Michael Binnion, President and Chief Executive Officer, commented, “As noted in our annual report, we are focused on preserving liquidity. We entered this year with relatively low debt levels and have a lot of discretion on our capital spending. We deferred all non-essential investment, cutting our budget by over 80% or $15 million. We spent around $3 million in the first quarter, financed largely by our cash flow from operations. With the operators at Kakwa suspending their capital programs in this crisis, we expect minimal spending, if any, over the remainder of the year.”
“Net of cash on hand, we expect to end the first quarter effectively less than 50% drawn on our $20 million credit facility. With limited capital spending planned, we believe we have sufficient near-term liquidity. The facility is scheduled for its bi-annual review at the end of the second quarter.” Commenting on the recent fiscal aid package for the oil and gas industry announced by the Federal Government of Canada, he added, “There are no guarantees, but we hope to qualify for some of this financial assistance. It will provide some additional flexibility for the next 12-18 months.”
He further added, “We are also reducing overheads with the goal of eliminating $1.5 million or one third of gross expenses last year. Effective April 1, 2020, we instituted a four-day work week with reductions in salaries of between 20% and 50% and a 20% reduction in Board fees. We are continuing to look at other opportunities to reduce overheads.”
“Earlier this year, we were able to cover field lifting costs, including firm transportation and processing commitments, at prices between US$20 and US$30 per barrel. The collapse in oil prices last month and rising local discounts of up to 80% of the oil price due to reduced demand and lack of storage have made this situation much worse. Differentials have improved recently but we may shut in production either partially or completely when realized prices fall materially below break-even levels. If shut-in, we do not expect to see the reservoirs at Antler and Kakwa impacted from a productivity perspective but are working to minimize any effects.”
Mr. Binnion added, “With the Government of Quebec actively seeking projects to contribute to the recovery and improve their self-sufficiency and independence, we are optimistic about the long-term value of our assets, particularly Quebec. Our Clean Tech Energy project can create significant benefits, both economic and environmental. We look forward to discussing these benefits with local communities and the government when the shutdown is lifted.”
Questerre is an energy technology and innovation company. It is leveraging its expertise gained through early exposure to low permeability reservoirs to acquire significant high-quality resources. We believe we can successfully transition our energy portfolio. With new clean technologies and innovation to responsibly produce and use energy, we can sustain both human progress and our natural environment.
Questerre is a believer that the future success of the oil and gas industry depends on a balance of economics, environment and society. We are committed to being transparent and are respectful that the public must be part of making the important choices for our energy future.