Birchcliff Energy Ltd. (“
Birchcliff” or the
“
Corporation”) (TSX: BIR) is pleased to announce
its Q2 2022 financial and operational results, which included
record quarterly adjusted funds flow and free funds flow, resulting
in a significant reduction in the Corporation’s total debt.
“Birchcliff had a record quarter in Q2 2022,”
stated Jeff Tonken, Chief Executive Officer of Birchcliff. “We
remain confident that Birchcliff will reach zero total debt and be
in a cash surplus position in Q4 2022, based on the strength of
forward commodity prices. We continue to target increasing our
annual common share dividend in 2023 to at least $0.80 per share
($212 million annually), subject to commodity prices and the
approval of our board of directors. We have initiated our formal
budgeting process for 2023 and plan on providing a corporate update
and releasing our preliminary 2023 budget on October 13, 2022.”
Mr. Tonken continued: “Birchcliff’s quarterly
average production was 73,746 boe/d, resulting in record quarterly
adjusted funds flow(1) of $285.5 million ($1.08 per basic common
share(2)) and record quarterly free funds flow(1) of $201.3 million
($0.76 per basic common share(2)). To illustrate this
accomplishment, our free funds flow in Q2 2022 was $17.6 million
higher than our adjusted funds flow in Q1 2022, a quarterly record
at the time. These results allowed us to significantly reduce our
total debt(3) at June 30, 2022 to $266.9 million, a decrease of
$504.0 million (65%) from June 30, 2021 and $142.1 million (35%)
from March 31, 2022.”
Q2 2022 HIGHLIGHTS
-
Achieved quarterly average production of 73,746 boe/d, which
included the impact of planned turnarounds and maintenance
activities, a 2% decrease from Q2 2021. Liquids accounted for 17%
of Birchcliff’s total production in Q2 2022 as compared to 22% in
Q2 2021.
-
Generated record quarterly adjusted funds flow of $285.5 million,
or $1.08 per basic common share, a 217% and 218% increase,
respectively, from Q2 2021. Cash flow from operating activities was
$273.7 million, a 238% increase from Q2 2021.
-
Delivered record quarterly free funds flow of $201.3 million, or
$0.76 per basic common share, an increase of $192.0 million from Q2
2021.
-
Earned record quarterly net income to common shareholders of $213.9
million, or $0.81 per basic common share, a 388% and 406% increase,
respectively, from Q2 2021.
- F&D capital expenditures were
$84.2 million in Q2 2022, which included drilling 12 (12.0 net)
wells and bringing 10 (10.0 net) wells on production.
-
Significantly reduced total debt at June 30, 2022 to $266.9
million, a reduction of $504.0 million (65%) from June 30,
2021.
-
Achieved an operating netback(2) of $41.73/boe, a 143% increase
from Q2 2021.
-
Achieved adjusted funds flow per boe(2) of $42.55, a 223% increase
from Q2 2021.
-
Realized an operating expense(4) of $3.40/boe, an 8% increase from
Q2 2021.
-
In Q2 2022, Birchcliff returned $46.0 million to common
shareholders through dividends and purchases under its normal
course issuer bid (the “NCIB”), including the
doubling of its common share dividend and the purchase of 4,211,596
common shares under the NCIB at an average price of $9.67 per share
(before fees). In the first six months of 2022, Birchcliff returned
$57.4 million to common shareholders through dividends and the
purchase of 5,514,792 common shares under the NCIB at an average
price of $8.96 per share (before fees).
Birchcliff’s unaudited interim condensed
financial statements for the three and six months ended June 30,
2022 and related management’s discussion and analysis will be
available on its website at www.birchcliffenergy.com and on SEDAR
at www.sedar.com.
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”.
(1) Non-GAAP financial measure. See
“Non-GAAP and Other Financial Measures”.(2) Non-GAAP
ratio. See “Non-GAAP and Other Financial Measures”. (3)
Capital management measure. See “Non-GAAP and Other Financial
Measures”. (4) Supplementary financial measure. See
“Non-GAAP and Other Financial Measures”.
Q2 2022 FINANCIAL AND OPERATIONAL
SUMMARY
|
|
Three months endedJune 30, |
|
Six months endedJune 30, |
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
OPERATING |
|
|
|
|
|
Average production |
|
|
|
|
|
Light oil (bbls/d) |
1,855 |
|
2,766 |
|
2,111 |
|
3,059 |
|
|
Condensate (bbls/d) |
4,500 |
|
6,070 |
|
4,647 |
|
5,770 |
|
|
NGLs (bbls/d) |
6,349 |
|
7,647 |
|
7,158 |
|
8,187 |
|
|
Natural gas (Mcf/d) |
366,256 |
|
352,694 |
|
365,779 |
|
348,897 |
|
|
Total (boe/d) |
73,746 |
|
75,265 |
|
74,879 |
|
75,166 |
|
|
Average realized sales price (CDN$)(1)(2) |
|
|
|
|
|
Light oil (per bbl) |
135.91 |
|
76.50 |
|
124.50 |
|
71.33 |
|
|
Condensate (per bbl) |
138.28 |
|
81.90 |
|
129.70 |
|
78.28 |
|
|
NGLs (per bbl) |
48.26 |
|
25.27 |
|
45.66 |
|
24.96 |
|
|
Natural gas (per Mcf) |
8.61 |
|
3.48 |
|
7.02 |
|
3.50 |
|
|
Total (per boe) |
58.75 |
|
28.27 |
|
50.19 |
|
27.87 |
|
|
|
|
|
|
|
| NETBACK AND
COST ($/boe)(2) |
|
|
|
|
|
Petroleum and natural gas revenue(1) |
58.75 |
|
28.27 |
|
50.19 |
|
27.87 |
|
|
Royalty expense |
(7.75 |
) |
(2.44 |
) |
(6.06 |
) |
(2.08 |
) |
|
Operating expense |
(3.40 |
) |
(3.14 |
) |
(3.44 |
) |
(3.16 |
) |
|
Transportation and other expense(3) |
(5.87 |
) |
(5.50 |
) |
(5.65 |
) |
(5.51 |
) |
|
Operating netback(3) |
41.73 |
|
17.19 |
|
35.04 |
|
17.12 |
|
|
G&A expense, net |
(1.15 |
) |
(0.88 |
) |
(1.14 |
) |
(0.90 |
) |
|
Interest expense |
(0.50 |
) |
(1.21 |
) |
(0.49 |
) |
(1.21 |
) |
|
Realized gain (loss) on financial instruments |
2.49 |
|
(1.96 |
) |
1.21 |
|
(2.12 |
) |
|
Other income (expense) |
(0.02 |
) |
0.03 |
|
- |
|
0.19 |
|
|
Adjusted funds flow(3) |
42.55 |
|
13.17 |
|
34.62 |
|
13.08 |
|
|
Depletion and depreciation expense |
(7.52 |
) |
(7.49 |
) |
(7.50 |
) |
(7.48 |
) |
|
Unrealized gain on financial instruments |
7.07 |
|
3.12 |
|
6.06 |
|
1.01 |
|
|
Other non-cash (expense) income(4) |
(0.38 |
) |
(0.24 |
) |
(0.22 |
) |
0.01 |
|
|
Dividends on preferred shares |
(0.26 |
) |
(0.25 |
) |
(0.26 |
) |
(0.25 |
) |
|
Deferred income tax expense |
(9.59 |
) |
(1.91 |
) |
(7.64 |
) |
(1.52 |
) |
|
Net income to common shareholders |
31.87 |
|
6.40 |
|
25.06 |
|
4.85 |
|
|
|
|
|
|
|
|
FINANCIAL |
|
|
|
|
|
Petroleum and natural gas revenue ($000s)(1) |
394,315 |
|
193,643 |
|
680,291 |
|
379,252 |
|
|
Cash flow from operating activities ($000s) |
273,711 |
|
81,013 |
|
427,863 |
|
163,621 |
|
| Adjusted funds
flow ($000s)(5) |
285,535 |
|
90,188 |
|
469,234 |
|
178,008 |
|
|
Per basic common share ($)(3) |
1.08 |
|
0.34 |
|
1.77 |
|
0.67 |
|
| Free funds
flow ($000s)(5) |
201,288 |
|
9,301 |
|
296,705 |
|
1,281 |
|
|
Per basic common share ($)(3) |
0.76 |
|
0.03 |
|
1.12 |
|
- |
|
| Net income to common
shareholders ($000s) |
213,855 |
|
43,854 |
|
339,647 |
|
66,019 |
|
|
Per basic common share ($) |
0.81 |
|
0.16 |
|
1.28 |
|
0.25 |
|
|
End of period basic common shares (000s) |
265,204 |
|
266,953 |
|
265,204 |
|
266,953 |
|
| Weighted average basic common
shares (000s) |
265,440 |
|
266,231 |
|
265,485 |
|
266,110 |
|
|
Dividends on common shares ($000s) |
5,310 |
|
1,333 |
|
7,968 |
|
2,663 |
|
|
Dividends on preferred shares ($000s) |
1,715 |
|
1,725 |
|
3,432 |
|
3,471 |
|
|
F&D capital expenditures ($000s)(6) |
84,247 |
|
80,887 |
|
172,529 |
|
176,727 |
|
| Total capital
expenditures ($000s)(5) |
86,150 |
|
81,160 |
|
174,274 |
|
177,785 |
|
| Long-term
debt ($000s) |
276,030 |
|
720,920 |
|
276,030 |
|
720,920 |
|
| Total
debt ($000s)(7) |
266,894 |
|
770,897 |
|
266,894 |
|
770,897 |
|
(1) Excludes the effects of financial
instruments but includes the effects of physical delivery
contracts.(2) Average realized sales prices and the
component values of netback and cost set forth in the table above
are supplementary financial measures unless otherwise indicated.
See “Non-GAAP and Other Financial Measures”.
(3) Non-GAAP ratio. See “Non-GAAP and Other
Financial Measures”.(4) Includes non-cash items
such as compensation, accretion, amortization of deferred financing
fees and other gains and losses.(5) Non-GAAP
financial measure. See “Non-GAAP and Other Financial
Measures”.(6) See “Advisories – F&D Capital
Expenditures”. (7) Capital management measure. See
“Non-GAAP and Other Financial Measures”.
OUTLOOK AND GUIDANCE
2023 Budgeting Process
The Corporation has initiated its formal
budgeting process for 2023, which will be geared towards maximizing
Birchcliff’s ability to generate free funds flow, increasing
shareholder returns and fully utilizing the processing capacity of
the Corporation’s existing infrastructure. Birchcliff plans to
provide a corporate update and release its preliminary 2023 budget
on October 13, 2022 after the completion of the Corporation’s
preliminary 2023 budget planning process.
Updated 2022 Guidance
Birchcliff continues to expect to reach zero
total debt and be in a cash surplus position in Q4 2022, which
takes into account the redemption of all of its issued and
outstanding cumulative redeemable preferred shares, Series A (the
“Series A Preferred Shares”) and cumulative
redeemable preferred shares, Series C (the “Series C
Preferred Shares”) on September 30, 2022 for an aggregate
redemption price of approximately $88.2 million, which redemption
was announced by the Corporation on August 4, 2022. Birchcliff is
able to take full advantage of strong commodity prices because it
has no fixed price commodity hedges in place and it does not
currently intend to hedge any future production.
Birchcliff is updating its 2022 guidance to
reflect the current commodity price environment and the impacts of
inflation on its business. The Corporation anticipates significant
production additions in the second half of 2022 and is maintaining
its previous guidance for annual average production at 78,000 to
80,000 boe/d. Significant changes to Birchcliff’s guidance include
the following:
- Adjusted funds flow for 2022 is now
anticipated to be $1.1 billion, primarily as a result of the
revised commodity price forecast.
-
F&D capital expenditures in 2022 are now anticipated to be $275
million to $285 million, primarily as a result of increased
inflation and the procurement of certain long-lead capital items to
prepare for the efficient execution of Birchcliff’s 2023 capital
program.
-
Free funds flow for 2022 is now anticipated to be $830 million to
$840 million and excess free funds flow for 2022 is now anticipated
to be $810 million to $820 million, both as a result of the changes
to Birchcliff’s adjusted funds flow and F&D capital
expenditures guidance.
-
Birchcliff is now forecasting that it will have a surplus of $160
million to $170 million at December 31, 2022.
-
Average royalty expense for 2022 is now anticipated to be $6.60/boe
to $6.80/boe, primarily as a result of the revised commodity price
forecast.
-
Average operating expense for 2022 is now anticipated to be
$3.30/boe to $3.50/boe, primarily as a result of anticipated
inflationary pressures continuing to impact power and other fuel
supply costs.
The following table sets forth Birchcliff’s
updated and previous guidance and commodity price assumptions for
2022, as well as its free funds flow sensitivity:
2022 Guidance and Commodity Price
Assumptions
|
|
Updated 2022guidance and assumptions
–August 10, 2022(1) |
Previous 2022guidance and assumptions
–May 11, 2022 |
Original 2022guidance and assumptions
–January 19, 2022 |
|
Production |
|
|
|
|
Annual average production (boe/d) |
78,000 – 80,000 |
78,000 – 80,000 |
78,000 – 80,000 |
|
% Light oil |
3% |
3% |
3% |
|
% Condensate |
6% |
7% |
7% |
|
% NGLs |
10% |
10% |
10% |
|
% Natural gas |
81% |
80% |
80% |
|
Q4 average production (boe/d) |
81,000 – 83,000 |
81,000 – 83,000 |
81,000 – 83,000 |
|
|
|
|
|
|
Average Expenses ($/boe) |
|
|
|
|
Royalty(2) |
6.60 – 6.80 |
7.10 – 7.30 |
3.10 – 3.30 |
|
Operating(2) |
3.30 – 3.50 |
3.15 – 3.35 |
3.15 – 3.35 |
|
Transportation and other(3) |
5.30 – 5.50 |
5.20 – 5.40 |
4.90 – 5.10 |
|
Interest(2) |
0.30 – 0.50 |
0.20 – 0.40 |
0.50 – 0.60 |
|
|
|
|
|
|
Adjusted Funds Flow(4) |
$1.115 billion |
$1.180 billion |
$0.590 billion |
|
|
|
|
|
|
F&D Capital Expenditures (millions) |
$275 – $285(5) |
$240 – $260 |
$240 – $260 |
|
|
|
|
|
|
Free Funds Flow (millions)(4) |
$830 – $840 |
$920 – $940 |
$330 – $350 |
|
|
|
|
|
|
Excess Free Funds Flow (millions)(4)(6) |
$810 – $820 |
$900 – $920 |
N/A |
|
|
|
|
|
|
Surplus (Total Debt) at Year
End (millions)(7) |
$160 – $170(8) |
$260 – $280 |
($175 – $195) |
|
|
|
|
|
|
Natural Gas Market Exposure |
|
|
|
|
AECO exposure as a % of total natural gas production |
16% |
19% |
19% |
|
Dawn exposure as a % of total natural gas production |
42% |
42% |
42% |
|
NYMEX HH exposure as a % of total natural gas production |
38% |
38% |
38% |
|
Alliance exposure as a % of total natural gas production |
4% |
1% |
1% |
|
|
|
|
|
|
Commodity Prices |
|
|
|
|
Average WTI price (US$/bbl) |
99.00 |
99.50 |
76.00 |
|
Average WTI-MSW differential (CDN$/bbl) |
3.60 |
3.10 |
5.00 |
|
Average AECO price (CDN$/GJ) |
5.60 |
6.50 |
3.50 |
|
Average Dawn price (US$/MMBtu) |
6.65 |
6.85 |
3.90 |
|
Average NYMEX HH price (US$/MMBtu) |
6.95 |
6.95 |
4.00 |
|
Exchange rate (CDN$ to US$1) |
1.28 |
1.28 |
1.26 |
Forward Six Months’ Free Funds Flow
Sensitivity(9)
|
Forward six months’ sensitivity |
Estimated change to 2022 free funds
flow (millions) |
|
Change in WTI US$1.00/bbl |
$1.8 |
|
Change in NYMEX HH US$0.10/MMBtu |
$2.4 |
|
Change in Dawn US$0.10/MMBtu |
$2.9 |
|
Change in AECO CDN$0.10/GJ |
$1.3 |
|
Change in CDN/US exchange rate CDN$0.01 |
$4.1 |
(1) Birchcliff’s updated guidance
for its production commodity mix, adjusted funds flow, free funds
flow, excess free funds flow, surplus and natural gas market
exposure in 2022 is based on an annual average production rate of
79,000 boe/d, which is the mid-point of Birchcliff’s annual average
production guidance range for 2022. 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)
Birchcliff’s updated estimate of F&D capital expenditures
excludes any net potential acquisitions and dispositions and the
capitalized portion of annual cash incentive payments that have not
been approved by Birchcliff’s board of directors. See “Advisories –
F&D Capital Expenditures”. (6) Excess free
funds flow is defined as free funds flow less common share
dividends paid. This measure was not disclosed on January 19,
2022.(7) Capital management measure. See “Non-GAAP
and Other Financial Measures”. (8) Surplus is
equivalent to adjusted working capital surplus as disclosed in the
Corporation’s financial statements (see “Non-GAAP and Other
Financial Measures”). The updated estimate of surplus at December
31, 2022 is expected to be largely comprised of cash on hand plus
accounts receivable less accounts payable at the end of the year.
Birchcliff previously referred to “surplus” as
“cash”.(9) Illustrates the expected impact of
changes in commodity prices and the CDN/US exchange rate on the
Corporation’s estimate of free funds flow for 2022 of $830 million
to $840 million. The sensitivity is based on the updated 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.
Q2 2022 FINANCIAL AND OPERATIONAL
RESULTS
Production
Birchcliff’s production averaged 73,746 boe/d in
Q2 2022, a 2% decrease from 75,265 boe/d in Q2 2021. The decrease
in production was primarily due to a major scheduled turnaround in
May and June 2022 at AltaGas’ deep-cut sour gas processing facility
in Gordondale (the “AltaGas Facility”) that
decreased quarterly liquids and natural gas production in
Gordondale by approximately 3,600 boe/d. Production was positively
impacted by incremental production volumes from the new
Montney/Doig wells brought on production since Q2 2021, including
the new 10-well (01-08) pad in Pouce Coupe brought on production in
May 2022 and the new 6-well (13-29) pad in Pouce Coupe brought on
production in February 2022, partially offset by natural production
declines.
Birchcliff is on target to meet is annual
average production guidance of 78,000 to 80,000 boe/d due to
significant production additions expected in the second half of
2022.
Liquids accounted for 17% of Birchcliff’s total
production in Q2 2022 as compared to 22% in Q2 2021, with a
liquids-to-gas ratio in Q2 2022 of 34.7 bbls/MMcf (50% high-value
light oil and condensate). The decrease in liquids weighting was
primarily due to a combination of lower liquids production in
Gordondale as a result of the AltaGas Facility turnaround, the
Corporation specifically targeting horizontal natural gas wells in
liquids-rich zones in the Pouce Coupe and Gordondale areas since Q2
2021 and natural production declines from light oil and
liquids-rich natural gas wells producing since Q2 2021.
Adjusted Funds Flow and Cash Flow From
Operating Activities
Birchcliff achieved record quarterly adjusted
funds flow of $285.5 million, or $1.08 per basic common share, in
Q2 2022, a 217% and 218% increase, respectively, from $90.2 million
and $0.34 per basic common share in Q2 2021. Birchcliff’s cash flow
from operating activities was $273.7 million in Q2 2022, a 238%
increase from $81.0 million in Q2 2021. The increases were
primarily due to higher reported petroleum and natural gas revenue
and a realized gain on financial instruments of $16.7 million in Q2
2022 as compared to a realized loss on financial instruments of
$13.4 million in Q2 2021, partially offset by a higher royalty
expense in Q2 2022. The increases in petroleum and natural gas
revenue and royalty expense were largely the result of a 108%
increase in the average realized sales price received for
Birchcliff’s production in Q2 2022. The Corporation’s average
realized sales price in Q2 2022 benefited from significant
increases in benchmark oil and natural gas prices since Q2 2021.
See “Q2 2022 Financial and Operational Results – Commodity
Prices”.
Free Funds Flow
Birchcliff delivered record quarterly free funds
flow of $201.3 million, or $0.76 per basic common share, in Q2
2022, as compared to $9.3 million and $0.03 per basic common share
in Q2 2021. The increases were primarily due to significantly
higher adjusted funds flow and comparable F&D capital
expenditures in Q2 2022 as compared to Q2 2021.
Net Income to Common
Shareholders
Birchcliff earned record quarterly net income to
common shareholders of $213.9 million, or $0.81 per basic common
share, in Q2 2022, a 388% and 406% increase, respectively, from
$43.9 million and $0.16 per basic common share in Q2 2021. The
increases were primarily due to higher adjusted funds flow and a
higher unrealized mark-to-market gain on financial instruments,
partially offset by an increase in deferred income tax expense in
Q2 2022. Birchcliff recorded an unrealized mark-to-market gain on
financial instruments of $47.5 million in Q2 2022, as compared to
$21.3 million in Q2 2021.
Operating Netback and Selected Cash
Costs
In Q2 2022, Birchcliff’s operating netback was
$41.73/boe, a 143% increase from $17.19/boe in Q2 2021. The
increase was primarily due to higher per boe petroleum and natural
gas revenue, partially offset by a higher per boe royalty expense,
both of which were both largely impacted by a 108% increase in the
average realized sales price received for Birchcliff’s production
in Q2 2022.
The following table sets forth Birchcliff’s
selected cash costs for the periods indicated:
|
|
Three months endedJune 30, |
|
($/boe) |
2022 |
2021 |
% Change |
| Royalty expense(1) |
7.75 |
2.44 |
218% |
| Operating expense(1) |
3.40 |
3.14 |
8% |
| Transportation and other
expense(2) |
5.87 |
5.50 |
7% |
| G&A expense, net(1) |
1.15 |
0.88 |
31% |
|
Interest expense(1) |
0.50 |
1.21 |
(59%) |
(1) Supplementary financial
measure. See “Non-GAAP and Other Financial
Measures”.(2) Non-GAAP ratio. See “Non-GAAP and
Other Financial Measures”.
Royalty expense per boe increased by 218% from
Q2 2021, primarily due to the significant increase in the average
realized sales price received for Birchcliff’s liquids and natural
gas production in Q2 2022.
Operating expense per boe increased by 8% from
Q2 2021, primarily due to higher inflationary pressures on power
and other fuel supply costs which together increased by 45% on a
per boe basis. Operating expense per boe was also negatively
impacted by higher field labour costs, road and lease maintenance
costs, municipal property taxes and regulatory fees, and was
partially offset by lower third-party natural gas processing fees
resulting from the turnaround at the AltaGas Facility in Q2
2022.
Transportation and other expense per boe
increased by 7% from Q2 2021, primarily due to higher natural gas
transportation costs which resulted from increased natural gas
production and higher firm NGTL tolling charges. Notwithstanding
lower liquids production, liquids transportation and fractionation
costs also increased in Q2 2022, primarily due to inflationary
pressures that resulted in higher pipeline tariffs, higher trucking
and hauling costs and higher variable operating, power, fuel and
service costs.
Net G&A expense per boe increased by 31%
from Q2 2021, primarily due to higher employee-related expenses,
higher corporate costs due to the easing of Birchcliff’s COVID-19
restrictions and higher general business expenditures due to
inflationary pressures.
Interest expense per boe decreased by 59% from
Q2 2021, primarily due to a decrease in the Corporation’s average
effective interest rate and a lower average outstanding balance
under its extendible revolving credit facilities (the
“Credit Facilities”) in Q2 2022.
Debt and Credit Facilities
Total debt at June 30, 2022 was $266.9 million,
a decrease of 65% from $770.9 million at June 30, 2021. At June 30,
2022, Birchcliff had long-term bank debt under the Credit
Facilities of $276.0 million (June 30, 2021: $720.9 million) from
available Credit Facilities of $850.0 million (June 30, 2021:
$850.0 million), leaving $569.4 million of unutilized credit
capacity after adjusting for outstanding letters of credit and
unamortized fees.
During Q2 2022, Birchcliff’s syndicate of
lenders completed its regular semi-annual review of the borrowing
base limit under the Credit Facilities. As a result of this review,
the agreement governing the Credit Facilities was amended effective
May 3, 2022 to extend the maturity dates of each of the syndicated
extendible revolving term credit facility and the extendible
revolving working capital facility from May 11, 2024 to May 11,
2025. In addition, the lenders confirmed the borrowing base limit
at $850.0 million. The Credit Facilities do not contain any
financial maintenance covenants.
Commodity Prices
The following table sets forth the average
benchmark commodity index prices and exchange rate for the periods
indicated:
|
|
Three months endedJune 30, |
|
|
2022 |
2021 |
% Change |
| Light oil – WTI
Cushing (US$/bbl) |
109.08 |
66.07 |
65% |
| Light oil – MSW (Mixed
Sweet) (CDN$/bbl) |
137.55 |
76.77 |
79% |
| Natural gas – NYMEX
HH (US$/MMBtu)(1) |
7.17 |
2.83 |
153% |
| Natural gas – AECO 5A
Daily (CDN$/GJ) |
6.86 |
2.98 |
130% |
| Natural gas – AECO 7A Month
Ahead (US$/MMBtu)(1) |
4.94 |
2.32 |
113% |
| Natural gas – Dawn Day
Ahead (US$/MMBtu)(1) |
7.21 |
2.80 |
158% |
| Natural gas – ATP 5A Day
Ahead (CDN$/GJ) |
7.48 |
2.68 |
179% |
| Exchange rate (CDN$ to
US$1) |
1.2688 |
1.2281 |
3% |
|
Exchange rate (US$ to CDN$1) |
0.7881 |
0.8143 |
(3%) |
(1) See “Advisories – MMBtu
Pricing Conversions”.
Marketing and Natural Gas Market
Diversification
Birchcliff’s physical natural gas sales exposure
primarily consists of the AECO, Dawn and Alliance markets. In
addition, the Corporation has various financial instruments
outstanding that provide it with exposure to NYMEX HH pricing.
The following table details Birchcliff’s
effective sales, production and average realized sales price for
natural gas and liquids for Q2 2022, after taking into account the
Corporation’s financial instruments:
|
Three months ended June 30, 2022 |
|
|
Effectivesales(CDN$000s) |
Percentage of total sales(%) |
Effectiveproduction(per day) |
Percentage oftotal natural gas
production(%) |
Percentage oftotal corporate
production(%) |
Effective average realizedsales
price(CDN$) |
|
Market |
|
|
|
|
|
|
|
AECO(1)(2)(3) |
48,133 |
11% |
67,748 Mcf |
18% |
15% |
7.81/Mcf |
|
Dawn(4) |
141,145 |
33% |
159,817 Mcf |
44% |
36% |
9.71/Mcf |
|
NYMEX HH(1)(2)(5) |
136,627 |
32% |
138,691 Mcf |
38% |
32% |
10.83/Mcf |
|
Total natural gas(1) |
325,905 |
76% |
366,256 Mcf |
100% |
83% |
9.78/Mcf |
|
Light oil |
22,935 |
5% |
1,855 bbls |
|
2% |
135.91/bbl |
|
Condensate |
56,620 |
13% |
4,500 bbls |
|
6% |
138.28/bbl |
|
NGLs |
27,887 |
6% |
6,349 bbls |
|
9% |
48.26/bbl |
|
Total liquids |
107,442 |
24% |
12,704 bbls |
|
17% |
92.94/bbl |
|
Total corporate(1) |
433,347 |
100% |
73,746 boe |
|
100% |
64.57/boe |
(1) Effective sales and effective
average realized sales price are non-GAAP financial measures and
non-GAAP ratios, respectively, as identified in the above table.
See “Non-GAAP and Other Financial
Measures”.(2) AECO sales and production that
effectively received NYMEX HH pricing under Birchcliff’s long-term
physical NYMEX HH/AECO 7A basis swap contracts have been included
as effective sales and production in the NYMEX HH market.
Birchcliff sold physical NYMEX HH/AECO 7A basis swaps for 5,000
MMBtu/d at an average contract price of NYMEX HH less
US$1.205/MMBtu during Q2 2022.(3) Birchcliff has
short-term physical sales agreements with third-party marketers to
sell and deliver into the Alliance pipeline system. All of
Birchcliff’s short-term physical Alliance sales and production
during Q2 2022 received AECO premium pricing and have therefore
been included as effective sales and production in the AECO
market.(4) Birchcliff has agreements for the firm
service transportation of an aggregate of 175,000 GJ/d of natural
gas on TransCanada PipeLines’ Canadian Mainline, whereby natural
gas is transported to the Dawn trading hub in Southern
Ontario.(5) NYMEX HH sales and production includes
financial and physical NYMEX HH/AECO 7A basis swaps for 152,500
MMBtu/d at an average contract price of NYMEX HH less
US$1.227/MMBtu during Q2 2022. Birchcliff’s effective average
realized sales price for NYMEX HH of CDN$10.83/Mcf (US$7.76/MMBtu)
was determined on a gross basis before giving effect to the average
NYMEX HH/AECO 7A fixed contract basis differential price of
CDN$1.70/Mcf (US$1.23/MMBtu). After giving effect to the NYMEX
HH/AECO 7A basis contact price, Birchcliff’s effective average
realized net sales price for NYMEX HH was CDN$9.13/Mcf
(US$6.53/MMBtu) in Q2 2022.
The following table sets forth Birchcliff’s
sales, production, average realized sales price, transportation
costs and natural gas sales netback by natural gas market for the
periods indicated, before taking into account the Corporation’s
financial instruments:
|
Three months ended June 30, 2022 |
|
|
Natural
gassales(1)(CDN$000s) |
Percentage of natural gas sales(%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realizednatural gas
salesprice(1)(2)(CDN$/Mcf) |
Natural gas transportation
costs(2)(3)(CDN$/Mcf) |
Natural gas sales netback(2)(4)(CDN$/Mcf) |
|
AECO |
131,062 |
46 |
186,717 |
51 |
7.71 |
0.45 |
7.35 |
|
Dawn |
141,145 |
49 |
159,817 |
44 |
9.71 |
1.50 |
8.20 |
|
Alliance(5) |
14,648 |
5 |
19,722 |
5 |
8.16 |
- |
8.16 |
|
Total |
286,855 |
100 |
366,256 |
100 |
8.61 |
0.89 |
7.72 |
|
Three months ended June 30, 2021 |
|
|
Natural
gassales(1)(CDN$000s) |
Percentage of natural gas sales(%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realizednatural gas
salesprice(1)(2)(CDN$/Mcf) |
Natural gas transportation
costs(2)(3)(CDN$/Mcf) |
Natural gas sales netback(2)(4)(CDN$/Mcf) |
|
AECO |
43,721 |
39 |
147,178 |
42 |
3.28 |
0.49 |
2.79 |
|
Dawn |
53,025 |
48 |
159,197 |
45 |
3.66 |
1.55 |
2.11 |
|
Alliance(5) |
14,810 |
13 |
46,319 |
13 |
3.51 |
- |
3.51 |
|
Total |
111,556 |
100 |
352,694 |
100 |
3.48 |
0.91 |
2.57 |
(1) Excludes the effects of
financial instruments but includes the effects of physical delivery
contracts.(2) Supplementary financial measure. See
“Non-GAAP and Other Financial
Measures”.(3) Reflects costs to transport natural
gas from the field receipt point to the delivery sales trading
hub.(4) Natural gas sales netback denotes the
average realized natural gas sales price less natural gas
transportation costs.(5) Birchcliff has short-term
physical sales agreements with third-party marketers to sell and
deliver into the Alliance pipeline system. Alliance sales are
recorded net of transportation tolls.
Capital Activities and
Investment
F&D capital expenditures were $84.2 million
in Q2 2022. In Q2 2022, Birchcliff drilled 12 (12.0 net) wells and
brought 10 (10.0 net) wells on production. In addition, Birchcliff
safely and efficiently completed significant turnarounds in Pouce
Coupe and Gordondale. See “Operations Update”.
OPERATIONS UPDATE
As at the date hereof, Birchcliff has
successfully completed the drilling of all 30 (30.0 net) wells
under its 2022 capital program and has completed 26 (26.0 net)
wells (which includes 5 wells that were drilled and rig released in
Q4 2021). During Q3 2022, Birchcliff anticipates that it will
finish well completions and bring on production 10 (10.0 net) wells
in Pouce Coupe and 9 (9.0 net) wells in Gordondale. Similar to the
wells previously brought on production this year, these 19 (19.0
net) wells are expected to deliver strong natural gas and
condensate rates with an average payout of less than a year, driven
by successful execution and robust commodity prices. As part of its
long-term planning strategy, the Corporation has secured multi-year
contracts with its key service providers to ensure the efficient
execution of its short and long-term plans.
The following table sets forth the wells that
are part of the Corporation’s 2022 capital program, including the
anticipated timing of the remaining wells to be completed and
brought on production in 2022:
|
|
Total # of wells to be brought on production in
2022 |
|
Status at August 10, 2022 |
|
|
Drilled |
|
Completed |
|
On production |
|
|
|
|
|
|
|
|
|
|
POUCE COUPE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13-29 pad |
Basal Doig/Upper Montney |
2 |
|
0 |
|
2 |
|
2 |
|
|
|
Montney D1 |
4 |
|
1 |
|
4 |
|
4 |
|
|
|
Total |
6(1) |
|
1 |
|
6 |
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
01-08 pad |
Basal Doig/Upper Montney |
4 |
|
4 |
|
4 |
|
4 |
|
|
|
Montney D1 |
5 |
|
5 |
|
5 |
|
5 |
|
|
|
Montney C |
1 |
|
1 |
|
1 |
|
1 |
|
|
|
Total |
10 |
|
10 |
|
10 |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
04-04 pad |
Basal Doig/Upper Montney |
6 |
|
6 |
|
6 |
|
Q3 |
|
|
|
Montney D1 |
3 |
|
3 |
|
3 |
|
Q3 |
|
|
|
Montney C |
1 |
|
1 |
|
1 |
|
Q3 |
|
|
|
Total |
10 |
|
10 |
|
10 |
|
|
|
GORDONDALE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06-35 pad |
Montney D2 |
5 |
|
5 |
|
Q3 |
|
Q3 |
|
|
|
Montney D1 |
4 |
|
4 |
|
Q3 |
|
Q3 |
|
|
Total |
9 |
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
35(1) |
|
30 |
|
26 |
|
16 |
(1) Includes 5 wells that were
drilled and rig released in Q4 2021.
Pouce Coupe Area
6-well pad (13-29-77-12W6)
Birchcliff’s 13-29 pad was brought on production
in Q1 2022. The initial 30 and 60 day production rates for the
wells from the 13-29 pad were disclosed in the Corporation’s press
release dated May 11, 2022. The performance of this pad continues
to exceed the Corporation’s expectations, with very strong natural
gas and condensate production rates. In addition, Birchcliff
continues to see stabilized production rates for an extended
duration, which allows for strong stable production profiles and
less backout of Birchcliff’s existing area production.
10-well pad (01-08-78-13W6)
Birchcliff’s 01-08 pad in Pouce Coupe was
drilled in Q2 2022 and brought on production in April and May 2022
through Birchcliff’s owned and operated infrastructure. The wells
from the 01-08 pad have now been producing for over 60 days and
have produced in-line with the Corporation’s forecast. During the
initial 30 and 60 days of production, the pad was flowing inline
post-fracture condensate, raw natural gas and frac water. The
production rates of the wells are stabilized and the frac water
flowing back to surface continues to diminish over time. The
following table summarizes the aggregate and average production
rates for the 10 wells from the 01-08 pad:
|
|
IP 30(1) |
IP 60(1) |
|
Aggregate production
rate (boe/d) |
9,079 |
8,261 |
|
Aggregate natural gas production rate (Mcf/d) |
52,552 |
47,921 |
|
Aggregate condensate production rate (bbls/d) |
358 |
288 |
|
Average per well production
rate (boe/d) |
908 |
826 |
|
Average per well natural gas production rate (Mcf/d) |
5,255 |
4,792 |
|
Average per well condensate production rate (bbls/d) |
36 |
29 |
|
Condensate-to-gas
ratio (bbls/MMcf) |
7 |
6 |
(1) Represents the cumulative
volumes for each well measured at the wellhead separator for the 30
or 60 days (as applicable) of production immediately after each
well was considered stabilized after producing fracture treatment
fluid back to surface in an amount such that flow rates of
hydrocarbons became reliable. See “Advisories – Initial Production
Rates”.
10-well pad (04-04-78-13W6)
The Corporation recently finished completion
operations on its 04-04 pad in Pouce Coupe and all 10 wells are
expected to be brought on production in Q3 2022. Birchcliff
anticipates providing further details regarding the results of
these wells with the release of its Q3 2022 results.
Gordondale Area
9-well pad (06-35-77-11W6)
Birchcliff’s 06-35 pad in Gordondale was drilled
in Q2 and Q3 2022 and is expected to be completed and brought on
production before the end of Q3 2022. These wells are offsetting
high-rate light oil and natural gas producing wells drilled by
Birchcliff in the southeastern portion of Gordondale in the
previous three years. Birchcliff anticipates providing further
details regarding the results of these wells with the release of
its Q3 2022 results.
Turnarounds
During Q2 2022, Birchcliff safely and
efficiently completed significant turnarounds in Pouce Coupe and
Gordondale. In April 2022, Birchcliff completed a turnaround at its
100% owned and operated natural gas processing plant in Pouce
Coupe, ahead of schedule and on budget, while effectively
mitigating the impact to production volumes. In May and June 2022,
the Corporation completed a significant turnaround in Gordondale at
two of Birchcliff’s major oil batteries, while a turnaround was
completed by AltaGas at the AltaGas Facility.
The completion of these turnarounds was
particularly challenging in the current environment due to labour
shortages and cost pressures and Birchcliff commends its field
staff and contractors for their great teamwork, coordination and
dedication to safety in efficiently completing them. The AltaGas
turnaround will allow Birchcliff to maximize liquids recovery
through the deep-cut plant and increase overall plant reliability
throughout the remainder of 2022 and onwards.
ABBREVIATIONS
|
AECO |
benchmark price for natural gas determined at the AECO ‘C’ hub in
southeast Alberta |
|
ATP |
Alliance Trading Pool |
|
bbl |
barrel |
|
bbls |
barrels |
|
bbls/d |
barrels per day |
|
boe |
barrel of oil equivalent |
|
boe/d |
barrel of oil equivalent per day |
|
condensate |
pentanes plus (C5+) |
|
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 |
|
IP |
initial production |
|
Mcf |
thousand cubic feet |
|
Mcf/d |
thousand cubic feet per day |
|
MMBtu |
million British thermal units |
|
MMBtu/d |
million British thermal units per day |
|
MMcf |
million cubic feet |
|
MPa |
megapascal |
|
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 |
|
$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, preferred share redemptions, 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 dividend increases, common share buybacks and
other opportunities that would complement or otherwise improve the
Corporation’s business and enhance long-term shareholder value.
The following table provides a reconciliation of
cash flow from operating activities, as determined in accordance
with GAAP, to adjusted funds flow, free funds flow and excess free
funds flow for the periods indicated:
|
|
Three months endedJune 30, |
Six months endedJune 30, |
|
($000s) |
2022 |
2021 |
2022 |
2021 |
|
Cash flow from operating activities |
273,711 |
81,013 |
427,863 |
163,621 |
|
Change in non-cash operating working capital |
11,199 |
8,982 |
40,029 |
13,111 |
|
Decommissioning expenditures |
625 |
193 |
1,342 |
1,276 |
|
Adjusted funds flow |
285,535 |
90,188 |
469,234 |
178,008 |
|
F&D capital expenditures |
(84,247) |
(80,887) |
(172,529) |
(176,727) |
|
Free funds flow |
201,288 |
9,301 |
296,705 |
1,281 |
|
Dividends on common shares |
(5,310) |
(1,333) |
(7,968) |
(2,663) |
|
Excess free funds flow |
195,978 |
7,968 |
288,737 |
(1,382) |
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 following table provides a
reconciliation of transportation expense, as determined in
accordance with GAAP, to transportation and other expense for the
periods indicated:
|
|
Three months endedJune 30, |
Six months endedJune 30, |
|
($000s) |
2022 |
2021 |
2022 |
2021 |
|
Transportation expense |
39,855 |
38,165 |
77,692 |
75,849 |
|
Marketing purchases |
2,644 |
1,734 |
6,213 |
3,781 |
|
Marketing revenue |
(3,043) |
(2,234) |
(7,277) |
(4,692) |
|
Marketing gain |
(399) |
(500) |
(1,064) |
(911) |
|
Transportation and other expense |
39,456 |
37,665 |
76,628 |
74,938 |
Operating Netback
Birchcliff defines “operating netback” as
petroleum and natural gas revenue less royalty expense, operating
expense and transportation and other expense. Management believes
that operating netback assists management and investors in
assessing Birchcliff’s operating profits after deducting the cash
costs that are directly associated with the sale of its production,
which can then be used to pay other corporate cash costs or satisfy
other obligations. The following table provides a breakdown of
Birchcliff’s operating netback for the periods indicated:
|
|
Three months endedJune 30, |
Six months endedJune 30, |
|
($000s) |
2022 |
2021 |
2022 |
2021 |
|
Petroleum and natural gas revenue |
394,315 |
193,643 |
680,291 |
379,252 |
|
Royalty expense |
(52,010) |
(16,692) |
(82,168) |
(28,319) |
|
Operating expense |
(22,796) |
(21,538) |
(46,643) |
(43,036) |
|
Transportation and other expense |
(39,456) |
(37,665) |
(76,628) |
(74,938) |
|
Operating netback – Corporate |
280,053 |
117,748 |
474,852 |
232,959 |
Effective Sales – Total Corporate, Total
Natural Gas, AECO Market and NYMEX HH Market
Birchcliff defines “effective sales” in the AECO
market and NYMEX HH market as the sales amount received from the
production of natural gas that is effectively attributed to the
AECO and NYMEX HH market pricing, respectively, and does not
consider the physical sales delivery point in each case. Effective
sales in the NYMEX HH market includes realized gains and losses on
financial instruments and excludes the notional fixed basis costs
associated with the underlying financial contract in the period.
Birchcliff defines “effective total natural gas sales” as the
aggregate of the effective sales amount received in each natural
gas market. Birchcliff defines “effective total corporate sales” as
the aggregate of the effective total natural gas sales and the
sales amount received from the production of light oil, condensate
and NGLs. Management believes that disclosing effective sales for
each natural gas market assists management and investors in
assessing Birchcliff’s natural gas diversification and commodity
price exposure to each market. The following table provides a
reconciliation of natural gas sales, as determined in accordance
with GAAP, to effective total natural gas sales and effective total
corporate sales for the periods indicated:
|
|
Three months endedJune 30, |
|
($000s) |
2022 |
2021(1) |
|
Natural gas sales |
286,855 |
111,556 |
|
Realized gain (loss) on financial instruments |
16,687 |
(13,392) |
|
Notional fixed basis costs(2) |
22,363 |
22,502 |
|
Effective total natural gas sales |
325,905 |
120,666 |
|
Light oil sales |
22,935 |
19,255 |
|
Condensate sales |
56,620 |
45,241 |
|
NGLs sales |
27,887 |
17,582 |
|
Effective total corporate sales |
433,347 |
202,744 |
(1) Prior period amounts have been
adjusted to include the aggregate notional fixed basis cost for
comparison purposes.(2) Reflects the aggregate
notional fixed basis cost associated with Birchcliff’s financial
and physical NYMEX HH/AECO 7A basis swaps in the period.
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
ratios 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. Set
forth below is a description of the non-GAAP ratios used in this
press release.
Adjusted Funds Flow Per
Boe and Adjusted Funds Flow Per Basic Common
Share
Birchcliff calculates “adjusted funds flow per
boe” as aggregate adjusted funds flow in the period divided by the
production (boe) in the period. Management believes that adjusted
funds flow per boe assists management and investors in assessing
Birchcliff’s financial profitability and sustainability on a cash
basis by isolating the impact of production volumes to better
analyze its performance against prior periods on a comparable
basis. The Corporation previously referred to adjusted funds flow
per boe as “adjusted funds flow netback”.
Birchcliff calculates “adjusted funds flow per
basic common share” as aggregate adjusted funds flow in the period
divided by the basic common shares outstanding at the end of the
period. Management believes that adjusted funds flow per basic
common share assists management and investors in assessing
Birchcliff’s financial strength on a per common share basis.
Free Funds Flow Per Basic Common
Share
Birchcliff calculates “free funds flow per basic
common share” as aggregate free funds flow in the period divided by
the basic common shares outstanding at the end of the period.
Management believes that free funds flow per basic common share
assists management and investors in assessing Birchcliff’s
financial strength and its ability to generate shareholder returns
on a per common share basis.
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.
Operating Netback Per Boe
Birchcliff calculates “operating netback per
boe” as aggregate operating netback in the period divided by the
production (boe) in the period. Management believes that operating
netback per boe assists management and investors in assessing
Birchcliff’s operating profitability and sustainability by
isolating the impact of production volumes to better analyze its
performance against prior periods on a comparable basis.
Effective Average Realized Sales Price –
Total Corporate, Total Natural Gas, AECO Market and NYMEX HH
Market
Birchcliff calculates “effective average
realized sales price” as effective sales, in each of total
corporate, total natural gas, AECO market and NYMEX HH market, as
the case may be, divided by the effective production in each of the
markets during the period. Management believes that disclosing
effective average realized sales price for each natural gas market
assists management and investors in comparing Birchcliff’s
commodity price realizations in each natural gas market on a per
unit 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 either a per unit disclosure of a corresponding
GAAP measure, or a component of a corresponding GAAP measure,
presented in the financial statements. Supplementary financial
measures that are disclosed on a per unit basis are calculated by
dividing the aggregate GAAP measure (or component thereof) by the
applicable unit for the period. Supplementary financial measures
that are disclosed on a component basis of a corresponding GAAP
measure are a granular representation of a financial statement line
item and are determined in accordance with GAAP.
The supplementary financial measures used in
this press release include: operating expense per boe average
realized sales price per bbl, Mcf and boe; petroleum and natural
gas revenue per boe; royalty expense per boe; G&A expense, net
per boe; interest expense per boe; realized gain (loss) on
financial instruments per boe; other income (expense) per boe;
depletion and depreciation expense per boe; unrealized gain on
financial instruments per boe; other non-cash (expense) income per
boe; dividends on preferred shares per boe; deferred income tax
expense per boe; net income to common shareholders per boe; average
realized natural gas sales price per Mcf; natural gas
transportation costs per Mcf; and natural gas sales netback per
Mcf.
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 Adjusted Working Capital
Deficit (Surplus)
Birchcliff calculates “total debt” as the amount
outstanding under the Corporation’s Credit Facilities plus adjusted
working capital deficit (surplus). “Adjusted working capital
deficit (surplus)” is calculated as working capital deficit
(current assets less current liabilities) less fair value of
financial instruments and capital securities. Surplus as disclosed
in this press release is equivalent to adjusted working capital
surplus. Management believes that total debt assists management and
investors in assessing Birchcliff’s overall liquidity and financial
position at the end of the period. Management believes that
adjusted working capital deficit (surplus) assists management and
investors in assessing Birchcliff’s short-term liquidity. The
following table provides a reconciliation of the amount outstanding
under the Credit Facilities and working capital deficit, as
determined in accordance with GAAP, to total debt and adjusted
working capital deficit (surplus), respectively:
|
As at,($000s) |
June 30, 2022 |
March 31, 2022 |
December 31, 2021 |
June 30, 2021 |
|
Revolving term credit facilities |
276,030 |
397,752 |
500,870 |
720,920 |
|
Working capital deficit |
18,633 |
46,213 |
53,312 |
131,796 |
|
Fair value of financial instruments |
10,436 |
3,249 |
(16,517) |
(43,491) |
|
Capital securities |
(38,205) |
(28,216) |
(38,268) |
(38,328) |
|
Adjusted working capital deficit (surplus) |
(9,136) |
11,246 |
(1,473) |
49,977 |
|
Total debt |
266,894 |
408,998 |
499,397 |
770,897 |
ADVISORIES
Unaudited Information
All financial and operational information
contained in this press release for the three and six months ended
June 30, 2022 and 2021 is unaudited.
Currency
Unless otherwise indicated, all dollar amounts
are expressed in Canadian dollars and all references to “$” 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.
Oil and Gas Metrics
This press release contains metrics commonly
used in the oil and natural gas industry, including netbacks. These
oil and gas metrics do not have any standardized meanings or
standard methods of calculation and therefore may not be comparable
to similar measures presented by other companies where similar
terminology is used. As such, they should not be used to make
comparisons. Management uses these oil and gas metrics for its own
performance measurements and to provide investors with measures to
compare Birchcliff’s performance over time; however, such measures
are not reliable indicators of Birchcliff’s future performance,
which may not compare to Birchcliff’s performance in previous
periods, and therefore should not be unduly relied upon. For
additional information regarding netbacks, see “Non-GAAP and Other
Financial Measures”.
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) except where otherwise stated, 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.
Initial Production Rates
Any references in this press release to initial
production rates or other short-term production rates are useful in
confirming the presence of hydrocarbons; however, such rates are
not determinative of the rates at which such wells will continue to
produce and decline thereafter and are not indicative of the
long-term performance or the ultimate recovery of such wells. In
addition, such rates may also include recovered “load oil” or “load
water” fluids used in well completion stimulation. While
encouraging, readers are cautioned not to place undue reliance on
such rates in calculating the aggregate production for Birchcliff.
Such rates are based on field estimates and may be based on limited
data available at this time.
With respect to the production rates for the
Corporation’s 10-well (10-08) pad in Pouce Coupe disclosed herein,
such rates represent the cumulative volumes for each well measured
at the wellhead separator for the 30 and 60 days (as applicable) of
production immediately after each well was considered stabilized
after producing fracture treatment fluid back to surface in an
amount such that flow rates of hydrocarbons became reliable
(between 0 and 4 days), divided by 30 or 60 (as applicable), which
were then added together to determine the aggregate production
rates for the 10-well pad and then divided by 10 to determine the
per well average production rates. The production rates excluded
the hours and days when the wells did not produce. Approximate
tubing pressures for the 10 wells were stabilized between 3.4 and
4.3 MPa for IP 30 production rates and between 3.1 and 3.6 MPa for
IP 60 production rates. Approximate casing pressures for the 10
wells were stabilized between 8.0 and 11.3 MPa for IP 30 production
rates and between 7.3 and 10.3 MPa for IP 60 production rates.
To-date, no pressure transient or well-test interpretation has been
carried out on any of the wells. The natural gas volumes represent
raw natural gas volumes as opposed to sales gas volumes.
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.
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”
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 the following:
-
Birchcliff’s plans and other aspects of its anticipated future
financial performance, results, operations, focus, objectives,
strategies, opportunities, priorities and goals, including: that
Birchcliff remains confident that it will reach zero total debt and
be in a cash surplus position in Q4 2022, based on the strength of
forward commodity prices; and that Birchcliff continues to target
increasing its annual common share dividend in 2023 to at least
$0.80 per share ($212 million annually), subject to commodity
prices and the approval of its board of directors;
-
the information set forth under the heading “Outlook and Guidance”
and elsewhere in this press release as it relates to Birchcliff’s
updated outlook and guidance for 2022 and 2023, including: that
Birchcliff’s 2023 budget will be geared towards maximizing its
ability to generate free funds flow, increasing shareholder returns
and fully utilizing the processing capacity of the Corporation’s
existing infrastructure; that Birchcliff plans to provide a
corporate update and release its preliminary 2023 budget on October
13, 2022 after the completion of the Corporation’s preliminary 2023
budget planning process; that the Corporation anticipates
significant production additions in the second half of 2022 and is
maintaining its previous guidance for annual average production at
78,000 to 80,000 boe/d; that Birchcliff is able to take full
advantage of strong commodity prices because it has no fixed price
commodity hedges in place and it does not currently intend to hedge
any future production; estimates of annual and Q4 average
production, production commodity mix, average expenses, adjusted
funds flow, F&D capital expenditures, free funds flow, excess
free funds flow, surplus at year end and natural gas market
exposure in 2022; that the estimate of surplus at December 31, 2022
is expected to be largely comprised of cash on hand plus accounts
receivable less accounts payable at the end of the year; and the
expected impact of changes in commodity prices and the CDN/US
exchange rate on Birchcliff’s estimate of free funds flow in
2022;
- the announced redemption of the
Series A and Series C Preferred Shares, including the anticipated
timing thereof; and
-
the information set forth under the heading “Operations Update”
regarding Birchcliff’s 2022 capital program and its exploration and
development activities and the timing thereof, including: the
number and types of wells to be drilled, completed and brought on
production in 2022; that the wells to be brought on production in
Q3 2022 are expected to deliver strong natural gas and condensate
rates with an average payout of less than a year, driven by
successful execution and robust commodity prices; that the wells
from Birchcliff’s 04-04 pad are expected to be brought on
production in Q3 2022; that Birchcliff’s 06-35 pad is expected to
be completed and brought on production before the end of Q3 2022;
that Birchcliff anticipates providing further details regarding the
results of the wells from its 04-04 pad and 06-35 pad with the
release of its Q3 2022 results; and that the AltaGas turnaround
will allow Birchcliff to maximize liquids recovery through the
deep-cut plant and increase overall plant reliability throughout
the remainder of 2022 and onwards.
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
environmental, climate change and other 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; board of director approval of
proposed 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 2022 guidance (as updated on August
10, 2022):
-
The following commodity prices and exchange rate are assumed: an
average WTI price of US$99.00/bbl; an average WTI-MSW differential
of CDN$3.60/bbl; an average AECO price of CDN$5.60/GJ; an average
Dawn price of US$6.65/MMBtu; an average NYMEX HH price of
US$6.95/MMBtu; and an exchange rate (CDN$ to US$1) of 1.28. These
commodity price and exchange rate assumptions are based on
anticipated full-year averages, which include settled benchmark
commodity prices and exchange rate for the period from January 1,
2022 to July 31, 2022 and forward strip benchmark commodity prices
and CDN/US exchange rate as of August 2, 2022 for the period from
August 1, 2022 to December 31, 2022.
-
Birchcliff’s production guidance for 2022 assumes that: the 2022
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 updated estimates of adjusted funds flow, free funds
flow and excess free funds flow for 2022 assume that: the 2022
capital program will be carried out as currently contemplated and
the level of capital spending for 2022 set forth herein will be
achieved; and the targets for production, production commodity mix,
expenses and natural gas market exposure and the commodity price
and exchange rate assumptions are met. Birchcliff’s updated
estimate of excess free funds flow for 2022 also assumes that: (i)
a quarterly common share dividend of $0.02 per share is paid for
the quarters ending September 30, 2022 and December 31, 2022; and
(ii) there are 265 million common shares outstanding, with no
further buybacks of common shares occurring during 2022.
Birchcliff’s updated estimate of adjusted funds flow takes into
account the effects of its physical and financial basis swap
contracts outstanding as at August 10, 2022 and excludes annual
cash incentive payments that have not been approved by Birchcliff’s
board of directors.
-
Birchcliff’s updated estimate of capital expenditures for 2022
assumes that the 2022 capital program will be carried out as
currently contemplated. 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.
-
Birchcliff’s updated estimate of surplus at December 31, 2022
assumes that: (i) 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; (ii) there are 265 million
common shares outstanding, with no further buybacks of common
shares occurring during 2022, and a quarterly common share dividend
of $0.02 per share is paid for the quarters ending September 30,
2022 and December 31, 2022; (iii) there are 2,000,000 Series A and
1,528,219 Series C Preferred Shares outstanding, with such shares
redeemed by the Corporation on September 30, 2022, and a quarterly
dividend of $0.527677 per Series A Preferred Share and $0.441096
per Series C Preferred Share is paid for the quarter ending
September 30, 2022; (iv) no significant acquisitions or
dispositions are completed by the Corporation and there is no
repayment of debt using the proceeds from equity issuances during
2022; (v) there are no further proceeds received from the exercise
of stock options or performance warrants during 2022; (vi) the 2022
capital program will be carried out as currently contemplated with
F&D capital expenditures of $275 million to $285 million; and
(vii) the targets for production, production commodity mix, capital
expenditures, adjusted funds flow, free funds flow and natural gas
market exposure and the commodity price and exchange rate
assumptions set forth herein are met. Birchcliff’s estimate of
surplus at December 31, 2022 does not include annual cash incentive
payments that have not been approved by Birchcliff’s board of
directors.
-
Birchcliff’s guidance regarding its natural gas market exposure
assumes: (i) 175,000 GJ/d being sold on a physical basis at the
Dawn price; (ii) 18,029 GJ/d being sold at Alliance on a physical
basis at the AECO 5A price plus a premium; and (iii) 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.
-
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; 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; actions by government
authorities, including those with respect to the COVID-19 pandemic;
an inability of the Corporation to comply with existing and future
environmental, climate change and other laws; the cost of
compliance with current and future environmental laws; political
uncertainty and uncertainty associated with government policy
changes; 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 Birchcliff’s board of directors to declare dividends
and change the Corporation’s dividend policy; 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.
While Birchcliff anticipates approval by the
board of directors of the proposed increase to the annual common
share dividend to $0.80 per share in 2023, the payment of such
dividend remains subject to the approval of the board of directors.
In addition, the proposed increase to the common share dividend in
2023 is subject to commodity prices and Birchcliff achieving its
target of zero total debt in Q4 2022. The declaration and payment
of any proposed dividends are subject to the discretion of the
board of directors 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 and Series A and Series C Preferred Shares are listed for
trading on the Toronto Stock Exchange under the symbols “BIR”,
“BIR.PR.A” and “BIR.PR.C”, respectively.
|
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 |
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