CALGARY,
AB, March 2, 2023 /CNW/ - Spartan
Delta Corp. ("Spartan" or the "Company") (TSX:
SDE) is pleased to report its financial and operating results for
the fourth quarter and year ended December
31, 2022, as well as highlights of the Company's year-end
reserves evaluation.
Selected financial and operational information is set out below
and should be read in conjunction with Spartan's audited
consolidated annual financial statements and related management's
discussion and analysis ("MD&A") for the years ended
December 31, 2022 and 2021, which are
filed on SEDAR at www.sedar.com and are available on the
Company's website at www.spartandeltacorp.com. The highlights
reported in this press release include certain non-GAAP financial
measures and ratios which have been identified using capital
letters. The reader is cautioned that these measures may not be
directly comparable to other issuers; refer to additional
information under the heading "Reader Advisories – Non-GAAP
Measures and Ratios".
2022 FINANCIAL AND OPERATING HIGHLIGHTS
- The Company achieved 53% growth in average production from
47,674 BOE/d (33% liquids) in 2021 to 73,084 BOE/d (38% liquids) in
2022, which exceeded the high-end of the range of its 2022
production guidance of 71,000 to 73,000 BOE/d.
-
- Production averaged 74,639 BOE/d (39% liquids) during the
fourth quarter of 2022.
- Spartan successfully executed a $434
million capital program in 2022, with specific focus placed
on the development of its Gold Creek and Karr assets located in the
Montney oil window as well as
continued development across multiple horizons in the Deep
Basin.
-
- In the Montney, Spartan
drilled 24.2 net wells, completed 26.2 net wells and 2.0 disposals
wells, and brought 23.9 net wells on production.
- In the Deep Basin, Spartan drilled and completed 21.0 net wells
and brought 20.0 net wells on production.
- Oil and gas sales revenue increased by 141% to $1.464 billion in 2022 compared to $608 million in 2021, driven by the Company's
production growth and materially higher oil and gas prices.
- Spartan reported net income for 2022 of $681 million ($3.88
per share, diluted), up 104% from $334
million ($2.50 per share,
diluted) in 2021.
- The Company's operations generated Adjusted Funds Flow of
$233 million ($1.31 per share, diluted) in the fourth quarter
and $826 million ($4.66 per share, diluted) for the year ended
December 31, 2022.
- Free Funds Flow of $392 million
was used to:
-
- repay the Company's bank debt in full and significantly reduce
its Net Debt to $138 million at
December 31, 2022, down from
$458 million at December 31, 2021;
- return capital to shareholders by declaring a special dividend
of $86 million ($0.50 per share) payable on January 16, 2023, to eligible shareholders of
record on December 15, 2022; and
- fund a strategic corporate acquisition for cash consideration
of $6 million in August 2022, pursuant to which Spartan assumed
approximately $625 million of
non-capital loss tax pools which further extended the Company's tax
horizon. Spartan's total available tax pools are estimated to be
$2.1 billion at December 31, 2022.
The table below summarizes the Company's financial and operating
results for the fourth quarters and years ended December 31, 2022 and December 31, 2021:
(CA$ thousands,
except as otherwise noted)
|
Three months ended
December 31
|
Year ended December
31
|
|
2022
|
2021
|
%
|
2022
|
2021
|
%
|
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
Oil and gas
sales
|
357,126
|
296,425
|
20
|
1,464,467
|
608,142
|
141
|
Net income and
comprehensive income
|
152,919
|
128,455
|
19
|
681,086
|
334,220
|
104
|
$ per share, basic
(a)
|
0.95
|
0.84
|
13
|
4.36
|
2.89
|
51
|
$ per share, diluted
(a)
|
0.87
|
0.76
|
14
|
3.88
|
2.50
|
55
|
Cash provided by
operating activities
|
200,363
|
147,975
|
35
|
795,371
|
279,766
|
184
|
Adjusted Funds Flow
(b)
|
232,839
|
137,026
|
70
|
825,667
|
293,986
|
181
|
$ per share, basic
(a)(b)
|
1.45
|
0.89
|
63
|
5.29
|
2.54
|
108
|
$ per share, diluted
(a)(b)
|
1.31
|
0.80
|
64
|
4.66
|
2.18
|
114
|
Free Funds Flow
(b)
|
73,689
|
21,344
|
245
|
391,510
|
105,011
|
273
|
Cash used in investing
activities
|
134,048
|
98,225
|
36
|
442,303
|
925,713
|
(52)
|
Capital Expenditures before
A&D (b)
|
159,150
|
115,682
|
38
|
434,157
|
188,975
|
130
|
Adjusted Net Capital
Acquisitions (b)
|
231
|
(1,437)
|
(116)
|
5,183
|
956,763
|
(99)
|
Total assets
|
2,099,475
|
1,742,414
|
20
|
2,099,475
|
1,742,414
|
20
|
Long-term
debt
|
145,180
|
387,564
|
(63)
|
145,180
|
387,564
|
(63)
|
Net Debt
(b)
|
138,376
|
458,259
|
(70)
|
138,376
|
458,259
|
(70)
|
Net Debt to Annualized AFF
Ratio (b)
|
0.2
x
|
0.8 x
|
(75)
|
0.2
x
|
0.8 x
|
(75)
|
Shareholders'
equity
|
1,516,821
|
886,649
|
71
|
1,516,821
|
886,649
|
71
|
Common shares
outstanding (000s), end of period (a)
|
171,410
|
153,214
|
12
|
171,410
|
153,214
|
12
|
OPERATING HIGHLIGHTS
AND NETBACKS (e)
|
|
|
|
|
|
|
Average daily
production
|
|
|
|
|
|
|
Crude oil
(bbls/d)
|
13,714
|
11,450
|
20
|
12,976
|
4,697
|
176
|
Condensate (bbls/d)
(c)
|
2,549
|
2,373
|
7
|
2,328
|
1,924
|
21
|
Natural gas liquids (bbls/d)
(c)
|
12,757
|
13,576
|
(6)
|
12,612
|
9,120
|
38
|
Natural gas
(mcf/d)
|
273,716
|
270,176
|
1
|
271,010
|
191,596
|
41
|
BOE/d
|
74,639
|
72,428
|
3
|
73,084
|
47,674
|
53
|
% Liquids
(d)
|
39 %
|
38 %
|
3
|
38 %
|
33 %
|
15
|
Average realized
prices, before financial instruments
|
|
|
|
|
|
|
Crude oil ($/bbl)
|
109.76
|
91.38
|
20
|
119.94
|
86.48
|
39
|
Condensate ($/bbl)
(c)
|
111.19
|
96.63
|
15
|
119.70
|
85.15
|
41
|
Natural gas liquids ($/bbl)
(c)
|
44.94
|
44.39
|
1
|
50.45
|
37.11
|
36
|
Natural gas
($/mcf)
|
5.55
|
4.97
|
12
|
5.69
|
3.95
|
44
|
Combined average
($/BOE)
|
52.01
|
44.48
|
17
|
54.90
|
34.95
|
57
|
Netbacks ($/BOE)
(e)
|
|
|
|
|
|
|
Oil and gas sales
|
52.01
|
44.48
|
17
|
54.90
|
34.95
|
57
|
Processing and other
revenue
|
0.39
|
0.36
|
8
|
0.35
|
0.54
|
(35)
|
Royalties
|
(5.53)
|
(4.91)
|
13
|
(5.99)
|
(3.83)
|
56
|
Operating
expenses
|
(8.64)
|
(7.52)
|
15
|
(8.75)
|
(6.61)
|
32
|
Transportation
expenses
|
(2.76)
|
(2.41)
|
15
|
(2.80)
|
(2.00)
|
40
|
|
Three months ended
December 31
|
Year ended December
31
|
Netbacks continued
from previous page
|
2022
|
2021
|
%
|
2022
|
2021
|
%
|
Operating Netback,
before hedging ($/BOE) (e)
|
35.47
|
30.00
|
18
|
37.71
|
23.05
|
64
|
Settlements on Commodity
Derivative Contracts(e)(f)
|
(1.19)
|
(6.39)
|
(81)
|
(4.81)
|
(3.53)
|
36
|
Net Pipeline Transportation
Margin (e)(g)
|
-
|
(0.25)
|
(100)
|
(0.01)
|
(0.12)
|
(92)
|
Operating Netback,
after hedging ($/BOE) (e)
|
34.28
|
23.36
|
47
|
32.89
|
19.40
|
70
|
General and administrative
expenses
|
(0.98)
|
(1.12)
|
(13)
|
(0.95)
|
(1.22)
|
(22)
|
Cash Financing Expenses
(e)(h)
|
(0.76)
|
(1.08)
|
(30)
|
(0.94)
|
(0.59)
|
59
|
Realized foreign exchange
gain (loss)
|
(0.01)
|
0.04
|
(125)
|
0.03
|
0.02
|
50
|
Other income
|
2.08
|
-
|
-
|
0.56
|
0.03
|
nm
|
Settlement of
decommissioning obligations
|
(0.28)
|
(0.16)
|
75
|
(0.19)
|
(0.12)
|
58
|
Lease payments
(i)
|
(0.42)
|
(0.48)
|
(13)
|
(0.45)
|
(0.62)
|
(27)
|
Adjusted Funds Flow
Netback ($/BOE) (e)
|
33.91
|
20.56
|
65
|
30.95
|
16.90
|
83
|
a)
|
Refer to "Share
Capital" section of this press release.
|
b)
|
"Adjusted Funds Flow",
"Free Funds Flow", "Capital Expenditures before A&D", "Adjusted
Net Capital Acquisitions", "Net Debt" and "Net Debt to Annualized
AFF Ratio" do not have standardized meanings under IFRS, refer to
"Non-GAAP Measures and Ratios" section of this press
release.
|
c)
|
Condensate is a natural
gas liquid ("NGL") as defined by NI 51-101. See "Other
Measurements".
|
d)
|
"Liquids" includes
crude oil, condensate and NGLs.
|
e)
|
"Netbacks" are non-GAAP
financial ratios calculated per unit of production. "Operating
Netback", "Settlements on Commodity Derivative Contracts", "Net
Pipeline Transportation Margin", "Cash Financing Expenses"
and "Adjusted Funds Flow Netback" do not have standardized
meanings under IFRS, refer to "Non-GAAP Measures and Ratios"
section of this press release.
|
f)
|
Includes realized gains
or losses on derivative financial instruments plus settlements of
acquired derivative liabilities.
|
g)
|
Pipeline transportation
revenue, net of pipeline transportation expense.
|
h)
|
Includes interest and
fees on long-term debt, net of interest income.
|
i)
|
Includes total lease
payments comprised of the principal portion and financing cost of
lease liabilities.
|
2022 RESERVES INFORMATION
Spartan is pleased to provide below select highlights from the
results of its year end independent oil and gas reserves evaluation
as of December 31, 2022 (the
"McDaniel Report"), as prepared by its independent qualified
reserves evaluator, McDaniel & Associates Consultants Ltd.
("McDaniel"). The evaluation of Spartan's properties was
prepared in accordance with the definitions, standards and
procedures contained in the most recent publication of the Canadian
Oil and Gas Evaluation Handbook ("COGEH") and National
Instrument 51-101 – Standards of Disclosure for Oil and Gas
Activities ("NI 51-101").
- Relative to year-end 2021, Spartan increased proved developed
producing ("PDP") reserves 8% to 134.9 MMBOE, total proved
("TP") reserves 8% to 318.6 MMBOE, and total proved plus
probable ("TPP") reserves 6% to 578.6 MMBOE at year-end
2022.
- The before-tax net present value ("NPV") of reserves,
discounted at 10%, was approximately $1.624
billion on a PDP basis, $3.031
billion on a TP basis, and $5.011
billion on a TPP basis, representing an increase in NPV of
41% on a PDP basis, 28% on a TP basis and 26% on a TPP basis,
year-over-year.
- The McDaniel Report includes future development capital
("FDC") of approximately $2.238
billion in the TP category with 260.6 net locations and
approximately $3.952 billion in the
TPP category with 463.6 net locations.
The following tables highlight the findings of the McDaniel
Report. The McDaniel Report was based on the published average
forecast pricing of McDaniel, GLJ Ltd. and Sproule Associates
Limited. See "Reader Advisories – Reserves Disclosure"
for more information. Additional reserves information as required
under NI 51-101 will be included in Spartan's Annual Information
Form for the year ended December 31,
2022, which will be filed on or before March 31, 2022, on SEDAR at www.sedar.com. The
numbers in the tables below may not add due to rounding.
Summary of Reserves Volumes as at December 31, 2022
The Company's reserves volumes and undiscounted FDC costs as at
December 31, 2022 are summarized
below:
SUMMARY OF RESERVE
VOLUMES(1)
|
Crude Oil
(Mbbls)
|
NGL(2)
(Mbbls)
|
Natural Gas
(MMcf)
|
Combined
(MBOE)
|
FDC Costs
($MM)
|
Proved developed
producing
|
15,986
|
31,333
|
525,295
|
134,868
|
47.9
|
Proved developed
non-producing
|
44
|
71
|
1,905
|
433
|
0.3
|
Proved
undeveloped
|
44,094
|
37,042
|
612,713
|
183,255
|
2,189.8
|
Total
Proved
|
60,124
|
68,446
|
1,139,912
|
318,556
|
2,238.0
|
Probable
|
58,262
|
55,083
|
880,473
|
260,091
|
1,714.1
|
Total Proved plus
Probable
|
118,386
|
123,529
|
2,020,386
|
578,647
|
3,952.1
|
(1) Gross working
interest reserves before royalty deductions.
|
(2) Natural gas liquids
include condensate volumes.
|
Net Present Value of Future Net Revenue as at December 31, 2022 (Before-Tax)
The following table summarizes the NPV of the Company's reserves
(before-tax) as at December 31, 2022.
The reserves value on a $/BOE basis, discounted at 10% per year, is
also summarized for each category.
NET PRESENT
VALUE BEFORE-TAX
|
0 %
|
5 %
|
10 %
|
15 %
|
20 %
|
Unit Value
(1)Before Tax
Discounted at 10%/Year
($/BOE)
|
($MM)
|
($MM)
|
($MM)
|
($MM)
|
($MM)
|
Developed
Producing
|
2,089.9
|
1,843.9
|
1,623.6
|
1,455.2
|
1,326.2
|
14.10
|
Developed
Non-Producing
|
5.5
|
4.7
|
4.2
|
3.7
|
3.3
|
10.79
|
Undeveloped
|
2,698.6
|
1,913.8
|
1,403.2
|
1,056.1
|
810.7
|
8.99
|
Total
Proved
|
4,794.0
|
3,762.5
|
3,031.0
|
2,515.0
|
2,140.3
|
11.16
|
Probable
|
5,080.2
|
3,020.2
|
1,980.2
|
1,398.4
|
1,045.6
|
9.38
|
Total Proved plus
Probable
|
9,874.2
|
6,782.7
|
5,011.2
|
3,913.4
|
3,185.8
|
10.38
|
(1) Unit values
are based on net reserves. Net reserves are the Company's working
interest reserves after deduction of royalties, plus its royalty
interests in reserves.
|
Forecast Costs
The following table outlines estimated annual future development
capital expenditures required to bring TP and TPP reserves on
production per the McDaniel Report:
FUTURE DEVELOPMENT
CAPITAL
|
TP Reserves
($MM)
|
TPP Reserves
($MM)
|
2023
|
387.6
|
387.6
|
2024
|
454.3
|
458.3
|
2025
|
467.7
|
471.9
|
2026
|
454.8
|
454.8
|
2027
|
429.3
|
429.3
|
Thereafter
|
44.3
|
1,750.2
|
Total FDC,
undiscounted
|
2,238.0
|
3,952.1
|
Total FDC,
discounted at 10%
|
1,761.7
|
2,627.9
|
2023 OUTLOOK
In the fourth quarter of 2022, Spartan announced that its Board
of Directors had commenced a formal process to evaluate strategic
positioning alternatives in an effort to enhance shareholder value
(the "Repositioning Process"). The Repositioning Process is
progressing as planned and includes the evaluation of a broad range
of alternatives including, but not limited to, a corporate sale,
merger, corporate restructuring, sale of select assets, sale of a
royalty, purchase of assets, the spin-out of select assets into a
newly-formed company whose securities would be distributed to
shareholders or any combination of these potential alternatives in
conjunction with a robust return of capital strategy.
Spartan's business has not been impacted during this
Repositioning Process and the Company continues to execute on the
2023 budget published in its press release dated November 30, 2022. The Company's budget of
$430 million of capital expenditures
and forecast average production of between 80,000 to 82,000 BOE per
day for 2023 remains unchanged.
ABOUT SPARTAN DELTA CORP.
Spartan is committed to creating a modern energy company,
focused on sustainability both in operations and financial
performance. The Company's ESG-focused culture is centered on
generating Free Funds Flow through responsible oil and gas
exploration and development. The Company has established a
portfolio of high-quality production and development opportunities
in the Deep Basin and Montney.
Spartan is focused on the execution of the Company's organic
drilling program, delivering operational synergies in a respectful
and responsible manner to the environment and communities it
operates in. The Company is well positioned to continue pursuing
immediate production optimization, future growth with organic
drilling, opportunistic acquisitions and the delivery of Free
Funds Flow.
Spartan's corporate presentation and updated ESG reporting as of
March 2, 2023 can be accessed on the
Company's website at www.spartandeltacorp.com.
READER ADVISORIES
Non-GAAP Measures and Ratios
This press release contains certain financial measures and
ratios which do not have standardized meanings prescribed by
International Financial Reporting Standards ("IFRS") or
Generally Accepted Accounting Principles ("GAAP"). As these
non-GAAP financial measures and ratios are commonly used in the oil
and gas industry, Spartan believes that their inclusion is useful
to investors. The reader is cautioned that these amounts may not be
directly comparable to measures for other companies where similar
terminology is used.
The non-GAAP measures and ratios used in this press release,
represented by the capitalized and defined terms outlined below,
are used by Spartan as key measures of financial performance and
are not intended to represent operating profits nor should they be
viewed as an alternative to cash provided by operating activities,
net income or other measures of financial performance calculated in
accordance with IFRS.
The definitions below should be read in conjunction with the
"Non-GAAP Measures and Ratios" section of the Company's MD&A
dated March 2, 2023, which includes
discussion of the purpose and composition of the specified
financial measures and detailed reconciliations to the most
directly comparable GAAP financial measures.
Operating Income and Operating Netback
Operating Income, a non-GAAP financial measure, is a useful
supplemental measure that provides an indication of the Company's
ability to generate cash from field operations, prior to
administrative overhead, financing and other business expenses.
"Operating Income, before hedging" is calculated by Spartan
as oil and gas sales, net of royalties, plus processing and other
revenue, less operating and transportation expenses. "Operating
Income, after hedging" is calculated by adjusting Operating
Income for: (i) realized gains or losses on derivative financial
instruments including settlements on acquired derivative financial
instrument liabilities (together a non-GAAP financial measure
"Settlements on Commodity Derivative Contracts"), and (ii)
pipeline transportation revenue, net of pipeline transportation
expense (the "Net Pipeline Transportation Margin"). The
Company refers to Operating Income expressed per unit of production
as an "Operating Netback" and reports the Operating Netback
before and after hedging, both of which are non-GAAP financial
ratios. Spartan considers Operating Netback an important measure to
evaluate its operational performance as it demonstrates its field
level profitability relative to current commodity prices.
Adjusted Funds Flow and Free Funds Flow
Cash provided by operating activities is the most directly
comparable measure to Adjusted Funds Flow. "Adjusted Funds
Flow" is reconciled to cash provided by operating activities by
excluding changes in non-cash working capital, adding back
transaction costs on acquisitions, and deducting the principal
portion of lease payments. Spartan utilizes Adjusted Funds Flow as
a key performance measure in the Company's annual financial
forecasts and public guidance. Transaction costs, which primarily
include legal and financial advisory fees, regulatory and other
expenses directly attributable to execution of acquisitions, are
added back because the Company's definition of Free Funds Flow
excludes capital expenditures related to acquisitions and
dispositions. For greater clarity, incremental overhead expenses
related to ongoing integration and restructuring post-acquisition
are not adjusted and are included in Spartan's general and
administrative expenses. Lease liabilities are not included in
Spartan's definition of Net Debt (non-GAAP measure defined herein)
therefore lease payments are deducted in the period incurred to
determine Adjusted Funds Flow.
The Company refers to Adjusted Funds Flow expressed per unit of
production as an "Adjusted Funds Flow Netback".
"Free Funds Flow" is calculated by Spartan as Adjusted
Funds Flow less Capital Expenditures before A&D, which is also
a non-GAAP financial measure (defined herein). Spartan believes
Free Funds Flow provides an indication of the amount of funds the
Company has available for future capital allocation decisions such
as to repay long-term debt, reinvest in the business or return
capital to shareholders.
Adjusted Funds Flow per share
Adjusted Funds Flow ("AFF") per share is a non-GAAP
financial ratio used by the Spartan as a key performance indicator.
AFF per share is calculated using the same methodology as net
income per share ("EPS"), however the diluted weighted
average common shares ("WA Shares") outstanding for AFF may
differ from the diluted weighted average determined in accordance
with IFRS for purposes of calculating EPS due to non-cash items
that impact net income only. The dilutive impact of stock options
and share awards is more dilutive to AFF than EPS because the
number of shares deemed to be repurchased under the treasury stock
method is not adjusted for unrecognized share based compensation
expense as it is non-cash. For periods in which the convertible
promissory note was outstanding, it was always dilutive to AFF per
share but could be antidilutive to EPS because of the non-cash
change in fair value recognized through net income (see also,
"Share Capital").
Capital Expenditures, before A&D
"Capital Expenditures before A&D" is used by Spartan
to measure its capital investment level compared to the Company's
annual budgeted capital expenditures for its organic drilling
program. It includes capital expenditures on exploration and
evaluation assets and property, plant and equipment, before
acquisitions and dispositions. The directly comparable GAAP measure
to capital expenditures is cash used in investing activities.
Adjusted Net Capital Acquisitions
"Adjusted Net Capital Acquisitions" is a supplemental
measure disclosed by Spartan which aggregates the total amount of
cash, debt and share consideration used to acquire crude oil and
natural gas assets during the period, net of cash proceeds received
on dispositions. The Company believes this is useful information
because it is more representative of the total transaction value
than the cash acquisition costs or total cash used in investing
activities, determined in accordance with IFRS.
Net Debt (Surplus) and Adjusted Working Capital
References to "Net Debt (Surplus)" includes long-term
debt under Spartan's revolving credit facility and second lien term
facility, net of Adjusted Working Capital. Net Debt (Surplus) and
Adjusted Working Capital are both non-GAAP financial measures.
"Adjusted Working Capital" is calculated as current assets
less current liabilities, excluding lease liabilities and
derivative financial instrument assets and liabilities. As at
December 31, 2022 and 2021, the
Adjusted Working Capital (surplus) deficit includes cash and cash
equivalents, accounts receivable, prepaid expenses and deposits,
other current assets, accounts payable and accrued liabilities,
dividends payable, and the current portion of decommissioning
obligations.
Spartan uses Net Debt (Surplus) as a key performance measure to
manage the Company's targeted debt levels. The Company believes its
presentation of Adjusted Working Capital and Net Debt (Surplus) are
useful as supplemental measures because lease liabilities and
derivative financial instrument assets and liabilities relate to
contractual obligations for future production periods. Lease
payments and cash receipts or settlements on derivative financial
instruments are included in Spartan's reported Adjusted Funds Flow
in the production month to which the obligation relates.
References to "Cash Financing Expenses" includes interest
and fees on long-term debt, net of interest income, and excludes
financing costs related to lease liabilities and accretion of
decommissioning obligations. Cash Financing Expenses is a non-GAAP
financial measure used by Spartan in its budget and guidance as it
corresponds to the Company's definition of Net Debt (Surplus),
however it should not be viewed as an alternative to total
financing expenses presented in accordance with IFRS.
Net Debt to Annualized AFF Ratio
The Company monitors its capital structure using a "Net Debt
to Annualized AFF Ratio", which is a non-GAAP financial ratio
calculated as the ratio of the Company's "Net Debt" to its
"Annualized Adjusted Funds Flow" which is calculated by multiplying
Adjusted Funds Flow for the most recent quarter, normalized for
significant non-recurring items, by a factor of 4.
O&G READER ADVISORIES
Reserves Disclosure
The reserves information and data provided in this press release
presents only a portion of the disclosure required under NI 51-101.
Spartan's Statement of Reserves Data and Other Oil and Gas
Information on Form 51-101F1 dated effective as at December 31, 2022, which includes further
disclosure of Spartan's oil and gas reserves and other oil and gas
information in accordance with NI 51-101 and COGEH forming the
basis of this press release, will be included in the Company's
Annual Information Form for the year ended December 31, 2022, which will be available on or
before March 31, 2023 on SEDAR at
www.sedar.com.
All reserves values, future net revenue and ancillary
information contained in this press release are derived from the
McDaniel Report unless otherwise noted. All reserve references in
this press release are "Company gross reserves". Company gross
reserves are the Company's total working interest reserves before
the deduction of any royalties payable by the Company. Estimates of
reserves and future net revenue for individual properties may not
reflect the same level of confidence as estimates of reserves and
future net revenue for all properties, due to the effect of
aggregation. There is no assurance that the forecast price and cost
assumptions applied by McDaniel in evaluating Spartan's reserves
will be attained and variances could be material. All reserves
assigned in the McDaniel Report are located in the Province of
Alberta and presented on a
consolidated basis.
All evaluations and summaries of future net revenue are stated
prior to the provision for interest, debt service charges or
general and administrative expenses and after deduction of
royalties, operating costs, estimated well abandonment and
reclamation costs and estimated future capital expenditures. It
should not be assumed that the estimates of future net revenues
presented represent the fair market value of the reserves. The
recovery and reserve estimates of Spartan's oil, NGLs and natural
gas reserves provided herein are estimates only and there is no
guarantee that the estimated reserves will be recovered. Actual
oil, natural gas and NGL reserves may be greater than or less than
the estimates provided herein. There are numerous uncertainties
inherent in estimating quantities of crude oil, reserves and the
future cash flows attributed to such reserves. The reserve and
associated cash flow information set forth herein are estimates
only.
Proved reserves are those reserves that can be estimated with a
high degree of certainty to be recoverable. It is likely that the
actual remaining quantities recovered will exceed the estimated
proved reserves. Probable reserves are those additional reserves
that are less certain to be recovered than proved reserves. It is
equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved plus
probable reserves. Proved developed producing reserves are those
reserves that are expected to be recovered from completion
intervals open at the time of the estimate. These reserves may be
currently producing or, if shut-in, they must have previously been
on production, and the date of resumption of production must be
known with reasonable certainty. Undeveloped reserves are those
reserves expected to be recovered from known accumulations where a
significant expenditure (e.g., when compared to the cost of
drilling a well) is required to render them capable of production.
They must fully meet the requirements of the reserves category
(proved, probable, possible) to which they are assigned. Certain
terms used in this press release but not defined are defined in NI
51-101, CSA Staff Notice 51-324 – Revised Glossary to NI 51-101,
Revised Glossary to NI 51-101, Standards of Disclosure for Oil and
Gas Activities ("CSA Staff Notice 51-324") and/or the
COGEH and, unless the context otherwise requires, shall have the
same meanings herein as in NI 51-101, CSA Staff Notice 51-324 and
the COGEH, as the case may be.
Drilling Locations
This press release discloses drilling inventory in two
categories: (a) proved locations; and (b) probable locations.
Proved locations and probable locations are derived from the
McDaniel Report and account for drilling locations that have
associated proved and/or probable reserves, as applicable. Of the
463.6 net total booked drilling locations identified herein, 260.6
are net proved locations and 203.0 are net probable locations.
Other Measurements
All dollar figures included herein are presented in Canadian
dollars, unless otherwise noted.
This press release contains various references to the
abbreviation "BOE" which means barrels of oil equivalent.
Where amounts are expressed on a BOE basis, natural gas volumes
have been converted to oil equivalence at six thousand cubic feet
(Mcf) per barrel (bbl). The term BOE may be misleading,
particularly if used in isolation. A BOE conversion ratio of six
thousand cubic feet per barrel is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead and is
significantly different than the value ratio based on the current
price of crude oil and natural gas. This conversion factor is an
industry accepted norm and is not based on either energy content or
current prices. Such abbreviation may be misleading, particularly
if used in isolation.
References to "oil" in this press release include light crude
oil and medium crude oil, combined. NI 51-101 includes condensate
within the product type of "natural gas liquids". References to
"natural gas liquids" or "NGLs" include pentane, butane, propane
and ethane. References to "gas" or "natural gas" relates to
conventional natural gas.
References to "liquids" includes crude oil, condensate and
NGLs.
Share Capital
Spartan's common shares are listed on the Toronto Stock Exchange
("TSX") and trade under the symbol "SDE". The volume
weighted average trading price of Spartan's common shares on the
TSX was $13.93 in the fourth quarter
and averaged $12.01 per common share
for the year ended December 31, 2022.
Spartan's closing share price was $14.95 on December 31,
2022, compared to $5.97 on
December 31, 2021.
As at December 31, 2022 and as of
the date hereof, there are 171.4 million common shares
outstanding. There are no preferred shares or special shares
outstanding. The following securities are outstanding as of the
date of this press release: 3.7 million restricted share
awards; and 3.3 million stock options outstanding with an
average exercise price of $4.56 per
common share and average remaining term of 2.9 years.
The table below summarizes the weighted average number of common
shares outstanding (000s) used in the calculation of diluted EPS
and diluted AFF per share:
|
Three months ended
December 31
|
Year ended December
31
|
|
(000s)
|
2022
|
2021
|
%
|
2022
|
2021
|
%
|
WA Shares outstanding,
basic
|
160,807
|
153,128
|
5
|
156,136
|
115,555
|
35
|
Dilutive effect of
outstanding securities
|
15,046
|
15,962
|
(6)
|
19,347
|
17,903
|
8
|
WA Shares, diluted –
for EPS
|
175,853
|
169,090
|
4
|
175,483
|
133,458
|
31
|
Incremental dilution
for AFF (a)
|
1,340
|
1,130
|
19
|
1,537
|
1,329
|
16
|
WA Shares, diluted –
for AFF (a)
|
177,193
|
170,220
|
4
|
177,020
|
134,787
|
31
|
|
|
|
|
|
|
|
|
a) AFF per share
does not have a standardized meaning under IFRS, refer to "Non-GAAP
Measures and Ratios".
|
Forward-Looking and Cautionary Statements
Certain statements contained within this press release
constitute forward-looking statements within the meaning of
applicable Canadian securities legislation. All statements other
than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "anticipate", "budget",
"plan", "endeavor", "continue", "estimate", "evaluate", "expect",
"forecast", "monitor", "may", "will", "can", "able", "potential",
"target", "intend", "consider", "focus", "identify", "use",
"utilize", "manage", "maintain", "remain", "result", "cultivate",
"could", "should", "believe" and similar expressions. Spartan
believes that the expectations reflected in such forward-looking
statements are reasonable as of the date hereof, but no assurance
can be given that such expectations will prove to be correct and
such forward-looking statements should not be unduly relied upon.
Without limitation, this press release contains forward-looking
statements pertaining to: the business plan, cost model and
strategy of Spartan, including commodity diversification and oil
weighted production; Spartan's 2023 outlook, including anticipated
2023 production levels and capital expenditure budget for 2023; the
expectation that the Repositioning Process may elicit change and
enhance shareholder value; the estimated amount of available tax
pools and the anticipated impact to Spartan's tax horizon; Spartan
plans to deliver strong operational performance and to generate
long term sustainable Free Funds Flow and organic growth; and being
well positioned to take advantage of opportunities in the current
business environment, and to continue pursuing immediate production
optimization, responsible future growth with organic drilling, and
opportunistic acquisitions.
The forward-looking statements and information are based on
certain key expectations and assumptions made by Spartan, including
expectations and assumptions concerning the business plan of
Spartan, the timing of and success of future drilling, development
and completion activities, the performance of existing wells, the
performance of new wells, the availability and performance of
facilities and pipelines, the geological characteristics of
Spartan's properties, the successful integration of the recently
acquired assets into Spartan's operations, the successful
application of drilling, completion and seismic technology,
prevailing weather conditions, prevailing legislation affecting the
oil and gas industry, prevailing commodity prices, price
volatility, price differentials and the actual prices received for
the Company's products, impact of inflation on costs, royalty
regimes and exchange rates, the application of regulatory and
licensing requirements, the availability of capital, labour and
services, the creditworthiness of industry partners and the ability
to source and complete acquisitions.
Although Spartan believes that the expectations and assumptions
on which such forward-looking statements and information are based
are reasonable, undue reliance should not be placed on the
forward-looking statements and information because Spartan can give
no assurance that they will prove to be correct. By its nature,
such forward-looking information is subject to various risks and
uncertainties, which could cause the actual results and
expectations to differ materially from the anticipated results or
expectations expressed. These risks and uncertainties include, but
are not limited to, the failure to achieve the anticipated benefits
of the Repositioning Process or any transactions undertaken
pursuant to the Repositioning Process, fluctuations in
commodity prices, changes in industry regulations and political
landscape both domestically and abroad, wars (including
Russia's military actions in
Ukraine), hostilities, civil
insurrections, foreign exchange or interest rates, increased
operating and capital costs due to inflationary pressures (actual
and anticipated), stock market volatility, impacts of the current
COVID-19 pandemic and the retention of key management and
employees. Ongoing military actions between Russia and Ukraine have the potential to threaten the
supply of oil and gas from the region. The long-term impacts of the
actions between these nations remains uncertain.
Please refer to Spartan's MD&A for the year ended
December 31, 2022 and annual
information form for the year ended December
31, 2021 for discussion of additional risk factors relating
to the Company, which can be accessed either on Spartan's website
at www.spartandeltacorp.com or under Spartan's SEDAR profile on
www.sedar.com. Readers are cautioned not to place undue reliance on
this forward-looking information, which is given as of the date
hereof, and to not use such forward-looking information for
anything other than its intended purpose. Spartan undertakes no
obligation to update publicly or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by law.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about Spartan's prospective results of operations
and production, generating Free Funds Flow and organic growth, 2023
capital budget, expenditures and guidance, tax horizon and
components thereof, all of which are subject to the same
assumptions, risk factors, limitations, and qualifications as set
forth in the above paragraphs. FOFI contained in this document was
approved by management as of the date of this document and was
provided for the purpose of providing further information about
Spartan's future business operations. Spartan and its management
believe that FOFI has been prepared on a reasonable basis,
reflecting management's best estimates and judgments, and
represent, to the best of management's knowledge and opinion, the
Company's expected course of action. However, because this
information is highly subjective, it should not be relied on as
necessarily indicative of future results. Spartan disclaims any
intention or obligation to update or revise any FOFI contained in
this document, whether as a result of new information, future
events or otherwise, unless required pursuant to applicable law.
Readers are cautioned that the FOFI contained in this document
should not be used for purposes other than for which it is
disclosed herein. Changes in forecast commodity prices, differences
in the timing of capital expenditures, and variances in average
production estimates can have a significant impact on the key
performance measures included in Spartan's guidance. The Company's
actual results may differ materially from these
estimates.
Abbreviations
A&D
|
acquisitions and
dispositions
|
AECO
|
Alberta Energy Company
"C" Meter Station of the NOVA Pipeline System
|
AFF
|
Adjusted Funds
Flow
|
AIF
|
refers to the Company's
Annual Information Form dated March 8, 2022
|
bbl
|
barrel
|
bbls/d
|
barrels per
day
|
BOE
|
barrels of oil
equivalent
|
BOE/d
|
barrels of oil
equivalent per day
|
CA$ or CAD
|
Canadian
dollar
|
COVID-19
|
refers to the outbreak
of the novel coronavirus, a public health crisis
|
Edm Light
|
Edmonton light sweet
grade crude oil
|
ESG
|
Environment, Social and
Governance
|
FDC
|
Future development
capital
|
GJ
|
gigajoule
|
Mbbls
|
thousands of
barrels
|
Mboe
|
thousands of barrels of
oil equivalent
|
mcf
|
one thousand cubic
feet
|
mcf/d
|
one thousand cubic feet
per day
|
MMboe
|
millions of barrels of
oil equivalent
|
MMbtu
|
one million British
thermal units
|
MMcf
|
one million cubic
feet
|
MD&A
|
refers to Management's
Discussion and Analysis of the Company dated March 2,
2023
|
MM
|
millions
|
$MM
|
millions of
dollars
|
NI 51-101
|
National Instrument
51-101 – Standards of Disclosure for Oil and Gas
Activities
|
NGL(s)
|
natural gas
liquids
|
NPV
|
Net present value, all
references to NPV in this press release are before-tax
|
NYMEX
|
New York Mercantile
Exchange, with reference to the U.S. dollar "Henry Hub" natural gas
price index
|
PDP
|
Proved developed
producing reserves
|
Q4 2022
|
fourth quarter of
2022
|
Q4 2021
|
fourth quarter of
2021
|
TSX
|
Toronto Stock
Exchange
|
TP
|
Total proved
reserves
|
TPP
|
Total proved plus
probable reserves
|
US$ or USD
|
United States
dollar
|
WTI
|
West Texas
Intermediate, the reference price paid in U.S. dollars at Cushing,
Oklahoma for crude oil of standard grade
|
SOURCE Spartan Delta Corp.