/NOT FOR DISSEMINATION IN THE U.S. OR THROUGH
U.S. NEWSWIRES./
CALGARY, Nov. 27, 2019 /CNW/ - Highwood Oil Company Ltd.
("Highwood" or the "Company") (TSXV: HOCL) is pleased
to announce financial and operating results for the quarter ended
September 30, 2019. The Company
also announces that its unaudited financial statements and
associated Management's Discussion and Analysis ("MD&A")
for the quarter ended September 30,
2019, can be found at www.sedar.com and
www.highwoodoil.com.
Highlights
- Drilled three wells (1.5 net) in the Clearwater play at Nipisi during the third
quarter of 2019 with another three (1.5 net) wells rig released
subsequent to September 30, 2019. To
date, three of the wells are on production and early production
indications meet the Company's expectation. The remaining three
wells should be on-stream early December.
- Throughout 2019, industry production and delineation activity
has remained robust surrounding Highwood's core lands at Nipisi /
Marten Hills and recently, offset
operators around Highwood's exploratory Clearwater lands have drilled wells that
expand the prospective scope of the play. Highwood continued to
survey, construct and submit approvals for drilling locations it
seeks to drill in the fourth quarter of 2019 and into 2020.
- Achieved average corporate production of 1,495 bbl/d of oil in
the third quarter of 2019, reflecting a modest decrease from an
average of 1,608 bbl/d in the second quarter of 2019. The decrease
was primarily due to required shut-ins during pad drilling,
turnarounds and workovers completed during the period. Production
has increased from the prior year on account of new Clearwater production that's been brought
on-stream and due to the acquisition of Gambit Oil in April 2019. Production from the three gross (1.5
net) wells drilled during the quarter was not brought online until
after September 30, 2019.
- Operating netbacks remained strong at more than $18.25/boe for the three months ended
September 30, 2019 but were down from
$27.36/boe during the three months
ended June 30, 2019 due to an
increase in operating and transportation expenses that were
impacted by shut-in production at Nipisi. Operating netbacks have
increased from the prior year, mainly due to Clearwater production adds that realized
netback of $38/boe for the nine
months ended September 30, 2019.
- Continued strong quarterly cashflow from operating activities
of $2.2 million for the three months
ended September 30, 2019, to provide
for $11.4 million of cashflow from
operating activities for the first nine months of 2019.
- Current production is approximately 1,550 bbl/d of oil,
including 100 bbl/d from the Q3 drilled Clearwater wells currently producing at low
rates consistent with the Company's initial production
techniques.
Operating Highlights
|
Three months
ended September 30,
|
|
Nine months
ended September 30,
|
|
|
2019
|
|
2018
|
%
|
|
|
2019
|
|
2018
|
%
|
Financial
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas
sales
|
$
|
8,849,696
|
$
|
7,336,814
|
21
|
|
$
|
25,440,302
|
$
|
21,826,363
|
17
|
Transportation
pipeline revenues
|
|
1,316,317
|
|
975,964
|
35
|
|
|
4,047,792
|
|
2,640,085
|
53
|
Total revenues, net
of royalties and
|
|
7,410,354
|
|
6,870,212
|
8
|
|
|
19,796,066
|
|
18,876,913
|
5
|
commodity
contracts
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
1,447,053
|
|
837,471
|
73
|
|
|
4,430,102
|
|
3,033,125
|
46
|
Cash flow from (used
in) operating
|
|
|
|
|
|
|
|
|
|
|
|
activities
|
|
2,225,868
|
|
(2,965,870)
|
(175)
|
|
|
11,392,431
|
|
(1,349,015)
|
(944)
|
Capital
expenditures
|
|
2,382,201
|
|
2,118,155
|
12
|
|
|
7,054,921
|
|
16,828,400
|
(58)
|
Net debt
(2)
|
|
|
|
|
|
|
|
(34,179,493)
|
|
(28,558,039)
|
20
|
Shareholder's equity
(end of period)
|
|
|
|
|
|
|
|
24,279,335
|
|
24,059,396
|
1
|
Shares outstanding
(end of period)
|
|
|
|
|
|
|
|
6,013,965
|
|
5,538,674
|
9
|
Weighted-average
basic shares
|
|
6,013,965
|
|
5,538,674
|
9
|
|
|
5,968,379
|
|
5,538,674
|
8
|
outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas
(Mcf/d)
|
|
-
|
|
16
|
-
|
|
|
-
|
|
36
|
-
|
Natural gas liquids
(NGL) (bbls/d)
|
|
-
|
|
-
|
-
|
|
|
-
|
|
-
|
-
|
Crude oil
(bbls/d)
|
|
1,495
|
|
1,033
|
45
|
|
|
1,486
|
|
1,120
|
33
|
Total
(boe/d)
|
|
1,495
|
|
1,036
|
44
|
|
|
1,486
|
|
1,127
|
32
|
Average realized
prices (3)
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas (per Mcf)
(5)
|
|
-
|
|
1.33
|
-
|
|
|
-
|
|
1.27
|
-
|
NGL (per bbl)
(5)
|
|
-
|
|
82.25
|
-
|
|
|
-
|
|
71.14
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil (per
bbl)
|
|
64.32
|
|
77.15
|
(17)
|
|
|
62.70
|
|
71.29
|
(12)
|
Operating netback
(per BOE) (4)
|
|
18.25
|
|
11.10
|
64
|
|
|
20.83
|
|
10.61
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
Wells
drilled:
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
3.0
|
|
1.0
|
200
|
|
|
6.0
|
|
1.0
|
500
|
Net
|
|
1.5
|
|
0.5
|
200
|
|
|
3.0
|
|
0.5
|
500
|
Success (%)
|
|
100
|
|
100
|
-
|
|
|
100
|
|
100
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) For a
description of the boe conversion ratio, see "Basis of Barrel of
Oil Equivalent"
|
(2) Net
debt consists of bank debt and working capital surplus (deficit)
excluding commodity contract assets and/or liabilities
|
(3)
Before hedging
|
(4) See
"Non-GAAP measures"
|
(5) Natural gas
and NGL production and revenues are immaterial to the
Company
|
2019 Third Quarter Overview
Highwood's third quarter results were highlighted by strong cash
flow from operating activities of $2.2
million, a $5.2 million
increase from the same period in 2018. A planned Company
owned facility turnaround, as well as shut-in Clearwater production required for continued
pad drilling, resulted in average daily production of 1,495 bbl/d
during the quarter. As a result of decreased production and
slightly lower benchmark oil pricing, operating netbacks were
$18.25/boe compared with $27.36/boe for the second quarter of 2019.
Amidst recent price volatility in Western
Canada, the Company has adopted a flexible capital program
that is purposely setup to will be responsive to the fluxes in the
current pricing environment. The Company also continues to
hedge a significant level of its production related to new drilling
activity.
2019 Third Quarter Operations
Highwood successfully drilled three (1.5 net) wells in the
Clearwater oil play during the
third quarter of 2019 with another three (1.5 net) wells spud after
September 30, 2019. Since its
inaugural drilling program began in Q4 2018, the Company has
drilled a total of 13 (6.5 net) wells in the emerging resource play
since it's drilling program began in Q4 2018. The Company
continues to focus its drilling efforts within the area of Nipisi,
Alberta where compelling pad and
infill development opportunities present themselves. Provided that
production results remain encouraging, the Company intends to keep
a rig in the Nipisi area until breakup 2020 providing production
results are continually positive.
Highwood's Clearwater land
position has grown to 215 (109 net) sections. Management continues
to dynamically assess and tier its prospective drilling inventory
to pursue drilling those development opportunities that are
characterized by short cycle times and quick payback periods at
current strip pricing. Meanwhile, ongoing industry delineation
drilling continues to de-risk the Company's exploration portfolio.
Outlook
The Company has, and will continue to, evaluate acquisition
opportunities in the M&A market, bit will remain disciplined to
pursue only those opportunities that are accretive and deleveraging
with a drilling inventory that is economic at current strip
pricing. The Company intends to build a growing profile of
recurring free funds flow that will provide maximum flexibility
fund growth, debt repayment and / or other strategic M&A
opportunities in a non-dilutive fashion.
The Clearwater oil resource
play continues to deliver positive delineation results which
underpin an expanding opportunity set for Highwood to pursue lower
risk, highly economic, oil-weighted growth. Since early 2017,
industry has spud more than 200 wells to delineate and quickly grow
the Clearwater play to achieve
production in excess of 20,000 bbl/d. Even within a pricing
environment that has been suppressed by historical standards,
strong well economics characterized by short cycle times and quick
payback periods have supported industry to already spud 110 new
wells in 2019. Highwood will continue to focus its efforts
throughout 2019 and into 2020 on delineating its Clearwater lands in a capital-efficient
manner, while mainly pursuing infill and pad drilling development
opportunities offsetting positive initial production
results.
Oil and Gas Measures
Readers should see the "Selected Technical Terms" in the
Annual Information Form filed on April 30,
2019 for the definition of certain oil and gas
terms.
Basis of Barrels of Oil Equivalent – This news release
discloses certain production information on a barrels of oil
equivalent ("boe") basis with natural gas converted to barrels of
oil equivalent using a conversion factor of six thousand cubic feet
of gas (Mcf) to one barrel (bbl) of oil (6 Mcf:1 bbl). Condensate
and other NGLs are converted to boe at a ratio of 1 bbl:1 bbl. Boe
may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf:1 bbl is based roughly on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at sales point.
Although the 6:1 conversion ratio is an industry-accepted norm, it
is not reflective of price or market value differentials between
product types. Based on current commodity prices, the value ratio
between crude oil, NGLs and natural gas is significantly different
from the 6:1 energy equivalency ratio. Accordingly, using a
conversion ratio of 6 Mcf:1 bbl may be misleading as an indication
of value.
Mcfe Conversions: Thousands of cubic feet of gas equivalent
("Mcfe") amounts have been calculated by using the conversion ratio
of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of
natural gas. Mcfe amounts may be misleading, particularly if used
in isolation. A conversion ratio of 1 bbl to 6 Mcf 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
natural gas as compared to oil is significantly different from the
energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may
be misleading as an indication of value.
Non-GAAP Measures
This press release refers to certain financial measures that
are not determined in accordance with GAAP. Since non-GAAP measures
do not have a standardized meaning prescribed by IFRS and are
therefore unlikely to be comparable to similar measures presented
by other companies, securities regulations require that non- GAAP
measures are clearly defined, qualified and reconciled to their
nearest GAAP measure. Except as otherwise indicated, these non-GAAP
measures are calculated and disclosed on a consistent basis from
period to period. Specific adjusting items may only be relevant in
certain periods.
The intent of non-GAAP measures is to provide additional
useful information with respect to Highwood's operational and
financial performance to investors and analysts though the measures
do not have any standardized meaning under IFRS. The measures
should not, therefore, be considered in isolation or used in
substitute for measures of performance prepared in accordance with
IFRS. Other issuers may calculate these non-GAAP measures
differently.
In particular, the term "netback" is used in this press
release and readers should be cautioned that netback is not defined
by GAAP and may not be comparable to similar measures presented by
other companies. Management believes this is a useful metric in
providing a comparison of relative overall performance between
companies as it is a common metric used by other companies
operating in the oil and gas industry. Management uses the metric
to assess the Company's overall performance relative to that of its
competitors and for internal planning purposes.
"Netback" is a non-GAAP financial measure and is calculated
as revenues net of royalties, less transportation and processing
charges and operating expenses and then divided by BOE or Mcf
sold.
Other Warnings
The Exchange has in no way passed upon the merits of the
proposed transaction and has neither approved nor disapproved the
contents of this press release.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the Exchange)
accepts responsibility for the adequacy or accuracy of this press
release.
This news release contains forward-looking statements
relating to the future operations of the Company and other
statements that are not historical facts. Forward-looking
statements are often identified by terms such as "will", "may",
"should", "anticipate", "expects" and similar expressions. All
statements other than statements of historical fact, included in
this release, including, without limitation, statements regarding
the future plans and objectives of the Company, are forward-looking
statements that involve risks and uncertainties. There can be no
assurance that such statements will prove to be accurate and actual
results and future events could differ materially from those
anticipated in such statements. Important factors that could cause
actual results to differ materially from the Company's expectations
include risks detailed from time to time in the filings made by the
Company with securities regulatory authorities.
The reader is cautioned that assumptions used in the
preparation of any forward-looking information may prove to be
incorrect. Events or circumstances may cause actual results to
differ materially from those predicted, as a result of numerous
known and unknown risks, uncertainties, and other factors, many of
which are beyond the control of the Company and certain of may be
found under the heading "Risk Factors" in the Company's AIF.
The reader is cautioned not to place undue reliance on any
forward-looking information. Such information, although considered
reasonable by management at the time of preparation, may prove to
be incorrect and actual results may differ materially from those
anticipated. Forward-looking statements contained in this news
release are expressly qualified by this cautionary statement. The
forward-looking statements contained in this news release are made
as of the date of this news release and the Company will update or
revise publicly any of the included forward-looking statements as
expressly required by Canadian securities law.
SOURCE Highwood Oil Company Ltd.