CALGARY, Alberta – Athabasca Oil Corporation (TSX: ATH) (“Athabasca” or the “Company”) is pleased to announce its preliminary 2021 year-end results, $32 million (US$25 million) term note repayment and an operational update demonstrating momentum into 2022.
Athabasca is uniquely positioned as a low leveraged company generating significant free cash flow through its low-decline, oil weighted asset base. In the current oil price environment, the Company’s assets generate exceptional cash flow. The Company expects to generate ~$900 million of Free Cash Flow during the next three years (US$85 WTI and US$12.50 Western Canadian Select “WCS” heavy differential).
The Company is committed to utilizing up to 100% of near‐term free cash flow to further reduce its term debt and is anticipating being in a net cash position at year end 2022 at current commodity prices. Athabasca expects to achieve its target outstanding term debt of US$175 million (50% reduction) in H1 2023.
Reduced cash flow volatility, consistent operational execution and a best‐in‐class balance sheet is expected to unlock significant shareholder value.
Preliminary 2021 Year End Results
The Company is pleased to announce strong preliminary 2021 Year End Results.
- Production: December production averaged ~34,900 boe/d with annual 2021 production of ~34,600 boe/d. This is significantly above original 2021 guidance of 31,000 – 33,000 boe/d and is also above December’s 2021 annual guidance of 34,500 boe/d.
- Capital: ~$90 million, ahead of guidance of $100 million.
- Financial: Adjusted EBITDA ~$245 million; Adjusted Funds Flow ~$185 million; Free Cash Flow ~$90 million.
- Balance Sheet: ~$300 million of Liquidity at year-end, including ~$225 million cash. Term on debt until Q4 2026.
- Tax Pools: The Company has ~$3.2 billion in tax pools, including ~$2.4 billion of immediately deductible non-capital losses and exploration pools.
The Company intends to release its audited year-end results after market close on March 2, 2022. An updated presentation has been posted to the Company’s website (https://www.atha.com/investors/presentation-events.html).
Debt Repayment and Financial Outlook
Athabasca is pleased to announce that it has completed the repayment of $32 million (US$25 million) term debt. This payment was in advance of its first scheduled term debt repayment (May 2022) resulting in significant redemption and interest savings for the Company.
Accelerating the return of capital to shareholders is a top priority to Athabasca. The $32 million repayment of term debt, along with a commitment to utilize up to 100% of near-term free cash flow towards debt reduction demonstrates the Company’s commitment to its balance sheet targets. The Company is quickly transitioning enterprise value to its equity holders which is expected to unlock significant shareholder value. Upon achieving a US$175MM debt target the Company intends to direct a portion of free cash flow to its shareholders. The Company will assess market conditions to determine the best method to enhance shareholder returns, which could include a dividend, share buybacks, further debt reduction or a combination thereof.
In 2022, the Company anticipates generating ~$350 million of Adjusted EBITDA (~$300 million of Adjusted Funds Flow) and ~$180 million of Free Cash Flow (US$85 WTI & US$13.50 WCS differential). With strengthening commodity prices Athabasca now forecasts ~$900 million in Free Cash Flow during the three year timeframe of 2022-24 (US$85 WTI & US$12.50 WCS differential flat pricing).
Athabasca maintains excellent upside exposure to the current commodity price environment. In 2022, ~50% of the Company’s estimated sales volumes are unhedged, ~20% of sales volumes are hedged through collars with WTI upside to US$96 WTI and 30% of sales volumes are hedged through fixed price swaps at an implied WTI of US$67.50. For 2023, the Company maintains significant exposure to strengthening commodity prices with <10% of sales volumes hedged through wide WTI collars.
Athabasca had previously announced a 2022 capital program of $128 million and is maintaining this guidance. The Company estimates its 2022 production will average 33,000 – 34,000 boe/d and is pleased with the performance of its top tier assets.
Leismer is producing ~18,500 bbl/d with a steam oil ratio “SOR” of 3.2x (December). Volumes are forecasted to grow through 2022 as Pad L8 ramps-up to its expected plateau rate of >5,000 bbl/d (five well pairs). Steaming commenced last Fall and three wells were converted to full SAGD production in January, with the remaining wells to be placed on production in early Q2. The Company will drill two additional infill wells at Pad L6 and five additional well pairs at Pad L8 in H2 2022. These wells will support production through 2023 and have unparalleled Profit to Investment Ratios (NPV/Investment) of ~10x at current commodity prices.
Hangingstone is producing ~9,500 bbl/d with a record low SOR of 3.7x (December). The Company recently started up an additional well pair (AA03) and non-condensable gas co-injection is aiding in pressure support and reduced energy usage. Hangingstone generated ~$85 million Operating Income in 2021 and is demonstrating that it is financially competitive in the current price environment.
The Company’s Thermal Oil portfolio is expected to contribute significant cash flow in 2022 with an estimated Operating Income of ~$390 million (US$85 WTI & US$13.50 WCS differential).
In Light Oil, three Duvernay wells were recently completed in the oil window at Two Creeks and are currently being tied-in. Wells in this area have demonstrated compelling results with the last 12 wells averaging IP180’s of ~725 boe/d (85% liquids) and IP365’s of ~550 boe/d (83% liquids).
The Light Oil division continues to demonstrate strong operating netbacks (~$43/boe Q4 2021) and will contribute significant cash flow in 2022 with an estimated Operating Income of ~$95 million (US$85 WTI & C$4 AECO). Future development opportunities are substantial, with ~150 well locations in Placid Montney and ~700 well locations in Kaybob Duvernay. The Company has minimal near-term land expiries.