- Clearview acquires strategic light oil and natural gas assets in its west-central Alberta core area
- Adjusted funds flow of $2.1 million, $9.12 per barrel of oil equivalent (“boe”), up 381% from the comparative quarter
- Reduced net debt by $1.4 million to $16.8 million at March 31, 2019 resulting in a net debt to annualized adjusted funds flow ratio of 2.0:1
CALGARY, May 27, 2019 /CNW/ – Clearview Resources Ltd. (“Clearview” or the “Company”) is pleased to announce its financial and operational results for the three months ended March 31, 2019.
HIGHLIGHTS
- On February 22, 2019, the Company closed the acquisition of light oil and natural gas assets in its west-central Alberta core area adding operated production of approximately 300 barrels of oil equivalent per day (“boe/d”) (53% light oil and natural gas liquids);
- Increased Clearview’s existing, light oil prone, undeveloped land base by 50% through the acquisition of assets;
- Incurred minimal capital expenditures of $0.2 million, other than the cash component of the asset acquisition of $0.5 million, in the first quarter to deploy excess adjusted funds flow of $1.4 million towards the reduction of net debt;
- Consistent with the strategy of the Company, increased oil production 54% in the first quarter ended March 31, 2019 to 768 barrels per day (“bbl/d”), up from 498 bbl/d in the comparative period of the prior year;
- Increased total production by 17% to 2,515 boe/d for the three months ended March 31, 2019 as a result of the continued strong production performance from the new wells brought on-stream in the prior year, minimal downtime through the winter and the acquisition completed in the current quarter;
- Realized a sales price per boe for production for the three months ended March 31, 2019 which was 10% greater than the comparative quarter, primarily due to higher natural gas prices;
- Reduced operating costs by $0.73 to $14.59 per boe, a decrease of 5%, in the three months ended March 31, 2019 versus the comparative quarter;
- Operating netbacks were $14.11 per boe for the three months ended March 31, 2019, 38% higher than the comparative period of the prior year at $10.25 per boe.
- Reduced general and administrative costs by 49% to $2.38 per boe for the three months ended March 31, 2019 versus the comparative quarter;
- Increased the corporate netback in the three months ended March 31, 2019 to $9.12 per boe, a 309% improvement over the comparative quarter as a result of a $3.11 increase in revenue per boe and a reduction in all cash costs, net of processing income, of $3.78 per boe in the first quarter of 2019 versus the comparative period of 2018;
- Generated adjusted funds flow of $2.1 million in the first quarter, up 381% from the comparative quarter, as a result of a 17% increase in production and a 309% increase in the corporate netback per boe. Cash flow from operations was $1.6 million in the current quarter versus $1.9 million in the comparative quarter; and
- Reduced net debt by $1.4 million in the current quarter, deploying the excess of adjusted funds flow of $2.1 million over capital expenditures of $0.7 million. At March 31, 2019, the Company’s net debt to annualized adjusted funds flow ratio was 2.0:1.
FINANCIAL and OPERATIONAL RESULTS
Clearview had a solid first quarter with production increasing by 17% over the same period in 2018 to 2,515 boe/d. Very little downtime was incurred in the quarter, despite very cold weather in the month of February, after a winterization program was undertaken in the field during the fall of 2018. Production of oil increased 54% in the first quarter to 768 bbl/d versus the comparative quarter of 2018.
With the growth in production, efficiencies were seen across most cost categories on a per boe basis. While revenue per boe increased by 10% to $33.13 per boe due to higher natural gas prices, the Company’s cash costs were reduced by $3.78 per boe in the first quarter of 2019 compared to the same period in 2018. As a result, the Company’s corporate netback increased by 309% to $9.12 per boe in the first quarter of 2019 from $2.23 per boe in the comparative period of 2018.
Adjusted funds flow for the first quarter of 2019 was $2.1 million. Capital expenditures were $0.7 million, approximately one-third of adjusted funds flow, enabling the Company to reduce its net debt by $1.4 million in the quarter. At March 31, 2019, the Company had net debt of $16.8 million with a net debt to annualized adjusted funds flow ratio of 2.0:1.
Financial and Operating Highlights
Financial |
Three months ended March 31 |
|||
($ 000’s except per share amounts) |
2019 |
2018 |
% Change |
|
Oil and natural gas sales |
7,500 |
5,794 |
29 |
|
Net earnings (loss) |
(454) |
(3,879) |
(86) |
|
Per share–basic and diluted |
(0.04) |
(0.46) |
(91) |
|
Adjusted funds flow (1) |
2,064 |
429 |
381 |
|
Per share–basic and diluted |
0.19 |
0.05 |
280 |
|
Capital expenditures – net |
713 |
3,919 |
(82) |
|
Weighted average shares |
||||
Basic and diluted (000’s) |
10,868 |
8,438 |
29 |
|
(1) See non-GAAP measures |
||||
Production |
Three months ended March 31 |
|||
2019 |
2018 |
% Change |
||
Oil – bbl/d |
768 |
498 |
54 |
|
Natural gas liquids – bbl/d |
473 |
450 |
5 |
|
Total liquids – bbl/d |
1,241 |
948 |
31 |
|
Natural gas – mcf/d |
7,646 |
7,175 |
7 |
|
Total – boe/d |
2,515 |
2,144 |
17 |
|
Realized sales prices |
Three months ended March 31 |
|||
2019 |
2018 |
% Change |
||
Oil – $/bbl |
62.50 |
63.68 |
(2) |
|
NGLs – $/bbl |
31.95 |
37.37 |
(15) |
|
Natural gas – $/mcf |
2.59 |
2.13 |
22 |
|
Total – $/boe |
33.13 |
30.02 |
10 |
|
Netback analysis |
Three months ended March 31 |
|||
Barrel of oil equivalent ($/boe) |
2019 |
2018 |
% Positive |
|
Realized sales price |
33.13 |
30.02 |
10 |
|
Royalties |
(3.51) |
(4.10) |
14 |
|
Processing income |
0.73 |
1.25 |
(42) |
|
Transportation |
(1.65) |
(1.60) |
(3) |
|
Operating |
(14.59) |
(15.32) |
5 |
|
Operating netback |
14.11 |
10.25 |
38 |
|
Realized gain (loss) on commodity contracts |
(0.80) |
(1.59) |
50 |
|
General & administrative |
(2.38) |
(4.66) |
49 |
|
Transaction costs |
(0.37) |
(0.50) |
26 |
|
Cash finance costs |
(1.44) |
(1.27) |
(13) |
|
Corporate netback |
9.12 |
2.23 |
309 |
(1) |
% Positive (Negative) is expressed as being positive (better performance in the category) or negative (reduced performance in the category) in relation to operating netback, corporate netback and net earnings. |
(2) |
See non-GAAP measures. |
OPERATIONS UPDATE
Clearview has purchased certain oil and gas assets (“Assets”) focused in its core area of west-central Alberta for consideration of $0.58 million in cash and the issuance of 1.357 million common shares of Clearview to the vendor. The acquisition closed on February 22, 2019 and has an effective date of July 1, 2018. The acquisition was funded from Clearview’s existing credit facility and common shares issued from treasury.
Clearview’s management believes the development potential on the lands acquired, will deliver significant, light oil weighted, growth and drive value creation for Clearview shareholders over the medium and long term.
The Assets are primarily located between Clearview’s existing core properties of Wilson Creek and Windfall along the light oil prone, deep basin trend of the Cardium and Bluesky formations. The Assets are situated on 40,420 acres of land including 23,200 acres of undeveloped land. The properties are characterized by high (87%) working interests and operated production. The acquisition represents a 50% increase to Clearview’s existing undeveloped land base. January 2019 average production of the acquired assets was approximately 300 boe/d with 53% of such production being light oil and natural gas liquids.
McDaniel & Associates Consultants Ltd. (“McDaniel”), the Company’s independent petroleum engineering firm, has evaluated the Assets crude oil, natural gas and natural gas liquids reserves as at March 31, 2019 and prepared a reserves report (the “McDaniel Report”) in accordance with National Instrument 51-101 “Standards of Disclosure for Oil and Gas Activities” and the “Canadian Oil and Gas Evaluation Handbook”. A three-consultant average (McDaniel, GLJ and Sproule) price forecast dated April 1, 2019 (“Price Forecast”) was used in the evaluation. The following is a presentation of the Reserves information with respect to the Assets acquired only. For more information on Clearview’s reserves at December 31, 2018, please refer to the Company’s Annual Information Form available on SEDAR at www.SEDAR.com.
The following is a summary of the Assets reserves information detailed in the McDaniel Report at March 31, 2019:
RESERVES |
||||||||||||||||
LIGHT AND |
CONVENTIONAL |
NATURAL GAS |
OIL |
|||||||||||||
RESERVES CATEGORY |
Gross(3) (Mbbls) |
Net(4) (Mbbls) |
Gross (MMcf) |
Net (MMcf) |
Gross (Mbbls) |
Net (Mbbls) |
Gross (Mboe) |
Net (Mboe) |
||||||||
PROVED: |
||||||||||||||||
Developed Producing |
258.4 |
237.3 |
2,663.6 |
2,055.1 |
175.9 |
123.6 |
879.3 |
704.2 |
||||||||
Developed Non-Producing |
4.1 |
4.1 |
11.5 |
11.0 |
0.2 |
0.1 |
6.2 |
6.1 |
||||||||
Undeveloped |
543.1 |
493.7 |
3,267.7 |
2,881.3 |
202.8 |
168.6 |
1,290.5 |
1,142.5 |
||||||||
TOTAL PROVED |
805.6 |
735.1 |
5,942.8 |
4,947.3 |
378.9 |
292.3 |
2,176.0 |
1,852.8 |
||||||||
PROBABLE |
792.0 |
658.2 |
4,453.3 |
3,706.7 |
270.9 |
195.7 |
1,805.4 |
1,471.8 |
||||||||
TOTAL PROVED PLUS PROBABLE |
1,597.6 |
1,393.3 |
10,396.1 |
8,653.9 |
649.8 |
488.0 |
3,981.3 |
3,324.6 |
||||||||
Notes: |
|
(1) |
Includes solution gas. |
(2) |
Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil (6:1). |
(3) |
Gross Reserves are the Company’s working interest share of the remaining reserves before the deduction of any royalties. |
(4) |
Net Reserves are working interest reserves after royalty deductions plus royalty interest reserves. Tables may not add due to rounding. |
Net Present Value of Future Net Revenue
The estimated future net revenues associated with the Assets reserves at March 31, 2019, based on the Price Forecast, are summarized in the following table.
NET PRESENT VALUES OF FUTURE NET REVENUE |
|||||||||||
RESERVES CATEGORY |
0% ($000s) |
5% ($000s) |
10% ($000s) |
15% ($000s) |
20% ($000s) |
Unit Value $/boe (1) |
|||||
PROVED: |
|||||||||||
Developed Producing |
10,113.9 |
8,755.6 |
7,578.8 |
6,621.4 |
5,853.3 |
8.61 |
|||||
Developed Non-Producing |
36.6 |
56.5 |
66.9 |
71.8 |
73.6 |
10.79 |
|||||
Undeveloped |
18,318.8 |
10,512.9 |
5,817.4 |
2,859.1 |
920.5 |
4.51 |
|||||
TOTAL PROVED |
28,469.3 |
19,325.0 |
13,463.1 |
9,552.3 |
6,847.4 |
6.19 |
|||||
PROBABLE |
34,092.1 |
20,385.5 |
12,870.9 |
8,428.0 |
5,626.2 |
7.13 |
|||||
TOTAL PROVED PLUS PROBABLE |
62,561.5 |
39,710.5 |
26,333.9 |
17,980.4 |
12,473.6 |
6.61 |
Notes: |
|
(1) |
Unit values are before income tax discounted at 10% and based on net reserves. |
(2) |
Future net revenues are estimated using forecast prices, costs arising from the anticipated development and production of reserves, associated royalties, operating costs, development costs, and abandonment and reclamation costs. The estimated values disclosed do not necessarily represent fair market value. |
TOTAL FUTURE NET REVENUE |
||||||
RESERVES |
REVENUE (1) ($M) |
ROYALTIES (2) ($M) |
OPERATING ($M) |
FUTURE DEVELOPMENT ($M) |
ABANDONMENT ($M) |
FUTURE NET ($M) |
Total Proved |
106,394.7 |
12,014.9 |
38,444.9 |
24,438.7 |
3,026.9 |
28,469.3 |
Total Proved plus |
||||||
Probable |
208,505 |
29,342.9 |
69,764.3 |
42,759.4 |
4,076.9 |
62,561.5 |
Notes: |
|
(1) |
Includes all product revenues and other revenues as forecast. |
(2 |
Royalties include Crown, freehold, overriding royalties, and freehold mineral taxes |
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS |
||||||||||||||||||
FORECAST PRICES AND COSTS (1) |
||||||||||||||||||
WTI |
Edmonton |
Bow River |
Ethane |
Butane |
Pentane |
AECO Spot |
||||||||||||
Year |
Inflation |
USD/CAD |
USD/bbl |
CAD/bbl |
CAD/bbl |
CAD/bbl |
CAD/bbl |
CAD/bbl |
CAD/MMBtu |
|||||||||
2019(9 mos) |
0.0 |
0.757 |
61.33 |
73.09 |
62.57 |
6.24 |
16.99 |
75.55 |
1.71 |
|||||||||
2020 |
2.0 |
0.782 |
64.43 |
75.64 |
61.60 |
7.88 |
35.10 |
79.44 |
2.15 |
|||||||||
2021 |
2.0 |
0.797 |
67.87 |
78.87 |
64.89 |
9.47 |
45.79 |
82.88 |
2.58 |
|||||||||
2022 |
2.0 |
0.800 |
70.67 |
82.49 |
68.46 |
10.67 |
52.35 |
86.10 |
2.88 |
|||||||||
2023 |
2.0 |
0.800 |
72.64 |
85.17 |
70.92 |
11.33 |
53.85 |
88.66 |
3.05 |
|||||||||
2024 |
2.0 |
0.800 |
74.59 |
87.54 |
73.08 |
11.65 |
55.36 |
91.08 |
3.14 |
|||||||||
2025 |
2.0 |
0.800 |
76.26 |
89.57 |
74.90 |
11.90 |
56.64 |
93.16 |
3.23 |
|||||||||
2026 |
2.0 |
0.800 |
77.93 |
91.57 |
76.70 |
12.22 |
57.93 |
95.23 |
3.32 |
|||||||||
2027 |
2.0 |
0.800 |
79.59 |
93.59 |
78.51 |
12.46 |
59.21 |
97.30 |
3.38 |
|||||||||
2028 |
2.0 |
0.800 |
81.19 |
95.50 |
80.20 |
12.77 |
60.41 |
99.27 |
3.47 |
|||||||||
2029 |
2.0 |
0.800 |
82.81 |
97.41 |
81.80 |
13.03 |
61.62 |
101.26 |
3.54 |
|||||||||
2030 |
2.0 |
0.800 |
84.47 |
99.35 |
83.44 |
13.29 |
62.85 |
103.28 |
3.61 |
|||||||||
2031 |
2.0 |
0.800 |
86.16 |
101.34 |
85.11 |
13.56 |
64.11 |
105.35 |
3.68 |
|||||||||
2032 |
2.0 |
0.800 |
87.88 |
103.37 |
86.81 |
13.83 |
65.39 |
107.45 |
3.76 |
|||||||||
2033 |
2.0 |
0.800 |
89.64 |
105.44 |
88.55 |
14.10 |
66.70 |
109.60 |
3.83 |
|||||||||
Thereafter |
2.0 |
0.800 |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2.0%/yr. |
+2/0%/yr. |
+2.0%/yr. |
Notes: |
|
(1) |
Three-consultant average (McDaniel, GLJ and Sproule) escalated price forecast dated April 1, 2019 |
(2) |
Inflation rate for costs. |
(3) |
Exchange rate used to generate the benchmark reference prices in this table. |
OUTLOOK
The Company has a risk management program in place to mitigate volatility of commodity prices received for its production. Prudently, the Company recently hedged some of its light oil production for the remainder of 2019 and will continue to monitor further opportunities to hedge the price received for its production.
The light oil differential, which negatively impacted the Company’s realized price for oil and NGLs significantly in the fourth quarter of 2018, has narrowed to more historic levels since then and continues to be supportive of reasonable light oil prices. Butane prices are under significant pressure in 2019 due to an over supply in the Canadian market.
Clearview’s March 31, 2019 unaudited condensed interim financial statements and management’s discussion and analysis are available on the Company’s website at www.clearviewres.com and SEDAR at www.SEDAR.com.
On behalf of the Board of Directors and all the employees of Clearview, we would like to thank our shareholders for their continued support.