Birchcliff Announces Second Quarter 2017 Results and Updated Guidance – Part 1

FOR: BIRCHCLIFF ENERGY LTD.
TSX SYMBOL: BIR

Date issue: August 10, 2017
Time in: 4:00 PM e

Attention:

CALGARY, ALBERTA--(Marketwired - Aug. 10, 2017) - Birchcliff Energy Ltd. ("Birchcliff") (TSX:BIR) is pleased to announce its second quarter 2017 results, with record quarterly funds flow from operations of $88.6 million and record quarterly average production of 64,636 boe/d. Funds flow from operations is up 568% and quarterly average production is up 64% from the second quarter of 2016. The full text of Birchcliff's Second Quarter Report containing the unaudited interim condensed financial statements for the three and six month periods ended June 30, 2017 and the related management's discussion and analysis will be available on Birchcliff's website at www.birchcliffenergy.com and on SEDAR at www.sedar.com.

"Birchcliff had a very strong second quarter in 2017, notwithstanding transportation issues on the NGTL system, wet weather and access to third party services. Our per unit operating costs were significantly lower compared to the first quarter of 2017. Our 80 MMcf/d Phase V expansion of our Pouce Coupe natural gas processing plant is on time and under budget which will result in strong fourth quarter average production," commented Jeff Tonken, President and Chief Executive Officer of Birchcliff. "We have recently completed and entered into a series of asset sales for total expected proceeds to Birchcliff of approximately $142 million. As a result of these asset sales, we can now focus on our properties in Pouce Coupe and Gordondale, whose profitable growth is the driver of our returns to shareholders. The proceeds from these asset sales will allow us to reduce our indebtedness, which will improve our balance sheet and increase our financial flexibility. We expect that as a result of these asset sales, our operating, transportation and marketing and interest costs will all decrease on a per unit basis."

Second Quarter 2017 Highlights

Highlights of the second quarter include the following:

/T/

-- Record quarterly average production of 64,636 boe/d, a 64% increase from

39,513 boe/d in the second quarter of 2016. Production consisted of approximately 77% natural gas and 23% light oil and NGLs as compared to 90% natural gas and 10% light oil and NGLs in the second quarter of 2016. -- Record quarterly funds flow from operations of $88.6 million ($0.33 per basic common share), a 568% increase from $13.3 million ($0.09 per basic common share) in the second quarter of 2016. -- Birchcliff saw a return to net income in the second quarter of 2017, with net income to common shareholders of $17.0 million ($0.06 per basic common share), as compared to the net loss to common shareholders of $24.3 million ($0.16 per basic common share) in the second quarter of 2016. -- Operating costs of $4.67/boe, an 11% decrease from $5.22/boe in the first quarter of 2017 and a 35% increase from $3.45/boe in the second quarter of 2016. Operating costs increased from the second quarter of 2016 primarily as a result of the liquids-rich assets that Birchcliff acquired in Gordondale on July 28, 2016, which have higher realized sales prices but also have a higher cost structure. -- General and administrative expense of $1.07/boe, a 14% decrease from $1.24/boe in the second quarter of 2016. -- Interest expense of $1.16/boe, a 47% decrease from $2.18/boe in the second quarter of 2016. -- Net capital expenditures of $120.8 million for the three months ended June 30, 2017 and $245.3 million for the six months ended June 30, 2017. The majority of capital under Birchcliff's planned 2017 capital expenditure program will be spent during the first half of 2017 due to the timing of the completion of the Phase V expansion of Birchcliff's 100% owned and operated natural gas processing plant located in Pouce Coupe (the "Pouce Coupe Gas Plant") and the drilling, completion, equipping and tie-in of the wells necessary to fill the expanded plant. -- At June 30, 2017, Birchcliff's long-term bank debt was $628.4 million and its total debt was $700.5 million, which does not take into account expected proceeds in the amount of $132 million ($122 million in cash; $10 million in securities) from asset sales which were announced subsequent to the end of the quarter. -- The maturity dates of Birchcliff's credit facilities were extended to May 11, 2020 from May 11, 2018 and the borrowing base was confirmed at $950 million. In addition, Birchcliff's lenders consented to the borrowing base remaining at $950 million after giving effect to the asset sales. -- Birchcliff drilled a total of 22 (22.0 net) wells in the second quarter of 2017, consisting of 16 (16.0 net) Montney/Doig horizontal natural gas wells in Pouce Coupe and 6 (6.0 net) Montney horizontal oil and natural gas wells in Gordondale. -- During the second quarter of 2017, Birchcliff completed the disposition of certain non-core assets for total proceeds of approximately $10 million (prior to closing adjustments).

/T/

For further information regarding Birchcliff's financial and operational results for the second quarter of 2017, please see the President's Message from the Second Quarter Report, the full text of which is attached hereto.

Expansion to 2017 Capital Expenditure Budget

/T/

-- Birchcliff's Board of Directors has approved an increased 2017 capital

expenditure budget to approximately $404 million, from the $355 million that was previously announced on February 8, 2017. -- Net capital expenditures in 2017 are expected to be approximately $262 million. -- A significant portion of the expanded budget relates to bringing 2018 capital forward in order to ensure the efficient execution of Birchcliff's 2018 capital program. -- Birchcliff's increased capital expenditure program contemplates infrastructure capital for the Phase VI expansion of the Pouce Coupe Gas Plant and capital for the drilling of an additional 8 wells, 2 of which are expected to be brought on production in October 2017 and 4 of which are expected to be brought on production in late December 2017.

/T/

Updated 2017 Production Guidance

/T/

-- Birchcliff has updated its 2017 production guidance to take into account

the asset sales recently announced (which represent forecast 2017 production of 3,600 boe/d) and its increased capital expenditure program. -- Birchcliff's 2017 annual average production is expected to be 67,000 to 68,000 boe/d (revised from 70,000 to 74,000 boe/d) and its fourth quarter average production is expected to be 79,000 to 80,000 boe/d (revised from 80,000 to 82,000 boe/d).

/T/

This press release contains forward-looking information within the meaning of applicable securities laws. Such forward-looking information is based upon certain expectations and assumptions and actual results may differ materially from those expressed or implied by such forward-looking information. For further information regarding the forward-looking information contained herein, please see "Advisories - Forward-Looking Information". In addition, this press release contains references to "funds flow from operations", "funds flow per common share", "operating netback", "estimated operating netback", "funds flow netback", "operating margin", "total cash costs", "adjusted working capital deficit" and "total debt", which do not have standardized meanings prescribed by GAAP. For further information regarding these non-GAAP measures, including reconciliations to the most directly comparable GAAP measure, please see "Non-GAAP Measures".

SECOND QUARTER 2017 FINANCIAL AND OPERATIONAL HIGHLIGHTS

/T/

---------------------------------------- Three months ended Six months ended June 30, June 30, ---------------------------------------- 2017 2016 2017 2016 ---------------------------------------------------------------------------- OPERATING Average daily production Light oil - (bbls) 7,121 2,504 6,212 2,868 Natural gas - (Mcf) 297,016 213,130 294,407 217,804 NGLs - (bbls) 8,013 1,488 7,877 1,567 Total - boe 64,636 39,513 63,157 40,736 ---------------------------------------------------------------------------- Average sales price ($ CDN)(1) Light oil - (per bbl) 60.38 51.20 61.32 43.16 Natural gas - (per Mcf) 3.13 1.48 3.10 1.74 NGLs - (per bbl) 31.10 50.77 31.58 46.19 Total - boe 24.90 13.13 24.42 14.12 ---------------------------------------------------------------------------- NETBACK AND COST ($/boe) Petroleum and natural gas revenue(1) 24.92 13.14 24.43 14.13 Royalty expense (0.80) (0.25) (1.37) (0.46) Operating expense (4.67) (3.45) (4.93) (3.58) Transportation and marketing expense (2.57) (2.35) (2.57) (2.30) ---------------------------------------------------------------------------- Operating netback 16.88 7.09 15.56 7.79 General & administrative expense, net (1.07) (1.24) (1.06) (1.28) Interest expense (1.16) (2.18) (1.26) (1.94) Realized gain on financial instruments 0.42 0.02 0.43 0.01 ---------------------------------------------------------------------------- Funds flow netback 15.07 3.69 13.67 4.58 Stock-based compensation expense, net (0.17) (0.15) (0.15) (0.16) Depletion and depreciation expense (7.41) (8.75) (7.50) (8.85) Accretion expense (0.14) (0.16) (0.15) (0.15) Amortization of deferred financing fees (0.06) (0.06) (0.06) (0.06) Loss on sale of assets (3.58) (3.03) (1.62) (1.47) Unrealized gain on financial instruments 0.80 0.03 1.86 0.02 Dividends on Series C preferred shares (0.15) (0.24) (0.15) (0.24) Income tax recovery (expense) (1.30) 2.18 (1.71) 1.56 ---------------------------------------------------------------------------- Net income (loss) 3.06 (6.49) 4.19 (4.77) Dividends on Series A preferred shares (0.17) (0.27) (0.17) (0.27) ---------------------------------------------------------------------------- Net income (loss) to common shareholders 2.89 (6.76) 4.02 (5.04) ---------------------------------------------------------------------------- FINANCIAL Petroleum and natural gas revenue ($000s)(1) 146,597 47,261 279,305 104,764 ---------------------------------------------------------------------------- Funds flow from operations ($000s) 88,612 13,267 156,242 33,962 Per common share - basic ($) 0.33 0.09 0.59 0.22 Per common share - diluted ($) 0.33 0.09 0.58 0.22 ---------------------------------------------------------------------------- Net income (loss) ($000s) 18,015 (23,321) 47,943 (35,356) Net income (loss) to common shareholders ($000s) 17,015 (24,321) 45,943 (37,356) Per common share - basic ($) 0.06 (0.16) 0.17 (0.25) Per common share - diluted ($) 0.06 (0.16) 0.17 (0.25) ---------------------------------------------------------------------------- Common shares outstanding (000s) End of period - basic 265,417 152,308 265,417 152,308 End of period - diluted 284,461 169,089 284,461 169,089 Weighted average common shares for period - basic 265,326 152,308 264,716 152,308 Weighted average common shares for period - diluted 268,203 154,279 268,065 153,869 ---------------------------------------------------------------------------- Dividends on common shares ($000s) 6,635 - 13,239 - Dividends on Series A preferred shares ($000s) 1,000 1,000 2,000 2,000 Dividends on Series C preferred shares ($000s) 875 875 1,750 1,750 ---------------------------------------------------------------------------- Capital expenditures, net ($000s) 120,782 4,722 245,320 68,582 Revolving term credit facilities ($000s) 628,401 709,510 628,401 709,510 Adjusted working capital deficit ($000s) 72,083 6,141 72,083 6,141 Total debt ($000s) 700,484 715,651 700,484 715,651 ---------------------------------------------------------------------------- (1) Excludes the effect of hedges using financial instruments.

/T/

PRESIDENT'S MESSAGE FROM THE SECOND QUARTER 2017 REPORT

August 10, 2017

Fellow Shareholders,

We are pleased to report the second quarter financial and operational results for Birchcliff Energy Ltd. ("Birchcliff") for the three and six month periods ended June 30, 2017.

Highlights for the Second Quarter 2017

We had a successful second quarter in 2017, with record quarterly average production of 64,636 boe/d and record quarterly funds flow from operations of $88.6 million. In addition, we saw a return to net income as compared to the net loss recorded in the second quarter of 2016, primarily as a result of greater production and improved commodity prices. Highlights of the second quarter include the following:

/T/

-- We had record quarterly average production of 64,636 boe/d, a 64%

increase from 39,513 boe/d in the second quarter of 2016. Production consisted of approximately 77% natural gas and 23% light oil and NGLs as compared to 90% natural gas and 10% light oil and NGLs in the second quarter of 2016. -- We had record quarterly funds flow from operations of $88.6 million ($0.33 per basic common share), a 568% increase from $13.3 million ($0.09 per basic common share) in the second quarter of 2016. -- We had net income to common shareholders of $17.0 million ($0.06 per basic common share), as compared to the net loss to common shareholders of $24.3 million ($0.16 per basic common share) in the second quarter of 2016. -- Our operating costs were $4.67/boe, an 11% decrease from $5.22/boe in the first quarter of 2017 and a 35% increase from $3.45/boe in the second quarter of 2016. Operating costs increased from the second quarter of 2016 primarily as a result of the liquids-rich assets that we acquired in Gordondale on July 28, 2016, which have higher realized sales prices but also have a higher cost structure. -- Our general and administrative expense was $1.07/boe, a 14% decrease from $1.24/boe in the second quarter of 2016. -- Our interest expense was $1.16/boe, a 47% decrease from $2.18/boe in the second quarter of 2016. -- We had net capital expenditures of $120.8 million for the three months ended June 30, 2017 and $245.3 million for the six months ended June 30, 2017. The majority of capital under our planned 2017 capital expenditure program will be spent during the first half of 2017 due to the timing of the completion of the Phase V expansion of our 100% owned and operated natural gas processing plant located in Pouce Coupe (the "Pouce Coupe Gas Plant") and the drilling, completion, equipping and tie-in of the wells necessary to fill the expanded plant. -- At June 30, 2017, our long-term bank debt was $628.4 million and our total debt was $700.5 million, which does not take into account expected proceeds in the amount of $132 million ($122 million in cash; $10 million in securities) from asset sales which were announced subsequent to the end of the quarter. -- The maturity dates of our credit facilities were extended to May 11, 2020 from May 11, 2018 and the borrowing base was confirmed at $950 million. In addition, our lenders consented to the borrowing base remaining at $950 million after giving effect to certain asset sales. -- We drilled a total of 22 (22.0 net) wells in the second quarter of 2017, consisting of 16 (16.0 net) Montney/Doig horizontal natural gas wells in Pouce Coupe and 6 (6.0 net) Montney horizontal oil and natural gas wells in Gordondale. -- During the second quarter of 2017, we completed the disposition of certain non-core assets for total proceeds of approximately $10 million (prior to closing adjustments).

/T/

Share This:

---

More News Articles