Crew Energy Inc. (TSX: CR) (“Crew” or the “Company”) is pleased to
announce our operating and financial results for the three and six
month periods ended June 30, 2021, and the release of our inaugural
Environmental, Social and Governance (“ESG”) Report. Crew’s
Financial Statements and Notes, as well as Management’s Discussion
and Analysis (“MD&A”) for the three and six month periods ended
June 30, 2021 are available on Crew’s newly designed website at
www.crewenergy.com and filed on SEDAR at www.sedar.com.
Two-year sustainability plan on
track1: Crew is now
targeting adjusted funds flow (“AFF”)3 in 2021 and 2022 between
$310 and $350 million on spending of $220 to $265 million,
supporting the generation of $95 to $140 million of 2022 annual
AFF3 in excess of capital expenditures. These updated targets are
based on estimated future commodity prices, and are expected to
result in last-twelve month (”LTM”) EBITDA3 to debt of 1.3 to 1.5x
at the end of 2022.
“In the second quarter of 2021, we continued
steadfast in the advancement of our two-year plan, designed to
increase the pace of development of our world-class Montney
resource, with a goal to optimize throughput of our 40,000 boe per
day infrastructure capacity and improve debt metrics,” said Dale
Shwed, President and CEO of Crew. “We are excited to continue with
our plan to increase production, reduce unit costs to expand
margins and to create sustainable value for all stakeholders, while
playing an important role in the production of responsible energy.
Today we are proud to unveil Crew’s inaugural ESG Report, presented
in digital format as a reflection of our commitment to adopt new
technologies while adapting to the evolving needs of our
stakeholders. Join us on our ESG journey here.”
Q2 2021 HIGHLIGHTS
-
26,712 boe per day2 (160.3 mmcfe per day) average
production in Q2/21, a 21% increase over Q2/20. First half 2021
volumes averaged 26,486 boe per day2 (158.9 mmcfe per day), a 15%
increase over the same period in 2020.
-
$25.5 million of AFF3 ($0.16 per fully diluted
share) was generated in the quarter, a 451% increase over Q2/20,
with year-over-year growth being bolstered by higher production,
lower cash costs and a significantly improved commodity price
environment. First half 2021 AFF3 of $59.5 million ($0.37 per
share) was nearly 3.5 times higher than the first half of
2020.
-
16% reduction in net operating costs3 in Q2/21,
totaling $4.79 per boe in the quarter compared to $5.68 per boe in
Q2/20, reflecting new production added at West Septimus which
yields lower net operating costs, combined with improved
operational efficiencies. General and administrative (“G&A”)
costs of $0.93 per boe for the first half of 2021 were 3% lower
than the same period in the prior year.
-
$21.2 million of net capital expenditures3 in
Q2/21, above our previously forecast range of $15
to $18 million, due to favorable spring break-up conditions that
allowed for an early start to our capital program in June. The
majority of expenditures were directed towards the continued
development at Septimus and West Septimus (“Greater Septimus”),
with $10.4 million invested in drilling and completions, $8.5
million directed to facilities, equipment and pipelines, and $2.3
million on land, seismic and other miscellaneous items.
-
Four natural gas wells were drilled in Q2/21 at
West Septimus, and three oil wells were recompleted in the
Lloydminster area. The four ultra-extended reach horizontal
(“U-ERH”) natural gas wells have a combined average lateral length
exceeding 3,800 metres, with one of the wells being drilled to a
total measured depth of 6,425 metres, the longest in the Company’s
history.
-
$373.1 million of net debt4 at
June 30, 2021, in-line with the prior quarter, with no near-term
maturities and no financial covenants or repayment requirements on
the $300 million of senior notes termed out until 2024, and 43%
drawn on our $150 million credit facility. Crew’s strengthening
financial prospects and improved liquidity in North American bond
markets have improved the potential for refinancing of the notes
prior to their maturity in 2024.
FINANCIAL & OPERATING
HIGHLIGHTS
FINANCIAL($ thousands, except per share
amounts) |
Three monthsendedJune 30,
2021 |
|
Three monthsendedJune 30, 2020 |
|
Six monthsendedJune 30, 2021 |
|
Six months endedJune 30, 2020 |
|
Petroleum and natural gas sales |
68,550 |
|
24,889 |
|
154,067 |
|
62,983 |
|
Adjusted funds flow 1 |
25,530 |
|
4,633 |
|
59,525 |
|
17,033 |
|
Per share – basic |
0.17 |
|
0.03 |
|
0.39 |
|
0.11 |
|
- diluted |
0.16 |
|
0.03 |
|
0.37 |
|
0.11 |
|
Net loss |
(23,138 |
) |
(24,803 |
) |
(21,785 |
) |
(216,712 |
) |
Per share – basic |
(0.15 |
) |
(0.16 |
) |
(0.14 |
) |
(1.42 |
) |
- diluted |
(0.15 |
) |
(0.16 |
) |
(0.14 |
) |
(1.42 |
) |
Exploration and development expenditures |
21,198 |
|
5,348 |
|
71,288 |
|
23,377 |
|
Property acquisitions (net of dispositions) |
- |
|
44 |
|
- |
|
(34,896 |
) |
Net capital expenditures |
21,198 |
|
5,392 |
|
71,288 |
|
(11,519 |
) |
Capital Structure($ thousands) |
As at June 30, 2021 |
As at Dec. 31, 2020 |
|
Working capital deficiency 1 |
11,282 |
24,361 |
|
Bank loan |
64,515 |
35,994 |
|
|
75,797 |
60,355 |
|
Senior Unsecured Notes |
297,343 |
296,851 |
|
Total net debt 1 |
373,140 |
357,206 |
|
Common shares outstanding (thousands) |
156,557 |
156,449 |
|
Notes:
(1) Non-IFRS measure that does not
have any standardized meaning as prescribed by International
Financial Reporting Standards, and therefore, may not be comparable
with the calculations of similar measures for other entities. See
“Advisories - Non-IFRS Measures” contained within this press
release.
Operations |
Three monthsendedJune 30,
2021 |
Three monthsendedJune 30, 2020 |
Six months endedJune 30,
2021 |
Six months endedJune 30, 2020 |
Daily production |
|
|
|
|
Light crude oil (bbl/d) 1 |
171 |
191 |
163 |
203 |
Heavy crude oil (bbl/d) |
1,153 |
1,175 |
1,104 |
1,351 |
Natural gas liquids (“ngl”) 2 (bbl/d) |
2,687 |
2,147 |
2,545 |
2,218 |
Condensate (bbl/d) |
3,019 |
2,634 |
2,864 |
2,987 |
Conventional natural gas (mcf/d) |
118,089 |
95,564 |
118,858 |
97,354 |
Total (boe/d @ 6:1) |
26,712 |
22,074 |
26,486 |
22,985 |
Average prices 3 |
|
|
|
|
Light crude oil ($/bbl) |
71.65 |
24.04 |
68.02 |
35.05 |
Heavy crude oil ($/bbl) |
60.03 |
18.08 |
56.54 |
19.20 |
Natural gas liquids ($/bbl) |
11.85 |
7.74 |
12.65 |
6.26 |
Condensate ($/bbl) |
75.36 |
23.69 |
72.72 |
41.10 |
Conventional natural gas ($/mcf) |
3.49 |
1.76 |
4.52 |
1.81 |
Oil equivalent ($/boe) |
28.20 |
12.39 |
32.14 |
15.06 |
Notes: (1) The Company does not have
any medium crude oil as defined by NI
51-101.(2) Throughout this news release, natural gas
liquids (“ngl”) comprise all natural gas liquids as defined in
National Instrument 51-101, Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"), other than condensate, which is disclosed
separately, and natural gas means conventional natural gas by NI
51-101 product type.(3) Average prices are before
deduction of transportation costs and do not include realized gains
and losses on derivative financial instruments.
|
Three monthsendedJune 30,
2021 |
|
Three monthsendedJune 30, 2020 |
|
Six months endedJune 30,
2021 |
|
Six months endedJune 30, 2020 |
|
Netback ($/boe) |
|
|
|
|
Petroleum and natural gas sales |
28.20 |
|
12.39 |
|
32.14 |
|
15.06 |
|
Royalties |
(1.91 |
) |
(0.46 |
) |
(2.06 |
) |
(0.74 |
) |
Realized commodity hedging (loss) gain |
(3.46 |
) |
3.34 |
|
(5.37 |
) |
2.51 |
|
Marketing loss 1 |
- |
|
(0.26 |
) |
- |
|
(0.07 |
) |
Net operating costs 2,3 |
(4.79 |
) |
(5.68 |
) |
(4.72 |
) |
(5.70 |
) |
Transportation costs |
(4.10 |
) |
(3.42 |
) |
(4.13 |
) |
(3.31 |
) |
Operating netback 3 |
13.94 |
|
5.91 |
|
15.86 |
|
7.75 |
|
G&A |
(0.93 |
) |
(0.76 |
) |
(0.93 |
) |
(0.96 |
) |
Financing costs on long-term debt |
(2.51 |
) |
(2.85 |
) |
(2.51 |
) |
(2.71 |
) |
Adjusted funds flow 3 |
10.50 |
|
2.30 |
|
12.42 |
|
4.08 |
|
Notes:
(1) Marketing income was recognized
from the monetization of forward physical sales contracts offset by
the cost of committed natural gas transportation that was not
available during the period.(2) Net operating costs are
calculated as gross operating costs less processing revenue.
(3) Non-IFRS measure that does not have any standardized
meaning as prescribed by International Financial Reporting
Standards, and therefore, may not be comparable with the
calculations of similar measures for other entities. See
“Advisories - Non-IFRS Measures” contained within this press
release.
SUSTAINABILITY AND ESG
INITIATIVES
Crew's commitment to progressing our ESG
initiatives remained a primary focus in Q2/21, as we continued to
invest in finding sustainable solutions and initiatives to ensure
corporate growth while also supporting our diverse group of
stakeholders and the environment. Crew is proud to have released
our inaugural 2020 ESG report today along with the launch of a new
corporate website. Please visit us at www.crewenergy.com to learn
more, and to see a full list of our new ESG goals and targets.
- Crew’s 2020 ESG
report highlights our efforts to:
-
Apply innovation and increase operational
efficiencies to reduce emissions; an example of
which is the installation of a waste heat recovery unit at our West
Septimus plant that is expected to reduce GHG emissions by over 10%
at the facility. Crew gratefully acknowledges assistance from the
Province of British Columbia’s CleanBC Industry Fund for their
support of this project.
-
Reduce our environmental footprint through
responsible pad development and abandonment and reclamation
activities.
-
Strengthen existing relationships and
foster new relationships in the communities in
which we live and work.
-
Protect our “crew” through robust health and
safety standards and protocols.
-
Crew continued to participate in provincially funded dormant well
programs, abandoning 27 wells in Q2/21. Crew expects to abandon
approximately 16% of the Company’s idle wells during 2021.
-
In Q2/21, Crew’s regulatory compliance record remained strong,
achieving a 95% compliance rating with 137 regulatory inspections
completed across the three provinces in which we operate.
-
No workforce recordable or lost time injuries occurred, and zero
reportable spills occurred in Q2/21.
TWO-YEAR PLAN
UPDATE6
During the second quarter of 2021, Crew advanced
our two-year development plan that was announced in late 2020, with
annual production trending in-line and AFF trending higher than
initial guidance.
-
Production Growth – Q2/21 production averaged
26,712 boe per day5, within the previously announced forecasted
annual average 2021 range of 26,000 to 28,000 boe per day,
representing another period of growth supported by new completions
and continued drilling. Average annual production in 2022 is now
targeted to be 32,000 to 34,000 boe per day5,6, up from initial
estimates of 31,000 to 33,000 boe per day.
-
AFF Supported by Improved Pricing Environment –
AFF7 of $59.5 million in the first half of 2021 has been bolstered
by an improved commodity price environment which has continued into
the second half of 2021. Our full year 2021 AFF7 forecast has been
increased to between $120 to $140 million which compares to initial
guidance between $85 to $105 million. Full year AFF6,7 in 2022 is
now targeted at $190 to $210 million, an increase from initial
estimates of $120 to $150 million.
-
Capital Program Expanded – Our initial 2021
capital program of $120 to $145 million contemplated the drilling
of 19 wells and completing between 14 wells and 21 wells, with an
exit rate of over 30,000 boe per day. Updated guidance of $150 to
$170 million of capital expenditures with an exit rate of over
32,500 boe per day5 now includes the drilling of 21 wells and the
completion of 21 wells. The two additional wells are planned to be
drilled on the 4-14 pad at North Septimus, and three wells at
Groundbirch that were drilled in Q1/21 are planned to be completed,
equipped and tied-in through a new six kilometre 12-inch pipeline
connecting to our West Septimus gathering system. Production
related to the incremental capital expenditures will start later in
the fourth quarter of 2021 and will allow the Company to utilize
services in a time of less demand and increase volumes into the
winter heating season, providing production momentum entering 2022.
Crew’s targeted capital expenditures in 2022 remain at $70 to $95
million6.
-
Reduced Costs – Crew’s plan to reduce unit costs
by over 25% is largely based on increasing production volumes into
existing infrastructure, as over 50% of the Company’s expenses are
fixed. As production increases, per unit costs associated with
operating, transportation, G&A and interest expenses are
targeted to decline from $13.19 per boe in 2020 to between $9.50
and $10.50 per boe in 20228. Crew has reduced net operating costs
from $5.70 per boe in H1/20 to $4.72 per boe in H1/21.
-
Balanced Hedging Program – An important step in
executing our two-year plan was to prudently ensure the Company had
adequate AFF to execute our planned capital programs, and as such,
we have embarked on an active risk management program. Crew
currently has over 55% of forecast 2021 natural gas production
hedged at an average price of $2.48 per Gigajoule (“GJ”) (or $3.08
per mcf calculated using Crew’s heat content factor), while
approximately 35% of targeted natural gas production for 2022 is
hedged at an average price of $2.47 per GJ (or $3.06 per mcf using
Crew’s heat content factor). Crew also has approximately 65% of our
2021 condensate production hedged at $61.24 per bbl, and 50% of our
heavy oil production hedged at $46.00 per bbl, with limited 2022
liquids hedging currently in place.
-
Forecasted Debt Reduction Metrics Ahead of Plan –
Crew’s original projection in the two-year plan was for debt to LTM
EBITDA9 to be between 2.0 and 2.5x at the end of 20228, and this is
now projected to be between 1.3 and 1.5x.
OPERATIONS & AREA
OVERVIEW
NE BC Montney (Greater
Septimus)
-
Production at Greater Septimus totaled 23,062 boe per day10 in
Q2/21, in line with the prior quarter and a 24% increase
year-over-year, supported by Crew’s 3-32 pad which came on-stream
mid-April and is flowing through permanent facilities.
-
Favorable spring break-up conditions allowed for an advanced start
to Crew’s second quarter capital program, allowing for the
successful drilling of four U-ERH wells on the Company’s 4-14 pad.
The four wells drilled achieved a combined average lateral length
exceeding 3,800 metres, with one of the wells being drilled to a
total measured depth of 6,425 metres, the longest in the Company’s
history.
-
Crew commenced construction of a five-kilometre 12-inch trunkline
into North Septimus to allow for further development into that
area, which is expected to represent another extension of the West
Septimus ultra condensate rich play. Crew’s 4-14 pad will be the
anchor development in this area, with completion operations
expected to commence in late Q3/21 on the first group of wells on
this ten well pad.
-
Mobilization towards the completion of seven wells on the Company’s
1-8 pad at Greater Septimus started earlier than anticipated, with
fracturing operations having commenced on the pad in early July.
These wells have since been completed and are now flowing back at
encouraging initial rates.
-
Crew has 118 permitted well authorizations in the Montney in
northeast BC, and with our current pace of development, would
require five to six years to develop. The Company also has 277
sections of land that are on private property or are outside of the
region claimed in an action by the Blueberry River First Nation
against the province of British Columbia. Crew continues to foster
strong relationships in the communities in which we live and work
and we are proud to work together to achieve common
objectives.
Other NE BC Montney
-
At Groundbirch, Crew has elected to increase the scope of our 2021
budget. The Company now expects to complete and tie-in the three
land tenure extension wells that were drilled in Q1/21, which was
not originally planned in the 2021 budget. If successful, these
wells would help de-risk over 35,000 acres of prospective Montney
acreage and provide confidence in another core area of future
development where the Company has over 300 potential extended reach
horizontal (“ERH”) well locations11 identified.
-
The Company has begun construction of a six-kilometre 12-inch
pipeline in Q3/21 in anticipation of these wells being completed in
the fourth quarter of 2021, with production being routed to our
West Septimus gas plant.
-
Crew continues to evaluate encouraging offset operator activity in
the Attachie and Oak/Flatrock areas.
Lloydminster Heavy Oil
-
During the second quarter, Crew recompleted three heavy crude oil
wells in the Lloydminster area to optimize value creation from
existing assets and capitalize on an improved outlook for heavy
crude oil prices.
-
In Q2/21, Crew successfully executed 27 well abandonments in the
Lloydminster area.
OUTLOOK12
-
Updated Full Year 2021 Guidance Designed
to:
-
Invest in capital projects with robust rates of return and payouts
of less than 12 months, which can be supported by an active hedging
program and by producing flush volumes into the winter heating
season while maintaining the option to rapidly pivot in response to
changing market conditions;
-
Respond to positive market conditions by expediting our goal of
optimizing transportation and processing capacity through an
expansion of the 2021 capital program to include the completion,
equipping and six-kilometre tie-in of three Groundbirch wells and
the drilling of two additional wells at our North Septimus 4-14
pad;
-
Validate the future development potential of two strategic areas at
Groundbirch and North Septimus;
-
Test new zones in the Upper Montney ”C” and the Lower Montney at
the North Septimus 4-14 pad, evaluating their long-term future
development potential; and
- Enter
2022 with five drilled and uncompleted wells.
|
New 2021Guidance |
Initial 2021Guidance1 |
New 2022Guidance3 |
Initial 2022Guidance1 |
Annual Production (boe/d) |
26,000 to 28,000 |
26,000 to 28,000 |
32,000 to 34,000 |
31,000 to 33,000 |
Exit Production (boe/d) |
>32,500 |
>30,000 |
|
|
Capital Expenditures ($MM) |
$150 to $170 |
$120 to $145 |
$70 to $95 |
$70 to $95 |
AFF2 |
$120 to $140 |
$85 to $105 |
$190 to $210 |
$120 to $150 |
Wells Drilled |
21 |
19 |
|
|
Wells Completed |
21 |
14 to 21 |
|
|
Notes: (1) Initial guidance provided
in the December 10, 2020, Capital Budget press
release.(2) Non-IFRS measure that does not have any
standardized meaning as prescribed by International Financial
Reporting Standards, and therefore, may not be comparable with the
calculations of similar measures for other entities. See
“Advisories - Non-IFRS Measures” contained within this press
release.(3) Crew’s plans for 2022 and associated targets
remain preliminary in nature and do not reflect a Board approved
capital expenditures budget.
-
Q3 2021 Production & Capital Expenditures –
During Q3/21, scheduled plant turnarounds, including at our West
Septimus facility for the installation of a waste heat recovery
unit, coupled with shut-in production volumes related to adjacent
well completions, will result in lower average volumes during the
period as compared to Q2 and Q1, with volumes anticipated to range
between 20,000 and 22,000 boe per day13 and capital spending
forecast at $60 to $70 million in the quarter. This was budgeted in
Crew’s full year 2021 plans and is not expected to impact full year
average volumes as fourth quarter production volumes are expected
to average over 30,000 boe per day13.
-
Debt Reduction Advanced – Based on projected
capital spending, current forward commodity prices and the
production assumptions outlined in Crew’s most recent Corporate
Presentation, we expect that debt metrics will improve to between
1.3 and 1.5x LTM EBITDA14 by the end of 202215, compared to initial
estimates of 2.0 and 2.5x, representing a 38% improvement at the
midpoint.
As global markets recover from the impact of the
COVID-19 pandemic and demand for energy increases, Crew anticipates
that Canadian natural gas will play an increasingly important role
in the global energy mix as the world looks to diversify energy
sources and reduce emissions. Accordingly, we remain excited to
execute on our business plan to produce responsible energy while
creating meaningful value and corporate growth. We thank all of our
stakeholders, including employees, directors, partners, communities
and shareholders, for their contribution and dedication to the
success of Crew.
ADVISORIES
Non-IFRS Measures
Certain financial measures referred to in this
press release, such as adjusted funds flow or AFF, EBITDA,
operating netback, net capital expenditures, net debt, net
operating costs and working capital deficiency and are not
prescribed by IFRS. Crew uses these measures to help evaluate its
financial and operating performance as well as its liquidity and
leverage. These non-IFRS financial measures do not have any
standardized meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other issuers.
“Adjusted funds flow"
or “AFF”, presented herein is equivalent to funds from operations
before decommissioning obligations settled. The Company considers
this metric as a key measure that demonstrate the ability of the
Company’s continuing operations to generate the cash flow necessary
to maintain production at current levels and fund future growth
through capital investment and to service and repay debt. Crew also
presents AFF per share in this presentation whereby per share
amounts are calculated using fully diluted shares outstanding.
“EBITDA” is
calculated as consolidated net income (loss) before interest and
financing expenses, income taxes, depletion, depreciation and
amortization, adjusted for certain non-cash, extraordinary and
non-recurring items primarily relating to unrealized gains and
losses on financial instruments and impairment losses. Crew
utilizes EBITDA as a measure of operational performance and cash
flow generating capability. EBITDA impacts the level and extent of
funding for capital projects investments. This measure is
consistent with the EBITDA formula prescribed under the Company's
Credit Facility and allows Crew and others to assess its ability to
fund financing expenses, net debt reductions and other
obligations.
"Operating Netbacks"
equals petroleum and natural gas sales including realized gains and
losses on commodity related derivative financial instruments,
marketing income, less royalties, net operating costs and
transportation costs calculated on a boe basis. Management
considers operating netback an important measure to evaluate its
operational performance as it demonstrates its field level
profitability relative to current commodity prices. The calculation
of Crew’s netbacks can be seen under “Operating Netbacks” within
the Company’s most recently filed MD&A."
"Net Capital
Expenditures" equals exploration and development expenditures plus
property acquisitions or less property dispositions.
“Net Debt" is defined
as bank debt plus working capital deficiency or surplus, excluding
the current portion of the fair value of financial instruments.
“Net Operating Costs”
equals operating costs net of processing revenue.
"Working Capital
Surplus (Deficiency)" equals current assets less current
liabilities and derivative financial instruments.
Please refer to Crew’s most recently filed
MD&A for additional information relating to Non-IFRS measures
including a reconciliation of AFF to its most closely related IFRS
measure. The MD&A can be accessed either on Crew’s website at
www.crewenergy.com or under the Company’s profile on
www.sedar.com.
Forward-Looking Information and
Statements
This news release contains certain
forward–looking information and statements within the meaning of
applicable securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "may", "will", "project",
"should", "believe", "plans", "intends" “forecast” and similar
expressions are intended to identify forward-looking information or
statements. In particular, but without limiting the foregoing, this
news release contains forward-looking information and statements
pertaining to the following: the ability to execute on its two-year
development plan as described herein; as to our plan to optimize
and increase production and infrastructure utilization, reduce unit
costs and enhance margins, increase AFF and improve leverage
metrics; our Q3 2021, Q4 2021 and 2021 annual capital budget range
and associated drilling and completion plans and associated
guidance; preliminary capital plans and targets for 2022; the
planned construction of 12-inch pipelines in the Groundbirch and
Septimus areas; the completion and tie-in of three land tenure
extension wells that were drilled in Q1/21; production estimates
including forecast Q3, Q4 and 2021 annual average and exit
production volumes; preliminary 2022 targets and estimates;
commodity price expectations including Crew’s estimates of natural
gas pricing exposure; Crew's commodity risk management programs and
future hedging opportunities; well abandonment plans; marketing and
transportation and processing plans and requirements; estimates of
processing capacity and requirements; future liquidity and
financial capacity; future results from operations and operating
and leverage metrics; anticipated reductions in expenses and
associated estimates including forecast unit costs in 2022;
expected debt metric improvements to between 1.3x and 1.5x LTM
EBITDA; strong capital efficiencies and enhanced returns going
forward; the potential impact of COVID-19 as well as government
programs associated with COVID-19; world supply and demand
projections and long-term impact on pricing; future development,
exploration, acquisition and disposition activities (including
drilling and completion plans, anticipated on-stream dates and
associated development timing and cost estimates); the potential of
our Groundbirch area to be a core area of future development and
the number of potential wells to be drilled; infrastructure
investment plans; the successful implementation of our ESG
initiatives; achievement of key ESG goals and targets; the amount
and timing of capital projects; and anticipated improvement in our
long-term sustainability including the improved potential for
refinancing our senior notes prior to maturity in 2024 and the
expected positive attributes discussed herein attributable to our
two-year development plan.
The internal projections, expectations, or
beliefs underlying our Board approved 2021 capital budget and
associated guidance, as well as management's preliminary estimates
and targets in respect of plans for 2022 and beyond, are subject to
change in light of the impact of the COVID-19 pandemic, and any
related actions taken by businesses and governments, ongoing
results, prevailing economic circumstances, commodity prices, and
industry conditions and regulations. Crew's financial outlook and
guidance provides shareholders with relevant information on
management's expectations for results of operations, excluding any
potential acquisitions or dispositions, for such time periods based
upon the key assumptions outlined herein. In this press release
reference is made to the Company's longer range 2022 and beyond
internal plan and associated economic model, targets and
preliminary guidance. Such information reflects internal
targets used by management for the purposes of making capital
investment decisions and for internal long-range planning and
budget preparation. Readers are cautioned that events or
circumstances could cause capital plans and associated results to
differ materially from those predicted and Crew's guidance for 2021
and beyond may not be appropriate for other purposes. Accordingly,
undue reliance should not be placed on same.
In addition, forward-looking statements or
information are based on a number of material factors, expectations
or assumptions of Crew which have been used to develop such
statements and information but which may prove to be incorrect.
Although Crew believes that the expectations reflected in such
forward-looking statements or information are reasonable, undue
reliance should not be placed on forward-looking statements because
Crew can give no assurance that such expectations will prove to be
correct. In addition to other factors and assumptions which may be
identified herein, assumptions have been made regarding, among
other things: that Crew will continue to conduct its operations in
a manner consistent with past operations; results from drilling and
development activities consistent with past operations; the quality
of the reservoirs in which Crew operates and continued performance
from existing wells; the continued and timely development of
infrastructure in areas of new production; the accuracy of the
estimates of Crew’s reserve volumes; certain commodity price and
other cost assumptions; continued availability of debt and equity
financing and cash flow to fund Crew’s current and future plans and
expenditures; the impact of increasing competition; the general
stability of the economic and political environment in which Crew
operates; the general continuance of current industry conditions;
the timely receipt of any required regulatory approvals; the
ability of Crew to obtain qualified staff, equipment and services
in a timely and cost efficient manner; drilling results; the
ability of the operator of the projects in which Crew has an
interest in to operate the field in a safe, efficient and effective
manner; the ability of Crew to obtain financing on acceptable
terms; field production rates and decline rates; the ability to
replace and expand oil and natural gas reserves through
acquisition, development and exploration; the timing and cost of
pipeline, storage and facility construction and expansion and the
ability of Crew to secure adequate product transportation; future
commodity prices; currency, exchange and interest rates; regulatory
framework regarding royalties, taxes and environmental matters in
the jurisdictions in which Crew operates; and the ability of Crew
to successfully market its oil and natural gas products.
The forward-looking information and statements
included in this news release are not guarantees of future
performance and should not be unduly relied upon. Such information
and statements, including the assumptions made in respect thereof,
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to defer materially from
those anticipated in such forward-looking information or statements
including, without limitation: the continuing and uncertain impact
of COVID-19; changes in commodity prices; changes in the demand for
or supply of Crew's products, the early stage of development of
some of the evaluated areas and zones the potential for variation
in the quality of the Montney formation; interruptions,
unanticipated operating results or production declines; changes in
tax or environmental laws, royalty rates; climate change
regulations, or other regulatory matters; changes in development
plans of Crew or by third party operators of Crew's properties,
increased debt levels or debt service requirements; inaccurate
estimation of Crew's oil and gas reserve volumes; limited,
unfavourable or a lack of access to capital markets; increased
costs; a lack of adequate insurance coverage; the impact of
competitors; and certain other risks detailed from time-to-time in
Crew's public disclosure documents (including, without limitation,
those risks identified in this news release and Crew's Annual
Information Form).
This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about Crew's prospective capital
expenditures, all of which are subject to the same assumptions,
risk factors, limitations, and qualifications as set forth in the
above paragraphs. The actual results of operations of Crew and the
resulting financial results will likely vary from the amounts set
forth in this press release and such variation may be material.
Crew and its management believe that the FOFI has been prepared on
a reasonable basis, reflecting management's best estimates and
judgments. However, because this information is subjective and
subject to numerous risks, it should not be relied on as
necessarily indicative of future results. Except as required by
applicable securities laws, Crew undertakes no obligation to update
such FOFI. FOFI contained in this press release was made as of the
date of this press release and was provided for the purpose of
providing further information about Crew's anticipated future
business operations. Readers are cautioned that the FOFI contained
in this press release should not be used for purposes other than
for which it is disclosed herein.
The forward-looking information and statements
contained in this news release speak only as of the date of this
news release, and Crew does not assume any obligation to publicly
update or revise any of the included forward-looking statements or
information, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws.
1 Crew’s plans for 2022 and associated targets remain
preliminary in nature and do not reflect a Board approved capital
expenditures budget. See table in the Advisories for key
budget and underlying material assumptions related to Crew’s
development plan and associated guidance.2 See table in the
Advisories for production breakdown by product type as defined in
NI 51-101.3 Non-IFRS measure that does not have any
standardized meaning as prescribed by International Financial
Reporting Standards, and therefore, may not be comparable with the
calculations of similar measures for other entities. See
“Advisories - Non-IFRS Measures” contained within this press
release.4 Non-IFRS measure that does not have any standardized
meaning as prescribed by International Financial Reporting
Standards, and therefore, may not be comparable with the
calculations of similar measures for other entities. See
“Advisories - Non-IFRS Measures” contained within this press
release.5 See table in the Advisories for production breakdown by
product type as defined in NI 51-101.6 Crew’s plans for 2022 and
associated targets remain preliminary in nature and do not reflect
a Board approved capital expenditures budget.7 Non-IFRS measure
that does not have any standardized meaning as prescribed by
International Financial Reporting Standards, and therefore, may not
be comparable with the calculations of similar measures for other
entities. See “Advisories - Non-IFRS Measures” contained within
this press release.8 See table in the Advisories for key budget and
underlying material assumptions related to Crew’s development plan
and associated guidance.9 Non-IFRS measure that does not have any
standardized meaning as prescribed by International Financial
Reporting Standards, and therefore, may not be comparable with the
calculations of similar measures for other entities. See
“Advisories - Non-IFRS Measures” contained within this press
release.10 See table in the Advisories for production breakdown by
product type as defined in NI 51-101.11 See ‘Drilling Locations’ in
the Advisories.12 See table in the Advisories for key budget and
underlying material assumptions related to Crew’s development plan
and associated guidance.13 See table in the Advisories for
production breakdown by product type as defined in NI 51-101.14
Non-IFRS measure that does not have any standardized meaning as
prescribed by International Financial Reporting Standards, and
therefore, may not be comparable with the calculations of similar
measures for other entities. See “Advisories - Non-IFRS Measures”
contained within this press release.15 See table in the Advisories
for key budget and underlying material assumptions related to
Crew’s development plan and associated guidance.
Key Budget and Underlying Material
Assumptions1
|
2021 (Updated)3 |
|
2022
(Updated)3,4 |
Capital Expenditures ($MM) |
150-170 |
|
70-95 |
Annual Average Production (boe/d) |
26,000 – 28,000 |
|
32,000-34,000 |
Adjusted Funds Flow ($MM) |
120-140 |
|
190-210 |
EBITDA2 ($MM) |
145-165 |
|
214-234 |
Oil price (WTI)($US per bbl) |
$66.00 |
|
$65.00 |
WCS price ($C per bbl) |
$66.50 |
|
$65.00 |
Natural gas price (AECO 5A) ($C per mcf) |
$3.40 |
|
$3.15 |
Natural gas price (NYMEX) ($US per mmbtu) |
$3.35 |
|
$3.40 |
Natural gas price (Crew est. wellhead) ($C per mcf) |
$4.60 |
|
$3.90 |
Foreign exchange ($US/$CAD) |
$0.80 |
|
$0.80 |
Royalties |
5-7% |
|
4-6% |
Net operating costs2 ($ per boe) |
$4.75-$5.25 |
|
$4.25-$4.75 |
Transportation ($ per boe) |
$3.50-$4.00 |
|
$2.25-$2.75 |
G&A ($ per boe) |
$0.90-$1.10 |
|
$0.80-$1.00 |
Interest rate – bank debt |
6.0% |
|
6.0% |
Interest rate – high yield |
6.5% |
|
6.5% |
Notes:
(1) The actual results of operations of Crew and
the resulting financial results will likely vary from the estimates
and material underlying assumptions set forth in this guidance by
the Company and such variation may be material. The guidance and
material underlying assumptions have been prepared on a reasonable
basis, reflecting management's best estimates and judgments.(2)
Non-IFRS measure that does not have any standardized meaning as
prescribed by International Financial Reporting Standards, and
therefore, may not be comparable with the calculations of similar
measures for other entities. See “Non-IFRS Measures” contained
within this Press Release.(3) See the Guidance section of the
Company’s most recently filed Management’s Discussion and Analysis
for additional information regarding updated guidance and material
assumptions.(4) Crew’s plans for 2022 and associated targets remain
preliminary in nature and do not reflect a Board approved capital
expenditures budget.
Supplemental Information Regarding
Product Types
The following is intended to provide the product
type composition for each of the boe/d production figures provided
herein, where not already disclosed within tables above:
Corporate Production Volume
Breakdown2
|
Crude Oil1 |
Natural gasliquids3 |
Condensate |
ConventionalNatural gas |
Total (boe/d) |
2021 Q2 Greater Septimus Average |
0 |
% |
11 |
% |
13 |
% |
76 |
% |
23,062 |
2021 Q2 Average |
5 |
% |
10 |
% |
11 |
% |
74 |
% |
26,712 |
2021 Q3 Average |
6 |
% |
10 |
% |
9 |
% |
75 |
% |
20,000-22,000 |
2021 Q4 Average |
3 |
% |
9 |
% |
10 |
% |
77 |
% |
>30,000 |
2021 H1 Average |
5 |
% |
10 |
% |
11 |
% |
74 |
% |
26,486 |
2021 Annual Average |
5 |
% |
10 |
% |
10 |
% |
75 |
% |
26,000-28,000 |
2021 Exit Rate |
3 |
% |
8 |
% |
11 |
% |
78 |
% |
>32,500 |
2022 Annual Average |
4 |
% |
9 |
% |
9 |
% |
78 |
% |
32,000-34,000 |
Notes:(1) Crude oil is comprised
primarily of Heavy crude oil, with an immaterial portion of Light
and Medium crude oil.(2) With respect to forward
looking production guidance, given the potential for variability in
actual product type results, the issuer approximates percentages
for budget planning purposes based on management's reasonable
assumptions including, without limitation, historical well
results.(3) Excludes condensate volumes which have been
reported separately.
Drilling Locations
This press release discloses an estimate of over
300 potential ERH well locations identified by management in the
Company's Groundbirch area of operations which are comprised of:
(i) 8 proved locations; and (ii) 294 unbooked locations. Proved
locations are derived from the Company's independent reserves
evaluation effective December 31, 2020 and account for drilling
inventory that have associated proved reserves assigned by Sproule.
Unbooked locations are internally identified potential drilling
opportunities based on the Company's prospective acreage and an
assumption as to the number of wells that can be drilled per
section based on industry practice and internal review. Unbooked
locations do not have reserves or resources attributed to them and
are not estimates of drilling locations which have been evaluated
by a qualified reserves evaluator performed in accordance with the
COGE Handbook. There is no certainty that the Company will drill
any of these potential drilling opportunities 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 we actually drill wells will ultimately depend upon the
availability of capital, regulatory approvals, seasonal
restrictions, oil and natural gas prices, costs, actual drilling
results, additional reservoir information that is obtained and
other factors. While certain of the unbooked locations are
expected to be de-risked by drilling in relative close proximity to
existing wells, other unbooked drilling locations are further away
from existing wells where management has less information about the
characteristics of the reservoir and, therefore, there is more
uncertainty whether wells will ultimately be drilled in such
locations.
BOE and MMCFE Conversions
Barrel of oil equivalents or BOEs 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 than the energy equivalency
of 6:1, utilizing the 6:1 conversion ratio may be misleading as an
indication of value.
Crew is a growth-oriented oil and natural gas
producer, committed to pursuing sustainable per share growth
through a balanced mix of financially and socially responsible
exploration and development complemented by strategic acquisitions.
The Company’s operations are primarily focused in the vast Montney
resource, situated in northeast British Columbia, and include a
large contiguous land base. Greater Septimus along with Groundbirch
and the light oil area at Tower in British Columbia offer
significant development potential over the long-term. The Company
has access to diversified markets with operated infrastructure and
access to multiple pipeline egress options. Crew adheres to safe
and environmentally responsible operations while remaining
committed to sound ESG practices that underpin Crew’s fundamental
business tenets. Crew’s common shares are listed for trading on the
Toronto Stock Exchange (“TSX”) under the symbol “CR”.
Financial statements and Management’s Discussion
and Analysis for the three- and six-month periods ended June 30,
2021 are filed on SEDAR at www.sedar.com and are available on the
Company’s website at www.crewenergy.com.
FOR DETAILED INFORMATION, PLEASE
CONTACT:
Dale Shwed, President and CEO |
Phone: (403) 266-2088 |
John Leach, Executive Vice President and CFO |
Email: investor@crewenergy.com |
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