Michael Binnion, President, and Chief Executive Officer, commented, “During the quarter, three new Kakwa wells were brought on production. Leveraging the strong commodity prices, we recorded adjusted funds flow from operations of over $12 million for the period.”
Commenting on Quebec, he added, “Protecting our legal rights is our top priority after the Government of Quebec announced its plans to enact Bill 21 and revoke our licenses without meaningful compensation. We filed our primary claim in the Superior Court of Quebec this winter. Our litigation counsel recently engaged one of the Big 4 accounting firms as an expert witness to quantify our damages. Based on the value of the multi-Tcf discovery, we expect this claim will be substantially larger than the notional $100 million the Government has suggested as a settlement. We are also supporting other stakeholders including First Nations and Quebec royalty holders to ensure their rights are also protected against the Government’s actions.”
Reporting on the Company’s 40% investment in Red Leaf, he added, “They also made progress on their new technology with a successful third-party review completed early in the third quarter. The granting of the final permit for a short line railroad that terminates on their land is also very good news for Red Leaf and its refinery permit in the Uinta Basin in Utah.”
- Average daily production of 1,909 boe/d(1) and adjusted funds flow from operations of $12.2 million for the quarter
- Government of Quebec announces plans to enact Bill 21 and revoke exploration licenses
- Red Leaf completes third-party engineering validation of new design
Consistent with prior periods, Kakwa continued to account for 80% of corporate production. With three (0.75 net) wells brought on production in the quarter, production increased materially over the prior year. For the second quarter, daily production averaged 1,909 boe/d (2021: 1,479 boe/d) and for the six months ended June 30, 2022, it averaged 1,600 boe/d (2021: 1,579 boe/d).
The improvement in commodity prices over the same period last year materially improved revenue and adjusted funds flow from operations in 2022. For the quarter, petroleum and natural gas sales increased to $17 million from $7.1 million last year and $26.6 million year to date from $14.1 million in the prior year. The higher revenue contributed to adjusted funds flow from operations of $12.2 million (2021: $4.2 million) in the quarter and $16.5 million for the first six months of the year (2021: $7.1 million).
The higher revenue also contributed to net income of $9.1 million for the quarter (2021: $2.9 million) and $11.5 million (2021: $3.8 million) for the first half of the year. Capital expenditures in the quarter were $2.8 million (2021: $0.5 million) and $7.8 million year to date (2021: $0.9 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 $16 million revolving operating demand facility will remain unchanged at $16 million. 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 2022 was 4.08% (2021: 3.45%). As at June 30, 2022, effectively no amounts were drawn on the facility and the Company held unrestricted cash and term deposits of $13.8 million. The Company had a net working capital surplus of $10.6 million (2021: $1.2 million deficit).
The term “adjusted funds flow from operations” and “working capital surplus (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.