Crew Energy Inc. (TSX: CR; OTCQB: CWEGF) (“Crew” or the “Company”),
a growth-oriented, liquids rich natural gas producer operating in
the world-class Montney play in northeast British Columbia (“NE
BC”), is pleased to announce our operating and financial results
for the three and twelve-month periods ended December 31, 2022.
Crew’s audited consolidated 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.
HIGHLIGHTS
- 33,277 boe per
day1 (200 mmcfe per day) average production in 2022 grew
26% over 2021, exceeding guidance of 32,500 to 33,000 boe per day,
while Q4/22 average production of 32,893 boe per day1 (197 mmcfe
per day) also surpassed guidance of 30,000 to 32,000 boe per day.
- 27% increase in
natural gas production vs 2021 to 154,971 mmcf per
day.
- 70% increase in
condensate production vs 2021 to a record 4,546 bbls per
day.
- 15% increase in
natural gas liquids5,6 (“NGLs”) production vs 2021 to 2,804
bbls per day.
- $337.3 million of
AFF2 ($2.08 per fully diluted share3) generated in 2022,
154% higher than 2021, driven by production growth and strong
operating netbacks4 that were 76% higher than 2021, averaging
$30.43 per boe. In Q4/22, AFF2 grew 60% over Q4/21 to total $75.0
million ($0.46 per fully diluted share).
- $160.7 million of Free
AFF4 generated in 2022, $14.4 million of which was
generated in Q4/22, supporting significant deleveraging through the
year, further enhancing Crew’s long-term sustainability, while 2022
after-tax net income rose 29% to $264.3 million ($1.63 per fully
diluted share) over the prior year.
- 63% reduction in net
debt2 to $149.5 million at year-end 2022, with zero drawn
on our $200 million credit facility and proceeds from our $130
million disposition of non-core properties (the “Disposition”)
allowed Crew to reduce our outstanding Senior Unsecured Notes by
43% compared to year-end 2021, reducing the balance due at maturity
in 2024 to $172 million.
- Significant
improvement in net debt2 to trailing last twelve-month
(“LTM”) EBITDA3 ratio which declined to 0.4 times
at year-end 2022 from 2.6 times last year.
- 21% lower cash costs per
boe4 averaging $9.53 in 2022, while net operating costs
per boe4 declined 18% over 2021 to $3.65, and Q4/22 cash costs per
boe4 of $8.67 were 15% lower than Q4/21.
- $176.6 million exploration
and development program executed safely and responsibly,
with 80% directed to drilling and completion activities, 16% to
facilities, equipment and pipelines and 4% to land, seismic, and
other miscellaneous expenditures.
- Net capital
expenditures4 in 2022 totaled $46.8 million as proceeds
from the Disposition offset expenditures.
FINANCIAL & OPERATING
HIGHLIGHTS
|
FINANCIAL($ thousands, except per share
amounts) |
Three monthsendedDec. 31,
2022 |
Three monthsendedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
Petroleum and natural gas sales |
136,948 |
103,153 |
598,569 |
332,848 |
| Cash provided by
operating activities |
62,570 |
45,747 |
317,337 |
119,156 |
| Adjusted funds
flow2 |
74,994 |
46,833 |
337,345 |
132,869 |
|
Per share3 |
|
|
|
|
|
– basic |
0.49 |
0.31 |
2.21 |
0.87 |
|
– diluted |
0.46 |
0.29 |
2.08 |
0.82 |
| Net
income |
71,383 |
50,901 |
264,359 |
205,299 |
|
Per share |
|
|
|
|
|
– basic |
0.47 |
0.33 |
1.73 |
1.34 |
|
– diluted |
0.44 |
0.31 |
1.63 |
1.27 |
| Property, plant and
equipment expenditures |
60,639 |
42,341 |
176,621 |
177,924 |
|
Net property dispositions4 |
(7) |
(460) |
(129,787) |
(8,276) |
|
Net capital expenditures4 |
60,632 |
41,881 |
46,834 |
169,648 |
|
Capital Structure($ thousands) |
As atDec. 31, 2022 |
As atDec. 31, 2021 |
|
Working capital surplus (deficiency)2 |
21,844 |
(33,068) |
| Bank
loan |
- |
(75,067) |
|
|
21,844 |
(108,135) |
| Senior
unsecured notes |
(171,298) |
(297,834) |
|
Net debt2 |
(149,454) |
(405,969) |
|
Common shares outstanding(thousands) |
154,377 |
152,480 |
|
OPERATIONAL |
Three monthsendedDec. 31,
2022 |
Three monthsendedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
Daily production |
|
|
|
|
|
Light crude oil (bbl/d) |
84 |
157 |
98 |
158 |
|
Heavy crude oil (bbl/d) |
- |
- |
- |
802 |
|
Natural gas liquids (“ngl”)5,6 (bbl/d) |
2,565 |
2,458 |
2,804 |
2,446 |
|
Condensate (bbl/d) |
3,955 |
2,596 |
4,546 |
2,667 |
|
Conventional natural gas (mcf/d) |
157,732 |
143,584 |
154,971 |
122,217 |
|
Total (boe/d @ 6:1) |
32,893 |
29,142 |
33,277 |
26,443 |
| Average
realized3 |
|
|
|
|
|
Light crude oil price ($/bbl) |
100.10 |
89.98 |
111.56 |
75.95 |
|
Heavy crude oil price ($/bbl) |
- |
- |
- |
59.41 |
|
Natural gas liquids price ($/bbl) |
37.42 |
34.50 |
44.42 |
20.75 |
|
Condensate price ($/bbl) |
105.30 |
93.90 |
115.43 |
79.86 |
|
Natural gas price ($/mcf) |
6.14 |
5.42 |
6.32 |
4.82 |
|
Commodity price ($/boe) |
45.25 |
38.47 |
49.28 |
34.49 |
|
|
Three monthsendedDec. 31,
2022 |
Three monthsendedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
Netback($/boe) |
|
|
|
|
|
Petroleum and natural gas sales |
45.25 |
38.47 |
49.28 |
34.49 |
|
Royalties |
(6.09) |
(2.70) |
(4.90) |
(2.39) |
|
Realized loss on derivative financial instruments |
(5.72) |
(8.06) |
(7.07) |
(6.31) |
|
Net operating costs4 |
(3.47) |
(3.49) |
(3.65) |
(4.47) |
|
Net transportation costs4 |
(3.05) |
(3.52) |
(3.23) |
(4.07) |
|
Operating netback4 |
26.92 |
20.70 |
30.43 |
17.25 |
|
General and administrative (“G&A”) |
(1.17) |
(0.91) |
(0.98) |
(0.95) |
|
Financing costs on debt4 |
(0.98) |
(2.31) |
(1.67) |
(2.53) |
|
Adjusted funds flow2 |
24.77 |
17.48 |
27.78 |
13.77 |
|
|
|
| ¹ See table in the Advisories for production
breakdown by product type as defined in NI 51-101.² Capital
management 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 and Other
Financial Measures” contained within this press release.³
Supplementary financial 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 and Other Financial Measures” contained
within this press release.⁴ Non-IFRS financial measure or ratio
that does not have any standardized meaning as prescribed by
International Financial Reporting Standards, and therefore, may not
be comparable with calculations of similar measures or ratios for
other entities. See “Advisories - Non-IFRS and Other Financial
Measures” contained within this press release and in our most
recently filed MD&A, available on SEDAR at www.sedar.com.⁵
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.⁶ Excludes condensate volumes
which have been reported separately. |
NEW FOUR-YEAR PLAN UPDATE
Crew’s recently announced, four-year strategic
plan (the “Four-Year Plan”7) is designed to significantly increase
the Company’s size and scale through 2026, building on the momentum
and stronger financial position realized following the successful
execution of our recently completed two-year plan. Successful
implementation of this Four-Year Plan would enable Crew to achieve
our next phase of growth with significantly increased production,
targeting annual volumes of over 60,000 boe per day. With 70,000
net acres of contiguous land in the Groundbirch area, a key driver
behind the Four-Year Plan is the expansion of our gas processing
infrastructure which is planned to be anchored by the construction
of a 180 mmcf per day deep-cut gas plant in an area ideally located
to supply natural gas to Canada’s future liquified natural gas
(“LNG”) export facilities.
Advancement of our focused Groundbirch
development plan is predicated on all necessary permits being
obtained, supportive commodity prices and securing the requisite
financing while maintaining conservative debt leverage metrics.
With current spot and future strip natural gas prices being
depressed from a supply/demand imbalance caused by unseasonably
warm weather across North America and Europe, the Company plans to
methodically, and cost effectively, advance the Four-Year Plan
through obtaining the necessary permits, monitoring price signals
for additional hedging opportunities and continuing to explore a
variety of financing options for the project.
_________________________⁷ Crew’s plans, goals
and targets for 2024 and beyond remain preliminary in nature and do
not, at this time, reflect a Board approved capital expenditures
budget. Accordingly, undue reliance should not be placed on the
same.
OPERATIONS UPDATE & AREA
OVERVIEW
NE BC Montney (Greater
Septimus)
- Five (5.0 net) extended reach
horizontal (“ERH”) ultra-condensate rich (“UCR”) wells were
completed on the 11-27 pad in December of 2022. After 34 days on
production, based on field estimates, these wells are currently
producing at an average raw gas production rate of 1,570 mcf per
day of natural gas and 828 bbls per day of condensate.
Groundbirch
- The second phase of development at
Crew’s 4-17 pad, targeting two additional zones in the Upper
Montney with five (5.0 net) ERH wells, continues to exceed internal
type curve forecasts, with an average per well raw gas production
rate over 160 days (“IP160”) of 6,577 mcf per day.
- The Upper Montney at Groundbirch is
approximately 470 feet in thickness and has four prospective zones,
all of which were tested through Crew’s 4-17 exploration and
development program in 2021 and 2022, with each zone having
generated promising initial commercial development rates.
- The results from the past year’s
delineation and initial development drilling at Groundbirch
demonstrated the breadth and strength of our asset base, and
position Crew with potentially decades of continued
development.
Other NE BC Montney
- The Company completed drilling
operations on the six-well, 15-28 ERH pad at Tower during Q4/22.
The wells target light oil in the upper Montney “B” and “C” zones,
have lateral lengths of over 4,000 meters and are currently planned
to be completed in Q3/23.
RISK MANAGEMENT PROFILE
To secure a base level of AFF2 to fund planned
capital projects, Crew continues to utilize hedging to limit
exposure to fluctuations in commodity prices and foreign exchange
rates, while allowing for participation in spot commodity prices.
As of March 8, 2023, the Company has hedged approximately 72,000
GJ’s at C$4.47 per GJ (or $5.36 per mcf using Crew’s higher heat
content factor) and 1,500 bbls per day of condensate at an average
price of C$106.00 per bbl for the first six months of 2023, and
1,000 bbls per day at an average price of C$100.25 per bbl for the
second half of 2023.
SUSTAINABILITY AND ESG
INITIATIVES
Crew strives to be a leader in environmental,
social, and governance ("ESG"). With a focus on sustainability
initiatives, we are unwavering in our dedication to safe and
responsible energy production.
Throughout 2022, some of our key ESG highlights
include:
- Crew achieved independent
certification of our natural gas and natural gas liquids production
from our NE BC Development area under the Equitable Origin EO100™
Standard for Responsible Energy Development. The certification
confirms Crew’s best-practice methods for ESG performance in the
energy sector and demonstrates our commitment to continuous
improvement.
- Crew invested a record $13.1
million on decommissioning activities in 2022. Undertaking these
activities has reduced our idle well count by 33% in 2022.
- Crew anticipates a 25% reduction in
Scope 1 and Scope 2 GHG emissions intensity in 2022 from 2021
levels. We continue to strive for top-tier emissions intensity as
we pursue opportunities such as waste heat recovery, re-spoolable
surface pipelines, and electrification by using low emission
hydroelectric power.
Please visit www.esg.crewenergy.com to learn
more about Crew’s latest sustainability initiatives showcased
within our digital ESG Report and data performance tables.
OUTLOOK
On January 18, 2023, the B.C. Government and
Blueberry River First Nations announced the signing of the
‘Blueberry River First Nations Implementation Agreement’.
Additionally, on January 20, 2023, a Consensus Agreement between
the B.C. Government and several of the Treaty 8 First Nations was
announced. Crew believes this resolution now supports our ability
to optimize capital allocation, further enabling the Company to
continue to generate value from our vast Montney resource. Permit
applications have been submitted for approval to the BC Energy
Regulator in respect of 93 well locations, our planned Groundbirch
Plant, pipelines, facilities and other investments.
As a result of unseasonably warmer temperatures
across parts of North America and Europe through the latter part of
2022 and into 2023, a natural gas supply/demand imbalance has
materialized, leading to a sharp price decline for both spot and
future natural gas prices. In response, the Company is adjusting
our original 2023 budget and associated guidance initially released
in early December 2022, summarized below.
- 2023 net capital
expenditures4 reduced
to $190 to $210 million, from
original budget of $230 to $250 million, targeting to:
- Drill 15 (15.0
net) Montney wells (versus original budget of 18 (18.0
net) wells)
- Complete, equip
and tie-in 12 (12.0 net) wells (versus
previous plan to complete, equip and tie-in 19 (19.0 net)
wells)
- Maintain 2023 average production
at 30,000 to 32,000 boe per day1 targeting an exit
rate of 32,000 to 34,000 boe per day1, versus
previous exit rate forecast of 35,000 to 37,000 boe per day1, given
seven (7.0 net) fewer wells are planned to be completed in the
latter half of the year
- Hold an inventory of ten
(10.0 net) drilled and uncompleted UCR wells at year end
2023 (versus previous plan of six (6.0 net) wells)
- Continues to facilitate the
redemption of the balance of Crew’s $172 million outstanding Senior
Unsecured Notes in the first half of 2023
- Inherent optionality of our
asset base plus condensate prices over $100 per bbl has
led Crew to pivot and focus on drilling in the UCR area of Greater
Septimus, which is expected to drive 50% growth in condensate and
light oil production in Q4/23 vs Q4/22, achieving volumes greater
than 6,000 bbls per day
- Crew estimates that liquids
production will represent over 50% of petroleum and natural
gas sales in 2023
- Incremental volumes are expected to
be supported by a condensate stabilization project at Septimus,
which is forecast to increase corporate condensate processing
capacity to 11,000 bbls per day in Q3/23
- Q1/23 net capital
expenditures4 are forecast at $25 to $30 million,
with average production of 31,000 to 33,000 boe per
day1;
Crew's active development program is designed to
continue targeting optimal investment returns in the current
environment while maintaining conservative leverage metrics,
positioning the Company to prudently and strategically develop our
significant resource base under the Four-Year Plan.
The following table sets forth Crew’s updated
guidance and underlying material assumptions:
|
|
Previous 2023 Guidanceand Assumptions |
Updated 2023 Guidanceand
Assumptions8 |
|
Net capital expenditures4 ($Millions) |
230-250 |
190-210 |
| Annual average
production1 (boe/d) |
30,000–32,000 |
30,000–32,000 |
| Adjusted funds
flow2 ($Millions) |
300-320 |
240-260 |
| Free adjusted funds
flow4 ($Millions) |
50–90 |
30-70 |
| EBITDA4 ($Millions) |
310–330 |
250-270 |
| Oil price (WTI)($US per
bbl) |
$80.00 |
$75.00 |
| Natural gas price (NYMEX) ($US
per mmbtu) |
$5.00 |
$3.20 |
| Natural gas price (AECO 5A)
($C per mcf) |
$4.25 |
$2.85 |
| Natural gas price (Crew est.
wellhead) ($C per mcf) |
$5.25 |
$3.30 |
| Foreign exchange
($US/$CAD) |
$0.75 |
$0.74 |
| Royalties |
9–11% |
9–11% |
| Net operating costs4 ($
per boe) |
$4.50–$5.00 |
$4.50–$5.00 |
| Net transportation
costs4 ($ per boe) |
$3.50–$4.00 |
$3.50–$4.00 |
| G&A ($ per boe) |
$1.00–$1.20 |
$1.00–$1.20 |
|
Effective interest rate on long-term debt |
6.5–7.5% |
6.5–7.5% |
|
2023 Sensitivities |
AFF ($MM) |
AFF/Share |
FD AFF/Share |
|
100 bbl per day Condensate |
$3.3 |
$0.02 |
$0.02 |
| C$1.00 per bbl WTI |
$1.3 |
$0.01 |
$0.01 |
| US $0.10 NYMEX (per
mmbtu) |
$3.1 |
$0.02 |
$0.02 |
| 1 mmcf per day natural
gas |
$1.2 |
$0.01 |
$0.01 |
| $0.10 AECO 5A (per GJ) |
$2.6 |
$0.02 |
$0.02 |
| $0.01
FX CAD/US |
$2.9 |
$0.02 |
$0.02 |
With a world-class Montney asset base that is
ideally situated to capitalize on the incredible potential to
provide natural gas for Canadian LNG, Crew remains focused on
operational excellence and financial strength. With an established
track record of successfully navigating a variety of market
opportunities and challenges, Crew has a quality asset base and a
committed team with the vision to deliver long-term shareholder
value. With a strong risk management program and a proven strategy,
we look forward to realizing our objectives while upholding our
commitment to remain a safe and environmentally responsible
operator. Thank you to our stakeholders for your ongoing
contributions, dedication, and continued support.
_________________________⁸ 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.
ADVISORIES
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” “targets” 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 Four-Year Plan and underlying strategy, plans, goals and
targets, all as more particularly outlined and described in this
press release; our 2023 annual capital budget range (the "2023
Budget"), associated drilling and completion plans, the anticipated
timing thereof, and all associated near term initiatives, goals and
targets, along with all guidance and underlying assumptions related
to the 2023 Budget as outlined in the “Outlook” section in this
press release; production estimates and targets under the 2023
Budget and balance of the Four-Year Plan; infrastructure plans and
anticipated benefits outlined in this press release including
construction of the Groundbirch Plant, anticipated timing and
assumed receipt of all regulatory approvals required in connection
therewith; our ability to secure financing for the Groundbirch
Plant and timing thereof; forecast improvement in debt and leverage
metrics; commodity price expectations and assumptions; Crew's
commodity risk management programs and future hedging 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 and planned redemption of our
outstanding senior unsecured notes; future results from operations
and operating and leverage metrics; targeted debt levels and
leverage metrics over the course of the Four-Year Plan; world
supply and demand projections and long-term impact on pricing;
future development, exploration, acquisition and disposition
activities (including our capital investment model through 2026 and
associated drilling and completion plans, associated receipt of all
required regulatory permits for our Four-Year Plan, development
timing and cost estimates); the potential to serve a Canadian LNG
market; the potential of our Groundbirch area to be a core area of
future development and the anticipated commerciality of up to four
potential prospective zones to be drilled; the successful
implementation of our ESG initiatives, and significant emissions
intensity improvements going forward; 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 Four-Year Plan.
The internal projections, expectations, or
beliefs underlying our Board approved 2023 Budget and associated
guidance, as well as management's preliminary strategy, and
associated plans, goals and targets in respect of the balance of
its Four-Year Plan, are subject to change in light of, without
limitation, the Russia/Ukraine conflict and any related actions
taken by businesses and governments, ongoing results, prevailing
economic circumstances, volatile commodity prices, resulting
changes in our underlying assumptions, goals and targets provided
herein and changes in 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 2024
and beyond internal plan and associated economic model. Such
information reflects internal goals and targets used by management
for the purposes of making capital investment decisions and for
internal long-range planning and future budget preparation. Readers
are cautioned that events or circumstances and updates to
underlying assumptions could cause capital plans and associated
results to differ materially from those predicted and Crew's
guidance for 2023, and more particularly its internal plan, goals
and targets for 2024 and beyond which are not based upon Board
approved budget(s) at this time, 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 several 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; that future business, regulatory and industry conditions
will be within the parameters expected by Crew; 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,
environmental and indigenous matters in the jurisdictions in which
Crew operates; that regulatory authorities in British Columbia will
resume and continue, as the case may be, granting approvals for oil
and gas activities on time frames, and on terms and conditions,
consistent with past practices; 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 pandemics and the Russia / Ukraine conflict; 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 and 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 MD&A and 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.
Risk Factors to the Company’s Four-Year
Plan
Risk factors that could materially impact
successful execution and actual results of the Four-Year Plan
include:
- volatility of petroleum and natural
gas prices and inherent difficulty in the accuracy of predictions
related thereto;
- changes in Federal and Provincial
regulations;
- execution of construction timelines
from BC Hydro to support the electrification of the Groundbirch
Plant;
- receipt of high-value regulatory
permits required to launch development under the Four-Year
Plan;
- the Company’s ability to secure
financing for the Groundbirch Plant sourced from AFF, bank or other
Debt instruments, asset sales, equity issuance, infrastructure
financing or some combination thereof; and
- Those additional risk factors set
forth in the Company’s MD&A and most recent Annual Information
Form filed on SEDAR.
Information Regarding Disclosure on Oil
and Gas Operational Information
All amounts in this news release are stated in
Canadian dollars unless otherwise specified. This press release
contains metrics commonly used in the oil and natural gas industry.
Each of these metrics are determined by Crew as specifically set
forth in this news release. These terms do not have standardized
meanings or standardized methods of calculation and therefore may
not be comparable to similar measures presented by other companies,
and therefore should not be used to make such comparisons. Such
metrics have been included to provide readers with additional
information to evaluate the Company’s performance however, such
metrics are not reliable indicators of future performance and
therefore should not be unduly relied upon for investment or other
purposes. See "Non-IFRS and Other Financial Measures" below for
additional disclosures.
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 preliminary until such
analysis or interpretation has been completed. Test results and
initial production (“IP”) rates disclosed herein, particularly
those short in duration, may not necessarily be indicative of
long-term performance or of ultimate recovery.
BOE and Mcfe Conversions
Measurements expressed in barrel of oil
equivalents, BOEs or Mcfe may be misleading, particularly if used
in isolation. A BOE conversion ratio of 6 mcf: 1 bbl and an Mcfe
conversion ratio of 1 bbl:6 Mcf are based on an energy equivalency
conversion method primarily applicable at the burner tip and do 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.
Non-IFRS and Other Financial
Measures
Throughout this press release and other
materials disclosed by the Company, Crew uses certain measures to
analyze financial performance, financial position and cash flow.
These non-IFRS and other specified financial measures do not have
any standardized meaning prescribed under IFRS and therefore may
not be comparable to similar measures presented by other entities.
The non-IFRS and other specified financial measures should not be
considered alternatives to, or more meaningful than, financial
measures that are determined in accordance with IFRS as indicators
of Crew’s performance. Management believes that the presentation of
these non-IFRS and other specified financial measures provides
useful information to shareholders and investors in understanding
and evaluating the Company’s ongoing operating performance, and the
measures provide increased transparency and the ability to better
analyze Crew’s business performance against prior periods on a
comparable basis.
Capital Management Measures
a) Funds from Operations and
Adjusted Funds Flow (“AFF”)
Funds from operations represents cash provided
by operating activities before changes in operating non-cash
working capital, accretion of deferred financing costs and
transaction costs on property dispositions. Adjusted funds flow
represents funds from operations before decommissioning obligations
settled (recovered). The Company considers these metrics as key
measures 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. Management believes that
such measures provide an insightful assessment of the Company's
operations on a continuing basis by eliminating certain non-cash
charges, actual settlements of decommissioning obligations and
transaction costs on property dispositions, the timing of which is
discretionary. Funds from operations and adjusted funds flow should
not be considered as an alternative to or more meaningful than cash
provided by operating activities as determined in accordance with
IFRS as an indicator of the Company’s performance. Crew’s
determination of funds from operations and adjusted funds flow may
not be comparable to that reported by other companies. Crew also
presents adjusted funds flow per share whereby per share amounts
are calculated using weighted average shares outstanding consistent
with the calculation of income per share. The applicable
reconciliation to the most directly comparable measure, cash
provided by operating activities, is contained under “free adjusted
funds flow” below.
b) Net Debt and Working Capital
Surplus (Deficiency)
Crew closely monitors its capital structure with
a goal of maintaining a strong balance sheet to fund the future
growth of the Company. The Company monitors net debt as part of its
capital structure. The Company uses net debt (bank debt plus
working capital deficiency or surplus, excluding the current
portion of the fair value of financial instruments) as an
alternative measure of outstanding debt. Management considers net
debt and working capital deficiency (surplus) an important measure
to assist in assessing the liquidity of the Company.
Non-IFRS Financial Measures and
Ratios
a) Net Property
Acquisitions (Dispositions)
Net property acquisitions (dispositions) equals
property acquisitions less property dispositions and transaction
costs on property dispositions. Crew uses net property acquisitions
(dispositions) to measure its total capital investment compared to
the Company’s annual capital budgeted expenditures. The most
directly comparable IFRS measures to net property acquisitions
(dispositions) are property acquisitions and property
dispositions.
b) Net Capital Expenditures
Net capital expenditures equals exploration and
development expenditures less net property acquisitions
(dispositions). Crew uses net capital expenditures to measure its
total capital investment compared to the Company’s annual capital
budgeted expenditures. The most directly comparable IFRS measure to
net capital expenditures is property, plant and equipment
expenditures.
|
($ thousands) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
Property, plant and equipment expenditures |
60,639 |
53,560 |
42,341 |
176,621 |
177,924 |
| Less: Net property
dispositions |
(7) |
(129,780) |
(460) |
(129,787) |
(8,276) |
|
Net capital expenditures |
60,632 |
(76,220) |
41,881 |
46,834 |
169,648 |
c) EBITDA
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. The Company considers this metric as key
measures 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. The most directly
comparable IFRS measure to EBITDA is cash provided by operating
activities.
|
($ thousands) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
|
|
|
|
|
|
|
Cash provided by operating activities |
62,570 |
82,322 |
45,747 |
317,337 |
119,156 |
|
Change in operating non-cash working capital |
7,565 |
(16,243) |
(668) |
8,331 |
8,844 |
|
Accretion of deferred financing costs |
(149) |
(214) |
(246) |
(854) |
(983) |
|
Transaction costs on property dispositions |
- |
203 |
- |
203 |
2,505 |
|
Funds from operations |
69,986 |
66,068 |
44,833 |
325,017 |
129,522 |
|
Decommissioning obligations settled excluding government
grants |
5,008 |
3,349 |
2,000 |
12,328 |
3,347 |
|
Adjusted funds flow |
74,994 |
69,417 |
46,833 |
337,345 |
132,869 |
|
Interest |
2,971 |
6,916 |
6,199 |
22,211 |
24,399 |
|
EBITDA |
77,965 |
76,333 |
53,032 |
359,556 |
157,268 |
d) Free Adjusted
Funds Flow
Free adjusted funds flow represents adjusted
funds flow less capital expenditures, excluding acquisitions and
dispositions. The Company considers this metric a key measure that
demonstrates the ability of the Company’s continuing operations to
fund future growth through capital investment and to service and
repay debt. The most directly comparable IFRS measure to free
adjusted funds flow is cash provided by operating activities.
|
($ thousands) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
|
|
|
|
|
|
|
Cash provided by operating activities |
62,570 |
82,322 |
45,747 |
317,337 |
119,156 |
|
Change in operating non-cash working capital |
7,565 |
(16,243) |
(668) |
8,331 |
8,844 |
|
Accretion of deferred financing costs |
(149) |
(214) |
(246) |
(854) |
(983) |
|
Transaction costs on property dispositions |
- |
203 |
- |
203 |
2,505 |
|
Funds from operations |
69,986 |
66,068 |
44,833 |
325,017 |
129,522 |
|
Decommissioning obligations settled excluding government
grants |
5,008 |
3,349 |
2,000 |
12,328 |
3,347 |
|
Adjusted funds flow |
74,994 |
69,417 |
46,833 |
337,345 |
132,869 |
|
Less: property, plant and equipment expenditures |
60,639 |
53,560 |
42,341 |
176,621 |
177,924 |
|
Free adjusted funds flow |
14,355 |
15,857 |
4,492 |
160,724 |
(45,055) |
e) Net Operating
Costs
Net operating costs equals operating costs net
of processing revenue. Management views net operating costs as an
important measure to evaluate its operational performance. The most
directly comparable IFRS measure for net operating costs is
operating costs.
|
($ thousands, except per boe) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
|
|
|
|
|
|
| Operating costs |
11,115 |
12,580 |
10,287 |
47,759 |
45,828 |
|
Processing revenue |
(616) |
(520) |
(934) |
(3,441) |
(2,720) |
|
Net operating costs |
10,499 |
12,060 |
9,353 |
44,318 |
43,108 |
| Per
boe |
3.47 |
4.12 |
3.49 |
3.65 |
4.47 |
f) Net Operating
Costs per boe
Net operating costs per boe equals net operating
costs divided by production. Management views net operating costs
per boe as an important measure to evaluate its operational
performance. The calculation of Crew’s net operating costs per boe
can be seen in the non-IFRS measure entitled “Net Operating Costs”
above.
g) Net
Transportation Costs
Net transportation costs equals transportation
costs net of transportation revenue. Management views net
transportation costs as an important measure to evaluate its
operational performance. The most directly comparable IFRS measure
for net transportation costs is transportation costs. The
calculation of Crew’s net transportation costs can be seen in the
section entitled “Net Transportation Costs” of this MD&A.
|
($ thousands, except per boe) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
|
|
|
|
|
|
| Transportation costs |
10,701 |
11,482 |
10,868 |
45,120 |
44,943 |
|
Transportation revenue |
1,485 |
1,485 |
1,421 |
5,892 |
5,638 |
|
Net transportation costs |
9,216 |
9,997 |
9,447 |
39,228 |
39,305 |
| Per
boe |
3.05 |
3.42 |
3.52 |
3.23 |
4.07 |
h) Net
Transportation Costs per boe
Net transportation costs per boe equals net
transportation costs divided by production. Management views net
transportation costs per boe as an important measure to evaluate
its operational performance.
i) Operating
Netback per boe
Operating netback per boe 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 per boe an
important measure to evaluate its operational performance as it
demonstrates its field level profitability relative to current
commodity prices.
|
($/boe) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
|
|
|
|
|
|
|
Petroleum and natural gas sales |
45.25 |
45.46 |
38.47 |
49.28 |
34.49 |
|
Royalties |
(6.09) |
(6.86) |
(2.70) |
(4.90) |
(2.39) |
|
Realized loss on derivative financial instruments |
(5.72) |
(4.63) |
(8.06) |
(7.07) |
(6.31) |
|
Net operating costs |
(3.47) |
(4.12) |
(3.49) |
(3.65) |
(4.47) |
|
Net transportation costs |
(3.05) |
(3.42) |
(3.52) |
(3.23) |
(4.07) |
|
Operating netbacks |
26.92 |
26.43 |
20.70 |
30.43 |
17.25 |
|
Production (boe/d) |
32,893 |
31,792 |
29,142 |
33,277 |
26,443 |
j) Cash costs per
boe
Cash costs per boe is comprised of net
operating, transportation, general and administrative and financing
costs on debt calculated on a boe basis. Management views cash
costs per boe as an important measure to evaluate its operational
performance.
|
($/boe) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
|
|
|
|
|
|
| Net operating costs |
3.47 |
4.12 |
3.49 |
3.65 |
4.47 |
| Net transportation costs |
3.05 |
3.42 |
3.52 |
3.23 |
4.07 |
| General and administrative
expenses |
1.17 |
0.99 |
0.91 |
0.98 |
0.95 |
|
Financing costs on debt |
0.98 |
1.70 |
2.31 |
1.67 |
2.53 |
|
Cash costs |
8.67 |
10.23 |
10.23 |
9.53 |
12.02 |
k) Financing costs
on debt per boe
Financing costs on debt per boe is comprised of
the sum of interest on bank loan and other, interest on senior
notes and accretion of deferred financing charges, divided by
production. Management views financing costs on debt per boe as an
important measure to evaluate its cost of debt financing.
|
($ thousands, except per boe) |
Three months endedDec. 31, 2022 |
Three months endedSept 30, 2022 |
Three months endedDec. 31, 2021 |
Year endedDec. 31, 2022 |
Year endedDec. 31, 2021 |
|
|
|
|
|
|
|
| Interest on bank loan and
other |
4 |
154 |
1,038 |
2,321 |
3,916 |
| Interest on senior notes |
2,818 |
4,607 |
4,915 |
17,095 |
19,500 |
|
Accretion of deferred financing charges |
149 |
214 |
246 |
854 |
983 |
|
Financing costs on debt |
2,971 |
4,975 |
6,199 |
20,270 |
24,399 |
| Production (boe/d) |
32,893 |
31,792 |
29,142 |
33,277 |
26,443 |
|
Financing costs on debt per boe |
0.98 |
1.70 |
2.31 |
1.67 |
2.53 |
Supplementary Financial
Measures
"Adjusted funds flow per basic
share" is comprised of adjusted funds flow divided by the
basic weighted average common shares.
"Adjusted funds flow per diluted
share" is comprised of adjusted funds flow divided by the
diluted weighted average common shares.
"Adjusted funds flow per boe"
is comprised of adjusted funds flow divided by total
production.
"Average realized commodity
price" is comprised of commodity sales from production, as
determined in accordance with IFRS, divided by the Company's
production. Average prices are before deduction of net
transportation costs and do not include gains and losses on
financial instruments.
“Average realized light crude oil
price” is comprised of light crude oil commodity sales
from production, as determined in accordance with IFRS, divided by
the Company’s light crude oil production. Average prices are before
deduction of net transportation costs and do not include gains and
losses on financial instruments.
“Average realized heavy crude oil
price” is comprised of heavy crude oil commodity sales
from production, as determined in accordance with IFRS, divided by
the Company’s heavy crude oil production. Average prices are before
deduction of net transportation costs and do not include gains and
losses on financial instruments.
"Average realized ngl price" is
comprised of ngl commodity sales from production, as determined in
accordance with IFRS, divided by the Company's ngl production.
Average prices are before deduction of net transportation costs and
do not include gains and losses on financial instruments.
“Average realized condensate
price” is comprised of condensate commodity sales from
production, as determined in accordance with IFRS, divided by the
Company’s condensate production. Average prices are before
deduction of net transportation costs and do not include gains and
losses on financial instruments.
"Average realized natural gas
price" is comprised of natural gas commodity sales from
production, as determined in accordance with IFRS, divided by the
Company's natural gas production. Average prices are before
deduction of net transportation costs and do not include gains and
losses on financial instruments.
"Net debt to last twelve months (“LTM”)
EBITDA" is calculated as net debt at a point in time
divided by EBITDA earned from that point back for the trailing
twelve months.
Supplemental Information Regarding
Product Types
References to gas or natural gas and NGLs in
this press release refer to conventional natural gas and natural
gas liquids product types, respectively, as defined in National
Instrument 51-101, Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"), except where specifically noted
otherwise.
The following is intended to provide the product
type composition for each of the production figures provided
herein, where not already disclosed within tables above:
|
|
Light & Medium Crude Oil |
HeavyCrude Oil |
Condensate |
Natural Gas Liquids1 |
ConventionalNatural Gas |
Total(boe/d) |
|
Q1 2023 Average |
0% |
0% |
14% |
7% |
79% |
31,000-33,000 |
| 2023 Annual
Average |
3% |
0% |
13% |
7% |
77% |
30,000-32,000 |
|
2023 Exit Rate |
6% |
0% |
14% |
7% |
73% |
32,000-34,000 |
Notes: 1) Excludes
condensate volumes which have been reported separately.
Crew is a growth-oriented natural gas and
liquids producer, committed to pursuing sustainable per share
growth through a balanced mix of financially and socially
responsible exploration and development. The Company’s operations
are exclusively located in northeast British Columbia and feature a
vast Montney resource with a large contiguous land base in the
Greater Septimus and Groundbirch areas in British Columbia,
offering significant development potential over the long-term. Crew
has access to diversified markets with operated infrastructure and
access to multiple pipeline egress options. The Company’s common
shares are listed for trading on the Toronto Stock Exchange (“TSX”)
under the symbol “CR” and on the OTCQB in the US under ticker
“CWEGF”.
FOR DETAILED INFORMATION, PLEASE
CONTACT:
| Dale Shwed, President and CEOJohn
Leach, Executive Vice President and CFO |
Phone: (403) 266-2088Email:
investor@crewenergy.com |
| |
|
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