(TSX: AAV)
CALGARY,
AB, July 6, 2022 /CNW/ - Advantage Energy Ltd.
("Advantage" or the "Corporation") is pleased to provide an
operational update for the second quarter of 2022 and an outlook
through 2023.
Operational Update
As a result of continued outperformance at Glacier, Wembley and Valhalla, production during the second quarter
of 2022 increased to average approximately 60,000 boe/d (89%
natural gas, 5% natural gas liquids and 6% light and medium crude
oil). This outperformance resulted from several new wells
being delivered ahead of schedule and new well productivity
exceeding forecasts. Net capital expenditures(a)
for the second quarter of 2022 are estimated to be $46 million, including casing and other equipment
that was pre-purchased for future quarters to reduce costs and
secure supply given the current inflationary environment.
Advantage is pleased to announce that the Glacier Gas Plant will
be expanded to 425 mmcf/d from the current capacity of 400
mmcf/d. One inlet compressor will be added early in the
second quarter of 2023 at a cost of approximately $12 million. By virtue of this highly
efficient expansion, the existing processing capacity will be
maximized at a very low incremental cost per unit of
production. At no additional cost to Advantage, the new
compressor will be equipped with Integrated Carbon Capture and
Storage ("iCCSTM"), developed and funded by Entropy
Inc., which will be the first deployment of this technology in the
world. While this expansion will extend Advantage's runway
for production growth, it will also be a positive step towards our
target of achieving net-zero emissions by 2025.
The Corporation has completed its semi-annual redetermination of
its credit facilities effective June 17,
2022, with no change to the $350
million borrowing base. As a part of this process, the
lending syndicate has removed fixed limits on share buybacks
(previously $50 million) and replaced
them with a liquidity-based limit that is significantly higher than
Advantage's current net debt(a) target of $200 million.
Corporate Outlook
In order to maximize shareholder returns, Advantage's priority
is growing adjusted funds flow ("AFF") per share(a),
through organic growth and share buybacks. The quantum of
share buybacks will be approximately equal to free cash
flow(a) plus the amount required to achieve our
$200 million net debt(a)
target.
The capital program for the second half of 2022 is focused on
oil-weighted growth which delivers outsized AFF(a) per
unit of production. Strong production results from the first
half of 2022 are expected to result in annual production levels
approaching the high end of our 2022 guidance range (52,000 to
55,000 boe/d).
Although the budget has not been set for 2023, Advantage intends
to deliver organic growth of between 10% and 15%, and capital
spending is expected to be between $225
million and $275 million,
dependent upon the commodity price environment. Advantage's
formal 2023 budget will be announced late in 2022.
With modern, low emissions-intensity assets, the commissioning
of Entropy Inc.'s first carbon capture and storage project at
Glacier, and a plan to achieve net-zero emissions by 2025, the
Corporation is proud to deliver clean, reliable, sustainable
energy, while contributing to a reduction in global emissions by
displacing high-carbon fuels.
(a)
|
Specified financial
measure which is not a standardized measure under International
Financial Reporting Standards ("IFRS") and may not be comparable to
similar specified financial measures used by other entities. Please
see "Specified Financial Measures" for the composition of such
specified financial measure, an explanation of how such specified
financial measure provides useful information to a reader and the
purposes for which management of Advantage uses the specified
financial measure, and where required, a reconciliation of the
specified financial measure to the most directly comparable IFRS
measure.
|
Forward-Looking Information
and 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 "anticipate", "continue",
"demonstrate", "expect", "may", "can", "will", "believe", "would"
and similar expressions and include statements relating to, among
other things, Advantage's position, strategy and development plans
and the benefits to be derived therefrom; the Corporation's
anticipated net capital expenditures for the second quarter of
2022; that the Glacier Gas Plant will be expanded to 425 mmcf/d and
that one inlet compressor will be added thereto and the anticipated
timing thereof, costs thereof and benefits to be derived therefrom;
Advantage's expectations that its new compressor will be equipped
with iCCSTM; that the existing processing capacity at
the Glacier Gas Plant will be maximized at a very low incremental
cost per unit of production; the focus of Advantage's
capital program for the second half of 2022; Advantage's
expectations that its annual production may approach the high end
of its 2022 guidance range; Advantage's anticipated capital
spending for 2022; Advantage's expectations that it will be
able to maximize shareholder returns by growing AFF per share;
Advantage's anticipated capital spending and amount of organic
growth in 2023; Advantage's anticipated share buybacks; Advantage's
net debt target; Advantage's expectations that it will achieve
net-zero emissions by 2025; and the Corporation's expectations that
it will continue to deliver clean, reliable, sustainable energy,
and contribute to a reduction in global emissions by displacing
high-carbon fuels. Advantage's actual decisions, activities,
results, performance or achievement could differ materially from
those expressed in, or implied by, such forward-looking statements
and accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur or, if any of them do, what benefits that Advantage will
derive from them.
These statements involve substantial known and unknown risks
and uncertainties, certain of which are beyond Advantage's control,
including, but not limited to: that risk that Advantage's net
capital expenditures for the second quarter of 2022 may be
different than expected; the risk that pre-purchasing casing and
other equipment may not reduce costs to the extent anticipated; the
risk that the Glacier Gas Plant may not be expanded in the
timing or for the costs anticipated; the risk that Advantage's new
compressor may not be equipped with iCCSTM; the risk
that the existing processing capacity at the Glacier Gas Plant may
not be maximized at the costs anticipated; Advantage's
anticipated growth per year may be less than anticipated; that
growth in adjusted funds flow per share may not lead to increased
shareholder returns; the risk that Advantage's annual
production may be less than anticipated; the risk that
Advantage's share buybacks may be less than anticipated; the
risk that the Corporation may not allocate its free cash
flow to its share buyback program to the extent anticipated;
the risk that Advantage may not achieve net-zero emissions by
2025; 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;
our 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; and the ability to access sufficient capital from
internal and external sources. Many of these risks and
uncertainties and additional risk factors are described in the
Corporation's Annual Information Form which is available at
www.sedar.com ("SEDAR") and www.advantageog.com. Readers are also
referred to risk factors described in other documents Advantage
files with Canadian securities authorities.
With respect to forward-looking statements contained in this
press release, Advantage has made assumptions regarding, but not
limited to: Advantage's expectations that pre-purchasing casing and
other equipment will reduce costs; that the efficiency of
the Glacier Gas Plant expansion will help maximize existing
processing capacity at a very low incremental cost per unit of
production; the impact of inflationary pressures; that
growth in adjusted funds flow per share will lead to increased
shareholder returns; 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
impact of increasing competition; the price of crude oil and
natural gas; the number of new wells required to achieve the budget
objectives; that the Corporation will have sufficient cash 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 the Corporation will
allocate its free cash flow to its share buyback program; 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. Readers
are cautioned that the foregoing lists of factors are not
exhaustive.
The future acquisition by the Corporation of the
Corporation's common shares pursuant to its share buyback program,
if any, and the level thereof is uncertain. Any decision to acquire
common shares of the Corporation pursuant to the share buyback
program will be subject to the discretion of the board of directors
of the Corporation and may depend on a variety of factors,
including, without limitation, the Corporation's business
performance, financial condition, financial requirements, growth
plans, expected capital requirements and other conditions existing
at such future time including, without limitation, the policies of
the Toronto Stock Exchange, contractual restrictions and
satisfaction of the solvency tests imposed on the Corporation under
applicable corporate law. There can be no assurance of the number
of common shares of the Corporation that the Corporation will
acquire pursuant to its share buyback program, if any, in the
future.
Management has included the above summary of assumptions and
risks related to forward-looking information above and in its
continuous disclosure filings on SEDAR 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 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 news
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.
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, the Corporation's anticipated net
capital expenditures for the second quarter of 2022; the
focus of Advantage's capital program for the second half of 2022;
Advantage's anticipated capital spending for 2022;
Advantage's expectations that it will be able to maximize
shareholder returns by growing AFF per share; Advantage's
anticipated growth per year; Advantage's anticipated capital
spending in 2023; Advantage's anticipated share buybacks; and
Advantage's net debt target, 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.
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.
Specified Financial
Measures
Throughout this news release, Advantage discloses certain
measures to analyze financial performance, financial position, and
cash flow. These non-GAAP and other financial measures do not have
any standardized meaning prescribed under International Financial
Reporting Standards ("IFRS") and therefore may not be comparable to
similar measures presented by other entities. The non-GAAP and
other financial measures should not be considered to be more
meaningful than GAAP measures which are determined in accordance
with IFRS, such as net income (loss) and comprehensive income
(loss), cash provided by operating activities, and cash used in
investing activities, as indicators of Advantage's
performance.
Non-GAAP Financial
Measures
Adjusted Funds Flow
The Corporation considers adjusted funds flow ("AFF") 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, support future capital
expenditures plans, or return capital to shareholders. Changes in
non-cash working capital are excluded from AFF 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.
Net Capital Expenditures
Net capital expenditures include total capital expenditures
related to property, plant and equipment, exploration and
evaluation assets and intangible assets. Management considers this
measure reflective of actual capital activity for the period as it
excludes changes in working capital related to other periods and
excludes cash receipts on government grants.
Free Cash Flow
Advantage computes free cash flow as AFF 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.
Non-GAAP Ratios
AFF per Share
AFF per share is derived by dividing AFF by the basic
weighted average shares outstanding of the Corporation. Management
believes that AFF per share provides investors an indicator of
funds generated from the business that could be allocated to each
shareholder's equity position.
Capital Management
Measures
Net Debt
Net debt is a capital management financial measure that
provides Management and users with a measure to assess the
Corporation's liquidity. Net debt is not a standardized measure and
therefore may not be comparable with the calculation of similar
measures by other entities.
Refer to the Corporation's most recent Management's
Discussion and Analysis for the three months ended March 31, 2022, which is available at
www.sedar.com and www.advantageog.com, for additional information
about certain specified financial measures, including
reconciliations to the nearest GAAP measures and disclosure of
historical non-GAAP financial measures, as applicable.
The following abbreviations used in this press release
have the meanings set forth below:
bbl
|
one
barrel
|
bbls
|
barrels
|
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
|
mbbl
|
thousand
barrels
|
mboe
|
thousand barrels of
oil equivalent of natural gas
|
mcf
|
thousand cubic
feet
|
mcf/d
|
thousand cubic feet
per day
|
mcfe
|
thousand cubic feet
equivalent on the basis of six thousand cubic feet of natural gas
for one barrel of oil or NGLs
|
mmcf
|
million cubic
feet
|
mmcf/d
|
million cubic feet
per day
|
mmbtu
|
million British
thermal units
|
mmcfe/d
|
million cubic feet
equivalent per day
|
tcf
|
trillion cubic
feet
|
tcfe
|
trillion cubic feet
equivalent
|
Liquids
|
Includes NGLs,
condensate and crude oil
|
NGLs and
condensate
|
Natural Gas Liquids
as defined in National Instrument 51-101
|
Natural
Gas
|
Conventional Natural
Gas as defined in National Instrument 51-101
|
Crude
Oil
|
Light Crude Oil and
Medium Crude Oil as defined in National Instrument
51-101
|
SOURCE Advantage Energy Ltd.