CDN NEWS | 
US NEWS 
FOURTH QUARTER 2022 CORPORATE HIGHLIGHTS
- In Q4 2022, Pipestone achieved record average quarterly production totaling 33,816 boe/d (30% condensate and crude oil, 42% total liquids), representing a 5% quarterly increase over Q3 2022, and a 18% increase over Q4 2021. The Company’s average annual production for 2022 was 31,090 boe/d (29% condensate, 41% total liquids) within its guidance range of 31,000 boe/d and 33,000 boe/d, representing 26% year-over-year growth in average daily production volumes. Production volumes averaged 34,500 boe/d (30% condensate and crude oil, 40% total liquids) in January and February 2023, based on field estimates;
- As a result of increased production volumes and improved commodity prices, the Company generated quarterly revenue of $185.4 million which represents a $48.1 million or 35% increase from Q4 2021 revenue of $137.3 million. This is also an increase of $11.0 million or 6% from Q3 2022 revenue of $174.4 million with realized commodity prices remaining relatively flat quarter over quarter;
- In Q4 2022, the Company’s operating netback(1) was $34.58/boe, an increase of 38% over Q4 2021 operating netback(1) of $25.06/boe and a 8% increase over Q3 2022 operating netback(1) of $31.88/boe.
- In Q4 2022, the Company produced adjusted funds flow from operations(1) of $99.7 million ($0.36 per share basic and diluted), an increase of 69% from its Q4 2021 adjusted funds flow from operations(1) of $58.9 million ($0.31 per share basic and $0.21 per share diluted) and representing a $13.2 million or 15% increase from Q3 2022 adjusted funds flow from operations(1) of $86.5 million ($0.46 per share basic and $0.30 per share diluted);
- The Company has realized robust returns on invested capital with Q4 2022 annualized ROCE(1) and CROIC(1) of 28% and 34%, respectively, as compared to Q4 2021 annualized ROCE(1) and CROIC(1) of 23% and 26%, respectively;
- In Q4 2022, Pipestone generated record free cash flow(1) of $70.1 million while continuing to grow its production (three months ended December 31, 2021 – free cash flow(1) of 19.8 million). In executing its return of capital to shareholders plan, Pipestone utilized $4.9 million or 7% of the free cash flow(1) to repurchase its common shares during Q4 2022 pursuant to its normal course issuer bid (“NCIB”) with the remainder allocated to deleveraging its balance sheet.
- The Company exited 2022 with net debt(1) of $117.4 million, which is a material reduction of $62.8 million or 35% from its September 30, 2022 net debt(1) balance of $180.2 million and a decrease of $87.0 million or 43% from its December 31, 2021 net debt(1) balance of $204.4 million. The Company’s net debt(1) to annualized trailing quarter adjusted funds flow from operations(1) ratio at December 31, 2022 is 0.3 times (December 31, 2021 – 0.9 times) which demonstrates the strength of the Company’s current financial position.
(1) See “Advisory Regarding Non-GAAP Measures – Non-GAAP Measures” advisory.
Pipestone Energy Corp. – Financial and Operating Highlights
| Three months ended December 31, |
Year ended December 31, |
|||||||||||
| ($ thousands, except per unit and per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||
| Financial | ||||||||||||
| Sales of liquids and natural gas | $ | 185,405 | $ | 137,264 | $ | 723,755 | $ | 391,295 | ||||
| Cash from operating activities | 96,119 | 71,810 | 378,805 | 157,864 | ||||||||
| Adjusted funds flow from operations(1) | 99,739 | 58,927 | 382,960 | 166,358 | ||||||||
| Per share, basic | 0.36 | 0.31 | 1.82 | 0.87 | ||||||||
| Per share, diluted | 0.36 | 0.21 | 1.79 | 0.59 | ||||||||
| Capital expenditures, including capitalized G&A | 29,603 | 39,219 | 245,727 | 186,838 | ||||||||
| Free cash flow(1) | 70,136 | 19,777 | 137,233 | (20,633 | ) | |||||||
| Income and comprehensive income | 53,437 | 51,307 | 220,117 | 67,920 | ||||||||
| Per share, basic | 0.20 | 0.27 | 1.04 | 0.35 | ||||||||
| Per share, diluted | 0.19 | 0.18 | 1.04 | 0.24 | ||||||||
| Adjusted EBITDA(1) | 104,906 | 63,667 | 401,952 | 183,882 | ||||||||
| Annualized cash return on invested capital (CROIC)(1) | 33.8 | % | 26.1 | % | 32.4 | % | 18.9 | % | ||||
| Annualized return on capital employed (ROCE)(1) | 28.0 | % | 22.8 | % | 30.9 | % | 14.9 | % | ||||
| Net debt(end of period)(1) | 117,435 | 204,418 | ||||||||||
| Net debt to annualized adjusted funds flow from operations for the trailing period(1) | 0.3x | 0.9x | 0.3x | 1.2x | ||||||||
| Available funding(end of period)(1) | $ | 153,800 | $ | 75,160 | ||||||||
| Amount purchased under NCIB | 4,890 | 3,434 | 39,363 | 3,434 | ||||||||
| Common shares purchased under NCIB(000s) | 1,189 | 949 | 8,649 | 949 | ||||||||
| Common shares outstanding(000s) (end of period) | 278,949 | 191,446 | ||||||||||
| Weighted-average basic shares outstanding(000s) | 274,029 | 192,033 | 210,967 | 191,525 | ||||||||
| Weighted-average diluted shares outstanding(000s) | 276,530 | 282,530 | 213,560 | 281,656 | ||||||||
| Operations | ||||||||||||
| Production | ||||||||||||
| Condensate(bbls/d) | 9,833 | 8,481 | 8,785 | 7,561 | ||||||||
| Other Natural Gas Liquids (NGLs)(bbls/d) | 4,027 | 3,978 | 3,948 | 3,346 | ||||||||
| Total NGLs(bbls/d) | 13,860 | 12,459 | 12,733 | 10,907 | ||||||||
| Crude oil(bbls/d) | 218 | 44 | 93 | 74 | ||||||||
| Natural gas(Mcf/d) | 118,428 | 96,718 | 109,581 | 81,620 | ||||||||
| Total(boe/d)(2) | 33,816 | 28,623 | 31,090 | 24,584 | ||||||||
| Condensate and crude oil(% of total production) | 30 | % | 30 | % | 29 | % | 31 | % | ||||
| Total liquids(% of total production) | 42 | % | 44 | % | 41 | % | 45 | % | ||||
| Average realized prices(3) | ||||||||||||
| Condensate(per bbl) | 109.11 | 95.68 | 118.15 | 81.49 | ||||||||
| Other NGLs(per bbl) | 46.53 | 44.30 | 53.81 | 34.61 | ||||||||
| Total NGLs(per bbl) | 90.92 | 79.27 | 98.20 | 67.11 | ||||||||
| Crude oil(per bbl) | 98.99 | 89.13 | 106.83 | 70.45 | ||||||||
| Natural gas(per Mcf) | 6.19 | 5.17 | 6.60 | 4.10 | ||||||||
| Netbacks | ||||||||||||
| Revenue(per boe) | 59.59 | 52.12 | 63.78 | 43.61 | ||||||||
| Realized loss on commodity risk management contracts(per boe) | (0.89 | ) | (8.45 | ) | (4.57 | ) | (6.34 | ) | ||||
| Royalties(per boe) | (7.74 | ) | (2.58 | ) | (6.53 | ) | (1.60 | ) | ||||
| Operating expenses(per boe) | (12.87 | ) | (13.01 | ) | (12.63 | ) | (11.52 | ) | ||||
| Transportation(per boe) | (3.51 | ) | (3.02 | ) | (3.66 | ) | (2.77 | ) | ||||
| Operating netback(per boe)(1) | 34.58 | 25.06 | 36.39 | 21.38 | ||||||||
| Adjusted funds flow netback(per boe)(1) | $ | 32.04 | $ | 22.37 | $ | 33.75 | $ | 18.54 | ||||
(1) See “Advisory Regarding Non-GAAP Measures – Non-GAAP Measures” advisory.
(2) For a description of the boe conversion ratio, see “Advisories Regarding Oil and Gas Information – Basis of Barrel of Oil Equivalent” advisory. References to crude oil in production amounts are to the product type “tight oil” and references to natural gas in production amounts are to the product type “shale gas”. References to total liquids include oil and natural gas liquids (including condensate, pentane, butane, propane and ethane).
(3) Figures calculated before hedging.
Operations Update
In late February, Pipestone commenced drilling on its 11-09 eastern delineation pad, with the first of two new wells rig released and the second well currently drilling. These wells are the first to be drilled south of the Wapiti River and are the easternmost locations drilled, since 2018. The first well on this pad was drilled to a total depth of ~7,000m in 13 days, with the entire 4,400m lateral section completed in a single bit run. Completions will commence immediately after rig release of the second well, followed by extended flow tests. This summer, the Company plans to install a new gathering pipeline to tie the 11-09 pad into Pipestone’s existing 12-14 battery.
Flow back operations commenced in late February on the recently completed six well pad at 11-05. After approximately seven days of flowback, the average rate of all six wells is meeting type curve expectations at 3.6 MMcf/d raw gas and 480 bbls/d condensate (condensate-gas-ratio (“CGR”) of 133 bbl / MMcf). Completions operations have also begun on four wells recently drilled at the 2-31 pad, with a second set of four wells at the 2-25 pad slated to follow shortly thereafter. By April 2023, the Company will have increased its producing well count by 14 since December 31, 2022.
Updated 2023 Guidance and 2024 Outlook
2023 production guidance of 34,000 – 36,000 boe/d and capital spend guidance of $245 – $265 million remains consistent as previously announced in November 2022. However, as a result in the reduction in commodity prices, Pipestone’s 2023 guidance and 2024 outlook pricing has been reduced to US$80 WTI and $3.00 AECO which results in a reduction of the Company’s projected cash flow(1) and free cash flow(1). The revised 2023 guidance and 2024 outlook are detailed in the table below.
(1) See “Advisory Regarding Non-GAAP Measures – Non-GAAP Measures” advisory.
| Prev. 2023 Guidance |
2023 Guidance Update |
2024 Forecast Update |
||||
| Price Forecast | US$85 WTI $0.75 CAD | $4.00 AECO |
US$80 WTI | $0.74 CAD $3.00 AECO |
||||
| Full Year Production (boe/d) | 34,000 – 36,000 | 34,000 – 36,000 | 40,000 – 42,000 | |||
| AT Cash Flow(1) ($MM) | $400 – $430 | $330 – $350 | $345 (net of ~$40 MM in cash taxes) |
|||
| Capex ($MM) | $245 – $265 | $245 – $265 | $220 | |||
| Free Cash Flow(1) ($MM) | $135 – $165 | $75 – $95 | $125 | |||
| Base Dividend ($MM) | $32 | $32 | $32 | |||
| (Net Debt)(1) / Net Cash ($MM) | Pipestone is targeting a run-rate net debt(1) of $100 million | |||||
| LTM Debt / Cash Flow(1) (x) | ||||||
(1) See “Advisory Regarding Non-GAAP Measures – Non-GAAP Measures” advisory.
Shareholder Returns
Pipestone remains committed to delivering meaningful returns to shareholders. On November 9, 2022, the Company declared an inaugural quarterly dividend of three cents per common share, which will be paid on March 31, 2023 to shareholders of record at the close of business on March 15, 2023. In addition to the quarterly base dividend, Pipestone expects to allocate a substantial portion of its future free cash flow(1) to share buybacks. With respect to its previously announced intention to launch a substantial issuer bid, Pipestone expects to provide an update to investors in the near term.
(1) See “Advisory Regarding Non-GAAP Measures – Non-GAAP Measures” advisory.
The table below outlines the expected cash flow(1) generation of the Company in 2023 at various commodity prices and details the expected prioritized uses of this cashflow from left to right.
A table accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/df5e2c38-63b7-4351-91ba-1c1575340064
Regulatory Filings:
Pipestone has filed its year-end 2022 audited financial statements, management’s discussion and analysis (“MD&A”), and 2022 annual information form on SEDAR, as well as posted these documents on its website at www.pipestonecorp.com.
Q4 2022 and Full Year 2022 Financial Results Conference Call
Fourth quarter and full year 2022 results are expected to be released before markets open on March 8, 2023. A conference call has been scheduled for March 8, 2023 at 10:00 a.m. Mountain Time (12:00 p.m. Eastern Time) for interested investors, analysts, brokers, and media representatives.
Conference Call Details:
Please use the following participant URL to register for the Q4 and full year 2022 financial results conference call: https://register.vevent.com/register/BIf2529ca87a7949c8bece6d62670b175b. This registration link can also be found on the Company’s website at www.pipestonecorp.com. This link will provide each registrant with a toll-free dial-in number and a unique PIN to connect to the call.
Share This:
