr.
Gardner was SVP of Business Development for Husky Energy in
Calgary culminating in Husky's
combination with Cenovus Energy in January
2021. Mr. Gardner, also, was a Special Adviser with
Kirk Lovegrove & Company Ltd in
London in 2021. Since December 2021, Mr Gardner has been the CEO of
Shale Petroleum Ltd. Mr. Gardner has a BS degree in Geology from
the College of William and Mary in
Virginia, an MS degree in Geology
from the University of
Wisconsin-Madison and an MBA degree from the University of
California, Los Angeles.
Mr. Ulmer is currently serving as Chief Executive Officer of
private oil and gas company West Lake Energy following
approximately 2 years as Chief Operating Officer. Prior
thereto, he worked in roles of increasing responsibility at
Bellatrix Exploration from 2009 up to the role of Chief Operating
Officer from 2017 to 2020. He has over 30 years experience in
the upstream oil and gas industry including extensive service with
Imperial Oil (Exxon Mobil) and ConocoPhillips in various
roles.
The Board now consists of: Joel
Macleod (Executive Chairman), Greg
Macdonald, Stephen Holyoake, Ryan Mooney, David
Gardner and Garrett
Ulmer. The officers consist of: Joel Macleod (Executive Chairman), Greg Macdonald (Chief Executive Officer),
Chris Allchorne (Chief Financial
Officer), Kelly McDonald (Vice
President, Exploration) and Trevor
Wong-Chor (Corporate Secretary).
Mr. Gardner is the nominee pursuant to a board nomination
agreement ("HR Board Nomination Agreement") between
the Company and HR Exploration whereby HR Exploration shall,
for so long as it and its affiliates together shall own or control
or exercise discretion over, directly or indirectly, not less than
10% of the issued and outstanding Common Shares, be entitled to
nominate for election or appointment to the board of directors of
the Company (the "Board"), as applicable, the greater of:
(i) one nominee and (ii) such number of nominees that, when
compared to the authorized number of directors on the Board at
such time, is closest to but not less than proportional to the
total number of Common Shares which HR Exploration and its
affiliates together own or exercise control or direction over,
directly or indirectly, relative to the total number of Common
Shares then issued and outstanding. The Company shall use
commercially reasonable efforts to ensure that the nominee(s) of HR
Exploration shall be elected or appointed to the Board. The HR
Board Nomination Agreement further provides HR Exploration with
participation rights for future offerings to maintain its
percentage ownership interest in the issued and outstanding Common
Shares up to a maximum of a percentage ownership interest of 17% of
the issued and outstanding Common Shares. HR Exploration also has
the right to appoint an observer to the Board for so long as it is
entitled to designate a Board nominee for election or appointment
under the HR Board Nomination Agreement.
Mr. Ulmer is the nominee pursuant to a board nomination
agreement between the Company and West Lake ("WL Board
Nomination Agreement") whereby West Lake shall, for so long as
it shall own or control, directly or indirectly, not less than 9%
of the issued and outstanding Common Shares, be entitled to
designate for election or appointment to the Board, as applicable,
one nominee. The Company shall use commercially reasonable efforts
to ensure that West Lake's nominee shall be elected to the
Board.
Private Placement
In connection with the closing of the Acquisitions, 1080766 has
purchased an aggregate amount of $2.8 million in units of the
Company (the "Private Placement Units") comprised of one
Common Share and one-half of one Warrant (the "Private
Placement"). Each Private Placement Warrant is
exercisable into one Warrant Share at an exercise price of
$7.50 per Warrant Share until
August 3, 2026.
The Private Placement Units purchased pursuant to the Private
Placement (including the Common Shares and Warrants comprising such
Private Placement Units, and the Warrant Shares issuable upon the
exercise of such Warrants) are subject to a statutory hold period
until December 4, 2023.
1080766 (and Joel MacLeod) also
participated in the Offering for an additional $2.2 million, bringing the aggregate equity
commitment from 1080766 (and Joel
MacLeod) to $5 million.
Early Warning Requirements
Following completion of the Acquisitions, conversion of
Subscription Receipts and the Private Placement, Highwood now has
15,114,323 Common Shares outstanding.
1080766 Alberta Ltd. ("1080766") (a company controlled by
Joel MacLeod, a Director and
Executive Chairman of the Company) acquired 309,416 Subscription
Receipts pursuant to the Offering. Further, Joel MacLeod directly acquired 57,250
Subscription Receipts pursuant to the Offering. All of these
Subscription Receipts will be converted to Common Shares and
Warrants effective August 3, 2023 in
connection with closing of the Acquisitions. For the purposes
of this press release, all securities acquired or to be acquired
directly by Joel MacLeod
are included in the amount of securities that 1080766 owns
and exercises control and direction over.
1080766 completed the Private Placement for $2.8 million and received 466,666 Common Shares
and 233,333 Warrants in connection with the Private Placement.
Following completion of the Private Placement and Conversion of
the Subscription Receipts, 1080766 and Joel MacLeod will
own and exercise control or direction over 4,879,193 Common Shares
and 416,666 Warrants, representing approximately 32% of the issued
and outstanding Common Shares on a non-diluted basis and
approximately 34% of the issued and outstanding Common Shares on a
partially-diluted basis (assuming the exercise of all Warrants held
by 1080766 and Joel
MacLeod). Joel MacLeod is the sole control person of
the 1080766. Joel MacLeod and
1080766 participated in the Offering for investment
purposes.
HR Exploration acquired 1,666,666 Subscription Receipts
pursuant to the Offering at an aggregate purchase price of
$10,000,000 ($6.00 per Subscription
Receipt). All of these Subscription Receipts will be converted into
an aggregate of 1,666,666 Common Shares and 833,333 Warrants
effective August 3, 2023 in
connection with closing of the Acquisitions. On August 3, 2023, HR Exploration also received
943,741 Common Shares in connection with the closing of the Shale
Acquisition. HR Exploration will own and exercise control or
direction over 2,610,407 Common Shares and 833,333 Warrants,
representing approximately 17% of the issued and outstanding
Common Shares on a non-diluted basis and approximately 21% of
the issued and outstanding Common Shares on a partially-diluted
basis (assuming the exercise of all Warrants held by HR
Exploration). HR Exploration may acquire or dispose of additional
securities of the Company in the future through the market,
privately, or otherwise, as circumstances or market conditions
warrant.
The involvement of 1080766 in the Private Placement and
Guarantee are "related party transactions" within the meaning of
Multilateral Instrument 61-101 — Protection of Minority Security
Holders in Special Transactions ("MI 61-101") and the Company is
relying on the exemptions in sections 5.5(a) and 5.7(a) [Fair
Market Value Not More Than 25% of Market Capitalization] of MI
61-101 in order to be exempt from the formal valuation and
minority shareholder approval requirements therein, as the
aggregate fair market value of such transactions does not exceed
25% of the Company's current market capitalization, as determined
in accordance with MI 61-101.
Common Share and Warrant Listing on TSX Venture
Exchange
The Warrants underlying the Subscription Receipts are expected
to be listed for trading on the TSX Venture Exchange under the
symbol "HAM.WT" effective as of the opening of markets on, or
about, August 4, 2023. The Common
Shares underlying the Subscription Receipts are expected to be
listed for trading on the TSX Venture Exchange effective as of the
opening of markets on, or about, August
4, 2023.
Financial and Strategic Advisors
RBC Capital Markets acted as financial advisor to Highwood on
the Acquisitions and Echelon Capital Markets, Raymond James and ATB Capital Markets acted as
strategic advisors to Highwood on the Acquisitions.
About Highwood Asset Management Ltd.
Highwood Asset Management Ltd. (TSXV: HAM) is a growth
orientated oil and gas exploration and production company committed
to shareholder alignment with high insider ownership while creating
long-term value for its shareholders. The Company has an extensive
inventory of low-risk, oil development drilling locations focused
primarily on horizontal multi-lateral development of its
assets. Operating as a responsible corporate citizen is a key focus
to ensure we deliver on our environmental, social and governance
(ESG) commitments and goals. For more information, please visit the
Company's website at www.highwoodmgmt.com.
Cautionary Note Regarding Forward-Looking Information
This news release contains certain statements and
information, including forward-looking statements within the
meaning of the "safe harbor" provisions of applicable securities
laws, and which are collectively referred to herein as
"forward-looking statements". The forward-looking statements
contained in this news release are based on Highwood's current
expectations, estimates, projections and assumptions in light of
its experience and its perception of historical trends. When used
in this news release, the words "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could",
"might", "should", "believe" and similar expressions, as they
relate to Highwood or the proposed Acquisitions, are intended to
identify forward-looking statements. These 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. Actual operational
and financial results may differ materially from Highwood's
expectations contained in the forward-looking statements as a
result of various factors, many of which are beyond the control of
the Company.
Undue reliance should not be placed on these forward-looking
statements, as there can be no assurance that the plans, intentions
or expectations upon which they are based will occur. By its
nature, forward-looking information involves numerous assumptions,
known and unknown risks and uncertainties, both general and
specific, that contribute to the possibility that the predictions,
forecasts, projections and other forward-looking statements will
not occur and may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. Forward-looking statements may include, but are not
limited to, statements with respect to:
- expectations regarding future share ownership of Highwood by
insiders;
- anticipated benefits of each of the Acquisitions, including
anticipated acquisition metrics used in this news release;
- the listing of the Warrants on the
TSX-V;
- pending approximately 60% of anticipated cash flow;
- growing production over 25%;
- de-leveraging to approximately 0.9x by year-end
2024;
- drilling plans, timing of drilling and results
expectations;
- the Company's expectations with respect to Highwood's
financial and operational results following completion of the
Acquisitions;
- the Company's estimates of the drilling locations inventory
and tax pools associated with the Acquisitions;
- the Company's expectations regarding capacity of
infrastructure associated with its business and the businesses of
Shale, Boulder and Castlegate;
- the performance characteristics of the Company and the oil
and natural gas properties subject to the Acquisitions;
- the quantity of the Company's and the acquired businesses'
oil and natural gas reserves and anticipated future cash flows from
such reserves;
- the Company's expectations regarding commodity prices and
costs;
- the Company's expectations regarding supply and demand for
oil and natural gas;
- expectations regarding the Company's ability to raise
capital and to continually add to reserves through acquisitions and
development;
- the Company's expectation regarding its ability to return of
capital to shareholders;
- treatment under governmental regulatory regimes and tax
laws;
- fluctuations in depletion, depreciation, and accretion
rates;
- expected changes in regulatory regimes in respect of royalty
curves and regulatory improvements and the effects of such changes;
and
- Highwood's business and acquisition strategy, the criteria
to be considered in connection therewith and the benefits to be
derived therefrom.
These forward-looking statements are not guarantees of future
performance and are subject to a number of known and unknown risks
and uncertainties that could cause actual events or results to
differ materially, including, but not limited to:
- failure to realize the anticipated benefits of acquisitions,
including results and/or synergies of each of the proposed
Acquisitions;
- unexpected costs or liabilities related to each of the
Acquisitions;
- volatility in market prices for oil and natural
gas;
- operational risks and liabilities inherent in oil and
natural gas operations;
- uncertainties associated with estimating oil and natural gas
reserves;
- changes in royalty regimes;
- competition for, among other things, capital, acquisitions
of reserves, undeveloped lands and skilled personnel;
- incorrect assessments of the value of benefits to be
obtained from acquisitions and exploration and development
programs;
- unforeseen difficulties in integrating assets acquired
through acquisitions (including each of the Acquisitions) into the
Company's operations;
- that the Company's ability to maintain strong business
relationships with its suppliers, service providers and other third
parties will be maintained;
- geological, technical, drilling and processing
problems;
- fluctuations in foreign exchange or interest rates and stock
market volatility;
- liquidity;
- commodity price volatility and adverse general economic,
political and market conditions;
- the accuracy of oil and gas reserves estimates and estimated
production levels as they are affected by exploration and
development drilling and estimated decline rates;
- the uncertainties in regard to the timing of Highwood's
exploration and development program;
- fluctuations in the costs of borrowing;
- political or economic developments;
- uncertainty related to geopolitical conflict;
- ability to obtain regulatory approvals; and
- the results of litigation or regulatory proceedings that may
be brought against the Company;
- changes in income tax laws or changes in tax laws and
incentive programs relating to the oil and gas industry.
Caution Respecting Reserves Information
Readers should see the "Selected Technical Terms" in the
Annual Information Form filed on April 28,
2023 for the definition of certain oil and gas
terms.
Disclosure in this news release of oil and gas information is
presented in accordance with generally accepted industry practices
in Canada and National Instrument
51-101— Standards of Disclosure for Oil and Gas Activities ("NI
51-101"). Specifically, other than as noted herein, the oil and gas
information regarding the potential Acquisitions presented in this
news release is based on: (i) in respect of Boulder, the reserves
report prepared by McDaniel & Associates Consultants Ltd. and
dated April 3, 2023 evaluating oil,
natural gas liquids and natural gas interests attributable to
Boulder's properties at January 1,
2023 (the "Brazeau Reserves Report"), (ii) in respect
of Castlegate, the reserves report prepared by GLJ Ltd. and dated
May 24, 2023 evaluating Castlegate's
oil, natural gas liquids and natural gas interests at January 1, 2023 (the "Castlegate Reserves
Report"), and (iii) in respect of Shale, the reserves report
prepared by GLJ Ltd. and dated January 18,
2023 evaluating Shale's oil and gas reserves in aggregate
at January 1, 2023 (the "Shale
Reserves Report", and together with the Brazeau Report and the
Castlegate Report, the "Acquisition Reserves Reports").
Neither Highwood nor the Agents have engaged in any independent
verification of any of the Brazeau Reserves Report, the Castlegate
Reserves Report or the Shale Reserves Report, nor any of the
contents thereof. Other than as noted herein, the oil and gas
information regarding the Company presented in this news release is
based on the reserves report prepared by GLJ Ltd. evaluating the
crude oil, natural gas and natural gas liquids attributable to the
Company's properties at January 1,
2023 (the "2022 Reserves Report").
Reserves are classified according to the degree of certainty
associated with the estimates as follows:
"Proved reserves" or "1P" are those reserves that can be
estimated with a high degree of certainty to be recoverable. It is
likely that the actual remaining quantities recovered will exceed
the estimated proved reserves.
"Probable reserves" are those additional reserves that are
less certain to be recovered than proved reserves.
"Proved plus probable reserves" or "2P" is the total of
proved reserves and probable reserves. It is equally likely that
the actual remaining quantities recovered will be greater or less
than the sum of the estimated proved plus probable
reserves.
"Proved Developed Producing" or "PDP" reserves are those
reserves that are expected to be recovered from completion
intervals open at the time of the estimate. These reserves may be
currently producing or, if shut in, they must have previously been
on production, and the date of resumption of production must be
known with reasonable certainty.
This news release contains oil and gas metrics commonly used
in the oil and gas industry, including those set out below, which
do not have standardized meanings or standard methods of
calculation and may not be comparable to similar measures presented
by other companies. Such metrics have been included in this news
release to provide readers with an additional method to evaluate
the Company's performance. However, such measures are not reliable
indicators of the Company's future performance and should therefore
not be unduly relied upon or used to make comparisons to other
companies. Further, these metrics have not been independently
evaluated, audited or reviewed and are based on historical data,
extrapolations therefrom and management's professional judgement,
which involves a high degree of subjectivity. For these reasons,
actual metrics attributable to any particular group of properties
may differ from our estimates herein and the differences could be
significant.
"2P RLI" means proven and probable reserves life
index and is calculated as proven and probable reserves divided by
total estimated NTM production.
"NPV10" represents the anticipated net present value
of the future net revenue discounted at a rate of 10% associated
with the applicable reserves.
"Payback Period" is measured as the time from the
start of production to recovery of the capital investment.
"RLI" means reserves life index and is calculated
based on the amount for the relevant reserves category divided by
total estimated NTM production.
The net present value of future net revenues attributable to
reserves and resources included in this news release do not
represent the fair market value of such reserves and resources.
There is no assurance that the forecast prices and costs
assumptions will be attained, and variances could be material. The
recovery and reserve estimates of reserves and resources provided
in this news release are estimates only and there is no guarantee
that the estimated reserves or resources will be recovered. Actual
reserves and resources may be greater or less than the estimates
provided in this news release. The estimates of reserves and future
net revenue for individual properties in this news release may not
reflect the same confidence level as estimates of reserves and
future net revenue for all properties, due to the effects of
aggregation.
This news release discloses potential future drilling
locations in two categories: (a) booked locations; and (b) unbooked
locations. Booked locations are proposed drilling locations
identified in the Acquisition Reserves Reports that have proved
and/or probable reserves, as applicable, attributed to them in the
Acquisition Reserves Reports. Unbooked locations are internal
estimates based on prospective acreage and an assumption as to the
number of wells that can be drilled per section based on industry
practice and internal technical analysis review. Unbooked locations
have been identified by members of management who are qualified
reserves evaluators in accordance with NI 51-101 based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. Unbooked locations do not have proved or
probable reserves attributed to them in the Acquisition Reserves
Reports. Highwood's ability to drill and develop these locations
and the drilling locations on which Highwood actually drills wells
depends on a number of known and unknown risks and uncertainties.
As a result of these risks and uncertainties, there can be no
assurance that the potential future drilling locations identified
in this news release will ever be drilled or if Highwood will be
able to produce crude oil, natural gas and natural gas liquids from
these or any other potential drilling locations.
Basis of Barrels of Oil Equivalent – In this news
release, the abbreviation boe means a barrel of oil equivalent on
the basis of 1 boe to 6 Mcf of natural gas when converting natural
gas to boes. Boes may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 Mcf to 1 boe is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. Additionally, given 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 ratio at 6:1 may be misleading.
References to "liquids" in this news release refer to,
collectively, heavy crude oil, light crude oil and medium crude oil
combined, and natural gas liquids.
Non-GAAP and other Specified Financial Measures
This news release contains financial measures commonly used
in the oil and natural gas industry, including "Field Net
Operating Income" and "Adjusted EBITDA". These financial measures
do not have any standardized meaning under IFRS and therefore may
not be comparable to similar measures presented by other companies.
Readers are cautioned that these non-IFRS measure should not be
construed as an alternative to other measures of financial
performance calculated in accordance with IFRS. These non-IFRS
measures provides additional information that Management believes
is meaningful in describing the Company's operational performance,
liquidity and capacity to fund capital expenditures and other
activities. Management believes that the presentation of these
non-IFRS measures provide useful information to investors and
shareholders as the measures provide increased transparency and the
ability to better analyze performance against prior periods on a
comparable basis.
"Adjusted EBITDA" is calculated as cash flow from (used in)
operating activities, adding back changes in non-cash working
capital, decommissioning obligation expenditures, transaction
costs and interest expense. The Company considers Adjusted EBITDA
to be a key capital management measure as it is both used within
certain financial covenants anticipated to be prescribed under the
New Credit Facilities and demonstrates Highwood's standalone
profitability, operating and financial performance in terms of
cash flow generation, adjusting for interest related to its capital
structure. The most directly comparable GAAP measure is cash flow
from (used in) operating activities.
"Field Net Operating Income" or "Field NOI" is used a
measure to calculate NOI at the field level. The most directly
comparable GAAP measure is cash flow from (used in) operating
activities. Field NOI is calculated as cash flow from (used in)
operating activities, adding back decommissioning obligation
expenditures and any costs incurred at the corporate level. There
are no general and administrative expenses included in Field Cash
Flow as those costs are incurred at the corporate level.
"Free Cash Flow" or "FCF" is used as an indicator of the
efficiency and liquidity of the Company's business, measuring its
funds after capital expenditures available to manage debt levels,
pursue acquisitions and assess the optionality to pay dividends
and/or return capital to shareholders though activities such as
share repurchases. The most directly comparable GAAP measure is
cash flow from (used in) operating activities. Free Cash Flow is
calculated as cash flow from (used in) operating activities, less
interest, office lease expenses, cash taxes and capital
expenditures.
All dollar figures included herein are presented in Canadian
dollars, unless otherwise noted.
Neither TSX Venture Exchange nor its Regulation Services
Provider accepts responsibility for the adequacy or accuracy of
this release.
SOURCE Highwood Oil Company Ltd.