Financial and Operating Highlights
Three months ended |
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March 31, |
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($ in thousands, except per share) |
2023 |
2022 |
||
Petroleum and natural gas sales, net of blending(1) |
10,287 |
7,803 |
||
Cash flow from operating activities |
(3,424) |
2,087 |
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Per share – basic |
$ |
(0.01) |
$ |
0.03 |
Per share – diluted |
$ |
(0.01) |
$ |
0.03 |
Adjusted funds flow from operations(1) |
2,622 |
2,426 |
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Net income |
21,812 |
1,347 |
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Per share – basic |
$ |
0.07 |
$ |
0.02 |
Per share – diluted |
$ |
0.06 |
$ |
0.02 |
Capital expenditures – exploration & development |
11,687 |
491 |
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Capital expenditures – net acquisitions & dispositions |
50,000 |
(185) |
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Adjusted working capital (net debt)(1) |
(4,982) |
56,835 |
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Weighted average shares outstanding (thousands) |
||||
Basic |
318,148 |
78,499 |
||
Diluted |
338,403 |
78,499 |
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Average daily production: |
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Crude oil (bbls/d) |
1,919 |
895 |
||
Natural gas (mcf/d) |
125 |
45 |
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Total (boe/d) |
1,940 |
903 |
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Realized prices: |
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Crude oil ($/bbl)(2) |
56.57 |
91.37 |
||
Natural gas ($/mcf) |
2.77 |
4.46 |
||
Total ($/boe) |
56.14 |
90.83 |
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Operating netback ($/boe) |
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Petroleum and natural gas revenues(2) |
56.14 |
90.83 |
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Royalties |
(9.15) |
(14.68) |
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Net operating expenses(1) |
(29.55) |
(41.13) |
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Transportation expenses |
(0.49) |
(0.69) |
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Operating netback ($/boe)(1) |
16.95 |
34.33 |
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Adjusted funds flow from operations ($/boe) (1) |
15.01 |
29.86 |
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(1) See Non-IFRS Measures, Non-IFRS Financial Ratios and Capital Management Measures |
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(2) Realized prices are based on revenue, net of blending expense |
Message to Shareholders
The first quarter of 2023 represents a stub quarter with the newly acquired properties only contributing for 31 days. The second quarter will represent the first full quarter incorporating the property acquisition and results from our active drilling program.
In April, the corporation achieved record production of over 3,000 boe/d (99% oil) at a greatly improved estimated operating netback(1) of greater than $43/boe, representing an improvement of greater than 150% from the reported first quarter period of 2023.
First quarter 2023 operating and financial results:
- Lycos completed the acquisition of heavy oil assets in the Company’s Lloydminster area which added approximately 1,500 boe/d of production and a large inventory of multi-lateral drilling locations.
- The Company added approximately 2,600 net acres of land with multiple identified drilling locations. Our first well on these lands will be drilled in June 2023.
- Capital program included two successful multi-leg “fishbone” wells that achieved IP 30’s of 118 bbls/d and 101 bbls/d, respectively. Both wells are shorter fishbone wells and are outperforming the offsetting conventional multi lateral of similar length.
- Existing fishbones continue to deliver better than forecast results with the original 8-33-43-22W3 well having produced over 20,000 boe (99% oil) since coming on stream at the end of the fourth quarter of 2022 and posting an IP180 of 107 boe/d (99% oil). Additionally, the half fishbone in Alberta produced at an IP60 of 305 boe/d (99% oil) and has produced over 24,000 boe (99% oil), since coming on stream at the end of the first quarter of 2023.
- The acquisition, along with investment in facilities, decreased the average net operating expenses(1) for the first quarter of 2023 of $29.55/boe (a reduction of 26% from the fourth quarter of 2022) and achieved an average March 2023 net operating expense(1) of $22.64/boe (a reduction of 44 % from the fourth quarter of 2022).
- Completed all facility work on the first pod of reactivations at Neilburg, Saskatchewan with the start up of production in the second quarter of 2023.
(1) See “Non-IFRS Measures, Non-IFRS Financial Ratios and Capital Management Measures“ |
Credit Facility Increase
Lycos has entered into an amending agreement with the National Bank of Canada to increase the existing revolving credit facility from $20.0 million to $35.0 million. The credit facility provides added financial flexibility to support the Company’s growth.
Potential Consolidation
At the upcoming Annual General Meeting, shareholders of the Company will be asked to consider for approval, among other things, a resolution authorizing the Board of Directors, at its discretion, to proceed with a potential consolidation (the “Consolidation“) of the common shares of Lycos (the “Common Shares“) on the basis of a ratio between four (4) and eight (8) pre-Consolidation Common Shares for each one (1) post-Consolidation Common Share. The Consolidation is subject to approval of the TSX Venture Exchange (the “TSXV“) and shareholders at the Annual General Meeting. If these approvals are received and the Board of Directors determines to proceed, the Consolidation will occur at a time determined by the Board and announced by a press release of the Company. The Company believes that the Consolidation, if implemented, will promote increased liquidity and reduce volatility in the trading of the Common Shares.
The Company currently has 318,147,806 issued and outstanding Common Shares. In the event that the Consolidation is completed, for example on a four (4) to one (1) basis, the Company would have approximately 79,536,951 Common Shares outstanding following the Consolidation. In addition, the exercise price and number of Common Shares issuable upon the exercise of any convertible securities would be proportionally adjusted upon the implementation of the Consolidation. Further details on the reasoning for the Consolidation and other matters to be considered at the Annual General Meeting are contained in the Company’s management information circular dated May 1, 2023.
Outlook
The outlook for Lycos remains unchanged at $37.0 million of exploration and development expenditures to achieve annual average production guidance of 3,000 boe/d with anticipated fourth quarter production rates of 4,000 boe/d.
Our next drilling campaign will commence with two drilling rigs expected to spud in the next several weeks. During the balance of the year we anticipate drilling 7 fishbone wells and 4 conventional multi-lateral wells including 2 fishbone exploration tests on the newly acquired acreage.
Lycos continues to assess and purse strategic asset and land acquisitions that will continue to enhance our growth and sustainability. Through our acquisition diligence and continued innovation and refinement of multi-lateral drilling techniques we anticipate be able to provide meaningful per share growth for the foreseeable future.