CALGARY,
AB, May 18, 2022 //CNW/
- Kiwetinohk Energy Corp. (TSX: KEC) today announced an
acceleration and expansion of its 2022 upstream operational
program, resulting in increased 2022 guidance. The momentum
of the upstream program, as announced in conjunction with the
Company's first quarter results last week, and the ability to
secure field services to tighten drilling and completion schedules
will accelerate the tie-in of six wells and add five new wells to
the 2022 drilling program.
"Benefiting from strong netbacks in this commodity price
environment, we are investing to increase production and fill our
wholly-owned facilities which we expect to reduce per-barrel
operating costs. We are able to do this more quickly than
expected at the beginning of this year and still maintain a strong
balance sheet. We are effectively adding about 2,000 barrels
of oil equivalent per day and five wells to the 2022 program.
All considered, we expect to exit the year with similar
balance sheet metrics as we guided to in January when we first
listed for trading on the TSX," said CEO Pat Carlson.
Following strong first quarter operational and financial
performance, Kiwetinohk's Board of Directors has approved a
$65 - $70
million 2022 capital program acceleration to drill and
complete five additional Simonette wells during the second half of
2022. Kiwetinohk now targets approximately 65 - 75%
production growth in average quarterly volumes from Q1 2022 levels
of 13,253 boe/d to Q1 2023 levels of 22,000 - 23,000 boe/d.
Most production from the newly added wells is scheduled to come
onstream in early 2023, accelerating significant free cash flow
generation and debt repayment beginning early next year.
Updated guidance & 2023
outlook
The increase to the 2022 guidance is largely a result of the
accelerated tie-in schedule with only a modest contribution from
the newly added wells. Of the five new wells, two are
expected to be tied-in late in the fourth quarter while the
remaining three are to be tied-in to produce in early 2023, largely
making the new well additions a 2023 outcome to continue the
Company's strong growth profile into next year.
These 2022 program changes allow Kiwetinohk to increase its 2022
annual average production guidance by 1,500 boe/d in addition to
the increase of 500 boe/d announced with first quarter results last
week that reflected strong base production performance. 2022
production guidance is now set at an average of 15,000 - 17,000
boe/d, an increase of approximately 14% from mid-point to mid-point
(of the guidance range) from initial 2022 guidance provided in
January and approximately 10% increase from guidance updated last
week.
The 2022 upstream capital budget has been increased to a range
between $265 to $290 million with the focus remaining in the
Fox Creek area. The Company
now plans to drill 16 gross wells during the year, an increase from
the 11 originally planned. However, given the additional cash
flow expected due to the acceleration, the net incremental capital
requirement is approximately $15 -
$20 million to add five additional
wells to the 2022 program. The capital program is
expected to be fully funded from cash flow from operating
activities and available debt capacity and is anticipated to
deliver strong production and cash flow growth into 2023.
While Kiwetinohk maintains its corporate G&A expense for
2022, the Company continues to build out its upstream and green
energy teams.
The following table sets forth Kiwetinohk's revised and original
capital expenditures and production guidance for 2022:
Operational &
financial guidance
|
|
|
Revised
|
|
Revised
|
Original
|
|
|
|
May 18,
2022
|
|
May 12,
2022
|
January 12,
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production (2022
average) 1
|
Mboe/d
|
|
15.0 -
17.0
|
|
13.5 - 15.5
|
13.0 - 15.0
|
Oil &
liquids
|
Mbbl/d
|
|
7.5 -
8.5
|
|
6.75 - 7.75
|
6.50 - 7.50
|
Natural
gas
|
MMcf/d
|
|
45 -
51
|
|
40.5 - 46.5
|
39 - 45
|
Production by market
2
|
%
|
|
100%
|
|
100%
|
100%
|
Chicago
|
%
|
|
80% -
85%
|
|
80% - 85%
|
87% - 97%
|
AECO
|
%
|
|
15% -
20%
|
|
15% - 20%
|
3% - 13%
|
Financial
|
|
|
|
|
|
|
Royalty rate
(Crown)
|
%
|
|
11% -
14%
|
|
12% - 15%
|
12% - 15%
|
Operating costs
1
|
$/boe
|
|
$7.50 -
$8.50
|
|
$7.50 -
$8.50
|
$7.50 -
$8.50
|
Transportation
|
$/boe
|
|
$5.00 -
$6.00
|
|
$5.00 -
$6.00
|
$5.00 -
$6.00
|
Corporate
G&A expense 3
|
$MM
|
|
$15 -
$18
|
|
$15 - $18
|
$15 - $18
|
Cash
taxes
|
$MM
|
|
$0
|
$0
|
$0
|
Capital
guidance
|
$MM
|
|
280 -
310
|
|
215 -
240
|
210 -
240
|
Upstream
|
$MM
|
|
265 -
290
|
|
200 - 220
|
200 - 220
|
Green
Energy
|
$MM
|
|
15 -
20
|
|
15 - 20
|
10 - 20
|
Drilling - Fox
Creek
|
wells
|
|
16
|
|
11
|
11
|
Duvernay
|
wells
|
|
15
|
|
10
|
10
|
Montney
|
wells
|
|
1
|
|
1
|
1
|
Sensitivities
|
|
|
|
|
|
|
2022 Adjusted Funds
Flow from Operations 4, 5, 6
|
|
|
|
|
|
|
US$70/bbl
WTI & US$3.75/MMBtu HH
|
$MM
|
|
$190 -
$200
|
|
$165 - $175
|
$145 - $155
|
US$80/bbl
WTI & US$4.25/MMBtu HH
|
$MM
|
|
$210 -
$220
|
|
$180 - $190
|
$165 - $175
|
2022 Net debt to
Adjusted Funds Flow from Operations 4, 5,
6
|
|
|
|
|
|
US$70/bbl
WTI & US$3.75/MMBtu HH
|
x
|
|
0.7x
|
|
0.7x
|
1.0x
|
US$80/bbl
WTI & US$4.25/MMBtu HH
|
x
|
|
0.6x
|
|
0.6x
|
0.7x
|
1 – Production and cash
operating costs include a provision for scheduled Fox Creek plant
turnarounds.
|
2 – AECO sales
year-to-date were higher than forecast due to timing of the
Bigstone Alliance meter reactivation. AECO/Chicago split of
approximately 8-13% expected for rest of year.
|
3 – Includes all cash
G&A expenses for all divisions of the Company – Corporate,
Upstream, Green Energy (power & hydrogen) and Business
Development.
|
4 - Non-GAAP measure
that does not have any standardized meaning under GAAP (as
hereinafter defined) and therefore may not be comparable to similar
measures presented by other entities. Please refer to the
Corporation's MD&A as at and for the three months ended March
31, 2022 under the section "Non-GAAP Measures" available on
Kiwetinohk's SEDAR profile at www.sedar.com.
|
5 – Q1/22 actual prices
with US$70/Bbl WTI flat; US$3.75/MMBtu HH flat; US$0.79/CAD flat
thereafter for remainder of 2022.
|
6 – Q1/22 actual prices
with US$80/Bbl WTI flat; US$4.25/MMBtu HH flat; US$0.81/CAD flat
thereafter for remainder of 2022.
|
The wells added to this year's capital program will further grow
production into 2023 and allow Kiwetinohk to more rapidly achieve
its goal of filling the Company's processing facilities at
Fox Creek, which are currently
operating at less than half of available capacity. Management
expects average production to increase to 22,000 - 23,000 boe/d in
the first quarter of 2023, up from earlier expectations of 20,000 -
21,000 boe/d. This represents expected production growth of
approximately 70% from the first quarter of 2022 to the first
quarter of 2023, an increase from prior expectations of
approximately 55%.
The acceleration of the 2022 capital program positions
Kiwetinohk to continue development of its Fox Creek asset base into 2023 while adhering
to a number of key strategic principles 1) highly economic growth
of upstream production, including growth of profitable natural gas
available for downstream integration; 2) maintaining a robust
balance sheet with debt-to-adjusted-funds-flow from operations
5 expected to stay comfortably below 1.0x at long-term
US$70/bbl and US$80/bbl WTI prices; 3) optimization of owned
infrastructure to decrease operating costs, increase netbacks and
lower free adjusted funds flow operations breakeven and 4) position
Kiwetinohk to begin generating significant free cash from its
assets at which point it will discuss future capital allocation
decisions with its Board of Directors including, further capital
investments in existing assets, potential acquisitions and
development of a future return of capital framework for
shareholders.
The following table provides an indicative full year outlook for
2023 at flat commodity prices if Kiwetinohk were to maintain a
similar corporate drilling cadence to 2022. This 2023 outlook
and development drilling schedule is not based on a budget or
capital expenditures plan approved by the Board of Directors of the
Company beyond 2022.
2023 Outlook
1
|
$70 Flat
2
|
$80 Flat
3
|
Production
|
Activity
level
|
AFF 5
($MM)
|
D/AFF
5
|
AFF 5
($MM)
|
D/AFF
5
|
Boe/d
|
|
Low - High
|
Low - High
|
Low - High
|
Low - High
|
Low - High
|
2023 Outlook
4
|
$315 - $355
|
0.4x - 0.5x
|
$355 - $400
|
0.2 - 0.3x
|
23,000 -
26,000
|
1 The 2023
Outlook presented herein is based on an assumption of continued
development drilling in Kiwetinohk's Fox Creek core area during
2023 and certain flat commodity price assumptions as detailed in
the table. This 2023 outlook and development drilling
schedule is not based on a budget or capital expenditures plan
approved by the Board of Directors of the Company beyond 2022.
See "Advisory related to the indicative 2023 Outlook" under
forward looking information.
2 Q1/22
actual prices with US$70/Bbl WTI flat; US$3.75/MMBtu HH flat;
US$0.79/CAD flat thereafter for remainder of 2022 and full year
2023.
3 Q1/22
actual prices with US$80/Bbl WTI flat; US$4.25/MMBtu HH flat;
US$0.81/CAD flat thereafter for remainder of 2022 and full year
2023.
4 Including
debottlenecking capital invested in 2023 for plant expansion
available in late 2023 or early 2024.
5 Non-GAAP
measure that does not have any standardized meaning under GAAP (as
hereinafter defined) and therefore may not be comparable to similar
measures presented by other entities. Please refer to the
Corporation's MD&A as at and for the three months ended March
31, 2022 under the section "Non-GAAP Measures" available on
Kiwetinohk's SEDAR profile at www.sedar.com
|
|
Risk Management
The Company continues to pursue an active and prudent risk
management policy designed to receive fixed prices, in the case of
swaps, or a range of acceptable prices, in the case of collars, to
offset the risk of revenue losses if commodity prices decline and
to protect returns as the Company executes the annual capital
program. As new production is added during the year,
Kiwetinohk is taking additional time to monitor volumes as it
manages flow rates and determines additional production volumes to
hedge in line with the Company's risk management policy. As
of May 18, approximately 36%, on
average, of gross oil and condensate production volumes were hedged
against WTI and approximately 49%, on average, of gross natural gas
volumes were hedged against Henry Hub using swaps and collars for
the remainder of 2022. Recent higher volatility in commodity
prices has increased the risk of swap contracts and collars have
widened, as a result, Kiwetinohk will look more to wider collars
and put options, to systematically add hedges to our 2022
production. The aim of the risk management strategy is to
provide attractive floors on commodity prices to protect returns
while maximizing upside. Additional details of the current
hedges in place can be found in the corporate presentation on the
Company website (www.kiwetinohk.com).
About Kiwetinohk
We, at Kiwetinohk, are passionate about climate change and the
future of energy. Kiwetinohk's mission is to build a
profitable energy transition business providing clean, reliable,
dispatchable, low-cost energy. Kiwetinohk develops and
produces natural gas and related products and is in the process of
developing renewable power, natural gas-fired power, carbon capture
and hydrogen clean energy projects. We view climate change
with a sense of urgency, and we want to make a difference.
Kiwetinohk's common shares trade on the Toronto Stock Exchange
under the symbol KEC.
Additional details are available within the year-end documents
available on Kiwetinohk's website at www.kiwetinohk.com and SEDAR
at www.sedar.com.
Advisories
This news release is for informational purposes only and is not
intended to and does not constitute, or form any part of, an
offer to sell or the solicitation of an offer to subscribe for or
buy or an invitation to purchase or subscribe for any securities in
any jurisdiction, nor shall there be any sale or issuance of
securities in any jurisdiction in contravention of applicable law
or regulation. In particular, this news release is not an offer of
securities for sale in Canada or
the United States.
Oil and Gas Disclosure
The term "boe" may be misleading, particularly if used in
isolation. A boe conversion rate of six thousand cubic feet of
natural gas per barrel of oil (6 mcf:1 bbl) is 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 from an energy
equivalency of 6:1, utilizing a conversion ratio of 6:1 may be
misleading as an indication of value.
Forward looking
information
Certain information set forth in this news release contains
forward-looking information and statements. Such forward-looking
statements or information are provided for the purpose of providing
information about management's current expectations and plans
relating to the future. Forward-looking statements or information
typically contain statements with words such as "anticipate",
"believe", "expect", "plan", "intend", "estimate", "project",
"potential" or similar words suggesting future outcomes or
statements regarding future performance and outlook. Readers are
cautioned that assumptions used in the preparation of such
information may prove to be incorrect. Events or circumstances may
cause actual results to differ materially from those predicted as a
result of numerous known and unknown risks, uncertainties and other
factors, many of which are beyond the control of the Company.
In particular, this news release contains forward-looking
statements pertaining to the following:
- the timing for drilling, completing and bringing certain wells
on-stream and the cost and timing thereof;
- the Company's 2022 updated operational, financial and capital
guidance, including average production, adjusted funds flow from
operations, net debt to adjusted funds flow from operations,
capital, royalty rates, operating costs, transportation, taxes,
general and administrative expenses;
- plant debottlenecking costs, timing and results;
- the Company's 2023 first quarter average production and year
over year growth from first quarter 2022;
- the Company's anticipated hedging plans and commodity price
risk management strategies;
- the Company's demonstrative 2023 outlook, including average
production, adjusted funds flow from operations and net debt to
adjusted funds flow from operations; and
- debt repayment, the effect of the accelerated and expanded 2022
upstream program on the Company's balance sheet and the Company's
net debt.
In addition to other factors and assumptions that may be
identified in this news release, assumptions have been made
regarding, among other things:
- the timing and costs of the Company's capital projects,
including drilling, completing and tying-in of certain wells;
- 2022 and 2023 costs and debt repayment;
- the impact of increasing competition;
- the general stability of the economic and political environment
in which the Company operates;
- general business, economic and market conditions;
- the ability of the Company to obtain qualified staff, equipment
and services in a timely and cost efficient manner;
- future commodity and power prices;
- currency, exchange and interest rates;
- the regulatory framework regarding royalties, taxes, power,
renewable and environmental matters in the jurisdictions in which
the Company operates;
- the ability of the Company to obtain the required capital to
finance its exploration, development and other operations and meet
its commitments and financial obligations;
- the ability of the Company to secure adequate product
processing, transportation, fractionation and storage capacity on
acceptable terms and the capacity and reliability of
facilities;
- the impact of the Covid-19 pandemic on the Company; and
- the ability of the Company to successfully market its
products.
Readers are cautioned that the foregoing list is not exhaustive
of all factors and assumptions that have been used. Although the
Company believes that the expectations reflected in such
forward-looking statements or information are reasonable, undue
reliance should not be placed on forward-looking statements as the
Company can give no assurance that such expectations will prove to
be correct.
Forward-looking statements or information involve a number of
risks and uncertainties that could cause actual results to differ
materially from those anticipated by the Company and described in
the forward-looking statements or information. These risks and
uncertainties include, among other things:
- those risks set out in the Company's current Annual Information
Form under "Risk Factors";
- the ability of management to execute its business plan;
- general economic and business conditions;
- the risk of instability affecting the jurisdictions in which
the Company operates;
- the risks of the power and renewable industries;
- operational and construction risks associated with certain
projects;
- the possibility that government policies or laws may change or
governmental approvals may be delayed or withheld;
- risks relating to regulatory approvals and financing;
- uncertainty involving the forces that power certain renewable
projects;
- the Company's ability to enter into or renew leases;
- potential delays or changes in plans with respect to power and
solar projects or capital expenditures;
- risks associated with rising capital costs and timing of
project completion;
- fluctuations in commodity and power prices, foreign currency
exchange rates and interest rates;
- risks inherent in the Company's marketing operations, including
credit risk;
- health, safety, environmental and construction risks;
- risks associated with existing and potential future lawsuits
and regulatory actions against the Company;
- uncertainties as to the availability and cost of
financing;
- the ability to secure adequate processing, transportation,
fractionation and storage capacity on acceptable terms;
- processing, pipeline and fractionation infrastructure outages,
disruptions and constraints;
- financial risks affecting the value of the Company's
investments; and
- other risks and uncertainties described elsewhere in this
document and in Kiwetinohk's other filings with Canadian securities
authorities.
Advisory related to the indicative
2023 Outlook
The Company has presented herein an indicative 2023 Outlook that
provides for continued development drilling in the Company's
Fox Creek core area during 2023
and certain flat commodity price assumptions as detailed herein to
achieve an expected 2023 production base of 23,000 - 26,000 boe/d.
The 2023 Outlook is based on a number of assumptions as
discussed in this news release including, without limitation:
reinvestment rates in 2022 and 2023 required to maintain production
from the Company's Fox Creek core
area; expected results from wells drilled in Fox Creek and expected recovery factors
resulting from well designs and geological zones in the areas wells
are drilled in; average production per year resulting from such
strategy; expected after tax funds flow from operations; capital
expenditures per year; access to capital; access to required
equipment, services and supplies; expectations as to commodity
prices, royalty rates, general and administrative expenses,
applicable laws and regulations and certain other assumptions.
Production forecasts in the 2023 Outlook are based on
management's analysis and interpretation of the results from
analogous wells drilled in the greater Fox Creek area and the Company's well designs.
For the purposes of determining adjusted funds flow from
operations and debt-to-adjusted funds flow from operations on an
after-tax basis for the 2023 Outlook, the following commodity price
assumptions have been utilized:
Commodity price
assumptions
|
Units
|
$70
Flat
|
$80
Flat
|
WTI
|
US$/Bbl
|
$70.00
|
$80.00
|
HH
|
US$/MMBtu
|
$3.75
|
$4.25
|
AECO
|
C$/Mcf
|
$3.73
|
$4.26
|
FX
|
US$/C$
|
$0.79
|
$0.81
|
The 2023 Outlook presented in this news release is not based on
a budget or capital expenditures plan approved by the Board of
Directors of the Company beyond 2022 and is not intended to present
a forecast of future performance or a financial outlook. In
addition, such 2023 Outlook does not represent management's
expectations of the Company's future performance but rather is
intended to present readers insight into management's view of the
opportunities associated with the Company's assets as used by
management for planning and strategy purposes based on the expected
commodity pricing and other assumptions used for such strategy.
In addition, the 2023 Outlook does not represent an estimate
of reserves or resources or the future net present value of
reserves or resources.
There is no certainty that the Company will proceed with all the
drilling of wells, drilling and completion designs or other capital
expenditures contemplated by the 2023 Outlook and even if the
Company does proceed with such plans there is no certainty that the
reserves or resources recovered will match the expectations used
for such 2023 Outlook base strategy. All future drilling,
completion designs, and other capital expenditures will ultimately
depend upon the availability of capital, regulatory approvals,
seasonal restrictions, oil and natural gas prices, costs, actual
drilling results, additional reservoir information that is obtained
and other factors.
The assumptions used for the 2023 Outlook presented in this new
release and the 2023 Outlook are subject to a number of risks
and uncertainties including the risks set out under the forward
looking advisories in this news release, the risk factors
identified in this news release and the risk factors set out in the
Company's annual information form for the year ended December 31 2021 which is available on SEDAR at
www.sedar.com.
Readers are cautioned that the foregoing list is not exhaustive
of all possible risks and uncertainties.
The forward-looking statements and information contained in this
news release speak only as of the date of this news release and the
Company undertakes no obligation to publicly update or revise any
forward-looking statements or information, except as expressly
required by applicable securities laws.
Non-GAAP Measures
This news release contains measures that do not have a
standardized meaning under generally accepted accounting principles
("GAAP") and therefore may not be comparable to similar measures
presented by other entities. These performance measures
presented in this document, being adjusted funds flow and net debt
to adjusted funds flow, should not be considered in isolation or as
a substitute for performance measures prepared in accordance with
GAAP and should be read in conjunction with the consolidated
financial statements of the Company. Readers are cautioned
that these non-GAAP measures do not have any standardized meanings
and should not be used to make comparisons between Kiwetinohk and
other companies without also taking into account any differences in
the method by which the calculations are prepared.
Please refer to the Company's MD&A as at and for the three
months ended March 31, 2022 under the
section "Non-GAAP Measures" for a description of these measures,
the reason for their use and a reconciliation to their closest GAAP
measure where applicable. The Corporation's MD&A is
available on Kiwetinohk's SEDAR profile at www.sedar.com.
Future-Oriented Financial
Information
Financial outlook and future-oriented financial information
contained in this news release about prospective financial
performance, financial position or cash flows is based on
assumptions about future events, including economic conditions and
proposed courses of action, based on management's assessment of the
relevant information currently available. In particular, this
news release contains financial outlook information for the
Company, including expected royalty rates, operating costs,
transportation expenses, corporate G&A expenses, cash taxes,
adjusted funds flow from (used in) operations, net debt and net
debt to adjusted funds flow from (used in) operations. These
projections contain forward-looking statements and are based on a
number of material assumptions and factors set out above and are
provided to give the reader a better understanding of the potential
future performance of the Company in certain areas. Actual
results may differ significantly from the projections presented
herein. These projections may also be considered to contain future
oriented financial information or a financial outlook. The
actual results of the Company's operations for any period will
likely vary from the amounts set forth in these projections, and
such variations may be material. See "Risk Factors" in the
Company's current Annual Information Form published on the
Company's profile on SEDAR at www.sedar.com for a further
discussion of the risks that could cause actual results to vary.
The future oriented financial information and financial
outlooks contained in this news release have been approved by
management as of the date of this news release. Readers are
cautioned that any such financial outlook and future-oriented
financial information contained herein should not be used for
purposes other than those for which it is disclosed herein.
Abbreviations
|
|
AFF
|
adjusted funds
flow
|
$/bbl
|
dollars per
barrel
|
$/boe
|
dollars per barrel
equivalent
|
$MM
|
millions of
dollars
|
bbl/d
|
barrels per
day
|
boe
|
barrel of oil
equivalent, including crude oil, condensate, natural gas
liquids,
and natural gas (converted on the basis of one boe per six mcf of
natural
gas)
|
D/AFF
|
net debt to adjusted
funds flow ratio
|
HH
|
Henry Hub
|
MMbbl/d
|
millions of barrels per
day
|
MMboe/d
|
millions of barrels of
oil equivalent per day
|
Mcf/d
|
thousand cubic standard
feet per day
|
MMboe
|
million barrels of oil
equivalent
|
MMBtu
|
million British thermal
units
|
MMcf/d
|
million cubic feet per
day
|
WTI
|
West Texas
Intermediate
|
FOR MORE INFORMATION ON KIWETINOHK, PLEASE
CONTACT:
Mark
Friesen, Director, Investor Relations
IR phone: (587) 392-4395
IR email: IR@kiwetinohk.com
Address: Suite 1900, 250 - 2 Street S.W.
Calgary, Alberta T2P 0C1
Pat
Carlson, CEO
Jakub Brogowski, CFO
SOURCE Kiwetinohk Energy