Crew Energy Inc. (TSX: CR, OTCQB: CWEGF) (“Crew” or the “Company”),
a growth-oriented natural gas weighted producer operating
exclusively in the world-class Montney play in northeast British
Columbia, is pleased to announce our operating and financial
results for the three and nine month periods ended September 30,
2021. Crew’s Financial Statements and Notes, as well as
Management’s Discussion and Analysis (“MD&A”) are available on
Crew’s website and filed on SEDAR at www.sedar.com.
“Crew benefitted from positive market
developments in the third quarter as commodity prices reached
levels unseen in recent history, enabling the Company to capture
value from our world-class resource to generate meaningful adjusted
funds flow1 (“AFF”),” said Dale Shwed, President and CEO of Crew.
“Crew exceeded previously announced quarterly production guidance
by 13% at the midpoint, due largely to the successful execution of
our capital program. In addition, we are now a pure-play Montney
producer with an improved environmental profile after the sale of
our Lloydminster heavy crude oil operations. We are excited to
advance our two-year plan to create sustainable value for
shareholders by increasing production into a strengthening
commodity price environment, while also reducing per unit costs to
expand margins.”
Q3 2021 HIGHLIGHTS
- 23,659 boe per day1 (142.0 mmcfe per day) of
average production in Q3/21, a 17% increase over Q3/20 and 13%
above the midpoint of production guidance range of 20,000 to 22,000
boe per day1, a result of the successful execution of our capital
program highlighted by production from the new 1-8 pad and the
quick turnaround of the West Septimus gas plant in 7.5 days. For
the first nine months of 2021, volumes averaged 25,532 boe per day1
(153.2 mmcfe per day), a 16% increase over the same period in
2020.
- $26.5 million of AFF2 ($0.17 per fully diluted
share) was generated in the quarter, a 210% increase over Q3/20,
with year-over-year growth being bolstered by higher production,
lower cash costs and significantly improved commodity prices. AFF1
in the first nine months of 2021 totaled $86.0 million ($0.55 per
share), 236% higher than the same period in 2020.
- $176.2 million of net income
($1.12 per fully diluted share) compared to a net loss of $21.1
million ($0.14 per fully diluted share) in the comparable period of
2020, with the increase due primarily to the reversal of a previous
impairment charge of $228.5 million, net of depletion.
- 11% reduction in net operating costs2 per unit
in Q3/21, totaling $5.11 per boe compared to $5.74 per boe in
Q3/20, reflecting lower average net operating costs from new
production at West Septimus and improved operational efficiencies,
supporting an 86% year-over-year increase in operating netback2 to
$16.07 per boe. The previously announced disposition of our
Lloydminster heavy crude oil operations on September 24, 2021, is
expected to reduce operating costs by approximately $0.70 per boe
going forward.
- $56.5 million of net capital expenditures2 in
Q3/21, below our previously forecast range of $60
to $70 million due to the recently announced disposition of the
Company’s Lloydminster heavy crude oil operations offsetting total
exploration and development spending of $64.3 million. The majority
of expenditures were directed towards continued development at
Septimus and West Septimus (“Greater Septimus”).
- Three new Groundbirch wells were completed in
Q3/21, achieving a combined restricted rate of 32 mmcf per day at
the end of an 18-day flowback period in October, establishing a
promising new development area with over 70,000 acres of contiguous
land.
- Achieved record throughput of 115 mmcf per day
of sales gas at the West Septimus gas plant at its peak in October,
leading to record high natural gas production levels of 149 mmcf
per day.
- $404.1 million of net debt2 at September 30,
2021, with no near-term maturities and no financial covenants or
repayment requirements on the $300 million of senior notes termed
out until 2024. The Company’s bank syndicate completed its fall
review, confirming the facility at $150 million until the next
review in the second quarter of 2022.
- Completed the sale of Crew’s Lloydminster heavy crude
oil operations (as previously announced in Crew’s press
release dated October 28, 2021), successfully accomplishing our
corporate evolution to become a pure play Montney producer.
Divestment of these assets sets the stage for Crew to improve
efficiencies, significantly reduce our Greenhouse Gas (“GHG”)
emissions intensity going forward, and decrease overall
decommissioning obligations by nearly 40%.
- Advanced our corporate sustainability
initiatives through listing on OTCQB market under the
ticker ‘CWEGF’, which expands our audience scope, pool of capital,
and provides U.S. investors greater flexibility and ease to trade
in the Company’s common shares.
FINANCIAL & OPERATING
HIGHLIGHTS
FINANCIAL($ thousands, except per share
amounts) |
Three months ended Sept. 30,
2021 |
|
Three months ended Sept. 30, 2020 |
|
Nine months ended Sept. 30,
2021 |
|
Nine months ended Sept. 30, 2020 |
|
Petroleum and natural gas sales |
75,628 |
|
32,344 |
|
229,695 |
|
95,327 |
|
Adjusted funds flow1 |
26,511 |
|
8,549 |
|
86,036 |
|
25,582 |
|
Per share – basic |
0.17 |
|
0.06 |
|
0.56 |
|
0.17 |
|
– diluted |
0.17 |
|
0.06 |
|
0.55 |
|
0.17 |
|
Net Income (loss) |
176,183 |
|
(21,136 |
) |
154,398 |
|
(237,848 |
) |
Per share – basic |
1.14 |
|
(0.14 |
) |
1.01 |
|
(1.56 |
) |
– diluted |
1.12 |
|
(0.14 |
) |
0.99 |
|
(1.56 |
) |
Exploration and development expenditures |
64,295 |
|
21,876 |
|
135,583 |
|
45,253 |
|
Net
property dispositions |
(7,816 |
) |
(35 |
) |
(7,816 |
) |
(34,931 |
) |
Net capital expenditures |
56,479 |
|
21,841 |
|
127,767 |
|
10,322 |
|
Capital Structure($ thousands) |
As at Sept. 30, 2021 |
As at Dec. 31, 2020 |
Working capital deficiency1 |
35,093 |
24,361 |
Bank loan |
71,460 |
35,994 |
|
106,553 |
60,355 |
Senior unsecured
notes |
297,588 |
296,851 |
Total net debt1 |
404,141 |
357,206 |
Common shares
outstanding (thousands) |
156,577 |
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 months ended Sept. 30,
2021 |
Three months ended Sept. 30, 2020 |
Nine months ended Sept. 30,
2021 |
Nine months ended Sept. 30, 2020 |
Daily production |
|
|
|
|
Light crude oil (bbl/d)1 |
148 |
159 |
158 |
188 |
Heavy crude oil (bbl/d) |
1,009 |
1,464 |
1,072 |
1,389 |
Natural gas liquids (“ngl”)2
(bbl/d) |
2,242 |
1,894 |
2,442 |
2,109 |
Condensate (bbl/d) |
2,350 |
2,247 |
2,691 |
2,739 |
Conventional natural gas (mcf/d) |
107,459 |
86,658 |
115,016 |
93,763 |
Total (boe/d @ 6:1) |
23,659 |
20,207 |
25,532 |
22,052 |
Average prices3 |
|
|
|
|
Light crude oil ($/bbl) |
78.29 |
43.93 |
71.26 |
37.56 |
Heavy crude oil ($/bbl) |
65.59 |
37.82 |
59.41 |
25.79 |
Natural gas liquids ($/bbl) |
23.76 |
11.08 |
16.09 |
7.71 |
Condensate ($/bbl) |
81.47 |
43.53 |
75.30 |
41.77 |
Conventional natural gas ($/mcf) |
4.65 |
1.97 |
4.56 |
1.86 |
Oil equivalent ($/boe) |
34.75 |
17.40 |
32.95 |
15.78 |
Notes: (1) The Company does not have any
medium crude oil as defined by NI 51-101.(2) Throughout this
news release, ngls 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 months ended Sept. 30,
2021 |
|
Three months ended Sept. 30, 2020 |
|
Nine months ended Sept. 30,
2021 |
|
Nine months ended Sept. 30, 2020 |
|
Netback ($/boe) |
|
|
|
|
Petroleum and natural gas sales |
34.75 |
|
17.40 |
|
32.95 |
|
15.78 |
|
Royalties |
(2.74 |
) |
(0.76 |
) |
(2.27 |
) |
(0.74 |
) |
Realized commodity hedging (loss)
gain |
(6.22 |
) |
1.90 |
|
(5.64 |
) |
2.33 |
|
Marketing loss1 |
- |
|
(0.28 |
) |
- |
|
(0.13 |
) |
Net operating costs2,3 |
(5.11 |
) |
(5.74 |
) |
(4.84 |
) |
(5.72 |
) |
Transportation costs |
(4.61 |
) |
(3.89 |
) |
(4.28 |
) |
(3.49 |
) |
Operating netback3 |
16.07 |
|
8.63 |
|
15.92 |
|
8.03 |
|
General and administrative
(“G&A”) |
(1.05 |
) |
(0.79 |
) |
(0.97 |
) |
(0.91 |
) |
Financing costs on long-term debt |
(2.84 |
) |
(3.25 |
) |
(2.61 |
) |
(2.88 |
) |
Adjusted funds flow3 |
12.18 |
|
4.59 |
|
12.34 |
|
4.24 |
|
Notes:
(1) Marketing loss 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.
TWO-YEAR PLAN PROGRESS3
In Q3/21, Crew continued to advance our two-year
development plan that was announced in late 2020:
- AFF Supported by Higher Prices – AFF4 of $26.5
million in Q3/21 has been augmented by the continued improvement of
commodity markets. Our full year 2021 AFF4 forecast remains between
$120 to $140 million. Crew intends to announce updated 2022
guidance in December 2021.
- Production Growth – Q3/21 production averaged
23,659 boe per day5, 13% above the midpoint of our previously
announced quarterly guidance range of 20,000 to 22,000 boe per day
and is on track to generate annual 2021 average production between
26,000 to 28,000 boe per day5.
- Optimized Capital Program – Building on
momentum realized to date in 2021, Crew now plans to drill 26 and
complete 21 wells (compared to our previous guidance of drilling
and completing 21 wells) by the end of 2021, carrying forward ten
drilled and uncompleted wells into 2022. Crew intends to implement
the expanded program within our previous net capital expenditures
guidance range of $150 to $170 million.
- Reduced Costs – Crew’s plan to reduce per unit
costs by over 25% from 2020 to 2022 is largely based on increasing
production volumes into existing infrastructure, as over 50% of the
Company’s expenses are fixed. Additional Montney production into
Crew infrastructure is expected to have fixed and variable
operating costs of approximately $1.40 per boe. 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 $9.00 and $10.00 per
boe in 20226, representing decreases of 32% and 24%, respectively.
The Company has taken significant steps towards achieving these
goals with the addition of production from the 1-8 West Septimus
and 4-17 Groundbirch pads, leading to more efficient use of the 120
mmcf per day of sales gas capacity at our West Septimus plant and
the 60 mmcf per day of sales gas capacity at the Septimus gas
plant. Crew has reduced net operating costs4 from $5.74 per boe in
Q3/20 to $5.11 per boe in Q3/21, and we expect that the sale of the
Lloydminster operations will reduce unit operating costs by
approximately $0.70 per boe.
- Balanced Hedging – An active risk management
program ensures the Company generates sufficient AFF to execute our
planned capital programs under various pricing environments. Crew
currently has approximately 75,000 GJ’s per day of natural gas
production for 2022 hedged at an average price of $2.63 per GJ (or
$3.21 per mcf using Crew’s heat content factor).
- Debt Reduction – Based on projected capital
spending and current forward commodity prices, Crew’s previously
announced 2021, year end debt to last twelve-month (“LTM”) EBITDA4
is on track to be at the lower end of the forecasted range of 2.7x
to 2.5x and is trending towards 1.0x by the end of 2022.
OPERATIONS & AREA
OVERVIEW
NE BC Montney (Greater
Septimus)
- Production at Greater Septimus averaged 20,237 boe per day5 in
Q3/21, a 12% decrease from the preceding quarter and an 18%
increase year-over-year. Volumes were affected by a scheduled
facility turnaround at Crew’s West Septimus gas plant and were
partially offset by the activation of seven new wells in the West
Septimus field.
- Production at the West Septimus gas plant, which has a
nameplate capacity of 120 mmcf per day of sales gas, achieved
record processing volumes of 115 mmcf per day in late October
driving corporate production over 30,000 boe per day5.
- The prescheduled West Septimus gas plant shutdown was completed
ahead of schedule with zero recordable injuries, minimizing the
shutdown’s impact on production volumes and overall
operations.
- Nine ultra-extended reach horizontal natural gas wells were
drilled and seven wells were completed in Q3/21 at Greater
Septimus. One of the wells accomplished a new corporate record with
a total drilled length of 6,634 meters. The seven well 1-8 pad has
been producing at restricted rates with the 9-5 pad into a 10 inch
pipeline at approximately 50,000 mmcf per day.
- In Q3/21, Crew completed the construction of a 4.3 kilometre,
12-inch gas trunkline and a 4.3 kilometre, 8-inch liquids gathering
pipeline into North Septimus to allow for further development in
the area, which is expected to represent an extension of the West
Septimus ultra condensate rich play. Crew’s new ten well 4-14 pad
was drilled during the quarter and will be the anchor development
in the area.
- Crew completed the installation of a waste heat recovery system
on budget and on schedule during Q3/21 to manage our environmental
footprint and optimize operations. The system is operating as
expected and is on track to reduce GHG emissions by 7,700 tCO2e per
year and expand condensate capacity to 5,000 bbls per day. Crew
gratefully acknowledges assistance from the Province of British
Columbia for their support of this project.
Groundbirch
- As announced in Crew’s press release dated October 28, 2021,
three wells were completed at the 4-17 pad at Groundbirch during
Q3/21. The wells achieved rates of 32 mmcf per day7 over the 18-day
flowback period and are now shut in for a period of two weeks to
enable the installation of permanent production facilities.
- The successful validation of this test pad, along with the
evaluation of two distinct zones within the Groundbirch Montney,
represent strategically important milestones for Crew given that
these drilling results represent the foundation for development of
a new core area at Groundbirch. Based on a combination of
production and pressure test data, we believe that these wells have
the potential to be the most prolific gas wells the Company has
drilled to date.
- Crew owns over 70,000 net acres of contiguous land in the
Greater Groundbirch area and has an additional five well
authorization permits at the 4-17 pad to follow up on the success
of the first three wells. We expect that at least two additional
zones in the Groundbirch Montney are potentially prospective and we
are currently advancing plans to test those zones in the
future.
- The Company completed construction of a 6.1 kilometre 12-inch
pipeline in Q3/21 to connect the new wells with Crew’s processing
infrastructure at our West Septimus gas plant.
Other NE BC Montney
- We continue to evaluate encouraging offset operator activity in
the Tower, Attachie and Oak/Flatrock areas.
CORPORATE SUSTAINABILITY AND ESG
INITIATIVES
Crew's environmental, social and governance
("ESG") initiatives continue to be a prime focus as we continue our
unwavering commitment to safe and responsible energy production.
During the third quarter of 2021, Crew released our inaugural 2020
ESG report in an environmentally conscious online format, outlining
our efforts to promote operational innovation, reduce our
environmental footprint, support stakeholders and protect our
employees’ health and safety. Please visit
https://esg.crewenergy.com to learn more.
In addition to our ESG report, Crew advanced our
corporate sustainability initiatives through listing on OTCQB
market, which expands our audience scope, pool of capital, and
provides U.S. investors greater flexibility and ease to trade.
Further, Crew continued to be active in our ongoing stakeholder
engagement efforts by participating in virtual investor conferences
and industry meetings, with a goal of ensuring two-way
communication with stakeholders and conveying Crew’s recent
achievements.
- In Q3/21, Crew completed the previously announced non-core
asset sale of our Lloydminster heavy crude oil operations, making
the Company a pure-play Montney natural gas focused producer. Given
Lloydminster represented Crew’s most emission-intensive asset, we
will have removed 46% of our direct 2020 GHG emissions (Scope 1)
and anticipate our total GHG emissions intensity will be reduced
significantly going forward. The asset sale sets the stage for Crew
to streamline operations and improve efficiencies while reducing
our overall decommissioning obligations by nearly 40%, representing
approximately $34.5 million associated with 609 gross (539 net)
wellbores.
- Crew completed the installation of a waste heat recovery system
on budget and on schedule during Q3/21. The system is operating as
expected and is on track to reduce corporate GHG emissions by 7,700
tCO2e per year.
- Crew’s Septimus 4-14 pad was drilled during Q3/21 and allows
for the development of 11 square kilometres of reservoir from one
surface lease, thereby minimizing land disturbance.
- In Q3/21, the Company maintained our strong regulatory
compliance record, achieving a 95% compliance rating with 62
regulatory inspections completed.
- The Company recorded no spills of significance and no lost time
injuries in the third quarter.
OUTLOOK8
- Full Year 2021 Guidance on Track
– Crew is pleased to confirm our full year 2021
guidance and plans to announce the Company’s 2022 budget in
December 2021:
|
2021 Guidance |
Updated 2022 Guidance2 |
Annual Production (boe/d) |
26,000 to
28,000 |
31,000 to
33,000 |
Net
Capital Expenditures ($MM) |
$150 to
$170 |
$70 to
$95 |
AFF1 |
$120 to
$140 |
$190 to
$210 |
Wells Drilled |
26 |
|
Wells Completed |
21 |
|
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.(2) Crew’s plans for 2022 and associated targets
remain preliminary in nature and do not reflect a Board approved
capital expenditures budget.
- Updated full year 2022 production guidance was
reduced by 1,000 boe per day to reflect the sale of the
Lloydminster heavy oil operations.
- Q4 2021 Production – After the disposition of
1,050 boe per day9 of Lloydminster heavy oil assets, Q4/21 volumes
are anticipated to average between 28,000 to 29,000 boe per
day9.
- Full Year 2021 Guidance Reaffirmed – Forecast
full year 2021 average volumes are expected to remain within our
previously announced guidance range of 26,000 to 28,000 boe per
day9, with full year net capital expenditures between $150 to $170
million.
- Near Term Initiatives
- Use forecasted free AFF10 in Q4/21 to reduce debt;
- Invest in capital projects with strong rates of return and
payouts under 12 months, which can be supported by an active
hedging program;
- 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;
- Complete, test and place on production five wells on our 4-21
pad that are evaluating two distinct zones within the Montney;
and
- Enter 2022 with ten drilled and uncompleted wells, with plans
to complete and bring ten wells onto production through the
Septimus gas processing facility in the first quarter of 2022.
We are excited to continue the execution on our
proven plan to expand the production of responsible energy into a
strengthening operating environment to create value and corporate
growth. We would like to thank our employees and our Board of
Directors for their contribution and commitment to Crew, as well as
our extended stakeholders for their ongoing support.
PASSING OF BOARD MEMBER
It is with profound sorrow that Crew reports the
passing of Mr. Dennis Nerland on October 30th, 2021, a
long-standing member of the Company’s Board of Directors. Mr.
Nerland was a respected and successful leader in the business and
legal community, and a dedicated father, husband and avid
sportsman. After 18-years serving as an integral part of our
organization and working alongside the Crew team and our Board of
Directors, Dennis’ business acumen, calm demeanor, wisdom and his
friendship will be deeply missed. Our Crew would like to extend our
deepest condolences to Dennis’ family.
“Dennis leaves a legacy of significant business
and legal accomplishments that was recognized by so many,” said
Dale Shwed, President and Chief Executive Officer of the Company.
“We were fortunate to have had Dennis as a member of our Board, and
he will be greatly missed as both a colleague and a friend.”
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.
"Free AFF" is
calculated by taking adjusted funds flow and subtracting capital
expenditures, excluding acquisitions and dispositions. Management
believes that free adjusted funds flow provides a useful measure to
determine Crew's ability to improve sustainability and to manage
the long-term value of the business.
“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
and net operating costs and enhance margins, streamline operations
and improve efficiencies; our Q4 2021 and 2021 annual capital
budget range and associated drilling and completion plans and
associated guidance; preliminary capital plans and targets for 2022
and associated guidance; production estimates including forecast Q4
and 2021 annual average production volumes; 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; anticipated reductions in GHG
emissions and decommissioning obligations; 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;
forecast debt metric improvements to the lower end of the
forecasted range of 2.7x to 2.5x; debt metric trends towards 1.0x
by the end of 2022; efficiencies and enhanced returns going
forward; 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 for at least two additional zones to
be developed at Groundbirch; the potential extension of our West
Septimus ultra-condensate rich play; the potential of our
Groundbirch area to be a core area of future development and the
number of potential and prolific nature of wells to be drilled;
infrastructure investment plans; the successful implementation of
our ESG initiatives; the amount and timing of capital projects; and
anticipated improvement in our long-term sustainability 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.
Key Budget and Underlying Material
Assumptions1
|
|
20213 |
2022 (Updated)3,4 |
Net Capital Expenditures ($MM) |
150-170 |
70-95 |
Annual Average Production (boe/d) |
26,000 – 28,000 |
31,000-33,000 |
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 gj) |
$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 |
$3.50-$4.00 |
Transportation ($ per boe) |
$3.50-$4.00 |
$2.50-$3.00 |
G&A ($ 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 gas liquids3 |
Condensate |
Conventional Natural gas |
Total (boe/d) |
Lloydminster heavy oil production |
98 |
% |
0 |
% |
0 |
% |
2 |
% |
1,050 |
Recent production level |
1 |
% |
8 |
% |
9 |
% |
82 |
% |
>30,000 |
2021 Q3 Greater Septimus Average |
0 bbl/d |
2,168 bbl/d |
2,322 bbl/d |
94,482 mcf/d |
20,237 |
2021 Q3 Average |
1,157 bbl/d |
2,242 bbl/d |
2,350 bbl/d |
107,459 mcf/d |
23,659 |
2021 Q4 Average |
1 |
% |
9 |
% |
9 |
% |
81 |
% |
28,000-29,000 |
2021 Annual Average |
5 |
% |
10 |
% |
10 |
% |
75 |
% |
26,000-28,000 |
2022 Annual Average |
0 |
% |
9 |
% |
11 |
% |
80 |
% |
31,000-33,000 |
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.
Test Results and Initial Production
Rates
A pressure transient analysis or well-test
interpretation has not been carried out and thus certain of the
test results provided herein should be considered to be preliminary
until such analysis or interpretation has been completed.
Test results and initial production (“IP”) rates disclosed herein,
particularly those of short duration may not necessarily be
indicative of long term performance or of ultimate recovery.
Initial Production ("IP") rates indicate the average daily
production over the indicated daily period.
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 Energy Inc. is a liquids-rich natural gas
producer, committed to pursuing sustainable per share growth
through a balanced mix of financially 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. Crew's liquids-rich natural gas areas of
Septimus and West Septimus and Groundbirch 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 environmental, social and governance
practices which 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 nine month periods ended September
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) 266-2088Email: investor@crewenergy.com |
John Leach, Executive Vice President and CFO |
|
1 See table in the Advisories for production
breakdown by product type as defined in NI 51-101.2
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.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
See table in the Advisories for key budget and
underlying material assumptions related to Crew’s development plan
and associated guidance.7 See ‘Test Results and Initial
Production Rates’ in the Advisories.8 See table in the
Advisories for key budget and underlying material assumptions
related to Crew’s development plan and associated guidance.9
See table in the Advisories for production breakdown by
product type as defined in NI 51-101.10 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.
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