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Birchcliff Energy Ltd. Announces Filing of Its 2018 Year-End Audited Financial Statements and Disclosure Documents and Provides Operational Update


CALGARY, Alberta, March 13, 2019 (GLOBE NEWSWIRE) — Birchcliff Energy Ltd. (“Birchcliff”) (TSX: BIR) is pleased to announce that it has filed its audited annual financial statements and related management’s discussion and analysis (the “MD&A”) and its annual information form (the “AIF”) for the financial year ended December 31, 2018 (collectively, the “Annual Filings”) on the System for Electronic Document Analysis and Retrieval (“SEDAR”).

The audited annual financial statements are consistent with the unaudited financial results disclosed in the press release issued by Birchcliff on February 13, 2019. The AIF includes the disclosure and reports relating to reserves data and other oil and gas information required pursuant to National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities, as well as supplemental information relating to Birchcliff’s contingent and prospective resources. The Annual Filings are available electronically on Birchcliff’s website at www.birchcliffenergy.com and on SEDAR at www.sedar.com.

Operational Update

Birchcliff’s disciplined 2019 capital program (the “2019 Capital Program”) is focused on its high-value light oil assets in Gordondale and its condensate-rich assets in Pouce Coupe. Wells that have been brought on production in 2019 to date have had encouraging initial production rates with strong oil and condensate volumes. These rates are summarized in Birchcliff’s corporate presentation at www.birchcliffenergy.com/investors/corporate-presentation/.

Birchcliff currently has three drilling rigs at work, with two rigs in the Gordondale area and one in the Pouce Coupe area. Year-to-date, Birchcliff has drilled 10 (10.0 net) wells, consisting of 4 (4.0 net) Montney horizontal oil wells in the Gordondale area and 6 (6.0 net) Montney/Doig horizontal natural gas wells in the Pouce Coupe area. All of these wells were drilled on multi-well pads and none have been completed yet. With respect to the 9 wells Birchcliff drilled in Q4 2018, 7 of these wells have been brought on production and the remaining 2 wells are currently in various stages of completion. With 7 (7.0 net) wells left to drill under the 2019 Capital Program, Birchcliff expects to reduce the drilling rigs being utilized after break-up. Birchcliff anticipates that all 17 (17.0 net) wells to be drilled in 2019 will be brought on production by the end of Q3 2019.

The following tables summarize the wells that Birchcliff has drilled and brought on production year-to-date, as well as the remaining wells to be drilled and brought on production during 2019:

Wells Drilled – 2019

Area Wells drilled to-date Remaining wells to be
drilled in 2019
Total wells to be drilled in
2019
Pouce Coupe
Montney D1 horizontal natural gas wells 4 2 6
Montney D2 horizontal natural gas wells 2 0 2
Montney C horizontal natural gas wells 0 1 1
Total – Pouce Coupe 6 3 9
Gordondale
Montney D2 horizontal oil wells 3 2 5
Montney D1 horizontal oil wells 1 2 3
Total – Gordondale 4 4 8
TOTAL – COMBINED 10 7 17

Wells Brought on Production – 2019

Area Wells brought on
production to-date
Remaining wells to be
brought on production in
2019
Total wells to be brought
on production in 2019
Pouce Coupe
Montney D1 horizontal natural gas wells 3 8 11
Montney D2 horizontal natural gas wells 0 2 2
Montney C horizontal natural gas wells 0 1 1
Total – Pouce Coupe 3 11 14
Gordondale
Montney D2 horizontal oil wells 2 5 7
Montney D1 horizontal oil wells 2 3 5
Total – Gordondale 4 8 12
TOTAL – COMBINED 7 19 26(1)

 

(1) Includes the 9 horizontal wells that were drilled in Gordondale and Pouce Coupe in Q4 2018 and have been or will be completed in 2019. Accordingly, a total of 26 (26.0 net) wells are expected to be brought on production during 2019.

2019 Guidance

Birchcliff is pleased to re-affirm its 2019 guidance. The following table sets forth its guidance and commodity price assumptions for 2019:

    2019 Guidance and
Assumptions
(1)
Production
Annual average production (boe/d) 76,000 – 78,000
% Natural gas 79%
% Light oil 7%
% Condensate 6%
% Other NGLs 8%
     
Average Expenses ($/boe)    
Royalty 1.30 – 1.50
Operating 3.15 – 3.35
Transportation and other 4.65 – 4.85(2)
     
Adjusted Funds Flow (MM$) 330(3)
     
F&D Capital Expenditures (MM$) 204(4)
     
Free Funds Flow (MM$)(5) 126
     
Acquisition Purchase Price (MM$) 39(6)
     
Total Capital Expenditures (MM$) 245(4)
     
Natural Gas Market Exposure(7)    
AECO exposure as a % of total natural gas production 35%
Dawn exposure as a % of total natural gas production 39%
NYMEX HH exposure as a % of total natural gas production 25%
Alliance pipeline exposure as a % of total natural gas production 1%
     
Commodity Prices    
Average WTI price (US$/bbl) 56.00
Average WTI-MSW differential (CDN$/bbl) 10.00
Average AECO price (CDN$/GJ) 1.65
Average Dawn price (CDN$/GJ) 3.40
Average NYMEX HH price (US$/MMBtu)(8) 3.00
Exchange rate (CDN$ to US$1) 1.32

 

(1) Please see “Advisories – Forward-Looking Statements”. Birchcliff’s guidance for its commodity mix, average expenses, funds flow, capital expenditures and natural gas market exposure in 2019 is based on an annual average production rate of 77,000 boe/d during 2019, which is the mid-point of Birchcliff’s annual average production guidance for 2019.
(2) Includes transportation tolls for 150,000 GJ/d of natural gas sold at the Dawn price from January 1, 2019 to October 31, 2019 and 175,000 GJ/d from November 1, 2019 to December 31, 2019. Also includes any new unused firm transportation costs associated with Birchcliff’s commitments on the NGTL system, which is available for future production growth.
(3) Adjusted Funds Flow is calculated as cash flow from operating activities before the effects of decommissioning expenditures and changes in non-cash working capital. See “Non-GAAP Measures”. Birchcliff’s estimate of adjusted funds flow takes into account the settlement of financial and physical commodity risk management contracts outstanding as at March 13, 2019. See “Commodity Price Risk Management” in the MD&A.
(4) Birchcliff’s estimate of F&D capital expenditures corresponds to Birchcliff’s 2019 capital budget of $204 million. This estimate excludes the purchase price for the Corporation’s recent acquisition of Montney land for total cash consideration of $39 million, which closed on January 3, 2019 (the “Acquisition”) as described in the MD&A under “Subsequent Event”, and any other net potential acquisitions and dispositions. Birchcliff’s estimate of total capital expenditures includes the purchase price for the Acquisition; however, this estimate does not take into account any other potential acquisitions or dispositions as these amounts are unbudgeted. The estimate of total capital expenditures also includes minor administrative assets. See “Advisories – Capital Expenditures”.
(5) Free funds flow is calculated as adjusted funds flow less F&D capital expenditures and is prior to administrative assets, acquisitions, dispositions, dividend payments and abandonment and reclamation obligations. See “Non-GAAP Measures”. Free funds flow may be used by Birchcliff to reduce debt, pursue additional growth, pay dividends and/or to fund share buybacks under its normal course issuer bid. Any prolonged or significant decrease in commodity prices may leave insufficient free funds flow for debt reduction or the other foregoing purposes.
(6) Represents the purchase price for the Acquisition of $39 million.
(7) Birchcliff’s guidance regarding its natural gas market exposure in 2019 assumes: (i) 150,000 GJ/d being sold at the Dawn index price from January 1, 2019 to October 31, 2019 and 175,000 GJ/d from November 1, 2019 to December 31, 2019; (ii) 5 MMcf/d being sold at Alliance’s Trading Pool daily index price; and (iii) 100,000 MMBtu/d being hedged at a fixed basis differential between the AECO price and the NYMEX HH price.
(8) $1.00 per MMBtu equals $1.00 per Mcf based on a standard heat value of 37.4 MJ/mor a heat uplift of 1.055 when converting from $/GJ.

Abbreviations

AECO benchmark price for natural gas determined at the AECO ‘C’ hub in southeast Alberta
bbl barrel
boe barrel of oil equivalent
boe/d barrel of oil equivalent per day
F&D finding and development
G&A general and administrative
GAAP generally accepted accounting principles for Canadian public companies which are currently International Financial Reporting Standards as issued by the International Accounting Standards Board
GJ gigajoule
GJ/d gigajoules per day
HH Henry Hub
m3 Cubic metres
Mcf thousand cubic feet
MJ megajoule
MM$ millions of dollars
MMBtu million British thermal units
MMBtu/d million British thermal units per day
MMcf/d million cubic feet per day
MSW price for mixed sweet crude oil at Edmonton, Alberta
NGLs natural gas liquids
NGTL NOVA Gas Transmission Ltd.
NYMEX New York Mercantile Exchange
TCPL TransCanada PipeLines Limited
WTI West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma, for crude oil of standard grade


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