With the majority of Canadian producers having now reported their second quarter results, the time has come for another BOE Intel Earnings Season Report Card. The major story in the second quarter was natural gas pricing, which dropped precipitously; average natural gas pricing in Q2 was the lowest we’ve seen since Q3 2019. But before diving too deep into realized pricing, which we’ll save for part 2, we wanted to review production and financial indicators. While individual results varied, production declines were contrasted with cash flow and capital spending increases. Net debt varied as always, but Q2 was a period of deleveraging in aggregate.
Liquids Production
Liquids production was down slightly in the second quarter, with the average company’s production shrinking by 1.6% relative to the first quarter. Highwood led all companies with respect to quarter-over-quarter liquids production growth, increasing its output by 31.8%. According to the company’s July 2024 corporate presentation, Highwood drilled 9 wells through the end of Q1 2024 that appear to have begun to deliver results. Lycos also recorded significant proportional growth, adding 810 BBL/d relative to its 3,804 BBL/d Q1 2024 liquids production baseline. According to BOE Intel data, the company has spud 26 wells since the beginning of the year, 5 of which were put on production in the second quarter. Rounding out the top 3 was Hemisphere Energy, which grew its liquids production by 16.0% relative to Q1. The company attributed this increase to “six new Atlee Buffalo wells that were placed on production in the third quarter of 2023, as well as to the general overall increase in production from the polymer floods throughout the Atlee Buffalo pools“. The company with the greatest absolute increase in liquids production was Whitecap, which grew its liquids production by 6,154 BBL/d relative to the first quarter. The company brought 19 wells on production in Q2, 5 of which target the oil-weighted Lower Shaunavon formation.
| Company | Q2 2024 (BBL/d) | Q1 2024 (BBL/d) | Absolute Change (BBL/d) | % Change |
| Highwood | 4,893 | 3,712 | 1,181 | 31.8 |
| Lycos | 4,614 | 3,804 | 810 | 21.3 |
| Hemisphere | 3,609 | 3,110 | 499 | 16.0 |
| Logan | 2,621 | 2,337 | 284 | 12.2 |
| Saturn | 23,683 | 21,325 | 2,358 | 11.1 |
| Advantage Energy | 7,141 | 6,452 | 689 | 10.7 |
| Crew Energy | 8,620 | 7,805 | 815 | 10.4 |
| Athabasca | 36,837 | 34,126 | 2,711 | 7.9 |
| Headwater | 18,892 | 17,599 | 1,293 | 7.3 |
| NuVista | 33,185 | 31,242 | 1,943 | 6.2 |
| Average | 73,800 | 75,000 | -1,200 | -1.6 |
Liquids production for Hemisphere, Highwood, Logan, and Lycos, Q2 2023 – Q2 2024
Gas Production
Similar to liquids production, gas production was down on average in Q2. Canadian E&Ps produced 1.3% less natural gas in the second quarter, which may have been a response to low natural gas price realizations. Proportionally, Athabasca was the top company by quarter-over-quarter natural gas production growth; the company posted a 43.0% increase. Athabasca’s natural gas production is predominantly through its privately held subsidiary, Duvernay Energy Corporation, which has directed a portion of its 2024 capital spending to 2 tie-ins and completions. Saturn recorded an increase of 8.2 mmcf/d in Q2 relative to Q1. Tamarack Valley, primarily an oil producer, achieved a 6.7% increase in gas output relative to the first quarter of 2024. This is particularly impressive as Tamarack managed this in spite of a third-party service interruption at one of the company’s natural gas processing facilities at the beginning of the second quarter. Ovintiv recorded the largest absolute gas production increase of any company, eclipsing its first quarter production by 92.0 mmcf/d. This substantial increase can likely be tied to the 36 Montney wells Ovintiv brought on production in Q2 2024.
| Company | Q2 2024 (mmcf/d) | Q1 2024 (mmcf/d) | Absolute Change (mmcf/d) | % Change |
| Athabasca | 4.7 | 3.3 | 1.4 | 43.0 |
| Saturn | 38.7 | 30.4 | 8.2 | 27.1 |
| Highwood | 9.4 | 7.9 | 1.5 | 19.4 |
| Tamarack Valley | 54.9 | 51.4 | 3.4 | 6.7 |
| Ovintiv | 1,740.0 | 1,648.0 | 92.0 | 5.6 |
| Birchcliff | 389.0 | 370.3 | 18.7 | 5.1 |
| Yangarra | 40.2 | 38.4 | 1.8 | 4.6 |
| Bonterra Energy | 37.5 | 36.6 | 0.9 | 2.5 |
| Whitecap | 377.7 | 368.7 | 9.0 | 2.4 |
| NuVista | 299.8 | 292.8 | 7.0 | 2.4 |
| Average | 320.8 | 324.9 | -4.1 | -1.3 |
Liquids production for Athabasca, Highwood, Saturn, Tamarack Valley, Q3 2021 – Q2 2024
Capital Expenditures
On average, Canadian producers recorded slightly more capital spending in the second quarter; capital spending was 3.2% higher relative to Q1. Perpetual reported a 906.2% increase, a seemingly absurd boost that is mostly explained by particularly low spending in the first quarter. Per the company’s Q2 report, $2.000 million out of the $3.079 million in spending went toward the drilling of 2 gross (1 net) wells. ROK Resources boosted its spending by $3.900 million. The highlight of this 325.0% increase, according to the company, was “4 gross (3.44 net) wells, all in Southeast Saskatchewan, targeting the Frobisher formation“. Rubellite nearly doubled its capex in the second quarter, with the bulk of this spending going toward “eight (8.0 net) multi-lateral horizontal development / step-out delineation wells at Figure Lake“. In addition, the company allocated $1.9 million to its Figure Lake gas conservation project. Suncor recorded the largest absolute change in capital spending, exceeding the first quarter by over $650 million. In its August 2024 corporate presentation, the company highlights $350-370 million in budgeted 2024 spending on in-situ well pad development at its Firebag and MacKay River projects.
| Company | Q2 2024 ($) | Q1 2024 ($) | Absolute Change ($) | % Change |
| Perpetual | 3,079,000 | 306,000 | 2,773,000 | 906.2 |
| ROK Resources | 5,100,000 | 1,200,000 | 3,900,000 | 325.0 |
| Rubellite | 23,886,000 | 12,602,000 | 11,284,000 | 89.5 |
| Pine Cliff | 1,037,000 | 559,000 | 478,000 | 85.5 |
| Gear Energy | 11,688,000 | 7,600,000 | 4,088,000 | 53.8 |
| Suncor | 1,964,000,000 | 1,311,000,000 | 653,000,000 | 49.8 |
| Canadian Natural Resources | 1,621,000,000 | 1,113,000,000 | 508,000,000 | 45.6 |
| Logan | 46,104,000 | 35,182,000 | 10,922,000 | 31.0 |
| Paramount | 240,800,000 | 213,900,000 | 26,900,000 | 12.6 |
| Cenovus | 1,155,000,000 | 1,036,000,000 | 119,000,000 | 11.5 |
| Average | 203,100,000 | 196,800,000 | 6,300,000 | 3.2 |
Capital Expenditures for Gear, Perpetual, ROK Resources, Rubellite, Q1 2022 – Q2 2024
Operating Cash Flow
The average company in our dataset generated significantly more cash from operations in the second quarter; average operating cash flow grew by 32.9% relative to Q1. Having said that, gas-weighted producers had a more difficult quarter than oilier producers. Of the top 10 producers by quarter-over-quarter cash flow growth, only one (Ovintiv) recorded more BOE gas production than oil production. Three producers reported quarter-over-quarter operating cash flow growth of over 200%, with Hemisphere topping all companies at 451.2% growth. The company, which produces minimal natural gas, reported that this increase was primarily a result of increased production and improved commodity pricing. Similarly, Lycos reported a 21% increase in production (99% crude oil), which drove operating cash flow for the quarter to its second-highest level in the history of the company. In contrast, Greenfire’s 399.1% operating cash flow growth was achieved in spite of a decrease in production; the company attributed its strong quarter to higher oil revenue as well as “an increase to non-cash working capital, from the accelerated collection of June 2024 oil sales receivables“. CNRL recorded the best quarter in terms of absolute growth in cash from operations; the company generated an additional $1.216 billion relative to Q1.
| Company | Q2 2024 ($) | Q1 2024 ($) | Absolute Change ($) | % Change |
| Hemisphere | 14,795,000 | 2,684,000 | 12,111,000 | 451.2 |
| Greenfire | 85,163,000 | 17,064,000 | 68,099,000 | 399.1 |
| Lycos | 14,024,000 | 4,105,000 | 9,919,000 | 241.6 |
| Cardinal Energy | 71,463,000 | 39,364,000 | 32,099,000 | 81.5 |
| Athabasca | 135,083,000 | 76,638,000 | 58,445,000 | 76.3 |
| Highwood | 19,539,000 | 11,417,000 | 8,122,000 | 71.1 |
| Gear Energy | 17,212,000 | 10,466,000 | 6,746,000 | 64.5 |
| Headwater | 90,402,000 | 55,047,000 | 35,355,000 | 64.2 |
| Ovintiv | 1,395,360,000 | 888,991,000 | 506,369,000 | 57.0 |
| ROK Resources | 6,484,206 | 4,175,725 | 2,308,481 | 55.3 |
| Average | 424,000,000 | 319,100,000 | 104,900,000 | 32.9 |
Operating Cash Flow for Cardinal, Greenfire, Hemisphere, Lycos, Q2 2022 – Q2 2024
Net Debt
Overall, Canadian producers deleveraged in the second quarter; the average company in our dataset reported a 10.2% net debt decrease. Going company by company for producers with available figures, 24 out of 43 companies decreased their net debt balances in Q2. Among all companies, Paramount reported the most significant proportional decrease in its net debt balance, decreasing it by 57.2%. While the company didn’t provide an explanation for the decline, it is possible that cash generated from Paramount’s April 2024 sale of 6 million shares of NuVista (for net proceeds of $74.8 million) was put toward this reduction. Suncor, which was also the top company by absolute debt reduction, decreased its net debt by 26.9%. Per the company’s August 2024 corporate presentation, Suncor has an $8 billion net debt target that, once reached, will trigger a shift toward increased buybacks. On the other end of spectrum, Advantage Energy reported a 141% net debt increase, which is unsurprising in light of the company’s $445.5 million acquisition of certain Charlie Lake and Montney assets. Similarly, Saturn reported a 105% net debt increase, likely due to its $534.8 million Q2 acquisition.
| Company | Q2 2024 ($) | Q1 2024 ($) | Absolute Change ($) | % Change |
| Bottom 5 | ||||
| Paramount | 29,300,000 | 68,400,000 | -39,100,000 | -57.2 |
| Suncor | 9,054,000,000 | 13,485,000,000 | -4,431,000,000 | -32.9 |
| Gear Energy | 9,111,000 | 12,462,000 | -3,351,000 | -26.9 |
| Surge Energy | 234,707,000 | 295,924,000 | -61,217,000 | -20.7 |
| Crescent Point | 2,962,700,000 | 3,582,900,000 | -620,200,000 | -17.3 |
| Top 5 | ||||
| Perpetual | 24,651,000 | 19,861,000 | 4,790,000 | 24.1 |
| Spartan Delta | 132,449,000 | 92,668,000 | 39,781,000 | 42.9 |
| Kelt Exploration | 63,084,000 | 31,961,000 | 31,123,000 | 97.4 |
| Saturn | 792,193,000 | 386,417,000 | 405,776,000 | 105.0 |
| Advantage Energy | 674,665,000 | 279,963,000 | 394,702,000 | 141.0 |
| Average | 987,400,000 | 1,100,000,000 | -112,600,000 | -10.2 |
Net Debt for Kelt Exploration, Paramount, Spartan Delta, Surge, Q3 2020 – Q2 2024
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