CALGARY, ALBERTA–(Marketwired – May 11, 2016) – NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is pleased to announce results for the three months ended March 31, 2016 and provide an update on its future business plans. NuVista had another strong quarter of growth with continued development drilling program success and lower costs. Netbacks held up well despite the historically low commodity prices which were experienced by industry, as a result of increased condensate production and our favorable hedge positions.
These factors have placed NuVista in a position to continue to weather the current weak commodity environment, and ready to pivot to more rapid growth as commodity prices continue recovering. We possess a material position in the condensate-rich Wapiti Montney play which has the ability to deliver strong financial returns to shareholders over the long term. With our prudent focus on balance sheet strength, we maintain flexibility to adjust capital spending and pace of growth commensurate with the business environment while adhering to our long term growth and profitability objectives.
Significant Operating Highlights
- Achieved first quarter 2016 production of 25,484 Boe/d, representing growth of 9% compared to the prior quarter, exceeding the top of our first quarter guidance range of 24,500 – 25,000 Boe/d;
- Achieved funds from operations of $30.3 million ($0.20/share, basic) for the first quarter;
- Successfully executed a first quarter capital program of $61.2 million. Drilled 5 (5.0 net) wells in our Montney condensate rich resource play, brought 7 new wells on production and completed and production tested another 4 wells. Favorable weather and increased drilling efficiency allowed projects to be accelerated into the first quarter to avoid spring breakup. This had the effect of phasing capital from second quarter to first quarter with no change to first half 2016 spending plans overall. Capital costs continue below our original 2016 budget estimates, so we remain on track with our 2016 spending guidance. New well results continue to meet and exceed our expectations as laid out in the corporate presentation on our website;
- Achieved first quarter operating costs of $10.59/Boe, a 3% reduction from the first quarter of 2015 and a 5% reduction from the fourth quarter of 2015. Operating costs continue to reduce as a result of steadily increasing utilization as we tie in new wells to our large new facilities, and continued efficiencies from strategic infrastructure additions including Company owned water disposal wells and facilities;
- Achieved reduced G&A costs which have continued to trend downwards as planned, reaching $1.90/Boe for the first quarter of 2016, and representing a reduction of 23% from the 2015 average. Cost reduction in all aspects of our business remains a key area of focus for NuVista;
- Delivered funds from operations netback of $13.06/Boe for the first quarter of 2016 despite the current low commodity price environment;
- Exited the first quarter of 2016 with bank borrowings of $230.6 million on a current facility of $300 million. NuVista’s annual redetermination of the borrowing base with the banks will be concluded during the second quarter of 2016; and
- Maintained a ratio of net debt to annualized current quarter funds from operations of 2.1x despite the first quarter being the largest planned spending quarter of the year, as is typical due to winter drilling season phasing. With May 1 strip pricing, run rate capital spending is expected to be less than funds from operations for the remainder of 2016.
NuVista continued to benefit from our strong hedging program in the first quarter of 2016. We currently possess hedges which in aggregate cover 53% of remaining 2016 projected liquids production at a WTI price of C$77.17/Bbl, and 73% of remaining 2016 projected gas production at a price of C$3.30/Mcf. Both of these percentage figures relate to production net of royalty volumes. Combined with our Alliance pipeline volumes shipped to Chicago, NuVista has less than 10% of our natural volumes exposed to AECO prices in 2016. With the significant reduction in AECO pricing during the summer 2016 period, we have thus far elected to limit new well production volumes close to previously guided levels to eliminate effectively all AECO exposure near term.
We are pleased to note that the main terms of the Modernized Royalty Framework (MRF) have now been finalized as announced by the Government of Alberta. The outcome is expected to be slightly favorable for the Company and for Alberta as it brings renewed fiscal certainty, a focus upon capital cost reduction which is an area of strength for NuVista and continued investment in the Alberta economy. The changes are not expected to have any measurable impact on Company revenues, payout periods, or project/well economics.
2016 Outlook: Guidance Reaffirmed
NuVista will continue to focus prudently upon our balance sheet during 2016. We are continuing as planned with a one-rig development program in the Wapiti Montney area, which has recently been reduced from two rigs. The Company’s second half capital spending plans will be re-evaluated during the second quarter of 2016, and the pace of spending will be contingent on the commodity price outlook. We have significant flexibility to adjust the capital program quickly when desired, accelerating growth as commodity prices recover. We re-affirm our projected 2016 capital spending in the range of $115 – $135 million. We also reaffirm our production guidance for 2016 in the range of 24,500 – 25,500 Boe/d, an increase of 12% compared to 2015 average production. Our guidance for funds from operations for 2016 remains unchanged, in the range of $100 – $110 million. This assumes May benchmark strip pricing of US$45.00/Boe WTI and C$1.80/GJ AECO natural gas for the remainder of 2016.
Given top quality assets and a management team focused upon relentless improvement, NuVista will continue to optimize results in the current commodity price environment. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their guidance and support as we build an ever more valuable future for NuVista.
Please note that our corporate presentation is being updated and will be available at www.nuvistaenergy.com on or before midday on May 12, 2016. NuVista’s first quarter 2016 condensed interim financial statements and notes to the financial statements and management’s discussion and analysis will be filed on SEDAR (www.sedar.com) under NuVista Energy Ltd. on or before Thursday, May 12, 2016 and can also be accessed on NuVista’s website.
Corporate Highlights | |||||||||||||
Three months ended March 31 | |||||||||||||
($ thousands, except per share and per $/Boe) | 2016 | 2015 | % Change | ||||||||||
Financial | |||||||||||||
Oil and natural gas revenues | $ | 59,720 | $ | 57,927 | 3 | ||||||||
Funds from operations (1) | 30,288 | 30,317 | – | ||||||||||
Per basic and diluted share | 0.20 | 0.22 | (9 | ) | |||||||||
Net earnings (loss) | 2,453 | (7,659 | ) | (132 | ) | ||||||||
Per basic and diluted share | 0.02 | (0.06 | ) | (133 | ) | ||||||||
Total assets | 1,014,772 | 1,094,181 | (7 | ) | |||||||||
Net debt (1) | 255,646 | 260,087 | (2 | ) | |||||||||
Capital expenditures | 61,193 | 107,316 | (43 | ) | |||||||||
Proceeds on property dispositions | 450 | 2,752 | (84 | ) | |||||||||
Weighted average common shares outstanding – basic | 153,319 | 138,712 | 11 | ||||||||||
End of period common shares outstanding | 153,349 | 138,834 | 10 | ||||||||||
Operating | |||||||||||||
Production | |||||||||||||
Natural gas (MMcf/d) | 102.6 | 98.6 | 4 | ||||||||||
Condensate & oil (Bbls/d) | 6,243 | 4,986 | 25 | ||||||||||
NGLs (Bbls/d) (2) | 2,143 | 1,794 | 19 | ||||||||||
Total (Boe/d) | 25,484 | 23,215 | 10 | ||||||||||
Condensate, oil & NGLs weighting | 33 | % | 29 | % | |||||||||
Condensate & oil weighting | 25 | % | 21 | % | |||||||||
Average selling prices (3) & (4) | |||||||||||||
Natural gas ($/Mcf) | 3.75 | 3.83 | (2 | ) | |||||||||
Condensate & oil ($/Bbl) | 41.67 | 48.03 | (13 | ) | |||||||||
NGLs ($/Bbl) | 5.35 | 14.87 | (64 | ) | |||||||||
Netbacks | |||||||||||||
Oil and natural gas revenues ($/Boe) | 25.75 | 27.73 | (7 | ) | |||||||||
Realized gain on financial derivatives ($/Boe) | 4.94 | 5.87 | (16 | ) | |||||||||
Royalties ($/Boe) | (1.32 | ) | (1.36 | ) | (3 | ) | |||||||
Transportation expenses ($/Boe) | (2.74 | ) | (3.21 | ) | (15 | ) | |||||||
Operating expenses ($/Boe) | (10.59 | ) | (10.94 | ) | (3 | ) | |||||||
Operating netback ($/Boe) (1) | 16.04 | 18.09 | (11 | ) | |||||||||
Funds from operations netback ($/Boe) (1) | 13.06 | 14.52 | (10 | ) | |||||||||
Share trading statistics | |||||||||||||
High | 5.50 | 8.98 | (39 | ) | |||||||||
Low | 2.72 | 5.87 | (54 | ) | |||||||||
Close | 4.90 | 7.62 | (36 | ) | |||||||||
Average daily volume | 463,637 | 404,105 | 15 |
(1) | See “Non-GAAP measurements”. |
(2) | Natural gas liquids (“NGLs”) include butane, propane and ethane. |
(3) | Product prices exclude realized gains/losses on financial derivatives. |
(4) | The average NGLs selling price is net of tariffs and fractionation fees. |