Q1 2024 Earnings Season Report Card – Part 2

With Part 1 having been out for a few days (and a few more companies having now reported their Q1 results), we’ve prepared Part 2 of our Earnings Season Report Card for Q1 2024. As usual, Part 2 focuses on per-barrel indicators for Canadian producers. Realized pricing was down overall from January through March 2024, but that hides a much more complex story that saw benchmark oil prices increase amid stagnating natural gas and condensate pricing. Operating and transportation costs were both up slightly, which may be partly explained by the modest reduction in aggregate production that we covered in Part 1. Unsurprisingly, worsened pricing and unfavorable cost structure changes resulted in slightly lower netbacks as well. Having said that, producers displayed significant variance in performance on these indicators, and a number of producers posted improvements across the board. For an expanded analysis on per-barrel metrics in Q1 2024, keep reading.

Realized Pricing ($/BOE)

Price realizations worsened this quarter, with the average company reporting a $0.88/BOE drop in overall realized pricing. Realized pricing metrics improved for NGLs, while condensate and oil realizations generally decreased for most producers despite an increase in the oil benchmark. Numerous companies improved on their pricing metrics from Q4 2023, with 10 out of 36 companies reporting a realized pricing boost. Yangarra was the top performer among these companies, recording a $6.87/BOE improvement in the first quarter. This was due in large part to a boosted liquids percentage of production, which increased from 38% in Q4 2023 to 43% in Q1 2024. Athabasca benefitted from improved bitumen realizations in the first quarter. Bitumen and midstream realized pricing at its Hangingstone asset, for example, improved from $60.12/BBL in Q4 2023 to $68.96/BBL in Q1 2024. Pieridae’s substantially improved realized natural gas pricing (which increased by $0.21/mcf) more than compensated for worsened realized condensate pricing (which dropped by $5.97/BBL). Headwater benefitted from a boost in its realized heavy oil pricing, which increased from $74.69/BBL in Q4 2023 to $76.04/BBL in Q1 2024.

Operating Expenses ($/BOE)

Operating expenses increased slightly this quarter, with the average firm in our dataset reporting a $0.47/BOE increase. Out of 34 firms with data available, only 10 reported operating cost declines this quarter. As an interesting side note, Peyto reported exactly the same operating cost metric in both Q4 2023 and Q1 2024 ($3.29/BOE) despite some big developments taking place at the company in the past 6 months. Moving on to the top performers, Kiwetinohk decreased its operating expenses by an impressive 17.8% in the first quarter. Per the company’s Q1 2024 MD&A, Kiwetinohk benefitted from improved economies of scale and efficiencies at owned and operated infrastructure at the Simonette play. The company even adjusted its operating cost guidance for the year, from $8.00 – $8.75/BOE to $7.75 – $8.25/BOE. Greenfire reported operating expenses that were improved compared to the previous quarter in both per-barrel and absolute terms. This is particularly noteworthy on account of the fact the company also increased production this quarter. Saskatchewan producer ROK Resources reported a $2.29/BOE improvement in the first quarter. While the company’s processing and treatment costs expenses increased slightly, a combined $3.13/BOE reduction in per-barrel maintenance, workover and general operating expenses made a more significant impact.

Transportation Expenses ($/BOE)

Transportation costs for Canadian E&Ps were largely unchanged compared to the prior quarter, with the average company reporting a $0.04/BOE increase. Of the 34 companies for which we have data available, 14 reduced their transportation costs, 18 reported increased costs and 2 reported identical costs in Q4 2023 and Q1 2024. Journey had the most impressive transportation cost reduction in Q1, with an absolute cost decline of $1.096 million and a per-barrel cost decline of $0.88/BOE. Surge reduced its transportation costs by 20.3% quarter-over-quarter, with the company referencing lower trucking costs compared to the prior year on account of pipeline connectivity expansions in Southeast Saskatchewan. Kiwetinohk recorded a positive adjustment to its 2023 expenses that was received in Q1 2024, which “reconciled previously paid pipeline obligations” to match actual shipped volumes in 2023. This adjustment was reported in tandem with an adjustment to the company’s 2024 transportation cost guidance, which was reduced from $6.00 – 6.50/BOE to $5.75 – 6.25/BOE.

Netback ($/BOE)

Netbacks, the ultimate barometer of per-barrel performance, were down in Q1 2024 relative to the prior quarter. Only 15 of the 38 producers for which netback data is available saw netback improvements last quarter, with the average company reporting a $1.02/BOE decline. Greenfire bucked this trend more than any other producer, however, reporting a $7.50/BOE improvement versus Q4 2023. The company referenced improved realized bitumen pricing as well as reduced condensate pricing, which reduced the company’s diluent expenses for the quarter. Yangarra’s netback increase was primarily related to improved realized commodity prices across its NGL and natural gas production categories. The company’s post-hedging realized NGL pricing, for example, increased by $15.20/BBL quarter-over-quarter. Athabasca benefitted from improved hedging outcomes as well as aggregate thermal oil diluent costs that were $3.58 million lower.

Hedging Gains/Losses ($/BOE)

The typical company reported worsened hedging performance in Q1 2024, with an average reduction of $0.25/BOE among Canadian producers. Of the 36 companies for which we have Q1 2024 hedging data available, 16 reported hedging performance improvements. Hedging performance is mostly a result of shifts in commodity pricing, and as such it isn’t surprising to see the top 10 in a given quarter be made up of companies with a similar commodity production mix. For example, recall our Q4 2023 Earnings Season Report Card in which 8 of the top 10 hedging performers were oil-weighted. This makes it all the more interesting, then, that this quarter’s top performers are fairly heterogenous; the top 10 is a mix of small and large, oil-weighted and gas-weighted producers. Vermilion was the top hedging performer by far, with the company posting a per-barrel hedging improvement of $17.22/BOE. It’s important to recall that Vermilion is unique among Canadian producers on account of its exposure to a diverse array of markets. Peyto also posted a risk management performance improvement of almost $4/BOE, driven in large part by gains from its natural gas hedging program. We also wanted to point out that Rubellite and Saturn were in the top 10 improvers for the second quarter in a row, although Saturn posted a net hedging loss in each quarter.

For access to more granular data, check out BOE Intel.