CALGARY, AB – Spartan Delta Corp. (“Spartan” or the “Company“) (TSXV: SDE); (TSXV: SDE.R) is pleased to announce its financial and operating results for the fourth quarter and year ended December 31, 2020, as well as its independent oil and gas reserves evaluation as of December 31, 2020, prepared by McDaniel & Associates Consultants Ltd. (the “McDaniel Report“).
Corporate Milestones Achieved Since the Recapitalization of Spartan Delta Corp. in December 2019
- Completed a transformational Spirit River and Cardium asset acquisition in June 2020, which included ~25,000 boe/d of production in west central Alberta, consisting of ~250 bbls/d of crude oil, ~1,000 bbls/d of condensate, ~6,500 bbls/d of NGLs and ~103.5 MMcf/d of conventional natural gas.
- Maintained production at 26,141 boe/d on average during the second half of 2020, consisting of ~330 bbls/d of crude oil, ~1,100 bbls/d of condensate, ~6,800 bbls/d of NGLs and ~107.5 MMcf/d of conventional natural gas, through low-cost field optimization, which more than offset normal corporate declines.
- Reduced operating costs by 18% in less than three quarters of operating the properties acquired in June 2020.
- Established a $100 million syndicated credit facility and successfully accessed capital markets raising aggregate gross proceeds of $213 million from equity financings since the inception in December 2019, inclusive of a $124 million financing expected to be completed in March 2021.
- Recently closed three small acquisitions and executed definitive agreements for two additional acquisitions which are collectively expected to add ~9,500 boe/d of run-rate production, consisting of ~2,090 bbls/d of crude oil, ~475 bbls/d of condensate, ~760 bbls/d of NGLs and ~37.05 MMcf/d of conventional natural gas.
- Added a new core development and consolidation area with a material entry into the Alberta Montney.
Selected Financial and Operational Information
Selected financial and operational information is set out below and should be read in conjunction with Spartan’s audited annual consolidated financial statements and related management’s discussion and analysis (“MD&A“) for the years ended December 31, 2020 and 2019, which are available on the Company’s website at www.spartandeltacorp.com and filed on SEDAR at www.sedar.com.
Three months ended December 31 |
Year ended December 31 |
|||
(CA$ thousands, except as otherwise indicated) |
2020 |
2019 |
2020 |
2019 |
OPERATING |
||||
Average daily production |
||||
Crude oil (bbls/d) |
332 |
25 |
196 |
26 |
Condensate (bbls/d) (1) |
1,131 |
– |
656 |
– |
NGLs (bbls/d) (1) |
6,728 |
20 |
3,965 |
15 |
Natural gas (Mcf/d) |
106,912 |
1,070 |
63,625 |
1,102 |
Combined (boe/d) |
26,010 |
223 |
15,421 |
225 |
Average realized prices, before financial instruments |
||||
Crude oil ($/bbl) |
47.95 |
54.14 |
46.03 |
61.76 |
Condensate ($/bbl) (1) |
54.46 |
– |
51.39 |
– |
NGLs ($/bbl) (1) |
18.35 |
53.39 |
16.74 |
54.13 |
Natural gas ($/Mcf) |
2.72 |
2.20 |
2.42 |
1.51 |
Combined average ($/boe) |
18.89 |
21.33 |
17.07 |
18.18 |
Operating and Corporate Netbacks ($/boe) (2) |
||||
Oil and gas sales, before financial instruments |
18.89 |
21.33 |
17.07 |
18.18 |
Realized loss on financial instruments |
(0.90) |
– |
(0.17) |
– |
Oil and gas sales, after financial instruments |
17.99 |
21.33 |
16.90 |
18.18 |
Processing and other revenue |
0.66 |
1.78 |
0.60 |
1.66 |
Royalties |
(2.01) |
(0.15) |
(1.57) |
0.26 |
Operating expenses |
(5.68) |
(30.91) |
(6.11) |
(24.58) |
Transportation expenses |
(1.37) |
– |
(1.36) |
– |
Operating Netback (2) |
9.59 |
(7.95) |
8.46 |
(4.48) |
General and administrative expenses |
(1.48) |
(27.19) |
(1.64) |
(17.13) |
Interest expense, net of interest income |
(0.19) |
– |
(0.21) |
– |
Corporate Netback (2) |
7.92 |
(35.14) |
6.61 |
(21.61) |
FINANCIAL |
||||
Oil and gas sales |
45,206 |
437 |
96,324 |
1,491 |
Cash provided by (used in) operating activities |
16,064 |
(599) |
32,209 |
(1,298) |
Adjusted Funds from Operations (2) |
18,939 |
(723) |
37,308 |
(1,772) |
$ per share, basic |
0.33 |
(0.16) |
0.83 |
(0.89) |
$ per share, diluted |
0.28 |
(0.16) |
0.67 |
(0.89) |
Net income (loss) and comprehensive income (loss) |
12,358 |
(60) |
47,663 |
(1,998) |
$ per share, basic |
0.21 |
(0.01) |
1.06 |
(1.00) |
$ per share, diluted |
0.18 |
(0.01) |
0.86 |
(1.00) |
Capital expenditures, net of dispositions |
14,346 |
29 |
125,869 |
(231) |
Total assets |
331,430 |
34,245 |
331,430 |
34,245 |
Net Debt (Surplus) (2) |
12,292 |
(23,538) |
12,292 |
(23,538) |
Shareholders’ equity |
137,540 |
25,640 |
137,540 |
25,640 |
Common shares outstanding (000s) (3) |
||||
Weighted average, basic |
58,220 |
4,638 |
44,848 |
1,996 |
Weighted average, diluted |
68,859 |
4,638 |
55,403 |
1,996 |
End of period |
58,226 |
26,106 |
58,226 |
26,106 |
(1) |
Condensate is a natural gas liquid as defined by NI 51-101. See “Reader Advisories – Other Measurements“. |
(2) |
“Operating Netback”, “Corporate Netback”, “Adjusted Funds from Operations” and “Net Debt (Surplus)” do not have standardized meanings under IFRS. See “Reader Advisories – Non-GAAP Measures“. |
(3) |
See “Reader Advisories – Share Capital“. |
Fourth Quarter 2020 Financial and Operational Highlights
- Development Execution: Spartan drilled four and brought on production two extended reach horizontal Spirit River wells at Ferrier, Alberta during the fourth quarter and subsequently drilled and completed the remainder of the eight-well winter program in the first quarter of 2021. The winter drilling program was delivered ahead of schedule and below budget with six wells having produced, on restricted production for operational efficiencies and decline management purposes, at an average IP30 of 1,580 boe/d, consisting of 93 bbls/d condensate, 370 bbls/d NGLs and 6.85 MMcf/d conventional natural gas. Two of these wells have produced for more than two months at an average IP60 of 1,526 boe/d, consisting of 82 bbls/d condensate, 345 bbls/d NGLs and 6.53 MMcf/d conventional natural gas.
- Production Optimization: Maintained fourth quarter 2020 production volumes of 26,010 boe/d, in-line with third quarter 2020 volumes, primarily through production optimization as the Company’s first two new wells were brought onstream in mid-December. (See “Selected Financial and Operational Information” for breakdown by product type)
- Improved Operating Netback: Spartan’s Operating Netback increased by 15% and averaged $9.59/boe for the fourth quarter of 2020, up from $8.32/boe in the third quarter of 2020. The improved operating netback reflects the decrease in per unit operating costs in conjunction with stronger commodity prices, partly offset by higher royalties. (See “Reader Advisories – Non-GAAP Measures“, below)
- Strong Cash Flows: The Company generated Adjusted Funds from Operations of $18.9 million ($0.33 per share, basic and $0.28 per share, diluted) during the fourth quarter of 2020, resulting in a Corporate Netback of $7.92/boe. Free Funds Flow was $2.8 million after leases, decommissioning and $14.0 million of capital expenditures. (See “Reader Advisories – Non-GAAP Measures“, below)
- Operational Excellence: Spartan generated meaningful cost savings and reduced its operating expenses each consecutive quarter during 2020, highlighting the successful integration of the acquired assets and impact of the Company’s strategic initiatives. Operating expenses averaged $5.68/boe for the quarter ended December 31, 2020, down 7% from $6.10/boe during the previous quarter and down 18% since the acquisition of the Company’s west central Alberta assets in the second quarter of 2020.
- Balance Sheet Strength: Spartan exited the fourth quarter with its credit facility undrawn and an authorized borrowing amount of $100.0 million. Spartan had Net Debt of $12.3 million as at December 31, 2020. (See “Reader Advisories – Non-GAAP Measures“, below)
2020 Reserve Evaluation Highlights
Spartan is pleased to provide highlights of the Company’s December 31, 2020 reserves from the McDaniel Report, below. The results of the McDaniel Report are reflective of Spartan’s significant acquisition in West Central Alberta, making up a majority of the Company’s reserves in 2020. The West Central reserves were reconfigured in 2020 to capitalize on extended reach horizontal drilling techniques (“ERH“) and to adjust booked locations to more accurately reflect the near-term development plans of the Company post-acquisition.
- 72% of the 101 booked locations and 56% of the total inventory are ERH.
- Reconfiguring to ERH has made booked locations more efficient, economic and reduced the environmental impact of the development:
- Approximately a 70% increase in IRR, while only increasing capital cost by 25% when compared to conventional bookings of one-mile horizontals; (See “Reader Advisories – Non-GAAP Measures“)
- Go-forward estimated undeveloped finding and development (“F&D“) costs has been decreased considerably with proved undeveloped F&D costs equal to $3.94 and proved plus probable undeveloped F&D costs equal to $3.35; and
- Go-forward proved undeveloped recycle ratio of 2.4x and proved plus probable undeveloped recycle ratio of 2.9x.
- Future development capital (“FDC“) totaled $266.5 million in the total proved category with 63 net locations and $417.3 million in the total proved plus probable category with 101 net locations.
- The Company has over 425 Spirit River and Cardium locations in inventory (>75% unbooked).
- Before-tax net present value (“NPV“) of reserves, discounted at 10%, is $375.9 million on a proved developed producing basis, $777.3 million on a total proved basis, and $1.1 billion on a total proved plus probable basis.
- Approximately 33% of the Company’s reserves are in the proved developed producing category and 65% of the reserves are in the total proved category.
See “Reader Advisories – Oil and Gas Advisories“.
2020 Independent Qualified Reserve Evaluation
The following tables highlight the findings of the McDaniel Report, which has been prepared in accordance with the definitions, standards and procedures contained in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101“) and the most recent publication of the Canadian Oil and Gas Evaluation Handbook. The McDaniel Report was based on the average forecast pricing of McDaniel, GLJ Ltd. and Sproule Associates Limited. See “Reader Advisories – Oil and Gas Advisories” for more information. Additional reserves information as required under NI 51-101 will be included in Spartan’s Annual Information Form, which will be filed on SEDAR on or before March 30, 2021. The numbers in the tables below may not add due to rounding.
Summary of Oil and Natural Gas Reserves as at December 31, 2020
Crude Oil Lt. & Med. |
Conventional |
Coal Bed Methane |
Natural Gas |
Total |
||||||
Reserves Categories |
Gross |
Net (Mbbl) |
Gross |
Net |
Gross |
Gross |
Gross |
Net |
Gross |
Net |
Proved: |
||||||||||
Developed Producing |
878 |
806 |
276,731 |
242,510 |
559 |
473 |
20,196 |
16,205 |
67,289 |
57,508 |
Developed Non-Producing |
1 |
1 |
177 |
144 |
– |
– |
7 |
4 |
37 |
29 |
Undeveloped |
1,719 |
1,440 |
279,507 |
259,265 |
– |
– |
19,348 |
16,354 |
67,651 |
61,005 |
Total Proved |
2,598 |
2,247 |
556,414 |
501,919 |
559 |
473 |
39,551 |
32,563 |
134,977 |
118,542 |
Probable |
2,451 |
1,965 |
290,631 |
264,176 |
151 |
128 |
21,051 |
17,416 |
71,965 |
63,432 |
Total Proved plus Probable |
5,048 |
4,212 |
847,045 |
766,095 |
710 |
601 |
60,601 |
49,979 |
206,942 |
181,974 |
% Change |
2020 |
2019 |
2018 |
|
Reserves (Mboe) |
||||
Proved Developed Producing (“PDP“) |
>1,000% |
67,289 |
507 |
604 |
Total Proved (“1P“) |
>1,000% |
134,977 |
1,671 |
1,112 |
Total Proved plus Probable (“2P“) |
>1,000% |
206,942 |
3,314 |
2,353 |
PDP as % of 2P |
120% |
33% |
15% |
26% |
1P as % of 2P |
30% |
65% |
50% |
47% |
Reserve Life Index (1) (years) |
||||
PDP |
15% |
7.1 |
6.2 |
7.2 |
1P |
(31%) |
14.2 |
20.5 |
13.3 |
2P |
(46%) |
21.8 |
40.7 |
28.2 |
(1) |
RLI is calculated as total Company share reserves divided by the annualized fourth quarter actual production of 26,010 boe/d. See “Reader Advisories – Oil and Gas Advisories“. |
Net Present Value of Future Net Revenue as at December 31, 2020 (Before Income Tax)
Reserves Category |
0% ($M) |
5% ($M) |
10% ($M) |
15% ($M) |
20% ($M) |
Unit Value(1) |
Unit Value (1) |
Proved: |
|||||||
Developed Producing |
440,816 |
440,426 |
375,938 |
324,359 |
286,270 |
6.54 |
1.09 |
Developed Non-Producing |
112 |
96 |
83 |
73 |
64 |
2.88 |
0.48 |
Undeveloped |
835,220 |
558,130 |
401,286 |
303,493 |
237,920 |
6.58 |
1.10 |
Total Proved |
1,276,147 |
998,652 |
777,307 |
627,926 |
524,254 |
6.56 |
1.09 |
Probable |
1,001,067 |
512,426 |
300,803 |
194,061 |
133,645 |
4.74 |
0.79 |
Total Proved plus Probable |
2,277,214 |
1,511,078 |
1,078,110 |
821,986 |
657,899 |
5.92 |
0.99 |
(1) |
Unit values are based on net reserves. Net reserves means the Corporation’s working interest reserves after deduction of royalties, plus its royalty interests in reserves. |
Forecast Prices Used in Estimates
The forecast cost and price assumptions assume increases in wellhead selling prices and take into account inflation with respect to future operating and capital costs. Crude oil and natural gas benchmark reference pricing, inflation and exchange rates utilized in the McDaniel Report were McDaniel’s forecasts, as at December 31, 2020, as follows:
Year |
Crude Oil |
Edmonton |
Western |
Edmonton |
Edmonton |
Edmonton |
Edmonton |
Alberta |
Inflation |
Exchange |
2021 |
47.17 |
55.76 |
44.63 |
8.91 |
18.18 |
26.36 |
59.24 |
2.78 |
0.00 |
0.7680 |
2022 |
50.17 |
59.89 |
48.18 |
8.65 |
21.91 |
32.85 |
63.19 |
2.70 |
1.30 |
0.7650 |
2023 |
53.17 |
63.48 |
52.10 |
8.35 |
24.57 |
39.20 |
67.34 |
2.61 |
2.00 |
0.7630 |
2024 |
54.97 |
65.76 |
54.10 |
8.46 |
25.47 |
40.65 |
69.77 |
2.65 |
2.00 |
0.7630 |
2025 |
56.07 |
67.13 |
55.19 |
8.63 |
26.00 |
41.50 |
71.18 |
2.70 |
2.00 |
0.7630 |
Reserves Reconciliation
The following sets out the reconciliation of Spartan’s gross reserves (1) based on forecast prices and costs by principal product type as at December 31, 2020.
Lt & Med Crude Oil |
Heavy Crude Oil |
Total Crude Oil |
|||||||
Proved |
Probable |
Proved |
Proved |
Probable |
Proved |
Proved |
Probable |
Proved |
|
December 31, 2019 |
656 |
801 |
1,457 |
– |
– |
– |
656 |
801 |
1,457 |
Extensions & Improved Recovery |
– |
– |
– |
– |
– |
– |
– |
– |
– |
Technical Revisions (2) |
(592) |
166 |
(426) |
– |
– |
– |
(592) |
166 |
(426) |
Acquisitions |
2,605 |
1,483 |
4,088 |
– |
– |
– |
2,605 |
1,483 |
4,088 |
Dispositions |
– |
– |
– |
– |
– |
– |
– |
– |
– |
Economic Factors |
– |
– |
– |
– |
– |
– |
– |
– |
– |
Production |
(72) |
– |
(72) |
– |
– |
– |
(72) |
– |
(72) |
December 31, 2020 |
2,597 |
2,450 |
5,048 |
– |
– |
– |
2,597 |
2,450 |
5,048 |
NGL |
Conventional Natural Gas |
Total |
|||||||
Proved |
Probable |
Proved + |
Proved |
Probable |
Proved + |
Proved |
Probable |
Proved + |
|
December 31, 2019 |
76 |
61 |
137 |
5,631 |
4,689 |
10,320 |
1,670 |
1,644 |
3,314 |
Extensions & Improved Recovery |
1,354 |
339 |
1,693 |
12,859 |
3,216 |
16,075 |
3,497 |
875 |
4,372 |
Technical Revisions (2) |
77 |
44 |
121 |
(2,575) |
1,637 |
(938) |
(944) |
483 |
(461) |
Acquisitions |
39,735 |
20,606 |
60,342 |
564,345 |
281,239 |
845,584 |
136,398 |
68,963 |
205,361 |
Dispositions |
– |
– |
– |
– |
– |
||||
Economic Factors |
– |
– |
– |
– |
– |
||||
Production |
(1,691) |
– |
(1,691) |
(23,287) |
– |
(23,287) |
(5,644) |
– |
(5,644) |
December 31, 2020 |
39,551 |
21,050 |
60,601 |
556,973 |
290,781 |
847,754 |
134,977 |
71,965 |
206,942 |
(1) |
Gross Reserves means the Corporation’s working interest reserves before calculation of royalties and before consideration of the Corporation’s royalty interests. |
(2) |
Technical Revisions also include changes in reserves associated with changes in operating costs, capital costs and commodity price offsets. |
Future Development Capital Costs
The following table is McDaniel estimated future development capital required to bring total proved and total proved plus probable reserves on production.
Year |
Total Proved Reserves ($M) |
Total Proved Plus Probable Reserves ($M) |
2021 |
44,921 |
44,892 |
2022 |
44,519 |
44,519 |
2023 |
47,335 |
47,335 |
2024 |
68,581 |
68,581 |
2025 |
61,122 |
61,122 |
Thereafter |
– |
150,856 |
Total |
266,478 |
417,305 |
10% Discounted |
209,496 |
296,124 |
Performance Measures (Including FDC)
The following table highlights our 1P/2P Future Undeveloped F&D costs and associated recycle ratios, including FDC, based on the evaluation of our petroleum and natural gas reserves prepared by McDaniel.
Future Undeveloped F&D Costs |
||
Proved Undeveloped |
||
Future Development Capital |
$M |
266,478 |
Undeveloped Reserves |
Mboe |
67,651 |
1P F&D (1) |
$/boe |
3.94 |
Recycle Ratio (2) |
2.4x |
|
Proved plus Probable Undeveloped |
||
Future Development Capital |
$M |
417,305 |
Undeveloped Reserves |
Mboe |
124,400 |
2P F&D (1) |
$/boe |
3.35 |
Recycle Ratio (2) |
2.9x |
(1) |
Undeveloped F&D costs are calculated as the sum of FDC divided by undeveloped reserves. See “Reader Advisories – Oil and Gas Advisories“. |
(2) |
Recycle ratio is calculated as the fourth quarter 2020 operating netback of $9.59/boe divided by 1P or 2P F&D costs, as applicable. See the selected financial and operational information table, above, for the assumptions used to calculate Q4 2020 operating netback and “Reader Advisories – Non-GAAP Measures” for more information. |
Outlook and Guidance
On February 16, 2021, Spartan announced that the Company entered into definitive agreements with respect to three strategic acquisitions (the “Acquisitions“), the completion of which will create a new core development and consolidation area for the Company and a material entry in the Alberta Montney. The Acquisitions include: (a) assets in the Alberta Montney fairway, including the corporate acquisition of Inception Exploration Ltd. (the “Inception Acquisition“) and the purchase of assets located primarily in the Simonette area of northwest Alberta (the “Simonette Acquisition“); and (b) the acquisition of a tuck-in asset in the Company’s West Central core area, which closed on March 5, 2021 (the “Willesden Green Acquisition“). The Inception Acquisition and Simonette Acquisition are expected to close on or about March 18, 2021.
As part of the Company’s press release dated February 16, 2021, Spartan also announced intentions to complete an $80.0 million equity financing and provided revised corporate guidance for 2021 which reflected the Company’s preliminary operating and financial forecast after giving effect to the proposed Acquisitions and financing. The initial equity financing was comprised of a $50.0 million non-brokered private placement and a $30.0 million bought deal prospectus offering. Subsequent to the initial announcement, the equity financings were upsized by 55% to aggregate gross proceeds of $124.0 million, comprised of a $79.0 million non-brokered private placement and a $45.0 million bought deal prospectus offering (together, the “2021 Financings“). The 2021 Financings are expected to be completed concurrently with, and are conditional upon, the successful completion of the Inception Acquisition.
Based on the recent rise in crude oil and NGL prices, additional proceeds from the upsized 2021 Financings and minor revisions to the expected timing and allocation of budgeted capital expenditures, the Company has further revised its operating and financial guidance for 2021. The revised guidance outlined below was approved by the Company’s board of directors on March 11, 2021.
Spartan’s 2021 capital expenditures are estimated to be approximately $101.0 million (unchanged from previous guidance). Leveraging Spartan’s strategic infrastructure position including the infrastructure to be acquired with the Acquisitions, the capital expenditure program will be focused on the execution and acceleration of drill-ready development across the Company’s core properties targeting the Montney, Spirit River, and Cardium formations.
Spartan expects 2021 production to average between 35,500 to 37,500 boe/d (previous guidance 35,000 to 37,000 BOE per day, see notes to below table for a breakdown by product type). The Company’s organic development program, supplemented with production from the Acquisitions, is expected to deliver approximately 40% production growth in 2021 compared to average production of 26,010 boe/d during the fourth quarter of 2020 (see table under “Selected Financial and Operational Information“, above, for a breakdown by product type).
The Company expects to generate approximately $139.0 million of Adjusted Funds Flow in 2021, up from previous guidance of $122.0 million (see “Reader Advisories – Non-GAAP Measures“). The increase in forecasted Adjusted Funds Flow is primarily driven by the increase in forecast oil prices to US$55.00 per barrel for WTI (previously US$50.00 per barrel) as well as the corresponding impact on NGL pricing. Spartan’s forecast of $2.75 per GJ for AECO natural gas is unchanged. Reallocation of capital within the budget as well as minor changes in expected “on-stream” dates also contributed to the increase in forecasted Adjusted Funds Flow.
Spartan is now forecasting its Net Surplus to be approximately $115.0 million at the end of 2021 compared to previous guidance of $54.0 million. The increase in forecasted Net Surplus reflects the $17.0 million increase in forecast Adjusted Funds Flow and $44.0 million of additional proceeds from the upsized 2021 Financings. Spartan expects to use its cash surplus to continue executing on the Company’s targeted acquisition and consolidation strategy. (See “Reader Advisories – Non-GAAP Measures“)
The table below outlines Spartan’s revised 2021 guidance compared to previous guidance published in the Company’s press release dated February 16, 2021:
2021 GUIDANCE |
Revised Guidance |
Previous Guidance |
% Change |
|
Average Production (BOE/d) (1)(3) |
35,500 – 37,500 |
35,000 – 37,000 |
1 |
|
% Oil and NGLs |
31% |
31% |
– |
|
Forecast Average Commodity Prices |
||||
WTI oil price (US$/bbl) |
55.00 |
50.00 |
10 |
|
Edmonton condensate ($/bbl) |
67.93 |
60.96 |
11 |
|
Conway propane (US$/gal) |
0.71 |
0.65 |
9 |
|
AECO 5A natural gas price ($/GJ) |
2.75 |
2.75 |
– |
|
Average exchange rate (CA$/US$) |
1.26 |
1.27 |
(1) |
|
Operating Netback ($/BOE) (1)(2)(3)(4) |
12.74 |
11.59 |
10 |
|
Adjusted Funds Flow ($MM) (1)(2)(3)(4) |
139 |
122 |
14 |
|
Capital expenditures, excluding A&D ($MM) (5) |
101 |
101 |
– |
|
Free Funds Flow ($MM) (4) |
38 |
20 |
90 |
|
Net Debt (Surplus), end of year ($MM) (4)(6) |
(115) |
(54) |
113 |
|
Common shares outstanding, end of 2021 (MM) (7) |
114 |
104 |
10 |
(1) |
Production guidance is post-completion of the Acquisitions and consists of approximately 4% crude oil, 4% condensate, 23% NGLs and 69% natural gas (product weighting is unchanged from previous guidance). The forecasted financial guidance and percentage change is based on the midpoint of revised production guidance of 36,500 boe/d (previously 36,000 boe/d). |
(2) |
In addition to the forecast of benchmark commodity prices outlined above, the guidance includes the following significant assumptions for 2021: royalties are expected to average 11% of oil and gas sales; budgeted operating and transportation expenses are expected to average $6.09/boe and $1.53/boe, respectively; G&A is budgeted to average $1.35/boe; and cash interest expense is budgeted to average $0.07/boe (unchanged from previous guidance in all material respects, minor differences in per unit estimates due to higher volumes). |
(3) |
Assumes the Inception Acquisition and Simonette Acquisition close on March 18, 2021. |
(4) |
Operating Netback, Adjusted Funds Flow, Free Funds Flow and Net Debt (Surplus) do not have a prescribed meaning under IFRS. Refer to “Reader Advisories – Non-GAAP Measures“. |
(5) |
The forecast of capital expenditures excludes acquisitions. The aggregate amount of cash consideration related to acquisitions completed to-date and expected to be completed in 2021 is estimated to be approximately $26.3 million, net of closing adjustments and working capital. |
(6) |
Net Debt (Surplus) does not include a $50.0 million unsecured non-interest bearing convertible promissory note (the “Convertible Note“) to be issued in connection with the Inception Acquisition. The Convertible Note will mature five years from the closing of the Inception Acquisition, and will be convertible in whole or in part beginning on the day that is two years following the closing of the Inception Acquisition, at the Company’s election, for such number of common shares calculated based on the greater of: (i) the volume weighted average trading price of the common shares for the 10 trading days immediately preceding the delivery by the Company of a notice of conversion to the Inception Shareholder; and (ii) $7.67, being two times the deemed issuance price of the common shares under the Inception Acquisition. The Convertible Note will be “in-the-money” during all periods in which Spartan’s share price is less than $7.67. Spartan intends to settle the Convertible Note in the future by exercising the Company’s conversion option and the maximum number of Spartan common shares issuable on conversion is 6,518,905 common shares. |
(7) |
The forecast number of common shares outstanding assumes the Acquisitions and 2021 Financings close and does not include common shares potentially issuable in respect of dilutive securities (see “Reader Advisories – Share Capital“). |
Spartan’s guidance is contingent upon the successful completion of the Inception Acquisition, Simonette Acquisition and the 2021 Financings (see “Reader Advisories – Forward-Looking Statements“). In addition, changes in forecast commodity prices, differences in the timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in the budget. The Company’s actual results may differ materially from these estimates. Holding all other assumptions constant for 2021: if the forecast for AECO natural gas increased (decreased) by $0.25/GJ, the Adjusted Funds Flow forecast for 2021 would increase (decrease) by approximately $7.0 million; or, if the WTI crude oil reference price forecast increased (decreased) by US$5.00/bbl, the Adjusted Funds Flow forecast for 2021 would increase (decrease) by approximately $9.0 million. Assuming capital expenditures are unchanged, the impact on Free Funds Flow and resulting Net Debt (Surplus) would be equivalent to the increase or decrease in Adjusted Funds Flow.
Share Award Grants
On August 19, 2020, the Board of Directors of the Company approved a Share Award Incentive Plan (the “Plan“). The Plan is intended to assist in retaining and engaging the directors, officers and any future employees of the Company and to provide additional incentive to these individuals for their efforts on behalf of the Company. The Plan allows the Company to issue restricted share awards (“RSAs“) and performance share awards (“PSAs”), provided that the aggregate number of common shares that may be issuable pursuant to the Plan does not exceed 2,900,000. The Plan is subject to the approval of the TSX Venture Exchange and the formal approval of the Plan by the shareholders of the Company at the next annual general meeting.
Effective March 11, 2021, the Company has issued a total of 984,100 options under its existing stock option plan and 1,180,800 RSAs under the Plan to officers and directors of the Company. The options each have an exercise price of $4.08 per share, are exercisable for a period of 5 years and vest in one third increments on the first, second and third anniversaries from the date of grant. The RSAs each vest in one third increments on the first, second and third anniversaries from the date of grant. Each RSA was valued at $4.08 per share. The grant of the RSAs is subject to final regulatory and shareholder approval of the Plan.
Promotions
In recognition of their continued strong contributions to operations in their respective disciplines, Spartan is pleased to announce the promotion of Brendan Paton, from Manager, Engineering to Vice President, Engineering and Ashley Hohm, from Manager, Finance and Controller to Vice President, Finance and Controller.
Updated Corporate Presentation
An updated corporate presentation has been posted on the Company’s website along with this morning’s fourth quarter results release.
About Spartan Delta Corp.
Spartan is a differentiated energy company whose ESG-focused culture is centered on generating sustainable free funds flow through oil and gas exploration and development. Building on its existing high-quality, low-decline operated production in the heart of the Alberta Deep Basin and Alberta Montney, Spartan intends to continue acquiring undervalued, diversified assets that can be restructured, optimized and rebranded, financially or operationally, yielding accretion to shareholder value. With excess infrastructure capacity, the Company is well positioned to continue pursuing immediate production optimization and responsible future growth. Further detail is available in Spartan’s March corporate presentation, which can be accessed on its website at www.spartandeltacorp.com.