Razor Energy Corp. (“Razor” or the “Company”) (TSXV: RZE) announces
its third 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 September 30, 2021
which are available on SEDAR at www.sedar.com and the Company’s
website www.razor-energy.com.
RECENT HIGHLIGHTS
-
Financing: On October 22,
2021, the Company closed a Private Placement of common shares with
Alberta Investment Management Corporation and certain members of
management which raised $1,890,000.
-
Production: Reactivation work in
our operated and non-operated properties has increased current
production to approximately 4,700 boe/d based on field
estimates.
- Production
Guidance: The Company expects to
exit 2021 with production at 5,000 boe/d or higher.
Q3 HIGHLIGHTS
- Net
Income: Generated $9.7 million of net
income, primarily due to a $12.1 million gain related to the
acquisition of additional working interests in the Swan Hills
area.
- Swan Hills
Acquisition: Strategic consolidation of
Razor’s working interest in Swan Hills Unit No.1 to 49.7%, adding
long life low-risk light oil reserves, production and cash flow
underpinned by industry-leading annual base decline rate of
10%.
-
Production: Averaged 3,567 boe/d
in Q3 which represents a 13% increase from Q2 2021.
- Production
Enhancement: Third quarter activities
focused in Swan Hills on both operated and non-operated
properties.
- Geothermal
Project: Commenced project execution on
the Co-produced Geothermal Power Generation Project in Swan Hills
(the “Geothermal Project”) with estimated completion within the
first quarter of 2022. The Geothermal Project will be capable of
generating up to 21 MW of grid connected power, of which up to 30%
will be sustainable clean power generation.
- ESG and
Sustainability: Deposited approximately
2,500 tonnes of hydrocarbon impacted soils into Razor’s recently
completed treatment facility in Virginia Hills, which employs
bioremediation to treat hydrocarbon-impacted soils. This first
batch of soil is expected to be remediated by Q2 2022.
- Reducing Decommissioning
Liabilities: Settled $1.1 million of
decommissioning obligations, which includes $0.3 million related to
government grants received for well site rehabilitation through
Alberta’s Site Rehabilitation Program (“SRP”).
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.
OUTLOOKRazor
Razor continues to look forward and plan for the
future while remaining focused on its long-term sustainability. The
Company has an extensive opportunity set of high-quality wells
requiring reactivation, many of which have payout metrics which
exceed the Company’s economic thresholds. Razor will continue the
production enhancement activity started in February 2021 and
anticipates reactivating 14 wells in Q4 2021. This
program is intended to continue into 2022. 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 rate of approximately
12%. In its history the
Company has reactivated over 80 wells adding
approximately 2,400 boe/d, or 30 boe/d of initial production on
average per well, and it expects
that this program will result in similar favorable
metrics.
The Company continues to focus on cost control
on its operated properties. In addition to the planned production
enhancement program, Razor will take a cautious and case-by-case
approach to spending for the remainder of 2021 and into 2022,
focusing on low risk, low investment capital opportunities to
increase field and corporate netbacks.
Razor has high reservoir quality, low decline,
isolate carbonate Swan Hills reef light oil pools that contain
large original oil in place with over 60 years of production
history. Razor believes these reefs are ideally suited for carbon
capture, utilization and storage and enhanced oil recovery (“EOR”)
purposes1, in addition to geothermal power production and
conventional open-hole horizontal development drilling upside.
Razor recognizes multiple deep value streams in
its assets and is actively engaged in liberating them for the
benefit of shareholders.
FutEra
In May 2021, FutEra Power Corp. (“FutEra”), a
subsidiary of Razor entered the project execution stage of its
Geothermal Project. FutEra expects the total capital cost of the
Geothermal Project to be $34.0 million. Stage Gate 1 is fully
funded. Stage Gate 2 requires additional financing which FutEra
continues to seek. With both Stage Gate 1 and 2 of the Geothermal
Project complete, the total nameplate electricity output of up to
21 MW, of which up to 30% will be sustainable clean power
generation. FutEra has partnered with provincial and federal
government agencies to invigorate the emerging geothermal industry.
Provincially, Alberta Innovates and Emissions Reduction Alberta,
and federally, Natural Resources Canada, have provided grants to
complete funding. To date, Razor has received $10.5 million in
government grants to support this power generation project. (See
May 4, 2021, Razor press release and www.futerapower.com for more
details.)
With the strategic acquisition of additional
working interest in the Swan Hills area, FutEra has identified the
potential for additional geothermal and/or natural gas power
generation projects in Swan Hills Unit No.1. The volume and
temperature of the produced fluids processed through two of the
Unit’s main facilities are highly analogous to FutEra’s current
Geothermal Project.
FutEra has identified and is in the process of
reviewing and capturing additional projects including solar, wind,
and other low carbon technologies. In addition, FutEra is in
discussions with an industry resource partner to evaluate its
renewable energy options and to develop a long term environmental,
social and governance plan.
_______________1 These programs have been
successfully demonstrated by the previous operator’s South Swan
Hills Unit CO2 EOR Injection Pilot which ran from 2008 to 2010 in
addition to CO2 injection programs carried out in the Swan Hills
Unit No. 1 and Judy Creek oil pools from 2004 to 2010.
OPERATIONAL
UPDATE
Production volumes in the third quarter of 2021
averaged 3,567 boe/d, which is on par with the production volumes
in the same period of 2020 and represents a 13% production increase
from Q2 2021. Highlights of the causes for the differences in
production volumes between Q3 2021 and Q3 2020 are as follows:
- Swan Hills – production volumes are
on par with those in the same period of 2020. Production in Q3 2021
was negatively impacted by various third party, temporary
infrastructure issues. These impacts have been offset by increased
production in the Swan Hills Unit No.1 as a result of the working
interest acquisition in August 2021, a 4 well reactivation program,
and the conclusion of operated and non-operated facility
turnarounds.The Company is completing a reactivation program in Q4
2021 which will positively impact production in Swan Hills. This
program is intended to continue into Q1 2022. The operator in Swan
Hills Unit No.1 has embarked on various production enhancing
activities in Q3 and Q4 2021. The Company expects these types of
activities to continue in 2022.
- Kaybob – production volumes have
increased 28% from the same period in 2020 due to certain
reactivation and repair activities in the Simonette area offset by
various, temporary shut-ins in other Kaybob non-operated wells. The
Company is contemplating a reactivation program in Q1 2022.
- South District – production volumes
have decreased 21% from the same period in 2020 primarily due
natural declines and a non-operated field being shut in due to
operator insolvency. Production from this particular non-operated
field is expected to commence in January, 2022. The Company has
also completed a limited reactivation program in its South District
within Q4 2021.
Razor’s operating expenses on a corporate level
in Q3 2021 were at a historical high, with an increase as compared
to Q2 2021 primarily due to higher electricity costs, facility
repairs and chemical purchases.
The primary factors affecting operating costs on
a $/boe basis are production levels, workover activity, and
electricity pricing. Inherent within the Company’s hydrocarbon
operations is a prominent fixed cost element, or those costs that
are not related to production levels. On a relative basis these
costs are higher with lower production. In Q3 2021, Razor’s
production was lower than historical averages due to the factors
described above. In addition, Razor embarked on a workover program
in Q3 2021, which will extend into Q4 2021, the majority of which
will be expensed. Furthermore, the electricity market has seen a
continual rise in prices, which has recently stabilized.
The Company expects a decrease in operating
costs in Q4 2021 on a $/boe basis due to higher production levels,
offset by higher workover activity.
CAPITAL
PROGRAM
During the third quarter of 2021, Razor invested
$3.9 million in its Geothermal Project. The Company also
capitalized $0.1 million of costs related to operated and
non-operated turnaround activities executed in the prior quarter.
As of September 30, 2021, Razor has received $10.5 million in
government grants since inception in to support its Geothermal
Project.
Razor did not initiate any projects requiring
finding and development capital in the quarter.
SELECT QUARTERLY HIGHLIGHTSThe
following tables summarizes key financial and operating highlights
associated with the Company’s financial performance.
|
Three Months Ended Sept 30, |
|
Nine Months Ended Sept 30, |
|
($000's, except for per share amounts and production) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Production |
|
|
|
|
|
Light Oil (bbl/d) |
2,282 |
|
2,047 |
|
2,074 |
|
2,228 |
|
Gas (mcf/d) 1 |
4,381 |
|
4,411 |
|
3,934 |
|
4,538 |
|
NGL (boe/d) |
554 |
|
791 |
|
513 |
|
865 |
|
Total (boe/d) |
3,567 |
|
3,573 |
|
3,242 |
|
3,849 |
|
Sales volumes |
|
|
|
|
|
Light Oil (bbl/d) |
2,304 |
|
2,186 |
|
2,075 |
|
2,231 |
|
Gas (mcf/d)1 |
3,831 |
|
4,411 |
|
3,533 |
|
4,538 |
|
NGL (bbl/d) |
554 |
|
791 |
|
513 |
|
865 |
|
Total (boe/d) |
3,497 |
|
3,712 |
|
3,177 |
|
3,852 |
|
Oil inventory volumes (bbls) |
7,752 |
|
8,306 |
|
7,752 |
|
8,306 |
|
Revenue |
|
|
|
|
|
Oil and NGLs sales |
19,295 |
|
11,345 |
|
47,108 |
|
31,717 |
|
Natural gas sales |
1,348 |
|
712 |
|
3,179 |
|
2,078 |
|
Blending and processing income |
455 |
|
1,286 |
|
2,599 |
|
3,960 |
|
Other revenue |
248 |
|
155 |
|
800 |
|
916 |
|
Total
revenue |
21,346 |
|
13,498 |
|
53,686 |
|
38,671 |
|
Cash flows from (used in)
operating activities |
(2,317 |
) |
2,124 |
|
(5,454 |
) |
3,837 |
|
Per share -basic and
diluted |
(0.11 |
) |
0.10 |
|
(0.26 |
) |
0.18 |
|
Funds flow 2 |
306 |
|
5,598 |
|
(755 |
) |
3,924 |
|
Per share -basic and
diluted |
0.01 |
|
0.27 |
|
(0.04 |
) |
0.19 |
|
Adjusted funds flow 2 |
1,113 |
|
5,562 |
|
852 |
|
4,258 |
|
Per share -basic and
diluted |
0.05 |
|
0.26 |
|
0.04 |
|
0.20 |
|
Net income (loss) |
9,669 |
|
(1,838 |
) |
(1,510 |
) |
(40,149 |
) |
Per share - basic and
diluted |
0.46 |
|
(0.09 |
) |
(0.07 |
) |
(1.91 |
) |
Weighted average number of shares outstanding (basic and
diluted) |
21,064 |
|
21,064 |
|
21,064 |
|
21,064 |
|
Capital expenditures |
576 |
|
481 |
|
6,176 |
|
1,493 |
|
Government grants |
(3,254 |
) |
(270 |
) |
(4,617 |
) |
(1,121 |
) |
Netback
($/boe) |
|
|
|
|
|
Oil and gas sales 3 |
62.91 |
|
36.68 |
|
56.81 |
|
32.05 |
|
Royalties |
(11.39 |
) |
(1.50 |
) |
(8.13 |
) |
(2.80 |
) |
Adjusted operating expenses 2 4 |
(39.52 |
) |
(23.12 |
) |
(38.61 |
) |
(25.41 |
) |
Production enhancement expenses 2 |
(3.87 |
) |
(0.10 |
) |
(5.47 |
) |
(1.53 |
) |
Transportation and treating |
(2.65 |
) |
(2.36 |
) |
(2.36 |
) |
(1.92 |
) |
Operating netback 2 |
5.48 |
|
9.60 |
|
2.24 |
|
0.39 |
|
Net blending and processing income 2 |
0.93 |
|
2.40 |
|
1.68 |
|
2.97 |
|
Realized loss on commodity contracts settlement 3 |
(0.42 |
) |
0.82 |
|
(0.21 |
) |
(1.41 |
) |
Unrealized gain/(loss) on commodity risk management |
(1.07 |
) |
(0.12 |
) |
(1.44 |
) |
- |
|
Other revenues |
2.72 |
|
7.11 |
|
2.90 |
|
5.39 |
|
General and administrative |
(3.77 |
) |
(2.49 |
) |
(3.82 |
) |
(3.29 |
) |
Other expenses |
(0.35 |
) |
- |
|
(0.29 |
) |
- |
|
Impairment |
- |
|
- |
|
- |
|
(23.46 |
) |
Interest |
(5.23 |
) |
(5.23 |
) |
(5.29 |
) |
(4.07 |
) |
Corporate netback 2 |
(1.71 |
) |
12.09 |
|
(4.23 |
) |
(23.48 |
) |
|
|
|
|
|
|
|
|
|
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)
|
September 30, |
|
December 31, |
|
($000's, except for share amounts) |
2021 |
|
2020 |
|
Total assets |
199,233 |
|
163,709 |
|
Cash |
3,952 |
|
1,098 |
|
Long-term debt
(principal) |
72,251 |
|
50,878 |
|
Minimum lease obligation |
2,239 |
|
3,469 |
|
Net debt 1 |
91,968 |
|
72,789 |
|
Number
of shares outstanding |
21,064,466 |
|
21,064,466 |
|
|
|
|
|
|
1) Refer to "Non-IFRS
measures.”
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 a 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 BaileyPresident and Chief Executive Officer |
|
Kevin BraunChief Financial Officer |
|
|
|
Razor Energy Corp.800, 500-5th Ave SW Calgary Alberta T2P
3L5Telephone: 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 2021, possible business
combination transactions, assistance from government programs
including under the SRP and Canadian Emergency Wage Subsidy,
commitments under the area based closure 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", "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. 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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