CALGARY, AB – Clearview Resources Ltd. (“Clearview” or the “Company”) is pleased to announce its financial and operational results and reserves report for the year ended December 31, 2020.
“Unprecedented does not do the past twelve months justice,” commented Tony Angelidis, Clearview’s CEO. “Yet our management team, employees and directors displayed unparalleled resilience and determination to reduce costs, optimize production, raise capital and renegotiate our credit facilities with remarkable success. As a result, the Company is now poised for a much clearer and brighter future than this time last year,” added Mr. Angelidis.
HIGHLIGHTS
In 2020, the Company was focused on and completed three strategic imperatives.
- Secured a workable credit agreement with its lender that provides the credit capacity and flexibility required for the current economic environment;
- Secured long-term funding through the Federal Government sponsored Export Development Canada (“EDC”) Guarantee program in the amount of $6.25 million; and
- Raised $1.26 million in convertible debentures from the Company’s very supportive shareholders to reduce the Company’s outstanding bank debt.
During the year Clearview also concentrated on a series of significant operational measures during unprecedented economic and pandemic related circumstances that helped mitigate significant downward revisions to the Company’s year end reserves.
- During the first quarter of 2020, the Company adopted austere operating practices to conserve cash in light of the severe drop in prices associated with the COVID-19 pandemic. As a result, over 2020 Clearview reduced its operating costs by $3.0 million, a decrease of 23%, its general and administrative costs by $0.7 million, a decrease of 30% and its capital program by $1.6 million, representing a decrease of 81%;
- Total production decreased 15% to average 2,055 barrels of oil equivalent per day (“boe/d”) for the year ended December 31, 2020, due in combination to a significant production shut-in during the price collapse of 2020, minimal net capital expenditures of $0.4 million and significantly reduced repairs and maintenance spending;
- Clearview’s realized sales price was $21.45 per barrel of oil equivalent (“boe”) for the twelve months ended December 31, 2020, a decrease of 26%, compared to $29.08 per boe in the prior year. Natural gas prices continued to remain strong with the Company’s realized price per mcf increasing 23% over the prior year; and
- Generated adjusted funds flow of $2.5 million in the year ended December 31, 2020 and cash flow from operations of $1.8 million as compared to $5.5 million and $5.0 million, respectively, in the comparative year.
- Proved developed producing (“PDP”) reserves decreased by 1% to 5.0 million barrels of oil equivalent (“MMboe”), while the total proved (“1P”) and total proved plus probable (“2P”) categories decreased by 11% to 10.5 MMboe and 9% to 19.4 MMboe, respectively versus 2019; driven largely by a material change in the price forecast used in the McDaniel Report, and
- Net present values (at 10% discount rates, before tax) are down year over year in the PDP, 1P and 2P categories by 16% to $28.1 million, 35% to $57.6 million and 35% to $97.0 million, respectively, primarily due to the lower commodity price forecast.
A combination of all these factors has resulted in a substantially brighter financial picture for the company in 2021 with net debt reduced by $2.1 million from the prior year to $13.2 million on total credit capacity from its lenders of $21.25 million resulting in the removal of the going concern note from Clearview’s financial statements.
Clearview is off to a strong start in the first quarter of 2021. The Company completed an optimization and repair and maintenance program on thirteen wells at a cost of approximately $0.7 million bringing Clearview’s production to 2,250 boe/d currently. The thirteen wells have been on production since early March 2021 and have produced an average of 270 boe/d in April generating approximately $0.6 million of revenue to date with a capital efficiency ratio of $2,600 per flowing boe. Clearview is pleased with the execution of this spending program and is reaching into its optimization inventory for future, organic growth in the form of a second program.
FINANCIAL and OPERATIONAL RESULTS
Production for the year ended December 31, 2020 was down 15% to 2,055 boe/d versus the comparative period of 2019, primarily due to the shut-in of oil and liquids production in the second quarter of 2020 due to the severe drop in prices associated with the COVID-19 pandemic and minimal spending on optimization projects and repairs and maintenance throughout the year.
In April of 2020, the Company made the decision to shut-in approximately 50% of its production, comprised of primarily oil volumes and the associated natural gas. The Company chose to preserve the value of its reserves to be produced at a later date when better economic conditions and better pricing have returned. By August of 2020, Clearview had brought back on-stream all of its shut-in production with minimal start-up costs and operational issues due to a controlled shut-in.
To offset the severe drop in revenue as a result of lower prices for the Company’s oil and natural gas liquids production, Clearview quickly adopted a program of reducing its cost structure where possible while still maintaining a strong production profile with a top priority of safety and regulatory compliance for both the office staff and field operators.
Adjusted funds flow for the year ended December 31, 2020 was $2.5 million. Capital expenditures and decommissioning expenditures were minimal at $0.5 million which enabled the Company to further reduce its net debt. At December 31, 2020, the Company had net debt of $13.2 million.
Financial and Operating Highlights
Financial |
Three months ended Dec. 31 |
Year |
Year |
|||
($ 000’s except per share amounts) |
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
Oil and natural gas sales |
4,870 |
6,512 |
(25) |
16,133 |
25,687 |
(37) |
Adjusted funds flow (1) |
957 |
1,271 |
(25) |
2,487 |
5,494 |
(55) |
Per share-basic and diluted |
0.08 |
0.11 |
(27) |
0.21 |
0.48 |
(56) |
Cash flow from operations |
55 |
1,120 |
(95) |
1,783 |
4,980 |
(64) |
Per share-basic and diluted |
– |
0.10 |
(100) |
0.15 |
0.43 |
(65) |
Net earnings (loss) |
16,891 |
(5,527) |
(406) |
(10,842) |
(8,768) |
24 |
Per share–basic and diluted |
1.45 |
(0.48) |
(402) |
(0.93) |
(0.76) |
22 |
Net debt (1) |
13,235 |
15,358 |
(14) |
|||
Capital expenditures – net (2) |
54 |
354 |
(85) |
376 |
1,955 |
(81) |
Weighted average shares |
||||||
Basic and diluted (000’s) |
11,671 |
11,671 |
– |
11,671 |
11,472 |
2 |
(1) |
See non-GAAP measures |
(2) |
Cash additions and acquisitions net of proceeds of dispositions |
Production |
Three months ended Dec. 31 |
Year |
Year |
|||
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
|
Oil – bbl/d |
487 |
621 |
(22) |
480 |
684 |
(30) |
Natural gas liquids – bbl/d |
345 |
494 |
(30) |
393 |
481 |
(18) |
Total liquids – bbl/d |
832 |
1,115 |
(25) |
873 |
1,165 |
(25) |
Natural gas – mcf/d |
7,443 |
7,859 |
(5) |
7,091 |
7,537 |
(6) |
Total – boe/d |
2,072 |
2,425 |
(15) |
2,055 |
2,421 |
(15) |
Realized sales prices |
Three months ended Dec. 31 |
Year |
Year |
|||
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
|
Oil – $/bbl |
45.41 |
64.03 |
(29) |
41.50 |
64.69 |
(36) |
NGLs – $/bbl |
28.20 |
23.87 |
18 |
20.72 |
25.69 |
(19) |
Natural gas – $/mcf |
2.84 |
2.44 |
16 |
2.26 |
1.83 |
23 |
Total – $/boe |
25.55 |
29.18 |
(12) |
21.45 |
29.08 |
(26) |
Netback analysis (1) |
Three months ended Dec. 31 |
Year |
Year |
|||
($/boe) |
2020 |
2019 |
% Positive (Negative) |
2020 |
2019 |
% Positive (Negative) |
Realized sales price |
25.55 |
29.18 |
(12) |
21.45 |
29.08 |
(26) |
Royalties |
(0.51) |
(2.86) |
82 |
(1.18) |
(3.18) |
63 |
Processing income |
0.62 |
0.87 |
(29) |
0.69 |
0.79 |
(13) |
Transportation |
(1.56) |
(1.53) |
(2) |
(1.57) |
(1.62) |
3 |
Operating |
(12.21) |
(15.93) |
23 |
(13.44) |
(14.88) |
10 |
Operating netback (2) |
11.89 |
9.73 |
22 |
5.95 |
10.19 |
(42) |
Realized gain (loss) on financial instruments |
(0.41) |
(0.35) |
(17) |
1.59 |
0.06 |
2,550 |
General & administrative |
(2.31) |
(2.36) |
2 |
(2.14) |
(2.59) |
17 |
Other costs |
(1.07) |
– |
(100) |
(0.27) |
– |
(100) |
Transaction costs |
– |
(0.03) |
100 |
– |
(0.13) |
100 |
Cash finance costs |
(3.06) |
(1.29) |
(137) |
(1.82) |
(1.30) |
(40) |
Corporate netback (2) |
5.04 |
5.70 |
(12) |
3.31 |
6.23 |
(47) |
(1) |
% Positive (Negative) is expressed as being positive (better performance in the category) or negative (reduced performance in the category) in relation to operating netback, corporate netback and net earnings. |
(2) |
See non-GAAP measures. |
SUMMARY OF OIL AND NATURAL GAS RESERVES
AND NET PRESENT VALUES OF FUTURE NET REVENUE
AS OF DECEMBER 31, 2020
FORECAST PRICES AND COSTS
McDaniel & Associates Consultants Ltd. (“McDaniel”), the Company’s independent petroleum engineering firm, has evaluated Clearview’s crude oil, natural gas and natural gas liquids reserves as at December 31, 2020 and prepared a reserves report (the “McDaniel Report”) in accordance with National Instrument 51-101 “Standards of Disclosure for Oil and Gas Activities” and the “Canadian Oil and Gas Evaluation Handbook” (“COGEH”). Consistent with the prior year’s reserve report, the Company used a three consultant (McDaniel, GLJ Petroleum Consultants Ltd. and Sproule) average commodity price forecast dated January 1, 2021 (“Price Forecast”) in the evaluation.
The following table is a summary of the Company’s reserves information as detailed in the McDaniel Report at December 31, 2020. Compared to the year-end 2019 report, proved developed producing (“PDP”) reserves fell by 1%, while total proved (“1P”) and total proved plus probable (“2P”) categories decreased by 11% and 9%, respectively.
RESERVES
Light and Medium |
Conventional |
Natural Gas |
Oil Equivalent |
|||||
Reserves Category |
Gross4 |
Net5 |
Gross |
Net |
Gross |
Net |
Gross |
Net |
PROVED |
||||||||
Developed Producing |
1,270.5 |
1,141.9 |
16,777.2 |
15,349.1 |
948.1 |
762.8 |
5,014.8 |
4,462.9 |
Developed Non-Producing |
223.2 |
204.3 |
1,601.5 |
1,467.9 |
61.2 |
47.3 |
551.3 |
496.3 |
Undeveloped |
2,806.1 |
2,522.4 |
10,969.4 |
10,162.0 |
290.6 |
253.5 |
4,924.9 |
4,469.6 |
TOTAL PROVED |
4,299.8 |
3,868.5 |
29,348.1 |
26,979.1 |
1,299.9 |
1,063.6 |
10,491.1 |
9,428.6 |
Probable |
2,087.8 |
1,814.6 |
30,090.0 |
27,385.3 |
1,833.1 |
1,584.8 |
8,935.9 |
7,963.6 |
TOTAL PROVED PLUS PROBABLE |
6,387.7 |
5,683.1 |
59,438.1 |
54,364.4 |
3,133.0 |
2,648.4 |
19,427.1 |
17,392.2 |
Notes |
|
(1) |
Includes solution/associated gas. |
(2) |
Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil (6:1). |
(3) |
Includes ethane, propane, butane, pentane and condensate. |
(4) |
Gross Reserves are the Company’s working interest share of the remaining reserves before the deduction of any royalties. |
(5) |
Net Reserves are working interest reserves after royalty deductions plus royalty interest reserves. |
Tables may not add due to rounding. |
NET PRESENT VALUE OF FUTURE NET REVENUE
The estimated future net revenues associated with Clearview’s reserves at December 31, 2020, based on the Price Forecast, are summarized in the following table. Net present values (at 10% discount rates, before tax) are down year over year in the proved developed producing, total proved and total proved plus probable categories by 16%, 35% and 35%, respectively, due to the lower commodity price forecast offset by positive technical revisions due to lower production declines and reduced operating costs.
NET PRESENT VALUES OF FUTURE NET REVENUE
BEFORE INCOME TAXES DISCOUNTED AT (%/year)
Reserves Category |
0% |
5% |
10% |
15% |
20% |
Unit |
PROVED |
||||||
Developed Producing |
16,692.8 |
27,365.9 |
28,095.4 |
26,288.9 |
24,054.5 |
6.30 |
Developed Non-Producing |
9,038.5 |
6,816.7 |
5,344.8 |
4,322.3 |
3,582.9 |
10.77 |
Undeveloped |
61,604.4 |
39,204.7 |
24,125.3 |
14,535.9 |
8,382.9 |
5.40 |
TOTAL PROVED |
87,335.8 |
73,387.4 |
57,565.5 |
45,147.0 |
36,020.4 |
6.11 |
Probable |
101,025.9 |
63,107.9 |
39,453.8 |
25,463.8 |
16,910.3 |
4.95 |
TOTAL PROVED PLUS PROBABLE |
188,361.7 |
136,495.2 |
97,019.3 |
70,610.9 |
52,930.6 |
5.58 |
Notes: |
|
(1) |
Unit values are before income tax discounted at 10% and based on net reserves. |
(2) |
Future net revenues are estimated using forecast prices, costs arising from the anticipated development and production of reserves, associated royalties, operating costs, development costs, and abandonment and reclamation costs. The estimated values disclosed do not necessarily represent fair market value. |
TOTAL FUTURE NET REVENUE (UNDISCOUNTED) AS OF DECEMBER 31, 2020
FORECAST PRICES AND COSTS
Reserve Category |
Revenue1 |
Royalties2 |
Operating |
Development |
ADR |
Future |
Income |
Future |
Total Proved |
402,898 |
35,771 |
156,680 |
83,040 |
40,071 |
87,336 |
– |
87,336 |
Total Proved + Probable |
706,275 |
63,787 |
261,678 |
145,664 |
46,785 |
188,362 |
17,549 |
170,813 |
Notes: |
|
(1) |
Includes all product revenues and other revenues as forecast |
(2) |
Royalties include Crown, freehold, overriding royalties and freehold mineral taxes |
SUMMARY OF PRICING AND INFLATION RATE ASSUMPTIONS
FORECAST PRICES AND COSTS1
Year |
Inflation2 |
USD/CAD3 |
WTI |
Edmonton |
Bow |
Ethane |
Propane |
Butane |
Pentane |
AECO Spot |
|
2021 |
0.0 |
0.768 |
47.17 |
55.76 |
45.36 |
8.91 |
18.18 |
26.36 |
59.24 |
2.78 |
|
2022 |
1.3 |
0.765 |
50.17 |
59.89 |
48.96 |
8.65 |
21.91 |
32.85 |
63.19 |
2.72 |
|
2023 |
2.0 |
0.763 |
53.17 |
63.48 |
52.91 |
8.35 |
24.57 |
39.20 |
67.34 |
2.61 |
|
2024 |
2.0 |
0.763 |
54.97 |
65.76 |
54.95 |
8.46 |
25.47 |
40.65 |
69.77 |
2.65 |
|
2025 |
2.0 |
0.763 |
56.07 |
67.13 |
56.05 |
8.63 |
26.00 |
41.50 |
71.18 |
2.70 |
|
2026 |
2.0 |
0.763 |
57.19 |
68.53 |
57.16 |
8.81 |
26.54 |
42.36 |
72.61 |
2.76 |
|
2027 |
2.0 |
0.763 |
58.34 |
69.95 |
58.30 |
8.99 |
27.09 |
43.24 |
74.07 |
2.81 |
|
2028 |
2.0 |
0.763 |
59.50 |
71.40 |
59.47 |
9.17 |
27.65 |
44.14 |
75.56 |
2.87 |
|
2029 |
2.0 |
0.763 |
60.69 |
72.88 |
60.66 |
9.36 |
28.23 |
45.06 |
77.08 |
2.92 |
|
2030 |
2.0 |
0.763 |
61.91 |
74.34 |
61.87 |
9.54 |
28.79 |
45.96 |
78.62 |
2.98 |
|
2031 |
2.0 |
0.763 |
63.15 |
75.83 |
63.10 |
9.74 |
29.37 |
46.88 |
80.20 |
3.04 |
|
2032 |
2.0 |
0.763 |
64.41 |
77.34 |
64.37 |
9.93 |
29.95 |
47.82 |
81.80 |
3.10 |
|
2033 |
2.0 |
0.763 |
65.70 |
78.89 |
65.65 |
10.13 |
30.55 |
48.77 |
83.44 |
3.16 |
|
2034 |
2.0 |
0.763 |
67.01 |
80.47 |
66.97 |
10.33 |
31.16 |
49.75 |
85.10 |
3.23 |
|
2035 |
2.0 |
0.763 |
68.35 |
82.08 |
68.31 |
10.54 |
31.79 |
50.74 |
86.81 |
3.29 |
|
2036 |
2.0 |
0.763 |
+2%/yr |
+2%/yr |
+2%/yr |
+2%/yr |
+2%/yr |
+2%/yr |
+2%/yr |
+2%/yr |
Notes: |
|
(1) |
Consensus average price forecast from three evaluators (McDaniel & Associates Ltd., GLJ Petroleum Consultants Ltd. and Sproule), dated January 1, 2021. |
(2) |
Inflation rate for operating costs, capital costs and price differentials. |
(3) |
Exchange rate used to generate the benchmark reference pricing in this price forecast. |
RESERVES RECONCILIATION
The following reconciliation of Clearview’s reserves compares changes in the Company’s working interest reserves at December 31, 2019, to the reserves at December 31, 2020, each evaluated in accordance with National Instrument 51-101 definitions.
Proved |
Total |
Total |
|
Light and Medium Oil (Mbbl) |
|||
Dec. 31, 2019 Opening Balance |
1,447.1 |
4,761.2 |
6,933.6 |
Economic Factors |
(236.0) |
(571.4) |
(666.6) |
Technical Revisions |
226.6 |
277.3 |
288.0 |
Production |
(167.3) |
(167.3) |
(167.3) |
Dec. 31, 2020 Closing Balance |
1,270.5 |
4,299.8 |
6,387.7 |
Natural Gas (MMcf) |
|||
Dec. 31, 2019 Opening Balance |
15,948.7 |
32,599.8 |
64,447.9 |
Economic Factors |
(2,660.1) |
(6,201.6) |
(8,050.7) |
Dispositions |
(90.8) |
(90.8) |
(139.1) |
Technical Revisions |
6,107.6 |
5,568.9 |
5,708.3 |
Production |
(2,528.3) |
(2,528.3) |
(2,528.3) |
Dec 31, 2020 Closing Balance |
16,777.2 |
29,348.1 |
59,438.1 |
Natural Gas Liquids (Mbbl) |
|||
Dec. 31, 2019 Opening Balance |
983.2 |
1,648.3 |
3,759.1 |
Economic Factors |
(172.9) |
(427.0) |
(511.0) |
Dispositions |
(5.8) |
(5.8) |
(8.9) |
Technical Revisions |
282.1 |
222.9 |
32.4 |
Production |
(138.6) |
(138.6) |
(138.6) |
Dec. 31, 2020 Closing Balance |
948.1 |
1,299.9 |
3,132.9 |
Total (MBOE) |
|||
Dec. 31, 2019 Opening Balance |
5,088.5 |
11,842.8 |
21,434.0 |
Economic Factors |
(852.2) |
(2,032.0) |
(2,519.4) |
Dispositions |
(20.9) |
(20.9) |
(32.1) |
Technical Revisions |
1,526.7 |
1,428.3 |
1,271.8 |
Production |
(727.3) |
(727.3) |
(727.3) |
Dec. 31, 2019 Closing Balance |
5,014.8 |
10,491.1 |
19,427.0 |
Economic factors have been calculated as the difference in reserves inputting the YE2020 Reserve Report price forecast into the YE2019 Reserve Report reserve forecasts. There is no consideration of changes in operating costs or price offset changes that occurred in 2020. Engineering consultants, under new guidance from COGEH, will no longer deviate more than 20% of strip pricing on the effective date of their price forecasts.
RESERVE LIFE INDEX
Using the average production in the first year of the McDaniel forecast, the Company’s PDP Reserve Life Index (“RLI”) is 7.1 years, Total Proved RLI is 13.9 years and Total Proved + Probable RLI is 25.2 years.
OPERATIONS
Due to the severe drop in prices in April of 2020, associated with the COVID-19 pandemic, the Company made the decision to shut-in approximately 50% of its production, comprised of primarily oil volumes and the associated natural gas. As oil prices recovered by August of 2020, Clearview had brought back on-stream all of its shut-in production.
Overall, the Company’s realized price per boe decreased 26% for the year ended December 31, 2020 due to the decrease in realized oil and natural gas liquids prices, partially offset by higher natural gas prices.
To offset the severe drop in revenue as a result of lower prices for the Company’s oil and natural gas liquids production, Clearview quickly adopted a program of reducing its cost structure where possible while still maintaining a strong production profile with a top priority of safety and regulatory compliance for both the office staff and field operators. Operating costs for the year ended December 31, 2020 were lower by 23% versus the comparative year.
For the year 2020, the Alberta Energy Regulator (“AER”) cancelled the Area Based Closure program due to the COVID-19 pandemic and resulting economic slow down. Clearview continued to abandon wells despite the challenging economic environment funded in part by the government Site Rehabilitation Programs (“SRP”). Six gross wells (3.5 net) were abandoned for a total net corporate abandonment and reclamation obligation (“ARO”) reduction of $116,000. Highlighting this was a five well campaign initiated in December wherein the wells were abandoned at an average of 64% of the AER’s deemed downhole liability cost estimates.
Through the first quarter of 2021, Clearview has abandoned seven gross (6.7 net) wells, retiring $0.4 million net of downhole liability. Clearview will continue to prioritize its abandonment program in the second half of 2021 once road bans are lifted in its areas of operations, and a closer examination of non-operated partner decommissioning spending is known. The Company anticipates spending a total of approximately $0.4 million on abandonment activities in 2021 in addition to any additional funds provided by the SRP programs.
OUTLOOK
In 2020, the Company successfully strengthened its financial position by reducing its net debt to $13.2 million, establishing a reserve-based credit facility agreement of $15.0 million, a second credit facility of $6.25 million, 80% guaranteed by the EDC and raised $1.26 million though a convertible debenture offering creating a total credit capacity from its lender of $21.25 million.
While the COVID-19 pandemic is not over, optimism around the global distribution of vaccine and the ultimate recovery of the economy has resulted in the price of oil recovering to over US $60.00 per barrel for West Texas Intermediate (“WTI”) as of April of 2021. This recovery has provided the Company with the opportunity to undertake capital programs on its assets to repair existing, previously producing wells that had ceased production during the 2020 downturn. Clearview has also begun to spend capital on the optimization and reactivation of existing wellbores to maximize revenue and further reduce its net debt during 2021.
Environment, Social and Governance (“ESG”) is a growing and significant underpinning of Clearview. We have prioritized the well-being of all field and office personnel and its culture of safety. Clearview is committed to strong health, safety and environmental management and protections for its employees, contractors, workers, suppliers, visitors and the public, the natural environment and its property. All staff, Officers and Directors of Clearview take a shared ownership in the culture of health, safety and environment protection.
Clearview continues to direct efforts toward strategic acquisitions and potential mergers/business combinations to significantly increase the size of the Company for greater efficiencies and cash generating capabilities. The objective of this effort would be to achieve enough adjusted funds flow to allow Clearview to access its deep inventory of light oil weighted development opportunities to increase its value per share and ultimately provide liquidity to all its stakeholders. To effect this change, Clearview’s Board has struck a Strategic Committee and engaged a Financial Advisor.
Clearview’s annual December 31, 2020 financial statements and management’s discussion and analysis are available on the Company’s website at www.clearviewres.com and SEDAR at www.SEDAR.com.