Calgary, Alberta – OBSIDIAN ENERGY LTD. (TSX: OBE) (NYSE American: OBE) (“Obsidian Energy“, the “Company“, “we“, “us” or “our“) announces our preliminary second quarter 2022 results and an extension to our syndicated credit facility to July 29, 2022, to accommodate timing associated with our debt refinancing.
“We continued our enhanced level of activity during the second quarter with the completion of our accelerated first half development program,” said Stephen Loukas, Obsidian Energy’s Interim President and CEO. “Wells brought on-stream during the quarter resulted in strong production gains, achieving the highest average quarterly production level since 2017. We also drilled our eight-well program in our Viking area that is currently being completed; the wells are expected to start on production in late July with the last well on production by mid-August. Our second half drilling program in our Peace River area commenced this week and we anticipate our Cardium development activity to start later this month as ground conditions improve.”
PRELIMINARY SECOND QUARTER 2022 RESULTS
Obsidian Energy is pleased to provide preliminary unaudited operating and financial results for the second quarter of 2022, all of which are approximate. During the quarter, we benefitted from higher commodity prices for both oil and natural gas, increasing our netbacks to $58.94 per boe in the second quarter of 2022 compared to $42.25 per boe in the first quarter of 2022 and $28.48 per boe in the second quarter of 2021. As a result of the cash flow generated by these higher netbacks and increased production, we continued to reduce debt outstanding under our syndicated credit facilities to $335.2 million at June 30, 2022, compared to $392.4 million at December 31, 2021 (a $57.2 million decrease).
We successfully completed our accelerated first half development program with capital expenditures of approximately $40.3 million in the second quarter focused on various completion and tie-in activities from wells drilled earlier in the year along with the drilling of our new Viking wells. Second quarter 2022 production averaged 31,575 boe/d up from 29,407 boe/d in the first quarter of the year. Year-over-year, average production increased by approximately 7,000 boe/d or 28 percent compared to the second quarter of 2021 (24,651 boe/d) due to the strong results from our expanded development program and the acquisition of our partner’s non-operated interested in the Peace River Oil Partnership (“PROP“) in late 2021.
Net operating costs averaged $14.02 per boe during the second quarter of 2022 compared to $13.71 per boe in the comparable period of 2021 and were impacted by general inflationary pressures. G&A expenditures in the second quarter 2022 decreased to $1.64 per boe from $1.69 per boe in the second quarter of 2021.
|Three Months Ended
|Six Months Ended
(millions, except as marked and per share amounts)
|Light oil (bbl/d)||12,261||10,836||11,689||10,427|
|Heavy oil (bbl/d)||6,174||2,660||5,982||2,723|
|Natural gas (mmcf/d)||64||54||62||52|
|Total production4 (boe/d)||31,575||24,651||30,497||23,942|
|Average sales price|
|Light oil ($/bbl)||139.88||76.97||129.49||72.37|
|Heavy oil ($/bbl)||106.18||48.58||95.88||44.46|
|Natural gas ($/mcf)||7.38||3.21||6.21||3.21|
|Risk management loss||(4.66||)||(0.52||)||(5.58||)||(1.44||)|
|Net sales price||91.78||49.04||81.59||45.54|
|Net operating costs3||(14.02||)||(13.71||)||(13.98||)||(13.62||)|
- We adhere to generally accepted accounting principles (“GAAP“); however, we also employ certain non-GAAP measures to analyze financial performance, financial position, and cash flow, including netback and net operating costs. Additionally, other financial measures are also used to analyze performance. These non-GAAP and other financial measures do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS“) and therefore may not be comparable to similar measures provided by other issuers. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as net income (loss) and cash flow from operating activities, as indicators of our performance.
- Includes drawings under the Company’s syndicated credit facility and outstanding amounts related to our outstanding senior secured notes and PROP limited recourse loan.
- Non-GAAP financial measure or non-GAAP ratio. See “Non-GAAP and Other Financial Measures“.
- Please refer to the “Oil and Gas Information Advisory” section below for information regarding the term “boe”.
SYNDICATED CREDIT FACILITY UPDATE
To accommodate timing associated with the Company’s refinancing, we have entered into an agreement with our lenders to extend the revolving period and borrowing base redetermination date under our syndicated credit facility to July 29, 2022, from July 15, 2022. The maturity date of both the syndicated credit facility and non-revolving term loan remain unchanged at November 30, 2022.
As part of the extension, Obsidian Energy has agreed to a $17.4. million reduction of the syndicated credit facility with the aggregate amount available now set at $340.7 million, consisting of a $260.0 million revolving syndicated credit facility and a $80.7 million non-revolving term loan. Obsidian Energy also made a US$2.0 million repayment on our senior secured notes, which reduced the Company’s outstanding balance of these notes to US$34.7 million (maturity date of November 30, 2022). Upon completion of the refinancing, our debt structure is expected to provide the Company with a stable capital source that provides appropriate operational liquidity and a longer-term maturity profile.
The Company is primarily focused on near term WTI positions to protect cash flow while building a solid foundation on summer AECO natural gas pricing. As at July 14, 2022, Obsidian Energy has the following financial oil and gas contracts in place on a weighted average basis:
|Term||Notional Volume||Pricing (CAD)|
|Oil – WTI|
|April 2022||8,183 bbl/d||$||121.81/bbl|
|May 2022||8,347 bbl/d||$||135.63/bbl|
|June 2022||2,833 bbl/d||$||139.06/bbl|
|July 2022||6,216 bbl/d||$||138.77/bbl|
|Natural Gas – AECO|
|May – October 2022||26,065 mcf/d||$||4.74/mcf|
In addition, PROP Energy 45 Limited Partnership, our wholly owned limited recourse subsidiary that purchased 45 percent of PROP from a third party on November 24, 2021, entered into the following financial hedges in conjunction with the acquisition financing:
|Term||Notional Volume||Pricing (USD)|
|Oil – WTI|
|Q2 2022||1,121 bbl/d||$||65.11/bbl|
|Q3 2022||593 bbl/d||$||63.26/bbl|
|Q4 2022||606 bbl/d||$||62.30/bbl|
|Heavy Oil – WCS Differential|
|Q2 2022||801 bbl/d||($15.43)/bbl|
SECOND QUARTER 2022 RELEASE DATE
The Company expects to release its full second quarter 2022 financial and operating results before North American markets open on July 28, 2022. In addition, the second quarter 2022 management’s discussion and analysis and the unaudited consolidated financial statements will be available on our website, on SEDAR, and on EDGAR on or about the same date.
ADDITIONAL READER ADVISORIES
OIL AND GAS INFORMATION ADVISORY
Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of crude oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is misleading as an indication of value. Boe/d means barrels of oil equivalent per day.
|bbl/d||Barrels per day||mcf||thousand cubic feet|
|boe/d||barrels of oil equivalent per day||mcf/d||thousand cubic feet per day|
|WCS||Western Canadian Select||mmcf/d||million cubic feet per day|
|WTI||West Texas Intermediate||AECO||Alberta benchmark price for natural gas|
NON-GAAP AND OTHER MEASURES
Included in this news release are references to terms “Netback”, “Netback per boe” and “Net operating costs per boe” which do not have a standardized meaning prescribed by International Financial Reporting Standards (“IFRS“) and therefore may not be comparable with the calculation of similar measures by other companies. These non-GAAP measures are described and defined in the management’s discussion and analysis dated May 3, 2022 for the three months ended March 31, 2022 (the “Interim MD&A“), as summarized below.
“Netback” is the absolute dollar amount of revenue less royalties, net operating costs, transportation expenses and realized risk management gains and losses, and is used in capital allocation decisions and to economically rank projects.
“Netback per boe” is the per unit of production amount of revenue less royalties, net operating costs, transportation expenses and realized risk management gains and losses, and is used in capital allocation decisions and to economically rank projects.
“Net operating costs per boe” are calculated by deducting processing income and road use recoveries from operating costs and is used to assess the Company’s cost position.