Athabasca Oil Corporation (TSX: ATH) (“Athabasca” or “the Company”)
announces its 2021 budget that is focused on maintaining base
production and maximizing funds flow. The Company also is pleased
to announce that it has renewed its syndicated bank facility and
has received an increase to its unsecured letter of credit facility
backstopped by Export Development Canada.
2021
Budget
Low Sustaining
Capital. Athabasca is planning expenditures of $75
million focused on sustaining projects at Leismer along with
routine maintenance activities at all properties. Capital will be
allocated $70 million to Thermal Oil and the remainder to Light
Oil.
Resilient
Production. Annual corporate production of 31,000
– 33,000 boe/d (90% liquids) which maintains annual 2020 production
estimated to average approximately 32,250 boe/d.
Thermal Oil
Activity. At Leismer, two infill wells at Pad L6
and an additional well pair at Pad L7 will be drilled in early
2021. These wells will support production in H2 2021 with payouts
within one year at current commodity prices. The Company will
progress readiness (long lead items, lease site and road
construction, pipeline access) for a 5 well-pair sustaining pad
(L8) with the option to initiate drilling during this winter
season. The sanctioning of capital to drill these wells will be
determined at a later date and will depend on the commodity price
environment and available liquidity. Hangingstone will have no
capital allocation other than routine pump replacements. The
Hangingstone project is expected to continue its production ramp up
in 2021 following the five month shut-in over the summer this year
in response to unprecedented oil price volatility. Hangingstone’s
current production is approximately 7,500 bbl/d.
Light Oil
Activity. Minimal activities are planned with no
new wells expected to be placed on-stream during the year. The
assets continue to demonstrate top decile industry netbacks and
will contribute significant cash flow to the Company. Future
development opportunities are substantial, with approximately 150
well locations in Placid Montney and 700 well locations in Kaybob
Duvernay. The land positions in these areas have minimal near term
expiries and the capital program is flexible to adjust to commodity
prices.
Financial Position
Ample
Liquidity. The Company is well positioned to
navigate the current challenging environment with estimated
liquidity of approximately $170 million at year-end 2020 (excluding
$150.9 million of restricted cash as at September 30, 2020).
Bank Facility Renewal. The
Company’s banking syndicate has renewed the reserve-based facility
until May 31, 2021. The credit facility remains unchanged at $39.9
million which reflects current outstanding letters of credit for
long term transportation commitments and is secured by the
Company’s restricted cash balances.
Increased Unsecured
Letter of Credit Facility. The
Company also increased its unsecured letter of credit facility with
ATB Capital Markets by $10 million to $40 million which is
supported by a performance security guarantee from Export
Development Canada.
Long Term Debt. The Company has
US$450 million in second lien debt with a maturity of February 24,
2022. The refinancing of Athabasca’s long term debt remains a key
2021 priority.
Risk Management and Market Access
Athabasca protects a base level of capital
activity through its risk management program. The hedge program
targets up to 50% of corporate production.
Hedging Summary1 |
|
|
|
Q1 2021 |
|
Q2 2021 |
|
Q3 2021 |
|
Q4 2021 |
WCS Differentials |
bbl/d |
|
18,000 |
|
7,500 |
|
7,500 |
|
- |
Average Price |
US$ |
|
$14.44 |
|
$11.98 |
|
$11.98 |
|
- |
|
|
|
|
|
|
|
|
|
|
WTI2 |
US$ |
|
11,000 |
|
- |
|
- |
|
- |
Average Price3 |
bbl/d |
|
$45.44 |
|
- |
|
- |
|
- |
Notes: |
|
|
|
|
|
|
|
|
|
1. Details of hedging contracts provided in the
Company's Q3 2020 MD&A. |
2. WTI hedges are collars contracts. |
3. Average pricing reflects strip commodity
pricing as at Dec. 1, 2020. |
The Company has secured ~7,200 bbl/d of Keystone
pipeline capacity for a term of 20 years which is expected to
commence service in 2021. This capacity diversifies Thermal Oil
dilbit sales to the US Gulf Coast at pipeline costs that will allow
the Company to further enhance its netback. Longer term, Athabasca
has secured egress with capacity on both the TC Energy Keystone XL
pipeline and the Trans Mountain Expansion Project.
About Athabasca Oil Corporation
Athabasca Oil Corporation is a Canadian energy
company with a focused strategy on the development of thermal and
light oil assets. Situated in Alberta’s Western Canadian
Sedimentary Basin, the Company has amassed a significant land base
of extensive, high quality resources. Athabasca’s common shares
trade on the TSX under the symbol “ATH”. For more information,
visit www.atha.com.
For more information, please contact:
Matthew Taylor
Chief
Financial
Officer 1-403-817-9104 mtaylor@atha.com
Reader Advisory:
This News Release contains forward-looking
information that involves various risks, uncertainties and other
factors. All information other than statements of historical fact
is forward-looking information. The use of any of the words
“anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”,
“will”, “project”, “believe”, “view”, ”contemplate”, “target”,
“potential” and similar expressions are intended to identify
forward-looking information. The forward-looking information is not
historical fact, but rather is based on the Company’s current
plans, objectives, goals, strategies, estimates, assumptions and
projections about the Company’s industry, business and future
operating and financial results. This information involves 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 information. No assurance can
be given that these expectations will prove to be correct and such
forward-looking information included in this News Release should
not be unduly relied upon. This information speaks only as of the
date of this News Release. In particular, this News Release
contains forward-looking information pertaining to the following:
the Company’s 2020 expected average production, 2021 production
guidance, including % of liquids production, 2021 budget guidance,
2021 drilling plans and expected payout periods, the Hangingstone
project ramp-up, key priorities in 2021 and other matters.
With respect to forward-looking information
contained in this News Release, assumptions have been made
regarding, among other things: commodity outlook; the regulatory
framework in the jurisdictions in which the Company conducts
business; the Company’s financial and operational flexibility; the
Company’s capital expenditure outlook, financial sustainability and
ability to access sources of funding; geological and engineering
estimates in respect of Athabasca’s reserves and resources; and
other matters.
Actual results could differ materially from
those anticipated in this forward-looking information as a result
of the risk factors set forth in the Company’s Annual Information
Form (“AIF”) dated March 4, 2020 and Management Discussion &
Analysis for the three and nine months ended September 30, 2020
dated November 4, 2020 (“MD&A”), each available on SEDAR at
www.sedar.com, including, but not limited to: fluctuations in
commodity prices, foreign exchange and interest rates; political
and general economic, market and business conditions in Alberta,
Canada, the United States and globally; changes to royalty regimes,
environmental risks and hazards; the potential for management
estimates and assumptions to be inaccurate; the dependence on
Murphy as the operator of the Company’s Duvernay assets; the
capital requirements of Athabasca’s projects and the ability to
obtain financing; operational and business interruption risks,
including those that may be related to the COVID-19 pandemic;
failure by counterparties to make payments or perform their
operational or other obligations to Athabasca in compliance with
the terms of contractual arrangements; aboriginal claims; failure
to obtain regulatory approvals or maintain compliance with
regulatory requirements; uncertainties inherent in estimating
quantities of reserves and resources; litigation risk;
environmental risks and hazards; reliance on third party
infrastructure; hedging risks; insurance risks; claims made in
respect of Athabasca’s operations, properties or assets; risks
related to Athabasca’s credit facilities and senior secured notes;
and risks related to Athabasca’s common shares.
The risks and uncertainties referred to above
are described in more detail in Athabasca’s most recent AIF, which
is available on the Company’s SEDAR profile at www.sedar.com.
Readers are cautioned that the foregoing list of risk factors
should not be construed as exhaustive. The forward-looking
information included in this News Release is expressly qualified by
this cautionary statement and is made as of the date of this News
Release. The Company does not undertake any obligation to publicly
update or revise any forward-looking information except as required
by applicable securities laws.
Oil and Gas Information
“BOEs" may be misleading, particularly if used
in isolation. A BOE conversion ratio of six thousand cubic feet of
natural gas to one barrel of oil equivalent (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. As the value ratio between natural gas and crude oil
based on the current prices of natural gas and crude oil 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.
The ~700 Duvernay drilling locations referenced
in this press release include: 45 proved undeveloped or
non-producing locations and 40 probable undeveloped locations for a
total of 85 booked locations with the balance being unbooked
locations. The ~150 Montney drilling locations referenced in this
press release include: 77 proved undeveloped locations and 24
probable undeveloped locations for a total of 101 booked locations
with the balance being unbooked locations. Proved undeveloped
locations and probable undeveloped locations are booked and derived
from the Company's most recent independent reserves evaluation as
prepared by McDaniel as of December 31, 2019 and account for
drilling locations that have associated proved and/or probable
reserves, as applicable. Unbooked locations are internal management
estimates. Unbooked locations do not have attributed reserves or
resources (including contingent or prospective). Unbooked locations
have been identified by management as an estimation of Athabasca’s
multi-year drilling activities expected to occur over the next two
decades based on evaluation of applicable geologic, seismic,
engineering, production and reserves information. There is no
certainty that the Company will drill all unbooked drilling
locations and if drilled there is no certainty that such locations
will result in additional oil and gas reserves, resources or
production. The drilling locations on which the Company will
actually drill wells, including the number and timing thereof is
ultimately dependent upon the availability of funding, oil and
natural gas prices, provincial fiscal and royalty policies, costs,
actual drilling results, additional reservoir information that is
obtained and other factors.
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