HIGHLIGHTS
Three months ended |
Nine months ended |
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As at and for the periods ended |
September 30, |
September 30, |
September 30, |
September 30, |
|
FINANCIAL |
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Revenue – realized oil and gas sales |
29,155 |
47,320 |
89,881 |
152,006 |
|
Funds flow (1) |
6,266 |
22,596 |
25,121 |
73,206 |
|
Per share – basic and diluted |
0.19 |
0.68 |
0.75 |
2.19 |
|
Dividend payout ratio |
0% |
4% |
4% |
4% |
|
Cash flow from operations |
6,370 |
19,774 |
33,272 |
60,365 |
|
Per share – basic and diluted |
0.19 |
0.59 |
1.00 |
1.81 |
|
Dividend payout ratio |
0% |
5% |
3% |
5% |
|
Cash dividends per share |
0.00 |
0.03 |
0.03 |
0.09 |
|
Net earnings (loss)(2) |
(5,211) |
(1,276) |
(295,818) |
23,312 |
|
Per share – basic and diluted |
(0.16) |
(0.04) |
(8.86) |
0.70 |
|
Capital expenditures |
2,819 |
17,845 |
24,664 |
47,949 |
|
Total assets |
722,910 |
1,133,137 |
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Net debt(3) |
295,168 |
308,069 |
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Shareholders’ equity |
207,325 |
506,011 |
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OPERATIONS |
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Oil |
– barrels per day |
5,355 |
7,157 |
5,987 |
7,328 |
– average price ($ per barrel) |
45.73 |
65.49 |
43.45 |
67.33 |
|
NGLs |
– barrels per day |
1,064 |
1,009 |
1,056 |
976 |
– average price ($ per barrel) |
19.29 |
22.45 |
16.78 |
26.34 |
|
Natural gas |
– MCF per day |
21,510 |
23,820 |
22,169 |
23,836 |
– average price ($ per MCF) |
2.40 |
0.96 |
2.27 |
1.58 |
|
Total barrels of oil equivalent per day (BOE)(4) |
10,004 |
12,136 |
10,737 |
12,277 |
(1) |
Funds flow is not a recognized measure under IFRS. For these purposes, the Company defines funds flow as funds provided by operations including proceeds from sale of investments and investment income received excluding the effects of changes in non-cash working capital items and decommissioning expenditures settled. |
(2) |
In the first quarter of 2020 the Company recorded a $331,678,000 impairment provision less a $54,107,000 deferred income tax recovery related to its Alberta CGU’s oil and gas assets for the COVID-19 effect on the forward benchmark prices for crude oil. |
(3) |
Net debt is comprised of current liabilities less current assets plus long-term bank debt. |
(4) |
BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 MCF: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. |
Q3 2020 IN REVIEW
Global energy market volatility continued through Q3 2020 in response to the ongoing COVID-19 pandemic, and its impact on crude oil demand. Entering the third quarter, stability in benchmark crude oil prices was realized as economies around the world started to display signs of normalcy. Bonterra continued to respond swiftly and strategically to the challenging market environment through prudent production management, control of non-recurring corporate costs and enhancing operational efficiencies. In addition, the Company bolstered its risk management position and crude oil price diversification through a combination of physical delivery sales and risk management contracts, both affording downside protection balanced with exposure to future commodity price improvements.
Bonterra’s oil and gas sales in the quarter increased 32 percent over the second quarter of 2020, owing to stronger realized pricing and relatively stable production volumes quarter-over-quarter. Funds flow1 in Q3 2020 grew 47 percent over the preceding quarter, aided by higher revenue and ongoing cost control. Net debt as at September 30, 2020 was $295.2 million, a reduction of $4.3 million compared to June 30, 2020 due to the increase in cash flow with stronger commodity prices. Bonterra resumed a modest capital program during the third quarter, investing approximately $2.8 million allocated to the drilling of three gross (3.0 net) wells and other infrastructure costs.
The Company continued to apply for, and receive, the Canada Emergency Wage Subsidy (“CEWS”) in the third quarter, which supported a decrease in employee compensation expense of $711,000 for the first nine months of 2020 compared to 2019. In addition, the Company submitted applications in partnership with vendors under Alberta’s Site Rehabilitation Program (“SRP”) and applied to similar programs in Saskatchewan and British Columbia for asset retirement relief. The funding will assist in reducing the Company’s operated inactive well count by 58 percent over the next two years, and reducing its pre-SRP annual spending commitments under the Alberta Based Closure (“ABC”) program from approximately $3.3 million to $2.0 million per year going forward.
Bonterra advanced critical steps for the approval of refinancing initiatives during Q3 2020, and subsequent to quarter-end, its lending syndicate approved the Export Development Canada (“EDC”) and Business Development Bank of Canada (“BDC”) programs and extended the revolving period of the Company’s existing credit facility to November 13, 2020 from October 30, 2020. With this short-term extension, Bonterra and associated parties have the time needed to finalize documentation pertaining to BDC’s second lien, non-revolving four-year term facility for $45 million (the “BDC Term Facility”) and the reserve-based lending commitment from EDC of up to $38.4 million (the “EDC Commitment”). With consent from its lending syndicate, the Company commenced its expanded 2020 capital expenditure program in November 2020 in an amount up to $9 million as a draw on its existing credit facility while banking documentation related to the BDC Term Facility and EDC Commitment is finalized.
(1) “Funds Flow” does not have a standardized meaning. See “Cautionary Statements” below. |
RESPONDING TO THE HOSTILE BID
Bonterra reiterates its recommendation that shareholders reject Obsidian Energy Ltd.’s (“Obsidian’s”) hostile bid for the Company’s shares. Bonterra has already received notice that shareholders, including every member of the Bonterra Board and management team, representing more than 33 percent of the common shares outstanding, will not tender their common shares to the hostile bid. The Company continues to recommend shareholders reject the hostile bid and take no action.
Bonterra is proud of its established history of working within a challenging market environment to pursue long-term sustainability and value generation. With lending syndicate approval of the BDC Term Facility, the EDC Commitment, and the funding available through Alberta’s Site Rehabilitation Program, the Company is positioned to continue generating sustained value for its stakeholders through initiatives focused on increasing asset value and reducing debt and asset retirement obligations.
Q3 2020 HIGHLIGHTS
(1) “Funds Flow” does not have a standardized meaning. See “Cautionary Statements” below. |
OUTLOOK – POSITIONING FOR THE FUTURE
During the COVID-19 pandemic, Bonterra has remained committed to ensuring the health, safety and well-being of employees and contractors. Since the pandemic began in March, the Company has been actively pursuing initiatives designed to improve liquidity, safeguard its financial position while striving to improve operational and corporate efficiencies, including working collaboratively with suppliers and vendors to streamline costs from the field to the head office.
Having successfully secured the EDC and BDC programs, the Company resumed its winter capital program subsequent to the end of the quarter, which is expected to help bring Bonterra’s production back to pre-COVID-19 levels. The Company intends to bring production on from four gross (4.0 net) wells that were drilled earlier in 2020, and drill, complete and tie-in an additional five gross (5.0 net) wells, all of which are also expected to be placed on production before year-end. Production volumes are expected to increase during the fourth quarter as incremental new wells are brought on-stream along with the planned reactivation of additional shut-in wells. These efforts are designed to further support the Company’s ability to generate long-term, sustainable net asset value per share growth as the economy recovers.
Building on its existing risk management program, Bonterra has secured an average price of $47.17 per bbl on 1,832 bbls per day in Q4 2020, representing approximately one third of the Company’s crude oil production. In addition, its natural gas pricing has been diversified for the remainder of 2020 and through the first ten months of 2021 by executing physical delivery sales contracts on 6,989 GJs per day in Q4 2020 and 3,000 GJs per day in the first ten months of 2021, ending October 31, 2021, at an average price of $2.64 per GJ and $2.79 per GJ, respectively.
Bonterra’s improved liquidity profile, continued to focus on sustainability and adopted initiatives designed to generate free cash flow, that will assist the Company to withstand further market uncertainty. The Company remains committed to being a positive and meaningful contributor to the economic success of the communities where it operates in central Alberta, by employing local services and to upholding stringent safety measures to ensure the health and well-being of its employees, contractors and partners.
Bonterra Energy Corp. is a conventional oil and gas corporation with operations in Alberta, Saskatchewan and British Columbia, focused on its strategy of long-term, sustainable growth and value creation for shareholders. The Company’s shares are listed on The Toronto Stock Exchange under the symbol “BNE”.
Cautionary Statements
This summarized news release should not be considered a suitable source of information for readers who are unfamiliar with Bonterra Energy Corp. and should not be considered in any way as a substitute for reading the full report. For the full report, please go to www.bonterraenergy.com
Use of Non-IFRS Financial Measures
Throughout this release the Company uses certain terms such as “Payout Ratio” and “Funds Flow” to analyze operating performance, which are not standardized measures recognized under IFRS and do not have standardized meanings prescribed by IFRS. These measures are commonly utilized in the oil and gas industry and are considered informative by management, shareholders and analysts. These measures may differ from those made by other companies and accordingly may not be comparable to such measures as reported by other companies.
The Company calculates payout ratio by dividing cash dividends paid to shareholders by cash flow from operating activities, both of which are measures prescribed by IFRS which appear on our statements of cash flows. The Company defines Funds Flow as funds provided by operations excluding effects of changes in non-cash working capital items and decommissioning expenditures settled.
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