Michael Binnion, President and Chief Executive Officer, commented, “We took advantage of higher prices to reduce net debt in the first half of the year. Our net debt stands at under $2 million compared to approximately $8 million at year-end. Although capital spending has been limited to date, if prices remain strong, we could see additional drilling at Kakwa late this fall or early winter.”
He added, “During the quarter, we also began work on the carbon dioxide recycling and storage elements for the circular economy in Quebec. These are essential to reducing not only the emissions from production but also usage of our clean gas. We are planning for permits for a small-scale project to demonstrate this storage potential later this year.”
- Assessing carbon dioxide storage project as first phase of Clean Tech Energy project in Quebec
- Average daily production of 1,479 boe/d with adjusted funds flow from operations of $4.2 million
Consistent with prior periods, Kakwa continued to account for 80% of corporate production. With no new drilling at Kakwa since the spring of 2020, production declined over the prior year. For the second quarter, daily production averaged 1,479 boe/d (2020: 2,058 boe/d) and for the six months ended June 30, 2021, it averaged 1,579 boe/d (2020: 2,068 boe/d).
The improvement in commodity prices over the same period last year materially improved revenue and adjusted funds flow from operations in 2021. For the quarter, petroleum and natural gas sales increased to $7.1 million from $3.4 million last year and $14.1 million year to date from $10.4 million in the prior year. The higher revenue contributed to adjusted funds flow from operations of $4.2 million (2020: $0.2 million) in the quarter and $7.1 million for the first six months of the year (2020: $2.7 million) (1).
The higher revenue also contributed to net income of $2.9 million for the quarter (2020: $2.7 million loss) and $3.8 million (2020: $117 million loss) for the first half of the year. In the prior year, the year-to-date loss reflects the impairment expense of $113 million incurred in the first quarter largely because of the lower future oil prices. Capital expenditures in the quarter were $0.5 million (2020: $0.5 million) and $0.9 million year to date (2019: $3.4 million).
The Company also reported on the pending renewal of its credit facility with a Canadian chartered bank. Following a preliminary review conducted in the second quarter, the Company anticipates its $17 million revolving operating demand facility will be reduced to $16 million and its uncommitted non-conforming revolving facility of $3 million will be terminated. The renewal will take effect upon receipt of the final requisite approvals in the third quarter.
The effective interest rate on the facility for the first half of 2021 was 3.45% (2020: 3.58%). As at June 30, 2021, $12 million was drawn on the facility and the Company held unrestricted cash and term deposits of $10.3 million. Including amounts drawn under the facility, the Company had a net working capital deficit of $1.2 million (2020: $9.3 million).
The term “adjusted funds flow from operations” and “working capital deficit” are non-IFRS measures. 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.