/NOT FOR DISSEMINATION IN THE U.S. OR THROUGH
U.S. NEWSWIRES/
CALGARY, May 29, 2020 /CNW/ - Highwood Oil Company Ltd.,
("Highwood" or the "Company") (TSXV: HOCL) is pleased
to announce financial and operating results for the quarter ended
March 31, 2020. The Company
also announces that its unaudited financial statements and
associated Management's Discussion and Analysis ("MD&A")
for the quarter ended March 31, 2020,
can be found at www.sedar.com and www.highwoodoil.com.
Highlights
- Achieved record production of 1,872 bbl/d of oil in the first
quarter of 2020, a 23% increase from 1,515 bbl/d in the fourth
quarter of 2019 and a 38% increase from 1,354 bbl/d in the first
quarter of 2019.
- Drilled 5 wells (2.5 net) in the Clearwater play during the first quarter of
2020 with one well remaining to drill past casing point when
commodity prices improve. The drilling activity included further
delineation of the Company's Nipisi land position as well as a
step-out well at Craigend where the Company holds a 17,920 acre
gross land position (8,960 net). Since the Company began its
Clearwater development program in
the fourth quarter of 2018, it has drilled 19 wells (9.5 net) to
today's date.
- Given current oil price environment, the Company ceased capital
spending in March 2020 and will
contemplate further Clearwater
drilling once sustained price recoveries are seen after spending
$4.2 million in the first quarter
- With current select shut-ins, current production from Highwood
is approximately 550 bbl/d inclusive of production from the Red
Earth field.
Red Earth Divestiture Update
On May 1,2020, after initially
providing conditional approval, the Alberta Energy Regulator
rejected the license transfers associated with the Red Earth
Divestiture. The Company continues to work through the impact of
this decision and will provide an update when one is available.
Summary of Financial & Operating Results
|
|
Three months ended
March 31,
|
|
|
|
2020
|
|
2019
|
% Change
|
Financial
|
|
|
|
|
|
Oil and natural gas
sales
|
$
|
6,545,440
|
$
|
6,928,968
|
(6)
|
Transportation
pipeline revenues
|
|
1,160,389
|
|
1,233,712
|
(6)
|
Total revenues, net
of royalties and commodity contracts (1)
|
|
16,264,900
|
|
5,572,594
|
192
|
Loss
|
|
(3,723,684)
|
|
(2,507,617)
|
183
|
Cash flow from
operating activities
|
|
3,787,170
|
|
5,731,356
|
(34)
|
Capital
expenditures
|
|
4,191,152
|
|
4,077,397
|
3
|
Net debt
(2)
|
|
(44,622,781)
|
|
(31,667,081)
|
41
|
Shareholders' equity
(end of period)
|
|
14,544,029
|
|
24,167,445
|
(54)
|
Shares outstanding
(end of period)
|
|
6,013,965
|
|
5,948,030
|
1
|
Weighted-average
basic shares outstanding
|
|
6,013,965
|
|
5,890,457
|
2
|
|
|
|
|
|
|
Operations
(3)
|
|
|
|
|
|
Production
|
|
|
|
|
|
|
Crude oil
(bbls/d)
|
|
1,872
|
|
1,354
|
38
|
|
Total
(boe/d)
|
|
1,872
|
|
1,354
|
38
|
Average realized
prices (4)
|
|
|
|
|
|
Crude oil (per
bbl)
|
|
38.42
|
|
56.85
|
(32)
|
Operating netback
(per boe) (5)
|
|
2.95
|
|
15.89
|
(81)
|
|
|
|
|
|
|
Wells
drilled:
|
|
|
|
|
|
|
Gross
(6)
|
|
5.0
|
|
2.0
|
|
|
Net
(6)
|
|
2.5
|
|
1.0
|
|
|
Success
(%)
|
|
100
|
|
100
|
|
|
|
|
|
|
|
(1)
|
Includes unrealized
gain and losses on commodity contracts.
|
(2)
|
Net debt consists of
bank debt and working capital surplus (deficit) excluding commodity
contract assets and/or liabilities
|
(3)
|
For a description of
the boe conversion ratio, see "Basis of Barrel of Oil
Equivalent".
|
(4)
|
Before
hedging.
|
(5)
|
See "Non-GAAP
measures".
|
(6)
|
Includes 1 gross (0.5
net) well outstanding to drill past casing point.
|
(7)
|
Natural gas and NGL
production and revenues are immaterial to the Company.
|
2020 First Quarter Overview
Highwood's first quarter results were highlighted by the
increase in production to 1,872 bbl/d, an increase of 357 bbl/d
from the fourth quarter of 2019 and 518 bbl/d from the first
quarter of 2019. For the first quarter of 2020, the Company had
revenues (excluding commodity contracts) of $8.2 million, impacted by the sharp drop in
commodity prices that occurred in March
2020. Highwood recognized $1.2
million of pipeline revenues during the first quarter,
consistent with the $1.2 million of
revenue recognized in the fourth quarter of 2019 and the first
quarter of 2019.
2020 First Quarter Operations
Highwood drilled 4 gross (2.0 net) in the Clearwater play at Nipisi during the first
quarter of 2020 and drilled an additional 1 gross well (0.5 net) in
the Clearwater play at
Craigend. The drilling activity further delineated the
Company's Clearwater land
position, further validating drilling inventory. The Company
has drilled 19 gross wells (9.5 net) in the Clearwater play since it started the
Clearwater program in the fourth
quarter of 2018. Total capital spend in the first quarter of
2020 was $4.2 million compared to
$4.9 million in the fourth quarter of
2019 where the Company drilled 5 gross (2.5 net) wells in the
Clearwater play. Of the
$4.2 million expenditure,
$4.1 million was development capital
with $2.6 million spent on the
drilling & completion of Clearwater wells, $1.0
million spent on the expansion of the Company's multi-well
oil battery in Nipisi and $0.5
million spent on recompletions in the Red Earth
area.
The Company continually reviews and revises its technical
approach to drilling in the Clearwater and has shortened well cycle times
and decreased costs as the program has evolved. The Company
continues to have its land position delineated by offset operators
who are also showing success with secondary recovery method pilot
projects. The Company is currently undergoing a waterflood
study project at Nipisi which would help to increase ultimate
recovery factors if a producing well bore was switched to an
injection well.
Outlook
The Company has ceased 2020 non-discretionary capital as a
result of the COVID-19 Pandemic and the current price collapse seen
in Western Canada and around the
world. The Company has also undertaken corporate cost saving
initiatives including reducing salaries and non-essential services
to help protect its balance sheet in this suppressed market.
The Company remains excited about the drilling inventory it
currently has in its portfolio for when pricing shows a
significant, sustained recovery. The Clearwater oil resource play continues to
deliver positive delineation results which underpin an expanding
opportunity set for Highwood to pursue lower risk, highly economic,
oil-weighted growth. Since early 2017, industry has spud more
than 290 wells to delineate and quickly grow the Clearwater play to achieve production in
excess of 25,000 bbl/d. Even within a pricing environment
that has been very suppressed by historical standards, strong well
economics characterized by short cycle times and quick payback
periods supported industry drilling over 130 wells to date in
2020.
The Company has, and will continue to, evaluate acquisition
opportunities in the M&A market, but will remain disciplined to
pursue only those opportunities that are accretive and deleveraging
to its balance sheet. The Company intends to build a growing
profile of recurring free funds flow that will provide maximum
flexibility fund growth, debt repayment and / or other strategic
M&A opportunities in a non-dilutive fashion.
Oil and Gas Measures
Readers should see the "Selected Technical Terms" in the
Annual Information Form filed on April 30,
2019 for the definition of certain oil and gas
terms.
Basis of Barrels of Oil Equivalent – This news release
discloses certain production information on a barrels of oil
equivalent ("boe") basis with natural gas converted to barrels of
oil equivalent using a conversion factor of six thousand cubic feet
of gas (Mcf) to one barrel (bbl) of oil (6 Mcf:1 bbl). Condensate
and other NGLs are converted to boe at a ratio of 1 bbl:1 bbl. Boe
may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf:1 bbl is based roughly on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at sales point.
Although the 6:1 conversion ratio is an industry-accepted norm, it
is not reflective of price or market value differentials between
product types. Based on current commodity prices, the value ratio
between crude oil, NGLs and natural gas is significantly different
from the 6:1 energy equivalency ratio. Accordingly, using a
conversion ratio of 6 Mcf:1 bbl may be misleading as an indication
of value.
Mcfe Conversions: Thousands of cubic feet of gas equivalent
("Mcfe") amounts have been calculated by using the conversion ratio
of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of
natural gas. Mcfe amounts may be misleading, particularly if used
in isolation. A conversion ratio of 1 bbl to 6 Mcf is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of
natural gas as compared to oil is significantly different from the
energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may
be misleading as an indication of value.
Non-GAAP Measures
"Netback" is a non-GAAP financial measure and is calculated
as revenues net of royalties, less transportation and processing
charges and operating expenses and then divided by BOE or Mcf
sold.
Other Warnings
The Exchange has in no way passed upon the merits of the
proposed transaction and has neither approved nor disapproved the
contents of this press release.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the Exchange)
accepts responsibility for the adequacy or accuracy of this press
release.
This news release contains forward-looking statements
relating to the future operations of the Company and other
statements that are not historical facts. Forward-looking
statements are often identified by terms such as "will", "may",
"should", "anticipate", "expects" and similar expressions. All
statements other than statements of historical fact, included in
this release, including, without limitation, statements regarding
the future plans and objectives of the Company, are forward-looking
statements that involve risks and uncertainties. There can be no
assurance that such statements will prove to be accurate and actual
results and future events could differ materially from those
anticipated in such statements. Important factors that could cause
actual results to differ materially from the Company's expectations
include risks detailed from time to time in the filings made by the
Company with securities regulations.
The reader is cautioned that assumptions used in the
preparation of any forward-looking 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. The reader is
cautioned not to place undue reliance on any forward-looking
information. Such information, although considered reasonable by
management at the time of preparation, may prove to be incorrect
and actual results may differ materially from those anticipated.
Forward-looking statements contained in this news release are
expressly qualified by this cautionary statement. The
forward-looking statements contained in this news release are made
as of the date of this news release and the Company will update or
revise publicly any of the included forward-looking statements as
expressly required by Canadian securities law.
SOURCE Highwood Oil Company Ltd.