CALGARY, AB – Bonterra Energy Corp. (www.bonterraenergy.com) (TSX: BNE) (“Bonterra” or the “Company”) today announces its operating and financial results for the three and nine month periods ended September 30, 2021. The related unaudited condensed financial statements and notes, as well as management’s discussion and analysis (“MD&A”), are available on SEDAR at www.sedar.com and on Bonterra’s website at www.bonterraenergy.com.
HIGHLIGHTS
Three months ended |
Nine months ended |
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As at and for the periods ended |
Sept 30, |
Sept 30, |
Sept 30, |
Sept 30, |
|
FINANCIAL |
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Revenue – realized oil and gas sales |
64,457 |
29,155 |
172,414 |
89,881 |
|
Funds flow (1) |
28,658 |
6,266 |
68,355 |
25,121 |
|
Per share – basic |
0.85 |
0.19 |
2.03 |
0.75 |
|
Per share – diluted |
0.83 |
0.19 |
1.98 |
0.75 |
|
Cash flow from operations |
24,616 |
6,370 |
58,235 |
33,272 |
|
Per share – basic |
0.73 |
0.19 |
1.73 |
1.00 |
|
Per share – diluted |
0.71 |
0.19 |
1.69 |
1.00 |
|
Net earnings (loss)(2) |
7,296 |
(5,211) |
162,966 |
(295,818) |
|
Per share – basic |
0.22 |
(0.16) |
4.84 |
(8.86) |
|
Per share – diluted |
0.21 |
(0.16) |
4.72 |
(8.87) |
|
Capital expenditures |
18,578 |
2,819 |
49,646 |
24,664 |
|
Total assets |
939,835 |
722,910 |
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Net debt(3) |
307,729 |
295,168 |
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Working capital deficiency |
260,976 |
295,168 |
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Long-term debt |
46,753 |
– |
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Shareholders’ equity |
361,590 |
207,325 |
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OPERATIONS |
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Light oil |
– barrels (bbl) per day |
6,948 |
5,355 |
7,051 |
5,987 |
– average price ($ per bbl) |
78.42 |
45.73 |
70.68 |
43.45 |
|
NGLs |
– bbl per day |
928 |
1,064 |
983 |
1,056 |
– average price ($ per bbl) |
48.86 |
19.29 |
39.82 |
16.78 |
|
Conventional natural gas – MCF per day |
27,995 |
21,510 |
26,131 |
22,169 |
|
– average price ($ per MCF) |
3.94 |
2.40 |
3.60 |
2.27 |
|
Total barrels of oil equivalent per day (BOE)(4) |
12,542 |
10,004 |
12,389 |
10,737 |
(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 due to the impact of COVID-19 effect on the forward benchmark prices for crude oil. With stronger forward prices in Q2 2021, the Company recorded a $203,197,000 impairment reversal on its Alberta CGU’s oil and gas assets less $47,149,000 deferred income tax expense. |
(3) |
Net debt is not a recognized measure under IFRS. The Company defines net debt as current liabilities less current assets plus long-term subordinated 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 2021 FINANCIAL & OPERATING SNAPSHOT
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|
1 |
October 2021 volumes comprised of 7,980 bbl/d light and medium crude oil, 1,120bbl/d NGLs and 29,400 mcf/d of conventional natural gas. |
2 |
“Funds Flow”, “Field Netback” and “Net Debt” are not recognized measures under IFRS. See “Cautionary Statements” below. |
QUARTER IN REVIEW
The Company has continued to benefit from further increases in crude oil and natural gas prices which have now generated nearly $19 million of funds flow in excess of capital expenditures during the first nine months of 2021, attributable to the Company’s low decline rate and disciplined approach to capital allocation. During the third quarter of 2021, Bonterra realized average oil prices of $78.42 per bbl, average NGL prices of $48.86 per bbl, and average natural gas prices of $3.94 per mcf. These improved revenues contributed to a 12 percent and 24 percent improvement of field and cash netbacks to $31.03 and $24.84 per BOE, respectively, compared to the prior quarter.
With spring breakup completed, the Company resumed its capital program during the quarter designed to target sustainable production growth, drilling 13 gross (11.5 net) wells and placing on production nine gross (7.5 net) wells.
Bonterra continued to reduce its decommissioning liabilities with support of the Alberta Site Rehabilitation Program (“SRP”). By the end of the third quarter, the Company had abandoned 189.4 net wells and decommissioned 2.0 net battery sites during the first nine months of the year, having spent $3.1 million of a $5.1 million commitment for the 2021 fiscal year. As the Company continues to execute its abandonment program through the remainder of 2021 and 2022, a further 167.8 net wells that have no deemed future potential are forecast to be abandoned. Bonterra continuously reviews its inactive well inventory for future potential to determine if a well bore should be reactivated, repurposed, or abandoned.
During the third quarter of 2021, the Company appointed Ms. Stacey McDonald to its Board of Directors (the “Board”), effective August 16, 2021. Ms. McDonald will assume the role of Chair of the Reserves Committee, while serving on the Audit, Compensation, and Governance and Nominating Committees. Ms. McDonald’s 16 years of energy and finance experience will bring valuable insights and contributions to the Board.
OUTLOOK
The Company expects that shut-ins related to the third-party fractionation plant fire and other downtime at downstream third-party pipelines and facilities will be resolved in the fourth quarter of 2021, returning 650 BOE per day of production which was shut-in during the third quarter of 2021. A further 275 BOE per day of voluntary shut-in production volumes are expected to be reactivated during the fourth quarter.
In Q4 2021, the Company expects to drill 8 gross (8.0 net) operated wells, of which 2 gross (2.0 net) wells will be completed and placed on production to further contribute to quarterly volumes. The remaining 6 wells are forecast to begin production in Q1 2022. The Company also plans to place on production an additional 4 gross (4.0 net) wells in Q4 2021 that were drilled in Q3 2021.
Even with the shut-ins experienced during the third quarter, the Company is pleased to reiterate its previous 2021 average annual production guidance range of 12,800 to 13,200 BOE per day[3], supported by average production of approximately 14,000 BOE per day[4] in October 2021. In the near-term, Bonterra anticipates realizing enhanced benefit from new volumes being brought on-stream into improved commodity prices.
Bonterra plans to announce the Board approved 2022 guidance before the end of December 2021. The 2022 preliminary budget estimates production will be in excess of the Company’s 2021 average annual guidance range. Assuming this level of production and current forward strip pricing, Bonterra anticipates a meaningful deleveraging of the balance sheet which would result in an improved debt to cash flow ratio between 1.0x and 1.5x by the end of 2022.
As part of the Company’s ongoing efforts to diversify commodity prices and protect future cash flows, Bonterra has put in place physical delivery sales and risk management contracts to the end of September 30, 2022, details of which are included in Note 12 to the third quarter 2021 financial statements. With approximately 30 percent of forecast volumes hedged, the Company can continue to benefit from potential commodity price improvements while mitigating market volatility and locking-in economics.
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3 |
2021 annual forecast volumes comprised of 7,050 to 7,400 bbl/d light and medium crude oil, 1,390 to 1,400 bbl/d NGLs and 26,100 to 26,500 mcf/d conventional natural gas. |
4 |
October 2021 volumes comprised of 7,980 bbl/d light and medium crude oil, 1,120bbl/d NGLs and 29,400 mcf/d of conventional natural gas. |
FINANCING UPDATE
Subsequent to the quarter end, and as previously announced on October 20, 2021, Bonterra successfully closed a brokered private placement debt and warrant financing (the “Initial Offering”), enhancing its financial flexibility and achieving its goal of restructuring all bank debt to a fully conforming revolving credit facility. The combination of senior unsecured debentures and common share purchase warrants provided gross proceeds of $32 million. Concurrent with the closing of the Initial Offering, Bonterra issued a separate offering, which was subsequently upsized, raising an additional $7.5 million on the same terms and conditions as the Initial Offering. The follow-on offer is expected to close on or about November 10, 2021.
In concert with the financings, the Company amended the terms of its credit facility to a $195 million syndicated revolving credit facility and a $25 million non-syndicated revolving facility, representing an elimination of the previous $65 million non-revolving term loan. The amended facility has $10 million step-downs at December 31, 2021 and March 31, 2022 prior to the next redetermination date before May 31, 2022, and has a maturity date of November 30, 2022.
Bonterra believes the Company is well positioned to continue reducing bank debt and strengthening the balance sheet, a commitment that has been bolstered by a strengthening commodity price environment. The Company plans to generate profitable growth through this period of improving oil and natural gas markets by prudently developing its high-quality, light oil weighted asset base and directing excess funds flow to a combination of debt repayment plus modest growth. In addition, the Company continues to prioritize environmental, social and governance (“ESG”) initiatives, and is committed to employing local services, being a key economic contributor to rural and surrounding communities located within central Alberta, upholding a responsible abandonment and reclamation program, and maintaining rigorous safety measures.
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”.
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