Birchcliff Energy Ltd. (“
Birchcliff” or the
“
Corporation”) (TSX: BIR) is pleased to announce
that its board of directors has declared a quarterly cash dividend
of $0.20 per common share for the quarter ending March 31, 2023.
Birchcliff is also pleased to announce its five-year plan for 2023
to 2027 and its 2023 budget and guidance.
“Our board of directors has approved a new
five-year plan for 2023 to 2027, which is designed to generate
substantial free funds flow, deliver significant returns to
shareholders and establish a meaningful cash position, while
achieving disciplined production growth of 10% over the five-year
period(1). The five-year plan provides for potential cumulative
free funds flow(2) of approximately $2.0 billion by the end of the
five-year period, which provides us with the ability to deliver
significant shareholder returns. Our board of directors has also
approved the previously announced increase to our annual base
dividend to $0.80 per common share for 2023, which will be declared
and paid quarterly at the rate of $0.20 per common share. The
five-year plan contemplates potential significant excess free funds
flow after our targeted finding and development
(“F&D”) capital expenditures and the payment
of the base dividend, providing us with significant flexibility to
further increase shareholder returns and invest in our business,
depending on commodity prices,”(3) commented Jeff Tonken, Chief
Executive Officer of Birchcliff.
“With respect to 2023, our board of directors
has approved an F&D capital budget of $260 million to $280
million, which is expected to deliver 5% production growth over
2022(4). Based on this targeted production and current strip
prices(5), we expect to generate approximately $570 million of
adjusted funds flow(2) and $290 million to $310 million of free
funds flow in 2023 and pay dividends to our shareholders of
approximately $213 million(6), resulting in excess free funds
flow(2) of approximately $77 million to $97 million in
2023.”(7)
“We had an excellent year in 2022 which saw us
safely and successfully execute our 2022 capital program,
significantly reduce our indebtedness and redeem all of our issued
and outstanding preferred shares for approximately $88.2 million,
while returning $128.9 million to our common shareholders through
dividends and common share buybacks. We look forward to announcing
our unaudited results for the year ended December 31, 2022 on
February 15, 2023.”
______________________
(1) Based on an annual average production rate
of 82,000 boe/d in 2023, which is the mid-point of Birchcliff’s
annual average production guidance range for 2023, and an annual
average production rate of 90,000 boe/d in 2027.(2) Non-GAAP
financial measure. See “Non-GAAP and Other Financial Measures”.(3)
See “Five-Year Plan” and “Advisories – Forward-Looking Statements”
for further information regarding the Corporation’s five-year plan
and the commodity price, exchange rate and other assumptions
underlying such plan. (4) Based on an annual average production
rate of 78,000 boe/d in 2022 and 82,000 boe/d in 2023, which is the
mid-point of Birchcliff’s annual average production guidance range
for 2023.(5) See “2023 Guidance” for Birchcliff’s commodity price
assumptions for 2023.(6) Based on 266 million common shares
outstanding.(7) See “2023 F&D Capital Budget”, “2023 Guidance”
and “Advisories – Forward-Looking Statements” for further
information regarding the Corporation’s 2023 capital program and
guidance and the commodity price, exchange rate and other
assumptions underlying such guidance.
This press release contains forward-looking
statements within the meaning of applicable securities laws. For
further information regarding the forward-looking statements
contained herein, see “Advisories – Forward-Looking Statements”.
With respect to the disclosure of Birchcliff’s production contained
in this press release, see “Advisories – Production”. In addition,
this press release uses various “non-GAAP financial measures”,
“non-GAAP ratios”, “supplementary financial measures” and “capital
management measures” as such terms are defined in National
Instrument 52-112 – Non-GAAP and Other Financial Measures
Disclosure (“NI 52-112”). Non-GAAP financial
measures and non-GAAP ratios are not standardized financial
measures under GAAP and might not be comparable to similar
financial measures disclosed by other issuers where similar
terminology is used. For further information regarding the non-GAAP
and other financial measures used in this press release, see
“Non-GAAP and Other Financial Measures”.
2023 DIVIDEND INCREASE AND DECLARATION OF
Q1 2023 QUARTERLY DIVIDEND
As part of its commitment to increasing
shareholder returns, Birchcliff’s board of directors (the
“Board”) has approved the previously announced
increase to the Corporation’s annual base dividend to $0.80 per
common share for 2023. This annual base dividend will be declared
and paid quarterly at the rate of $0.20 per common share, at the
discretion of the Board.
In connection therewith, the Board has declared
a quarterly cash dividend of $0.20 per common share for the quarter
ending March 31, 2023, which represents a 10-fold increase over the
previous quarterly dividend of $0.02 per common share. The dividend
will be payable on March 31, 2023 to shareholders of record at the
close of business on March 15, 2023. The ex-dividend date is March
14, 2023. The dividend has been designated as an eligible dividend
for the purposes of the Income Tax Act (Canada).
In Q4 2022, Birchcliff paid a special dividend
of $0.20 per common share. Together with the $0.20 dividend for Q1
2023, this will be the second consecutive quarter in which
Birchcliff has paid a cash dividend of $0.20 to its
shareholders.
FIVE-YEAR PLAN
The Board has approved a new five-year plan for
2023 to 2027 (the “Five-Year Plan”), which is
designed to generate substantial free funds flow, deliver
significant returns to shareholders and establish a meaningful cash
position, while achieving disciplined production growth to fully
utilize the Corporation’s existing processing and transportation
capacity. The Five-Year Plan takes a balanced approach to
increasing returns to shareholders, while investing in the
long-term sustainability and profitability of the Corporation.
Forecast Key Metrics
The following tables set forth the forecast
production and financial metrics, commodity price assumptions and
cumulative free funds flow sensitivity for the Five-Year Plan:
Five-Year Plan – Production and
Financial Metrics(1)
|
|
2023 |
2024 |
2025 |
2026 |
2027 |
|
Annual Average Production (boe/d) |
81,000 – 83,000 |
83,000 |
87,000 |
90,000 |
90,000 |
|
|
|
|
|
|
|
|
Liquids (%) |
20% |
21% |
20% |
19% |
18% |
|
|
|
|
|
|
|
|
Number of Wells Brought on Production |
32 |
44 |
45 |
32 |
29 |
|
|
|
|
|
|
|
|
Adjusted Funds Flow (millions)(2) |
$570 |
$745 |
$735 |
$755 |
$745 |
|
|
|
|
|
|
|
|
F&D Capital Expenditures (millions) |
$260 – $280 |
$355 |
$360 |
$305 |
$285 |
|
|
|
|
|
|
|
|
Free Funds Flow (millions)(2) |
$290 – $310 |
$390 |
$375 |
$450 |
$460 |
|
|
|
|
|
|
|
|
Annual Base Dividend (millions)(3) |
$213 |
$213 |
$213 |
$213 |
$213 |
|
|
|
|
|
|
|
|
Excess Free Funds Flow (millions)(2)(3) |
$77 – $97 |
$177 |
$162 |
$237 |
$247 |
|
|
|
|
|
|
|
|
Total (Debt) Surplus at Year
End (millions)(4)(5) |
($50 – $70) |
$110 |
$260 |
$490 |
$725 |
|
|
|
|
|
|
|
|
Cumulative Free Funds
Flow (millions)(2)(5) |
$290 – $310 |
$690 |
$1,065 |
$1,515 |
$1,975 |
Average Expenses and Natural Gas Market
Exposure(1)
|
|
2023 |
2024 |
2025 |
2026 |
2027 |
|
Average Expenses($/boe) |
|
|
|
|
|
|
Royalty(6) |
4.25 – 4.45 |
5.10 |
5.05 |
4.90 |
4.80 |
|
Operating(6) |
3.45 – 3.65 |
3.50 |
3.40 |
3.30 |
3.25 |
|
Transportation and Other(7) |
5.20 – 5.40 |
5.30 |
5.05 |
4.90 |
4.70 |
|
Current Income Tax(6)(8) |
– |
2.80 |
4.00 |
3.85 |
3.75 |
|
|
|
|
|
|
|
|
Natural Gas Market Exposure(9) |
|
|
|
|
|
|
AECO Exposure as a % of Total Natural Gas Production |
17% |
28% |
32% |
63% |
67% |
|
Dawn Exposure as a % of Total Natural Gas Production |
41% |
39% |
37% |
35% |
30% |
|
NYMEX HH Exposure as a % of Total Natural Gas Production |
36% |
33% |
31% |
2% |
3% |
|
Alliance Exposure as a % of Total Natural Gas Production |
6% |
– |
– |
– |
– |
Commodity Price
Assumptions(1)
|
|
2023 |
2024 |
2025 |
2026 |
2027 |
|
Commodity Prices |
|
|
|
|
|
|
Average WTI Price (US$/bbl) |
76.00 |
80.00 |
80.00 |
80.00 |
80.00 |
|
Average WTI-MSW Differential (CDN$/bbl) |
4.75 |
5.00 |
5.00 |
5.00 |
5.00 |
|
Average AECO Price (CDN$/GJ) |
3.30 |
4.40 |
4.40 |
4.40 |
4.40 |
|
Average Dawn Price (US$/MMBtu) |
3.55 |
4.45 |
4.45 |
4.45 |
4.45 |
|
Average NYMEX HH Price (US$/MMBtu) |
3.85 |
4.60 |
4.60 |
4.60 |
4.60 |
|
Exchange Rate (CDN$ to US$1) |
1.34 |
1.34 |
1.34 |
1.34 |
1.34 |
Cumulative Free Funds Flow
Sensitivity(1)(10)
|
|
Estimated Change to 2023 to 2027 Cumulative Free Funds
Flow (millions) |
|
Change in WTI US$1.00/bbl |
$21.0 |
|
Change in NYMEX HH US$0.10/MMBtu |
$17.7 |
|
Change in Dawn US$0.10/MMBtu |
$22.0 |
|
Change in AECO CDN$0.10/GJ |
$25.8 |
|
Change in CDN/US Exchange Rate CDN$0.01 |
$25.4 |
(1) For illustrative purposes only and should
not be relied upon as indicative of future results. The internal
projections, expectations and beliefs underlying the Five-Year Plan
are subject to change in light of ongoing results and prevailing
economic and industry conditions. Birchcliff’s F&D capital
budgets for 2024 to 2027 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, production commodity
mix, number of wells, adjusted funds flow, free funds flow, excess
free funds flow, total (debt) surplus at year end, expenses and
natural gas market exposure set forth herein. For further
information regarding the risks and assumptions relating to the
Five-Year Plan, see “Advisories – Forward-Looking Statements”.(2)
Non-GAAP financial measure. See “Non-GAAP and Other Financial
Measures”. (3) Assumes that an annual base dividend of $0.80 per
common share is paid during 2023 to 2027 and that there are 266
million common shares outstanding, with no changes to the base
dividend rate and no special dividends paid. Other than the
dividend declared for the quarter ending March 31, 2023, the
declaration of dividends is subject to the approval of the Board
and is subject to change. (4) Capital management measure. See
“Non-GAAP and Other Financial Measures”. The forecast of total debt
at year end 2023 is expected to be comprised of any amounts
outstanding under the Corporation’s extendible revolving credit
facilities (the “Credit Facilities”) plus accounts
payable and accrued liabilities and less cash, accounts receivable
and prepaid expenses and deposits at the end of the year. The
forecasts of total surplus at year end 2024 to 2027 are expected to
be largely comprised of cash plus accounts receivable less accounts
payable and accrued liabilities at the end of the year.(5) The
Corporation has used the mid-point of its 2023 guidance for free
funds flow and total debt at year end in determining the cumulative
free funds flow and total debt or total surplus (as the case may
be) at year end for 2024 to 2027.(6) Supplementary financial
measure. See “Non-GAAP and Other Financial Measures”. (7) Non-GAAP
ratio. See “Non-GAAP and Other Financial Measures”.(8) The
Corporation had previously forecasted that it would be required to
pay Canadian income taxes commencing in 2023. As a result of a
lower than anticipated commodity price forecast, the Corporation
now expects that it will be required to pay Canadian income taxes
commencing in 2024. (9) Birchcliff’s natural gas market exposure
for 2023 to 2027 takes into account its physical and financial
basis swap contracts outstanding as at January 9, 2023. (10)
Illustrates the expected impact of changes in commodity prices and
the CDN/US exchange rate on the Corporation’s forecast of potential
cumulative free funds flow of approximately $2.0 billion generated
during 2023 to 2027, 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
cumulative 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.
Highlights of the Five-Year
Plan
Substantial Free Funds Flow and Capital
Discipline
-
Based on the Corporation’s forecasted adjusted funds flow, F&D
capital spending and commodity price assumptions, the Five-Year
Plan projects that substantial free funds flow will be generated in
each year of the plan, with the potential for cumulative free funds
flow of approximately $2.0 billion by the end of the five-year
period.
-
In order to enhance its ability to generate free funds flow,
Birchcliff will focus on maintaining capital discipline over the
course of the Five-Year Plan, with F&D capital expenditures
targeted to be significantly lower than the Corporation’s
forecasted adjusted funds flow each year.
Delivering Significant Shareholder
Returns and Establishing a Cash Position
-
Birchcliff’s anticipated free funds flow over the course of the
Five-Year Plan provides it with the ability to deliver significant
shareholder returns.
-
Birchcliff currently expects to use its base dividend as its
primary mechanism for delivering shareholder returns over the
course of the Five-Year Plan, which may be supplemented with
special dividends.
-
Birchcliff’s annual base dividend of $0.80 per common share in 2023
($213 million annually) represents an annual dividend yield of
approximately 9% in 2023, based on the closing price of the common
shares of $9.13 on January 17, 2023.
-
The potential significant excess free funds flow after the
Corporation’s targeted F&D capital expenditures and the payment
of the base dividend on the common shares provides the Corporation
with significant flexibility, allowing it to focus on ways to
further increase shareholder returns and enhance long-term
shareholder value. Birchcliff will continue to strategically
evaluate the potential uses for its excess free funds flow, which
may include special dividends, increases to the base dividend,
building cash on the balance sheet and/or further investment in its
business, taking into account the business environment, commodity
prices and the amount of excess free funds flow available.
-
Although the Five-Year Plan contemplates an annual base dividend of
$0.80 per common share, it also illustrates that the Corporation
has the potential capacity to increase the base dividend, subject
to strong commodity prices and the discretion of the Board.
-
In addition, Birchcliff currently expects to use a portion of its
excess free funds flow to establish a meaningful cash position,
subject to strong commodity prices. This will help to protect the
Corporation’s base dividend and capital programs in the event of a
downturn in commodity prices and/or economic conditions and provide
the Corporation with optionality to pursue various opportunities to
enhance long-term shareholder value.
-
Depending on commodity prices, the Corporation will consider
further investment in its business and accelerating the production
growth contemplated in the Five-Year Plan, as well as strategic
acquisitions and other opportunities that would enhance long-term
shareholder value.
-
Birchcliff currently anticipates that it will continue to
repurchase its common shares to help offset the dilution resulting
from the exercise of stock options and will continue to evaluate
opportunistic share buybacks.
Disciplined Production Growth Utilizing
Existing Available Processing and Transportation
Capacity
-
The Five-Year Plan is focused on organically growing the
Corporation’s production utilizing its existing available
processing and transportation capacity. The Corporation is
targeting production growth of 10% from 2023 to 2027, with a
targeted annual average production rate of approximately 90,000
boe/d in 2027, subject to commodity prices.
-
The Five-Year Plan contemplates that Birchcliff will fill its
existing available processing capacity at its 100% owned and
operated natural gas processing plant in Pouce Coupe (the
“Pouce Coupe Gas Plant”) and utilize all of its
available processing capacity at AltaGas’ deep-cut sour gas
processing facility in Gordondale (the “AltaGas
Facility”) by the end of 2025. The Five-Year Plan
forecasts that a total of 182 wells will be brought on production
over the course of the five-year period. Birchcliff expects that
its rate of drilling will increase in 2024 and 2025 in order to
bring on production the wells necessary to fill the existing
processing capacity.
-
Fully utilizing the available processing capacity of the
Corporation’s existing infrastructure is expected to drive down its
per unit operating and other cash costs as production steadily
increases, which should result in increased netbacks. In addition,
increasing the Corporation’s production to fully utilize its
existing available processing and transportation capacity will
further drive its ability to generate free funds flow.
Extensive Drilling
Inventory
-
Birchcliff’s extensive inventory of low-risk, potential future
horizontal drilling locations supports its targeted production
growth to 90,000 boe/d during the Five-Year Plan and beyond,
without the need to rely on acquisitions of assets or Crown land.
All of the Corporation’s lands are located within the Province of
Alberta.
-
As at December 31, 2021, Birchcliff had 730.7 potential net future
horizontal drilling locations(8) in its core areas of Pouce Coupe
and Gordondale to which proved plus probable reserves have been
attributed by the Corporation’s independent qualified reserves
evaluator. Assuming an average of 30 net wells required per year,
these booked potential locations provide the Corporation with
approximately 23 years of drilling inventory(9).
-
In addition, Birchcliff has identified in Pouce Coupe and
Gordondale approximately 3,084 unbooked potential net future
horizontal drilling locations(8) as at December 31, 2021, which
provide the Corporation with further optionality for future
growth.
______________________
(8) See “Advisories – Drilling Locations”. (9)
Takes into account the wells drilled by the Corporation during
2022, as well as the 182 wells that are forecast to be brought on
production over the course of the Five-Year Plan as set forth in
further detail in the table above under the heading “Five-Year Plan
– Forecast Key Metrics”.
Optionality for Further Growth at Pouce
Coupe and Gordondale
-
Birchcliff’s drilling inventory provides it with optionality to
consider additional growth beyond its targeted production rate of
90,000 boe/d, to approximately 105,000 boe/d, subject to strong
commodity prices.
-
Birchcliff has agreed to acquire an additional 80 MMcf/d of firm
receipt service on the NGTL system with an estimated in-service
date in Q4 2026. This additional service, together with
Birchcliff’s existing firm receipt service, gives it the ability to
grow its production as outlined above, should commodity prices and
market conditions meet Birchcliff’s expectations for growth. In the
event market conditions are not favourable for further growth,
Birchcliff can, with one year’s notice, reduce its existing firm
receipt service to keep its production flat at approximately 90,000
boe/d.
-
This optionality for further growth in 2026 roughly coincides with
the anticipated timing for the commencement of Phase 1 of LNG
Canada’s LNG export facility(10), which Birchcliff believes will
have a long-term positive impact on natural gas prices in Western
Canada.
The Five-Year Plan set forth herein does not
reflect any potential special dividends, increases to the
Corporation’s base dividend, common share buybacks or further
investment in its business, all of which may receive consideration,
and could have an impact on the Corporation’s forecast metrics.
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, see “Advisories –
Forward-Looking Statements”.
2023 F&D CAPITAL BUDGET
The Board has approved a disciplined F&D
capital budget of $260 million to $280 million for 2023, which is
designed to deliver 5% production growth over 2022 and generate
free funds flow of $290 million to $310 million.
The budget is fully funded, with the
Corporation’s F&D capital expenditures representing
approximately 47% of Birchcliff’s anticipated 2023 adjusted funds
flow(11). Birchcliff’s F&D capital budget and base dividend of
$0.80 per common share for 2023 would remain fully funded at an
average WTI price of US$70.00/bbl, an average AECO price of
CDN$3.00/GJ, an average Dawn price of US$3.25/MMBtu and an average
NYMEX HH price of US$3.35/MMBtu(11)(12).
The following table sets forth details regarding
Birchcliff’s expected capital spending allocation in 2023:
|
Classification |
Capital (millions) |
|
DCCET(1)(2) |
$191 – $206 |
|
Facilities and Infrastructure(3) |
$26 – $28 |
|
Maintenance and Optimization(4) |
$19 – $20 |
|
Land and Seismic(5) |
|
$6 |
|
Other(6) |
$18 – $20 |
|
Total F&D Capital Expenditures(7) |
$260 – $280 |
(1) On a DCCET basis, the average well cost in
2023 is estimated to be approximately $7 million for each of Pouce
Coupe and Gordondale. 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) Includes the completion,
equipping and tie-in costs of approximately $37.8 million
associated with 9 wells that were drilled and rig released in Q4
2022.(3) Facilities and infrastructure includes capital for a
variety of projects, including gas gathering and plant emissions
reduction initiatives that will provide long-term economic and
environmental benefits. (4) Maintenance and optimization includes
capital to enhance production, reduce operating expense and
maximize netbacks.(5) Land and seismic includes capital for crown
sales and rental payments but does not include other property
acquisitions and dispositions.(6) Other primarily includes
capitalized G&A. (7) 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”.
Birchcliff’s F&D capital budget for 2023 has
taken into account expected inflationary increases in materials,
labour and services costs as compared to 2022.
______________________
(10) Source: LNG Canada Project Mid-Year Update,
Summer 2022 (July 28, 2022).(11) Based on F&D capital
expenditures of approximately $270 million in 2023, which is the
mid-point of the Corporation’s F&D capital expenditures
guidance range for 2023.(12) Holding all other variables
constant.
Highlights of the 2023 F&D Capital
Budget and Guidance
Disciplined Production
Growth
-
Based on its targeted F&D capital expenditures, Birchcliff
expects to deliver annual average production of 81,000 to 83,000
boe/d in 2023, which represents a 5% increase over Birchcliff’s
anticipated 2022 annual average production.
Efficient Two-Drilling Rig
Program
-
The 2023 capital program contemplates that Birchcliff will drill 23
wells and bring 32 wells on production in 2023, all of which will
be 100% working interest.
-
Similar to 2022, the 2023 capital program has been designed to
utilize multi-well pads and two drilling rigs, which is more
operationally efficient for the Corporation. Birchcliff has secured
multi-year contracts with its key service providers and ordered
various long-lead items, which will help to ensure the efficient
execution of the Corporation’s 2023 capital program, as well as
help Birchcliff mitigate inflationary pressures and manage supply
chain constraints by ensuring security of equipment and
services.
Significant Adjusted Funds Flow and Free
Funds Flow
-
Birchcliff expects to generate adjusted funds flow of approximately
$570 million in 2023(13) and free funds flow of approximately $290
million to $310 million in 2023, based on current strip
prices.
-
Birchcliff does not have any fixed price commodity hedges in place
and does not currently intend to enter into any, which gives it the
ability to fully participate in any strengthening of commodity
prices in 2023 above current strip prices.
Delivering Shareholder
Returns
-
Birchcliff plans to pay an annual base dividend of $0.80 per common
share in 2023 ($213 million annually). This annual base dividend
will be declared and paid quarterly at the rate of $0.20 per common
share, at the discretion of the Board.
Excess Free Funds Flow
-
After the payment of its targeted base dividend of $213 million in
2023, Birchcliff is forecasting that it will have approximately $77
million to $97 million of excess free funds flow in the year, which
is expected to be primarily allocated towards debt reduction.
See “2023 Guidance” and “Advisories –
Forward-Looking Statements” for additional information regarding
Birchcliff’s 2023 guidance.
______________________
(13) Based on an annual average production rate
of 82,000 boe/d, which is the mid-point of the Corporation’s annual
production guidance range for 2023.
Capital Activities
Birchcliff’s 2023 drilling program is focused on
high rate-of-return targets and developing its low-cost natural gas
and liquids production in Pouce Coupe and Gordondale. Wells will be
brought on production from multi-well pads, which allows Birchcliff
to reduce its environmental footprint and keep its per well costs
low. The program builds off the technical and operational knowledge
Birchcliff gained from its previous capital programs. As previously
announced on October 13, 2022, Birchcliff accelerated the execution
of its 2023 capital program into Q4 2022, drilling 9 wells that
will be brought on production in 2023.
The following table sets forth the number and
types of wells Birchcliff expects to drill and bring on production
in 2023:
|
Area |
Total Wells to be Drilled in 2023 |
Total Wells to be Brought onProduction in
2023(1) |
|
Pouce Coupe |
|
|
|
|
Basal Doig/Upper Montney Horizontal Natural Gas Wells |
4 |
4 |
|
|
Montney D2 Horizontal Natural Gas Wells |
6 |
8 |
|
|
Montney D1 Horizontal Natural Gas Wells |
9 |
15 |
|
|
Montney C Horizontal Natural Gas Wells |
2 |
3 |
|
|
Total – Pouce Coupe |
21 |
30 |
|
Gordondale |
|
|
|
|
Montney D2 Horizontal Oil Wells |
1 |
1 |
|
|
Montney D1 Horizontal Oil Wells |
1 |
1 |
|
|
Total – Gordondale |
2 |
2 |
|
TOTAL – COMBINED |
23 |
32 |
(1) Includes 9 wells that were drilled and rig
released in Q4 2022 in Pouce Coupe.
In Pouce Coupe, Birchcliff plans to drill 21
wells and bring 30 wells on production in 2023 from 5 pads
targeting a mix of liquids-rich and high-rate natural gas wells
placed in the lower Montney and upper Montney/Doig intervals. The
program is designed to deliver profitable production growth with
robust returns that will be further enhanced as Birchcliff
progressively fills the processing capacity of its existing
available infrastructure. As part of the 2023 program for Pouce
Coupe, Birchcliff will continue to make significant investments in
gas gathering pipelines to support future field development. In
addition, the Corporation plans to install approximately 20 km of
fuel gas lines that will provide long-term economic and
environmental benefits. By delivering natural gas to existing and
future sites, Birchcliff’s adoption of bi-fuel technology will
reduce emissions and costs. In addition, the fuel gas will be used
to enhance production and reduce future well downtime by installing
gas lift systems where appropriate.
In Gordondale, Birchcliff plans to drill and
bring 2 wells on production in 2023, which are expected to keep the
AltaGas Facility full during the year. The pad is strategically
placed to target high-rate, liquids-rich wells in the Montney D1
and D2 intervals.
Environmental Stewardship
Birchcliff anticipates spending approximately
$3.5 million in 2023 on its abandonment and reclamation activities.
Birchcliff is in an enviable position as it has a focused asset
base with minimal abandonment and reclamation obligations compared
to the industry average.
2023 GUIDANCE
The following tables set forth Birchcliff’s
guidance, commodity price assumptions and free funds flow
sensitivity for 2023:
|
|
2023 Guidance and Assumptions(1) |
|
Production |
|
|
Annual Average Production (boe/d) |
81,000 – 83,000 |
|
% Light Oil |
3% |
|
% Condensate |
7% |
|
% NGLs |
10% |
|
% Natural Gas |
80% |
|
|
|
|
Average Expenses ($/boe) |
|
|
Royalty(2) |
4.25 – 4.45 |
|
Operating(2) |
3.45 – 3.65 |
|
Transportation and Other(3) |
5.20 – 5.40 |
|
|
|
|
Adjusted Funds Flow (millions)(4) |
$570 |
|
|
|
|
F&D Capital Expenditures (millions) |
$260 – $280 |
|
|
|
|
Free Funds Flow (millions)(4) |
$290 – $310 |
|
|
|
|
Annual Base Dividend (millions)(5) |
$213 |
|
|
|
|
Excess Free Funds Flow (millions)(4)(5) |
$77 – $97 |
|
|
|
|
Total (Debt) at Year End (millions)(6) |
($50 – $70) |
|
|
|
|
Natural Gas Market Exposure(7) |
|
|
AECO Exposure as a % of Total Natural Gas Production |
17% |
|
Dawn Exposure as a % of Total Natural Gas Production |
41% |
|
NYMEX HH Exposure as a % of Total Natural Gas Production |
36% |
|
Alliance Exposure as a % of Total Natural Gas Production |
6% |
|
|
|
|
Commodity Prices(8) |
|
|
Average WTI Price (US$/bbl) |
76.00 |
|
Average WTI-MSW Differential (CDN$/bbl) |
4.75 |
|
Average AECO Price (CDN$/GJ) |
3.30 |
|
Average Dawn Price (US$/MMBtu) |
3.55 |
|
Average NYMEX HH Price (US$/MMBtu) |
3.85 |
|
Exchange Rate (CDN$ to US$1) |
1.34 |
|
Forward Twelve Months’ Free Funds Flow
Sensitivity(9) |
Estimated Change to 2023 Free Funds Flow
(millions) |
|
Change in WTI US$1.00/bbl |
$5.7 |
|
Change in NYMEX HH US$0.10/MMBtu |
$7.0 |
|
Change in Dawn US$0.10/MMBtu |
$8.3 |
|
Change in AECO CDN$0.10/GJ |
$4.3 |
|
Change in CDN/US exchange rate CDN$0.01 |
$6.4 |
(1) Birchcliff’s guidance for its production
commodity mix, adjusted funds flow, free funds flow, excess free
funds flow, total debt and natural gas market exposure in 2023 is
based on an annual average production rate of 82,000 boe/d in 2023,
which is the mid-point of Birchcliff’s annual average production
guidance range for 2023. Birchcliff’s guidance for its free funds
flow, excess free funds flow and total debt in 2023 is based on
F&D capital expenditures of approximately $270 million in 2023,
which is the mid-point of the Corporation’s F&D capital
expenditures guidance range for 2023. For further information
regarding the risks and assumptions relating to the Corporation’s
guidance, see “Advisories – Forward-Looking Statements”.(2)
Supplementary financial measure. See “Non-GAAP and Other Financial
Measures”. (3) Non-GAAP ratio. See “Non-GAAP and Other Financial
Measures”. (4) Non-GAAP financial measure. See “Non-GAAP and Other
Financial Measures”. (5) Assumes that an annual base dividend of
$0.80 per common share is paid and that there are 266 million
common shares outstanding, with no changes to the base dividend
rate and no special dividends paid. Other than the
dividend declared for the quarter ending March 31, 2023,
the declaration of dividends is subject to the approval of the
Board and is subject to change. (6) Capital management measure. See
“Non-GAAP and Other Financial Measures”. The forecast of total debt
at December 31, 2023 is expected to be comprised of any amounts
outstanding under the Credit Facilities plus accounts payable and
accrued liabilities and less cash, accounts receivable and prepaid
expenses and deposits at the end of the year.(7) Birchcliff’s
natural gas market exposure for 2023 takes into account its
physical and financial basis swap contracts outstanding as at
January 9, 2023. Birchcliff’s preliminary 2023 guidance (disclosed
on October 13, 2022 and reiterated on November 9, 2022) for its
ACEO, Dawn and NYMEX HH natural gas market exposure was 23%, 41%
and 36%, respectively. As a result of entering into contracts for
transportation service on the Alliance pipeline system,
Birchcliff’s AECO natural gas market exposure for 2023 has been
revised from 23% to 17%, with a corresponding increase to its
forecast Alliance natural gas market exposure.(8) Birchcliff’s
commodity price and exchange rate assumptions for 2023 are based on
anticipated full-year averages using the forward strip benchmark
commodity prices and CDN/US exchange rate as of January 9, 2023.(9)
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 2023, 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.
Birchcliff’s 2023 guidance for its production is
unchanged from its preliminary guidance. Birchcliff’s 2023 guidance
for F&D capital expenditures of $260 million to $280 million is
slightly higher than its preliminary guidance of $240 million to
$270 million as a result of higher inflation and the inclusion of
some minor additional capital projects. Primarily as a result of a
lower than anticipated commodity price forecast for 2023,
Birchcliff’s 2023 guidance for its adjusted funds flow, free funds
flow and excess free funds flow is lower than its preliminary
guidance of $855 million, $585 million to $615 million and $370
million to $400 million, respectively. Birchcliff’s 2023 guidance
for its royalty expense is lower than its preliminary guidance of
$4.95 to $5.15 per boe as a result of a lower than anticipated
commodity price forecast for 2023.
In addition, the Corporation had previously
forecasted that it would have a total surplus of $295 million to
$325 million at December 31, 2023 and have a total surplus at the
end of the Q1 2023. Primarily as a result of a lower than
anticipated commodity price forecast for 2023, the Corporation is
now forecasting that it will have total debt of $50 million to $70
million at December 31, 2023. Birchcliff continues to believe that
operating with little to no debt is in the best interests of the
Corporation over the long-term, as it increases the resiliency and
sustainability of the Corporation. Accordingly, Birchcliff will
continue to progress towards its goal of reaching zero total debt
over the course of 2023.
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 2023 could have an impact on Birchcliff’s 2023
guidance and assumptions set forth herein, which impact could be
material. For further information, see “Advisories –
Forward-Looking Statements”.
ABBREVIATIONS
|
AECO |
benchmark price for natural gas determined at the AECO ‘C’ hub in
southeast Alberta |
|
bbl |
barrel |
|
boe |
barrel of oil equivalent |
|
boe/d |
barrel of oil equivalent per day |
|
condensate |
pentanes plus (C5+) |
|
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 |
|
km |
kilometre |
|
LNG |
liquefied natural gas |
|
Mcf |
thousand cubic feet |
|
MMBtu |
million British thermal units |
|
MMBtu/d |
million British thermal units per day |
|
MMcf/d |
million cubic feet 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 |
|
NGTL |
NOVA Gas Transmission Ltd. |
|
NYMEX |
New York Mercantile Exchange |
|
OPEC |
Organization of the Petroleum Exporting Countries |
|
WTI |
West Texas Intermediate, the reference price paid in U.S. dollars
at Cushing, Oklahoma, for crude oil of standard grade |
|
$000s |
thousands of dollars |
NON-GAAP AND OTHER FINANCIAL
MEASURES
This press release uses various “non-GAAP
financial measures”, “non-GAAP ratios”, “supplementary financial
measures” and “capital management measures” (as such terms are
defined in NI 52-112), which are described in further detail below.
These measures facilitate management’s comparisons to the
Corporation’s historical operating results in assessing its results
and strategic and operational decision-making and may be used by
financial analysts and others in the oil and natural gas industry
to evaluate the Corporation’s performance.
Non-GAAP Financial Measures
NI 52-112 defines a non-GAAP financial measure
as a financial measure that: (i) depicts the historical or expected
future financial performance, financial position or cash flow of an
entity; (ii) with respect to its composition, excludes an amount
that is included in, or includes an amount that is excluded from,
the composition of the most directly comparable financial measure
disclosed in the primary financial statements of the entity; (iii)
is not disclosed in the financial statements of the entity; and
(iv) is not a ratio, fraction, percentage or similar
representation. The non-GAAP financial measures used in this press
release are not standardized financial measures under GAAP and
might not be comparable to similar measures presented by other
companies where similar terminology is used. Investors are
cautioned that non-GAAP financial measures should not be construed
as alternatives to or more meaningful than the most directly
comparable GAAP measures as indicators of Birchcliff’s performance.
Set forth below is a description of the non-GAAP financial measures
used in this press release.
Adjusted Funds Flow, Free Funds Flow and
Excess Free Funds Flow
Birchcliff defines “adjusted funds flow” as cash
flow from operating activities before the effects of
decommissioning expenditures and changes in non-cash operating
working capital. Birchcliff eliminates settlements of
decommissioning expenditures from cash flow from operating
activities as the amounts can be discretionary and may vary from
period to period depending on its capital programs and the maturity
of its operating areas. The settlement of decommissioning
expenditures is managed with Birchcliff’s capital budgeting process
which considers available adjusted funds flow. Changes in non-cash
operating working capital are eliminated in the determination of
adjusted funds flow as the timing of collection and payment are
variable and by excluding them from the calculation, the
Corporation believes that it is able to provide a more meaningful
measure of its operations and ability to generate cash on a
continuing basis. Adjusted funds flow can also be derived from
petroleum and natural gas revenue less royalty expense, operating
expense, transportation and other expense, net G&A expense,
interest expense and any realized losses (plus realized gains) on
financial instruments and plus any other cash income and expense
sources. Management believes that adjusted funds flow assists
management and investors in assessing Birchcliff’s financial
performance after deducting all operating and corporate cash costs,
as well as its ability to generate the cash necessary to fund
sustaining and/or growth capital expenditures, repay debt, settle
decommissioning obligations, buy back common shares and pay
dividends.
Birchcliff defines “free funds flow” as adjusted
funds flow less F&D capital expenditures. Management believes
that free funds flow assists management and investors in assessing
Birchcliff’s ability to generate shareholder returns through a
number of initiatives, including but not limited to, debt
repayment, common share buybacks, the payment of dividends and
acquisitions.
Birchcliff defines “excess free funds flow” as
free funds flow less common share dividends paid. Management
believes that excess free funds flow assists management and
investors in assessing Birchcliff’s ability to further enhance
shareholder returns after the payment of common share dividends,
which may include debt repayment, special dividends, increases to
the Corporation’s base dividend, common share buybacks,
acquisitions and other opportunities that would complement or
otherwise improve the Corporation’s business and enhance long-term
shareholder value.
Birchcliff has disclosed in this press release
forecasts of adjusted funds flow, free funds flow and excess free
funds flow for 2023 to 2027, which are forward-looking non-GAAP
financial measures. The equivalent historical non-GAAP measures are
adjusted funds flow, free funds flow and excess free funds flow for
the twelve months ended December 31, 2021. The most directly
comparable GAAP measure for 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,
2021:
|
|
Twelve months endedDecember
31, |
|
($000s) |
2021 |
|
Cash flow from operating activities |
515,369 |
|
Change in non-cash operating working capital |
21,161 |
|
Decommissioning expenditures |
3,203 |
|
Adjusted funds flow |
539,733 |
|
F&D capital expenditures |
(230,479) |
|
Free funds flow |
309,254 |
|
Dividends on common shares |
(6,639) |
|
Excess free funds flow |
302,615 |
Birchcliff anticipates the forward-looking
non-GAAP financial measures for adjusted funds flow and free funds
flow disclosed herein to generally exceed their respective
historical amounts for the twelve months ended December 31, 2021,
primarily due to higher anticipated benchmark oil and natural gas
prices which are expected to increase the average realized sales
prices the Corporation receives for its production. Birchcliff
anticipates the forward-looking non-GAAP financial measure for
excess free funds flow disclosed herein to be lower than its
respective historical amount for the twelve months ended December
31, 2021, primarily due to a higher targeted annual common share
dividend payment forecasted during 2023 to 2027. The commodity
price assumptions on which the Corporation’s guidance is based are
set forth in the tables under the headings “Five-Year Plan” and
“2023 Guidance”.
Transportation and Other
Expense
Birchcliff defines “transportation and other
expense” as transportation expense plus marketing purchases less
marketing revenue. Birchcliff may enter into certain marketing
purchase and sales arrangements with the objective of reducing any
available transportation and/or fractionation fees associated with
its take-or-pay commitments. Management believes that
transportation and other expense assists management and investors
in assessing Birchcliff’s total cost structure related to
transportation activities. The most directly comparable GAAP
measure for 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, 2021:
|
|
Twelve months endedDecember
31, |
|
($000s) |
2021 |
|
Transportation expense |
151,263 |
|
Marketing purchases |
18,034 |
|
Marketing revenue |
(20,722) |
|
Transportation and other expense |
148,575 |
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
ratio used in this press release is not a standardized financial
measure under GAAP and might not be comparable to similar measures
presented by other companies where similar terminology is used. Set
forth below is a description of the non-GAAP ratio used in this
press release.
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.
Supplementary Financial
Measures
NI 52-112 defines a supplementary financial
measure as a financial measure that: (i) is, or is intended to be,
disclosed on a periodic basis to depict the historical or expected
future financial performance, financial position or cash flow of an
entity; (ii) is not disclosed in the financial statements of the
entity; (iii) is not a non-GAAP financial measure; and (iv) is not
a non-GAAP ratio. The supplementary financial measures used in this
press release are per unit disclosures of corresponding GAAP
measures presented in the financial statements, which are
calculated by dividing the aggregate GAAP measure by the applicable
unit for the period. The supplementary financial measures used in
this press release are operating expense per boe, royalty expense
per boe and current income tax expense per boe.
Capital Management Measures
NI 52-112 defines a capital management measure
as a financial measure that: (i) is intended to enable an
individual to evaluate an entity’s objectives, policies and
processes for managing the entity’s capital; (ii) is not a
component of a line item disclosed in the primary financial
statements of the entity; (iii) is disclosed in the notes to the
financial statements of the entity; and (iv) is not disclosed in
the primary financial statements of the entity. Set forth below is
a description of the capital management measures used in this press
release.
Total Debt and Total
Surplus
Birchcliff calculates “total debt” and “total
surplus” as the amount outstanding under the Corporation’s Credit
Facilities (if any) plus working capital deficit (less working
capital surplus) plus the fair value of the current asset portion
of financial instruments less the fair value of the current
liability portion of financial instruments and less capital
securities (if any) at the end of the period. Management believes
that total debt and total surplus assist management and investors
in assessing Birchcliff’s overall liquidity and financial position
at the end of the period. The following table provides a
reconciliation of the amount outstanding under the Credit
Facilities, as determined in accordance with GAAP, to total debt as
at December 31, 2021:
|
As at, ($000s) |
December 31, 2021 |
|
Revolving term credit facilities |
500,870 |
|
Working capital deficit(1) |
53,312 |
|
Fair value of financial instruments – asset(2) |
69 |
|
Fair value of financial instruments – liability(2) |
(16,586) |
|
Capital securities |
(38,268) |
|
Total debt(3) |
499,397 |
(1) Current liabilities less current assets.(2)
Reflects the current portion only.(3) Total debt can also be
derived from the amounts outstanding under the Corporation’s Credit
Facilities plus accounts payable and accrued liabilities and less
cash, accounts receivable and prepaid expenses and deposits at the
end of the year.
ADVISORIES
Currency
Unless otherwise indicated, all dollar amounts
are expressed in Canadian dollars and all references to “$” and
“CDN$” are to Canadian dollars and all references to “US$” are to
United States dollars.
Boe Conversions
Boe amounts have been calculated by using the
conversion ratio of 6 Mcf of natural gas to 1 bbl of oil. Boe
amounts may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Given that the
value ratio based on the current price of crude oil as compared to
natural gas is significantly different from the energy equivalency
of 6:1, utilizing a conversion on a 6:1 basis may be misleading as
an indication of value.
MMBtu Pricing Conversions
$1.00 per MMBtu equals $1.00 per Mcf based on a
standard heat value Mcf.
Production
With respect to the disclosure of Birchcliff’s
production contained in this press release: (i) references to
“light oil” mean “light crude oil and medium crude oil” as such
term is defined in National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities (“NI
51-101”); (ii) references to “liquids” mean “light crude
oil and medium crude oil” and “natural gas liquids” (including
condensate) as such terms are defined in NI 51-101; and (iii)
references to “natural gas” mean “shale gas”, which also includes
an immaterial amount of “conventional natural gas”, as such terms
are defined in NI 51-101. In addition, NI 51-101 includes
condensate within the product type of natural gas liquids.
Birchcliff has disclosed condensate separately from other natural
gas liquids as the price of condensate as compared to other natural
gas liquids is currently significantly higher and Birchcliff
believes presenting the two commodities separately provides a more
accurate description of its operations and results therefrom.
F&D Capital
Expenditures
Unless otherwise stated, references in this
press release to “F&D capital expenditures” denotes exploration
and development expenditures determined in accordance with GAAP.
Management believes that F&D capital expenditures assists
management and investors in assessing Birchcliff capital cost
outlay associated with its exploration and development activities
for the purposes of finding and developing its reserves.
Potential Future Drilling
Locations
This press release discloses potential net
future horizontal drilling locations, specifically: (i) 730.7
potential net future horizontal drilling locations to which proved
plus probable reserves have been attributed by the Corporation’s
independent qualified reserves evaluator, Deloitte LLP
(“Deloitte”); and (ii) approximately 3,084
unbooked potential net future horizontal drilling locations.
Proved plus probable locations consist of
proposed drilling locations identified in the reserves report of
Deloitte dated February 9, 2022 with an effective date of December
31, 2021 (the “Deloitte Report”) that have proved
and/or probable reserves, as applicable, attributed to them.
Unbooked locations are internal estimates based on Birchcliff’s
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 management as an estimate of Birchcliff’s multi-year
drilling activities 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 Deloitte Report.
Birchcliff’s ability to drill and develop these
locations and the drilling locations on which Birchcliff actually
drills wells depends on a number of uncertainties and factors,
including, but not limited to, the availability of capital,
equipment and personnel, oil and natural gas prices, costs,
inclement weather, seasonal restrictions, drilling results,
additional geological, geophysical and reservoir information that
is obtained, production rate recovery, gathering system and
transportation constraints, the net price received for commodities
produced, regulatory approvals and regulatory changes. As a result
of these uncertainties, there can be no assurance that the
potential future drilling locations that Birchcliff has identified
will ever be drilled and, if drilled, that such locations will
result in additional oil, condensate, NGLs or natural gas
production and, in the case of unbooked locations, additional
reserves. As such, Birchcliff’s actual drilling activities may
differ materially from those presently identified, which could
adversely affect Birchcliff’s business. While certain of the
unbooked drilling locations have been de-risked by drilling
existing wells in relatively close proximity to such unbooked
drilling locations, some of the other unbooked drilling locations
are farther away from existing wells, where management has less
information about the characteristics of the reservoir and there is
therefore more uncertainty whether wells will be drilled in such
locations and, if drilled, there is more uncertainty that such
wells will result in additional proved or probable reserves,
resources or production.
Additional information regarding the
Corporation’s oil and gas activities and its reserves is contained
in its Annual Information Form for the year ended December 31,
2021, which is available on SEDAR at www.sedar.com.
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:
Birchcliff’s commitment to increasing shareholder returns;
Birchcliff’s belief that operating with little to no debt is in the
best interests of the Corporation over the long-term, as it
increases the resiliency and sustainability of the Corporation; and
that Birchcliff will continue to progress towards its goal of
reaching zero total debt over the course of 2023;
-
statements with respect to dividends, including: that the annual
base dividend of $0.80 per common share for 2023 will be declared
and paid quarterly at the rate of $0.20 per common share; and that
Birchcliff’s annual base dividend of $0.80 per common share in 2023
($213 million annually) represents an annual dividend yield of
approximately 9% in 2023, based on the closing price of the common
shares of $9.13 on January 17, 2023;
-
the information set forth under the heading “Five-Year Plan” and
elsewhere in this press release as it relates to Birchcliff’s
Five-Year Plan, including: forecasts of annual average production,
production commodity mix, the number of wells to be brought on
production, adjusted funds flow, F&D capital expenditures, free
funds flow, annual base dividend, excess free funds flow, total
debt or total surplus (as the case may be) at year end, average
expenses and natural gas market exposure; that the Five-Year Plan
is designed to generate substantial free funds flow, deliver
significant returns to shareholders and establish a meaningful cash
position, while achieving disciplined production growth of 10% over
the five-year period to fully utilize the Corporation’s existing
processing and transportation capacity; that the Five-Year Plan
provides for potential cumulative free funds flow of approximately
$2.0 billion by the end of the five-year period, which provides the
Corporation with the ability to deliver significant shareholder
returns; that the Five-Year Plan contemplates potential significant
excess free funds flow after the Corporation’s targeted F&D
capital expenditures and the payment of the base dividend,
providing it with significant flexibility to further increase
shareholder returns and invest in its business, depending on
commodity prices; that the Five-Year Plan takes a balanced approach
to increasing returns to shareholders, while investing in the
long-term sustainability and profitability of the Corporation; that
the forecasts of total surplus at year end 2024 to 2027 are
expected to be largely comprised of cash plus accounts receivable
less accounts payable and accrued liabilities at the end of the
year; the expected impact of changes in commodity prices and the
CDN/US exchange rate on Birchcliff’s forecast of potential
cumulative free funds flow; that the Corporation anticipates that
it will be required to pay Canadian income taxes commencing in
2024; that based on the Corporation’s forecasted adjusted funds
flow, F&D capital spending and commodity price assumptions, the
Five-Year Plan projects that substantial free funds flow will be
generated in each year of the plan; that in order to enhance its
ability to generate free funds flow, Birchcliff will focus on
maintaining capital discipline over the course of the Five-Year
Plan, with F&D capital expenditures targeted to be
significantly lower than the Corporation’s forecasted adjusted
funds flow each year; that Birchcliff currently expects to use its
base dividend as its primary mechanism for delivering shareholder
returns over the course of the Five-Year Plan, which may be
supplemented with special dividends; that the potential significant
excess free funds flow after the Corporation’s targeted F&D
capital expenditures and the payment of the base dividend on the
common shares provides the Corporation with significant
flexibility, allowing it to focus on ways to further increase
shareholder returns and enhance long-term shareholder value; that
Birchcliff will continue to strategically evaluate the potential
uses for its excess free funds flow, which may include special
dividends, increases to the base dividend, building cash on the
balance sheet and/or further investment in its business, taking
into account the business environment, commodity prices and the
amount of excess free funds flow available; that although the
Five-Year Plan contemplates an annual base dividend of $0.80 per
common share, it also illustrates that the Corporation has the
potential capacity to increase the base dividend, subject to strong
commodity prices and the discretion of the Board; that Birchcliff
currently expects to use a portion of its excess free funds flow to
establish a meaningful cash position, subject to strong commodity
prices, which will help to protect the Corporation’s base dividend
and capital programs in the event of a downturn in commodity prices
and/or economic conditions and provide the Corporation with
optionality to pursue various opportunities to enhance long-term
shareholder value; that depending on commodity prices, the
Corporation will consider further investment in its business and
accelerating the production growth contemplated in the Five-Year
Plan, as well as strategic acquisitions and other opportunities
that would enhance long-term shareholder value; that Birchcliff
currently anticipates that it will continue to repurchase its
common shares to help offset the dilution resulting from the
exercise of stock options and will continue to evaluate
opportunistic share buybacks; that the Five-Year Plan is focused on
organically growing the Corporation’s production utilizing its
existing available processing and transportation capacity; that the
Corporation is targeting production growth of 10% from 2023 to
2027, with a targeted annual average production rate of
approximately 90,000 boe/d in 2027, subject to commodity prices;
that the Five-Year Plan contemplates that Birchcliff will fill its
existing available processing capacity at the Pouce Coupe Gas Plant
and utilize all of its available processing capacity at the AltaGas
Facility by the end of 2025; that Birchcliff expects that its rate
of drilling will increase in 2024 and 2025 in order to bring on
production the wells necessary to fill the existing processing
capacity; that fully utilizing the available processing capacity of
the Corporation’s existing infrastructure is expected to drive down
its per unit operating and other cash costs as production steadily
increases, which should result in increased netbacks; that
increasing the Corporation’s production to fully utilize its
existing available processing and transportation capacity will
further drive its ability to generate free funds flow; that
Birchcliff’s extensive inventory of low-risk, potential future
horizontal drilling locations supports its targeted production
growth to 90,000 boe/d during the Five-Year Plan and beyond,
without the need to rely on acquisitions of assets or Crown land;
that Birchcliff’s drilling inventory provides it with optionality
to consider additional growth beyond its targeted production rate
of 90,000 boe/d, to approximately 105,000 boe/d, subject to strong
commodity prices; the estimated in-service date of Q4 2026 for the
additional 80 MMcf/d of firm receipt service on the NGTL system;
that this additional service, together with Birchcliff’s existing
firm receipt service, gives it the ability to grow its production,
should commodity prices and market conditions meet Birchcliff’s
expectations for growth; that Birchcliff can, with one year’s
notice, reduce its existing firm receipt service to keep its
production flat at approximately 90,000 boe/d; and that the
optionality for further growth in 2026 roughly coincides with the
anticipated timing for the commencement of Phase 1 of LNG Canada’s
LNG export facility, which Birchcliff believes will have a
long-term positive impact on natural gas prices in Western
Canada;
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Birchcliff’s drilling inventory and estimates of potential net
future horizontal drilling locations, including: that assuming an
average of 30 net wells required per year, Birchcliff’s booked
potential locations provide the Corporation with approximately 23
years of drilling inventory; and that Birchcliff’s unbooked
potential net future horizontal drilling locations in Pouce Coupe
and Gordondale provide the Corporation with further optionality for
future growth;
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the information set forth under the heading “2023 F&D Capital
Budget” and elsewhere in this press release as it relates to
Birchcliff’s 2023 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 2023 capital program; that the F&D
capital budget of $260 million to $280 million is expected to
deliver 5% production growth over 2022; that the budget is fully
funded, with the Corporation’s F&D capital expenditures
representing approximately 47% of Birchcliff’s anticipated 2023
adjusted funds flow; that Birchcliff’s F&D capital budget and
base dividend of $0.80 per common share for 2023 would remain fully
funded at an average WTI price of US$70.00/bbl, an average AECO
price of CDN$3.00/GJ, an average Dawn price of US$3.25/MMBtu and an
average NYMEX HH price of US$3.35/MMBtu; estimates of capital
expenditures (including Birchcliff’s expected capital spending
allocation and average well costs in 2023); that based on its
targeted F&D capital expenditures, Birchcliff expects to
deliver annual average production of 81,000 to 83,000 boe/d in
2023, which represents a 5% increase over Birchcliff’s anticipated
2022 annual average production; the number, types and working
interest of wells to be drilled and brought on production in 2023;
targeted product types; the number of well pads; that the 2023
capital program has been designed to utilize multi-well pads and
two drilling rigs, which is more operationally efficient for the
Corporation; that Birchcliff has secured multi-year contracts with
its key service providers and ordered various long-lead items,
which will help to ensure the efficient execution of the
Corporation’s 2023 capital program, as well as help Birchcliff
mitigate inflationary pressures and manage supply chain constraints
by ensuring security of equipment and services; that Birchcliff
does not have any fixed price commodity hedges in place and does
not currently intend to enter into any, which gives it the ability
to participate in any strengthening of commodity prices in 2023
above current strip prices; that after the payment of its targeted
base dividend of $213 million in 2023, Birchcliff is forecasting
that it will have approximately $77 million to $97 million of
excess free funds flow in the year, which is expected to be
primarily allocated towards debt reduction; that Birchcliff’s 2023
drilling program is focused on high rate-of-return targets and
developing its low-cost natural gas and liquids production in Pouce
Coupe and Gordondale; that wells will be brought on production from
multi-well pads, which allows Birchcliff to reduce its
environmental footprint and keep its per well costs low; that the
program is designed to deliver profitable production growth with
robust returns that will be further enhanced as Birchcliff
progressively fills the processing capacity of its existing
available infrastructure; that Birchcliff will continue to make
significant investments in gas gathering pipelines to support
future field development; that the Corporation plans to install
approximately 20 km of fuel gas lines that will provide long-term
economic and environmental benefits; that by delivering natural gas
to existing and future sites, Birchcliff’s adoption of bi-fuel
technology will reduce emissions and costs; that the fuel gas will
be used to enhance production and reduce future well downtime by
installing gas lift systems where appropriate; that the wells
drilled and brought on production in Gordondale are expected to
keep the AltaGas Facility full during the year; and estimated
spending on abandonment and reclamation activities;
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the information set forth under the heading “2023 Guidance” and
elsewhere in this press release as it relates to Birchcliff’s
guidance for 2023, including: forecasts of annual average
production, production commodity mix, average expenses, adjusted
funds flow, F&D capital expenditures, free funds flow, annual
base dividend, excess free funds flow, total debt at year end and
natural gas market exposure; that based on the Corporation’s
targeted production and current strip prices, it expects to
generate approximately $570 million of adjusted funds flow and $290
million to $310 million of free funds flow in 2023 and pay
dividends to its shareholders of approximately $213 million,
resulting in excess free funds flow of approximately $77 million to
$97 million in 2023; the expected impact of changes in commodity
prices and the CDN/US exchange rate on Birchcliff’s forecast of
free funds flow; and that the forecast of total debt at December
31, 2023 is expected to be comprised of any amounts outstanding
under the Credit Facilities plus accounts payable and accrued
liabilities and less cash, accounts receivable and prepaid expenses
and deposits at the end of the year;
-
that Birchcliff will announce its unaudited results for the year
ended December 31, 2022 on February 15, 2023; and
-
that Birchcliff anticipates the forward-looking non-GAAP financial
measures for adjusted funds flow and free funds flow disclosed
herein to generally exceed their respective historical amounts for
the twelve months ended December 31, 2021 and that Birchcliff
anticipates the forward-looking non-GAAP financial measure for
excess free funds flow disclosed herein to be lower than its
respective historical amount for the twelve months ended December
31, 2021.
With respect to the forward‐looking statements
contained in this press release, assumptions have been made
regarding, among other things: the degree to which the
Corporation’s results of operations and financial condition will be
disrupted by circumstances attributable to the COVID-19 pandemic;
prevailing and future commodity prices and differentials, exchange
rates, interest rates, inflation rates, royalty rates and tax
rates; the state of the economy, financial markets and the
exploration, development and production business; the political
environment in which Birchcliff operates; the regulatory framework
regarding royalties, taxes, environmental, climate change and other
laws; the Corporation’s ability to comply with existing and future
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 Five-Year Plan, such plan is based on
the commodity price, exchange rate and other assumptions set forth
under the heading “Five-Year Plan”. In addition:
-
Birchcliff’s production forecasts assume that: the Corporation’s
capital programs 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 forecasts of F&D capital expenditures assume that
the Corporation’s capital programs will be carried out as currently
contemplated, with the Pouce Coupe Gas Plant and the AltaGas
Facility being filled by the end of 2025, and exclude any net
potential acquisitions and dispositions and the capitalized portion
of cash incentive payments that have not been approved by the
Board. The Five-Year Plan also forecasts that approximately 182
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 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.
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Birchcliff’s forecasts of adjusted funds flow, free funds flow and
cumulative 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 physical and
financial basis swap contracts outstanding as at January 9, 2023
and exclude cash incentive payments that have not been approved by
the Board.
-
Birchcliff’s forecasts of excess free funds flow assume that: the
forecasts of adjusted funds flow and free funds flow are achieved
each year; and an annual base dividend of $0.80 per common share is
paid during the Five-Year Plan and there are 266 million common
shares outstanding, with no changes to the base dividend rate and
no special dividends paid.
-
Birchcliff’s forecasts of year end total surplus during 2024 to
2027 assume that: (i) the forecasts of adjusted funds flow, free
funds flow and excess free funds flow are achieved, with the level
of capital spending for each year met and the payment of an annual
base dividend of $213 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 full debt
repayment, with any remaining amounts allocated to increasing the
Corporation’s total surplus balance contemplated in the Five-Year
Plan; (iii) there are no buybacks of common shares during the
Five-Year Plan; (iv) there are no significant acquisitions or
dispositions completed by the Corporation during the Five-Year
Plan; (v) there are no equity issuances during the Five-Year Plan;
and (vi) there are no further proceeds received from the exercise
of stock options or performance warrants during the Five-Year Plan.
The forecasts of total surplus exclude cash incentive payments that
have not been approved by the Board.
-
Birchcliff’s forecasts of its natural gas market exposure assume:
(i) 175,000 GJ/d being sold on a physical basis at the Dawn price
during 2023 to 2026; (ii) 155,000 GJ/d being sold on a physical
basis at the Dawn price in 2027; (iii) 27,400 GJ/d being sold at
Alliance on a physical basis at the AECO 5A price plus a premium in
2023, with no Alliance deals during 2024 to 2027; (iv) 152,500
MMBtu/d being contracted during 2023, 2024 and 2025 on a financial
and physical basis at an average fixed basis differential price
between AECO 7A and NYMEX HH of approximately US$1.23/MMBtu,
US$1.13/MMBtu and US$1.09/MMBtu, respectively; (v) 10,000 MMBtu/d
being contracted in 2026 on a financial basis at an average fixed
basis differential price between AECO 7A and NYMEX HH of
approximately US$0.90/MMBtu; and (vi) 15,000 MMBtu/d being
contracted in 2027 on a financial basis at an average fixed basis
differential price between AECO 7A and NYMEX HH of approximately
US$0.71/MMBtu. Birchcliff’s natural gas market exposure takes into
account its physical and financial basis swap contracts outstanding
as at January 9, 2023.
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The Five-Year Plan disclosed herein supersedes Birchcliff’s
previous five-year plan for 2022 to 2026 (the “Previous
Plan”) as disclosed by the Corporation on May 11, 2022.
Primarily as a result of a lower than anticipated commodity price
forecast, the new Five-Year Plan now forecasts lower adjusted funds
flow, free funds flow and excess free funds flow over a five-year
period, as well as a total debt balance at the end of 2023 and
lower year end total surplus balances during 2024 to 2026.
Primarily as a result of higher than anticipated inflation, the
forecasts of F&D capital expenditures under the new Five-Year
Plan are higher than the Previous Plan. The Corporation’s
forecasted average annual production under the new Five-Year Plan
is generally comparable to the Previous Plan.
-
The Corporation’s expectation that it will be required to pay
Canadian income taxes commencing in 2024 and the forecasts of taxes
set forth herein are 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 the Five-Year Plan as illustrated herein and assumes,
among other things, that the levels of spending and production set
forth under the heading “Five-Year Plan” 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 Birchcliff’s 2023 guidance, such guidance is based
on the commodity price, exchange rate and other assumptions set
forth under the heading “2023 Guidance”. In addition:
-
Birchcliff’s production guidance assumes that: the 2023 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 capital expenditures assumes that the 2023
capital program will be carried out as currently contemplated and
excludes any net potential acquisitions and dispositions and the
capitalized portion of cash incentive payments that have not been
approved by the Board.
-
Birchcliff’s forecasts of adjusted funds flow and free funds flow
assume that: the 2023 capital program will be carried out as
currently contemplated and the level of capital spending for 2023
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 physical and financial basis swap contracts
outstanding as at January 9, 2023 and excludes cash incentive
payments that have not been approved by the Board.
-
Birchcliff’s forecast of excess free funds flow assumes that: the
forecasts of adjusted funds flow and free funds flow are achieved;
and an annual base dividend of $0.80 per common share is paid
during 2023 and there are 266 million common shares outstanding,
with no changes to the base dividend rate and no special dividends
paid.
-
Birchcliff’s forecast of year end total debt assumes that: (i) the
forecasts of adjusted funds flow, free funds flow and excess free
funds flow are achieved, with the level of capital spending for
2023 met and the payment of an annual base dividend of $213
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 2023; (iv) there are no significant
acquisitions or dispositions completed by the Corporation during
2023; (v) there are no equity issuances during 2023; and (vi) there
are no further proceeds received from the exercise of stock options
or performance warrants during 2023. The forecast of total debt
excludes cash incentive payments that have not been approved by the
Board.
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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) 152,500 MMBtu/d being contracted on a financial and physical
basis at an average fixed basis differential price between AECO 7A
and NYMEX HH of approximately US$1.23/MMBtu; and (iii) 27,400 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 physical and financial basis swap contracts outstanding
as at January 9, 2023.
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With respect to statements of future wells to be drilled and
brought on production, such statements assume: the continuing
validity of the geological and other technical interpretations
performed by Birchcliff’s technical staff, which indicate that
commercially economic volumes can be recovered from Birchcliff’s
lands as a result of drilling future wells; and that commodity
prices and general economic conditions will warrant proceeding with
the drilling of such wells.
Birchcliff’s actual results, performance or
achievements could differ materially from those anticipated in the
forward-looking statements as a result of both known and unknown
risks and uncertainties including, but not limited to: the risks
posed by pandemics (including COVID-19), epidemics and global
conflict (including the Russian invasion of Ukraine) and their
impacts on supply and demand and commodity prices; actions taken by
OPEC and other major producers of crude oil and the impact such
actions may have on supply and demand and commodity prices; the
uncertainty of estimates and projections relating to production,
revenue, costs, expenses and reserves; the risk that any of the
Corporation’s material assumptions prove to be materially
inaccurate (including the Corporation’s commodity price and
exchange rate assumptions for 2023 to 2027); general economic,
market and business conditions which will, among other things,
impact the demand for and market prices of Birchcliff’s products
and Birchcliff’s access to capital; volatility of crude oil and
natural gas prices; risks associated with increasing costs, whether
due to high inflation rates, supply chain disruptions or other
factors; fluctuations in exchange and interest rates; stock market
volatility; loss of market demand; an inability to access
sufficient capital from internal and external sources on terms
acceptable to the Corporation; risks associated with Birchcliff’s
Credit Facilities, including a failure to comply with covenants
under the agreement governing the Credit Facilities and the risk
that the borrowing base limit may be redetermined; fluctuations in
the costs of borrowing; operational risks and liabilities inherent
in oil and natural gas operations; the occurrence of unexpected
events such as fires, severe weather, explosions, blow-outs,
equipment failures, transportation incidents and other similar
events; an inability to access sufficient water or other fluids
needed for operations; uncertainty that development activities in
connection with Birchcliff’s assets will be economic; an inability
to access or implement some or all of the technology necessary to
operate its assets and achieve expected future results; the
accuracy of estimates of reserves, future net revenue and
production levels; geological, technical, drilling, construction
and processing problems; uncertainty of geological and technical
data; horizontal drilling and completions techniques and the
failure of drilling results to meet expectations for reserves or
production; uncertainties related to Birchcliff’s future potential
drilling locations; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the
accuracy of cost estimates and variances in Birchcliff’s actual
costs and economic returns from those anticipated; incorrect
assessments of the value of acquisitions and exploration and
development programs; changes to the regulatory framework in the
locations where the Corporation operates, including changes to tax
laws, Crown royalty rates, environmental laws, climate change laws,
carbon tax regimes, incentive programs and other regulations that
affect the oil and natural gas industry; political uncertainty and
uncertainty associated with government policy changes; 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; and the accuracy of the
Corporation’s accounting estimates and judgments.
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 Credit Facilities.
The agreement governing the Credit Facilities provides that
Birchcliff is not permitted to make any distribution (which
includes dividends) at any time when an event of default exists or
would reasonably be expected to exist upon making such
distribution, unless such event of default arose subsequent to the
ordinary course declaration of the applicable distribution.
Readers are cautioned that the foregoing lists
of factors are not exhaustive. Additional information on these and
other risk factors that could affect results of operations,
financial performance or financial results are included in
Birchcliff’s most recent Annual Information Form under the heading
“Risk Factors” and in other reports filed with Canadian securities
regulatory authorities.
This press release contains information that may
constitute future-orientated financial information or financial
outlook information (collectively, “FOFI”) about
Birchcliff’s prospective financial performance, financial position
or cash flows, all of which is subject to the same assumptions,
risk factors, limitations and qualifications as set forth above.
Readers are cautioned that the assumptions used in the preparation
of such information, although considered reasonable at the time of
preparation, may prove to be imprecise or inaccurate and, as such,
undue reliance should not be placed on FOFI. Birchcliff’s actual
results, performance and achievements could differ materially from
those expressed in, or implied by, FOFI. Birchcliff has included
FOFI in order to provide readers with a more complete perspective
on Birchcliff’s future operations and management’s current
expectations relating to Birchcliff’s future performance. Readers
are cautioned that such information may not be appropriate for
other purposes. FOFI contained herein was made as of the date of
this press release. Unless required by applicable laws, Birchcliff
does not undertake any obligation to publicly update or revise any
FOFI statements, whether as a result of new information, future
events or otherwise.
Management has included the above summary of
assumptions and risks related to forward-looking statements
provided in this press release in order to provide readers with a
more complete perspective on Birchcliff’s future operations and
management’s current expectations relating to Birchcliff’s future
performance. Readers are cautioned that this information may not be
appropriate for other purposes.
The forward-looking statements contained in this
press release are expressly qualified by the foregoing cautionary
statements. The forward-looking statements contained herein are
made as of the date of this press release. Unless required by
applicable laws, Birchcliff does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
ABOUT BIRCHCLIFF:
Birchcliff is a Calgary, Alberta based
intermediate oil and natural gas company with operations focused on
the Montney/Doig Resource Play in Alberta. Birchcliff’s common
shares are listed for trading on the Toronto Stock Exchange under
the symbol “BIR”.
| For further
information, please contact: |
|
Birchcliff Energy Ltd.Suite 1000, 600 – 3rd Avenue
S.W. Calgary, Alberta T2P 0G5Telephone: (403) 261-6401Email:
info@birchcliffenergy.comwww.birchcliffenergy.com |
|
Jeff Tonken –
Chief Executive OfficerChris Carlsen – President
and Chief Operating OfficerBruno Geremia –
Executive Vice President and Chief Financial Officer |
Birchcliff Energy (TSX:BIR)
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Birchcliff Energy (TSX:BIR)
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