CALGARY, AB, Jan. 6, 2021 /CNW/ - Spartan Delta
Corp. ("Spartan" or the "Company") (TSXV:
SDE) is pleased to provide an operational and corporate update with
revised guidance for 2021.
Highlights:
- Early results of Spartan's drilling program are positive with
fourth quarter production exceeding guidance.
- Executing on consolidation strategy, including three small but
strategic acquisitions in Spartan's focus development areas.
- Continued operational and financial performance results in
upward revision to 2021 Adjusted Funds Flow guidance.
Winter Drilling Program
Spartan's winter drilling program of six Spirit River locations is progressing ahead of
schedule and budget. The first two well pad was drilled, completed
and on production as of mid-December, 2020 and a three well pad is
in the final stages of drilling. Wells drilled to date are
consistent with expectations with payout forecasted to be less than
twelve months and yielding greater than 100% internal rate of
return on current strip commodity pricing. Spartan expects to
accelerate into the first quarter the drilling of two wells
previously scheduled for the fall of 2021, including a two-mile
well into the Cardium formation.
Fourth Quarter Production
Average production for the fourth quarter was maintained in
line with third quarter production levels at approximately
26,000 BOE/d despite a base decline of 19% on Spartan's asset base.
Production is 5% ahead of Spartan's mid-range guidance for the
fourth quarter. This reflects the continued success of the
Company's production optimization activities in the field and
earlier than expected production contribution from two new wells in
the second half of December.
Acquisitions Update
Spartan has closed one acquisition and executed definitive
agreements for two additional strategic acquisitions in its target
development areas for total consideration of $7.1 million (comprised of $0.9 million cash and the issuance of 2,002,584
common shares of Spartan) and the assumption of minimal abandonment
liability. The acquisitions add 28 sections of land in the
Montney play fairway along with
105 BOE/d of production (60% natural gas). The two additional
strategic acquisitions are expected to close on or about
January 15, 2021. Expected pro-forma
contribution from the assets to be acquired is included in the
revised corporate guidance for 2021, set out below.
Operational and Financial Improvements
Spartan continues to execute on the implementation of organic
operational measures and strategic initiatives with industry
partners. The Company expects 2021 operating expense of
$5.10/BOE, which is 16% lower than
third quarter of 2020 operating expense and 15% lower than
previously announced 2021 guidance. As a result of both operational
and financial improvements, Spartan expects 2021 Adjusted Funds
Flow of $92.5 million, an increase of
40% from prior guidance, and Free Funds Flow of $49.5 million, an increase of 102% from prior
guidance.
Revised Corporate Guidance for 2021
Below is a summary of revised corporate guidance for 2021:
(CA$ millions,
except as otherwise noted)
|
|
New 2021
Guidance
|
Prior 2021
Guidance
|
Change (%)
|
Average
Production
|
|
|
|
|
Crude oil and
condensate
|
|
5%
|
5%
|
-
|
NGLs
|
|
25%
|
25%
|
-
|
Conventional natural
gas
|
|
70%
|
70%
|
-
|
Combined (BOE/d)
|
|
29,000 –
31,000
|
27,000 –
29,000
|
7%
|
Forecast Average
Commodity Prices
|
|
|
|
|
WTI oil price
(US$/bbl)
|
|
45.00
|
45.00
|
-
|
AECO natural gas price
($/GJ)
|
|
2.75
|
2.75
|
-
|
Average Exchange Rate
(CA$/US$)
|
|
1.32
|
1.32
|
-
|
Key
Assumptions
|
|
|
|
|
Average royalty rate (% of
oil and gas sales)
|
|
11%
|
11%
|
-
|
Operating expenses
($/BOE)
|
|
5.10
|
6.00
|
(15%)
|
Transportation expenses
($/BOE)
|
|
1.45
|
1.45
|
-
|
G&A expenses
($/BOE)
|
|
1.40
|
1.50
|
(7%)
|
Capital expenditures,
excluding acquisitions ($MM)
|
|
43.0
|
40.0 –
43.0
|
-
|
Well count (# gross =
net)
|
|
9
|
8 – 9
|
-
|
Adjusted Funds Flow
(1)(2) (3) (4) ($MM)
|
|
92.5
|
66.0
|
40%
|
Free Funds Flow
(1) ($MM)
|
|
49.5
|
23.0 –
26.0
|
102%
|
Net Debt (Surplus),
end of period (1) ($MM)
|
|
(34.5)
|
(8.5)
|
306%
|
Common shares
outstanding, end of period (MM)
|
|
60.2
|
58.2
|
3%
|
(1)
|
"Adjusted Funds
Flow", "Free Funds Flow" and "Net Debt (Surplus)" do not have
standardized meanings under IFRS, refer to the "Non-GAAP Measures"
advisories at the end of this press release.
|
(2)
|
Based on the midpoint
of 2021 average production guidance of 30,000 BOE/d.
|
(3)
|
Based on
acquisitions, current forecast production, commodity prices, future
acquisitions and capital expenditures, Spartan is not expecting to
pay current income taxes for a minimum of 5 years.
|
(4)
|
Adjusted Funds Flow
Sensitivity: $0.25/Gj change in AECO results in ~$5-6MM change in
AFF, $5/bbl change in WTI results in ~$4-5MM change in
AFF.
|
About Spartan Delta Corp.
Spartan is an energy company whose ESG-focused culture is
centered on generating sustainable free funds flow through oil and
gas exploration and development. Building on its existing
high-quality, low-decline operated production in the heart of the
Alberta Deep Basin, Spartan intends to continue acquiring
diversified assets that can be restructured, optimized and
rebranded, financially or operationally, yielding an increase to
shareholder value. The Company is well positioned to continue
pursuing immediate production optimization and responsible future
growth. Further detail is available in Spartan's corporate
presentation, which can be accessed on its website at
www.spartandeltacorp.com.
READER ADVISORIES
Non-GAAP Measures
This release contains certain financial measures, as described
below, which do not have standardized meanings prescribed by
International Financial Reporting Standards ("IFRS") or
Generally Accepted Accounting Principles ("GAAP"). As these
non-GAAP financial measures are commonly used in the oil and gas
industry, the Company believes that their inclusion is useful to
investors. The reader is cautioned that these amounts may not be
directly comparable to measures for other companies where similar
terminology is used. The non-GAAP measures used in this release,
represented by the capitalized and defined terms outlined below,
are used by Spartan as key measures of financial performance and
are not intended to represent operating profits nor should they be
viewed as an alternative to cash provided by operating activities,
net income or other measures of financial performance calculated in
accordance with IFRS.
Adjusted Funds Flow and Free Funds Flow
"Adjusted Funds Flow" is calculated as cash provided by
operating activities determined in accordance with IFRS, adjusted
to add back changes in non-cash working capital and transaction
costs on acquisitions and to deduct cash lease payments. The
Company believes Adjusted Funds Flow is an appropriate metric to
compare relative to Net Debt because it reflects the net cash flow
generated from routine business operations and because Spartan does
not include lease liabilities in its definition of Net Debt
(Surplus).
"Free Funds Flow" is calculated as Adjusted Funds Flow less
total net capital expenditures, excluding acquisitions.
Net Debt (Surplus)
Throughout this release, references to "Net Debt (Surplus)"
include bank debt, net of Adjusted Working Capital. "Adjusted
Working Capital" is calculated as current assets less current
liabilities, excluding derivative financial instrument assets and
liabilities and lease liabilities. The Adjusted Working Capital
surplus included in Spartan's forecasted Net Debt (Surplus) at the
end of 2021 includes cash and cash equivalents, accounts
receivable, prepaid expenses and deposits, accounts payable and
accrued liabilities and the current portion of decommissioning
obligations. Spartan uses "Net Debt (Surplus)" as a measure of the
Company's financial position and liquidity, however it is not
intended to be viewed as an alternative to other measures
calculated in accordance with IFRS.
Forward-Looking and Cautionary Statements
Certain statements contained within this press release
constitute forward-looking statements within the meaning of
applicable Canadian securities legislation. All statements other
than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "anticipate", "budget",
"plan", "endeavor", "continue", "estimate", "evaluate", "expect",
"forecast", "monitor", "may", "will", "can", "able", "potential",
"target", "intend", "consider", "focus", "identify", "use",
"utilize", "manage", "maintain", "remain", "result", "cultivate",
"could", "should", "believe" and similar expressions. The Company
believes that the expectations reflected in such forward-looking
statements are reasonable, but no assurance can be given that such
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon. Without limitation,
this press release contains forward-looking statements pertaining
to: the intentions of management and the Company with respect to
its growth strategy and business plan; Spartan's expectations
regarding its winter drilling program, including the location of
wells, scheduled drilling and completion dates, expected rate of
return and the timing of expected payout from such wells;
forecasted reductions in operating costs; closing of the
above-described strategic acquisitions; expected production and
contribution from acquired assets; expectations regarding Spartan's
income tax obligations and timing thereof; and Spartan's production
forecasts and 2021 guidance.
The forward-looking statements and information are based on
certain key expectations and assumptions made by Spartan, including
expectations and assumptions concerning the business plan of the
Company, expected production, receipt of required approvals from
the TSX Venture Exchange, market conditions and benefits and
synergies arising from the acquired assets and the Company's
strategic partnerships. Although Spartan believes that the
expectations and assumptions on which such forward-looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward-looking statements and
information because Spartan can give no assurance that they will
prove to be correct. By its nature, such forward-looking
information is subject to various risks and uncertainties, which
could cause the actual results and expectations to differ
materially from the anticipated results or expectations expressed.
These risks and uncertainties include, but are not limited to,
fluctuations in commodity prices, changes in industry regulations
and political landscape both domestically and abroad, foreign
exchange or interest rates, stock market volatility, impacts of the
current COVID-19 pandemic and the retention of key management and
employees. Please refer to the Company's most recent Annual
Information Form and MD&A for additional risk factors
relating to Spartan, which can be accessed either on Spartan's
website at www.spartandeltacorp.com or under the Company's
profile on www.sedar.com. Readers are cautioned not to place
undue reliance on this forward-looking information, which is given
as of the date hereof, and to not use such forward-looking
information for anything other than its intended purpose. Spartan
undertakes no obligation to update publicly or revise any
forward-looking information, whether as a result of new
information, future events or otherwise, except as required by
law.
Future Oriented Financial Information
Any financial outlook or future oriented financial information
in this press release, as defined by applicable Canadian securities
legislation, has been approved by management of Spartan. Readers
are cautioned that any such future-oriented financial information
contained herein, including (but not limited to) references to
payout, internal rates of return and the Company's corporate
outlook and guidance for 2021, generally, should not be used for
purposes other than those for which it is disclosed herein. The
Company and its management believe that the prospective financial
information has been prepared on a reasonable basis, reflecting
management's best estimates and judgments, and represent, to the
best of management's knowledge and opinion, the Company's expected
course of action. However, because this information is highly
subjective, it should not be relied on as necessarily indicative of
future activities or results.
Other Measurements
All dollar figures included herein are presented in Canadian
dollars, unless otherwise noted.
This press release contains various references to the
abbreviation "BOE" which means barrels of oil equivalent. Where
amounts are expressed on a BOE basis, natural gas volumes have been
converted to oil equivalence at six thousand cubic feet (Mcf) per
barrel (bbl). The term BOE may be misleading, particularly if used
in isolation. A BOE conversion ratio of six thousand cubic feet per
barrel is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead and is significantly different
than the value ratio based on the current price of crude oil and
natural gas. This conversion factor is an industry accepted norm
and is not based on either energy content or current prices. Such
abbreviation may be misleading, particularly if used in
isolation.
References to "oil" in this press release include crude oil and
condensate. References to "natural gas liquids" or "NGLs" include
pentane, butane, propane, and ethane. References to "gas" relates
to natural gas.
National Instrument 51-101 – Standards of Disclosure for Oil
and Gas Activities includes condensate within the product type
of "natural gas liquids". Spartan has disclosed condensate sales
separate from natural gas liquids because the value equivalency of
condensate is more closely aligned with crude oil. The Company
believes the presentation of condensate as disclosed herein
provides a more accurate representation of operations and results
therefrom.
Neither the TSXV nor its Regulation Services Provider (as
that term is defined in the policies of the TSXV) accepts
responsibility for the adequacy or accuracy of this press
release.
SOURCE Spartan Delta Corp