Michael Binnion, President and Chief Executive Officer, commented, “With the fallout from the pandemic and collapse in oil prices, we are focused on preserving liquidity and the value of our long-term assets, particularly Quebec. As reported earlier, we eliminated all non-essential investment in early March. The operators at Kakwa are prudently suspending activity until prices improve. We are fortunate we can respond quickly given the relatively short time between spudding wells and putting them on production. We are also reducing operating costs, where possible, and cutting overheads.”
He added, “We are now more optimistic about our Clean Tech Energy project. The pandemic has stressed the importance of supply chains and self-sufficiency in Quebec. As the Government seeks projects to improve their independence and stimulate economic growth, we think the timing for our project could be getting much better.”
- Implementing cost-cutting measures to preserve liquidity following collapse in oil prices and coronavirus pandemic
- Received Government approvals for Quebec acquisition
- Decline in future oil prices impaired carrying value of assets by $113 million
- Average daily production of 2,078 boe/d with adjusted funds flow from operations of $2.5 million
Consistent with prior periods, Kakwa continued to account for over three quarters of corporate production. During the first quarter of 2020, daily production averaged 2,078 boe/d (2019: 1,944 boe/d). Despite materially lower oil prices in March 2020, petroleum and natural gas revenue declined marginally to $7 million from $7.1 million last year. As a result of the lower future oil prices, the Company incurred an impairment expense of $96.3 million related to the carrying value of its producing assets, with relatively no change in the volume of reserves compared to year-end. The Company also impaired an additional $14.4 million in exploration costs for Kakwa as well as a further $2.3 million for goodwill. These impairments resulted in a loss of $113.9 million for the quarter (2019: $0.9 million).
For the first quarter of 2020, the Company generated adjusted funds flow from operations of $2.5 million, unchanged from last year. Capital expenditures during the period were also unchanged and totaled $2.9 million. The Company anticipates that both these amounts will decrease materially in the next quarter and over the remainder of this year due to lower realized prices and the suspension of non-essential capital investment.
The term “adjusted funds flow from operations” is a non-IFRS measure. Please see the reconciliation elsewhere in this press release.
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.