Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) announces
its first quarter 2021 financial and operating results. Selected
financial, operational and reserves information is outlined below
and should be read in conjunction with Razor’s unaudited condensed
consolidated interim financial statements and management’s
discussion and analysis for the quarter ended March 31, 2021 which
are available on SEDAR at www.sedar.com and the Company’s website
www.razor-energy.com.
Q1 2021 HIGHLIGHTS
Financing
- The Company renewed the Amended
Term Facility with AIMCo (the “AIMCo Term Loan”) on February 16,
2021. The maturity date of the AIMCo Term Loan was extended to
January 31, 2024. There were no additional proceeds received as
part of this renewal.
- The Company also entered into a new
term loan with Arena Investors, LP (“the Arena Term Loan”) to
provide additional funding of US$11.0 million (CAD$14.0 million)
which can only be utilized for specific purposes and requires
monthly amortized repayments commencing April 1, 2021 and extends
to August 1, 2023.
InnovationRazor continues to
identify opportunities to alternative sources of energy and manage
the environmental and social impacts of our business.
- FutEra Power Corp. (“FutEra”), a
subsidiary of Razor, proceeded toward successfully financing the
first stage of its Co-produced Geothermal Power Generation Project
in Swan Hills, Alberta (“Geothermal Project”). FutEra has partnered
with our provincial and federal governments to complete the first
stage which intends to construct a 3MW geothermal electric power
plant from its existing producing field. See May 4, 2021 Razor
press release and www.futerapower.com for more details.
- Continued operation of six natural
gas-powered generators which reduced the Company's reliance on grid
electric power which resulted in cumulative savings of $6.7 million
since July 2018. For the three months ended March 31, 2021, Razor
has generated saving of $0.6 million (Q1 2020 - $0.9 million) in
electricity costs.
- Razor implemented cost saving
measures by internalizing certain oilfield services through its
subsidiary, Blade Energy Services Corp. ("Blade"), which provides
services such as crude oil hauling, earthworks and environmental
services. Blade conducted $1.0 million of services on behalf of
Razor during the first three months of 2021 (Q1 2020 - $0.3
million).
- The Company has commenced
construction to repurpose certain facilities in Virginia Hills to
become a Waste Management Component employing bioremediation to
treat hydrocarbon-impacted soils. This Soil Treatment Facility will
use naturally occurring microbes to digest hydrocarbons in soils
and will be integral to Razor’s Area Based Closure operations in
the Virginia Hills area. The facility is anticipated to be
operational in the second quarter of 2021.
Operating
- Production volumes in the first
quarter of 2021 averaged 3,009 boe/d, down 28% from the production
volumes in the same period of 2020. Decreased production volumes in
Q1 2021 are largely due to reduced spending on well reactivations
and repairs throughout 2020 and into early 2021, non-operated
production shut-in at Kaybob and natural 12% annual base
decline.
- Razor commenced its 2021 operated
production enhancement program in February 2021 with funds acquired
from the Arena Term Loan. The Company is required to use at least
US$6.7 million (CAD$8.4 million) to complete the activities
outlined in an agreed upon development plan for the fiscal year
ended December 31, 2021. In Q1 2021, the Company invested $1.8
million on the development plan which resulted in an average
production increase during Q1 2021 of 164 boe/d and an exit rate
production increase as at March 31, 2021 of 435 boe/d.
- Net revenues were consistent as
compared to the first quarter of 2020. The decline in production in
the first quarter of 2021 was offset by a 46% increase in commodity
prices as compared to the same period in 2020.
Capital
- Progressed our Geothermal Project,
which will be capable of generating 21 MW of grid connected power,
of which up to 3MW will be sustainable clean power generation.
Decommissioning
- In the first three months of 2021,
the Company settled $452 thousand (twelve months 2020 - $538
thousand) of decommissioning obligations which includes $399
thousand (twelve months 2020 - $198 thousand) related to government
grants received for well site rehabilitation through Alberta’s Site
Rehabilitation Program (“SRP”).
2021
OUTLOOKRazor
Razor continues to look forward and plan for the
future while remaining focused on its long-term sustainability. On
February 16, 2021 Razor secured an extension to the AIMCo Term
Loan, for an amended principal amount of $50.1 million. On the
same date, a subsidiary of Razor entered into the Arena Term Loan
in the principal amount of US$11.0 million (CAD$14.0 million).
The majority of the proceeds from the Arena Term
Loan will be used to invest US$6.7 million (CAD$8.4 million) in
2021 on production enhancement. The production enhancement activity
started in February 2021 and will continue into 2022. The Company
has an extensive opportunity set of high-quality wells requiring
reactivation. Most activities involve repairs and maintenance work
which will be expensed for accounting purposes and operating
netbacks will be reduced during this timeframe. In aggregate, the
annual base decline of these wells is anticipated to
be consistent with the Company’s current
corporate decline of approximately 12 percent. In its
history the Company has reactivated over 60 wells
adding approximately 2,000 boepd and it expects
that this program will result in similar favorable
metrics. The production enhancement program has resulted in
an average production increase during Q1 2021 of 164 boe/d and an
exit rate production increase as at March 31, 2021 of 435
boe/d.
The Company continues to focus on cost control
on its operated properties. In addition to the planned well
reactivation program, Razor will take a cautious and case-by-case
approach to spending in 2021 and into 2022, focusing on low risk,
low investment capital opportunities to increase field and
corporate netbacks.
FutEra
In May 2021, FutEra entered the project
execution stage of its Geothermal Project. FutEra expects the total
capital cost of the Geothermal Project to be $37 million. Stage
Gate 1 is fully funded and will produce up to 3 MW of green
geothermal electricity. Stage Gate 2 requires additional financing
of $10 million which the FutEra continues to seek. With both Stage
Gate 1 and 2 of the Geothermal Project complete, the total
nameplate electricity output will be 21 MW. FutEra has partnered
with provincial and federal government agencies to invigorate the
emerging geothermal industry. Provincially, Alberta Innovates
(“AI”) and Emissions Reduction Alberta (“ERA”), and federally,
Natural Resources Canada (“NRCan”), have provided grants to
complete funding. To date, Razor has received $5.9 million in
government grants to support this power generation project.
FutEra has identified and is in process of
reviewing and capturing additional projects including solar, wind
and well head geothermal. As at March 31, 2021, FutEra is executing
a 10 Petahash Bitcoin mining operation supplying both power
generation and behind-the-fence mining offtake installation. In
addition, FutEra is under contract with an industry resource
partner to evaluate a geothermal direct heat use program.
NEAR AND MEDIUM-TERM
OBJECTIVES
- Safely execute our production
enhancement program and Geothermal Project.
- Reduce net debt through continued
optimization of capital spending and increased efficiencies to
reduce operating and general and administrative costs.
- Actively identify and consider
business combinations with other oil and gas producers as well as
service companies.
- Further analyze ancillary
opportunities including power generating projects, oil blending and
vertical services integration.
SELECT QUARTERLY HIGHLIGHTSThe
following tables summarizes key financial and operating highlights
associated with the Company’s financial performance.
|
Three Months Ended March 31 |
|
($000's, except for per share amounts and production) |
2021 |
|
2020 |
|
Production |
|
|
Crude oil (bbl/d) |
1,952 |
|
2,642 |
|
Natural gas (mcf/d) 1 |
3,741 |
|
3,676 |
|
NGL (boe/d) |
434 |
|
940 |
|
Total (boe/d) |
3,009 |
|
4,195 |
|
Sales volumes |
|
|
Crude oil (bbl/d) |
1,907 |
|
2,537 |
|
Natural gas (mcf/d) |
3,463 |
|
2,954 |
|
NGL (bbl/d) |
434 |
|
940 |
|
Total (boe/d) |
2,918 |
|
3,969 |
|
Oil inventory volumes (bbls) |
12,197 |
|
18,848 |
|
Revenue |
|
|
Oil and NGLs sales |
12,367 |
|
12,476 |
|
Natural gas sales |
1,017 |
|
624 |
|
Blending and processing income |
1,368 |
|
1,613 |
|
Other revenue |
403 |
|
932 |
|
Total
revenue |
15,155 |
|
15,645 |
|
Cash flows (used in) from
operating activities |
(3,518 |
) |
2,253 |
|
Per share -basic and diluted |
(0.17 |
) |
0.11 |
|
Funds flow 2 |
(1,424 |
) |
(3,659 |
) |
Per share -basic and diluted |
(0.07 |
) |
(0.17 |
) |
Adjusted funds flow 2 |
(863 |
) |
(3,314 |
) |
Per share -basic and diluted |
(0.04 |
) |
(0.16 |
) |
Net (loss) |
(5,635 |
) |
(34,228 |
) |
Per share - basic and diluted |
(0.27 |
) |
(1.62 |
) |
Dividend paid |
- |
|
263 |
|
Dividends per share |
- |
|
0.01 |
|
Weighted average number of shares outstanding (basic and
diluted) |
21,064 |
|
21,064 |
|
Capital expenditures |
859 |
|
450 |
|
Netback
($/boe) |
|
|
Oil and gas sales 3 |
49.43 |
|
34.32 |
|
Royalties |
(4.66 |
) |
(4.15 |
) |
Adjusted operating expenses 2 4 |
(38.51 |
) |
(31.22 |
) |
Production enhancement expenses2 |
(7.98 |
) |
(3.93 |
) |
Transportation and treating |
(2.36 |
) |
(1.75 |
) |
Operating netback 2 |
(4.08 |
) |
(6.73 |
) |
Net blending and processing income 2 |
3.42 |
|
3.13 |
|
Realized loss on commodity contracts settlement 3 |
- |
|
(2.14 |
) |
Unrealized gain/(loss) on commodity risk management |
0.30 |
|
(0.17 |
) |
Other revenue and income |
3.59 |
|
2.43 |
|
General and administrative |
(4.49 |
) |
(4.98 |
) |
Other expenses |
(0.21 |
) |
0.01 |
|
Impairment |
- |
|
(64.81 |
) |
Interest |
(5.55 |
) |
(3.43 |
) |
Corporate netback 2 |
(7.02 |
) |
(76.68 |
) |
1) Natural gas
production includes internally consumed natural gas primarily used
in power generation.2) Refer to "Non-IFRS measures".3) Excludes the
effects of financial risk management contracts but includes the
effects of fixed price physical delivery contracts.4) Excludes
production enhancement expenses incurred in the period. |
SELECT QUARTERLY HIGHLIGHTS
(continued)
|
March 31, |
December 31, |
($000's, except for share amounts) |
2021 |
2020 |
Total assets |
150,560 |
163,709 |
Cash |
6,018 |
1,098 |
Long-term debt
(principal) |
62,182 |
50,878 |
Minimum lease obligation |
3,193 |
3,469 |
Net debt 1 |
76,622 |
72,789 |
Number
of shares outstanding |
21,064,466 |
21,064,466 |
1) Refer to "Non-IFRS measures.” |
OPERATIONAL
UPDATE
Production volumes in the first quarter of 2021
averaged 3,009 boe/d, down 28% from the production volumes in the
same period of 2020. Decreased production volumes in Q1 2021 are
largely due to reduced spending on well and pipeline reactivations
and repairs throughout 2020 and into early 2021, non-operated
production shut-in at Kaybob and natural 12% annual base
decline.
Net revenues were consistent as compared to the
first quarter of 2020. The decline in production in the first
quarter of 2021 was offset by a 46% increase in commodity prices as
compared to the same period in 2020. The Edmonton light sweet crude
oil differential to West Texas Intermediate ("WTI") was 9% in the
first quarter of 2021 compared to 17% in the same quarter of 2020.
Realized NGL prices increased 108% in the first quarter of 2021
from the same period in 2020.
During the first quarter of 2021, the Company
realized an operating loss of ($4.08)/boe, an improvement from the
operating loss of ($6.73)/boe in the first quarter of 2020.
Realized prices increased by $15.11/boe, however, the impact of
increased prices was offset by royalty increases of $0.51/boe due
to significantly higher commodity prices and an increase in
operating expenses of $7.29/boe as well as an increased in
reactivation expenses of $4.05/boe in comparison to the same period
as in 2020.
Royalty rates averaged 9% in the first quarter
of 2021 as compared to 12% for the same period in 2020 due to lower
production and as a result of a reduction in the Government of
Alberta’s PAR prices used in the calculation of crown royalties in
Q1 2021 as compared to Q1 2020.
Adjusted operating expenses decreased $1.5
million or 13% on a total dollar basis but increased 23% on a per
boe basis in the first quarter of 2021 compared to the same period
in 2020 due to a 28% decrease in production. The largest increase
in the adjusted operating expense per boe was fuel and electricity
costs which averaged $13.55/boe in the first quarter 2021 as
compared to $9.59/boe in 2020. Other operating expense changes from
Q1 2020 to Q1 2021 included chemicals which averaged $0.90/boe in
Q1 2021 compared to $2.04/boe in Q1 2020, repairs and maintenance
decreased by 14% from $3.76/boe to $3.24/boe and a decrease of 69%
for road and lease maintenance compared to Q1 2020.
The Company has increased its production
enhancement activity in Q1 2021 in response to the stronger
commodity price environment which reflects an increase of 103%,
production enhancement expenses per boe averaged $7.98/boe in the
first quarter 2021 as compared to $3.93/boe in 2020. The production
enhancement program initiated in February 2021 has resulted, on
average, a production increase of 164 boe/d during Q1 2021 and an
exit rate production increase as at March 31, 2021 of 435
boe/d.
The top cost drivers of the adjusted operating
expenses consist of fuel and electricity, labour, property taxes,
lease rentals, fluid hauling, pipeline repairs and maintenance and
environmental work. The top cost drivers accounted for 61% of the
adjusted operating expenses in the first quarter of 2021
(comparable costs in Q1 2020 – 85%).
The cost of electricity and fuel decreased 7% in
Q1 2021 as compared to the same quarter of last year mostly due a
34% decrease in consumption, decreased reliance on non-operated
fuel gas and lower production levels partially offset by a 44%
increase in average electricity pool prices.
Other revenue and income received during the
three months ended March 31, 2021 was $1.0 million which primarily
consisted of $0.4 million SRP grant income $0.1 million each of
insurance proceeds, road use, road maintenance and other
revenue.
During the first quarter of 2021, the Company
received funds from Canada Emergency Wage Subsidy of $0.2 million.
These grants were recognized as a $0.1 million reduction to both
general and administrative expense and a reduction of operating
expenses.
CAPITAL
PROGRAM
During the first quarter of 2021, Razor invested
$0.5 million in field equipment for its service company subsidiary
and $0.2 million on its Geothermal Project. As of March 31,
2021, Razor has received $5.9 million since inception in government
grants to support this power generation project.
Razor did not initiate any projects related to
finding and development capital and minimal capital reactivations
were conducted during this period as the Company’s focus is on
investing in its 2021 workover reactivation program to enhance
production and cash flow.
RAZOR'S RESPONSE TO
COVID-19
Razor is dedicated to ensuring the health,
safety and security of its employees, contractors, partners and
residents within all of its operating areas and communities. The
Company is following all applicable rules and regulations as set
out in Alberta Health and Health Canada guidelines to protect the
well-being of all stakeholders.
About Razor
Razor is a publicly traded junior oil and gas
development and production company headquartered in Calgary,
Alberta, concentrated on acquiring, and subsequently enhancing, and
producing oil and gas from properties primarily in Alberta. The
Company is led by experienced management and a strong, committed
Board of Directors, with a long-term vision of growth focused on
efficiency and cost control in all areas of the business. Razor
currently trades on TSX Venture Exchange under the ticker
“RZE.V”.
www.razor-energy.com
About FutEra
FutEra leverages Alberta’s resource industry
innovation and experience to create transitional power and
sustainable infrastructure solutions to commercial markets and
communities, both in Canada and globally. Currently it is
developing a 21 MW co-produced geothermal and natural gas hybrid
power project in Swan Hills, Alberta.
www.futerapower.com
About Blade
Blade Energy Services is as subsidiary of Razor.
Operating in west central Alberta, Blade’s primary services include
fluid hauling, road maintenance, earth works including well site
reclamation and other oilfield services.
www.blade-es.com
For additional
information
please
contact: |
|
Doug Bailey |
Kevin Braun |
President and Chief Executive Officer |
Chief Financial Officer |
|
|
Razor Energy Corp. |
|
800, 500-5th Ave SW Calgary, Alberta T2P 3L5 |
|
Telephone: (403) 262-0242 |
|
READER
ADVISORIES
FORWARD-LOOKING STATEMENTS:
This press release may contain certain statements that may be
deemed to be forward-looking statements. Such statements relate to
possible future events, including, but not limited to, the
Company’s ability to continue to operate in accordance with
developing public health efforts to contain COVID-19, the Company’s
objectives, including the Company’s capital program and other
activities, including ancillary opportunities such as power
generation, oil blending and services integration, restarting
wells, future rates of production, anticipated abandonment,
reclamation and remediation costs for 2020, possible business
combination transactions, assistance from government programs
including under the SRP and Canadian Emergency Wage Subsidy,
commitments under the ABC program and energy management program and
other environmental, social and governance initiatives. All
statements other than statements of historical fact may be
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as
“anticipate”, “believe”, "expect", “plan”, “estimate”, “potential”,
“will”, “should”, “continue”, “may”, “objective” and similar
expressions. The forward-looking statements are based on certain
key expectations and assumptions made by the Company, including but
not limited to expectations and assumptions concerning the
availability of capital, current legislation, receipt of required
regulatory approvals, the timely performance by third-parties of
contractual obligation, the success of future drilling and
development activities, the performance of existing wells, the
performance of new wells, the Company’s growth strategy, general
economic conditions, availability of required equipment and
services prevailing commodity prices, price volatility, price
differentials and the actual prices received for the Company's
products. Although the Company 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 the Company 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 oil and gas industry and
geothermal electricity projects 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; variability in geothermal resources; as the
uncertainty of reserve estimates; the uncertainty of estimates and
projections relating to production, costs and expenses, and health,
safety and environmental risks), electricity and commodity price
and exchange rate fluctuations, changes in legislation affecting
the oil and gas and geothermal industries and uncertainties
resulting from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures. In
addition, the Company cautions that COVID-19 may continue to have a
material adverse effect on global economic activity and worldwide
demand for certain commodities, including crude oil, natural gas
and NGL, and may continue to result in volatility and disruption to
global supply chains, operations, mobility of people and the
financial markets, which could continue to affect commodity prices,
interest rates, credit ratings, credit risk, inflation, business,
financial conditions, results of operations and other factors
relevant to the Company. The duration of the current commodity
price volatility is uncertain. Please refer to the risk factors
identified in the annual information form and management discussion
and analysis of the Company which are available on SEDAR at
www.sedar.com. The forward-looking statements contained in this
press release are made as of the date hereof and the Company
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.
This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about Razor's prospective results of
operations, sales volumes, including sale of inventory volumes,
production and production efficiency, balance sheet, capital
spending, cost and net debt reductions, operating efficiencies,
investment infrastructure and components thereof, all of which are
subject to the same assumptions, risk factors, limitations, and
qualifications as a set forth in the above paragraph. FOFI
contained in this document was approved by management as of the
date of this document and was provided for the purpose of providing
further information about Razor's future business operations. Razor
disclaims any intention or obligation to update or revise any FOFI
contained in this document, whether as a result of new information,
future events or otherwise, unless required pursuant to applicable
law. Readers are cautioned that the FOFI contained in this document
should not be used for purposes other than for which it is
disclosed herein.
NON-IFRS MEASURES: This press
release contains the terms "funds flow", "adjusted funds flow",
"net blending and processing income", "net debt", "income (loss) on
sale of commodities purchased from third parties", "operating
netback", "corporate netback", “adjusted operating expenses” and
“production enhancement expenses” which do not have standardized
meanings prescribed by International Financial Reporting Standards
("IFRS") and therefore may not be comparable with the calculation
of similar measures by other companies. Funds flow represents cash
generated from operating activities before changes in non-cash
working capital. Adjusted funds flow represents cash flow from
operating activities before changes in non-cash working capital and
decommissioning obligation expenditures incurred. Management uses
funds flow and adjusted funds flow to analyze operating performance
and leverage, and considers funds flow and adjusted funds flow from
operating activities to be key measures as it demonstrates the
Company's ability to generate cash necessary to fund future capital
investments and repay debt. Net blending and processing income is
calculated by adding blending and processing income and deducting
blending and processing expense. Net debt is calculated as the sum
of the long-term debt and lease obligations, less working capital
(or plus working capital deficiency), with working capital
excluding mark-to-market risk management contracts. Razor believes
that net debt is a useful supplemental measure of the total amount
of current and long-term debt of the Company. Income (loss) on sale
of commodities purchased from third parties is calculated by adding
sales of commodities purchased from third parties and deducting
commodities purchased from third parties. Income (loss) on sale of
commodities purchased from third parties may not be comparable to
similar measures used by other companies. Operating netback equals
total petroleum and natural gas sales less royalties and operating
costs calculated on a boe basis. Razor considers operating netback
as an important measure to evaluate its operational performance as
it demonstrates its field level profitability relative to current
commodity prices. Corporate netback is calculated by deducting
general & administration, acquisition and transaction costs,
and interest from operating netback. Razor considers corporate
netback as an important measure to evaluate its overall corporate
performance. Adjusted operating expenses are regular field or
general operating costs that occur throughout the year and do not
include production enhancement expenses. Management believes that
removing the expenses related to production enhancements from total
operating expenses is a useful supplemental measure to analyze
regular operating expenses. Adjusted operating expenses may not be
comparable to similar measures used by other companies. Production
enhancement expenses are expenses made by the company to increase
production volumes which are not regular field or general operating
costs that occur throughout a year. Management believes that
separating the expenses related to production enhancements is a
useful supplemental measure to analyze the cost of bringing wells
back on production and the related increases in production volumes.
Production enhancement expenses may not be comparable to similar
measures used by other companies.
ADVISORY PRODUCTION
INFORMATION: Unless otherwise indicated herein, all
production information presented herein is presented on a gross
basis, which is the Company's working interest prior to deduction
of royalties and without including any royalty interests.
BARRELS OF OIL EQUIVALENT: The
term "boe" or barrels of oil equivalent may be misleading,
particularly if used in isolation. A boe conversion ratio of six
thousand cubic feet of natural gas to one barrel of oil equivalent
(6 Mcf: 1 bbl) is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Additionally, given that the
value ratio based on the current price of crude oil, as compared to
natural gas, is significantly different from the energy equivalency
of 6:1; utilizing a conversion ratio of 6:1 may be misleading as an
indication of value.
Neither the
TSX
Venture
Exchange
nor its
Regulation
Services
Provider
(as that
term is
defined in the
policies of the
TSX
Venture
Exchange)
accepts
responsibility for the adequacy
or accuracy of this
news release.
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