Calgary, Alberta – OBSIDIAN ENERGY LTD. (TSX: OBE) (NYSE American: OBE) (“Obsidian Energy“, the “Company“, “we“, “us” or “our“) announces the full repayment of the $30.0 million non-revolving term loan (the “Term Loan“) from free cash flow from our operations. The Term Loan was part of our new syndicated credit facilities with initial borrowing capacity of $205.0 million that was entered into with our debt refinancing completed in July 2022. With the repayment of the Term Loan, our remaining debt consists of a $175.0 million revolving syndicated credit facility with a term-out period of July 27, 2024, and $127.6 million of senior unsecured notes due July 27, 2027.
“We are in a substantially stronger financial position from where the Company was a year ago,” said Stephen Loukas, Obsidian Energy’s Interim President and CEO. “With the recent refinancing and our repayment of the Term Loan, we are on track to reach our 2022 guidance range of net debt to funds flow from operations of less than 0.6x.”
Our second half 2022 development program is well underway in our core areas with several of the newly drilled wells rig-released and expected to be on production by mid-October. Approximately nine (9.0 net) wells have been rig-released thus far in the third quarter: four (4.0 net) Cardium wells in Pembina and Willesden Green, four (4.0 net) Bluesky wells in Peace River, and one (1.0 net) Mannville gas well in Willesden Green. In addition, all eight (8.0 net) Viking wells are on production with initial results in line with forecast as they clean up. A significant aspect of the Viking program is the step-out well drilled to test the western extent of the play, which displayed a peak 10-day initial production rate of 218 boe/d (86 percent oil) and opens up additional development and reserves in the area.
ACQUISITION OF SEAL 9-15 GAS PLANT IN PEACE RIVER
Obsidian Energy also announces that we purchased the Seal 9-15 gas plant within our core Peace River asset. The acquisition keeps with our established approach of owning the majority of required processing capacity in our operating areas. With this addition, Obsidian Energy owns a dominant infrastructure position in the Peace River area that includes 70 percent of the total area gas processing capacity, of which the Seal gas plant contributes approximately 10 mmcf/d. Obsidian Energy currently delivers less than 1 mmcf/d of gas to the facility, leaving ample room for our near term and future development.
The acquisition also supports the Company’s commitment to protect the environment through our ongoing work to reduce flaring. In the context of the Alberta Energy Regulator’s Directive 84 and 60 gas conservation regulations for Peace River, ownership of the gas plant provides us with takeaway capacity in an area that is anticipated to see increased future Clearwater and Bluesky development.
Stephen Loukas continued, “The Seal 9-15 gas plant is a key piece of infrastructure in the Peace River area. Given our intention to begin drilling our significant Clearwater holdings and expanding our Bluesky development, we took the opportunity to expand our facility ownership in this important area that is key to our future growth plans.”
The Company has continued to hedge WTI in order to protect cash flow as we execute on our capital program and repay debt. We expect to expand our commodity hedge position over the coming months as we solidify our 2023 plans. Currently, we have the following financial oil and gas contracts in place on a weighted average basis:
WTI Oil Contracts
|Bought Put Price
|Sold Call Price
AECO Natural Gas Contracts
|Swap||August – October 2022||26,065||$4.74|
PETERS & CO. ENERGY CONFERENCE PRESENTATION
Obsidian Energy is pleased to be participating at the Peters & Co. 26th Annual Energy Conference from September 13 to 15, 2022 in Toronto, Ontario (the “Conference“). Stephen Loukas, Interim President and CEO will discuss the Company at 4:00 p.m. ET (2:00 p.m. MT) on Wednesday, September 14, 2022. The presentation will be webcast with the link and associated information available on our website.
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.
TEST RESULTS AND INITIAL PRODUCTION RATES
Test results and initial production rates disclosed herein, particularly those short in duration, may not necessarily be indicative of long-term performance or of ultimate recovery. Readers are cautioned that short term rates should not be relied upon as indicators of future performance of these wells and therefore should not be relied upon for investment or other purposes. A pressure transient analysis or well-test interpretation has not been carried out and thus certain of the test results provided herein should be considered preliminary until such analysis or interpretation has been completed.
|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 FINANCIAL MEASURES
Throughout this news release and in other materials disclosed by the Company, we employ certain measures to analyze financial performance, financial position, and cash flow. These non-GAAP and other financial measures do not have any standardized meaning prescribed by 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. The Company’s unaudited consolidated financial statements and notes and management’s discussion and analysis (“MD&A“) as at and for the three and six months ended June 30, 2022 are available on the Company’s website at www.obsidianenergy.com and under our SEDAR profile at www.sedar.com. The disclosure under the section “Non-GAAP and Other Financial Measures” in the MD&A is incorporated by reference into this news release.
Non-GAAP Financial Measures
The following measures are non-GAAP financial measures: free cash flow, net debt and funds flow from operations (“FFO”). These non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. See the disclosure under the section “Non-GAAP and Other Financial Measures” in our MD&A for the three and six months ended June 30, 2022, for an explanation of the composition of these measures, how these measures provide useful information to an investor, and the additional purposes, if any, for which management uses these measures.
The following measure is a non-GAAP ratio: net debt to funds flow from operations, which uses both net debt and FFO as components. This non-GAAP ratio is not a standardized financial measure under IFRS and might not be comparable to similar financial measures disclosed by other issuers.