Canada NewsWire
CALGARY, AB, Nov. 9, 2020
CALGARY, AB, Nov. 9, 2020 /CNW/ - Crew Energy Inc. (TSX: CR) ("Crew" or the "Company") today announces our operating and financial results for the three and nine month periods ended September 30, 2020. Crew's Financial Statements and Notes, as well as Management's Discussion and Analysis ("MD&A") for the three and nine month periods ended September 30, 2020 are available on Crew's website and filed on SEDAR at www.sedar.com.
Q3 2020 HIGHLIGHTS
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(1) | Non-IFRS Measure. "Adjusted funds flow", "net debt", and "net capital expenditures" do not have standardized measures prescribed by International Financial Reporting Standards ("IFRS"), and therefore may not be comparable with the calculations of similar measures for other companies. See "Information Regarding Disclosure on Oil and Gas Reserves, Operational Information and Non-IFRS Measures" within this press release and the Company's MD&A for details including reasons for use. |
Financial & Operating Highlights:
FINANCIAL ($ thousands, except per share amounts) | Three months | Three months | Nine months | Nine months |
Petroleum and natural gas sales | 32,344 | 41,597 | 95,327 | 148,591 |
Adjusted Funds Flow (1) | 8,549 | 16,664 | 25,582 | 64,948 |
Per share - basic | 0.06 | 0.11 | 0.17 | 0.43 |
- diluted | 0.06 | 0.11 | 0.17 | 0.43 |
Net (loss) income | (21,136) | (3,255) | (237,848) | 18,306 |
Per share - basic | (0.14) | (0.02) | (1.56) | 0.12 |
- diluted | (0.14) | (0.02) | (1.56) | 0.12 |
Exploration and Development expenditures | 21,876 | 18,466 | 45,253 | 87,704 |
Property acquisitions (net of dispositions) | (35) | 7 | (34,931) | (19,166) |
Net capital expenditures | 21,841 | 18,473 | 10,322 | 68,538 |
Capital Structure | As at | As at | ||
Working capital deficiency (surplus) (2) | 14,998 | (149) | ||
Bank loan | 42,137 | 52,136 | ||
57,135 | 51,987 | |||
Senior Unsecured Notes | 296,605 | 295,868 | ||
Total Net Debt (3) | 353,740 | 347,855 | ||
Common Shares Outstanding (thousands) | 151,742 | 151,534 |
Notes: | |
(1) | Non-IFRS Measure. AFF is calculated as cash provided by operating activities, adding the change in non-cash working capital, decommissioning obligation expenditures, excluding grants, and accretion of deferred financing costs on the senior unsecured notes. AFF does not have a standardized measure prescribed by International Financial Reporting Standards, ("IFRS") and therefore may not be comparable with the calculations of similar measures for other companies. See "Non-IFRS Measures" contained within Crew's MD&A for details including a reconciliation of AFF to its most closely related IFRS measure. |
(2) | Non-IFRS Measure. Working capital deficiency and surplus includes accounts receivable and net assets held for sale; less accounts payable and accrued liabilities. See "Non-IFRS Measures" contained within Crew's MD&A. |
(3) | Non-IFRS Measure. Net debt is defined as outstanding long-term debt and net working capital. See "Non-IFRS Measures" within the Company's MD&A. |
Operations | Three months | Three months | Nine months | Nine months |
Daily production | ||||
Light crude oil (bbl/d) | 159 | 233 | 188 | 205 |
Heavy crude oil (bbl/d) | 1,464 | 1,627 | 1,389 | 1,653 |
Natural gas liquids ("ngl")(1) (bbl/d) | 1,894 | 2,148 | 2,109 | 2,071 |
Condensate (bbl/d) | 2,247 | 2,575 | 2,739 | 2,773 |
Natural gas (mcf/d) | 86,658 | 97,443 | 93,763 | 97,608 |
Total (boe/d @ 6:1) | 20,207 | 22,824 | 22,052 | 22,970 |
Average prices (2) | ||||
Light crude oil ($/bbl) | 43.93 | 63.81 | 37.56 | 63.39 |
Heavy crude oil ($/bbl) | 37.82 | 52.86 | 25.79 | 52.58 |
Natural gas liquids ($/bbl) | 11.08 | 0.57 | 7.71 | 6.16 |
Condensate ($/bbl) | 43.53 | 62.19 | 41.77 | 64.73 |
Natural gas ($/mcf) | 1.97 | 1.95 | 1.86 | 2.58 |
Oil equivalent ($/boe) | 17.40 | 19.81 | 15.78 | 23.70 |
Notes: | |
(1) | Throughout this news release, natural gas liquids ("ngl") comprise all natural gas liquids as defined by NI 51-101 other than condensate, which is disclosed separately. |
(2) | Average prices are before deduction of transportation costs and do not include realized gains and losses on derivative financial instruments. |
Three months | Three months | Nine months | Nine months | |
Netback ($/boe) | ||||
Petroleum and natural gas sales | 17.40 | 19.81 | 15.78 | 23.70 |
Royalties | (0.76) | (1.49) | (0.74) | (1.70) |
Realized commodity hedging gain | 1.90 | 1.38 | 2.33 | 0.12 |
Marketing income(1) | (0.28) | 1.33 | (0.13) | 1.32 |
Net operating costs(2) | (5.74) | (5.94) | (5.72) | (6.06) |
Transportation costs | (3.89) | (2.80) | (3.49) | (2.69) |
Operating netbacks(3) | 8.63 | 12.29 | 8.03 | 14.69 |
G&A | (0.79) | (1.36) | (0.91) | (1.42) |
Other revenue | 0.12 | - | 0.04 | - |
Financing costs on long-term debt | (3.25) | (2.99) | (2.88) | (2.90) |
Adjusted funds flow | 4.71 | 7.94 | 4.28 | 10.37 |
Drilling Activity | ||||
Gross wells | 6 | 0 | 8 | 6 |
Working interest wells | 6.0 | 0.0 | 8.0 | 6.0 |
Success rate, net wells (%) | 100% | N/A | 100% | 100% |
Notes: | |
(1) | Marketing income was recognized from the monetization of forward natural gas sales contracts offset by the cost of committed natural gas transportation that was not available during the period. |
(2) | Net operating costs are calculated as gross operating costs less processing revenue. |
(3) | Non-IFRS Measure. Operating netback equals petroleum and natural gas sales including realized hedging gains and losses on commodity contracts, marketing income, less royalties, net operating costs and transportation costs calculated on a boe basis. Operating netback does not have a standardized measure prescribed by IFRS and therefore may not be comparable with the calculations of similar measures for other companies. See "Non-IFRS Measures" within Crew's MD&A. |
THE CREW ADVANTAGE
As the global economy continued to manage through the broad-reaching effects of COVID-19 during Q3/20, the energy sector began to see some optimism with improving commodity prices, particularly for natural gas, and a slow return of industry activity. These factors contributed to Crew exceeding our previous quarterly production guidance range and delivering AFF per share which improved as the quarter progressed. The stronger forward curve for natural gas prices gave us an opportunity to continue adding to the Company's robust 2020 and 2021 hedge positions, which we have continued into the fourth quarter. Operationally, we remained active in Q3/20, focusing on the drilling of the first six wells on our seven-well 9-5 pad at West Septimus. With the combination of improved natural gas prices, a solid hedge position and favorable geology at West Septimus, Crew expects this project to generate compelling returns, with capital cost recoveries in approximately 12 to 14 months.
Crew's large proved plus probable reserve base of 2.46 TCFE1,2 provides low risk development and our uniquely positioned Montney asset base provides diversity of commodity types, as well as exposure to market diversification opportunities. The Company's proactive marketing strategy is centered on maintaining the flexibility to react quickly when markets dictate, allowing the Company to enhance AFF. This process has resulted in an active rebalancing of Crew's marketing portfolio to align our transportation commitments and processing capacity, while redirecting natural gas to markets that support stronger price realizations.
Advancing Crew's ESG goals and conducting our operations to the highest standards has always been part of our corporate identity. Our team of employees and contractors remained safe during the quarter, with zero recordable or lost time injuries and no reported incidents of COVID-19. Our environmental performance was exemplary as the Company had no reportable spills in Q3/20. The twinning and start-up of a pipeline at West Septimus earlier in the year continues to support production volumes, while reducing gas lift compression requirements. This proactive initiative facilitates an expected reduction of 1,550 tonnes of CO2 emissions annually, having the equivalent impact of removing 337 cars from the road each year3. In addition, a West Septimus water disposal well that began operating in Q2/20 is expected to handle all produced water from the West Septimus processing facility, ultimately reducing annual costs by up to $6.0 million, while eliminating 2,800 tonnes of CO2 emissions, equivalent to removing 609 cars off the road annually3.
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1 | Reflects total corporate reserves based on the Corporation's independent reserves evaluation effective December 31, 2019 |
2 | Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil |
3 | The average North American car emits 4.6 tonnes of CO2 per year (Source: EPA / Natural Resources Canada) |
FINANCIAL OVERVIEW
Production Higher as Prices Improve
Positive AFF
Costs Trending Lower
Liquidity Remains Strong
TRANSPORTATION, MARKETING & HEDGING
Market Access Diversification and Increased Risk Management Focus
OPERATIONS & AREA OVERVIEW
Sustainability and ESG Initiatives
NE BC Montney - Greater Septimus
Greater Septimus
Production & Drilling | Q3 | Q2 | Q1 | Q4 | Q3 |
Average daily production (boe/d) | 17,119 | 18,565 | 19,894 | 18,720 | 19,648 |
Wells drilled (gross / net) | 6 / 6.0 | 0 | 0 | 0 | 0 |
Wells completed (gross / net) | 0 | 0 | 0 | 4 / 4.0 | 1 / 1.0 |
Operating Netback | Q3 | Q2 | Q1 | Q4 | Q3 |
Revenue | 15.73 | 11.97 | 17.61 | 20.13 | 17.38 |
Royalties | (0.42) | (0.36) | (0.86) | (1.76) | (1.04) |
Realized commodity hedge gain | 2.18 | 3.06 | 1.44 | 0.90 | 1.78 |
Marketing income(1) | (0.33) | (0.31) | 0.13 | (0.02) | 1.55 |
Net operating costs(2) | (4.71) | (4.81) | (4.52) | (3.99) | (4.41) |
Transportation costs | (3.86) | (3.37) | (2.99) | (2.61) | (2.62) |
Operating netback(3) | 8.59 | 6.18 | 10.81 | 12.65 | 12.64 |
Notes: | |
(1) | Marketing income was recognized from the monetization of forward physical sales contracts offset by the cost of committed natural gas transportation that was not available during the period. |
(2) | Net operating costs are calculated as gross operating costs less processing revenue. |
(3) | Non-IFRS Measure. Operating netback equals petroleum and natural gas sales including realized hedging gains and losses on commodity contracts, marking income, less royalties, net operating costs and transportation costs calculated on a boe basis. Operating netback does not have a standardized measure prescribed by IFRS and therefore may not be comparable with the calculations of similar measures for other companies. See "Non-IFRS Measures" contained within Crew's MD&A. |
Other NE BC Montney
AB / SK Heavy Oil Lloydminster
OUTLOOK
Crew will continue to adhere to the highest safety standards in the field and ensure the physical and mental health of our employees, contractors and community is supported. From a value creation perspective, we are relentlessly seeking to identify opportunities to generate value for all stakeholders, over the short and longer term. We commend the tireless efforts of Crew's employees and directors whose commitment and dedication are critical to our ongoing success. We thank all of our shareholders and bondholders for your ongoing support and hope you and your families remain safe.
Advisories
Information Regarding Disclosure on Operational Information and Non-IFRS Measures
All amounts in this news release are stated in Canadian dollars unless otherwise specified. This press release contains financial and performance metrics that are not defined in IFRS and do not have standardized meanings or standardized methods of calculation, such as "adjusted funds flow", "operating netbacks", "net capital expenditures", "working capital deficiency (surplus)" and "net debt". As such, these terms may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Such metrics have been included herein to provide readers with additional information to evaluate the Company's performance, however such metrics should not be unduly relied upon. Management uses oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare Crew's operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this press release, should not be relied upon for investment or other purposes.
With respect to the use of terms used in this press release identified as Non-IFRS Measures, see Non-IFRS Measures contained in Crew's MD&A for applicable definitions, calculations, rationale for use and, where applicable, reconciliations to the most directly comparable measure under IFRS.
Forward-Looking Information and Statements
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" "forecast" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: the potential and uncertain impact of COVID-19 on the Company's operations and results; as to the execution of Crew's business plan including anticipated timing of completions and on-stream dates, Q4 spending plans and Q4 and annual 2020 production and operating cost guidance; capital spending plans and budget estimates; the estimated volumes and product mix of Crew's oil and gas production; commodity price expectations including Crew's estimates of natural gas pricing exposure; Crew's commodity risk management programs and future hedging opportunities; marketing and transportation plans; estimates of sales points weightings for 2020 and into 2021; future liquidity and financial capacity; future results from operations and operating metrics; potential for lower costs, strong capital efficiencies and enhanced returns going forward; anticipated reductions in transportation costs; estimated annual savings associated with planned operations and streamlining efforts; capital cost recovery targets; anticipated impact of our water disposal well at West Septimus including associated reductions in annual CO2 emissions; plans for the installation of a waste heat recovery system at West Septimus and the potential impact thereof; the potential impact of government programs associated with COVID-19; world supply and demand projections and anticipated reductions in industry spending as a result, and long-term impact on pricing; future development, exploration, acquisition and disposition activities (including drilling and completion plans and associated timing and cost estimates); infrastructure investment plans and associated production capacity; the amount and timing of capital projects; and the anticipated timing of release of our 2021 capital expenditure budget and associated guidance.
In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of Crew which have been used to develop such statements and information but which may prove to be incorrect. Although Crew believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Crew can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: that Crew will continue to conduct its operations in a manner consistent with past operations; results from drilling and development activities consistent with past operations; the quality of the reservoirs in which Crew operates and continued performance from existing wells; the continued and timely development of infrastructure in areas of new production; the accuracy of the estimates of Crew's reserve volumes; certain commodity price and other cost assumptions; continued availability of debt and equity financing and cash flow to fund Crew's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Crew operates; the general continuance of current industry conditions; the timely receipt of any required regulatory approvals; the ability of Crew to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Crew has an interest in to operate the field in a safe, efficient and effective manner; the ability of Crew to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Crew to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Crew operates; and the ability of Crew to successfully market its oil and natural gas products.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: the continuing and uncertain impact of COVID-19; changes in commodity prices; changes in the demand for or supply of Crew's products, the early stage of development of some of the evaluated areas and zones the potential for variation in the quality of the Montney formation; interruptions, unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates; climate change regulations, or other regulatory matters; changes in development plans of Crew or by third party operators of Crew's properties, increased debt levels or debt service requirements; inaccurate estimation of Crew's oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Crew's public disclosure documents (including, without limitation, those risks identified in this news release and Crew's Annual Information Form).
The internal projections, expectations or beliefs underlying the Company's 2020 capital budget and corporate outlook for 2020 and beyond are subject to change in light of ongoing results, prevailing economic circumstances, commodity prices and industry conditions and regulations. Crew's outlook for 2020 and beyond provides shareholders with relevant information on management's expectations for results of operations, excluding any potential acquisitions, dispositions or strategic transactions that may be completed in 2020 and beyond. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted and Crew's 2020 guidance and outlook may not be appropriate for other purposes.
The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Crew does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Supplemental Information Regarding Product Types
This news release includes references to average daily production volumes by quarter at Greater Septimus. The following is intended to provide the product type composition for each of the production figures provided herein, where not already disclosed within tables above:
Greater Septimus Production Volume Breakdown | ||||
Natural gas liquids(1) | Condensate | Natural gas | Total (boe/d) | |
Q3/20 | 11% | 13% | 76% | 17,119 |
Q2/20 | 11% | 14% | 75% | 18,565 |
Q1/20 | 11% | 17% | 72% | 19,894 |
Q4/19 | 10% | 13% | 77% | 18,720 |
Q3/19 | 11% | 13% | 76% | 19,648 |
Notes: | |
(1) | Throughout this news release, natural gas liquids ("ngl") comprise all natural gas liquids as defined by NI 51-101 other than condensate, which is disclosed separately. |
Test Results and Initial Production Rates
A pressure transient analysis or well-test interpretation has not been carried out and thus certain of the test results provided herein should be considered to be preliminary until such analysis or interpretation has been completed. Test results and initial production rates disclosed herein, particularly those short in duration, may not necessarily be indicative of long term performance or of ultimate recovery.
BOE, MMCFE and TCFE Conversions
Barrel of oil equivalents or BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of 6:1, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
TCFe of gas is defined as Trillion Cubic Feet Equivalent, and MMCFe of gas is defined as Million Cubic Feet Equivalent. Both terms have been applied using the oil equivalent conversion ratio of six thousand cubic feet of natural gas (6 mcf) to one barrel of oil (1 bbl). TCFe and MMCFe amounts may be misleading, particularly if used in isolation.
Crew is a growth-oriented oil and natural gas producer, committed to pursuing sustainable per share growth through a balanced mix of financially and socially responsible exploration and development complemented by strategic acquisitions. The Company's operations are primarily focused in the vast Montney resource, situated in northeast British Columbia, and include a large contiguous land base. Greater Septimus along with Groundbirch and the light oil area at Tower in British Columbia offer significant development potential over the long-term. The Company has access to diversified markets with operated infrastructure and access to multiple pipeline egress options. Crew's common shares are listed for trading on the Toronto Stock Exchange ("TSX") under the symbol "CR".
Financial statements and Management's Discussion and Analysis for the three and nine month periods ended September 30, 2020 and 2019 are filed on SEDAR at www.sedar.com and are available on the Company's website at www.crewenergy.com.
SOURCE Crew Energy Inc.
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