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 |
88,827 |
64,457 |
297,043 |
172,414 |
Funds flow (1) |
35,454 |
28,658 |
144,438 |
68,355 |
Per share – basic |
0.98 |
0.85 |
4.04 |
2.03 |
Per share – diluted |
0.95 |
0.83 |
3.87 |
1.98 |
Cash flow from operations |
48,810 |
24,616 |
148,059 |
58,235 |
Per share – basic |
1.35 |
0.73 |
4.14 |
1.73 |
Per share – diluted |
1.30 |
0.71 |
3.96 |
1.69 |
Net earnings(2) |
17,696 |
7,296 |
61,759 |
162,966 |
Per share – basic |
0.49 |
0.22 |
1.73 |
4.84 |
Per share – diluted |
0.47 |
0.21 |
1.65 |
4.72 |
Capital expenditures |
20,452 |
18,578 |
67,127 |
49,646 |
Total assets |
948,259 |
939,835 |
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Net debt(3) |
187,128 |
307,729 |
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Bank Debt |
74,524 |
224,784 |
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Shareholders’ equity |
461,199 |
361,590 |
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OPERATIONS |
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Light oil -barrels (bbl) per day |
6,649 |
6,948 |
7,207 |
7,051 |
-average price ($ per bbl) |
111.44 |
78.42 |
116.57 |
70.68 |
NGLs -bbl per day |
1,206 |
928 |
1,119 |
983 |
-average price ($ per bbl) |
64.45 |
48.86 |
68.41 |
39.82 |
Conventional natural gas – MCF per day |
31,052 |
27,995 |
31,333 |
26,131 |
– average price ($ per MCF) |
4.73 |
3.94 |
5.47 |
3.60 |
Total barrels of oil equivalent per day (BOE)(4) |
13,031 |
12,542 |
13,548 |
12,389 |
(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 second quarter of 2021 the Company recorded a $203,197,000 impairment reversal less a $47,149,000 deferred income tax expense related to its Alberta cash generating unit’s (“CGU”) oil and gas assets due to the stronger forward prices after the impact COVID-19 had on the forward benchmark prices for crude oil. |
(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 and subordinated debentures. |
(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. |
FINANCIAL & OPERATING HIGHLIGHTS
- Production averaged 13,031 BOE per day in Q3 2022, four percent higher than Q3 2021, and averaged 13,548 BOE per day in the first nine months of 2022, a nine percent increase over the comparative period in the prior year, reflecting an active drilling program along with a continued reactivation of wells supported by stronger commodity prices.
- Realized oil and gas sales in Q3 2022 increased 38 percent over Q3 2021 to total $88.8 million, and increased 72 percent in the first nine months of 2022 compared to the same period of 2021, with growth primarily driven by significantly improved commodity prices and higher production volumes.
- Field netbacks1 averaged $36.01 per BOE in Q3 2022 and $45.55 per BOE in the first nine months of 2022, an increase of 16 percent and 64 percent, respectively, over the same periods in 2021; cash netbacks in the same respective periods in 2022 averaged $29.57 per BOE and $39.05 per BOE, reflecting increases of 19 percent and 93 percent, respectively, due primarily to significantly higher commodity prices.
- Funds flow1 in Q3 2022 totaled $35.5 million ($0.95 per fully diluted share), an increase of 24 percent from Q3 2021, while funds flow1 in the first nine months of 2022 totaled $144.4 million ($3.87 per fully diluted share) representing an increase of 111 percent over the same period in 2021.
- Funds flow1 in excess of capital expenditures (“free funds flow”1) totaled $15.0 million in Q3 2022 and was $77.3 million in the first nine months of 2022, which was directed primarily to debt repayment.
- Capital expenditures in the first nine months of 2022 totaled $67.1 million and included $48.9 million directed to the drilling of 23 gross (22.7 net) wells and the completion, equip, and tie-in of 28 gross (27.7 net) wells, with six of the completed and equipped wells having been drilled late in 2021. All wells drilled were placed on production in the first nine months of 2022 except for one, which came on production in Q4 2022.
- $5.5 million of the capital program was directed to the construction of a wholly owned gas plant, and $13.0 million was directed to related infrastructure and recompletions.
- Quarter-end bank debt totaled $74.5 million, a 33 percent reduction compared to the preceding quarter, as the Company continues its keen focus on net debt reduction. Net debt1 of $187.1 million as at September 30, 2022, was 30 percent lower than year-end 2021, improving Bonterra’s net debt to twelve-month trailing cash flow ratio1 to 1.0 times compared to 2.8 times at December 31, 2021.
- Bonterra’s improved debt profile and increased cash flow facilitated the removal of the term portion of the Company’s bank debt, which had a less favorable interest rate grid.
- Progress has been made on re-constituting Bonterra’s banking syndicate and credit facility, and an update will be provided upon finalization of the new arrangements.
- During the first nine months of 2022, Bonterra continued to focus on being a responsible corporate citizen, including efficiently managing its abandonment and reclamation obligations. The Company successfully abandoned 105.9 net wells, 29.0 net pipeline segments and decommissioned 2.0 net battery sites with support from the Alberta Site Rehabilitation Program (“SRP”). Before the end of 2022, a further 41.4 net wells and associated pipelines that have no further economic potential are targeted for abandonment.
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1 “Funds Flow”, “Field Netback”, “Free Funds Flow”, “Net Debt” and “Net Debt to Twelve-Month Trailing Cash Flow Ratio” are not recognized measures under IFRS. See “Cautionary Statements” below. |
QUARTER IN REVIEW
Bonterra has built significant momentum year-to-date, realizing positive financial and operating results largely driven by production expansion, funds flow growth and meaningful debt repayment. During the first nine months of 2022, the Company executed a successful drilling program, reactivated off-line wells in response to stronger commodity prices, and commissioned a wholly-owned gas plant to alleviate processing capacity limitations, all of which contributed to average production of 13,548 BOE per day for the period. In the third quarter, Bonterra’s production averaged 13,031 BOE per day, an increase of four percent over the same period in 2021. The benefit of increased production volumes was enhanced further by continued strength in commodity prices that resulted in strong netbacks, and growing funds flow1 and free funds flow1, which enabled the Company to further improve its balance sheet.
Revenue, Netbacks and Funds Flow
Supported by robust benchmark commodity prices in the third quarter of 2022, the Company’s average realized light oil price was $111.44 per bbl, the NGL price was $64.45 per bbl, and the average natural gas price was $4.73 per mcf, reflecting increases of 42 percent, 32 percent and 20 percent, respectively, compared to the same period in 2021. Oil and liquids revenue represented 85 percent of the Company’s total realized oil and gas sales in Q3 2022, driving field and cash netbacks1 of $36.01 per BOE and $29.57 per BOE, respectively, increases of 16 percent and 19 percent, respectively, over Q3 2021.
Strong realized pricing also contributed to the generation of $35.5 million of funds flow1 ($0.95 per diluted share) and $15.0 million of free funds flow1 in Q3 2022, and $144.4 million in funds flow1 ($3.87 per diluted share) and $77.3 million of free funds flow1 during the first nine months of the year. The Company intends to maintain its focus on generating robust free funds flow1 that can be allocated to ongoing debt reduction designed to further strengthen the balance sheet.
Successful Capital Program
Through the first nine months of 2022, Bonterra continued to execute an active capital program largely directed to the drilling and development of its high-quality, light oil weighted asset base and other incremental growth initiatives. As of September 30, 2022, $67.1 million of the Company’s annual capital budget has been invested which included $48.9 million allocated to drilling and completions activities, $5.5 million to a wholly-owned gas plant and $13.0 million primarily to related infrastructure expenditures and well recompletions.
Improved Financial Flexibility
Consistent with Bonterra’s previous communications, the Company has maintained a sharp focus on strengthening the balance sheet, the results of which are highlighted by the achievement of a net debt to twelve-month trailing cash flow ratio1 of 1.0 times at quarter end, a significant improvement over 2.8 times recorded at year-end 2021. Net debt1 at September 30, 2022 totaled $187.1 million, a 30 percent reduction from December 31, 2021, reflecting the Company’s steadfast commitment to allocating free funds flow to bank debt reduction and continuing to prudently manage the business.
Bonterra’s bank facility at quarter end was drawn $74.5 million on a $125.0 million total facility ($110.0 million syndicated revolving credit facility and $15.0 million non-syndicated revolving facility), representing a 33 percent reduction in outstanding bank debt compared to the previous quarter. Following a facility step-down commitment of $10.0 million on October 31, 2022, the Company’s total available bank facility going forward is $115.0 million.
OUTLOOK
Bonterra has built significant momentum in the first nine months of 2022, setting the stage for continued positive results and performance to the end of the year and into 2023. Furthermore, the Company remains committed to further decreasing bank debt which supports its goal of restoring a shareholder returns-based business model focused on continued net debt repayment and sustainable dividends.
During the final quarter of 2022, Bonterra anticipates executing the balance of its capital program within a revised 2022 capital expenditure budget range of $75 million to $80 million. Given continued drilling success and a supportive commodity price environment for well reactivations, Bonterra anticipates average production for 2022 to be within its previously announced annual guidance range of 13,300 to 13,700 BOE per day[2]. Production for the month of October 2022 averaged approximately 13,510 BOE per day3, with three gross (3.0 net) operated wells to be placed on production in November 2022.
Recognizing the volatility of commodity prices through Q2 and Q3 2022 and in the interests of protecting future cash flows, Bonterra has prudently layered in hedges on approximately 30 percent of its expected crude oil and natural gas production to the end of Q3 2023. Through the coming 12 months, Bonterra has secured a WTI price range between $48.00 USD to $103.30 USD per bbl on 2,261 bbls per day, with a WTI to Edmonton par differential price ranging from approximately $4.80 to $6.05 per barrel on 1,123 bbls per day. In addition, the Company has secured natural gas prices between $3.00 to $5.00 on 9,674 GJ per day over the same period. This risk management position enables Bonterra to benefit from upward price movement while retaining the certainty of a floor price on a portion of production.
Financial discipline and cost control continue to be priorities as the Company remains committed to the responsible generation of robust funds flow1 and free funds flow1. With ongoing bank debt reduction, Bonterra aims to further strengthen the balance sheet and secure a financially flexible position free from capital allocation constraints, enabling the Company to advance its goal of returning capital to shareholders. Progress has been made regarding the re-constitution of Bonterra’s banking syndicate and credit facility, which is scheduled to mature on November 30, 2022. The Company plans to provide an update when new banking arrangements have been finalized.
Bonterra believes that through continued execution of its focused business strategy and development of its high-quality, oil-weighted asset base, the Company will be ideally positioned to generate positive returns supported by long‐term economic and environmental sustainability.
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”.