BOE Intel Q2 2023 Report Card – Part 1

With the vast majority of public Canadian producers having now released their Q2 2023 results, it’s high time for a review of a tumultuous quarter in the oil patch. With wildfire-related production curtailments and difficult macroeconomic conditions taking center stage, Q2 2023 was a challenging period for many producers. This was particularly true with respect to natural gas producers, who navigated a worsened price environment that hasn’t fully recovered. With that said, more than a few companies in our dataset put out strong numbers despite these challenges. Many Canadian producers deployed elevated cash flow volumes towards expanded capital budgets, share buybacks, and dividends to investors. The macroeconomic picture also appears to be improving as we enter the later part of the year.

Part 1 of this series will focus on production volumes, debt, and cash flow, while Part 2 will cover per barrel metrics. This analysis was made possible with BOE Intel. For more information or to arrange a demo, feel free to contact us.

Gas Production

Average natural gas production volumes declined slightly in Q2 2023, driven in part by wildfire-related production curtailments. Gas heavyweight Tourmaline, for example, shut down nine gas processing facilities in Q2 on account of wildfire risks. The average company in our dataset produced 2.6% less gas in Q2 2023 compared to Q1 2023, although a handful of companies grew production substantially. Saturn more than doubled its Q1 2023 natural gas production numbers, driven largely by its $516 million acquisition of Ridgeback Resources that closed in February 2023 and saw the company acquire assets in the Cardium and southern Saskatchewan. Crescent Point also grew its natural gas production by 21.5%, growth which can largely be attributed to the company’s May 2023 Montney acquisition. Vermilion also grew its corporate natural gas production by 14.5%, driven primarily by a 42.93 mmcf/d increase in production from its Ireland natural gas assets.

Companies	Q1 2023 (mmcf/d)	Q2 2023 (mmcf/d)	% Change
Saturn	12.7	26.6	109.6
Crescent Point	171.7	208.6	21.5
Vermilion	247.6	283.6	14.5
Ovintiv	1,555.0	1,743.0	12.1
Yangarra	43.2	44.8	3.7
Bonterra Energy	31.4	32.3	2.7
ARC Resources	1,264.0	12,89.0	2.0
NuVista	253.3	256.6	1.3
Pine Cliff	105.2	106.0	0.8
Cardinal Energy	16.0	16.0	0.4
Perpetual	30.8	30.6	-0.6
Hammerhead	127.3	126.3	-0.8
Birchcliff	383.1	379.8	-0.9
Journey	34.9	34.1	-2.2
Canadian Natural Resources	2,139.0	2,085.0	-2.5
Petrus Resources	45.2	44.0	-2.7
Peyto	544.3	527.0	-3.2
InPlay Oil	22.6	21.8	-3.9
Lucero	12.7	12.2	-4.1
Baytex	82.1	78.0	-5.0
Pipestone	124.1	117.4	-5.3
Whitecap	313.2	294.4	-6.0
Tourmaline	2,469.7	2,306.3	-6.6
Athabasca	14.4	13.3	-7.1
Obsidian Energy	69.0	64.0	-7.2
Kelt Exploration	116.7	107.8	-7.7
Crew Energy	155.8	143.8	-7.7
Gear Energy	5.3	4.9	-8.1
Tamarack Valley	74.3	68.0	-8.4
Surge Energy	20.2	18.5	-8.5
Enerplus	245.5	224.1	-8.7
Paramount	320.6	290.2	-9.5
Advantage Energy	314.3	272.9	-13.2
Pieridae	186.2	159.4	-14.4
Cenovus	857.0	729.4	-14.9
Kiwetinohk	83.5	70.6	-15.5
Spartan Delta	293.8	222.3	-24.3
Headwater	12.8	8.5	-33.6
AVERAGE	336.8	327.9	-2.6

Liquids Production

As was the case with natural gas production, liquids production was down slightly in Q2. Liquids production decreased by almost 5% compared to last quarter for the average company in our dataset. Saturn led all companies with respect to proportional liquids production growth, likely a result of the Saskatchewan light oil assets the company acquired in the Ridgeback transaction. Birchcliff, a gas-weighted producer, grew its liquids production by 32.4% on account of boosted NGL output. This was likely driven in part by the completion of 8-well pad 04-16 in May 2023 as well as 4-well pads 15-27 and 04-23 towards the end of Q1 2023. Ovintiv also realized strong liquids growth this quarter, with the company’s production increasing in both USA and Canada. The company’s Canadian liquids production, which was almost entirely made up of condensate and NGLs, increased by approximately 11,700 BBL/d compared to Q1 2023.

Companies	Q1 2023 (BBL/d)	Q2 2023 (BBL/d)	%Change
Saturn	15,672	21,562	37.6
Birchcliff	10,734	14,209	32.4
Ovintiv	252,200	282,700	12.1
Advantage Energy	5,765	6,355	10.2
Crescent Point	110,665	120,258	8.7
Headwater	14,868	15,731	5.8
Baytex	73,082	76,763	5.0
Lucero	9,139	9,493	3.9
Bonterra Energy	8,223	8,530	3.7
Enerplus	56,734	58,214	2.6
ARC Resources	127,769	128,742	0.8
Tamarack Valley	55,556	55,400	-0.3
Pine Cliff	2,547	2,527	-0.8
Athabasca	32,290	31,747	-1.7
Tourmaline	114,291	111,528	-2.4
NuVista	28,998	28,267	-2.5
Gear Energy	5,071	4,932	-2.7
Cardinal Energy	19,064	18,374	-3.6
Cenovus	636,200	608,400	-4.4
Hammerhead	18,771	17,950	-4.4
Whitecap	102,931	98,097	-4.7
Kelt Exploration	12,379	11,746	-5.1
Journey	7,106	6,714	-5.5
Perpetual	1,517	1,427	-5.9
Pipestone	14,485	13,568	-6.3
Surge Energy	21,776	20,387	-6.4
Obsidian Energy	21,728	20,300	-6.6
Rubellite	3,057	2,844	-7.0
InPlay Oil	5,246	4,845	-7.6
Paramount	43,832	39,878	-9.0
Peyto	12,205	10,989	-10.0
Yangarra	5,215	4,637	-11.1
Canadian Natural Resources	962,908	846,909	-12.0
Vermilion	41,187	35,880	-12.9
Crew Energy	6,998	6,087	-13.0
Kiwetinohk	10,075	8,673	-13.9
Pieridae	5,441	4,516	-17.0
Petrus Resources	3,846	3,156	-17.9
MEG Energy	106,840	85,974	-19.5
Spartan Delta	31,230	20,919	-33.0
AVERAGE	336.8	327.9	-2.6

Total BOE Production

Overall corporate production declined by 4.1% for the average company in our dataset. Production curtailments, unplanned facility and pipeline outages, and a worsened commodity price environment are commonly referenced by companies in their results announcements. Production declines in Q2 are not unusual, with 4 out of 6 Q2s since 2018 delivering lower aggregate production when compared to Q1. Saturn, Ovintiv, and Crescent Point all delivered proportional production growth of above 10% in Q2 2023.

Companies	Q1 2023 (BOE/d)	Q2 2023 (BOE/d)	%Change
Saturn	17,783	25,988	46.1
Ovintiv	511,400	573,000	12.0
Crescent Point	139,280	155,031	11.3
Birchcliff	74,592	77,510	3.9
Baytex	86,760	89,761	3.5
Bonterra Energy	13,464	13,911	3.3
Lucero	11,259	11,525	2.4
ARC Resources	338,377	343,630	1.6
Headwater	17,004	17,152	0.9
Vermilion	82,455	83,152	0.8
Pine Cliff	20,076	20,198	0.6
Suncor	742,100	741,900	0.0
NuVista	71,209	71,029	-0.3
Tamarack Valley	67,938	66,738	-1.8
Perpetual	6,655	6,532	-1.8
Athabasca	34,683	33,971	-2.1
Enerplus	97,652	95,572	-2.1
Hammerhead	39,992	39,009	-2.5
Yangarra	12,412	12,103	-2.5
Cardinal Energy	21,726	21,047	-3.1
Gear Energy	5,952	5,742	-3.5
Peyto	102,918	98,777	-4.0
Journey	12,920	12,400	-4.0
Whitecap	155,124	147,166	-5.1
Tourmaline	525,916	495,918	-5.7
Pipestone	35,162	33,143	-5.7
InPlay Oil	9,020	8,474	-6.1
Obsidian Energy	33,153	31,042	-6.4
Cenovus	779,900	729,900	-6.4
Surge Energy	25,138	23,463	-6.7
Kelt Exploration	31,833	29,705	-6.7
Rubellite	3,057	2,844	-7.0
Petrus Resources	11,385	10,492	-7.8
Crew Energy	32,963	30,046	-8.8
Paramount	97,269	88,243	-9.3
Canadian Natural Resources	1,319,391	1,194,326	-9.5
Advantage Energy	58,144	51,842	-10.8
Imperial	413,000	363,000	-12.1
Pieridae	36,467	31,087	-14.8
Kiwetinohk	23,996	20,432	-14.9
MEG Energy	106,840	85,974	-19.5
Spartan Delta	80,200	57,972	-27.7
AVERAGE	150,156	144,065	-4.1

Operating Cash Flow

The Operating Cash Flow picture, when viewed in aggregate, tells a different story from the reality faced by many producers. This is due in large part to uncharacteristically low cash flow numbers among Canadian majors in Q1 2023; Cenovus, Suncor, and Imperial all experienced reduced cash from operations in Q1 on account of corporate turnarounds and catch-up tax payments. This is common for these companies in the first quarter, with 4 of the past 5 years exhibiting similar cash flow drops in Q1 (see chart below).

As such, we have also taken a look at the change in cash flow for the median company in our dataset. This shows a $6.24 million reduction in operating cash flow, which is driven in large part by depressed commodity prices. In particular, gas-weighted producers faced a very poor pricing situation in the second quarter; average realized natural gas prices for companies in our dataset declined from $4.37 per mcf to $2.72 per mcf. ARC Resources defied this trend somewhat, in part because of increased production volumes (particularly condensate) and improved hedging outcomes. Oil prices held up a bit better, which resulted in increased cash flow for oil-weighted producers such as Tamarack Valley, Saturn and Athabasca Oil.

Companies	Q1 2023 ($)	Q2 2023 ($)	Absolute Change ($)
Cenovus	-286,000,000	1,990,000,000	2,276,000,000
Suncor	1,039,000,000	2,803,000,000	1,764,000,000
Imperial	-821,000,000	885,000,000	1,706,000,000
Canadian Natural Resources	1,295,000,000	2,745,000,000	1,450,000,000
Tamarack Valley	59,624,000	156,265,000	96,641,000
Saturn	46,794,000	94,232,000	47,438,000
Athabasca	20,537,000	46,914,000	26,377,000
Cardinal Energy	41,089,000	61,220,000	20,131,000
ARC Resources	540,300,000	550,900,000	10,600,000
Bonterra Energy	24,018,000	33,854,000	9,836,000
Lucero	34,918,000	43,183,000	8,265,000
Baytex	184,938,000	192,308,000	7,370,000
MEG Energy	237,000,000	244,000,000	7,000,000
Headwater	60,201,000	66,857,000	6,656,000
Surge Energy	54,506,000	60,608,000	6,102,000
Crew Energy	66,644,000	69,952,000	3,308,000
Rubellite	9,285,000	12,186,000	2,901,000
Journey	11,461,000	12,335,000	874,000
Perpetual	7,436,000	8,295,000	859,000
Petrus Resources	13,287,000	12,957,000	-330,000
Gear Energy	14,933,000	13,311,000	-1,622,000
Obsidian Energy	72,600,000	67,100,000	-5,500,000
InPlay Oil	22,224,000	13,351,000	-8,873,000
Pine Cliff	22,326,000	12,504,000	-9,822,000
Crescent Point	473,400,000	462,100,000	-11,300,000
Yangarra	33,948,000	22,292,000	-11,656,000
Pieridae	41,309,000	27,533,000	-13,776,000
Kelt Exploration	100,160,000	68,163,000	-31,997,000
Peyto	183,606,000	148,608,000	-34,998,000
Pipestone	78,000,000	40,957,000	-37,043,000
Kiwetinohk	80,160,000	41,360,000	-38,800,000
Hammerhead	115,541,000	75,855,000	-39,686,000
Birchcliff	111,330,000	62,353,000	-48,977,000
Whitecap	468,600,000	414,900,000	-53,700,000
Advantage Energy	105,955,000	37,966,000	-67,989,000
Spartan Delta	214,718,000	146,482,000	-68,236,000
Enerplus	326,216,216	252,162,162	-74,054,054
NuVista	215,221,000	134,166,000	-81,055,000
Paramount	271,400,000	172,200,000	-99,200,000
Vermilion	388,629,000	173,632,000	-214,997,000
Ovintiv	1,445,004,000	1,116,033,000	-328,971,000
Tourmaline	1,538,075,000	927,384,000	-610,691,000
TOTAL	8,962,393,216	14,519,478,162	5,557,084,946
MEDIAN	75,300,000	69,057,500	-6,242,500

Net Debt

Roughly half of the companies in our dataset reduced their net debt balances between March 31 and June 30. The average net debt change, however, was an increase of almost $45 million. This seeming discrepancy was the result of large, transaction-related debt increases for Baytex and Crescent Point. Suncor Energy reduced its net debt by over $1.3 billion, which is line with the company’s capital allocation plan (see Suncor’s most recent corporate presentation here). As of June 30, the company’s net debt was the lowest it had been since 2018. Lucero ended Q2 2023 with a net cash position, which was due in large part to the disposition of substantially all of the company’s non-operated properties.

Overall, the majority of the companies in our dataset are within their target net debt ranges. In addition, many companies have introduced new capital allocation frameworks to reflect new free cash and funds flow deployments in reduced debt scenarios. These allocation frameworks largely specify that more cash is to be devoted to share buybacks and dividend payouts.

Companies	Q1 2023 ($)	Q2 2023 ($)	Absolute Change ($)
Suncor	15,714,000,000	14,394,000,000	-1,320,000,000
Cenovus	6,632,000,000	6,367,000,000	-265,000,000
Lucero	69,608,000	-49,571,000	-119,179,000
Whitecap	1,471,100,000	1,361,200,000	-109,900,000
MEG Energy	1,381,000,000	1,316,000,000	-65,000,000
Vermilion	1,368,029,000	1,321,000,000	-47,029,000
Saturn	556,605,000	510,185,000	-46,420,000
Crew Energy	105,285,000	60,688,000	-44,597,000
Spartan Delta	138,706,000	96,673,000	-42,033,000
Obsidian Energy	351,400,000	324,300,000	-27,100,000
Pieridae	202,180,000	181,670,000	-20,510,000
Surge Energy	331,917,000	311,833,000	-20,084,000
Petrus Resources	53,111,000	36,857,000	-16,254,000
Bonterra Energy	183,674,000	168,344,000	-15,330,000
Kelt Exploration	-4,899,000	-18,580,000	-13,681,000
Peyto	877,827,000	869,550,000	-8,277,000
InPlay Oil	46,204,000	41,821,000	-4,383,000
Cardinal Energy	78,033,000	76,269,000	-1,764,000
Yangarra	121,529,000	119,958,000	-1,571,000
Gear Energy	15,276,000	14,322,000	-954,000
Tamarack Valley	1,374,068,000	1,373,620,000	-448,000
Rubellite	20,920,000	20,676,000	-244,000
Perpetual	55,429,000	56,708,000	1,279,000
Journey	71,071,000	74,662,000	3,591,000
Pine Cliff	-58,139,000	-49,301,000	8,838,000
Hammerhead	379,755,000	388,606,000	8,851,000
ARC Resources	1,264,700,000	1,281,100,000	16,400,000
Kiwetinohk	157,540,000	174,277,000	16,737,000
Pipestone	150,409,000	172,394,000	21,985,000
NuVista	168,985,000	197,894,000	28,909,000
Advantage Energy	195,523,000	229,426,000	33,903,000
Paramount	-43,600,000	2,300,000	45,900,000
Birchcliff	217,927,000	278,521,000	60,594,000
Enerplus	203,513,514	269,729,730	66,216,216
Tourmaline	709,003,000	791,131,000	82,128,000
Canadian Natural Resources	11,932,000,000	12,033,000,000	101,000,000
Crescent Point	1,436,300,000	3,000,700,000	1,564,400,000
Baytex	995,170,000	2,814,844,000	1,819,674,000
AVERAGE	1,287,451,566	1,331,942,282	44,490,716