November 19, 2020
CALGARY, AB – Altura Energy Inc. (“Altura” or the “Corporation”) (TSXV: ATU) announces its financial and operating results for the three and nine months ended September 30, 2020. The unaudited interim condensed consolidated financial statements and related management’s discussion and analysis (“MD&A”) are available at www.sedar.com and www.alturaenergy.ca. Selected financial and operating information for the three and nine months ended September 30, 2020 appear below and should be read in conjunction with the related financial statements and MD&A.
OPERATIONAL AND FINANCIAL SUMMARY
|Three Months Ended||Nine months ended|
|Average daily production|
|Heavy oil (bbls/d)||512||213||1,150||464||1,190|
|Light & medium oil (bbls/d)||16||–||–||8||22|
|Natural gas (Mcf/d)||2,118||1,154||3,733||2,066||3,057|
|Total boe/d per million shares – diluted||8.4||4.0||17.2||8.0||16.4|
|Average realized prices|
|Heavy oil ($/bbl)||40.19||21.39||55.31||33.93||56.01|
|Light & medium oil ($/bbl)||43.79||–||–||36.21||48.97|
|Natural gas ($/Mcf)||2.45||2.06||0.95||2.26||1.36|
|Average realized price ($/boe)||29.87||16.36||37.12||25.04||41.09|
|Petroleum and natural gas sales||29.87||16.36||37.12||25.04||41.09|
|Realized gain (loss) on financial instruments||0.51||16.60||(0.22)||5.59||0.28|
|General and administrative||(5.71)||(7.98)||(2.16)||(5.03)||(2.56)|
|Interest and financing expense (cash)||(1.21)||(1.42)||(0.27)||(0.75)||(0.35)|
|Adjusted funds flow per boe(1)||4.47||5.11||20.42||7.07||22.40|
|Financial ($000, except per share amounts)|
|Petroleum and natural gas sales||2,526||647||6,420||5,956||20,226|
|Cash flow from operating activities||505||512||3,181||2,200||9,039|
|Per share – diluted||–||–||0.03||0.02||0.08|
|Adjusted funds flow(1)||378||204||3,532||1,684||11,031|
|Per share – diluted(1)||–||–||0.03||0.02||0.10|
|Net income (loss)||(360)||(1,247)||298||(33,136)||2,271|
|Per share – basic||–||(0.01)||–||(0.30)||0.02|
|Per share – diluted||–||(0.01)||–||(0.30)||0.02|
|Property acquisitions (dispositions), net||(875)||(871)||–||(1,746)||–|
|Total capital expenditures, net||(406)||(653)||3,553||6,023||11,356|
|Common shares outstanding (000)|
|End of period – basic||108,921||108,921||108,921||108,921||108,921|
|Weighted average for the period – basic||108,921||108,921||108,921||108,921||108,921|
|Weighted average for the period – diluted||108,921||108,921||109,517||108,921||110,191|
|(1)||Adjusted funds flow, net debt and operating netback are non-GAAP measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Refer to the heading entitled “Non-GAAP Measures” contained within the “Advisories” section of Altura’s MD&A.|
THIRD QUARTER 2020 REVIEW
Production volumes averaged 919 boe per day in the third quarter, a 111% increase from the second quarter of 2020 due to the Corporation restarting wells in the Leduc-Woodbend area that were voluntarily curtailed in the second quarter due to the severe decline in crude oil prices caused by the COVID-19 pandemic and OPEC production quota concerns. Third-party gas processing restrictions delayed approximately 125 boe per day of production in the quarter which is expected to be back online in January 2021.
The Entice well was restarted in June and then shut-in in August to manage gas conservation requirements and evaluate the next steps to continue the production test. The well was drilled over 20 kms away and 100m down-dip from the nearest production analog with 33,000 barrels of 31° API oil proving the large extent of this hydrocarbon accumulation. Management is continuing technical work on the play and is planning on testing the up-dip portion of the pool through the recompletion of an existing vertical well in 2021.
Altura’s realized heavy oil price increased 88% to $40.19 per barrel in the third quarter compared to $21.39 per barrel in the second quarter of 2020 but decreased 27% compared to $55.31 per barrel in the third quarter of 2019.
Operating expenses in the third quarter were $13.85 per boe, compared to $16.27 per boe in the second quarter of 2020. The decrease was due to higher production volumes, partially offset by repair and maintenance costs associated with well workovers in the third quarter. Transportation expenses were $2.51 per boe, consistent with $2.46 per boe in the second quarter of 2020.
The Corporation’s operating netback1 averaged $11.39 per boe, down 22% from the second quarter of 2020 due to a decreased realized gain on financial instruments and increased royalty expenses, partially offset by higher crude oil and natural gas prices and lower operating expenses.
Adjusted funds flow1 was $378,000 in the quarter, up 85% from the second quarter of 2020 due to higher production volumes, increased crude oil and natural prices and lower per unit operating expenses, partially offset by higher royalties and a decreased realized gain on financial instruments.
Altura received $74,000 under the Canada Emergency Wage Subsidy in the third quarter, which was applied against G&A expenses.
Altura recorded a net loss of $360,000 in the quarter compared to a net loss of $1.2 million in the second quarter of 2020.
Third quarter capital expenditures of $469,000 focused primarily on land-related expenditures at Altura’s core Leduc-Woodbend area.
In August, Altura and its lender completed the redetermination of its revolving operating demand loan (the “Operating Loan”) and the borrowing base was confirmed at $6.0 million. Additionally, Altura secured a $3.0 million term loan from its lender through the Business Credit Availability Program from the Export Development Bank of Canada (the “Term Loan”). The Operating Loan and the Term Loan (collectively the “Credit Facilities”) provide Altura with $9.0 million of total Credit Facilities.
Altura reduced its net debt by $775,000 during the third quarter. Considering Altura’s net debt of $4.6 million as at September 30, 2020, the Corporation has sufficient liquidity to execute its business plan in the current volatile commodity market.
On September 30, 2020, Altura divested of a 1.375% working interest in the Corporation’s production, wells, lands and facilities for cash of $875,000 as outlined in the Corporation’s September 30, 2020 news release.
Altura has been approved for abandonment and reclamation funding of $508,000 under the Alberta Site Rehabilitation Program (“SRP”). The grant funding consists of $373,000 under Period 1 and $135,000 under Period 3. The Corporation expects to start utilizing the grants in the fourth quarter of 2020 to abandon up to five inactive wells and reclaim three wells that were previously abandoned at an estimated total cost of $251,000.
|1 Adjusted funds flow, net debt and operating netback are non-GAAP measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Refer to the heading entitled “Non-GAAP Measures” contained within the “Advisories” section of Altura’s MD&A.|
Crude oil and natural gas prices have improved since the beginning of May, but volatility remains high with continued uncertainty surrounding the COVID-19 pandemic. Altura remains focused on protecting balance sheet strength and no new wells are currently planned to be drilled or completed in the fourth quarter of 2020.
October 2020 production is estimated at approximately 975 boe per day based on field estimates. 125 boe per day remains shut-in from the second quarter due to third party curtailment and is expected to be restarted in January 2021. The Corporation forecasts production volumes to range between 900 and 1,000 boe per day for the second half of 2020. Through cash flow, Altura is forecasting to reduce its net debt to approximately $4.2 million by the end of the year2.
Altura expects to close two additional dispositions of a 1.375% working interest for $875,000 each on January 31, 2021 and June 30, 2021 (total remaining disposition