Altura Energy Inc. (“Altura” or the “Corporation”) (TSXV: ATU) is pleased to announce its financial and operating results for the three and six months ended June 30, 2019. The unaudited interim condensed consolidated financial statements and related management’s discussion and analysis (“MD&A”) are available at www.sedar.com and www.alturaenergy.ca. Selected financial and operating information for the three and six months ended June 30, 2019 appear below and should be read in conjunction with the related financial statements and MD&A.
OPERATIONAL AND FINANCIAL SUMMARY
|Three months ended||Six months ended|
|Average daily production|
|Heavy oil (bbls/d)||1,016||1,404||478||1,210||513|
|Medium oil (bbls/d)||–||68||271||34||339|
|Natural gas (Mcf/d)||2,914||2,510||1,309||2,713||1,323|
|Total boe/d per million shares – diluted||14.4||17.6||9.0||16.0||10.0|
|Average realized prices|
|Heavy oil ($/bbl)||62.83||51.62||58.83||56.36||51.80|
|Medium oil ($/bbl)||–||48.97||67.64||48.97||57.72|
|Natural gas ($/Mcf)||1.30||2.06||1.32||1.65||1.74|
|Petroleum and natural gas sales||43.89||42.71||49.87||43.24||45.32|
|Realized gain on financial instruments||1.23||–||–||0.56||–|
|General and administrative||(2.94||)||(2.64||)||(5.17||)||(2.78||)||(4.56||)|
|Credit facility interest and financing expense||(0.50||)||(0.29||)||(0.88||)||(0.39||)||(0.67||)|
|Adjusted funds flow per boe(1)||23.12||23.80||25.35||23.47||22.32|
|FINANCIAL ($000, except per share amounts)|
|Petroleum and natural gas sales||6,353||7,453||4,497||13,806||9,044|
|Adjusted funds flow(1)||3,346||4,153||2,285||7,499||4,453|
|Per share – diluted(1)||0.03||0.04||0.02||0.07||0.04|
|Per share – diluted||0.01||0.01||0.02||0.02||0.03|
|Total capital expenditures||6,350||1,453||(21,368||)||7,803||(14,023||)|
|Net debt/(working capital surplus)(1)||5,109||2,105||(14,761||)||5,109||(14,761||)|
|Common shares outstanding (000)|
|End of period – basic||108,921||108,921||108,921||108,921||108,921|
|Weighted average for the period – basic(2)||108,921||108,921||108,921||108,921||108,921|
|Weighted average for the period – diluted(2)||110,503||110,430||110,546||110,466||109,947|
1. Adjusted funds flow, net debt and operating netback are non-GAAP measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Refer to the heading entitled “Non-GAAP Measures” contained within the “Advisories” section of Altura’s MD&A.
SECOND QUARTER 2019 HIGHLIGHTS
- Produced an average of 1,591 boe per day, an increase of 60 percent on an absolute and per share basis from the second quarter of 2018.
- Generated adjusted funds flow1 of $3.3 million, up 46 percent on an absolute and per share basis from the second quarter of 2018.
- Generated net income of $1.0 million compared to net income of $2.8 million in the second quarter of 2018. The second quarter of 2018 net income included a gain on disposition of assets of $2.9 million.
- Capital expenditures totaled $6.4 million. Altura drilled two 1.5-mile extended reach horizontal (“ERH”) wells, a vertical stratigraphic well in a new area and completed its solution gas compressor installation at Leduc-Woodbend.
- Year-to-date capital expenditures totaled $7.8 million, consistent with year-to-date adjusted funds flow of $7.5 million.
- Net debt1 at June 30, 2019 was $5.1 million, 0.4 times annualized second quarter adjusted funds flow.
- August 2019 AER Liability Management Rating (“LMR”) of 10.53.
SECOND QUARTER REVIEW
Second quarter production averaged 1,591 boe per day, down 348 boe per day or 18 percent from the first quarter of 2019. Production was affected by natural declines as no new wells were brought on production, and by well down time from workover activities in the quarter. The well down time adversely impacted production volumes by approximately 205 boe per day in the quarter.
Altura’s realized heavy oil price increased 22 percent in the second quarter from the first quarter of 2019 while the Corporation’s average realized price increased three percent due to lower natural gas prices, lower propane and butane prices and an increased weighting of natural gas production relative to total production.
Operating costs in the second quarter increased 17 percent to $9.56 per boe from the first quarter of 2019 due to workover activities in April and May 2019 and increased gas processing costs. To improve well run-time efficiency and reduce future operating costs, the Corporation incurred $1.0 million in capital expenditures to convert six wells from progressive cavity pumps to pumpjacks in June 2019. As a result, operating costs decreased from $10.99 per boe in April and May 2019 to $6.62 per boe in June 2019.
Transportation costs increased 33 percent to $4.92 per boe from the first quarter of 2019 due to hauling reduced loads of clean oil during annual spring break-up road bans in April and May 2019. Transportation costs decreased from $5.62 per boe in April and May 2019 to $3.47 per boe in June 2019 after road bans were lifted.
Adjusted funds flow1 was $3.3 million in the second quarter of 2019, down 19 percent from the first quarter of 2019 due to decreased production volumes and higher operating and transportation costs.
The Corporation’s operating netback1 averaged $26.56 per boe, consistent with the first quarter of 2019 operating netback of $26.85 per boe.
Altura drilled two ERH wells at Leduc-Woodbend and a vertical stratigraphic well in a new area called Entice, located south of Strathmore, Alberta. The geological and geophysical data obtained from the stratigraphic well has been reviewed and further appraisal of the concept will be undertaken at the discretion of the Corporation.
1 Adjusted funds flow, net debt and operating netback are non-GAAP measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Refer to the heading entitled “Non-GAAP Measures” contained within the “Advisories” section of Altura’s MD&A.
The two ERH wells drilled in the second quarter were completed and equipped for production in July and brought on production in August 2019 with estimated drill, completion and equipping costs of $2.3 million per well, 13 percent lower than the 2018 ERH well costs. The reduction in well costs is mainly attributed to efficiencies on the well completions.
Altura’s adjusted funds flow in the second quarter of 2019 was adversely impacted by down time and increased operating costs associated with the workover activities. To maintain a strong balance sheet, Altura’s 2019 capital expenditure budget of $15.0 million has been reduced by $1.5 million to $13.5 million and includes drilling a total of three ERH wells at Leduc-Woodbend. This is down from four ERH wells in the previous guidance. Additionally, the Corporation has budgeted $0.8 million for the second half of 2019 to convert the remaining five wells at Leduc-Woodbend from progressive cavity pumps to pumpjacks to reduce future down time and operating costs associated with workover activities.
Altura is progressing its waterflood pilot project at Leduc-Woodbend. The two ERH wells drilled in the second quarter were drilled at 200 meter inter-well spacing, offsetting an existing horizontal well that is planned to be converted to a water injector in the fourth quarter of 2019.
Despite the downward revision in capital, Altura’s base production coupled with production from its planned capital program continues to be forecasted to grow annual average production to between 1,700 to 1,800 Boe per day in 2019 (unchanged from prior guidance), compared to 1,172 Boe per day in 2018, representing more than a 45 percent increase on an absolute and per share basis.
Management intends to continuously monitor well performance and commodity prices throughout the year and may at any time adjust the 2019 capital program if well performance is exceeding expectations or if oil prices deteriorate or strengthen. The capital program leaves Altura with a conservative balance sheet and the flexibility to accelerate development in the fourth quarter of 2019 if results and commodity prices are supportive.
ABOUT ALTURA ENERGY INC.
Altura is a junior oil and gas exploration, development and production company with operations in central Alberta. Altura predominantly produces from the Rex member in the Upper Mannville group and is focused on delivering per share growth and attractive shareholder returns through a combination of organic growth and strategic acquisitions.
An updated corporate presentation is available on Altura’s website at www.alturaenergy.ca.