(TSX: AAV)
CALGARY, AB, Oct. 28, 2021 /CNW/ - Advantage Energy Ltd.
("Advantage" or the "Corporation") is pleased to report its third
quarter 2021 results including record production, record free cash
flow(a) and accelerated debt reduction.
Operational performance of our summer development program
exceeded expectations, with many of our new wells ranking amongst
the best producers in our history. With elevated commodity
prices presiding through much of the quarter and excess plant
capacity available for new volumes, the average payout of new wells
fell to less than 7 months from the on-stream date.
Operating and Financial Highlights for the Quarter
- Cash provided by operating activities of $47.0 million
- Record adjusted funds flow ("AFF")(a) of
$63.4 million ($0.33 per share)
- Record free cash flow ("FCF")(a) of $32.0 million
- Record total production of 50,025 boe/d (271.8 mmcf/d natural
gas, 4,724 bbls/d liquids), up 13% over Q3 2020
- Liquids production of 4,724 bbls/d (1,038 bbls/d oil, 1,002
bbls/d condensate, and 2,684 bbls/d NGLs)
- Cash used in investing activities was $36.9 million while net capital
expenditures(a) were $31.4
million
- Net debt(a) decreased to $167.9 million while net debt to
AFF(a) ratio fell to 0.9x
- Operating costs remained low at $2.38/boe
Operational Update
- At Glacier, a five-well pad was brought onstream and delivered
an average IP30 of 10 mmcf/d per well (post-cleanup). Three of
Advantage's four best Glacier multi-well pads have been drilled in
the last 18 months.
- Two wells were completed in central Valhalla, ranking as the first and seventh
best wells Advantage has ever drilled, with wellhead IP30s of 2,410
boe/d (10.3 mmcf/d natural gas and 693 bbls/d condensate) and 1,964
boe/d (9.4 mmcf/d natural gas and 426 bbls/d condensate),
respectively. Frac designs were 1.5 tonnes/meter, typical of our
2021 program.
- A new, Advantage-operated joint venture was established at
Glacier where lands were pooled with a third-party, increasing the
inventory of 2 mile long top-tier wells by 24 gross wells (12 net).
Drilling of four 50% working interest wells on these lands has
begun with targeted onstream dates early in the first quarter of
2022. Benefits of the joint venture include operational
efficiencies and ancillary revenue from approximately 10 mmcf/d of
additional third-party processing in 2022.
- All major equipment for the Glacier Gas Plant Carbon Capture
and Storage project (Phase I) is under construction; expected
on-stream date remains April
2022.
a.
|
Non-GAAP
Measure which may not be comparable to similar non-GAAP measures
used by other entities. Please see Advisory for reconciliations to
the nearest measure calculated in accordance with
GAAP.
|
Marketing Update
Advantage has hedged approximately 36% of its natural gas
production for fourth quarter 2021 and 10% for 2022. These hedges
are fixed price swaps denominated at AECO, Henry Hub, Dawn and
Chicago, reflective of the market
exposures in our natural gas diversification strategy.
Looking Forward
Capital guidance for 2021 remains at $140 to $150
million and the mid-point of production guidance remains at
49,500 boe/d. With drilling results continuing to exceed
expectations, annual production per share growth is now likely to
be approximately 10%. Advantage plans to announce 2022
guidance before year-end, with a focus on optimizing balance sheet
strength, acquisition opportunities, moderate gas production
growth, and increasing oil production to balance commodity
exposure.
Advantage will continue to fortify its balance sheet and
maximize returns for its shareholders by executing on its strategy
to:
- Continue to deliver moderate (approximately 10%) production
growth for gas-weighted assets utilizing existing capacity at our
Glacier Gas Plant
- Enhance corporate resilience and scale using several
tactics:
-
- growing our liquids assets to balance our exposure to gas
pricing
- pursue revenue-generating cleantech investments through the
Corporation's subsidiary Entropy Inc. ("Entropy") that will
leverage our carbon capture and sequestration technology and
expertise
- pursue acquisitions that create efficiencies, resilience and
scale
- Potentially return capital to shareholders
Advantage appreciates the contributions of our staff that led to
strong performance this quarter, and the support of our board of
directors and investors; we look forward to progressing the
Corporation's strategy through the dynamic markets ahead.
Financial & Operating Summary
Financial
Highlights
|
|
Three months
ended
September
30
|
|
Nine months
ended
September
30
|
($000, except as
otherwise indicated)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Financial
Statement Highlights
|
|
|
|
|
|
|
|
|
Sales including
realized derivatives
|
$
|
110,344
|
$
|
55,763
|
$
|
293,653
|
$
|
170,128
|
Net income (loss) and
comprehensive income (loss)
|
$
|
43,098
|
$
|
(21,606)
|
$
|
51,398
|
$
|
(308,213)
|
per basic share
(2)
|
$
|
0.23
|
$
|
(0.11)
|
$
|
0.27
|
$
|
(1.64)
|
Basic weighted
average shares (000)
|
|
190,829
|
|
188,113
|
|
189,824
|
|
187,643
|
Cash provided by
operating activities
|
$
|
46,988
|
$
|
25,271
|
$
|
155,688
|
$
|
70,454
|
Cash provided by
(used in) financing activities
|
$
|
(26,960)
|
$
|
(15,436)
|
$
|
(55,988)
|
$
|
43,016
|
Cash used in
investing activities
|
$
|
(36,940)
|
$
|
(11,220)
|
$
|
(72,843)
|
$
|
(121,296)
|
Other Financial
Highlights
|
|
|
|
|
|
|
|
|
Adjusted funds flow
(1)
|
$
|
63,353
|
$
|
23,571
|
$
|
163,597
|
$
|
72,923
|
per boe
(1)
|
$
|
13.77
|
$
|
5.76
|
$
|
12.00
|
$
|
5.86
|
per basic share
(1)(2)
|
$
|
0.33
|
$
|
0.13
|
$
|
0.86
|
$
|
0.39
|
Net capital
expenditures (1)
|
$
|
31,352
|
$
|
21,252
|
$
|
91,019
|
$
|
125,545
|
Working capital
(surplus) deficit (1)
|
$
|
(25,891)
|
$
|
9,093
|
$
|
(25,891)
|
$
|
9,093
|
Bank
indebtedness
|
$
|
193,828
|
$
|
241,161
|
$
|
193,828
|
$
|
241,161
|
Net debt
(1)
|
$
|
167,937
|
$
|
250,254
|
$
|
167,937
|
$
|
250,254
|
|
|
(1)
|
Non-GAAP measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see "Non-GAAP Measures".
|
(2)
|
Based on basic
weighted average shares outstanding.
|
Operating
Highlights
|
|
Three months
ended
September
30
|
|
Nine months
ended
September
30
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Operating
|
|
|
|
|
|
|
|
|
Daily
Production
|
|
|
|
|
|
|
|
|
Crude oil
(bbls/d)
|
|
1,038
|
|
1,812
|
|
1,197
|
|
1,668
|
Condensate
(bbls/d)
|
|
1,002
|
|
605
|
|
788
|
|
736
|
NGLs
(bbls/d)
|
|
2,684
|
|
2,312
|
|
2,557
|
|
1,960
|
Total liquids
production (bbls/d)
|
|
4,724
|
|
4,729
|
|
4,542
|
|
4,364
|
Natural gas
(mcf/d)
|
|
271,804
|
|
238,315
|
|
272,467
|
|
246,147
|
Total production
(boe/d)
|
|
50,025
|
|
44,448
|
|
49,953
|
|
45,389
|
Average realized
prices (including realized derivatives)
|
|
|
|
|
|
|
|
|
Natural gas
($/mcf)
|
$
|
3.48
|
$
|
1.81
|
$
|
3.12
|
$
|
1.88
|
Liquids
($/bbl)
|
$
|
53.42
|
$
|
49.03
|
$
|
49.68
|
$
|
47.15
|
Operating Netback
($/boe)
|
|
|
|
|
|
|
|
|
Petroleum and natural
gas sales from production
|
$
|
29.19
|
$
|
14.69
|
$
|
24.40
|
$
|
13.82
|
Realized losses on
derivatives
|
|
(5.21)
|
|
(1.03)
|
|
(2.75)
|
|
(0.14)
|
Royalty
expense
|
|
(1.75)
|
|
(0.63)
|
|
(1.36)
|
|
(0.60)
|
Operating
expense
|
|
(2.38)
|
|
(2.35)
|
|
(2.35)
|
|
(2.35)
|
Transportation
expense
|
|
(3.86)
|
|
(3.12)
|
|
(3.72)
|
|
(3.32)
|
Operating netback
(1)
|
$
|
15.99
|
$
|
7.56
|
$
|
14.22
|
$
|
7.41
|
|
|
(1)
|
Non-GAAP measure
which may not be comparable to similar non-GAAP measures used by
other entities. Please see "Non-GAAP Measures".
|
The Corporation's unaudited consolidated financial statements
for the three and nine months ended September 30, 2021 together with the notes
thereto, and Management's Discussion and Analysis for the three and
nine months ended September 30, 2021
have been filed on SEDAR and are available on the Corporation's
website at https://www.advantageog.com/investors/financial-reports.
Upon request, Advantage will provide a hard copy of any financial
reports free of charge.
Advisory
The information in this press release contains certain
forward-looking statements, including within the meaning of
applicable securities laws. These statements relate to future
events or our future intentions or performance. All statements
other than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "guidance", "anticipate",
"target", "objectives", "estimates", "continue", "demonstrate",
"expect", "may", "can", "will", "believe", "would" and similar
expressions and include statements relating to, among other things,
Advantage's focus, strategy, priorities and development plans; that
Advantage will operate future development at Glacier on lands
pooled with a third party; the timing for wells to come on-stream
at Glacier and the additional third-party processing revenue
expected to be derived therefrom; the timing of the Glacier Gas
Plant Carbon Capture and Storage project (Phase I) to come
on-stream; Advantage's expectations of when it will announce its
2022 guidance and the primary focus thereof; anticipated capital
spending, production and production growth in 2021; Advantage's
ability to fortify its balance sheet and maximize returns for its
shareholders; Advantage's ability to enhance corporate resilience
and scale; Advantage's expectations to return capital to its
shareholders; Advantage's hedging program; Advantage's go-forward
strategy, its reasons therefor and the results and benefits to be
derived therefrom; and the Corporation's targeted 2021 production
growth. Advantage's actual decisions, activities, results,
performance, or achievement could differ materially from those
expressed in, or implied by, such forward-looking statements and
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur or, if any of them do, what benefits that Advantage will
derive from them.
These statements involve substantial known and unknown risks
and uncertainties, certain of which are beyond Advantage's control,
including, but not limited to: changes in general economic, market
and business conditions; industry conditions, including as a result
of demand and supply effects resulting from the COVID-19 pandemic;
actions by governmental or regulatory authorities including
increasing taxes and changes in investment or other regulations;
changes in tax laws, royalty regimes and incentive programs
relating to the oil and gas industry; Advantage's success at
acquisition, exploitation and development of reserves; unexpected
drilling results; changes in commodity prices, currency exchange
rates, net capital expenditures, reserves or reserves estimates and
debt service requirements; the occurrence of unexpected events
involved in the exploration for, and the operation and development
of, oil and gas properties, including hazards such as fire,
explosion, blowouts, cratering, and spills, each of which could
result in substantial damage to wells, production and processing
facilities, other property and the environment or in personal
injury; changes or fluctuations in production levels; delays in
anticipated timing of drilling and completion of wells; individual
well productivity; competition from other producers; the lack of
availability of qualified personnel or management; credit risk;
changes in laws and regulations including the adoption of new
environmental laws and regulations and changes in how they are
interpreted and enforced; Advantage's ability to comply with
current and future environmental or other laws; stock market
volatility and market valuations; liabilities inherent in oil and
natural gas operations; competition for, among other things,
capital, acquisitions of reserves, undeveloped lands and skilled
personnel; incorrect assessments of the value of acquisitions;
geological, technical, drilling and processing problems and other
difficulties in producing petroleum reserves; ability to obtain
required approvals of regulatory authorities; ability to access
sufficient capital from internal and external sources; that the
Glacier Gas Plant Carbon Capture and Storage project (Phase I) will
not come on-stream when expected; that Advantage will not announce
its 2022 guidance when expected; and that Advantage will not be
able to return capital to its shareholders. Many of these risks and
uncertainties and additional risk factors are described in the
Corporation's Annual Information Form which is available at
www.sedar.com ("SEDAR") and www.advantageog.com. Readers are also
referred to risk factors described in other documents Advantage
files with Canadian securities authorities.
With respect to forward-looking statements contained in this
press release, Advantage has made assumptions regarding, but not
limited to: conditions in general economic and financial markets;
the impact and duration thereof that the COVID-19 pandemic will
have on (i) the demand for crude oil, NGLs and natural gas, (ii)
the supply chain including the Corporation's ability to obtain the
equipment and services it requires, and (iii) the Corporation's
ability to produce, transport and/or sell its crude oil, NGLs and
natural gas; effects of regulation by governmental agencies;
current and future commodity prices and royalty regimes; the
Corporation's current and future hedging program; future exchange
rates; royalty rates; future operating costs; future transportation
costs and availability of product transportation capacity;
availability of skilled labor; availability of drilling and related
equipment; timing and amount of net capital expenditures; the
number of new wells required to achieve the budget objectives; that
the Corporation will have sufficient adjusted funds flow, debt or
equity sources or other financial resources required to fund its
capital and operating expenditures and requirements as needed; that
the Corporation's conduct and results of operations will be
consistent with its expectations; that the Corporation will have
the ability to develop the Corporation's properties in the manner
currently contemplated; current or, where applicable, proposed
assumed industry conditions, laws and regulations will continue in
effect or as anticipated; that Entropy will have the ability to
develop its technology in the manner currently contemplated;
that the Glacier Gas Plant Carbon Capture and Storage project
(Phase I) will come on-stream; the anticipated benefits and results
from Entropy's technology; and the estimates of the Corporation's
production and reserves volumes and the assumptions related thereto
(including commodity prices and development costs) are accurate in
all material respects.
Management has included the above summary of assumptions and
risks related to forward-looking information in order to provide
shareholders with a more complete perspective on Advantage's future
operations and such information may not be appropriate for other
purposes. Advantage's actual results, performance or achievement
could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurance can
be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what
benefits that Advantage will derive therefrom. Readers are
cautioned that the foregoing lists of factors are not exhaustive.
These forward-looking statements are made as of the date of this
press release and Advantage disclaims any intent or obligation to
update publicly any forward-looking statements, whether as a result
of new information, future events or results or otherwise, other
than as required by applicable securities laws.
Barrels of oil equivalent (boe) and thousand cubic feet of
natural gas equivalent (mcfe) may be misleading, particularly if
used in isolation. Boe and mcfe conversion ratios have been
calculated using a conversion rate of six thousand cubic feet of
natural gas equivalent to one barrel of oil. A boe and mcfe
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.
Non-GAAP Measures
The Corporation discloses several financial and performance
measures in this press release that do not have any standardized
meaning prescribed under GAAP. These financial and performance
measures include "net capital expenditures", "adjusted funds flow",
"free cash flow", "net debt", "operating netback", "working capital
deficit" and "net debt to adjusted funds flow", which should not be
considered as alternatives to, or more meaningful than "net
income", "comprehensive income", "cash provided by operating
activities", "cash used in investing activities", or "bank
indebtedness" presented within the consolidated financial
statements as determined in accordance with GAAP. Management
believes that these measures provide an indication of the results
generated by the Corporation's principal business activities and
provide useful supplemental information for analysis of the
Corporation's operating performance and liquidity. Advantage's
method of calculating these measures may differ from other
companies, and accordingly, they may not be comparable to similar
measures used by other companies.
Net Capital Expenditures
Net capital expenditures include total capital expenditures
related to property, plant and equipment and exploration and
evaluation assets incurred during the period. Management considers
this measure reflective of actual capital activity for the period
as it excludes changes in working capital related to other periods.
A reconciliation between net capital expenditure is provided
below:
|
|
Three months
ended
September
30
|
|
Nine months
ended
September
30
|
($000)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cash used in
investing activities
|
$
|
36,940
|
$
|
11,220
|
$
|
72,843
|
$
|
121,296
|
Changes in non-cash
working capital
|
|
(5,608)
|
|
10,032
|
|
(1,867)
|
|
4,249
|
Project funding
received, net of incurred cost
|
|
20
|
|
-
|
|
20,043
|
|
-
|
Net capital
expenditures
|
$
|
31,352
|
$
|
21,252
|
$
|
91,019
|
$
|
125,545
|
Working Capital
Working capital includes cash and cash equivalents, trade and
other receivables, prepaid expenses and deposits and trade and
other accrued payables at the reporting date. Working capital
provides Management and users with a measure of the Corporation's
operating liquidity.
Net Debt
Net debt is comprised of bank indebtedness and working
capital. Net debt provides Management and users with a measure of
the Corporation's bank indebtedness and expected settlement of net
liabilities in the next year. A detailed calculation of net debt is
provided below:
($000)
|
|
|
|
|
|
September
30
2021
|
|
December
31
2020
|
Bank indebtedness
(non-current)
|
|
|
|
|
$
|
193,828
|
$
|
247,105
|
Working capital
(surplus) deficit
|
|
|
|
|
|
(25,891)
|
|
4,292
|
Net debt
|
|
|
|
|
$
|
167,937
|
$
|
251,397
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Funds Flow
The Corporation considers adjusted funds flow to be a useful
measure of Advantage's ability to generate cash from the production
of natural gas and liquids, which may be used to settle outstanding
debt and obligations, and to support future capital expenditures
plans. Changes in non-cash working capital are excluded from
adjusted funds flow as they may vary significantly between periods
and are not considered to be indicative of the Corporation's
operating performance as they are a function of the timeliness of
collecting receivables and paying payables. Expenditures on
decommissioning liabilities are excluded from the calculation as
the amount and timing of these expenditures are unrelated to
current production and are partially discretionary due to the
nature of our low liability. Adjusted funds flow has also been
presented per boe, by dividing adjusted funds flow by total
production in boe for the reporting period, and per basic share, by
dividing by the basic weighted average shares outstanding of the
Corporation.
A reconciliation between adjusted funds flow and the nearest
measure calculated in accordance with GAAP, cash provided by
operating activities, is provided below:
|
|
Three months
ended
September
30
|
|
Nine months
ended
September
30
|
($000)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cash provided by
operating activities
|
$
|
46,988
|
$
|
25,271
|
$
|
155,688
|
$
|
70,454
|
Expenditures on
decommissioning liability
|
|
438
|
|
267
|
|
780
|
|
470
|
Changes in non-cash
working capital
|
|
15,927
|
|
(1,967)
|
|
7,129
|
|
1,999
|
Adjusted funds
flow
|
$
|
63,353
|
$
|
23,571
|
$
|
163,597
|
$
|
72,923
|
Net Debt to Adjusted Funds Flow
Net debt to adjusted funds flow is a non-GAAP ratio, and is
calculated by dividing net debt by adjusted funds flow for the
previous four quarters. Net debt to adjusted funds flow is a
coverage ratio that provides Management and users the ability to
determine how long it would take the Corporation to repay its bank
debt if it devoted all its adjusted funds flow to bank debt
repayment.
Free Cash Flow
Advantage computes free cash flow as adjusted funds flow less
net capital expenditures. Advantage uses free cash flow as an
indicator of the efficiency and liquidity of Advantage's business
by measuring its cash available after net capital expenditures to
settle outstanding debt and obligations and potentially return
capital to shareholders by paying dividends or buying back common
shares.
Operating Netback
Advantage calculates operating netback on a per boe basis.
Operating netback is comprised of sales revenue, realized gains
(losses) on derivatives, net of expenses resulting from field
operations, including royalty expense, operating expense and
transportation expense. Operating netback provides Management and
users with a measure to compare the profitability of field
operations between companies, development areas and specific
wells. A detailed calculation of operating netback is
provided below:
|
Three months
ended
September
30
|
|
2021
|
2020
|
|
|
$000
|
|
per boe
|
|
$000
|
|
per boe
|
Petroleum and natural
gas sales from production
|
$
|
134,354
|
$
|
29.19
|
$
|
60,063
|
$
|
14.69
|
Realized losses on
derivatives
|
|
(23,963)
|
|
(5.21)
|
|
(4,209)
|
|
(1.03)
|
Royalty
expense
|
|
(8,059)
|
|
(1.75)
|
|
(2,566)
|
|
(0.63)
|
Operating
expense
|
|
(10,967)
|
|
(2.38)
|
|
(9,615)
|
|
(2.35)
|
Transportation
expense
|
|
(17,754)
|
|
(3.86)
|
|
(12,754)
|
|
(3.12)
|
Operating
netback
|
$
|
73,611
|
$
|
15.99
|
$
|
30,919
|
$
|
7.56
|
|
Nine months
ended
September
30
|
|
2021
|
2020
|
|
|
$000
|
|
per boe
|
|
$000
|
|
per boe
|
Petroleum and natural
gas sales from production
|
$
|
332,780
|
$
|
24.40
|
$
|
171,882
|
$
|
13.82
|
Realized losses on
derivatives
|
|
(37,490)
|
|
(2.75)
|
|
(1,691)
|
|
(0.14)
|
Royalty
expense
|
|
(18,602)
|
|
(1.36)
|
|
(7,407)
|
|
(0.60)
|
Operating
expense
|
|
(32,023)
|
|
(2.35)
|
|
(29,255)
|
|
(2.35)
|
Transportation
expense
|
|
(50,672)
|
|
(3.72)
|
|
(41,329)
|
|
(3.32)
|
Operating
netback
|
$
|
193,993
|
$
|
14.22
|
$
|
92,200
|
$
|
7.41
|
The following terms and abbreviations used in this press
release have the meanings set forth below:
bbl
|
one
barrel
|
bbls/d
|
barrels per
day
|
boe
|
barrels of oil
equivalent of natural gas, on the basis of one barrel of oil or
NGLs for six thousand cubic feet of natural gas
|
boe/d
|
barrels of oil
equivalent of natural gas per day
|
mcf
|
thousand cubic
feet
|
mcf/d
|
thousand cubic fee
per day
|
mcfe
|
thousand cubic
feet equivalent on the basis of six thousand cubic feet of natural
gas for one barrel of oil or NGLs
|
mmcf/d
|
million cubic feet
per day
|
Crude oil
and
condensate
|
Light crude oil
and medium crude oil as defined in National Instrument
51-101
|
NGLs
|
Natural Gas
Liquids as defined in National Instrument 51-101
|
Natural
gas
|
Conventional
Natural Gas as defined in National Instrument 51-101
|
SOURCE Advantage Energy Ltd.