CALGARY, ALBERTA–(Marketwired – Oct. 31, 2017) – NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is pleased to announce results for the three and nine months ended September 30, 2017 and provide an update on its future business plans. NuVista delivered another strong quarter with continued development drilling success. Production and funds from operations exhibited significant growth despite planned outages and a reduction in commodity prices compared to the second quarter. Continued improvement in well results, higher than expected condensate yields, and reduced facility downtime versus the prior quarter all contributed to another quarter which exceeded expectations.
NuVista is continuing to deliver on our 2017 development program, and has made exciting progress in all four of our core development areas. We possess a material position in the condensate-rich Wapiti Montney play which is delivering strong financial returns to shareholders now and is expected to do so over the long term. With our prudent focus on balance sheet strength and gas market diversification, we maintain the 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 third quarter 2017 production of 29,405 Boe/d versus second quarter production of 25,454 Boe/d and third quarter 2016 production of 24,898 Boe/d. This represents 16% production growth versus the prior quarter and is well above the top of our third quarter guidance range of 26,000 – 29,000 Boe/d. This result is due to strong recent well performance and the on-time conclusion of third party midstream plant maintenance outages;
- Achieved funds from operations of $41.5 million ($0.24/share, basic) versus $39.3 million ($0.23/share, basic) for the second quarter and $31.2 million ($0.20/share, basic) for the third quarter of 2016;
- Delivered funds from operations netback of $15.36/Boe versus $13.65/Boe for the third quarter of 2016;
- Successfully executed a very active third quarter capital program of $98.0 million, drilling 3 (3.0 net) wells and completing 16 (16.0 net) wells;
- Achieved first production on 18 new wells in Bilbo and Elmworth during the third quarter, for a total of 28 new Montney wells onstream this year;
- Achieved third quarter operating costs of $10.26/Boe as compared to $10.66/Boe in the second quarter. G&A expenses also continued to fall, reaching $1.51/Boe in the third quarter as compared to $1.75/Boe for the second quarter;
- Exited the third quarter of 2017 with net debt of $232 million, which includes credit facility borrowing of $149 million. NuVista concluded the quarter with a ratio of net debt to annualized current quarter funds from operations of 1.4x; and
- Subsequent to the third quarter, NuVista has concluded the semi-annual redetermination of our credit facility. Due to strong well results this has resulted in a significant increase to our credit facility limit from $235 million to $310 million.
The Bilbo compression and dehydration facility is now at capacity with production ranging from 17,000 to 19,000 Boe/d depending on normal operational fluctuations. The new 6-well pad in northeast Bilbo has been started up and wells continue to be feathered onto production as facility space permits. The wells continue to exhibit high condensate-gas ratios (CGR’s) in excess of expectations, initially averaging 250 Bbls/MMcf as previously reported. We look forward to reporting IP30 flowback information on these wells when available.
The Elmworth block has recently reached a new weekly production record of 16,000 Boe/d, including the Gold Creek production which is presently flowing through our Elmworth facility. This is the original nameplate design capacity for Elmworth, but early indications are that we will be able to optimize production to higher levels in the near term. Completion activities progressed smoothly in the third quarter, with five more wells already on production including the two previously reported IP30 results and the three new ones listed below. In addition we have completed four more wells which will be brought on production as facility capacity permits. Three additional new high intensity fractured (HiFi) wells have now reached IP30 with an average flowrate of 2,240 Boe/d comprised of 9.7 MMcf/d of raw gas and 779 Bbl/d of condensate. These results once again eclipse prior Elmworth results, representing 2.1x the IP30 condensate rate of our historical Elmworth results. The IP30 CGR for the wells was 80 Bbls/MMcf versus the anticipated CGR of 40 Bbls/MMcf.
Gold Creek Block
All three wells of our extended reach horizontal (ERH) pad at Gold Creek continue to flow to our Elmworth compressor station with strong performance. During the third quarter, NuVista drilled another well in the North part of the block for expiry and delineation purposes. We look forward to completing this well during the fourth quarter of 2017.
As previously reported, NuVista completed and tested our first horizontal well in the Pipestone block during the third quarter. The well flowed for approximately 3.5 days with the final 24 hour rate being over 1,400 Boe/d including 6 MMcf/d raw gas and 600 Bbls/d condensate, with rates still increasing at the end of the short test period. Although the well was still cleaning up, these early indications provide a CGR greater than 100 Bbls/MMcf versus initial expectations of 60 Bbls/MMcf. The raw gas result was also favorable. The well will remain shut in until our Pipestone block facilities are in place. The Pipestone stakeholder and development plan is proceeding well to underpin our planned future growth in this area which has continued to see exciting offsetting industry activity.
NuVista has recently completed the drilling of our first Lower Montney horizontal well on one of our recent Bilbo pads. We have been able to accelerate the completion of this pad into November of 2017 and expect to obtain early test data on the well by early 2018 in this newly emerging layer of the Montney formation.
Commodity Price Risk Management Continues to Benefit NuVista
NuVista continues to benefit from the discipline of our strong hedging program during this period of volatile commodity prices. We currently possess hedges which in aggregate cover 66% of remaining 2017 projected liquids production at a floor WTI price of C$65.58/Bbl. This has been a challenging summer for AECO, with spot natural gas prices under pressure periodically due to temporary restrictions in pipeline and compressor station capacity on the Alberta NGTL system. We are pleased to report that there was virtually no impact to NuVista production and pricing as a result of these restrictions and price reductions. We currently have 70% of remaining 2017 projected gas production hedged at a floor price of C$3.04/Mcf. Both of these liquids and gas percentage figures relate to production net of royalty volumes. NuVista’s hedge position for 2018 currently provides floor prices of C$69.44/Bbl WTI and C$2.81/Mcf for approximately 50% of 2018 liquids and natural gas production. Due to our fixed price hedges, basis hedges, and our export pipeline transport capacity, NuVista has less than 1% of our natural gas volumes exposed to spot AECO for the remainder of 2017 and 2018.
2017 Outlook: Annual Production Guidance Reaffirmed
NuVista has recently reduced activity to one rig drilling in the Wapiti Montney area. Capital spending levels are expected to come in at the top of, or marginally above the prior guidance range of $280 – $300 million as we were able to accelerate into 2017 the completion of our Bilbo pad which includes the Lower Montney test well. In addition, this provides for the commencement of our 2018 winter drilling program late in the fourth quarter of 2017, which reduces spring breakup weather risk.
Due to the conclusion of planned facility outages and strong recent well results, weekly production has now reached a new record of 35,000 Boe/d. We re-affirm our fourth quarter production guidance range of 35,000 to 38,000 Boe/d. The full year 2017 production guidance range of 28,000 to 31,000 Boe/d also remains intact.
2018 Outlook – Annual Budget Now Approved
NuVista is pleased to announce that our 2018 budget has been approved by our board of directors. Our previously announced 2018 production guidance is unchanged at 35,000 to 40,000 Boe/d while capex has been lowered by 5% to a range of $270MM to $310MM. Continued improvements in per well capital efficiency particularly at Elmworth, a diversified gas marketing strategy, and higher than expected condensate proportion are expected to enable us to maintain our targeted debt to funds from operations ratio of approximately 1.5x throughout 2018 while still delivering production growth of approximately 25% year over year.
Given the uncertainties associated with commodity pricing, NuVista’s position within this capital spending range will be controlled based on our ongoing view of the multi-year commodity price environment. The higher end of the spending range includes significant capital for 2019 production growth and includes assumptions for slight service cost increases. As such, the higher end of the spending range will only be executed if the commodity price environment is favorable. The upper end of our production guidance range will be governed by facility limitations until early-mid 2019 when the new SemCams Wapiti gas plant is expected to start up.
Given top quality assets and a management team focused upon relentless improvement, NuVista will continue to optimize well results, improve margins, and grow our production profitably toward our 2021 goal of 60,000 Boe/d. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their guidance and support as we build an ever more valuable future for NuVista.
Please note that our corporate presentation is being updated and will be available at www.nuvistaenergy.com on or before November 13, 2017. NuVista’s third quarter 2017 condensed interim financial statements and notes to the financial statements and management’s discussion and analysis will be filed on SEDAR (www.sedar.com) under NuVista Energy Ltd. on or before November 1, 2017 and can also be accessed on NuVista’s website.
|Three months ended September 30||Nine months ended September 30|
|($ thousands, except per share and per $/Boe)||2017||2016||% Change||2017||2016||% Change|
|Oil and natural gas revenues||$||83,100||$||65,155||28||$||246,737||$||182,714||35|
|Funds from operations (1)||41,526||31,237||33||124,098||97,143||28|
|Per share – basic||0.24||0.20||20||0.72||0.63||14|
|Per share – diluted||0.24||0.20||20||0.71||0.63||13|
|Net earnings (loss)||(4,366||)||2,079||(310||)||59,718||(2,788||)||(2,242||)|
|Per share – basic||(0.03||)||0.01||(400||)||0.35||(0.02||)||(1,850||)|
|Per share – diluted||(0.03||)||0.01||(400||)||0.34||(0.02||)||(1,800||)|
|Net debt (1)||232,452||164,783||41|
|Proceeds on property dispositions||1,417||3,956||(64||)||2,241||73,901||(97||)|
|Weighted average common shares o/s – basic||173,317||157,097||10||173,032||154,633||12|
|Weighted average common shares o/s – diluted||173,317||157,097||10||173,659||154,633||12|
|End of period common shares o/s||173,598||157,268||10|
|Natural gas (MMcf/d)||109.3||97.4||12||100.3||97.3||3|
|Condensate & oil (Bbls/d)||9,273||7,634||21||8,773||6,769||30|
|NGLs (Bbls/d) (2)||1,908||1,035||84||1,723||1,634||5|
|Condensate, oil & NGLs weighting||38%||35%||38%||34%|
|Condensate & oil weighting||32%||31%||32%||28%|
|Average selling prices (3) (4)|
|Natural gas ($/Mcf)||3.48||3.37||3||3.64||3.47||5|
|Condensate & oil ($/Bbl)||51.94||48.73||7||57.31||46.79||22|
|Oil and natural gas revenues||30.72||28.45||8||33.22||27.09||23|
|Realized gain on financial derivatives||1.22||2.32||(47||)||0.61||3.56||(83||)|
|Operating netback (1)||18.32||16.79||9||19.60||17.57||12|
|Funds from operations netback (1)||15.36||13.65||13||16.72||14.41||16|
|SHARE TRADING STATISTICS|
|Average daily volume||393,134||538,865||(27||)||458,424||519,539||(12||)|
|(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.|