(TSX: AAV)
CALGARY, AB, Dec. 6, 2021 /CNW/ - Advantage Energy Ltd.
("Advantage" or the "Corporation") is pleased to announce its 2022
budget.
Advantage's 2022 capital program will be focused on growing
adjusted funds flow per share by continuing to drill high
rate-of-return targets in areas with existing infrastructure
capacity. An escalating emphasis will be placed on increasing
liquids revenue and making infrastructure investments that either
expand third-party processing revenue or advance our net-zero 2025
target. With gas prices currently elevated and robust oil
prices, we expect bank indebtedness to fall to zero in the second
half of 2022 with significant free cash flow available to fortify
the foundations of our business.
Highlights of the 2022 Budget:
- Corporate production is expected to grow by approximately 8%,
with total liquids production expected to grow by more than
25%.
- At NYMEX US$4/mmbtu and WTI
US$70/bbl, adjusted funds flow
("AFF")(a) is expected to be $370
million.
- Cash used in investing activities is planned to be between
$170 million and $200 million representing a payout
ratio(b) of approximately 50% (including provisions for
inflation).
- Revenue growth will be optimized by focusing on the highest
rate-of-return development drilling in areas with existing
facilities capacity (Glacier and Wembley).
- Sustaining capital for 2022 is approximately $75 million and includes drilling 9 Glacier wells
to replace corporate decline of 24%.
- Half of the drilling program will focus on gas-weighted assets,
and half will focus on oil-weighted assets. At current strip
pricing, production periods required to payout new wells are
approximately 7 months for Glacier gas wells and 8 months for
Wembley oil wells.
- The Wembley oil battery will
be connected to the Keyera Pipestone Processing Facility during the
first quarter, increasing total third-party processing capacity to
40 mmcf/d. Advantage's total take-or-pay volumes at Wembley, including existing Tidewater service,
will average 13.5 mmcf/d for 2022 before rising to 23 mmcf/d in
2023.
- The Progress compressor station (partially constructed in 2020
prior to the pandemic) is planned to be completed by early second
quarter, at a cost of $12 million. Up
to three new Progress wells are planned for 2022, and a third-party
has committed to tie-in approximately 10 mmcf/d for transportation
and processing through our Glacier Gas Plant. Third-party
processing revenue is expected to pay out the remaining cost of the
project within three years.
- Phase 1 of the Glacier carbon capture and storage ("CCS")
project is expected to come onstream by early second quarter, with
2022 capital expected to be $7
million.
a.
|
Non-GAAP
Financial Measure which does not have a standardized meaning under
IFRS and may not be comparable to similar non-GAAP financial
measures used by other entities. Please see
Advisory.
|
b.
|
Non-GAAP Ratio
which does not have a standardized meaning under IFRS and may not
be comparable to similar non-GAAP ratios used by other entities.
Please see Advisory for a description of how such non-GAAP ratio is
calculated, including the non-GAAP financial measures comprising
such non-GAAP ratio.
|
2022 Budget Summary (1)
Cash Used in
Investing Activities (2) (millions)
|
$170 to
$200
|
Average Production
(boe/day)
|
52,000 to
55,000
|
Liquids Production
(bbls/d)
|
5,400 to
5,800
|
Royalty Rate
(%)
|
7% to
9%
|
Operating Expense
($/boe)
|
$2.45
|
Transportation
Expense ($/boe)
|
$4.35
|
G&A/Finance
Expense ($/boe)
|
$1.55
|
Notes:
|
(1)
|
Forward-looking
statements and information representing Management estimates. Refer
to Advisory for cautionary statements regarding Advantage's budget
including material assumptions and risk factors.
|
(2)
|
Cash Used in
Investing Activities is the same as Net Capital Expenditures as no
change in non-cash working capital is assumed between years and
other differences are immaterial. See Advisory.
|
Marketing Update
Advantage has hedged approximately 39% of its natural gas
production for the fourth quarter of 2021. The Corporation
continues to increase its hedging position in 2022 and currently
has 11% of forecast natural gas production hedged at an average of
US$3.52/mmbtu assuming $US/$CDN
foreign exchange of $0.79.
Advantage has hedged 2,000 bbls/d of liquids for the fourth
quarter of 2021 at an average price of US$49.14/bbl and no liquids hedging for
2022.
Credit Facility Renewal
On November 30, 2021, Advantage's
Credit Facilities were renewed with no changes to the borrowing
base of $350 million.
Executive Update
As previously announced, Andy Mah
will retire from his role of Chief Executive Officer on
December 31, and Michael Belenkie (currently President and Chief
Operating Office) will assume the role of President and CEO.
The Advantage team wishes Andy all the best in his retirement and
looks forward to his continued contributions as a board member.
Advantage is also pleased to announce two executive appointments
as a reflection of our expanded strategy.
Darren Tisdale will assume the
role of Vice President, Geosciences. Mr. Tisdale has been
with Advantage for approximately two years as Chief Geoscientist
and has led Advantage's subsurface technology evolution, as well as
bringing deep skillsets to business development and strategic
planning.
Geoff Keyser will assume the role
of Vice President, Corporate Development. Mr. Keyser joined
Advantage a year ago as Director of Corporate Development, having
previously served as Vice President of Engineering at a private oil
and gas producer.
Looking Forward
Advantage is on the pathway to net-zero emissions by 2025[1],
primarily through Entropy Inc.'s revenue-generating carbon capture
and storage projects, including the Glacier CCS project.
Capital guidance for 2021 remains at $140
million to $150 million and
annual production guidance has been lowered marginally to 49,250
boe/d as a result of unplanned "firm service" restrictions on TC
Energy's NGTL system during the fourth quarter of 2021. With
drilling results having exceeded expectations throughout 2021,
production has grown by approximately 10%.
With commodity prices remaining robust, Advantage is in a strong
position to grow total shareholder returns by delivering moderate
production growth into existing infrastructure, enhancing corporate
resilience and scale. By growing our liquids assets more
rapidly than gas-weighted assets, revenue will be derived more
evenly from multiple commodities, reducing exposure to gas price
volatility. Cash-generating investments in infrastructure
will continue, and our energy transition subsidiary, Entropy Inc.,
will pursue rapid growth in carbon capture and sequestration
projects. Lastly, Advantage will continue to pursue strategic
acquisitions of low-emissions assets that create efficiencies,
resilience and scale.
Advantage looks forward to progressing the Corporation's
strategy through the dynamic markets ahead.
_____________________________
|
1 See
Advantage's 2021 Sustainability Report. Success in achieving
net-zero on this timeline is predicated on functional CCS
regulatory frameworks at both the federal and provincial
levels.
|
Advisory
The information in this press release contains certain
forward-looking statements, including within the meaning of
applicable securities laws. These statements relate to future
events or our future intentions or performance. All statements
other than statements of historical fact may be forward looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "guidance", "anticipate",
"target", "objectives", "estimates", "continue", "demonstrate",
"expect", "may", "can", "will", "believe", "would" and similar
expressions and include statements relating to, among other things,
Advantage's focus, strategy, priorities and development plans; that
Advantage will make infrastructure investments that either expand
third-party processing revenue or advance its net-zero 2025 target;
that Advantage's bank indebtedness will fall to zero and the
anticipated timing thereof; that Advantage will have significant
free cash flow available to fortify the foundations of its
business; anticipated growth in corporate production; anticipated
adjusted funds flow; anticipated cash used in investing activities;
anticipated sustaining capital; that the Wembley oil battery will be connected to the
Keyera Pipestone Processing Facility and the anticipated timing and
benefits in connection therewith; anticipated total take-or-pay
volumes at Wembley; Advantage's
expectations that it will be able to optimize revenue growth;
Advantage's expectations of the production periods required to
payout new wells; that the Progress compressor station will be
completed and the costs and timing thereof; Advantage's
expectations of the number of new wells and the number of tie-ins
in 2022; Advantage's expectations that third party processing
revenue will pay out the remaining cost of the Progress compressor
station project; that Phase 1 of the Glacier CCS project will come
onstream in 2022 and the anticipated capital and timing thereof;
Advantage's hedging program; that Advantage will achieve net-zero
emissions by 2025; that Advantage will be able to grow total
shareholder returns; Advantage's ability to deliver moderate
production growth utilizing existing infrastructure capacity;
Advantage's ability to enhance corporate resilience and scale; that
Advantage will be able to grow its liquids assets and reduce its
exposure to gas price volatility; and that Advantage will pursue
strategic acquisitions of low-emissions assets and their ability to
create efficiencies, resilience and scale. Advantage's actual
decisions, activities, results, performance, or achievement could
differ materially from those expressed in, or implied by, such
forward-looking statements and accordingly, no assurances can be
given that any of the events anticipated by the forward-looking
statements will transpire or occur or, if any of them do, what
benefits that Advantage will derive from them.
With respect to forward-looking statements contained in this
press release, Advantage has made assumptions regarding, but not
limited to: that Advantage's infrastructure investments will either
expand third-party processing revenue or advance its net-zero 2025
target; future oil and gas prices; anticipated NYMEX and WTI
prices; anticipated strip pricing; the third party processing
revenue available to Advantage; foreign exchange rates; conditions
in general economic and financial markets; the impact and duration
thereof that the COVID-19 pandemic will have on (i) the demand for
crude oil, NGLs and natural gas, (ii) the supply chain including
the Corporation's ability to obtain the equipment and services it
requires, and (iii) the Corporation's ability to produce, transport
and/or sell its crude oil, NGLs and natural gas; effects of
regulation by governmental agencies; current and future commodity
prices and royalty regimes; the Corporation's current and future
hedging program; future exchange rates; royalty rates; future
operating costs; future transportation costs and availability of
product transportation capacity; availability of skilled labor;
availability of drilling and related equipment; timing and amount
of net capital expenditures; the number of new wells required to
achieve the budget objectives; that the Corporation will have
sufficient adjusted funds flow, debt or equity sources or other
financial resources required to fund its capital and operating
expenditures and requirements as needed; that the Corporation's
conduct and results of operations will be consistent with its
expectations; that the Corporation will have the ability to develop
the Corporation's properties in the manner currently contemplated;
current or, where applicable, proposed assumed industry conditions,
laws and regulations will continue in effect or as anticipated;
that Entropy will have the ability to develop its technology in the
manner currently contemplated; that Phase 1 of the Glacier CCS
project will come on-stream; the anticipated benefits and results
from Entropy's technology; that increases in Advantage's liquids
assets will reduce its exposure to volatility; and the estimates of
the Corporation's production and reserves volumes and the
assumptions related thereto (including commodity prices and
development costs) are accurate in all material respects.
Management has included the above summary of assumptions and risks
related to forward-looking information in order to provide
shareholders with a more complete perspective on Advantage's future
operations and such information may not be appropriate for other
purposes. Advantage's actual results, performance or achievement
could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurance can
be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what
benefits that Advantage will derive therefrom. Readers are
cautioned that the foregoing lists of factors are not exhaustive.
These forward-looking statements are made as of the date of this
press release and Advantage disclaims any intent or obligation to
update publicly any forward-looking statements, whether as a result
of new information, future events or results or otherwise, other
than as required by applicable securities laws.
These statements involve substantial known and unknown risks
and uncertainties, certain of which are beyond Advantage's control,
including, but not limited to: changes in general economic, market
and business conditions; industry conditions, including as a result
of demand and supply effects resulting from the COVID-19 pandemic;
actions by governmental or regulatory authorities including
increasing taxes and changes in investment or other regulations;
changes in tax laws, royalty regimes and incentive programs
relating to the oil and gas industry; Advantage's success at
acquisition, exploitation and development of reserves; unexpected
drilling results; changes in commodity prices, currency exchange
rates, net capital expenditures, reserves or reserves estimates and
debt service requirements; the occurrence of unexpected events
involved in the exploration for, and the operation and development
of, oil and gas properties, including hazards such as fire,
explosion, blowouts, cratering, and spills, each of which could
result in substantial damage to wells, production and processing
facilities, other property and the environment or in personal
injury; changes or fluctuations in production levels; delays in
anticipated timing of drilling and completion of wells; individual
well productivity; competition from other producers; the lack of
availability of qualified personnel or management; credit risk;
changes in laws and regulations including the adoption of new
environmental laws and regulations and changes in how they are
interpreted and enforced; Advantage's ability to comply with
current and future environmental or other laws; stock market
volatility and market valuations; liabilities inherent in oil and
natural gas operations; competition for, among other things,
capital, acquisitions of reserves, undeveloped lands and skilled
personnel; incorrect assessments of the value of acquisitions;
geological, technical, drilling and processing problems and other
difficulties in producing petroleum reserves; ability to obtain
required approvals of regulatory authorities; ability to access
sufficient capital from internal and external sources; that
Advantage will not be able to reduce its bank indebtedness; that
Advantage will not have significant free cash flow available to
fortify the foundations of its business; the production periods
required to payout new wells will be longer than expected; that
Progress compressor station will not be completed when expected;
that third party processing revenue will not be able to pay out the
remaining cost of the Progress compressor station project within
three years; that the Wembley oil
battery will not be connected to the Keyera Pipestone Processing
Facility when expected; that the Glacier CCS project will not come
on-stream when expected; that Advantage will not be able to achieve
net-zero emissions by 2025; that Advantage will not be able to grow
total shareholder returns; that Advantage will not be able to
maximize returns for its shareholders; that revenue-generating
infrastructure investments will not be available to Advantage; and
that strategic acquisitions of low-emissions assets will not be
available to Advantage. Many of these risks and uncertainties and
additional risk factors are described in the Corporation's Annual
Information Form which is available at www.sedar.com ("SEDAR") and
www.advantageog.com. Readers are also referred to risk factors
described in other documents Advantage files with Canadian
securities authorities.
This press release contains information that may be
considered a financial outlook under applicable securities laws
about the Corporation's potential financial position, including,
but not limited to, that Advantage's bank indebtedness will fall to
zero; anticipated adjusted funds flow; anticipated cash used in
investing activities; anticipated average production, liquids
production, royalty rate, operating expenses, transportation
expenses and G&A/finance expenses in 2022; and Advantage's
expectations that it will be able to deliver the indicated
production growth; all of which are subject to numerous
assumptions, risk factors, limitations and qualifications,
including those set forth in the above paragraphs. The actual
results of operations of the Corporation and the resulting
financial results will vary from the amounts set forth in this
press release and such variations may be material. This information
has been provided for illustration only and with respect to future
periods are based on budgets and forecasts that are speculative and
are subject to a variety of contingencies and may not be
appropriate for other purposes. Accordingly, these estimates are
not to be relied upon as indicative of future results. Except as
required by applicable securities laws, the Corporation undertakes
no obligation to update such financial outlook. The financial
outlook contained in this press release was made as of the date of
this press release and was provided for the purpose of providing
further information about the Corporation's potential future
business operations. Readers are cautioned that the financial
outlook contained in this press release is not conclusive and is
subject to change.
Non-GAAP Financial Measures and Non-GAAP
Ratios
The Corporation discloses several financial and performance
measures in this press release that do not have any standardized
meaning prescribed under GAAP. These financial and performance
measures include "net capital expenditures", "adjusted funds flow",
"free cash flow", "net debt" and "working capital deficit", which
should not be considered as alternatives to, or more meaningful
than "net income", "comprehensive income", "cash provided by
operating activities", "cash used in investing activities", or
"bank indebtedness" presented within the consolidated financial
statements as determined in accordance with GAAP. Management
believes that these measures provide an indication of the results
generated by the Corporation's principal business activities and
provide useful supplemental information for analysis of the
Corporation's operating performance and liquidity. Advantage's
method of calculating these measures may differ from other
companies, and accordingly, they may not be comparable to similar
measures used by other companies.
Net Capital Expenditures
Net capital expenditures include total capital expenditures
related to property, plant and equipment and exploration and
evaluation assets incurred during the period. Management considers
this measure reflective of actual capital activity for the period
as it excludes changes in working capital related to other
periods.
Working Capital
Working capital includes cash and cash equivalents, trade and
other receivables, prepaid expenses and deposits and trade and
other accrued payables at the reporting date. Working capital
provides Management and users with a measure of the Corporation's
operating liquidity.
Net Debt
Net debt is comprised of bank indebtedness and working
capital. Net debt provides Management and users with a measure of
the Corporation's bank indebtedness and expected settlement of net
liabilities in the next year.
Adjusted Funds Flow
The Corporation considers adjusted funds flow to be a useful
measure of Advantage's ability to generate cash from the production
of natural gas and liquids, which may be used to settle outstanding
debt and obligations, and to support future capital expenditures
plans. Changes in non-cash working capital are excluded from
adjusted funds flow as they may vary significantly between periods
and are not considered to be indicative of the Corporation's
operating performance as they are a function of the timeliness of
collecting receivables and paying payables. Expenditures on
decommissioning liabilities are excluded from the calculation as
the amount and timing of these expenditures are unrelated to
current production and are partially discretionary due to the
nature of our low liability.
Free Cash Flow
Advantage computes free cash flow as adjusted funds flow less
net capital expenditures. Advantage uses free cash flow as an
indicator of the efficiency and liquidity of Advantage's business
by measuring its cash available after net capital expenditures to
settle outstanding debt and obligations and potentially return
capital to shareholders by paying dividends or buying back common
shares.
Payout Ratio
Cash used in investing activities divided by adjusted funds
flow. Advantage uses payout ratio as an indicator of the efficiency
and liquidity of Advantage's business by measuring its cash
available after cash used in investing activities to settle
outstanding debt and obligations.
Refer to the Corporation's most recent Management's
Discussion and Analysis for the three and nine months ended
September 30, 2021, which is
available at www.sedar.com and www.advantageog.com, for additional
information about certain non-GAAP financial measures, including
reconciliations to the nearest GAAP measures and disclosure of
historical non-GAAP financial measures, as applicable.
Oil and Gas Information
Barrels of oil
equivalent (boe) and thousand cubic feet of natural gas equivalent
(mcfe) may be misleading, particularly if used in isolation. Boe
and mcfe conversion ratios have been calculated using a conversion
rate of six thousand cubic feet of natural gas equivalent to one
barrel of oil. A boe and mcfe conversion ratio of 6 mcf: 1 bbl is
based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
Production estimates contained herein are expressed as
anticipated average production over the calendar year. In
determining anticipated production for the year 2022 Advantage
considered historical drilling, completion and production results
for prior years and took into account the estimated impact on
production of the Corporation's 2022 expected drilling and
completion activities.
The following terms and abbreviations used in this press
release have the meanings set forth below:
bbl
|
one
barrel
|
bbls/d
|
barrels per
day
|
boe
|
barrels of oil
equivalent of natural gas, on the basis of one barrel of oil or
NGLs for six thousand cubic feet of natural gas
|
boe/d
|
barrels of oil
equivalent of natural gas per day
|
Crude oil and
condensate
|
Light crude oil
and medium crude oil as defined in National Instrument
51-101
|
Liquids
|
Includes crude oil
and condensate and NGLs
|
mcfe
|
thousand cubic
feet equivalent on the basis of six thousand cubic feet of natural
gas for one barrel of oil or NGLs
|
mmbtu
|
million British
thermal units
|
mmcf/d
|
million cubic feet
per day
|
Natural
gas
|
Conventional
Natural Gas as defined in National Instrument 51-101
|
NGLs
Payout
|
Natural Gas
Liquids as defined in National Instrument 51-101
The point at which
all costs associated with a well are recovered from revenue from
the well.
|
SOURCE Advantage Energy Ltd.