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 six month periods ended June 30, 2023. Crew’s
Financial Statements and Notes, as well as Management’s Discussion
and Analysis (“MD&A”) are available on our website and filed on
SEDAR at www.sedar.com.
HIGHLIGHTS
-
30,046 boe per day1 (180 mmcfe per day) average
production in Q2/23 was at the high end of Crew’s previous
quarterly guidance of 28,000 to 30,000 boe per day as we realized
continued strong performance from wells drilled and completed at
the end of 2022 and early 2023, while first half 2023 (“1H/23”)
production averaged 31,496 boe per day1. Relative to the same
periods in 2022, lower volumes reflect shut-in production due to
weaker natural gas prices, as well as limited completion activity
in the first half of 2023 while the Company focused on debt
reduction.
-
143,752 mmcf per day of natural gas production in
Q2/23 represented 80% of total production and 47%
of sales, with 149,738 mmcf per day in 1H/23 representing 79% of
total production and 50% of sales.
-
3,745 bbls per day of light crude oil and
condensate production in Q2/23 represented 12% of
total production and 45% of sales, with 4,192 bbls per day in 1H/23
representing 13% of production and 43% of sales.
-
2,342 bbls per day of natural gas liquids5,6
(“ngls”) production in Q2/23 represented 8% of
total production and 7% of sales, with 2,348 bbls per day in 1H/23
representing 7% of production and 8% of sales.
-
$59.0 million of Adjusted Funds Flow (“AFF”)2
($0.36 per fully diluted share3) was generated in Q2/23, and $133.6
million ($0.83 per fully diluted share3) in 1H/23, with AFF
benefiting from the monetization of approximately $11.8 million of
natural gas hedge contracts in the quarter.
-
AFF2 as a
percentage of petroleum and natural gas sales (“AFF
Margin”)3 totaled 89% in Q2/23 and was 80% in
1H/23.
-
Operating netbacks4 averaged $23.43 per
boe in Q2/23 and $25.40 per boe in 1H/23, assisted by
realized hedging gains of $8.87 per boe and $6.71 per boe in Q2/23
and 1H/23, respectively.
-
$36.7 million of net capital expenditures4
invested in Q2/23, including the drilling of six ultra-condensate
rich (“UCR”) wells at Greater Septimus. Drier surface conditions in
the area enabled the drilling and construction of surface leases
earlier than anticipated during the quarter, allowing for
investments originally planned for Q3/23 to be accelerated into
Q2/23.
-
42% reduction in net debt2 compared to Q1/23 to
total $60.7 million at quarter-end, supported by the generation of
$21.4 million of Free AFF4 in Q2/23, and further
reduced by $29 million of other income arising from a
non-refundable, third-party payment.
-
Reduced net debt2 to trailing last twelve-month
(“LTM”) EBITDA3 by 50% to 0.2 times at June 30,
2023, from 0.4 times at year-end 2022.
-
$28.9 million drawn on our $200 million
credit facility that was extended to May 2025 during the
quarter.
-
Redeemed the remaining $172 million principal
amount of our 2024 Senior Unsecured Notes at par on April 28, 2023,
using cash on hand and drawings on the bank line,
simultaneously extending our $200 million credit facility maturity
to May 2025 with no financial maintenance covenants and no minimum
liquidity requirements.
-
$33.7 million in positive after-tax net
income ($0.21 per fully diluted share) was recorded during
the quarter, and $75.1 million ($0.46 per fully diluted share) in
the first half of the year, with both periods reflecting lower
commodity prices relative to the same periods in 2022.
-
Cash costs per boe4 of $9.68 in Q2/23 were in-line
with $9.63 per boe in Q2/22.
FINANCIAL & OPERATING
HIGHLIGHTS
FINANCIAL ($ thousands, except per share
amounts) |
Three months endedJune 30,
2023 |
Three months endedJune 30, 2022 |
Six months endedJune 30,
2023 |
Six months endedJune 30, 2022 |
Petroleum and natural gas sales |
66,623 |
|
198,329 |
167,304 |
|
328,671 |
Cash provided by operating activities |
69,952 |
|
117,363 |
136,596 |
|
172,445 |
Adjusted funds flow2 |
59,035 |
|
115,274 |
133,552 |
|
192,934 |
Per share3 – basic |
0.38 |
|
0.76 |
0.87 |
|
1.27 |
–
diluted |
0.36 |
|
0.71 |
0.83 |
|
1.19 |
Net income |
33,729 |
|
88,695 |
75,083 |
|
87,318 |
Per share – basic |
0.22 |
|
0.58 |
0.49 |
|
0.57 |
–
diluted |
0.21 |
|
0.55 |
0.46 |
|
0.54 |
Property, plant and equipment expenditures |
37,657 |
|
7,061 |
59,818 |
|
62,422 |
Net property dispositions4 |
(966 |
) |
- |
(966 |
) |
- |
Net capital expenditures4 |
36,661 |
|
7,061 |
58,822 |
|
62,422 |
Capital Structure($ thousands) |
As at Jun. 30, 2023 |
As at Dec. 31, 2022 |
Working capital (deficiency) surplus2 |
(13,563 |
) |
21,844 |
|
Other long-term obligations |
(18,223 |
) |
- |
|
Bank loan |
(28,902 |
) |
- |
|
Senior unsecured notes |
- |
|
(171,298 |
) |
Net debt2 |
(60,688 |
) |
(149,454 |
) |
Common shares outstanding (thousands) |
154,191 |
|
154,377 |
|
OPERATIONAL |
|
|
Three months endedJune 30,
2023 |
Three months endedJune 30, 2022 |
Six months endedJune 30,
2023 |
Six months endedJune 30, 2022 |
Daily production |
|
|
|
|
|
|
Light crude oil (bbl/d)7 |
|
|
74 |
108 |
73 |
112 |
Condensate (bbl/d) |
|
|
3,671 |
5,570 |
4,119 |
4,752 |
Natural gas liquids5,6 (bbl/d) |
|
|
2,342 |
3,108 |
2,348 |
2,982 |
Conventional natural gas (mcf/d) |
|
|
143,752 |
157,547 |
149,738 |
158,273 |
Total (boe/d @ 6:1) |
|
|
30,046 |
35,044 |
31,496 |
34,225 |
Average realized3 |
|
|
|
|
|
|
Light crude oil price ($/bbl) |
|
|
83.30 |
130.66 |
83.91 |
118.68 |
Condensate price ($/bbl) |
|
|
88.72 |
130.07 |
94.02 |
124.40 |
Natural gas liquids price ($/bbl) |
|
|
23.20 |
49.09 |
30.98 |
48.91 |
Natural gas price ($/mcf) |
|
|
2.41 |
8.17 |
3.06 |
6.73 |
Commodity price ($/boe) |
|
|
24.37 |
62.16 |
29.35 |
53.06 |
|
Three months endedJune 30,
2023 |
Three months endedJune 30, 2022 |
Six months endedJune 30,
2023 |
Six months endedJune 30, 2022 |
Netback ($/boe) |
|
|
|
|
Petroleum and natural gas sales |
24.37 |
|
62.16 |
|
29.35 |
|
53.06 |
|
Royalties |
(1.95 |
) |
(3.98 |
) |
(3.09 |
) |
(3.40 |
) |
Realized gain (loss) on derivative financial instruments |
8.87 |
|
(12.41 |
) |
6.71 |
|
(8.89 |
) |
Net operating costs4 |
(4.43 |
) |
(3.52 |
) |
(4.21 |
) |
(3.51 |
) |
Net transportation costs4 |
(3.43 |
) |
(3.33 |
) |
(3.36 |
) |
(3.23 |
) |
Operating netback4 |
23.43 |
|
38.92 |
|
25.40 |
|
34.03 |
|
General and administrative (“G&A”) |
(1.09 |
) |
(0.83 |
) |
(1.12 |
) |
(0.89 |
) |
Interest expenses on debt4 |
(0.73 |
) |
(1.95 |
) |
(0.85 |
) |
(1.99 |
) |
Adjusted funds flow2 |
21.61 |
|
36.14 |
|
23.43 |
|
31.15 |
|
____________________________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.
7 Throughout this news release, light crude oil
refers to light and medium crude oil product type as defined by
National Instrument 51-101 Standards of Disclosure for Oil and Gas
Activities (“NI 51-101”).
BALANCE SHEET STRENGTH REFLECTS SUCCESS
OF DELEVERAGING PLAN
-
In keeping with our 2023 plans, Crew remained committed to
deleveraging and has successfully reduced net debt2 from $406
million at year end 2021 to $60.7 million at June 30, 2023, a
decline of 85% over that period with no shareholder dilution.
Compared to the previous quarter, net debt2 in Q2/23 was reduced by
$44.6 million despite a more challenging environment for commodity
prices.
-
To capitalize on an improved outlook for North American natural gas
fundamentals and expanding market dynamics through the second half
of 2023, we strategically elected to monetize a portion of our
hedge book in Q2/23, generating $11.8 million. The cash received
from this hedge monetization, coupled with $29 million realized in
other income, enabled Crew to exceed our Q2/23 leverage target and
meaningfully enhance our financial flexibility.
-
A key tenet of Crew’s four-year plan to increase productive
capacity to over 60,000 boe per day is the expansion of our gas
processing infrastructure, including the construction of an
electric drive 180 mmcf per day deep-cut gas plant in our
Groundbirch area, ideally situated to supply natural gas to
Canada’s future liquified natural gas (“LNG”) export facilities.
Progressing our Groundbirch area development plan will depend on
receiving all necessary permits, gaining visibility into a
supportive commodity price environment, and being able to secure
the requisite financing while maintaining conservative debt
leverage metrics. With ongoing supply and demand imbalances in
global natural gas, the current spot and future strip prices have
remained under pressure. Considering this, Crew intends to continue
monitoring price signals that may support additional hedging
opportunities and is actively exploring a variety of project
financing options while we await regulatory approvals.
-
Our diverse land base affords the opportunity to pursue light oil
and condensate during periods of reduced natural gas pricing. As a
result, we plan to increase our light oil and condensate production
to over 7,000 bbls per day by year-end 2023 from Q2/23 volumes of
3,745 bbls per day, which is 1,000 bbls per day, or 17%, over
previous guidance. The financial leverage of this strategy is
demonstrated in our Q2/23 results, with light oil and condensate
having constituted 12% of total production while contributing 45%
of sales.
OPERATIONS UPDATE & AREA OVERVIEW
NE BC Montney (Greater
Septimus)
- Crew’s second
quarter capital program concentrated on drilling five (5.0 net)
wells at our 4-32 pad, all of which are scheduled to be completed
in Q3/23, along with construction and drilling of one extended
reach horizontal (“ERH”) well on the 2-24 pad.
- The Company
acquired additional spoolable surface pipeline in Q2/23 to support
water transfer during completion of the 4-32 pad, building on the
success of our past use of the equipment and facilitating the safe
and environmentally responsible transportation of produced water
with reduced emissions.
- Average production
from the five (5.0 net) ERH UCR wells that that were completed on
the 11-27 pad have produced at wellhead rates of 1,401 mcf per day
of natural gas and 437 bbls per day of condensate over the first
150 days of production (IP150).
- Advancement of key
projects at the Septimus Gas Plant continued during Q2/23,
including the waste heat recovery and condensate stabilization
projects, the latter of which is expected to increase the plant’s
condensate capacity to 5,000 bbls per day and facilitate expanded
development of our UCR area. These projects are anticipated to be
completed in Q3/23.
- Construction was
initiated on our North Septimus 6-18 UCR pad. These five (5.0 net)
wells are planned to be drilled in late summer of 2023 following
the drilling of the seven (7.0 net) wells on the 2-24 pad.
Groundbirch
-
The original three (3.0 net) wells on the 4-17 pad have produced an
average of 3.24 bcf of natural gas over 510 days, exceeding our
independent reserve evaluator’s year-end 2022 proved plus probable
type curve by approximately 34% to date.
-
The five (5.0 net) ERH wells in the second phase of development at
Crew’s 4-17 pad continue to exceed internal type curve estimates,
with an average per well raw gas production rate over 300 days
(“IP300”) of 5,670 mcf per day. We recently received regulatory
approval to drill six (6.0 net) additional wells at the 4-17 pad
and expand the lease to accommodate the additional required
facilities.
-
Engineering design is continuing for Crew’s proposed Groundbirch
plant, which will expand our gas processing infrastructure and
support future growth (the “Groundbirch Plant”).
-
The Upper Montney at Groundbirch is approximately 470 feet in
thickness and has four prospective zones, all of which were tested
through our 4-17 exploration and development program in 2021 and
2022, with each zone having generated promising initial commercial
development rates. Drilling and testing results at Groundbirch have
demonstrated the strength of our asset base, positioning the
Company with decades of potential development runway.
-
Crew currently holds 25 well permits in the Groundbirch area, with
an additional 60 well permit applications submitted to date which
are pending approval.
Other NE BC Montney
-
The Company currently has six drilled ERH wells on the 15-28 pad at
Tower, which are planned to be completed in Q1/24. The wells were
drilled to target light oil in the upper Montney “B” and “C” zones
and feature lateral lengths of over 4,000 meters.
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.
The strategic decision to monetize an average of 25,700 GJ per day
of hedges for the balance of 2023 contributed an incremental $11.8
million of AFF2 in Q2/23. The monetization was completed at an
average market price of $2.02 per GJ, realizing a gain of $2.44 per
GJ compared to our average hedge price, taking advantage of a low
point in the natural gas shoulder season. The current market for
AECO natural gas is averaging approximately $2.90 per GJ for the
remainder of the year.
As of August 9, 2023, our hedging profile
includes:
-
Approximately 48,000 GJ per day at C$4.29 per GJ for the remainder
of 2023, or C$5.23 per mcf using Crew’s higher heat content
factor;
-
1,250 bbls per day of Edmonton condensate at an average price of
C$100.25 per bbl for the remainder of 2023; and
-
500 bbls per day of WTI at an average price of C$100.18 per bbl for
Q4/23 and Q1/24.
LAUNCH OF 2022 SUSTAINABILITY & TCFD
REPORTS
Our commitment to environmental, social and
governance (“ESG”) initiatives remained a key focus in Q2/23 as we
continue to invest in developing sustainable solutions to
complement our operational and financial growth. We are proud to
confirm that we have updated our online, interactive ESG report
with 2022 data, and produced an inaugural, standalone report
aligned with the Task Force on Climate-related Financial
Disclosures (“TCFD”) framework. These reports highlight our
performance compared with goals and targets, along with current and
planned sustainability initiatives and are available
www.esg.crewenergy.com.
Continuing this commitment to responsible and
sustainable development, we are pleased to highlight Crew’s ESG
progress and achievements during Q2/23:
- Further demonstrated our unwavering
commitment to safety with no recordable or lost time injuries in
the period;
-
Directed a total of $1.28 million to abandonment and reclamation
activities;
-
Purchased an additional six kilometres of spoolable pipeline which
increases in-field water handling efficiencies while also reducing
GHG emissions due to the elimination of water truck hauling;
and
-
Invested 53 volunteer hours as part of our “Crew Cares” initiative
and made financial contributions into community support initiatives
and not-for-profit organizations, largely geared towards fostering
the health, well-being and resilience of our local communities and
their economies.
OUTLOOK
- 2023
Guidance – We have benefited from improved capital
efficiencies in our operations through the effective execution of
our plan to date, and are maintaining our annual capital investment
guidance of $190 to $210
million. As a result of improved efficiencies, we now plan
to have an additional two (2.0 net) drilled wells, one (1.0 net)
completed well and one (1.0 net) drilled and uncompleted well by
year end 2023. This has allowed us to refine our 2023 exit rate
guidance and add condensate production. Crew’s full year 2023 net
capital investment program now plans to:
- Maintain 2023
average production at 30,000 to
32,000 boe per day1 targeting a tightened exit
rate of 33,000 to 34,000 boe per
day1;
- Increase our light
oil and condensate production to over 7,000 bbls
per day by year end 2023 from Q2/23 volumes of 3,745 bbls per day,
which is 1,000 bbls per day, or 17%, higher than previous
guidance;
- Drill
17 (17.0 net) UCR Montney
wells;
- Complete, equip and
tie-in 13 (13.0 net) wells;
and
- Hold an inventory
of 11 (11.0 net) drilled and uncompleted UCR wells
at year end 2023.
-
Q3 Outlook – Net capital expenditures4 in Q3/23
are forecast at $115 to $125
million with average production of 26,000
to 28,000 boe per day1, reflecting offsetting
completion activities, natural production declines, and planned
pipeline and processing maintenance by our third party pipeline and
midstream partners. Our Q3/23 capital program includes plans to:
-
Complete the five (5.0 net) well 4-32 pad;
-
Complete the last remaining well on the 11-27 UCR
pad;
-
Finish drilling and begin completions on the seven (7.0
net) well 2-24 UCR pad;
-
Begin the drilling of a five (5.0 net) well UCR
pad at 6-18;
-
Drill and complete a water disposal well; and
-
Undertake a shutdown at Septimus in Q3 that will enable the tie-in
of installed condensate stabilization and waste heat recovery
facilities.
With dry weather in NE BC, the B.C. Government
has temporarily restricted the withdrawal of water from a number of
rivers. Crew uses produced water wherever possible in our
completion operations. However, we periodically withdraw water from
one of the affected rivers, which may result in the Company
altering the timing of completions.
-
2024 Preliminary Outlook – We will continue to
advance permitting and engineering on the Groundbirch expansion
project and await a supportive forward natural gas price before
advancing project financing options. 2024 capital expenditures are
expected to focus on developing our liquids rich natural gas at
Septimus and West Septimus along with progressing the
electrification and expansion of our gas processing
facilities.
The following table sets forth Crew’s reaffirmed
guidance and underlying material assumptions:
|
|
2023 Guidance and
Assumptions8 |
Net capital expenditures4 ($Millions) |
|
190-210 |
Annual average production1 (boe/d) |
|
30,000–32,000 |
Adjusted funds flow2 ($Millions) |
|
240-260 |
Free adjusted funds flow4 ($Millions) |
|
30-70 |
EBITDA4 ($Millions) |
|
250-270 |
Oil price (WTI)($US per bbl) |
|
$75.00 |
Natural gas price (NYMEX) ($US per mmbtu) |
|
$3.20 |
Natural gas price (AECO 5A) ($C per mcf) |
|
$2.85 |
Natural gas price (Crew est. wellhead) ($C per mcf) |
|
$3.30 |
Foreign exchange ($US/$CAD) |
|
$0.74 |
Royalties |
|
9–11% |
Net operating costs4 ($ per boe) |
|
$4.50–$5.00 |
Net transportation costs4 ($ per boe) |
|
$3.50–$4.00 |
G&A ($ per boe) |
|
$1.00–$1.20 |
Effective interest rate on long-term debt |
|
6.5–7.5% |
2023 Sensitivities (Q3 to Q4) |
AFF ($MM) |
AFF/Share |
FD AFF/Share |
100 bbl per day Condensate |
$ |
3.0 |
$ |
0.02 |
$ |
0.02 |
C$1.00 per bbl WTI |
$ |
1.2 |
$ |
0.01 |
$ |
0.01 |
US
$0.10 NYMEX (per mmbtu) |
$ |
5.1 |
$ |
0.03 |
$ |
0.03 |
1
mmcf per day natural gas |
$ |
1.1 |
$ |
0.01 |
$ |
0.01 |
$0.10 AECO 5A (per GJ) |
$ |
2.9 |
$ |
0.02 |
$ |
0.02 |
$0.01 FX CAD/US |
$ |
3.7 |
$ |
0.02 |
$ |
0.02 |
Crew’s world-class Montney asset base,
operational excellence and financial strength positions the Company
to succeed across dynamic market conditions by providing
optionality to adjust our capital program to optimize our
production mix, ensuring long term sustainability. Our dedicated
team is excited to continue delivering long-term shareholder value
through innovation and adaptability, supported by a robust risk
management program and proven strategy which enables us to achieve
our goals while maintaining a safe and responsible operating
culture. We express our gratitude to our stakeholders for their
commitment and ongoing support of Crew in this dynamic
environment.
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; preliminary 2024 plans as outlined in the “Outlook”
section in this press release; production and type-curve 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
and anticipated benefits thereof; completion of the Company’s waste
heat recovery and condensate stabilization projects at its Septimus
Gas Plant and anticipated benefits thereof; the planned conversion
of our West Septimus gas processing facility to electric drive and
anticipated timing and benefits thereof; anticipated timing, costs
and assumed receipt of all regulatory approvals required in
connection therewith; our ability to secure financing for the
Groundbirch plant and timing thereof; continued 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 ability to finance our
Four-Year Plan; 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, disposition and infrastructure 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 for potentially decades, and the anticipated
commerciality of up to four potential prospective zones to be
drilled; the successful implementation of our ESG initiatives as
set forth herein and in our updated ESG Report; 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
continue 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
Funds from operations represents cash provided
by operating activities before changes in operating non-cash
working capital, accretion of deferred financing charges 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 property, plant
and equipment 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 ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
Property, plant and equipment expenditures |
37,657 |
|
22,161 |
7,061 |
59,818 |
|
62,422 |
Less: Net property dispositions |
(996 |
) |
- |
- |
(996 |
) |
- |
Net capital expenditures |
36,661 |
|
22,161 |
7,061 |
58,822 |
|
62,422 |
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 ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
Adjusted funds flow |
59,035 |
74,517 |
115,274 |
133,552 |
192,934 |
Financing expenses on debt |
2,003 |
2,815 |
6,230 |
4,818 |
12,324 |
EBITDA |
61,038 |
77,332 |
121,504 |
138,370 |
205,258 |
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 ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
Cash provided by operating activities |
69,952 |
|
66,644 |
|
117,363 |
|
136,596 |
|
172,445 |
|
Change in operating non-cash working capital |
(12,154 |
) |
4,520 |
|
(2,666 |
) |
(7,634 |
) |
17,009 |
|
Accretion of deferred financing costs |
(49 |
) |
(150 |
) |
(245 |
) |
(199 |
) |
(491 |
) |
Funds from operations |
57,749 |
|
71,014 |
|
114,452 |
|
128,763 |
|
188,963 |
|
Decommissioning obligations settled excluding government
grants |
1,286 |
|
3,503 |
|
822 |
|
4,789 |
|
3,971 |
|
Adjusted funds flow |
59,035 |
|
74,517 |
|
115,274 |
|
133,552 |
|
192,934 |
|
Less: property, plant and equipment expenditures |
37,657 |
|
22,161 |
|
7,061 |
|
59,818 |
|
62,422 |
|
Free adjusted funds flow |
21,378 |
|
52,356 |
|
108,213 |
|
73,734 |
|
130,512 |
|
e) Net Operating
Costs
Net operating costs equals operating expenses
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 expenses.
($ thousands, except per boe) |
Three months ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
Operating expenses |
12,712 |
|
12,558 |
|
12,705 |
|
25,270 |
|
24,064 |
|
Processing revenue |
(610 |
) |
(636 |
) |
(1,475 |
) |
(1,246 |
) |
(2,305 |
) |
Net operating costs |
12,102 |
|
11,922 |
|
11,230 |
|
24,024 |
|
21,759 |
|
Per boe |
4.43 |
|
4.02 |
|
3.52 |
|
4.21 |
|
3.51 |
|
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
expenses 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 expenses. 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 ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
|
|
|
|
|
|
Transportation expenses |
10,967 |
|
11,288 |
|
12,092 |
|
22,255 |
|
22,937 |
|
Transportation revenue |
(1,576 |
) |
(1,520 |
) |
(1,469 |
) |
(3,096 |
) |
(2,922 |
) |
Net transportation costs |
9,391 |
|
9,768 |
|
10,623 |
|
19,159 |
|
20,015 |
|
Per boe |
3.43 |
|
3.29 |
|
3.33 |
|
3.36 |
|
3.23 |
|
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.
($/boe) |
Three months ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
Petroleum and natural gas sales |
24.37 |
|
33.94 |
|
62.16 |
|
29.35 |
|
53.06 |
|
Royalties |
(1.95 |
) |
(4.13 |
) |
(3.98 |
) |
(3.09 |
) |
(3.40 |
) |
Realized gain (loss) on derivative financial instruments |
8.87 |
|
4.72 |
|
(12.41 |
) |
6.71 |
|
(8.89 |
) |
Net
operating costs |
(4.43 |
) |
(4.02 |
) |
(3.52 |
) |
(4.21 |
) |
(3.51 |
) |
Net
transportation costs |
(3.43 |
) |
(3.29 |
) |
(3.33 |
) |
(3.36 |
) |
(3.23 |
) |
Operating netbacks |
23.43 |
|
27.22 |
|
38.92 |
|
25.40 |
|
34.03 |
|
Production (boe/d) |
30,046 |
|
32,963 |
|
35,044 |
|
31,496 |
|
34,225 |
|
j) Cash costs per
boe
Cash costs per boe is comprised of net
operating, transportation, general and administrative and financing
expenses on debt calculated on a boe basis. Management views cash
costs per boe as an important measure to evaluate its operational
performance.
($/boe) |
Three months ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
Net operating costs |
4.43 |
4.02 |
3.52 |
4.21 |
3.51 |
Net transportation costs |
3.43 |
3.29 |
3.33 |
3.36 |
3.23 |
General and administrative expenses |
1.09 |
1.14 |
0.83 |
1.12 |
0.89 |
Financing expenses on debt |
0.73 |
0.95 |
1.95 |
0.85 |
1.99 |
Cash costs |
9.68 |
9.40 |
9.63 |
9.54 |
9.62 |
k) Interest
expenses on debt per boe
Interest expenses 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 interest expenses on debt per boe as
an important measure to evaluate its cost of debt financing.
($ thousands, except per boe) |
Three months ended June
30, 2023 |
Three months ended March 31, 2023 |
Three months ended June 30, 2022 |
Six months ended June
30, 2023 |
Six months ended June 30, 2022 |
Interest on bank loan and other |
1,127 |
(92 |
) |
1,123 |
1,035 |
2,163 |
Interest on senior notes |
827 |
2,757 |
|
4,862 |
3,584 |
9,670 |
Accretion of deferred financing costs |
49 |
150 |
|
245 |
199 |
491 |
Financing expenses on debt |
2,003 |
2,815 |
|
6,230 |
4,818 |
12,324 |
Production (boe/d) |
30,046 |
32,963 |
|
35,044 |
31,496 |
34,225 |
Interest expenses on debt per boe |
0.73 |
0.95 |
|
1.95 |
0.85 |
1.99 |
Supplementary Financial Measures
“Adjusted fund flow margin” is
comprised of adjusted funds flow divided by petroleum and natural
gas sales.
"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 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 |
Condensate |
Natural Gas Liquids1 |
Conventional Natural Gas |
Total(boe/d) |
Q3 2023 Average |
0 |
% |
14 |
% |
7 |
% |
79 |
% |
26,000-28,000 |
2023 Annual Average |
0 |
% |
15 |
% |
7 |
% |
78 |
% |
30,000-32,000 |
2023 Exit Rate |
0 |
% |
23 |
% |
7 |
% |
70 |
% |
33,000-34,000 |
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, Tower 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 CEO |
Phone: (403) 266-2088Email: investor@crewenergy.com |
John
Leach, Executive Vice President and CFO |
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.
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