Birchcliff Energy Ltd. (“
Birchcliff” or the
“
Corporation”) (TSX: BIR) is proud to announce its
financial and operational results for the three and six months
ended June 30, 2021.
“Birchcliff had an excellent second quarter in
2021, with solid average production of 75,265 boe/d which resulted
in $90.2 million of adjusted funds flow(1), a 315% increase from Q2
2020. Our average production in July exceeded 85,000 boe/d(2) based
on field estimates and we are on track to meet our second half
production guidance of 84,000 to 86,000 boe/d and our annual
average production guidance of 79,000 to 81,000 boe/d. The
performance of our new wells and the current strength we are seeing
in oil and natural gas prices positions us for a very strong second
half in 2021, with significant anticipated increases in adjusted
funds flow and free funds flow(1). Birchcliff does not have any
fixed price commodity hedges which allows all of our production to
benefit from strong oil and natural gas prices and we currently
have no intention of entering into any fixed price commodity
hedges,” commented Jeff Tonken, President and Chief Executive
Officer of Birchcliff.
“Due to the successful execution of our business
plan and the recent strengthening of forward oil and natural gas
prices, we are increasing our 2021 guidance for adjusted funds flow
to $500 million(3) (up from $400 million) and free funds flow to
$270 million to $290 million (up from $170 million to $190
million). We remain committed to capital discipline and we are
maintaining our guidance for 2021 F&D capital expenditures at
$210 million to $230 million, notwithstanding the fact that this is
the second time in 2021 that we have increased our guidance for
adjusted funds flow and free funds flow,” said Mr. Tonken. “As the
majority of our 2021 capital program has now been completed, our
total debt(1) is expected to significantly decrease over the
remainder of the year. With free funds flow now targeted at $270
million to $290 million, we expect that our total debt at year end
will be $500 million to $520 million, down from our previous
guidance of $600 million to $620 million. Our total debt at year
end is expected to decrease by as much as 34% ($262 million) from
our total debt at December 31, 2020 of $762.0 million based on our
anticipated F&D capital spending, annual average production and
free funds flow in 2021.”
Birchcliff’s unaudited interim condensed
financial statements for the three and six months ended June 30,
2021 and related management’s discussion and analysis will be
available on its website at www.birchcliffenergy.com and on SEDAR
at www.sedar.com.
Q2 2021 HIGHLIGHTS
-
Achieved quarterly average production of 75,265 boe/d, which is
comparable to Birchcliff’s average production of 74,950 boe/d in Q2
2020.
-
Liquids accounted for approximately 22% of Birchcliff’s total
production in Q2 2021, as compared to approximately 24% in Q2
2020.
-
Generated $90.2 million of adjusted funds flow(1), or $0.34 per
basic common share, a 315% increase and a 325% increase,
respectively, from Q2 2020. Delivered $81.0 million of cash flow
from operating activities, a 513% increase from Q2 2020.
-
Delivered $9.3 million of free funds flow(1) in Q2 2021.
-
Recorded net income to common shareholders of $43.9 million, or
$0.16 per basic common share, as compared to a net loss to common
shareholders of $39.5 million and $0.15 per basic common share in
Q2 2020.
-
Achieved operating expense of $3.14/boe, a 9% increase from Q2
2020.
-
Realized an operating netback(1) of $17.19/boe, a 151% increase
from Q2 2020.
-
F&D capital expenditures were $80.9 million in Q2 2021. During
the quarter, Birchcliff continued with the safe and efficient
execution of its 2021 capital program (the “2021 Capital
Program”), drilling 8 (8.0 net) wells and bringing 14
(14.0 net) wells on production.
-
On June 16, 2021, the Corporation released its fourth annual ESG
report which outlines Birchcliff’s ESG performance for the year
ended December 31, 2020, highlighting Birchcliff as one of the
lowest emissions intensity producers in the industry. For more
information on Birchcliff’s ESG performance metrics and ESG
initiatives, please see the Corporation’s 2020 ESG Report and ESG
video which are available on the Corporation’s website at
www.birchcliffenergy.com.
This press release contains forward-looking
statements within the meaning of applicable securities laws. For
further information regarding the forward-looking statements
contained herein, see “Advisories – Forward-Looking Statements”.
With respect to the disclosure of Birchcliff’s production contained
in this press release, see “Advisories – Production”.
________________________________(1) Non-GAAP
measure that does not have any standardized meaning prescribed by
GAAP and therefore may not be comparable to similar measures
presented by other companies where similar terminology is used. See
“Non-GAAP Measures”.(2) Consists of approximately 411,738
Mcf/d of natural gas, 5,929 bbls/d of condensate, 7,514 bbls/d of
NGLs and 2,936 bbls/d of light oil.(3) Based on an annual average
production rate of 80,000 boe/d, which is the mid-point of
Birchcliff’s 2021 annual average production guidance of 79,000 to
81,000 boe/d. See “Outlook and Guidance”.
FINANCIAL AND OPERATIONAL HIGHLIGHTS FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
|
|
Three months endedJune 30, |
|
Six months endedJune 30, |
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
OPERATING |
|
|
|
|
|
Average production |
|
|
|
|
|
Light oil (bbls/d) |
2,766 |
|
5,744 |
|
3,059 |
|
4,849 |
|
|
Condensate (bbls/d) |
6,070 |
|
4,825 |
|
5,770 |
|
4,675 |
|
|
NGLs (bbls/d) |
7,647 |
|
7,455 |
|
8,187 |
|
7,709 |
|
|
Natural gas (Mcf/d) |
352,694 |
|
341,558 |
|
348,897 |
|
342,195 |
|
|
Total (boe/d) |
75,265 |
|
74,950 |
|
75,166 |
|
74,265 |
|
|
Average realized sales price (CDN$)(1) |
|
|
|
|
|
Light oil (per bbl) |
76.50 |
|
25.72 |
|
71.33 |
|
36.92 |
|
|
Condensate (per bbl) |
81.90 |
|
31.09 |
|
78.28 |
|
44.35 |
|
|
NGLs (per bbl) |
25.27 |
|
12.05 |
|
24.96 |
|
12.04 |
|
|
Natural gas (per Mcf) |
3.48 |
|
2.22 |
|
3.50 |
|
2.25 |
|
|
Total (per boe) |
28.27 |
|
15.27 |
|
27.87 |
|
16.83 |
|
|
|
|
|
|
|
|
NETBACK AND COST ($/boe) |
|
|
|
|
|
Petroleum and natural gas revenue(1) |
28.27 |
|
15.27 |
|
27.87 |
|
16.83 |
|
|
Royalty expense |
(2.44 |
) |
(0.20 |
) |
(2.08 |
) |
(0.57 |
) |
|
Operating expense |
(3.14 |
) |
(2.89 |
) |
(3.16 |
) |
(3.01 |
) |
|
Transportation and other expense(2) |
(5.50 |
) |
(5.34 |
) |
(5.51 |
) |
(5.18 |
) |
|
Operating netback ($/boe)(2) |
17.19 |
|
6.84 |
|
17.12 |
|
8.07 |
|
|
G&A expense, net |
(0.88 |
) |
(0.84 |
) |
(0.90 |
) |
(0.87 |
) |
|
Interest expense |
(1.21 |
) |
(0.69 |
) |
(1.21 |
) |
(0.79 |
) |
|
Realized loss on financial instruments |
(1.96 |
) |
(2.51 |
) |
(2.12 |
) |
(2.32 |
) |
|
Other income |
0.03 |
|
0.39 |
|
0.19 |
|
0.25 |
|
|
Adjusted funds flow netback
($/boe)(2) |
13.17 |
|
3.19 |
|
13.08 |
|
4.34 |
|
|
Depletion and depreciation expense |
(7.49 |
) |
(7.66 |
) |
(7.48 |
) |
(7.68 |
) |
|
Unrealized gain (loss) on financial instruments |
3.12 |
|
(1.86 |
) |
1.01 |
|
(3.85 |
) |
|
Other (expenses) income(3) |
(0.24 |
) |
(0.64 |
) |
0.01 |
|
(0.47 |
) |
|
Dividends on preferred shares |
(0.25 |
) |
(0.28 |
) |
(0.25 |
) |
(0.28 |
) |
|
Income tax recovery (expense) |
(1.91 |
) |
1.46 |
|
(1.52 |
) |
1.67 |
|
|
Net income (loss) to common shareholders
($/boe) |
6.40 |
|
(5.79 |
) |
4.85 |
|
(6.27 |
) |
|
|
|
|
|
|
|
FINANCIAL |
|
|
|
|
|
Petroleum and natural gas revenue ($000s)(1) |
193,643 |
|
104,180 |
|
379,252 |
|
227,443 |
|
|
Cash flow from operating activities ($000s) |
81,013 |
|
13,221 |
|
163,621 |
|
63,772 |
|
|
Adjusted funds flow ($000s)(2) |
90,188 |
|
21,746 |
|
178,008 |
|
58,640 |
|
|
Per basic common share ($)(2) |
0.34 |
|
0.08 |
|
0.67 |
|
0.22 |
|
|
Net income (loss) to common shareholders ($000s) |
43,854 |
|
(39,522 |
) |
66,019 |
|
(84,723 |
) |
|
Per basic common share ($) |
0.16 |
|
(0.15 |
) |
0.25 |
|
(0.32 |
) |
|
End of period basic common shares (000s) |
266,953 |
|
265,935 |
|
266,953 |
|
265,935 |
|
|
Weighted average basic common shares (000s) |
266,231 |
|
265,935 |
|
266,110 |
|
265,935 |
|
|
Dividends on common shares ($000s) |
1,333 |
|
1,327 |
|
2,663 |
|
8,308 |
|
|
Dividends on preferred shares ($000s) |
1,725 |
|
1,922 |
|
3,471 |
|
3,844 |
|
|
F&D capital expenditures ($000s)(4) |
80,887 |
|
83,473 |
|
176,727 |
|
215,834 |
|
|
Total capital expenditures ($000s)(4) |
81,160 |
|
83,974 |
|
177,785 |
|
216,814 |
|
|
Long-term debt ($000s) |
720,920 |
|
753,092 |
|
720,920 |
|
753,092 |
|
|
Total debt ($000s)(2) |
770,897 |
|
807,573 |
|
770,897 |
|
807,573 |
|
(1) Excludes the effects of financial
instruments but includes the effects of physical delivery
contracts.(2) Non-GAAP measure that does not have any
standardized meaning prescribed by GAAP and therefore may not be
comparable to similar measures presented by other companies where
similar terminology is used. See “Non-GAAP Measures”.(3)
Includes non-cash items such as compensation, accretion,
amortization of deferred financing fees and other gains and
losses.(4) See “Advisories – Capital Expenditures”.
OUTLOOK AND GUIDANCE
Updated 2021 Outlook and
Guidance
Birchcliff is reaffirming its second half 2021
production guidance of 84,000 to 86,000 boe/d and its 2021 annual
average production guidance of 79,000 to 81,000 boe/d. Birchcliff
does not have any fixed price commodity hedges which allows all of
its production to benefit from strong oil and natural gas prices.
This production, together with strong commodity prices, is expected
to generate significant adjusted funds flow and free funds flow in
2021. Birchcliff remains committed to significantly reducing its
total debt over the next number of years and free funds flow will
be primarily used to reduce indebtedness.
Due to the successful execution of Birchcliff’s
business plan and the recent strengthening of forward oil and
natural gas prices, Birchcliff is revising its commodity price and
exchange rate assumptions for 2021 and its guidance for adjusted
funds flow, free funds flow and total debt. Significant changes to
Birchcliff’s 2021 guidance include the following:
-
Adjusted funds flow guidance has been increased to $500 million
(previously $400 million), primarily as a result of the improvement
in the commodity price forecast.
-
Free funds flow guidance has been increased to $270 million to $290
million (previously $170 million to $190 million), as a result of
higher anticipated adjusted funds flow in 2021 with no change to
targeted F&D capital expenditures in 2021.
-
Total debt at year-end is now expected to be $500 million to $520
million (previously $600 million to $620 million), primarily as a
result of higher anticipated free funds flow in 2021.
-
Average royalty expense is now expected to be $2.40/boe to
$2.60/boe (previously $1.55/boe to $1.75/boe), primarily as a
result of the improvement in the commodity price forecast.
Birchcliff is maintaining its previous 2021
guidance for average production, F&D capital expenditures,
operating and transportation and other expenses, and natural gas
market exposure.
The following table sets forth Birchcliff’s
revised and previous guidance and commodity price assumptions for
2021:
|
|
Revised 2021guidance andassumptions –
August 11, 2021(1) |
Previous 2021guidance andassumptions – May
12, 2021(2) |
Original 2021guidance andassumptions –January 20,
2021(3) |
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
Annual average production (boe/d) |
79,000 – 81,000 |
79,000 – 81,000 |
78,000 – 80,000 |
|
|
% Light oil |
4% |
4% |
5% |
|
|
% Condensate |
7% |
8% |
9% |
|
|
% NGLs |
10% |
10% |
10% |
|
|
% Natural gas |
79% |
78% |
76% |
|
|
Second half 2021 average production (boe/d) |
84,000 – 86,000 |
84,000 – 86,000 |
83,000 – 85,000 |
|
|
|
|
|
|
|
|
Average Expenses ($/boe) |
|
|
|
|
|
Royalty |
2.40 – 2.60 |
1.55 – 1.75 |
1.15 – 1.35 |
|
|
Operating |
2.90 – 3.10 |
2.90 – 3.10 |
2.90 – 3.10 |
|
|
Transportation and other |
5.00 – 5.20 |
5.00 – 5.20 |
5.00 – 5.20 |
|
|
|
|
|
|
|
|
Adjusted Funds Flow (MM$) |
500(4) |
400 |
360 |
|
|
|
|
|
|
|
|
F&D Capital Expenditures
(MM$)(5) |
210 – 230 |
210 – 230 |
210 – 230 |
|
|
|
|
|
|
|
|
Free Funds Flow (MM$)(6) |
270 – 290 |
170 – 190 |
130 – 150 |
|
|
|
|
|
|
|
|
Total Debt at Year End (MM$) |
500 – 520(7) |
600 – 620 |
635 – 655 |
|
|
|
|
|
|
|
|
Natural Gas Market Exposure(8) |
|
|
|
|
|
AECO exposure as a % of total natural gas production |
13% |
13% |
12%(9) |
|
|
Dawn exposure as a % of total natural gas production |
43% |
43% |
44% |
|
|
NYMEX HH exposure as a % of total natural gas production |
38% |
38% |
38%(9) |
|
|
Alliance exposure as a % of total natural gas production |
6% |
6% |
6% |
|
|
Commodity Prices |
|
|
|
|
|
Average WTI price (US$/bbl) |
66.00(10) |
62.00 |
50.00 |
|
|
Average WTI-MSW differential (CDN$/bbl) |
5.50(10) |
5.70 |
6.00 |
|
|
Average AECO 5A price (CDN$/GJ) |
3.30(10) |
2.80 |
2.50 |
|
|
Average Dawn price (US$/MMBtu)(11) |
4.05(10) |
2.85 |
2.75 |
|
|
Average NYMEX HH price (US$/MMBtu)(11) |
3.45(10) |
2.90 |
2.80 |
|
|
Exchange rate (CDN$ to US$1) |
1.25(10) |
1.24 |
1.27 |
|
(1) Birchcliff’s guidance for its
commodity mix, adjusted funds flow and natural gas market exposure
in 2021 is based on an annual average production rate of 80,000
boe/d during 2021, which is the mid-point of Birchcliff’s annual
average production guidance for 2021.(2) As previously
disclosed on May 12, 2021.(3) Except where otherwise noted,
as previously disclosed on January 20, 2021. Birchcliff’s original
guidance for its commodity mix, adjusted funds flow and natural gas
market exposure in 2021 was based on an annual average production
rate of 79,000 boe/d during 2021, which was the mid-point of
Birchcliff’s original annual average production guidance for
2021.(4) Birchcliff’s estimate of adjusted funds flow takes
into account the effects of its physical and financial basis swap
contracts outstanding as at August 11, 2021.(5) Birchcliff’s
estimate of F&D capital expenditures excludes any net potential
acquisitions and dispositions and corresponds to Birchcliff’s 2021
F&D capital budget. See “Advisories – Capital
Expenditures”.(6) Free funds flow is calculated as adjusted
funds flow less F&D capital expenditures and is prior to
acquisitions and dispositions, dividend payments, preferred share
redemptions, proceeds received from the exercise of stock options
and performance warrants, abandonment and reclamation obligations,
administrative assets, financing fees and capital lease
obligations. See “Non-GAAP Measures”.(7) The total debt
amount set forth in the table above assumes the following: (i) that
the timing and amount of common share and preferred share dividends
paid by the Corporation remains consistent with previous years,
with the dividend rates and applicable taxes remaining unchanged;
(ii) that there are 267 million common, 2,000,000 series A and
1,533,108 series C preferred shares outstanding, with no additional
redemptions of series C preferred shares or buybacks of common
shares occurring during the remainder of 2021; (iii) that there is
no repayment of debt using the proceeds from asset dispositions or
equity issuances; (iv) that there are no proceeds received from the
exercise of stock options and performance warrants during the
remainder of 2021; (v) that the 2021 Capital Program will be
carried out as currently contemplated and the level of capital
spending set forth herein will be achieved; and (vi) the targets
for production, production commodity mix, capital expenditures,
adjusted funds flow, free funds flow and natural gas market
exposure and the commodity price and exchange rate assumptions set
forth herein are met. The amount set forth in the table above does
not include annual cash incentive payments.(8) Birchcliff’s
guidance regarding its natural gas market exposure in 2021 assumes:
(i) 175,000 GJ/d being sold on a physical basis at the Dawn price;
(ii) 34,000 GJ/d being sold at Alliance on a physical basis at the
AECO 5A price plus a premium; and (iii) 152,500 MMBtu/d being
contracted on a financial and physical basis at a fixed basis
differential between the AECO 7A price and the NYMEX HH
price.(9) Updated on March 10, 2021.(10) Updated
commodity price and exchange rate assumptions are based on
anticipated full-year averages, which include actual settled
benchmark commodity prices and exchange rate for the period from
January 1, 2021 to June 30, 2021 and forward strip benchmark
commodity prices and exchange rate as of August 6, 2021 for the
period from July 1, 2021 to December 31, 2021.(11) See
“Advisories – MMBtu Pricing Conversions”.
Adjusted Funds Flow
Sensitivity
The following table illustrates the expected
impact of changes in commodity prices and the CDN/US exchange rate
for the second half of 2021 on the Corporation’s estimate of
adjusted funds flow for 2021 of $500 million:
|
Forward Six Months’ Sensitivity(1) |
|
Estimated change to 2021 adjusted funds flow
(MM$)(2)(3) |
|
Change in WTI US$1.00/bbl |
|
2.0 |
|
Change in NYMEX HH US$0.10/MMBtu |
|
2.4 |
|
Change in Dawn US$0.10/MMBtu |
|
3.0 |
|
Change in AECO CDN$0.10/GJ |
|
2.0 |
|
Change in CDN/US exchange rate CDN$0.01 |
|
2.6 |
(1) Adjusted funds flow sensitivities take
into account actual settled benchmark commodity prices and exchange
rate for the period from January 1, 2021 to June 30, 2021 and
forward strip benchmark commodity prices and exchange rate as of
August 6, 2021 for the period from July 1, 2021 to December 31,
2021.(2) See the guidance table above.(3) The
calculated impact on adjusted funds flow is only applicable within
the limited range of change indicated. Calculations are performed
independently and may not be indicative of actual results. Actual
results may vary materially when multiple variables change at the
same time.
Ongoing volatility in commodity prices resulting
from the COVID-19 pandemic may adversely and materially impact the
Corporation’s future financial and operational results. Changes in
assumed commodity prices and variances in production estimates can
have a significant impact on the Corporation’s estimates of
adjusted funds flow and free funds flow and the Corporation’s other
guidance, which impact may be material. For further information,
see “Advisories – Forward-Looking Statements”.
Q2 2021 FINANCIAL AND OPERATIONAL
RESULTS
Production
Birchcliff’s production averaged 75,265 boe/d in
Q2 2021, which is comparable to Birchcliff’s average production of
74,950 boe/d in Q2 2020. Production in Q2 2021 was positively
impacted by incremental production volumes from new condensate-rich
natural gas wells brought on production since June 30, 2020.
Production was negatively impacted by scheduled plant turnarounds
in May 2021 at Phases 5/6 of the Corporation’s 100% owned and
operated natural gas processing plant in Pouce Coupe (the
“Pouce Coupe Gas Plant”) and extreme heat
conditions in June 2021 which reduced production processing
capabilities in the field, as well as by natural production
declines. For details regarding the wells drilled and brought on
production in 2021, see “Operational Update”.
Liquids accounted for approximately 22% of
Birchcliff’s total production in Q2 2021, as compared to
approximately 24% in Q2 2020, with total liquids production
decreasing by 9% from Q2 2020. The change in the corporate
commodity production mix was primarily due to Birchcliff targeting
natural gas wells in the Pouce Coupe and Gordondale areas since
June 30, 2020.
Adjusted Funds Flow and Cash Flow From
Operating Activities
Birchcliff’s adjusted funds flow in Q2 2021 was
$90.2 million, or $0.34 per basic common share, a 315% increase and
a 325% increase, respectively, from $21.7 million and $0.08 per
basic common share in Q2 2020. The increases were primarily due to
higher reported petroleum and natural gas revenue, partially offset
by an increase in royalty expense, both of which were largely
impacted by an 85% increase in the average realized sales price
received for Birchcliff’s production in Q2 2021 as compared to Q2
2020. The average realized sales price in Q2 2021 benefited from
the significant increases in benchmark oil and natural gas prices.
See “Q2 2021 Financial and Operational Results – Commodity
Prices”.
Birchcliff’s cash flow from operating activities
in Q2 2021 was $81.0 million, a 513% increase from $13.2 million in
Q2 2020. The reason for the increase is consistent with the
explanation for adjusted funds flow.
Net Income to Common
Shareholders
Birchcliff recorded net income to common
shareholders of $43.9 million, or $0.16 per basic common share, in
Q2 2021, as compared to a net loss to common shareholders of $39.5
million, or $0.15 per basic common share in Q2 2020. The change to
a net income position was primarily due to higher adjusted funds
flow and an unrealized after-tax mark-to-market gain on financial
instruments of $16.4 million in Q2 2021 as compared to an
unrealized after-tax mark-to-market loss on financial instruments
of $9.8 million in Q2 2020.
Operating Expense
Birchcliff’s operating expense was $3.14/boe in
Q2 2021, a 9% increase from $2.89/boe in Q2 2020. The increase was
primarily due to higher power and fuel prices as a result of
increased demand and higher municipal property taxes in Q2 2021 as
compared to Q2 2020. In 2020, the Alberta Government provided
municipal property tax relief in response to the COVID-19 pandemic;
however, this tax relief was discontinued in 2021. These increases
were partially offset by improved operating efficiencies achieved
in the field.
Operating Netback
Birchcliff’s operating netback was $17.19/boe in
Q2 2021, a 151% increase from $6.84/boe in Q2 2020. The increase
was primarily due to higher per boe petroleum and natural gas
revenue, partially offset by a higher per boe royalty expense in Q2
2021.
Total Cash Costs
Birchcliff’s total cash costs were $13.17/boe in
Q2 2021, a 32% increase from $9.96/boe in Q2 2020. The increase was
primarily due to a higher per boe royalty expense.
Pouce Coupe Gas Plant
Netbacks
During the six months ended June 30, 2021,
Birchcliff processed 69% of its total corporate natural gas
production and 61% of its total corporate production through the
Pouce Coupe Gas Plant, as compared to 66% and 55%, respectively,
during the six months ended June 30, 2020. The following table sets
forth Birchcliff’s average daily production and operating netback
for wells producing to the Pouce Coupe Gas Plant for the periods
indicated:
|
|
Six months ended June 30,
2021 |
|
Six months ended June 30,
2020 |
|
|
Average production: |
|
|
|
|
|
Condensate (bbls/d) |
|
3,935 |
|
|
2,872 |
|
|
NGLs (bbls/d) |
|
1,858 |
|
|
940 |
|
|
Natural gas (Mcf/d) |
|
239,768 |
|
|
224,354 |
|
|
Total (boe/d) |
|
45,754 |
|
|
41,204 |
|
|
Liquids-to-gas ratio(1)
(bbls/MMcf) |
|
24.2 |
|
|
17.0 |
|
|
Netback and cost: |
$/Mcfe |
|
$/boe |
|
$/Mcfe |
|
$/boe |
|
|
Petroleum and natural gas revenue(2) |
4.42 |
|
26.51 |
|
2.68 |
|
16.10 |
|
|
Royalty expense |
(0.28 |
) |
(1.70 |
) |
(0.06 |
) |
(0.35 |
) |
|
Operating expense(3) |
(0.36 |
) |
(2.15 |
) |
(0.41 |
) |
(2.47 |
) |
|
Transportation and other expense(4) |
(0.97 |
) |
(5.81 |
) |
(0.90 |
) |
(5.44 |
) |
|
Operating netback(4) |
$2.81 |
|
$16.85 |
|
$1.31 |
|
$7.84 |
|
|
Operating margin(5) |
64% |
|
64% |
|
49% |
|
49% |
|
(1) Liquids consists of condensate and other
NGLs.(2) Excludes the effects of financial instruments but
includes the effects of physical delivery contracts.(3)
Represents plant and field operating expense.(4) Non-GAAP
measure that does not have any standardized meaning prescribed by
GAAP and therefore may not be comparable to similar measures
presented by other companies where similar terminology is used. See
“Non-GAAP Measures”.(5) Operating margin is calculated by
dividing the operating netback for the period by the petroleum and
natural gas revenue for the period.
Birchcliff’s production and liquids-to-gas ratio
increased from Q2 2020 primarily due to: (i) specifically targeted
condensate-rich natural gas wells brought on production in Pouce
Coupe, including from the 14-well pad (14-19) brought on production
in Q3 2020 and the 7-well pad (04-04) and 10-well pad (14-06)
brought on production in the first half of 2021; (ii) increased
NGLs recovery at Phase 3 of the Pouce Coupe Gas Plant beginning in
Q4 2020; and (iii) the operation of its 20,000 bbls/d (50%
condensate, 50% water) inlet liquids-handling facility at the Pouce
Coupe Gas Plant (the “Inlet Liquids-Handling
Facility”), which became operational in Q3 2020 and allows
Birchcliff to handle increased condensate volumes in Pouce
Coupe.
Debt and Credit Facilities
At June 30, 2021, Birchcliff had long-term bank
debt of $720.9 million (June 30, 2020: $753.1 million) from
available credit facilities of $850.0 million (June 30, 2020: $1.0
billion), leaving $120.7 million of unutilized credit capacity
after adjusting for outstanding letters of credit and unamortized
fees. Total debt at June 30, 2021 was $770.9 million, as compared
to $807.6 million at June 30, 2020. With free funds flow now
targeted at $270 million to $290 million, the Corporation expects
that its total debt at year end 2021 will be $500 million to $520
million, down from its previous guidance of $600 million to $620
million. See “Outlook and Guidance”.
During Q2 2021, Birchcliff’s syndicate of
lenders completed its regular semi-annual review of the borrowing
base limit under the Corporation’s extendible revolving credit
facilities (the “Credit Facilities”). During this
review, Birchcliff requested that the lenders agree to extend the
maturity date of the Credit Facilities by two years and reduce the
aggregate borrowing base limit from $1.0 billion to $850.0 million.
Due to the fact that Birchcliff is committed to significantly
reducing total debt over the course of its current five-year plan,
it does not anticipate requiring additional credit capacity, and
accordingly, requested the borrowing base limit reduction. This
reduction to the borrowing base limit resulted in a corresponding
decrease to the Corporation’s renewal fees and reduces its standby
fees going forward. Accordingly, the agreement governing the Credit
Facilities was amended effective May 6, 2021 to: (i) extend the
maturity dates of each of the extendible revolving syndicated term
credit facility (the “Syndicated Credit Facility”)
and the extendible revolving working capital facility
(“Working Capital Facility”) from May 11, 2022 to
May 11, 2024; and (ii) decrease the borrowing base limit to $850.0
million from $1.0 billion, with the Syndicated Credit Facility
being decreased to $750.0 million and the Working Capital Facility
remaining at $100.0 million.
The Credit Facilities do not contain any
financial maintenance covenants.
Commodity Prices
The following table sets forth the average
benchmark index prices and exchange rate for the periods
indicated:
|
|
Three months ended June 30, |
|
|
|
2021 |
2020 |
% Change |
|
|
Light oil – WTI Cushing (US$/bbl) |
66.07 |
26.61 |
148 |
|
|
Light oil – MSW (Mixed Sweet) (CDN$/bbl) |
76.77 |
25.15 |
205 |
|
|
Natural gas – NYMEX HH (US$/MMBtu)(1) |
2.83 |
1.64 |
73 |
|
|
Natural gas – AECO 5A Daily (CDN$/GJ) |
2.98 |
1.89 |
58 |
|
|
Natural gas – AECO 7A Month Ahead (US$/MMBtu)(1) |
2.32 |
1.33 |
74 |
|
|
Natural gas – Dawn Day Ahead (US$/MMBtu)(1) |
2.80 |
1.63 |
72 |
|
|
Natural gas – ATP 5A Day Ahead (CDN$/GJ) |
2.68 |
1.68 |
60 |
|
|
Exchange rate (CDN$ to US$1) |
1.2281 |
1.3860 |
(11 |
) |
|
Exchange rate (US$ to CDN$1) |
0.8143 |
0.7215 |
13 |
|
(1) See “Advisories – MMBtu Pricing
Conversions”.
Marketing and Natural Gas Market
Diversification
Birchcliff’s physical natural gas sales exposure
primarily consists of the AECO, Dawn and Alliance markets. In
addition, the Corporation has various financial instruments
outstanding that provide it with exposure to NYMEX HH pricing.
These instruments allow Birchcliff to swap its physical natural gas
sales at the AECO 7A benchmark price for, predominantly on a
financial basis, a floating NYMEX HH benchmark price less the fixed
basis contract price. The price received for Birchcliff’s NYMEX HH
natural gas sales is not fixed, which allows the Corporation to
fully participate in the current strengthening of NYMEX HH
benchmark prices.
The following table details Birchcliff’s
effective sales, production and average realized sales price for
natural gas and liquids for Q2 2021, after taking into account the
Corporation’s financial instruments.
|
Three months ended June 30, 2021 |
|
|
Effectivesales(CDN$000s) |
Percentage oftotal sales(%) |
Effectiveproduction(per day) |
Percentage of total natural
gasproduction(%) |
Percentage of total
corporateproduction(%) |
Effective averagerealized sales
price(CDN$) |
|
Market |
|
|
|
|
|
|
|
AECO(1)(2) |
17,360 |
9 |
54,913 Mcf |
16 |
12 |
3.47/Mcf |
|
Dawn(3) |
53,025 |
26 |
159,197 Mcf |
45 |
35 |
3.66/Mcf |
|
NYMEX HH(1)(4) |
50,281 |
25 |
138,584 Mcf |
39 |
31 |
3.99/Mcf |
|
Total natural gas |
120,666 |
60 |
352,694 Mcf |
100 |
78 |
3.76/Mcf |
|
Light oil |
19,255 |
9 |
2,766 bbls |
|
4 |
76.50/bbl |
|
Condensate |
45,241 |
22 |
6,070 bbls |
|
8 |
81.90/bbl |
|
NGLs |
17,582 |
9 |
7,647 bbls |
|
10 |
25.27/bbl |
|
Total liquids |
82,078 |
40 |
16,483 bbls |
|
22 |
54.72/bbl |
|
Total corporate |
202,744 |
100 |
75,265 boe |
|
100 |
29.60/boe |
(1) A portion of AECO 5A sales and
production that effectively received NYMEX HH pricing under
Birchcliff’s long-term physical and financial NYMEX/AECO 7A basis
swap contracts has been included as effective sales and production
in the NYMEX HH market. Birchcliff sold financial and physical AECO
7A basis swaps for 152,500 MMBtu/d at an average contract price of
NYMEX HH less US$1.227/MMBtu during Q2 2021.(2) Birchcliff
has short-term physical sales agreements with third-party marketers
to sell and deliver into the Alliance pipeline system. All of
Birchcliff’s short-term physical Alliance sales and production
during Q2 2021 received AECO premium pricing and have therefore
been included as effective sales and production in the AECO market.
Alliance sales are recorded net of transportation tolls.(3)
Birchcliff has agreements for the firm service transportation of an
aggregate of 175,000 GJ/d of natural gas on TCPL’s Canadian
Mainline, whereby natural gas is transported to the Dawn trading
hub in Southern Ontario.(4) Birchcliff’s effective average
realized sales price for NYMEX HH of CDN$3.99/Mcf (US$2.95/MMBtu)
was determined on a gross basis before giving effect to the average
NYMEX HH/AECO 7A contract basis price of CDN$1.66/Mcf
(US$1.227/MMBtu). After giving effect to the NYMEX HH/AECO 7A basis
contact price of CDN$1.66/Mcf, Birchcliff’s effective average
realized net sales price for NYMEX HH was CDN$2.33/Mcf
(US$1.72/MMBtu) in Q2 2021.
The following table sets forth Birchcliff’s
sales, average daily production, average realized sales price,
transportation costs and netback by physical natural gas market for
the periods indicated, before taking into account the Corporation’s
financial instruments:
|
Three months ended June 30, 2021 |
|
|
Natural
gas sales(1)(CDN$000s) |
Percentage of natural gas sales (%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realized natural gas
sales price(1)(CDN$/Mcf) |
Natural gas transportation costs(2)
(CDN$/Mcf) |
Natural gas sales netback(3)(CDN$/Mcf) |
|
AECO |
43,721 |
39 |
147,178 |
42 |
3.28 |
0.49 |
2.79 |
|
Dawn |
53,025 |
48 |
159,197 |
45 |
3.66 |
1.55 |
2.11 |
|
Alliance(4) |
14,810 |
13 |
46,319 |
13 |
3.51 |
- |
3.51 |
|
Total |
111,556 |
100 |
352,694 |
100 |
3.48 |
0.91 |
2.57 |
|
Three months ended June 30, 2020 |
|
|
Natural
gas sales(1)(CDN$000s) |
Percentage of natural gas sales (%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realized natural gas
sales price(1)(CDN$/Mcf) |
Natural gas transportation costs(2)
(CDN$/Mcf) |
Natural gas sales netback(3)(CDN$/Mcf) |
|
AECO |
33,840 |
49 |
177,108 |
52 |
2.12 |
0.38 |
1.74 |
|
Dawn |
34,402 |
50 |
159,338 |
47 |
2.37 |
1.43 |
0.94 |
|
Alliance(4) |
665 |
1 |
5,112 |
1 |
1.43 |
- |
1.43 |
|
Total |
68,907 |
100 |
341,558 |
100 |
2.22 |
0.87 |
1.35 |
(1) Excludes the effects of financial
instruments but includes the effects of physical delivery
contracts.(2) Reflects costs to transport natural gas from
the field receipt point to the delivery sales trading hub.(3)
Natural gas sales netback denotes the average realized natural gas
sales price less natural gas transportation costs.(4)
Birchcliff has short-term physical sales agreements with
third-party marketers to sell and deliver into the Alliance
pipeline system. Alliance sales are recorded net of transportation
tolls.
Capital Activities and
Investment
During Q2 2021, Birchcliff continued with the
safe and efficient execution of its 2021 Capital Program, drilling
8 (8.0 net) wells and bringing 14 (14.0 net) wells on production.
The following table sets forth the number of wells drilled and
brought on production by the Corporation in Q2 2021:
|
Area |
Wells drilled in Q2 2021 |
|
Wells brought on production in Q2
2021 |
|
|
Pouce Coupe |
|
|
|
|
|
Montney D1 horizontal natural gas wells |
1 |
|
4 |
|
|
Montney D2 horizontal natural gas wells |
0 |
|
3 |
|
|
Montney C horizontal natural gas wells |
0 |
|
3 |
|
|
Basal Doig/Upper Montney horizontal natural gas wells |
3 |
|
0 |
|
|
Total – Pouce Coupe |
4 |
|
10 |
|
|
|
|
|
|
|
|
Gordondale |
|
|
|
|
|
Montney D1 horizontal natural gas wells |
0 |
|
2 |
|
|
Montney D2 horizontal natural gas wells |
0 |
|
1 |
|
|
Montney C horizontal natural gas wells |
0 |
|
1 |
|
|
Montney D1 horizontal oil wells |
2 |
|
0 |
|
|
Montney D2 horizontal oil wells |
2 |
|
0 |
|
|
Total – Gordondale |
4 |
|
4 |
|
|
TOTAL – COMBINED |
8 |
|
14 |
|
Total capital expenditures for Q2 2021 were
$81.2 million, which included F&D capital expenditures of $80.9
million. For further information regarding Birchcliff’s operational
activities year-to-date, see “Operational Update”.
ENVIRONMENTAL, SOCIAL AND
GOVERNANCE
Birchcliff is committed to the responsible
development of its assets and is one of the lowest emissions
intensity producers in the industry. Continuing Birchcliff’s
industry-leading ESG performance remains a top priority in 2021. On
June 16, 2021, Birchcliff released its 2020 ESG Report, which
details the Corporation’s ESG activities and performance metrics
for the year ended December 31, 2020. In 2020, Birchcliff continued
to find innovative ways to improve emissions performance and
protect the environment, maintain and strengthen its relationships
with the communities and Indigenous peoples where it operates and
advance its deeply ingrained culture of health and safety
excellence.
For more information on Birchcliff’s ESG
performance metrics and ESG initiatives, please see the
Corporation’s 2020 ESG Report and ESG video which are available on
the Corporation’s website at www.birchcliffenergy.com.
OPERATIONAL UPDATE
As at the date hereof, Birchcliff has completed
the majority of its 2021 Capital Program, with all previously
planned wells having now been drilled and brought on production.
The 2021 Capital Program is focused on developing Birchcliff’s
low-cost natural gas and liquids-rich production in Pouce Coupe and
Gordondale, with the majority of capital investment directed to
drilling, completing and bringing on production horizontal
condensate-rich natural gas wells in Pouce Coupe and horizontal
light oil and condensate-rich natural gas wells in Gordondale.
Birchcliff anticipates that the average payout
for the wells brought on production in 2021 will be less than a
year, driven by the successful execution of its low-cost drilling
program, strong well results and current strip pricing. The
following table sets forth the wells that Birchcliff has drilled
and brought on production in 2021:
|
Area |
Total wells drilled |
|
Total wells brought on production(1) |
|
|
Pouce Coupe |
|
|
|
|
|
Montney D1 horizontal natural gas wells |
7 |
|
7 |
|
|
Montney D2 horizontal natural gas wells |
3 |
|
3 |
|
|
Montney C horizontal natural gas wells |
3 |
|
3 |
|
|
Basal Doig/Upper Montney horizontal natural gas wells |
6 |
|
12 |
|
|
Total – Pouce Coupe |
19 |
|
25 |
|
|
|
|
|
|
|
|
Gordondale |
|
|
|
|
|
Montney D1 horizontal natural gas wells |
2 |
|
2 |
|
|
Montney D2 horizontal natural gas wells |
1 |
|
1 |
|
|
Montney C horizontal natural gas wells |
1 |
|
1 |
|
|
Montney D1 horizontal oil wells |
2 |
|
2 |
|
|
Montney D2 horizontal oil wells |
2 |
|
2 |
|
|
Total – Gordondale |
8 |
|
8 |
|
|
TOTAL – COMBINED |
27 |
|
33 |
|
(1) Includes 6 (6.0) net wells that were
drilled and rig released in Q4 2020.
As all wells have now been drilled and brought
on production, the majority of the execution risk of the 2021
Capital Program is behind the Corporation. Birchcliff has been able
to realize numerous capital cost savings as a result of its
strategic planning and efficient execution of the 2021 Capital
Program.
Pouce Coupe Area
Birchcliff has drilled 19 wells and brought 25
wells on production in Pouce Coupe this year, as discussed in
further detail below. The wells were drilled on three multi-well
pads.
7-Well Pad (04-04-78-13W6)
Birchcliff’s 04-04 pad in Pouce Coupe was
drilled in late Q4 2020 and early Q1 2021 and brought on production
in March 2021 through Birchcliff’s existing owned and operated
infrastructure. Wells were drilled in two different intervals (six
in the Basal Doig/Upper Montney and one in the Montney D1).
The initial 30 and 60 day production rates for
the wells from the 04-04 pad were previously disclosed in the
Corporation’s press release dated May 12, 2021. The performance of
the pad continues to exceed the Corporation’s expectations, with
very strong natural gas and condensate production rates. In
addition, Birchcliff continues to see stabilized production rates
for an extended duration, which allows for strong stable production
profiles and less backout of Birchcliff’s existing area
production.
10-Well Pad (14-06-79-12W6)
Birchcliff’s 14-06 pad in Pouce Coupe was
drilled in Q1 2021 and brought on production in May 2021 through
Birchcliff’s existing owned and operated infrastructure. The pad
utilized multi-interval cube-style development and wells were
drilled in three different intervals (three in the Montney C, four
in the Montney D1 and three in the Montney D2). The pad resides
three miles south of the Corporation’s 2020 14-well pad (14-19) and
targeted condensate-rich natural gas wells versus the light oil
wells discovered at the 14-19 pad. Birchcliff expects to continue
to drive drilling and completion costs down through scale and
repeatability on larger pads as exhibited by its recent execution
on its 2021 Capital Program and the successful operations at the
14-19 pad in 2020.
The wells from the 14-06 pad have now been
producing for over 60 days and have produced at better rates than
previously forecast. After completing initial well testing and frac
clean-up operations, the Corporation has been flowing the wells at
restricted rates between 3.0 and 5.0 MMcf/d to manage drawdown and
any potential sand flowback. Birchcliff expects that the pad is
capable of being held at stabilized production rates for an
extended duration, which will allow for strong stable production
profiles and less backout of Birchcliff’s existing area
production.
During the initial 30 and 60 days of production,
the pad was flowing inline post-fracture condensate, raw natural
gas and frac water. The production rates of the wells are
stabilized and the frac water flowing back to surface continues to
diminish over time. The following table summarizes the aggregate
and average production rates for the 10 wells from the 14-06
pad:
|
|
IP 30(1) |
IP 60(1) |
|
Aggregate production rate
(boe/d) |
9,612 |
8,794 |
|
Aggregate natural gas production rate (Mcf/d) |
42,871 |
41,326 |
|
Aggregate condensate production rate (bbls/d) |
2,467 |
1,906 |
|
Average per well production rate
(boe/d) |
961 |
879 |
|
Average per well natural gas production rate (Mcf/d) |
4,287 |
4,133 |
|
Average per well condensate production rate (bbls/d) |
247 |
191 |
|
Condensate-to-gas ratio
(bbls/MMcf) |
58 |
46 |
(1) Represents the cumulative volumes for
each well measured at the wellhead separator for the 30 or 60 days
(as applicable) of production immediately after each well was
considered stabilized after producing fracture treatment fluid back
to surface in an amount such that flow rates of hydrocarbons became
reliable. See “Advisories – Initial Production Rates”.
The Inlet Liquids-Handling Facility, which was
completed in Q3 2020, allows the Corporation to process and sell
the condensate from its new wells in Pouce Coupe to achieve a
premium price and handle the majority of the fracture flowback
water volumes at the Pouce Coupe Gas Plant instead of relying on
third-party infrastructure.
8-Well Pad (14-28-77-13W6)
Birchcliff’s 14-28 pad in Pouce Coupe was
drilled in Q1 and Q2 2021 and brought on production in July 2021
through Birchcliff’s owned and operated infrastructure. Wells were
drilled in two different intervals (six in the Basal Doig/Upper
Montney and two in the Montney D1). The early results from this pad
have been encouraging, with strong natural gas and condensate
rates. Birchcliff anticipates providing further details regarding
the results of these wells in November 2021, in conjunction with
the release of its Q3 2021 results.
Gordondale Area
Birchcliff has drilled and brought on production
8 wells in Gordondale this year, as discussed in further detail
below. The wells were drilled on two multi-well pads. The wells
brought on production this year are expected to keep AltaGas’s
deep-cut sour gas processing facility in Gordondale full during
2021. Development of the Montney D1 and D2 continues in Gordondale
and Birchcliff also brought on production its first Montney C well
in the area.
4-Well Pad (05-07-79-11W6)
Birchcliff’s 05-07 pad in Gordondale was drilled
in Q1 2021 and brought on production in May 2021. The pad utilized
multi-interval cube-style development and wells were drilled in
three different intervals (two in the Montney D1, one in the
Montney D2 and one in the Montney C). The successful extension of
the Montney C interval into Gordondale was based on successful well
results offsetting in Pouce Coupe and significant technical
reservoir and geoscience work. This successful Montney C well adds
a new commercialized drilling interval for the Corporation to
pursue in Gordondale.
The wells from the 05-07 pad have now been
producing for over 60 days and have produced at better rates than
previously forecast. After completing initial well testing and frac
clean-up operations, the Montney D1 and D2 wells have flowed with
approximate peak daily rates between 8.5 and 11.0 MMcf/d with 30 to
50 bbls of condensate per MMcf of natural gas and the Montney C
well has flowed with a peak daily rate of 9.4 MMcf/d with 63 bbls
of condensate per MMcf of natural gas. After well testing, the
Corporation has been flowing the wells at restricted rates between
5.0 and 6.5 MMcf/d to manage drawdown and any potential sand
flowback. Birchcliff expects that the pad is capable of being held
at stabilized production rates for an extended duration, which will
allow for strong stable production profiles and less backout of
Birchcliff’s existing area production.
During the initial 30 and 60 days of production,
the pad was flowing inline post-fracture condensate, raw natural
gas and frac water. The production rates of the wells are
stabilized and the frac water flowing back to surface continues to
diminish over time. The following table summarizes the aggregate
and average production rates for the 4 wells from the 05-07
pad:
|
|
IP 30(1) |
IP 60(1) |
|
Aggregate production rate
(boe/d) |
5,272 |
4,614 |
|
Aggregate natural gas production rate (Mcf/d) |
25,686 |
23,145 |
|
Aggregate condensate production rate (bbls/d) |
990 |
758 |
|
Average per well production rate
(boe/d) |
1,318 |
1,154 |
|
Average per well natural gas production rate (Mcf/d) |
6,422 |
5,786 |
|
Average per well condensate production rate (bbls/d) |
248 |
190 |
|
Condensate-to-gas ratio
(bbls/MMcf) |
39 |
33 |
(1) Represents the cumulative volumes for
each well measured at the wellhead separator for the 30 or 60 days
(as applicable) of production immediately after each well was
considered stabilized after producing fracture treatment fluid back
to surface in an amount such that flow rates of hydrocarbons became
reliable. See “Advisories – Initial Production Rates”.
4-Well Pad (06-35-77-11W6)
Birchcliff’s 06-35 pad in Gordondale was drilled
in Q2 2021 and brought on production in July 2021. Wells were
drilled in two different intervals (two in the Montney D1 and two
in the Montney D2) and targeted light oil and natural gas. These
wells are offsetting high-rate light oil and natural gas producing
wells drilled by Birchcliff in the southeastern portion of
Gordondale in 2019 and 2020. Birchcliff has been encouraged by the
initial flow test results to date on this pad. Birchcliff
anticipates providing further details regarding the results of
these wells in November 2021, in conjunction with the release of
its Q3 2021 results.
ABBREVIATIONS
|
AECO |
benchmark price for natural gas determined at the AECO ‘C’ hub in
southeast Alberta |
|
ATP |
Alliance Trading Pool |
|
bbl |
barrel |
|
bbls |
barrels |
|
bbls/d |
barrels per day |
|
boe |
barrel of oil equivalent |
|
boe/d |
barrel of oil equivalent per day |
|
condensate |
pentanes plus (C5+) |
|
ESG |
environmental, social and governance |
|
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 |
|
IP |
initial production |
|
m3 |
cubic metres |
|
Mcf |
thousand cubic feet |
|
Mcf/d |
thousand cubic feet per day |
|
Mcfe |
thousand cubic feet of gas equivalent |
|
MJ |
megajoule |
|
MM$ |
millions of dollars |
|
MMBtu |
million British thermal units |
|
MMBtu/d |
million British thermal units per day |
|
MMcf |
million cubic feet |
|
MMcf/d |
million cubic feet per day |
|
MPa |
megapascal |
|
MSW |
price for mixed sweet crude oil at Edmonton, Alberta |
|
NGLs |
natural gas liquids consisting of ethane (C2), propane (C3) and
butane (C4) and specifically excluding condensate |
|
NYMEX |
New York Mercantile Exchange |
|
OPEC |
Organization of the Petroleum Exporting Countries |
|
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 |
|
000s |
thousands |
|
$000s |
thousands of dollars |
NON-GAAP MEASURES
This press release uses the terms “adjusted
funds flow”, “adjusted funds flow per basic common share”, “free
funds flow”, “transportation and other expense”, “operating
netback”, “adjusted funds flow netback”, “total cash costs”,
“adjusted working capital deficit” and “total debt”. These measures
do not have standardized meanings prescribed by GAAP and therefore
may not be comparable to similar measures presented by other
companies where similar terminology is used. Management believes
that these non-GAAP measures assist management and investors in
assessing Birchcliff’s profitability, efficiency, liquidity and
overall performance. Each of these measures is discussed in further
detail below.
“Adjusted funds flow” denotes cash flow from
operating activities before the effects of decommissioning
expenditures and changes in non-cash operating working capital and
“adjusted funds flow per basic common share” denotes adjusted funds
flow divided by the basic weighted average number of common shares
outstanding for the period. Birchcliff eliminates settlements of
decommissioning expenditures from cash flow from operating
activities as the amounts can be discretionary and may vary from
period to period depending on its capital programs and the maturity
of its operating areas. The settlement of decommissioning
expenditures is managed with Birchcliff’s capital budgeting process
which considers available adjusted funds flow. Changes in non-cash
operating working capital are eliminated in the determination of
adjusted funds flow as the timing of collection and payment are
variable and by excluding them from the calculation, the
Corporation believes that it is able to provide a more meaningful
measure of its operations and ability to generate cash on a
continuing basis. Management believes that adjusted funds flow and
adjusted funds flow per basic common share assist management and
investors in assessing Birchcliff’s operating performance, as well
as its ability to generate cash necessary to fund sustaining and/or
growth capital expenditures, repay debt, settle decommissioning
obligations and pay common share and preferred share dividends.
Investors are cautioned that adjusted funds flow should not be
construed as an alternative to or more meaningful than cash flow
from operating activities or net income or loss as determined in
accordance with GAAP as an indicator of Birchcliff’s
performance.
“Free funds flow” denotes adjusted funds flow
less F&D capital expenditures. Management believes that free
funds flow assists management and investors in assessing
Birchcliff’s ability to further generate shareholder returns
through a number of initiatives, including but not limited to,
potential debt repayment, common share repurchases, preferred share
redemptions, dividend increases and acquisitions.
The following table provides a reconciliation of
cash flow from operating activities, as determined in accordance
with GAAP, to adjusted funds flow and free funds flow for the
periods indicated:
|
|
Three months endedJune 30, |
|
Six months endedJune 30, |
|
|
($000s) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
Cash flow from operating activities |
81,013 |
|
13,221 |
|
163,621 |
|
63,772 |
|
|
Change in non-cash operating working capital |
8,982 |
|
8,280 |
|
13,111 |
|
(5,928 |
) |
|
Decommissioning expenditures |
193 |
|
245 |
|
1,276 |
|
796 |
|
|
Adjusted funds flow |
90,188 |
|
21,746 |
|
178,008 |
|
58,640 |
|
|
F&D capital expenditures |
(80,887 |
) |
(83,473 |
) |
(176,727 |
) |
(215,834 |
) |
|
Free funds flow |
9,301 |
|
(61,727 |
) |
1,281 |
|
(157,194 |
) |
“Transportation and other expense” denotes
transportation expense plus marketing purchases minus marketing
revenue on a per boe basis. Birchcliff may enter into certain
marketing purchase and sales arrangements with the objective of
reducing any available transportation and/or fractionation fees
associated with its take-or-pay commitments. Management believes
that transportation and other expense assists management and
investors in assessing Birchcliff’s total cost structure related to
transportation activities.
“Operating netback” denotes petroleum and
natural gas revenue less royalty expense, less operating expense
and less transportation and other expense. “Adjusted funds flow
netback” denotes petroleum and natural gas revenue less royalty
expense, less operating expense, less transportation and other
expense, less net G&A expense, less interest expense, less any
realized losses (plus realized gains) on financial instruments and
plus any other cash income sources. Netbacks are calculated on a
per unit basis, unless otherwise indicated. Management believes
that operating netback and adjusted funds flow netback assist
management and investors in assessing Birchcliff’s operating
results by isolating the impact of production volumes to better
analyze its performance against prior periods on a comparable
basis. The following table provides a breakdown of Birchcliff’s
operating netback and adjusted funds flow netback for the periods
indicated:
| |
Three months endedJune 30, |
|
Six months endedJune 30, |
|
| |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
($000s) |
|
($/boe) |
|
($000s) |
|
($/boe) |
|
($000s) |
|
($/boe) |
|
($000s) |
|
($/boe) |
|
|
Petroleum and natural gas revenue |
193,643 |
|
28.27 |
|
104,180 |
|
15.27 |
|
379,252 |
|
27.87 |
|
227,443 |
|
16.83 |
|
|
Royalty expense |
(16,692 |
) |
(2.44 |
) |
(1,386 |
) |
(0.20 |
) |
(28,319 |
) |
(2.08 |
) |
(7,747 |
) |
(0.57 |
) |
|
Operating expense |
(21,538 |
) |
(3.14 |
) |
(19,700 |
) |
(2.89 |
) |
(43,036 |
) |
(3.16 |
) |
(40,747 |
) |
(3.01 |
) |
|
Transportation and other expense |
(37,665 |
) |
(5.50 |
) |
(36,413 |
) |
(5.34 |
) |
(74,938 |
) |
(5.51 |
) |
(69,865 |
) |
(5.18 |
) |
|
Operating netback |
117,748 |
|
17.19 |
|
46,681 |
|
6.84 |
|
232,959 |
|
17.12 |
|
109,084 |
|
8.07 |
|
|
G&A, net |
(6,017 |
) |
(0.88 |
) |
(5,740 |
) |
(0.84 |
) |
(12,256 |
) |
(0.90 |
) |
(11,783 |
) |
(0.87 |
) |
|
Interest expense |
(8,287 |
) |
(1.21 |
) |
(4,691 |
) |
(0.69 |
) |
(16,459 |
) |
(1.21 |
) |
(10,679 |
) |
(0.79 |
) |
|
Realized loss on financial instruments |
(13,392 |
) |
(1.96 |
) |
(17,146 |
) |
(2.51 |
) |
(28,890 |
) |
(2.12 |
) |
(31,406 |
) |
(2.32 |
) |
|
Other income |
136 |
|
0.03 |
|
2,642 |
|
0.39 |
|
2,654 |
|
0.19 |
|
3,424 |
|
0.25 |
|
|
Adjusted funds flow netback |
90,188 |
|
13.17 |
|
21,746 |
|
3.19 |
|
178,008 |
|
13.08 |
|
58,640 |
|
4.34 |
|
The breakdown for the operating netback from the
Pouce Coupe Gas Plant is provided under the heading “Q2 2021
Financial and Operational Results – Pouce Coupe Gas Plant Netbacks”
in this press release.
“Total cash costs” denotes royalty, operating,
transportation and other, G&A and interest expenses on a per
unit basis. Management believes that total cash costs assists
management and investors in assessing Birchcliff’s efficiency and
overall cash cost structure.
“Adjusted working capital deficit” is calculated
as current assets minus current liabilities excluding the effects
of any current portion of financial instruments and capital
securities. Management believes that adjusted working capital
deficit assists management and investors in assessing Birchcliff’s
short-term liquidity requirements. The following table reconciles
working capital deficit (current assets minus current liabilities),
as determined in accordance with GAAP, to adjusted working capital
deficit:
|
As at, ($000s) |
June 30, 2021 |
|
December 31, 2020 |
|
June 30, 2020 |
|
|
Working capital deficit |
131,796 |
|
93,988 |
|
145,748 |
|
|
Financial instrument – current liability |
(43,491 |
) |
(23,479 |
) |
(42,196 |
) |
|
Capital securities – current liability |
(38,328 |
) |
(39,930 |
) |
(49,071 |
) |
|
Adjusted working capital deficit |
49,977 |
|
30,579 |
|
54,481 |
|
“Total debt” is calculated as the amount
outstanding under the Credit Facilities plus adjusted working
capital deficit. Management believes that total debt assists
management and investors in assessing Birchcliff’s liquidity. The
following table provides a reconciliation of the revolving term
credit facilities, as determined in accordance with GAAP, to total
debt:
|
As at, ($000s) |
June 30, 2021 |
|
December 31, 2020 |
|
June 30, 2020 |
|
|
Revolving term credit facilities |
720,920 |
|
731,372 |
|
753,092 |
|
|
Adjusted working capital deficit |
49,977 |
|
30,579 |
|
54,481 |
|
|
Total debt |
770,897 |
|
761,951 |
|
807,573 |
|
ADVISORIES
Unaudited Information
All financial and operational information
contained in this press release for the three and six months ended
June 30, 2021 and 2020 is unaudited.
Currency
Unless otherwise indicated, all dollar amounts
are expressed in Canadian dollars and all references to “$” and
“CDN$” are to Canadian dollars and all references to “US$” are to
United States dollars.
MMBtu Pricing Conversions
$1.00 per MMBtu equals $1.00 per Mcf based on a
standard heat value of 37.4 MJ/m3 or a heat uplift of 1.055 when
converting from $/GJ.
Boe and Mcfe Conversions
Boe amounts have been calculated by using the
conversion ratio of 6 Mcf of natural gas to 1 bbl of oil and Mcfe
amounts have been calculated by using the conversion ratio of 1 bbl
of oil to 6 Mcf of natural gas. Boe and Mcfe amounts may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf: 1 bbl and an Mcfe conversion ratio of 1 bbl: 6 Mcf
is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the wellhead. Given that the value ratio based on
the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
Production
With respect to the disclosure of Birchcliff’s
production contained in this press release: (i) references to
“light oil” mean “light crude oil and medium crude oil” as such
term is defined in National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities (“NI
51-101”); (ii) unless otherwise indicated, references to
“liquids” mean “light crude oil and medium crude oil” and “natural
gas liquids” (including condensate) as such terms are defined in NI
51-101; and (iii) references to “natural gas” mean “shale gas”,
which also includes an immaterial amount of “conventional natural
gas”, as such terms are defined in NI 51-101. In addition, NI
51-101 includes condensate within the product type of natural gas
liquids. Birchcliff has disclosed condensate separately from other
natural gas liquids as the price of condensate as compared to other
natural gas liquids is currently significantly higher and
Birchcliff believes presenting the two commodities separately
provides a more accurate description of its operations and results
therefrom.
Oil and Gas Metrics
This press release contains metrics commonly
used in the oil and natural gas industry, including netbacks. These
oil and gas metrics do not have any standardized meanings or
standard methods of calculation and therefore may not be comparable
to similar measures presented by other companies where similar
terminology is used. As such, they should not be used to make
comparisons. Management uses these oil and gas metrics for its own
performance measurements and to provide investors with measures to
compare Birchcliff’s performance over time; however, such measures
are not reliable indicators of Birchcliff’s future performance,
which may not compare to Birchcliff’s performance in previous
periods, and therefore should not be unduly relied upon. For
additional information regarding netbacks, see “Non-GAAP
Measures”.
Initial Production Rates
Any references in this press release to initial
production rates or other short-term production rates are useful in
confirming the presence of hydrocarbons; however, such rates are
not determinative of the rates at which such wells will continue to
produce and decline thereafter and are not indicative of the
long-term performance or the ultimate recovery of such wells. In
addition, such rates may also include recovered “load oil” or “load
water” fluids used in well completion stimulation. While
encouraging, readers are cautioned not to place undue reliance on
such rates in calculating the aggregate production for Birchcliff.
Such rates are based on field estimates and may be based on limited
data available at this time.
With respect to the production rates for the
Corporation’s 10-well (14-06) pad in Pouce Coupe disclosed herein,
such rates represent the cumulative volumes for each well measured
at the wellhead separator for the 30 and 60 days (as applicable) of
production immediately after each well was considered stabilized
after producing fracture treatment fluid back to surface in an
amount such that flow rates of hydrocarbons became reliable
(between 0 and 7 days), divided by 30 or 60 (as applicable), which
were then added together to determine the aggregate production
rates for the 10-well pad and then divided by 10 to determine the
per well average production rates. The production rates excluded
the hours and days when the wells did not produce. Approximate
tubing pressures for the 10 wells were stabilized between 4.1 and
5.3 MPa for IP 30 production rates and between 3.8 and 4.5 MPa for
IP 60 production rates. Approximate casing pressures for the 10
wells were stabilized between 8.1 and 10.9 MPa for IP 30 production
rates and between 7.7 and 9.9 MPa for IP 60 production rates.
To-date, no pressure transient or well-test interpretation has been
carried out on any of the wells. The natural gas volumes represent
raw natural gas volumes as opposed to sales gas volumes.
With respect to the production rates for the
Corporation’s 4-well (05-07) pad in Gordondale disclosed herein,
such rates represent the cumulative volumes for each well measured
at the wellhead separator for the 30 and 60 days (as applicable) of
production immediately after each well was considered stabilized
after producing fracture treatment fluid back to surface in an
amount such that flow rates of hydrocarbons became reliable
(between 0 and 1 days), divided by 30 or 60 (as applicable), which
were then added together to determine the aggregate production
rates for the 4-well pad and then divided by 4 to determine the per
well average production rates. The production rates excluded the
hours and days when the wells did not produce. Approximate tubing
pressures for the 4 wells were stabilized between 2.7 and 3.5 MPa
for IP 30 production rates and between 2.6 and 3.4 MPa for IP 60
production rates. Approximate casing pressures for the 4 wells were
stabilized between 10.3 and 12.0 MPa for IP 30 production rates and
between 9.7 and 11.1 MPa for IP 60 production rates. To-date, no
pressure transient or well-test interpretation has been carried out
on any of the wells. The natural gas volumes represent raw natural
gas volumes as opposed to sales gas volumes.
Capital Expenditures
Unless otherwise indicated, references in this
press release to: (i) “F&D capital” denotes capital for land,
seismic, workovers, drilling and completions and well equipment and
facilities; and (ii) “total capital expenditures” denotes F&D
capital plus acquisitions, less any dispositions, plus
administrative assets.
Forward-Looking Statements
Certain statements contained in this press
release constitute forward‐looking statements and forward-looking
information (collectively referred to as “forward‐looking
statements”) within the meaning of applicable Canadian
securities laws. The forward-looking statements contained in this
press release relate to future events or Birchcliff’s future plans,
operations, strategy, performance or financial position and are
based on Birchcliff’s current expectations, estimates, projections,
beliefs and assumptions. Such forward-looking statements have been
made by Birchcliff in light of the information available to it at
the time the statements were made and reflect its experience and
perception of historical trends. All statements and information
other than historical fact may be forward‐looking statements. Such
forward‐looking statements are often, but not always, identified by
the use of words such as “seek”, “plan”, “focus”, “future”,
“outlook”, “position”, “expect”, “project”, “intend”, “believe”,
“anticipate”, “estimate”, “forecast”, “guidance”, “potential”,
“proposed”, “predict”, “budget”, “continue”, “targeting”, “may”,
“will”, “could”, “might”, “should”, “would”, “on track” and other
similar words and expressions.
By their nature, forward-looking statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward‐looking statements. Accordingly,
readers are cautioned not to place undue reliance on such
forward-looking statements. Although Birchcliff believes that the
expectations reflected in the forward-looking statements are
reasonable, there can be no assurance that such expectations will
prove to be correct and Birchcliff makes no representation that
actual results achieved will be the same in whole or in part as
those set out in the forward-looking statements.
In particular, this press release contains
forward‐looking statements relating to the following:
-
Birchcliff’s plans and other aspects of its anticipated future
financial performance, results, operations, focus, objectives,
strategies, opportunities, priorities and goals, including: that
Birchcliff not having any fixed price commodity hedges allows all
of its production to benefit from strong oil and natural gas
prices; that the Corporation currently has no intention of entering
into any fixed price commodity hedges; that the Corporation remains
committed to capital discipline; that Birchcliff’s production in
2021, together with strong commodity prices, is expected to
generate significant adjusted funds flow and free funds flow in
2021; that Birchcliff is committed to significantly reducing its
total debt over the next number of years and over the course of its
current five-year plan; that free funds flow will be primarily used
to reduce indebtedness; and that Birchcliff does not anticipate
requiring additional credit capacity under its Credit
Facilities;
-
Birchcliff’s outlook for commodity prices;
-
the information set forth under the heading “Outlook and Guidance”
and elsewhere in this press release as it relates to Birchcliff’s
2021 outlook and guidance, including: that Birchcliff is on track
to meet its second half 2021 production guidance and its 2021
annual average production guidance; that the performance of
Birchcliff’s new wells and the current strength it is seeing in oil
and natural gas prices positions the Corporation for a very strong
second half in 2021, with significant anticipated increases in
adjusted funds flow and free funds flow; that Birchcliff’s total
debt is expected to significantly decrease over the remainder of
the year; that the Corporation’s total debt at year end is expected
to decrease by as much as 34% ($262 million) from its total debt at
December 31, 2020 of $762.0 million; and estimates of annual and
second half average production, annual commodity mix, average
expenses, adjusted funds flow, F&D capital expenditures, free
funds flow, total debt and natural gas market exposure and the
expected impact of changes in commodity prices and the CDN/US
exchange rate on Birchcliff’s estimate of adjusted funds flow;
-
the information set forth under the heading “Environmental, Social
and Governance”, including that continuing Birchcliff’s
industry-leading ESG performance remains a top priority in
2021;
-
the information set forth under the heading “Operational Update”
and elsewhere in this press release as it relates to the 2021
Capital Program and Birchcliff’s proposed exploration and
development activities and the timing thereof, including: the focus
of, the objectives of, the timing of, the anticipated results from
and expected benefits of the 2021 Capital Program; that Birchcliff
anticipates that the average payout for the wells brought on
production in 2021 will be less than a year; that Birchcliff
expects to continue to drive drilling and completion costs down
through scale and repeatability on larger pads; that the 14-06 and
05-07 pads are capable of being held at stabilized production rates
for an extended duration, which will allow for strong stable
production profiles and less backout of Birchcliff’s existing area
production; that the Inlet Liquids-Handling facility allows the
Corporation to process and sell the condensate from its new wells
in Pouce Coupe to achieve a premium price; that Birchcliff
anticipates providing further details regarding the results of the
wells from the 14-28 pad and the 06-35 pad in November 2021, in
conjunction with the release of its Q3 2021 results; and that the
wells brought on production in Gordondale in 2021 are expected to
keep the AltaGas facility full during the year; and
-
the performance and other characteristics of Birchcliff’s oil and
natural gas properties and expected results from its assets,
including statements regarding the potential or prospectivity of
Birchcliff’s properties.
With respect to the forward‐looking statements
contained in this press release, assumptions have been made
regarding, among other things: the degree to which the
Corporation’s results of operations and financial condition will be
disrupted by circumstances attributable to the COVID-19 pandemic
and the responses of governments and the public to the pandemic;
prevailing and future commodity prices and differentials, exchange
rates, interest rates, inflation rates, royalty rates and tax
rates; the state of the economy, financial markets and the
exploration, development and production business; the political
environment in which Birchcliff operates; the regulatory framework
regarding royalties, taxes, environmental, climate change and other
laws; the Corporation’s ability to comply with existing and future
environmental, climate change and other laws; future cash flow,
debt and dividend levels; future operating, transportation,
marketing, G&A and other expenses; Birchcliff’s ability to
access capital and obtain financing on acceptable terms; the timing
and amount of capital expenditures and the sources of funding for
capital expenditures and other activities; the sufficiency of
budgeted capital expenditures to carry out planned operations; the
successful and timely implementation of capital projects and the
timing, location and extent of future drilling and other
operations; results of operations; Birchcliff’s ability to continue
to develop its assets and obtain the anticipated benefits
therefrom; the performance of existing and future wells; the
success of new wells drilled; reserves volumes and Birchcliff’s
ability to replace and expand reserves through acquisition,
development or exploration; the impact of competition on
Birchcliff; the availability of, demand for and cost of labour,
services and materials; the ability to obtain any necessary
regulatory or other approvals in a timely manner; the satisfaction
by third parties of their obligations to Birchcliff; the ability of
Birchcliff to secure adequate processing and transportation for its
products; Birchcliff’s ability to successfully market natural gas
and liquids; the results of the Corporation’s risk management
activities; and Birchcliff’s natural gas market exposure. In
addition to the foregoing assumptions, Birchcliff has made the
following assumptions with respect to certain forward-looking
statements contained in this press release:
-
Birchcliff’s 2021 guidance (as revised August 11, 2021) assumes the
following commodity prices and exchange rate: an average WTI price
of US$66.00/bbl; an average WTI-MSW differential of CDN$5.50/bbl;
an average AECO 5A price of CDN$3.30/GJ; an average Dawn price of
US$4.05/MMBtu; an average NYMEX HH price of US$3.45/MMBtu; and an
exchange rate (CDN$ to US$1) of 1.25.
-
With respect to estimates of 2021 capital expenditures and
Birchcliff’s spending plans for 2021, such estimates and plans
assume that the 2021 Capital Program will be carried out as
currently contemplated. Birchcliff makes acquisitions and
dispositions in the ordinary course of business. Any acquisitions
and dispositions completed could have an impact on Birchcliff’s
capital expenditures, production, adjusted funds flow, free funds
flow, costs and total debt, which impact could be material. The
amount and allocation of capital expenditures for exploration and
development activities by area and the number and types of wells to
be drilled and brought on production is dependent upon results
achieved and is subject to review and modification by management on
an ongoing basis throughout the year. Actual spending may vary due
to a variety of factors, including commodity prices, economic
conditions, results of operations and costs of labour, services and
materials.
-
With respect to Birchcliff’s adjusted funds flow and free funds
flow guidance for 2021, such guidance assumes that: the 2021
Capital Program will be carried out as currently contemplated and
the level of capital spending for 2021 set forth herein will be
achieved; and the Corporation’s targets for production, production
commodity mix, costs and natural gas market exposure and the
commodity price and exchange rate assumptions set forth herein are
met.
-
With respect to Birchcliff’s production guidance for 2021, such
guidance assumes that: the 2021 Capital Program will be carried out
as currently contemplated; no unexpected outages occur in the
infrastructure that Birchcliff relies on to produce its wells and
that any transportation service curtailments or unplanned outages
that occur will be short in duration or otherwise insignificant;
the construction of new infrastructure meets timing and operational
expectations; existing wells continue to meet production
expectations; and future wells scheduled to come on production meet
timing, production and capital expenditure expectations.
Birchcliff’s production guidance may be affected by acquisition and
disposition activity.
-
With respect to statements regarding the future potential and
prospectivity of properties and assets, such statements assume: the
continuing validity of the geological and other technical
interpretations performed by Birchcliff’s technical staff with
respect to such properties; and that, over the long-term, commodity
prices and general economic conditions will warrant proceeding with
the exploration and development of such properties.
Birchcliff’s actual results, performance or
achievements could differ materially from those anticipated in the
forward-looking statements as a result of both known and unknown
risks and uncertainties including, but not limited to: the risks
posed by pandemics (including COVID-19) and epidemics and their
impacts on supply and demand and commodity prices; actions taken by
OPEC and other major producers of crude oil and the impact such
actions may have on supply and demand and commodity prices; general
economic, market and business conditions which will, among other
things, impact the demand for and market prices of Birchcliff’s
products and Birchcliff’s access to capital; volatility of crude
oil and natural gas prices; fluctuations in exchange and interest
rates; stock market volatility; loss of market demand; an inability
to access sufficient capital from internal and external sources on
terms acceptable to the Corporation; risks associated with
Birchcliff’s Credit Facilities, including a failure to comply with
covenants under the agreement governing the Credit Facilities and
the risk that the borrowing base limit may be redetermined;
fluctuations in the costs of borrowing; operational risks and
liabilities inherent in oil and natural gas operations; the
occurrence of unexpected events such as fires, severe weather,
explosions, blow-outs, equipment failures, transportation incidents
and other similar events; an inability to access sufficient water
or other fluids needed for operations; uncertainty that development
activities in connection with Birchcliff’s assets will be economic;
an inability to access or implement some or all of the technology
necessary to effectively operate its assets and achieve expected
future results; uncertainties associated with estimating oil and
natural gas reserves; geological, technical, drilling, construction
and processing problems; uncertainty of geological and technical
data; horizontal drilling and completions techniques and the
failure of drilling results to meet expectations for reserves or
production; uncertainties related to Birchcliff’s future potential
drilling locations; delays or changes in plans with respect to
exploration or development projects or capital expenditures,
including delays in the completion of gas plants and other
facilities; the accuracy of cost estimates and variances in
Birchcliff’s actual costs and economic returns from those
anticipated; incorrect assessments of the value of acquisitions and
exploration and development programs; changes to the regulatory
framework in the locations where the Corporation operates,
including changes to tax laws, Crown royalty rates, environmental
laws, climate change laws, carbon tax regimes, incentive programs
and other regulations that affect the oil and natural gas industry
and other actions by government authorities; an inability of the
Corporation to comply with existing and future environmental,
climate change and other laws; the cost of compliance with current
and future environmental laws; political uncertainty and
uncertainty associated with government policy changes; dependence
on facilities, gathering lines and pipelines, some of which the
Corporation does not control; uncertainties and risks associated
with pipeline restrictions and outages to third-party
infrastructure that could cause disruptions to production; the lack
of available pipeline capacity and an inability to secure adequate
and cost-effective processing and transportation for Birchcliff’s
products; an inability to satisfy obligations under Birchcliff’s
firm marketing and transportation arrangements; shortages in
equipment and skilled personnel; the absence or loss of key
employees; competition for, among other things, capital,
acquisitions of reserves, undeveloped lands, equipment and skilled
personnel; management of Birchcliff’s growth; environmental and
climate change risks, claims and liabilities; potential litigation;
default under or breach of agreements by counterparties and
potential enforceability issues in contracts; claims by Indigenous
peoples; the reassessment by taxing or regulatory authorities of
the Corporation’s prior transactions and filings; unforeseen title
defects; third-party claims regarding the Corporation’s right to
use technology and equipment; uncertainties associated with the
outcome of litigation or other proceedings involving Birchcliff;
uncertainties associated with counterparty credit risk; risks
associated with Birchcliff’s risk management activities; risks
associated with the declaration and payment of future dividends,
including the discretion of Birchcliff’s board of directors to
declare dividends and change the Corporation’s dividend policy; the
failure to obtain any required approvals in a timely manner or at
all; the failure to complete or realize the anticipated benefits of
acquisitions and dispositions and the risk of unforeseen
difficulties in integrating acquired assets into Birchcliff’s
operations; negative public perception of the oil and natural gas
industry and fossil fuels; the Corporation’s reliance on hydraulic
fracturing; market competition; changing demand for petroleum
products; the availability of insurance and the risk that certain
losses may not be insured; breaches or failure of information
systems and security (including risks associated with
cyber-attacks); risks associated with the ownership of the
Corporation’s securities; the accuracy of the Corporation’s
accounting estimates and judgments; and potential requirements
under applicable accounting standards for the impairment or
reversal of estimated recoverable amounts of the Corporation’s
assets from time to time.
Birchcliff’s five year plan for 2021 to 2025
(the “Five Year Plan”) assumes an average WTI
price of US$50.00/bbl, an average WTI-MSW differential of
CDN$6.00/bbl, an average AECO 5A price of CDN$2.50/GJ, an average
Dawn price of US$2.75/MMBtu, an average NYMEX HH price of
US$2.80/MMBtu and an exchange rate (CDN$ to US$1) of 1.27. As
disclosed herein, Birchcliff has revised its guidance and commodity
price and exchange rate assumptions for 2021 which would have a
corresponding impact on the Five Year Plan and which would affect
some or all of the longer-term targets disclosed for 2022 to 2025.
The internal projections, expectations and beliefs underlying the
Five Year Plan are subject to change in light of ongoing results
and prevailing economic and industry conditions. For further
information regarding the assumptions on which the Five Year Plan
is based, please see Birchcliff’s January 20, 2021 press
release.
There is significant ongoing uncertainty
surrounding COVID-19 and the extent and duration of the impacts
that Birchcliff may experience. While the duration and full impact
of the COVID-19 pandemic is not yet known, the effect of low
commodity prices as a result of reduced demand associated with the
impact of COVID-19 has had, and may continue to have, a negative
impact on the Corporation’s business, results of operations,
financial condition and the environment in which it operates. The
Corporation’s current expectations, estimates, projections, beliefs
and assumptions underlying the Corporation’s forward-looking
statements are subject to change in light of the COVID-19 pandemic,
including potential future waves and actions taken by governments
and businesses in response thereto.
Readers are cautioned that the foregoing lists
of factors are not exhaustive. Additional information on these and
other risk factors that could affect results of operations,
financial performance or financial results are included in
Birchcliff’s most recent Annual Information Form under the heading
“Risk Factors” and in other reports filed with Canadian securities
regulatory authorities.
This press release contains information that may
constitute future-orientated financial information or financial
outlook information (collectively, “FOFI”) about
Birchcliff’s prospective financial performance, financial position
or cash flows, all of which is subject to the same assumptions,
risk factors, limitations and qualifications as set forth above.
Readers are cautioned that the assumptions used in the preparation
of such information, although considered reasonable at the time of
preparation, may prove to be imprecise or inaccurate and, as such,
undue reliance should not be placed on FOFI. Birchcliff’s actual
results, performance and achievements could differ materially from
those expressed in, or implied by, FOFI. Birchcliff has included
FOFI in order to provide readers with a more complete perspective
on Birchcliff’s future operations and management’s current
expectations relating to Birchcliff’s future performance. Readers
are cautioned that such information may not be appropriate for
other purposes. FOFI contained herein was made as of the date of
this press release. Unless required by applicable laws, Birchcliff
does not undertake any obligation to publicly update or revise any
FOFI statements, whether as a result of new information, future
events or otherwise.
Management has included the above summary of
assumptions and risks related to forward-looking statements
provided in this press release in order to provide readers with a
more complete perspective on Birchcliff’s future operations and
management’s current expectations relating to Birchcliff’s future
performance. Readers are cautioned that this information may not be
appropriate for other purposes.
The forward-looking statements contained in this
press release are expressly qualified by the foregoing cautionary
statements. The forward-looking statements contained herein are
made as of the date of this press release. Unless required by
applicable laws, Birchcliff does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
About Birchcliff:
Birchcliff is a Calgary, Alberta based
intermediate oil and natural gas company with operations
concentrated within its one core area, the Peace River Arch of
Alberta. Birchcliff’s common shares and cumulative redeemable
preferred shares, Series A and Series C are listed for trading on
the Toronto Stock Exchange under the symbols “BIR”, “BIR.PR.A” and
“BIR.PR.C”, respectively.
|
|
|
For further information, please contact: |
|
|
|
Birchcliff Energy Ltd.Suite 1000, 600 – 3rd Avenue
S.W. Calgary, Alberta T2P 0G5Telephone: (403) 261-6401Email:
info@birchcliffenergy.comwww.birchcliffenergy.com |
|
Jeff Tonken – President and Chief Executive
OfficerBruno Geremia – Vice-President and Chief
Financial Officer |
Birchcliff Energy (TSX:BIR)
Gráfico Histórico do Ativo
De Nov 2024 até Dez 2024
Birchcliff Energy (TSX:BIR)
Gráfico Histórico do Ativo
De Dez 2023 até Dez 2024
