CALGARY, AB, July 29, 2021 /CNW/ - Surge Energy Inc.
("Surge" or the "Company") (TSX: SGY) is pleased to
announce its financial and operating results for the quarter ended
June 30, 2021.
MESSAGE TO SHAREHOLDERS
Improving Macro Environment for Oil
Demand for crude oil continues to recover from the dramatic
plunge caused by the COVID-19 pandemic in 2020. The recovery,
combined with historical reductions in capital spending on
world-wide oil projects, has resulted in a very tight physical
market for oil, and a large, ongoing, structural deficit for crude
oil supply. This tight physical oil market is evidenced by a number
of large weekly draws on US crude oil inventories in Q2/21, erasing
much of the crude oil inventory accumulations that occurred during
the COVID-19 pandemic in 2020.
As world oil demand continues to return to pre-COVID-19 levels,
oil prices have recovered quickly and continued to improve
throughout the second quarter of 2021, with WTI averaging
US$66.07 per bbl during the period.
Oil prices are currently trading over US$73 per bbl. Furthermore, Canadian crude oil
differentials continue to trade well below their long-term
historical averages, resulting in a very positive pricing
environment for Canadian oil weighted producers.
SGY – Positioning For The Turn In Oil Prices
Surge's primary corporate goal is to be the best positioned, top
performing, intermediate public oil company in Canada in 2022 and beyond. As such, Surge's
management team spent the past nine months strategically
positioning the Company for success in an increasingly positive
macro environment for crude oil. Key actions executed by Management
include:
- Successful receipt of $40 million
in 2nd lien financing, led by BDC (November, 2020);
- Credit commitment from EDC into Surge's existing 1st lien
credit facility for $50.6 million
(November, 2020);
- Alberta Site Rehabilitation Program grants of $14 million (ongoing);
- Completion of a highly accretive, debt-adjusted, asset sale for
gross proceeds of $106 million
(closed March 25, 2021);
- Completion of an upsized bought deal flow-through financing for
gross proceeds of $23 million (closed
May 13, 2021);
- Entered into an Arrangement Agreement on June 22, 2021 to acquire Astra Oil Corp.
("Astra") – a privately held light oil producer with high operating
netback1 assets focused in SE
Saskatchewan, producing 4,100 boepd (90% liquids), for total
consideration of approximately $160
million. The Company anticipates that this strategic
acquisition will close on or about August
18, 2021; and
- In conjunction with the Astra acquisition, Surge negotiated a
new, $215 million, single-tranche
first lien revolving credit facility ("RBL") with the next bank
review scheduled to be on or before November
30, 2021. Maturity of Surge's RBL will be extended from
July 1, 2022 to November 30, 2022.
The culmination of the above strategic transactions has quickly
and efficiently repositioned the Company's balance sheet, reducing
net debt1 by nearly $90
million in just 6 months' time. Surge recently announced
preliminary 2022 guidance, and Management is now forecasting a
further reduction in net debt by way of significant free cash
flow1 generation at strip pricing through the back half of
2021, and throughout 2022.
Based on the above, with oil prices currently trading over
US$73 per bbl, the Company now
anticipates Surge's exit 2022 net debt to annualized Q4/22 adjusted
funds flow2 will be 0.8x at US$70 per bbl, and 0.6x at US$75 WTI per bbl pricing. Additionally, at these
price levels, Surge now anticipates generating $110 to $140
million in free cash flow in 2022 alone.
Q2 2021 FINANCIAL & OPERATING HIGHLIGHTS
In the second quarter of 2021, petroleum and natural gas revenue
per boe increased by 200 percent, from $19.58 per boe in Q2/20, to $58.74 per boe in Q2/21, and increased by nearly
10 percent from the $54.07 per boe
realized in Q1/21.
The Company closed an oversubscribed bought deal public offering
of flow-through common shares during the quarter for gross proceeds
of $23 million, extending the first
lien credit facilities to July 1,
2022, and further reducing net debt. Proceeds from the
flow-through share offering are being used to execute a disciplined
2H/21 drilling program, directing development capital predominately
to the Company's low risk, large OOIP, high operating netback
Sparky core area.
While Surge's realized commodity pricing benefitted from
the improving commodity price environment during the quarter, the
Company's cash flow from operating activities and adjusted funds
flow were materially impacted by realized losses on required
commodity contracts. In the second quarter of 2021 Surge
generated $8.3 million of cash flow
from operating activities, and $13.6
million of adjusted funds flow, after realized hedging
losses of $20.9 million.
These required fix priced oil hedge positions were primarily
entered into during the volatile price environment in 2020, and
Surge projects that the cash flow impact from these hedge positions
will continue to moderate over the remainder of 2021 as the
remaining fixed crude oil hedges expire over the next 2 fiscal
quarters.
Production in Q2/21 averaged 15,132 boe per day, down from Q1/21
production levels of 16,582 boe per day. This decrease was
primarily a result due to the 2,700 boe per day of production that
was sold for gross proceeds of $106
million on March 25, 2021.
This decrease in production has now been fully offset by the
Company's successful 28 (net) well 1H/21 drilling program, which
added approximately 2,675 boe per day in Q2/21 for a total "all-in"
onstream cost of $35 million
($13,080 per flowing boe).
Production in Q2/21 was impacted by approximately 650 boepd of
third-party outages and plant turnarounds.
FINANCIAL AND
OPERATING HIGHLIGHTS
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
($000s except per
share amounts)
|
2021
|
2020
|
%
Change
|
2021
|
2020
|
%
Change
|
Financial
highlights
|
|
|
|
|
|
|
Oil sales
|
76,411
|
28,432
|
169 %
|
146,367
|
89,643
|
63 %
|
NGL sales
|
1,827
|
644
|
184 %
|
3,775
|
1,707
|
121 %
|
Natural gas
sales
|
2,646
|
1,429
|
85 %
|
11,436
|
2,861
|
300 %
|
Total oil, natural
gas, and NGL revenue
|
80,884
|
30,505
|
165 %
|
161,578
|
94,211
|
72 %
|
Cash flow from
operating activities
|
8,254
|
2,970
|
178 %
|
23,804
|
46,108
|
(48)%
|
Per share - basic
($)
|
0.02
|
0.01
|
100 %
|
0.07
|
0.14
|
(50)%
|
Adjusted funds
flow1
|
13,557
|
8,854
|
53 %
|
29,314
|
38,882
|
(25)%
|
Per share - basic
($)1
|
0.04
|
0.03
|
33 %
|
0.08
|
0.12
|
(33)%
|
Net income
(loss)
|
307,113
|
(61,159)
|
nm3
|
297,128
|
(676,386)
|
nm
|
Per share basic
($)
|
0.85
|
(0.18)
|
nm
|
0.85
|
(2.03)
|
nm
|
Total exploration and
development expenditures
|
15,500
|
3,516
|
341 %
|
47,398
|
36,020
|
32 %
|
Total acquisitions
& dispositions
|
-
|
(5,276)
|
nm
|
(102,591)
|
(5,276)
|
nm
|
Total capital
expenditures
|
15,500
|
(1,760)
|
(981)%
|
(55,193)
|
30,744
|
(280)%
|
Net debt1,
end of period
|
292,806
|
376,907
|
(22)%
|
292,806
|
376,907
|
(22)%
|
|
|
|
|
|
|
|
Operating
highlights
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
Oil (bbls per
day)
|
12,202
|
13,813
|
(12)%
|
12,809
|
15,352
|
(17)%
|
NGLs (bbls per
day)
|
521
|
528
|
(1)%
|
552
|
546
|
1 %
|
Natural gas (mcf per
day)
|
14,456
|
16,664
|
(13)%
|
14,956
|
17,036
|
(12)%
|
Total (boe per day)
(6:1)
|
15,132
|
17,118
|
(12)%
|
15,854
|
18,737
|
(15)%
|
Average realized
price (excluding hedges):
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
68.81
|
22.62
|
204 %
|
63.13
|
32.08
|
97 %
|
NGL ($ per
bbl)
|
38.53
|
13.41
|
187 %
|
37.79
|
17.19
|
120 %
|
Natural gas ($ per
mcf)
|
2.01
|
0.94
|
114 %
|
4.22
|
0.92
|
359 %
|
|
|
|
|
|
|
|
Netback ($ per
boe)
|
|
|
|
|
|
|
Petroleum and natural
gas revenue
|
58.74
|
19.58
|
200 %
|
56.31
|
27.63
|
104 %
|
Realized gain (loss)
on commodity and FX contracts
|
(15.19)
|
9.93
|
(253)%
|
(13.15)
|
8.50
|
(255)%
|
Royalties
|
(8.04)
|
(2.06)
|
290 %
|
(6.81)
|
(3.44)
|
98 %
|
Net operating
expenses1
|
(17.87)
|
(14.50)
|
23 %
|
(17.98)
|
(14.39)
|
25 %
|
Transportation
expenses
|
(0.94)
|
(1.70)
|
(45)%
|
(0.99)
|
(1.67)
|
(41)%
|
Operating
netback1
|
16.70
|
11.25
|
48 %
|
17.38
|
16.63
|
5 %
|
G&A
expense
|
(2.21)
|
(1.99)
|
11 %
|
(2.09)
|
(1.91)
|
9 %
|
Interest
expense
|
(4.65)
|
(3.57)
|
30 %
|
(5.07)
|
(3.31)
|
53 %
|
Adjusted funds
flow1
|
9.84
|
5.69
|
73 %
|
10.22
|
11.41
|
(10)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
outstanding, end of period
|
379,594
|
335,069
|
13 %
|
379,594
|
335,069
|
13 %
|
Weighted average
basic shares outstanding
|
360,780
|
335,069
|
8 %
|
350,340
|
333,628
|
5 %
|
Stock option
dilution
|
11,458
|
-
|
- %
|
9,166
|
-
|
- %
|
Weighted average
diluted shares outstanding
|
372,238
|
335,069
|
11 %
|
359,506
|
333,628
|
8 %
|
|
|
|
|
|
|
|
1 This is
a non-GAAP financial measure which is defined in the Non-GAAP
Financial Measures section of this document.
|
2For the
quarter ended June 30, 2021, the Company realized net income of
$307.1 million, including a non-cash asset impairment charge
reversal of $323.6 million recognized in the period primarily due
to an increase in the Sproule engineering price forecasts. The
impairment charge reversal does not impact the Company's cash flow
from operating activities or adjusted funds flow.
|
3The
Company views this change calculation as not meaningful, or
"nm".
|
OUTLOOK – A TOP PERFORMER IN 2022
Surge Management remain very excited regarding the Company's
cash flow "torque" to rising crude oil prices in 2022. As the
Company's required fixed price crude oil hedges continue to expire
over the course of 2H/21, Surge anticipates generating very
attractive netbacks and cash flows in 2022 at current commodity
prices.
Surge's exciting, $160 million
acquisition of Astra is expected to close on or about August 18, 2021, and is consistent with Surge's
defined business model of acquiring high quality, operated, light
and medium gravity, conventional crude oil reservoirs with large
OOIP3 and low recovery factors.
Upon closing, the combined Surge/Astra will be a
well-positioned, 20,200 boepd (85 percent liquids) intermediate
producer with over 850 internally estimated net development
drilling locations4, providing a lower risk 13 year
development drilling inventory. As previously announced on
June 22, 2021, in conjunction with
the acquisition of Astra, the Company has reached an agreement in
principle with its lending syndicate to extend the maturity of its
RBL to November 30, 2022 upon close
of the transaction.
Surge's 2H/21 drilling program is now well underway and will
focus on the Company's premier Sparky assets, building on the
momentum achieved during the successful first half 2021 drilling
program in that core area. The Company's management team is now
working to finalize details of a second half development program
for the high operating netback SE
Saskatchewan light oil assets acquired with the acquisition
of Astra.
Surge also remains focused on its ongoing ESG initiatives, and
anticipates the completion of a 45-kilometer gas gathering
infrastructure system to conserve gas at critical facilities in the
newly-acquired SE Saskatchewan
core area in the third quarter of 2021. This project is anticipated
to reduce greenhouse gas emissions by over 95 percent from several
operating fields when completed.
The Company (after giving effect to the Astra acquisition) is
currently on track to exceed on Managements upwardly revised exit
2021 production guidance of 20,200 boe per day.
UPDATE ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS
("ESG")
Surge continues to strive to be a leader in reducing the impact
of its operations on the environment and is pleased to report that
it has abandoned 379 wells between October
1, 2020 and June 30,
2021. This represents over 30 percent of the Company's
previously inactive, unabandoned wells.
The reduction in the Company's environmental footprint has been
funded through a combination of Surge's ongoing internal
abandonment program and approximately $14
million in total grant funding under the Alberta
Government's Site Rehabilitation Program ("SRP"). During the second
quarter of 2021, Surge spent a total of $1.1
million of its own funds and $0.45
million of SRP grants, for a combined $1.6 million directed towards abandonment
activities. Year-to-date, Surge has now spent a total of
$3.5 million on abandonment
activities.
Surge anticipates spending a further $6.5 to $8.5
million on abandonment activities in the second half of
2021, through a combination of its internal abandonment program and
the SRP abandonment program, which will continue to significantly
reduce the Company's decommissioning liability.
Surge will also be participating in a significant emissions
reduction project in conjunction with the Astra acquisition,
whereby the Company will complete a 45km pipeline project to
conserve natural gas from a number of operated fields in
SE Saskatchewan. The project will
cost approximately $12 million and is
partially funded by the Natural Resources Canada Emissions
Reduction fund, and will reduce flared gas volumes in the area by
approximately 95 percent. This project is expected to be completed
in Q4/21.
In addition, Surge is proceeding with a gas conservation project
at its operated Shaunavon asset in
SW Saskatchewan that will tie in
approximately 90 percent of the gas volumes currently being flared
from that asset. This project is also expected to be completed in
Q4/21.
Surge strives to be a leader in reducing the impact of its
operations on the environment and is committed to producing energy
in a safe, responsible, and sustainable manner.
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking statements. The use
of any of the words "anticipate", "continue", "estimate", "expect",
"may", "will", "project", "should", "believe" and similar
expressions are intended to identify forward-looking statements.
These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. More particularly, this press release contains
statements with respect to management's expectations regarding
commodity prices; Surge's declared focus and primary goals; the
acquisition of all of the outstanding shares of Astra and the
anticipated benefits and timing thereof; management's expectations
regarding the reduction of net debt and free cash flow generation;
guidance regarding exit 2021 production and exit 2022 net debt;
Surge's hedging program; Surge's planned drilling program; Surge's
drilling inventory and locations; management's expectations and
plans with respect to the development of its assets and the timing
thereof; netbacks; production levels; amendments to Surge's credit
facilities; and Surge's ongoing ESG initiatives, including
abandonment activities and Surge's participation in emissions
reduction and gas conservation programs.
The forward-looking statements are based on certain key
expectations and assumptions made by Surge, including expectations
and assumptions the performance of existing wells and success
obtained in drilling new wells; anticipated expenses, cash flow and
capital expenditures; the application of regulatory and royalty
regimes; prevailing commodity prices and economic conditions;
development and completion activities; the performance of new
wells; the successful implementation of waterflood programs; the
availability of and performance of facilities and pipelines; the
geological characteristics of Surge's properties; the successful
application of drilling, completion and seismic technology; the
determination of decommissioning liabilities; prevailing weather
conditions; exchange rates; licensing requirements; the impact of
completed facilities on operating costs; the availability and costs
of capital, labour and services; and the creditworthiness of
industry partners.
Although Surge believes that the expectations and assumptions on
which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements because Surge can give no assurance that they will prove
to be correct. Since forward-looking statements address future
events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ materially
from those currently anticipated due to a number of factors and
risks. These include, but are not limited to, risks associated with
the condition of the global economy, including trade, public health
(including the impact of COVID-19) and other geopolitical risks;
risks associated with the oil and gas industry in general (e.g.,
operational risks in development, exploration and production;
delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses, and health, safety and
environmental risks); commodity price and exchange rate
fluctuations and constraint in the availability of services,
adverse weather or break-up conditions; uncertainties resulting
from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures; and
failure to obtain the continued support of the lenders under
Surge's bank line. Certain of these risks are set out in more
detail in Surge's AIF dated March 9,
2021 and in Surge's MD&A for the period ended
December 31, 2020, both of which have
been filed on SEDAR and can be accessed at www.sedar.com.
The forward-looking statements contained in this press release
are made as of the date hereof and Surge undertakes no obligation
to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
Oil and Gas Advisories
The term "boe" means barrel of oil equivalent on the basis of 1
boe to 6,000 cubic feet of natural gas. Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 1 boe
for 6,000 cubic feet of natural gas is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
"Boe/d" and "boepd" mean barrel of oil equivalent per day. Bbl
means barrel of oil and "bopd" means barrels of oil per day. NGLs
means natural gas liquids.
This press release contains certain oil and gas metrics and
defined terms which do not have standardized meanings or standard
methods of calculation and therefore such measures may not be
comparable to similar metrics/terms presented by other issuers and
may differ by definition and application. All oil and gas
metrics/terms used in this document are defined below:
Original Oil in Place ("OOIP") means Discovered Petroleum
Initially In Place ("DPIIP"). DPIIP is derived by Surge's internal
Qualified Reserve Evaluators ("QRE") and prepared in accordance
with National Instrument 51-101 and the Canadian Oil and Gas
Evaluations Handbook ("COGEH"). DPIIP, as defined in COGEH, is that
quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations prior to production. The
recoverable portion of DPIIP includes production, reserves and
Resources Other Than Reserves (ROTR). OOIP/DPIIP and potential
recovery rate estimates are based on current recovery technologies.
There is significant uncertainty as to the ultimate recoverability
and commercial viability of any of the resource associated with
OOIP/DPIIP, and as such a recovery project cannot be defined for a
volume of OOIP/DPIIP at this time. "Internally estimated" means an
estimate that is derived by Surge's internal QRE's and prepared in
accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities. All internal estimates
contained in this new release have been prepared effective as of
Jan 1, 2021.
Drilling Inventory
This press release discloses drilling locations in two
categories: (i) booked locations; and (ii) unbooked locations.
Booked locations are proved locations and probable locations
derived from an external evaluation using standard practices as
prescribed in the Canadian Oil and Gas Evaluations Handbook and
account for drilling locations that have associated proved and/or
probable reserves, as applicable.
Unbooked locations are internal estimates based on prospective
acreage and assumptions as to the number of wells that can be
drilled per section based on industry practice and internal review.
Unbooked locations do not have attributed reserves or resources.
Unbooked locations have been identified by Surge's internal
certified Engineers and Geologists (who are also Qualified Reserve
Evaluators) as an estimation of our multi-year drilling activities
based on evaluation of applicable geologic, seismic, engineering,
production and reserves information. There is no certainty that the
Company will drill all unbooked drilling locations and if drilled
there is no certainty that such locations will result in additional
oil and gas reserves, resources or production. The drilling
locations on which the Company actually drills wells will
ultimately depend upon the availability of capital, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results, additional reservoir information
that is obtained and other factors. While certain of the unbooked
drilling locations have been de-risked by drilling existing wells
in relative close proximity to such unbooked drilling locations,
the majority of other unbooked drilling locations are farther away
from existing wells where management has less information about the
characteristics of the reservoir and therefore there is more
uncertainty whether wells will be drilled in such locations and if
drilled there is more uncertainty that such wells will result in
additional oil and gas reserves, resources or production.
Net of Surge March 25, 2021
disposition, the pro forma Company (Surge + Astra) will have over
>925 gross (>850 net) drilling locations identified herein,
of these >450 gross (>400 net) are unbooked locations. Of the
461 net booked locations identified herein, 347 net are Proved
locations and 114 net are Probable locations based on Sproule's
2020YE reserves. Assuming an average number of net wells drilled
per year of 65, Surge's >925 net locations provide 13 years of
drilling.
Surge's internally developed type curves (for both Surge and
Astra) were constructed using a representative, factual and
balanced analog data set, as of Jan 1,
2021 for Surge type curves and April
15, 2021 for Astra type curves. All locations were
risked appropriately, and EUR's were measured against OOIP
estimates to ensure a reasonable recovery factor was being achieved
based on the respective spacing assumption. Other assumptions, such
as capital, operating expenses, wellhead offsets, land
encumbrances, working interests and NGL yields were all reviewed,
updated and accounted for on a well by well basis by Surge's
Qualified Reserve Evaluators. All type curves fully comply with
Part 5.8 of the Companion Policy 51 – 101CP.
Non-GAAP Financial Measures
Certain secondary financial measures in this press release –
namely, "adjusted funds flow", "adjusted funds flow per share",
"free cash flow", "net debt", "net operating expenses", "operating
netback", and "adjusted funds flow per boe" are not prescribed by
GAAP. These non-GAAP financial measures are included because
management uses the information to analyze business performance,
cash flow generated from the business, leverage and liquidity,
resulting from the Company's principal business activities and it
may be useful to investors on the same basis. None of these
measures are used to enhance the Company's reported financial
performance or position. The non-GAAP measures do not have a
standardized meaning prescribed by IFRS and therefore are unlikely
to be comparable to similar measures presented by other issuers.
They are common in the reports of other companies but may differ by
definition and application. All non-GAAP financial measures used in
this document are defined below:
Adjusted Funds Flow & Adjusted Funds Flow per
Share
The Company adjusts cash flow from operating activities in
calculating adjusted funds flow for changes in non-cash working
capital, decommissioning expenditures, and cash settled transaction
and other costs. Management believes the timing of collection,
payment or incurrence of these items involves a high degree of
discretion and as such may not be useful for evaluating Surge's
cash flows.
Changes in non-cash working capital are a result of the timing
of cash flows related to accounts receivable and accounts payable,
which management believes reduces comparability between periods.
Management views decommissioning expenditures predominately as a
discretionary allocation of capital, with flexibility to determine
the size and timing of decommissioning programs to achieve greater
capital efficiencies and as such, costs may vary between periods.
Transaction and other costs represent expenditures associated with
acquisitions and employee severance costs, which management
believes do not reflect the ongoing cash flows of the business, and
as such reduces comparability. Each of these expenditures, due to
their nature, are not considered principal business activities and
vary between periods, which management believes reduces
comparability.
Adjusted funds flow per share is calculated using the same
weighted average basic and diluted shares used in calculating
income per share.
The following table reconciles cash flow from operating
activities to adjusted funds flow and adjusted funds flow per share
for the three and six months ended June 30,
2021:
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
($000s except per
share amounts)
|
2021
|
2020
|
2021
|
2020
|
Cash flow from
operating activities
|
8,254
|
2,970
|
23,804
|
46,108
|
Change in non-cash
working capital
|
3,355
|
5,733
|
381
|
(9,015)
|
Decommissioning
expenditures
|
1,063
|
151
|
2,544
|
1,691
|
Cash settled
transaction and other costs
|
885
|
-
|
2,585
|
98
|
Adjusted funds
flow
|
$
|
13,557
|
$
|
8,854
|
$
|
29,314
|
$
|
38,882
|
Per share -
basic
|
$
|
0.04
|
$
|
0.03
|
$
|
0.08
|
$
|
0.12
|
Free Cash Flow
Free cash flow is calculated as cash flow from operating
activities less exploration and development capital expenditures.
Management uses free cash flow to determine the amount of funds
available to the Company for future capital allocation
decisions.
Net Debt
There is no comparable measure in accordance with IFRS for net
debt. Net debt is calculated as bank debt, term debt, plus the
liability component of the convertible debentures plus or minus
working capital, however, excluding the fair value of financial
contracts, decommissioning obligations, and lease and other
obligations. This metric is used by management to analyze the level
of debt in the Company including the impact of working capital,
which varies with timing of settlement of these balances.
($000s)
|
As at Jun 30,
2021
|
As at Mar 31,
2021
|
As at Jun 30,
2020
|
Accounts
receivable
|
29,244
|
30,240
|
27,503
|
Prepaid expenses and
deposits
|
4,595
|
5,921
|
5,828
|
Accounts payable and
accrued liabilities
|
(50,641)
|
(56,354)
|
(33,782)
|
Bank debt
|
(162,318)
|
(170,650)
|
(306,549)
|
Term debt
|
(41,164)
|
(40,649)
|
-
|
Convertible
debentures
|
(72,522)
|
(71,842)
|
(69,907)
|
Net Debt
|
(292,806)
|
(303,334)
|
(376,907)
|
Net Operating Expenses
Net operating expenses are determined by deducting processing
and other revenue primarily generated by processing third party
volumes at processing facilities where the Company has an ownership
interest. It is common in the industry to earn third party
processing revenue on facilities where the entity has a working
interest in the infrastructure asset. Under IFRS this source of
funds is required to be reported as revenue. However, the Company's
principal business is not that of a midstream entity whose
activities are dedicated to earning processing and other
infrastructure payments. Where the Company has excess capacity at
one of its facilities, it will look to process third party volumes
as a means to reduce the cost of operating/owning the facility. As
such, third party processing revenue is netted against operating
costs in the MD&A.
Operating Netback & Adjusted Funds Flow per
boe
Operating netback and adjusted funds flow per boe for the
three and six months ended June 30,
2021 are calculated on a per unit basis as follows:
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
($000s)
|
2021
|
2020
|
2021
|
2020
|
Petroleum and natural
gas revenue
|
80,884
|
30,505
|
161,578
|
94,211
|
Processing and other
income
|
1,172
|
1,112
|
2,261
|
2,832
|
Royalties
|
(11,073)
|
(3,215)
|
(19,550)
|
(11,720)
|
Realized gain (loss)
on commodity and FX contracts
|
(20,911)
|
15,464
|
(37,733)
|
28,973
|
Operating
expenses
|
(25,785)
|
(23,706)
|
(53,868)
|
(51,905)
|
Transportation
expenses
|
(1,293)
|
(2,641)
|
(2,832)
|
(5,687)
|
Operating
netback
|
22,994
|
17,519
|
49,856
|
56,704
|
G&A
expense
|
(3,041)
|
(3,102)
|
(5,998)
|
(6,518)
|
Interest
expense
|
(6,396)
|
(5,563)
|
(14,544)
|
(11,304)
|
Adjusted funds
flow
|
13,557
|
8,854
|
29,314
|
38,882
|
Barrels of oil
equivalent (boe)
|
1,377,078
|
1,557,700
|
2,869,475
|
3,410,114
|
Operating netback ($
per boe)
|
$
|
16.70
|
$
|
11.25
|
$
|
17.38
|
$
|
16.63
|
Adjusted funds flow
($ per boe)
|
$
|
9.84
|
$
|
5.69
|
$
|
10.22
|
$
|
11.41
|
Additional information relating to non-GAAP measures can be
found in the Company's most recent management's discussion and
analysis MD&A, which may be accessed through the SEDAR website
(www.sedar.com).
Neither the TSX nor its Regulation Services Provider (as that
term is defined in the policies of the TSX) accepts responsibility
for the adequacy or accuracy of this release.
_____________________________
|
1
|
This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
2
|
This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
3
|
See the Oil and
Gas Advisories section of this document for further
information.
|
4
|
See the Drilling
Inventory section of this document for further
information.
|
SOURCE Surge Energy Inc.