CALGARY, Alberta – NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is pleased to announce the successful renegotiations of our Minimum Volume Commitments (“MVCs”) under various processing and transportation agreements, and the successful consummation of an agreement for Letters of Credit (“LC”) support in the amount of $40 million with Export Development Canada (“EDC”).
The adjustments to our MVCs profile provides NuVista with:
- A successful reduction of approximately 20% in our near-term MVCs, therefore;
- The flexibility to continue to maintain annual average production volumes flat at current levels through 2021, if commodity prices remain below US$40/Bbl WTI in 2020/21, without growing MVCs costs;
- The continued availability of incremental capacity to grow production in 2021 and beyond with capital expenditures approximately within cash flow, should commodity prices remain at or above current strip levels. This results in an average annual growth target of 10%, which will comfortably exceed the revised future MVCs levels; and
- No material impact on our near-term or long term total cost structure on a per Boe basis.
In order to obtain this enhanced flexibility, we negotiated win-win adjustments to reduce MVCs with our midstream providers for processing and transportation for the years 2020-2022+, in exchange for term extension. This collaborative approach has ensured the mutual preservation of overall contract value while reducing near term requirements to grow in this unprecedented economic environment. While the outlook for recovery of WTI oil and NYMEX gas prices remains favorable, the estimated timing of recovery carries uncertainty. As a result, NuVista has pivoted to this flexible spending plan.
We are also pleased to announce that NuVista has closed a $40 million unsecured letter of credit facility under EDC’s Account Performance Security Guarantee (“APSG”) program. The Company intends to transfer currently outstanding letters of credit in the amount of $19.3 million from its $475 million credit facility to the APSG program, further enhancing the liquidity available under the credit facility.
Balance sheet strength is paramount. NuVista has prioritized this as previously announced, through the following combination:
- Reduced capital spending by 75% for the second half of 2020 while maintaining flat production;
- Significantly reduced G&A expenses and operating costs;
- Targeted $50 – $60MM in net debt reduction in the second half of 2020;
- Significantly reduced our near-term MVCs profile; and
- Augmented our liquidity with the APSG program.
This approach is expected to result in greater than $100 million of available liquidity by the end of 2020.
NuVista has top quality assets and a management team focused on relentless improvement. We have the necessary foundation and liquidity to add significant value as commodity prices recover. We have set the table for returns-focused profitable growth to between 70,000 – 90,000 Boe/d with only half-cycle spending, since the required facilities infrastructure will be in place by year end. We will continue to adjust to this environment in order to maximize the value of our asset base and ensure the long term sustainability of our business. 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 continued guidance and support. Please note that our updated corporate presentation is available at www.nuvistaenergy.com.