Birchcliff Energy Ltd. (“
Birchcliff” or the
“
Corporation”) (TSX: BIR) is pleased to announce
its unaudited 2021 full-year and fourth quarter financial and
operational results and highlights from its independent reserves
evaluation effective December 31, 2021.
“2021 was a record year for all of Birchcliff’s
cash flow metrics. We generated record annual adjusted funds
flow(1) of $539.7 million, record annual free funds flow(1) of
$309.3 million and record annual net income to common shareholders
of $310.5 million, with annual average production of 78,520 boe/d.
As a result of the significant free funds flow we generated in the
year, we were able to reduce our total debt(2) at December 31, 2021
by $262.6 million (34%) from year-end 2020, double our common share
dividend and return capital to shareholders through share buybacks.
These achievements speak to the continued strong performance of our
assets and the benefits of our low-cost operating structure,”
commented Jeff Tonken, Chief Executive Officer of Birchcliff.
Mr. Tonken continued: “Birchcliff was able to
grow its proved developed producing (“PDP”)
reserves at year-end 2021 by 5% over 2020, with top-tier PDP
F&D costs(3) of $5.88/boe, which has resulted in Birchcliff’s
PDP reserves having an operating netback recycle ratio(4) of 3.7x,
highlighting the profitability of our business.”
“For 2022, we remain committed to maintaining
capital discipline, maximizing free funds flow generation and
significantly reducing indebtedness. As set forth in our press
release dated January 19, 2022, we expect to generate approximately
$590 million of adjusted funds flow in 2022, with F&D capital
expenditures between $240 million and $260 million, resulting in
$330 million to $350 million of free funds flow. Free funds flow
generated in 2022 will be primarily allocated towards debt
reduction and we are targeting total debt of $175 million to $195
million at December 31, 2022(5).”
2021 Full-Year Highlights
-
Generated record annual adjusted funds flow of $539.7 million, or
$2.03 per basic common share(4), an increase of 192% and 194%,
respectively, from 2020. Cash flow from operating activities was
$515.4 million, a 174% increase from 2020.
-
Delivered record annual free funds flow of $309.3 million, or $1.16
per basic common share(4).
-
Achieved average production of 78,520 boe/d, a 3% increase from
2020. Liquids accounted for 21% of Birchcliff’s total production in
2021, as compared to 23% in 2020.
-
Significantly reduced total debt at year-end to $499.4 million, a
reduction of $262.6 million (34%) from $762.0 million at December
31, 2020.
-
Earned record annual net income to common shareholders of $310.5
million, or $1.17 per basic common share, as compared to a net loss
to common shareholders of $62.0 million and $0.23 per basic common
share in 2020.
-
Achieved an operating netback(4) of $21.50/boe, a 107% increase
from 2020.
-
Realized an operating expense(3) of $3.19/boe, an 8% increase from
2020.
-
Successfully executed the Corporation’s 2021 capital program,
bringing on production a total of 33 (33.0 net) wells. F&D
capital expenditures were $230.5 million in 2021.
-
Purchased 5,242,700 common shares pursuant to its normal course
issuer bid in 2021 at an average price of $6.00 per common share
for an aggregate gross cost of $31.5 million.
Q4 2021 Highlights
-
Generated record quarterly adjusted funds flow of $193.6 million,
or $0.73 per basic common share, an increase of 191% and 192%,
respectively, from Q4 2020. Cash flow from operating activities was
$196.1 million, a 175% increase from Q4 2020.
-
Delivered record quarterly free funds flow of $157.9 million, or
$0.60 per basic common share.
-
Achieved average production of 78,716 boe/d, which was comparable
to Q4 2020. Liquids accounted for 20% of Birchcliff’s total
production in Q4 2021, as compared to 24% in Q4 2020.
-
Earned quarterly net income to common shareholders of $106.1
million, or $0.40 per basic common share, an increase of 163% and
167%, respectively, from Q4 2020.
-
Achieved an operating netback of $27.53/boe, a 112% increase from
Q4 2020.
-
Realized an operating expense of $3.50/boe, a 16% increase from Q4
2020.
-
Increased its quarterly common share dividend by 100% to $0.01 per
share from $0.005 per share for the quarter ended December 31,
2021.
-
Purchased 2,042,700 common shares pursuant to its normal course
issuer bid in Q4 2021 at an average price of $6.91 per common share
for an aggregate gross cost of $14.1 million.
Birchcliff anticipates filing its annual
information form and audited financial statements and related
management’s discussion and analysis for the year ended December
31, 2021 on March 16, 2022.
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”. In addition,
this press release uses various “non-GAAP financial measures”,
“non-GAAP ratios”, “supplementary financial measures” and “capital
management measures” as such terms are defined in National
Instrument 52-112 – Non-GAAP and Other Financial Measures
Disclosure (“NI 52-112”). Non-GAAP financial
measures and non-GAAP ratios are not standardized financial
measures under GAAP and might not be comparable to similar
financial measures disclosed by other issuers where similar
terminology is used. For further information regarding the non-GAAP
and other financial measures used in this press release, see
“Non-GAAP and Other Financial Measures”.
(1) Non-GAAP financial measure. See “Non-GAAP
and Other Financial Measures”.(2) Capital management measure. See
“Non-GAAP and Other Financial Measures”.(3) Supplementary financial
measure. See “Non-GAAP and Other Financial Measures”.(4) Non-GAAP
ratio. See “Non-GAAP and Other Financial Measures”.(5) Assumes the
following commodity prices and exchange rate in 2022: an average
WTI price of US$76.00/bbl; an average WTI-MSW differential of
CDN$5.00/bbl; an average AECO price of CDN$3.50/GJ; an average Dawn
price of US$3.90/MMBtu; an average NYMEX HH price of US$4.00/MMBtu;
and an exchange rate (CDN$ to US$1) of 1.26. See “Advisories –
Forward-Looking Statements”.
2021 UNAUDITED FINANCIAL AND OPERATIONAL
HIGHLIGHTS
|
|
Three months endedDecember
31, |
Twelve months endedDecember
31, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
OPERATING |
|
|
|
|
| Average production |
|
|
|
|
|
Light oil (bbls/d) |
2,604 |
|
3,566 |
|
2,899 |
|
4,415 |
|
|
Condensate (bbls/d) |
5,330 |
|
6,658 |
|
5,715 |
|
5,824 |
|
|
NGLs (bbls/d) |
7,570 |
|
8,285 |
|
7,705 |
|
7,650 |
|
|
Natural gas (Mcf/d) |
379,275 |
|
360,839 |
|
373,217 |
|
351,068 |
|
|
Total (boe/d) |
78,716 |
|
78,649 |
|
78,520 |
|
76,401 |
|
|
Average realized sales price (CDN$)(1)(2) |
|
|
|
|
|
Light oil (per bbl) |
92.79 |
|
49.56 |
|
79.24 |
|
42.39 |
|
|
Condensate (per bbl) |
98.66 |
|
52.90 |
|
85.65 |
|
48.03 |
|
|
NGLs (per bbl) |
38.24 |
|
16.16 |
|
30.54 |
|
13.62 |
|
|
Natural gas (per Mcf) |
5.52 |
|
2.93 |
|
4.29 |
|
2.49 |
|
|
Total (per boe) |
40.02 |
|
21.87 |
|
32.53 |
|
18.90 |
|
|
|
|
|
|
|
| NETBACK AND
COST ($/boe)(2) |
|
|
|
|
|
Petroleum and natural gas revenue(1) |
40.02 |
|
21.88 |
|
32.53 |
|
18.90 |
|
|
Royalty expense |
(3.93 |
) |
(0.90 |
) |
(2.66 |
) |
(0.65 |
) |
|
Operating expense |
(3.50 |
) |
(3.03 |
) |
(3.19 |
) |
(2.95 |
) |
|
Transportation and other expense(3) |
(5.06 |
) |
(4.94 |
) |
(5.18 |
) |
(4.93 |
) |
|
Operating netback(3) |
27.53 |
|
13.01 |
|
21.50 |
|
10.37 |
|
|
G&A expense, net |
(1.45 |
) |
(1.11 |
) |
(0.99 |
) |
(0.88 |
) |
|
Interest expense |
(0.72 |
) |
(1.20 |
) |
(1.00 |
) |
(0.93 |
) |
|
Realized gain (loss) on financial instruments |
1.37 |
|
(1.63 |
) |
(0.75 |
) |
(2.13 |
) |
|
Other cash income |
0.01 |
|
0.12 |
|
0.07 |
|
0.17 |
|
|
Adjusted funds flow(3) |
26.74 |
|
9.19 |
|
18.83 |
|
6.60 |
|
|
Depletion and depreciation expense |
(7.44 |
) |
(7.49 |
) |
(7.42 |
) |
(7.60 |
) |
|
Unrealized gain (loss) on financial instruments |
- |
|
5.84 |
|
2.94 |
|
(1.27 |
) |
|
Other (expense) income(4) |
(0.01 |
) |
0.30 |
|
0.03 |
|
(0.16 |
) |
|
Dividends on preferred shares |
(0.23 |
) |
(0.26 |
) |
(0.24 |
) |
(0.27 |
) |
|
Income tax recovery (expense) |
(4.41 |
) |
(2.00 |
) |
(3.31 |
) |
0.48 |
|
|
Net income (loss) to common shareholders |
14.65 |
|
5.58 |
|
10.83 |
|
(2.22 |
) |
|
|
|
|
|
|
|
FINANCIAL |
|
|
|
|
|
Petroleum and natural gas revenue ($000s)(1) |
289,806 |
|
158,283 |
|
932,406 |
|
528,505 |
|
|
Cash flow from operating activities ($000s) |
196,142 |
|
71,431 |
|
515,369 |
|
188,180 |
|
| Adjusted funds flow
($000s)(5) |
193,649 |
|
66,509 |
|
539,733 |
|
184,526 |
|
|
Per basic common share ($)(3) |
0.73 |
|
0.25 |
|
2.03 |
|
0.69 |
|
| Net income (loss) to common
shareholders ($000s) |
106,102 |
|
40,407 |
|
310,489 |
|
(62,008 |
) |
|
Per basic common share ($) |
0.40 |
|
0.15 |
|
1.17 |
|
(0.23 |
) |
|
End of period basic common shares (000s) |
264,790 |
|
265,943 |
|
264,790 |
|
265,943 |
|
| Weighted average basic common
shares (000s) |
265,197 |
|
265,940 |
|
265,990 |
|
265,936 |
|
|
Dividends on common shares ($000s) |
2,646 |
|
1,330 |
|
6,639 |
|
10,968 |
|
|
Dividends on preferred shares ($000s) |
1,717 |
|
1,905 |
|
6,905 |
|
7,654 |
|
|
F&D capital expenditures ($000s)(6) |
35,726 |
|
41,291 |
|
230,479 |
|
287,967 |
|
| Total capital expenditures
($000s)(5) |
36,075 |
|
28,778 |
|
232,480 |
|
276,785 |
|
| Long-term debt ($000s) |
500,870 |
|
731,372 |
|
500,870 |
|
731,372 |
|
| Total
debt ($000s)(7) |
499,397 |
|
761,951 |
|
499,397 |
|
761,951 |
|
(1) Excludes the effects of financial
instruments but includes the effects of physical delivery
contracts. (2) Average realized sales prices and the component
values of netback and cost set out in the table above are
supplementary financial measures unless otherwise indicated. See
“Non-GAAP and Other Financial Measures”.(3) Non-GAAP ratio. See
“Non-GAAP and Other Financial Measures”.(4) Includes non-cash items
such as compensation, accretion, amortization of deferred financing
fees and other gains and losses.(5) Non-GAAP financial measure. See
“Non-GAAP and Other Financial Measures”.(6) See “Advisories –
F&D Capital Expenditures”.(7) Capital management measure. See
“Non-GAAP and Other Financial Measures”.
2021 RESERVES, F&D COSTS, RECYCLE
RATIO AND NET ASSET VALUE HIGHLIGHTS
-
PDP reserves at December 31, 2021 were 217.1 MMboe, a 5% increase
from 206.6 MMboe at December 31, 2020. After adding back 2021
actual production of 28.7 MMboe(6), Birchcliff added 39.2 MMboe of
PDP reserves.(6) Consists of 1,058.1 Mbbls of light oil, 2,086.0
Mbbls of condensate, 2,812.3 Mbbls of NGLs and 136,224.2 MMcf of
natural gas.
-
Birchcliff delivered top-tier PDP F&D costs of $5.88/boe and an
operating netback recycle ratio of 3.7x, both attributed to the
high-quality nature of Birchcliff’s Montney/Doig assets and the
efficient execution of its 2021 capital program.
-
The following table sets forth Birchcliff’s F&D costs per boe
for its PDP, total proved and total proved plus probable reserves
for 2021, 2020 and 2019, including future development costs
(“FDC”):
|
F&D costs ($/boe)(1) |
2021(2) |
2020(3) |
2019(4) |
3-Year Average |
|
Proved Developed Producing |
$5.88 |
$10.16 |
$8.65 |
$7.97 |
|
Total Proved |
$10.50 |
$7.08 |
$7.84 |
$8.25 |
|
Total Proved Plus Probable |
$13.57 |
$6.66 |
$6.22 |
$6.98 |
(1) Supplementary financial measure. See
“Non-GAAP and Other Financial Measures”. See “Advisories – Oil and
Gas Metrics” for a description of the methodology used to calculate
F&D costs. Birchcliff’s F&D capital expenditures were
$230.5 million in 2021 and it had negligible capital adds
associated with acquisitions and dispositions in 2021 resulting in
FD&A costs approximately equal to its F&D costs for PDP,
proved and proved plus probable reserves categories.(2) Reflects
the 2021 decrease in FDC from 2020 of $25.4 million on a proved and
$94.1 million on a proved plus probable basis.(3) Reflects the 2020
decrease in FDC from 2019 of $147.2 million on a proved and
$32.7 million on a proved plus probable basis.(4) Reflects the
2019 increase in FDC from 2018 of $135.7 million on a proved and
$193.7 million on a proved plus probable basis.
-
The following table sets forth Birchcliff’s F&D recycle ratios,
on an operating and adjusted funds flow basis, for its PDP, total
proved and total proved plus probable reserves for 2021 and 2020,
including FDC:
|
|
Operating NetbackRecycle
Ratio(1)(2) |
Adjusted Funds Flow Recycle
Ratio(1)(3) |
|
2021 |
2020 |
2021 |
2020 |
|
Proved Developed Producing |
3.7 |
1.0 |
3.2 |
0.6 |
|
Total Proved |
2.0 |
1.5 |
1.8 |
0.9 |
|
Total Proved Plus Probable |
1.6 |
1.6 |
1.4 |
1.0 |
(1) Non-GAAP ratio. See “Non-GAAP and Other
Financial Measures”.(2) Birchcliff’s operating netback was
$21.50/boe in 2021, as compared to $10.37/boe in 2020.(3)
Birchcliff’s adjusted funds flow was $18.83/boe in 2021, as
compared to $6.60/boe in 2020.
-
The following table sets forth Birchcliff’s net asset value for its
PDP, total proved and total proved plus probable reserves at
December 31, 2021:
|
|
Proved Developed Producing |
Total Proved |
Total Proved Plus Probable |
|
($000s, except per share amounts) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Reserves, NPV10%(1) |
|
2,490,206 |
|
|
1,869,446 |
|
|
4,966,920 |
|
|
3,736,237 |
|
|
6,367,284 |
|
|
4,831,693 |
|
| Total debt(2) |
|
(499,397 |
) |
|
(761,951 |
) |
|
(499,397 |
) |
|
(761,951 |
) |
|
(499,397 |
) |
|
(761,951 |
) |
|
Preferred shares(3) |
|
(88,268 |
) |
|
(89,930 |
) |
|
(88,268 |
) |
|
(89,930 |
) |
|
(88,268 |
) |
|
(89,930 |
) |
|
Value of unexercised securities(4) |
|
50,392 |
|
|
- |
|
|
50,392 |
|
|
- |
|
|
50,392 |
|
|
- |
|
|
Net asset value(5)(6) |
|
1,952,933 |
|
|
1,017,565 |
|
|
4,429,647 |
|
|
2,884,356 |
|
|
5,830,011 |
|
|
3,979,812 |
|
|
Net asset value (per share)(6)(7) |
|
$6.89 |
|
|
$3.83 |
|
|
$15.62 |
|
|
$10.85 |
|
|
$20.56 |
|
|
$14.96 |
|
(1) Represents the net present value of the
future net revenue (before income taxes, discounted at 10%) of
Birchcliff’s PDP, total proved and total proved plus probable
reserves, as applicable, as estimated by Deloitte LLP
(“Deloitte”) effective December 31, 2021 and
December 31, 2020, using forecast prices and costs. The estimated
net present value of the future net revenue of Birchcliff’s
reserves at December 31, 2021 increased by 33% in each of its PDP,
total proved and total proved plus probable reserves categories as
compared to December 31, 2020, primarily due to an improved
commodity price forecast.(2) Capital management measure. See
“Non-GAAP and Other Financial Measures”.(3) Represents the
redemption value of the Corporation’s Series A and Series C
preferred shares.(4) Represents the value of unexercised
in-the-money stock options and performance warrants outstanding at
December 31, 2021. For 2020, the value of unexercised securities
was negligible. The closing trading price on the Toronto Stock
Exchange of Birchcliff’s common shares on December 31, 2021 and
December 31, 2020 was $6.46 and $1.77, respectively.(5) Excludes
any value from undeveloped land and seismic.(6) Net asset value is
a non-GAAP financial measure and net asset value per share is a
non-GAAP ratio. See “Non-GAAP and Other Financial Measures”.(7) For
2021, based on 283.6 million common shares, which includes 264.8
million basic common shares outstanding at December 31, 2021 and
18.8 million dilutive common shares from unexercised in-the-money
stock options and performance warrants outstanding at December 31,
2021. For 2020, based on 265.9 million basic common shares
outstanding at December 31, 2020.
- The net asset
value of Birchcliff’s total proved reserves at December 31, 2021
was $15.62 per common share, a discount of 59% to its common share
trading price on February 8, 2022, which demonstrates the
significant value opportunity presented by Birchcliff.
FULL-YEAR AND Q4 2021 UNAUDITED FINANCIAL
AND OPERATIONAL RESULTS
Production
Birchcliff’s 2021 production averaged 78,520
boe/d, a 3% increase from 2020 and slightly below guidance of
79,000 to 80,000 boe/d. Birchcliff’s production averaged 78,716
boe/d in Q4 2021, which was comparable to Q4 2020. Birchcliff’s
full-year and Q4 2021 production was positively impacted by
incremental production volumes from the new Montney/Doig light oil
and condensate-rich natural gas wells brought on production in
2021. Annual average production was negatively impacted by: (i)
natural production declines; (ii) extreme heat conditions in the
summer months of 2021, which reduced production processing
capabilities in the field; and (iii) a force majeure event at a
third-party fractionation facility and a significant outage on a
third-party NGLs pipeline system experienced in late Q3 and early
Q4 2021.
Liquids accounted for 21% of total production in
2021, as compared to 23% in 2020, with a liquids-to-gas ratio in
2021 of 43.7 bbls/MMcf (53% high-value light oil and condensate).
For Q4 2021, liquids accounted for 20% of Birchcliff’s total
production, as compared to 24% in Q4 2020, with a liquids-to-gas
ratio in Q4 2021 of 40.9 bbls/MMcf (51% high-value light oil and
condensate). The decreases in the liquids production weighting were
primarily due to the Corporation targeting horizontal natural gas
wells in liquids-rich zones in the Pouce Coupe and Gordondale areas
in 2021 and natural production declines from light oil and
condensate-rich natural gas wells brought on-stream in 2020,
including from the 14-well pad brought on production in Q3
2020.
Adjusted Funds Flow and Cash Flow From
Operating Activities
Birchcliff achieved record adjusted funds flow
in 2021 of $539.7 million, or $2.03 per basic common share, a 192%
and 194% increase, respectively, from $184.5 million and $0.69 per
basic common share in 2020. Birchcliff’s Q4 2021 adjusted funds
flow was $193.6 million, or $0.73 per basic common share, a 191%
and 192% increase, respectively, from $66.5 million and $0.25 per
basic common share in Q4 2020. Birchcliff’s full-year 2021 adjusted
funds flow was lower than its guidance of $575 million, primarily
due to lower than anticipated full-year average realized natural
gas and liquids sales prices.
The increases in adjusted funds flow were
primarily due to higher reported petroleum and natural gas revenue,
partially offset by a higher royalty expense, both of which were
largely impacted by a 72% and 83% increase in the average realized
sales price received for Birchcliff’s production in the full-year
and Q4 2021, respectively, as compared to 2020. Birchcliff’s
average realized sales price benefited from the significant
increases in benchmark oil and natural gas prices in the full-year
and Q4 2021. See “Full-Year and Q4 2021 Unaudited Financial and
Operational Results – Commodity Prices”.
Birchcliff’s cash flow from operating activities
in 2021 was $515.4 million, a 174% increase from $188.2 million in
2020. Birchcliff’s Q4 2021 cash flow from operating activities was
$196.1 million, a 175% increase from $71.4 million in Q4 2020. The
reason for the increases is consistent with the explanation for the
increases to adjusted funds flow.
Free Funds Flow
Birchcliff delivered record annual free funds
flow in 2021 of $309.3 million, or $1.16 per basic common share. In
2020, Birchcliff’s F&D capital expenditures exceeded its
adjusted funds flow by $103.4 million. Birchcliff’s Q4 2021 free
funds flow was $157.9 million, or $0.60 per basic common share, a
527% and 567% increase, respectively, from $25.2 million and $0.09
per basic common share in Q4 2020. Birchcliff’s full-year 2021 free
funds flow was below its guidance of $345 million to $350 million,
primarily due to lower than anticipated full-year adjusted funds
flow.
Net Income (Loss) to Common
Shareholders
Birchcliff earned record net income to common
shareholders of $310.5 million, or $1.17 per basic common share in
2021, as compared to a net loss to common shareholders of $62.0
million and $0.23 per basic common share in 2020. The change to a
net income position was primarily due to higher adjusted funds flow
and an unrealized mark-to-market gain on financial instruments,
partially offset by higher income tax expense in 2021. Birchcliff
recorded an unrealized mark-to-market gain on financial instruments
of $84.2 million in 2021, as compared to an unrealized
mark-to-market loss on financial instruments of $35.4 million in
2020.
In Q4 2021, Birchcliff earned net income to
common shareholders of $106.1 million, or $0.40 per basic common
share, a 163% and 167% increase, respectively, from $40.4 million
and $0.15 per basic common share in Q4 2020. The increase to net
income to common shareholders was primarily due to higher adjusted
funds flow, partially offset by a lower unrealized mark-to-market
gain on financial instruments and higher income tax expense in Q4
2021. Birchcliff had a negligible unrealized mark-to-market gain on
financial instrument in Q4 2021, as compared to an unrealized
mark-to-market gain on financial instruments of $42.2 million in Q4
2020.
Operating Netback and Selected Cash
Costs
Birchcliff’s 2021 operating netback was
$21.50/boe, a 107% increase from $10.37/boe in 2020. In Q4 2021,
Birchcliff’s operating netback was $27.53/boe, a 112% increase from
$13.01/boe in Q4 2020. The increases were primarily due to higher
per boe petroleum and natural gas revenue, partially offset by a
higher per boe royalty expense in full-year and Q4 2021.
The following table sets forth Birchcliff’s
selected cash costs for the periods indicated:
|
|
Three months ended December
31, |
|
Twelve months ended December
31, |
|
($/boe) |
2021 |
2020 |
% Change |
|
2021 |
2020 |
% Change |
| Royalty expense(1) |
3.93 |
0.90 |
337 |
|
2.66 |
0.65 |
309 |
| Operating expense(1) |
3.50 |
3.03 |
16 |
|
3.19 |
2.95 |
8 |
| Transportation and other
expense(2) |
5.06 |
4.94 |
2 |
|
5.18 |
4.93 |
5 |
| G&A expense, net(1) |
1.45 |
1.11 |
31 |
|
0.99 |
0.88 |
13 |
|
Interest expense(1) |
0.72 |
1.20 |
(40 |
) |
1.00 |
0.93 |
8 |
(1) Supplementary financial measure. See
“Non-GAAP and Other Financial Measures”.(2) Non-GAAP financial
measure. See “Non-GAAP and Other Financial Measures”.
Royalty expense per boe increased by 309% and
337% from full-year and Q4 2020, respectively, primarily due to a
significant increase in the average realized sales price received
for Birchcliff’s production. Birchcliff’s full-year royalty expense
was within its guidance of $2.60/boe to $2.80/boe.
Operating expense per boe increased by 8% and
16% from full-year and Q4 2020, respectively, primarily due to
higher power and fuel costs and an increase in municipal property
taxes. In 2020, the Alberta Government provided municipal property
tax relief in response to the COVID-19 pandemic, which was
discontinued in 2021. Birchcliff’s full-year operating expense was
within its guidance of $3.00/boe to $3.20/boe.
G&A expense per boe increased by 13% and 31%
from full-year and Q4 2020, respectively, primarily due to higher
employee-related expenses, which included employee retirement costs
incurred in Q4 2021, and an increase in general business
expenditures.
Interest expense per boe increased by 8% and
decreased by 40% from full-year and Q4 2020, respectively. Interest
expense fell significantly throughout 2021 as a result of the
Corporation’s focus on reducing bank debt and improving its overall
financial position.
Debt
Total debt at December 31, 2021 was $499.4
million, a decrease of 34% from $762.0 million at December 31,
2020. Birchcliff’s 2021 year-end debt was above its guidance of
$450 million to $455 million primarily due to lower than
anticipated full-year average realized natural gas and liquids
sales prices and the additional cost associated with repurchasing
common shares under the Corporation’s normal course issuer bid,
which was unbudgeted.
At December 31, 2021, Birchcliff had long-term
bank debt under its revolving term credit facilities of $500.9
million (December 31, 2020: $731.4 million) from available credit
facilities of $850.0 million (December 31, 2020: $1.0 billion),
leaving $341.2 million of unutilized credit capacity after
adjusting for outstanding letters of credit and unamortized fees.
Birchcliff’s credit facilities do not contain any financial
maintenance covenants and do not mature until May 11, 2024.
Commodity Prices
The following table sets forth the average
benchmark commodity index prices and exchange rate for the periods
indicated:
|
|
Three months ended December
31, |
Twelve months ended December
31, |
|
|
2021 |
2020 |
% Change |
2021 |
2020 |
% Change |
|
Light oil – WTI Cushing (US$/bbl) |
79.78 |
42.57 |
87 |
|
68.70 |
38.91 |
77 |
|
| Light oil – MSW (Mixed Sweet)
(CDN$/bbl) |
96.12 |
49.57 |
94 |
|
80.67 |
43.52 |
85 |
|
| Natural gas – NYMEX HH
(US$/MMBtu)(1) |
5.83 |
2.66 |
119 |
|
3.88 |
2.08 |
87 |
|
| Natural gas – AECO 5A Daily
(CDN$/GJ) |
4.41 |
2.50 |
76 |
|
3.44 |
2.11 |
63 |
|
| Natural gas – AECO 7A Month
Ahead (US$/MMBtu)(1) |
3.93 |
2.10 |
87 |
|
2.84 |
1.68 |
69 |
|
| Natural gas – Dawn Day Ahead
(US$/MMBtu)(1) |
4.65 |
2.30 |
102 |
|
3.62 |
1.88 |
93 |
|
| Natural gas – ATP 5A Day Ahead
(CDN$/GJ) |
4.74 |
2.78 |
71 |
|
4.03 |
2.05 |
97 |
|
| Exchange rate (CDN$ to
US$1) |
1.2598 |
1.3035 |
(3 |
) |
1.2537 |
1.3413 |
(7 |
) |
|
Exchange rate (US$ to CDN$1) |
0.7938 |
0.7672 |
3 |
|
0.7976 |
0.7455 |
7 |
|
(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.
The following table details Birchcliff’s
effective sales, production and average realized sales price for
natural gas and liquids for Q4 2021, after taking into account the
Corporation’s financial instruments:
|
Three months ended December 31, 2021 |
|
|
Effective sales (CDN$000s) |
Percentage of total sales (%) |
Effectiveproduction(per day) |
Percentage of total natural gas
production(%) |
Percentage of total corporate
production(%) |
Effective average realizedsales
price(CDN$) |
|
Market |
|
|
|
|
|
|
|
AECO(1)(2)(3) |
40,079 |
12 |
83,965 Mcf |
22 |
18 |
5.19/Mcf |
|
Dawn(4) |
88,932 |
28 |
156,618 Mcf |
41 |
33 |
6.17/Mcf |
|
NYMEX HH(1)(2)(5) |
96,760 |
30 |
138,692 Mcf |
37 |
29 |
7.58/Mcf |
|
Total natural gas(1) |
225,771 |
70 |
379,275 Mcf |
100 |
80 |
6.47/Mcf |
|
Light oil |
22,231 |
7 |
2,604 bbls |
|
3 |
92.79/bbl |
|
Condensate |
48,377 |
15 |
5,330 bbls |
|
7 |
98.66/bbl |
|
NGLs |
26,635 |
8 |
7,570 bbls |
|
10 |
38.24/bbl |
|
Total liquids |
97,243 |
30 |
15,504 bbls |
|
20 |
68.18/bbl |
|
Total corporate(1) |
323,014 |
100 |
78,716 boe |
|
100 |
44.60/boe |
(1) Effective sales is a non-GAAP financial
measure and effective average realized sales price is a non-GAAP
ratio. See “Non-GAAP and Other Financial Measures”.(2) AECO sales
and production that effectively received NYMEX HH pricing under
Birchcliff’s long-term physical NYMEX/AECO 7A basis swap contracts
has been included as effective sales and production in the NYMEX HH
market. Birchcliff sold physical AECO 7A basis swaps for 5,000
MMBtu/d at an average contract price of NYMEX HH less
US$1.205/MMBtu during Q4 2021.(3) 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 Q4 2021
received AECO premium pricing and have therefore been included as
effective sales and production in the AECO market.(4) Birchcliff
has agreements for the firm service transportation of an aggregate
of 175,000 GJ/d of natural gas on TransCanada PipeLines’ Canadian
Mainline, whereby natural gas is transported to the Dawn trading
hub in Southern Ontario.(5) NYMEX HH sales and production includes
financial and physical AECO 7A basis swaps for 152,500 MMBtu/d at
an average contract price of NYMEX HH less US$1.226/MMBtu during Q4
2021. Birchcliff’s effective average realized sales price for NYMEX
HH of CDN$7.58/Mcf (US$5.47/MMBtu) was determined on a gross basis
before giving effect to the average NYMEX HH/AECO 7A contract basis
price of CDN$1.70/Mcf (US$1.226/MMBtu). After giving effect to the
NYMEX HH/AECO 7A basis contact price, Birchcliff’s effective
average realized net sales price for NYMEX HH was CDN$5.88/Mcf
(US$4.25/MMBtu) in Q4 2021.
The following table sets forth Birchcliff’s
sales, production, average realized sales price, transportation
costs and natural gas sales netback by natural gas market for the
periods indicated, before taking into account the Corporation’s
financial instruments:
|
Three months ended December 31, 2021 |
|
|
Natural gas
sales(1)(CDN$000s) |
Percentage of natural gas sales (%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realizednatural gas sales
price(1)(2)(CDN$/Mcf) |
Natural gas transportation costs(2)(3)
(CDN$/Mcf) |
Natural gas sales netback(2)(4)(CDN$/Mcf) |
|
AECO |
85,230 |
44 |
185,870 |
49 |
4.98 |
0.42 |
4.56 |
|
Dawn |
88,932 |
46 |
156,618 |
41 |
6.17 |
1.47 |
4.70 |
|
Alliance(5) |
18,391 |
10 |
36,787 |
10 |
5.43 |
- |
5.43 |
|
Total |
192,553 |
100 |
379,275 |
100 |
5.52 |
0.82 |
4.70 |
|
Three months ended December 31, 2020 |
|
|
Natural gas
sales(1)(CDN$000s) |
Percentage of natural gas sales (%) |
Natural gas production(Mcf/d) |
Percentage of natural gas production(%) |
Average realized natural gas
sales price(1)(2)(CDN$/Mcf) |
Natural gas transportation costs(2)(3)
(CDN$/Mcf) |
Natural gas sales netback(2)(4)(CDN$/Mcf) |
|
AECO |
44,556 |
46 |
172,817 |
48 |
2.80 |
0.39 |
2.41 |
|
Dawn |
44,785 |
46 |
159,071 |
44 |
3.06 |
1.42 |
1.64 |
|
Alliance(5) |
7,952 |
8 |
28,951 |
8 |
2.99 |
- |
2.99 |
|
Total |
97,293 |
100 |
360,839 |
100 |
2.93 |
0.81 |
2.12 |
(1) Excludes the effects of financial
instruments but includes the effects of physical delivery
contracts.(2) Supplementary financial measure. See “Non-GAAP and
Other Financial Measures”.(3) Reflects costs to transport natural
gas from the field receipt point to the delivery sales trading
hub.(4) Natural gas sales netback denotes the average realized
natural gas sales price less natural gas transportation costs.(5)
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
Birchcliff’s 2021 capital program was focused on
the drilling of high-value, low-cost condensate-rich natural gas
and light oil wells in Pouce Coupe and Gordondale. In addition, the
Corporation directed funds towards key infrastructure enhancement
projects to increase the overall throughput, reliability and safety
of Birchcliff’s operating assets. F&D capital expenditures were
$230.5 million in 2021, in-line with Birchcliff’s guidance of $225
million to $230 million.
The following table summarizes the number of
wells Birchcliff 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 |
10 |
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 |
8 |
12 |
|
|
Total – Pouce Coupe |
24 |
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 |
32 |
33 |
(1) Does not include 5 (5.0 net) additional
wells drilled in Q4 2021 as none of these wells were brought on
production in 2021. Includes 6 (6.0 net) additional wells that were
drilled in Q4 2020 and subsequently brought on production in
2021.
In 2021, Birchcliff was able to realize
significant cost savings in the execution of its capital program as
compared to its internal estimates. The Corporation utilized large
multi-well pads that enabled its operational teams to create
efficiencies through scale and repeatability, which resulted in a
12% reduction in drilling and completion costs per lateral metre
and a reduction in cycle times from spud to onstream of 23% as
compared to 2020.
As a result of Birchcliff’s strong operational
performance and realized cost savings during the year, the
Corporation was able to construct two new pads and drill 5 (5.0
net) additional wells (the 13-29 pad) in 2021 to prepare for its
2022 drilling program, while remaining in-line with its 2021
F&D capital expenditures guidance.
In 2021, Birchcliff successfully delineated and
commercialized the Montney C interval into the Gordondale area at
its 4-well pad (05-07) using multi-well cube-style development. The
continued success of the lower Montney cube (Montney C, D1 and D2)
provides Birchcliff with significant additional drilling inventory
for multi-well cube-style drilling, which lowers the Corporation’s
per well costs and increases its reservoir hydrocarbon capture.
Operations Update
Birchcliff currently has 2 drilling rigs at work
drilling a 10-well pad in Pouce Coupe. Birchcliff has successfully
completed its 6-well 13-29 pad in Pouce Coupe, which was drilled in
late Q4 2021 and early January 2022. Wells were drilled in 2
different intervals (4 in the Montney D1 and 2 in the Basal
Doig/Upper Montney) and targeted condensate-rich natural gas.
Flowback operations have commenced and the wells are expected to be
onstream in early March.
2021 YEAR-END RESERVES
Birchcliff retained Deloitte, independent
qualified reserves evaluator, to evaluate and prepare a report on
100% of Birchcliff’s light crude oil and medium crude oil,
conventional natural gas, shale gas and NGLs reserves. The reserves
data set forth below at December 31, 2021 is based upon the
evaluation by Deloitte with an effective date of December 31, 2021
as contained in the report of Deloitte dated February 9, 2022 (the
“2021 Reserves Report”). The forecast commodity
prices, inflation and exchange rates utilized were computed using
the average of forecasts from Deloitte, McDaniel & Associates
Consultants Ltd. (“McDaniel”), GLJ Petroleum
Consultants Ltd. (“GLJ”) and Sproule Associates
Ltd. (“Sproule”) effective January 1, 2022 (the
“2021 IQRE Price Forecast”).
The 2021 Reserves Report has been prepared in
accordance with the standards contained in the Canadian Oil and Gas
Evaluation Handbook (the “COGE Handbook”) and
National Instrument 51-101 – Standards of Disclosure for Oil and
Gas Activities (“NI 51-101”).
For additional information regarding the
presentation of Birchcliff’s reserves disclosure contained herein,
see “Presentation of Oil and Gas Reserves” and “Advisories” in this
press release. The reserves data provided in this press release
presents only a portion of the disclosure required under NI 51-101.
The disclosure required under NI 51-101 will be contained in
Birchcliff’s Annual Information Form for the year ended December
31, 2021, which is expected to be filed on the System for
Electronic Document Analysis and Retrieval (www.sedar.com) on March
16, 2022. In certain of the tables below, numbers may not add due
to rounding.
Reserves Summary
The following table summarizes the estimates of
Birchcliff’s gross reserves at December 31, 2021 and December
31, 2020, estimated using the forecast price and cost assumptions
in effect as at the effective date of the applicable reserves
evaluation:
Summary of Gross Reserves (Forecast
Prices and Costs)
|
Reserves Category |
December 31, 2021(Mboe) |
December 31, 2020(1)(Mboe) |
Change fromDecember 31,
2020(%) |
|
Proved Developed Producing |
217,145 |
206,606 |
5 |
|
Total Proved |
689,941 |
699,067 |
(1) |
|
Total Probable |
331,927 |
341,410 |
(3) |
|
Total Proved Plus Probable |
1,021,868 |
1,040,477 |
(2) |
| |
|
|
|
(1) Deloitte prepared an evaluation with an
effective date of December 31, 2020 as contained in the report of
Deloitte dated February 10, 2021 (the “2020 Reserves
Report”). Deloitte prepared the 2020 Reserves Report using
the average of forecasts from Deloitte, McDaniel, GLJ and Sproule
effective January 1, 2021 (the “2020 IQRE Price
Forecast”).
The following table sets forth Birchcliff’s
light crude oil and medium crude oil, conventional natural gas,
shale gas and NGLs reserves at December 31, 2021, estimated
using the 2021 IQRE Price Forecast:
Summary of Reserves at December 31,
2021(Forecast Prices and Costs)
|
Reserves Category |
|
Light Crude Oil and Medium Crude Oil |
|
Conventional Natural Gas |
|
Shale Gas |
|
NGLs(1) |
|
Total Boe |
|
|
Gross(Mbbls) |
|
Net(Mbbls) |
|
Gross(MMcf) |
|
Net(MMcf) |
|
Gross(MMcf) |
|
Net(MMcf) |
|
Gross(Mbbls) |
|
Net(Mbbls) |
|
Gross(Mboe) |
|
Net(Mboe) |
| Proved |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed Producing |
|
6,606 |
|
5,515 |
|
4,433 |
|
4,171 |
|
1,026,813 |
|
957,484 |
|
38,664 |
|
30,552 |
|
217,145 |
|
196,342 |
| |
Developed Non-Producing |
|
0 |
|
0 |
|
381 |
|
362 |
|
3,356 |
|
3,158 |
|
108 |
|
87 |
|
731 |
|
674 |
|
|
Undeveloped |
|
11,204 |
|
9,678 |
|
2,763 |
|
2,517 |
|
2,430,315 |
|
2,256,114 |
|
55,349 |
|
45,195 |
|
472,066 |
|
431,311 |
|
Total Proved |
|
17,810 |
|
15,193 |
|
7,577 |
|
7,050 |
|
3,460,484 |
|
3,216,756 |
|
94,121 |
|
75,833 |
|
689,941 |
|
628,327 |
|
Total Probable |
|
12,103 |
|
9,855 |
|
4,569 |
|
4,289 |
|
1,593,344 |
|
1,458,630 |
|
53,505 |
|
41,737 |
|
331,927 |
|
295,412 |
|
Total Proved Plus Probable |
|
29,913 |
|
25,048 |
|
12,146 |
|
11,338 |
|
5,053,827 |
|
4,675,386 |
|
147,627 |
|
117,570 |
|
1,021,868 |
|
923,739 |
(1) NGLs includes condensate.
Net Present Values of Future Net
Revenue
The following table sets forth the net present
values of future net revenue attributable to Birchcliff’s reserves
at December 31, 2021, estimated using the 2021 IQRE Price Forecast,
before deducting future income tax expenses and calculated at
various discount rates:
Summary of Net Present Values of Future
Net Revenue at December 31, 2021(1)(Forecast
Prices and Costs)
|
Reserves Category |
|
Before Income Taxes Discounted At (%/year) |
|
|
|
0 ($000s) |
|
5 ($000s) |
|
10 ($000s) |
|
15 ($000s) |
|
20($000s) |
|
Unit Value Discounted at 10%/year($/boe)(2) |
|
Proved |
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed Producing |
|
4,111,347 |
|
3,126,078 |
|
2,490,206 |
|
2,076,243 |
|
1,791,078 |
|
12.68 |
|
Developed Non-Producing |
|
12,274 |
|
8,225 |
|
6,033 |
|
4,706 |
|
3,836 |
|
8.96 |
|
Undeveloped |
|
7,787,417 |
|
4,210,617 |
|
2,470,682 |
|
1,526,126 |
|
969,739 |
|
5.73 |
|
Total Proved |
|
11,911,038 |
|
7,344,919 |
|
4,966,920 |
|
3,607,076 |
|
2,764,652 |
|
7.90 |
|
Total Probable |
|
7,099,560 |
|
2,927,045 |
|
1,400,364 |
|
744,708 |
|
427,364 |
|
4.74 |
|
Total Proved Plus Probable |
|
19,010,598 |
|
10,271,964 |
|
6,367,284 |
|
4,351,783 |
|
3,192,016 |
|
6.89 |
(1) Estimates of future net revenue, whether
calculated without discount or using a discount rate, do not
represent fair market value.(2) Unit values are based on net
reserves volumes.
Pricing Assumptions
The following table sets forth the 2021 IQRE
Price Forecast used in the 2021 Reserves Report:
2021 IQRE Price Forecast
|
Year |
|
Crude Oil |
|
Natural Gas(1) |
|
NGLs |
|
Currency Exchange Rate (US$/CDN$) |
|
Price and Cost Inflation Rates(%) |
|
|
WTI at Cushing Oklahoma (US$/bbl) |
|
Edmonton City Gate (CDN$/bbl) |
|
Alberta AECOAverage
Price(CDN$/Mcf) |
|
Ontario DawnReference
Point(CDN$/Mcf) |
|
NYMEX Henry Hub(US$/Mcf) |
|
Edmonton Ethane(CDN$/bbl) |
|
Edmonton Propane (CDN$/bbl) |
|
Edmonton Butane (CDN$/bbl) |
|
Edmonton Pentanes + Condensate (CDN$/bbl) |
|
|
|
2022 |
|
71.88 |
|
85.43 |
|
3.58 |
|
4.59 |
|
3.89 |
|
11.12 |
|
43.71 |
|
57.34 |
|
90.21 |
|
0.80 |
|
0.0 |
|
2023 |
|
67.91 |
|
79.36 |
|
3.22 |
|
4.27 |
|
3.47 |
|
10.00 |
|
35.40 |
|
48.92 |
|
83.90 |
|
0.80 |
|
2.25 |
|
2024 |
|
65.42 |
|
76.07 |
|
3.07 |
|
3.91 |
|
3.23 |
|
9.54 |
|
33.88 |
|
46.93 |
|
80.67 |
|
0.80 |
|
2.0 |
|
2025 |
|
66.72 |
|
77.59 |
|
3.14 |
|
3.99 |
|
3.29 |
|
9.73 |
|
34.55 |
|
47.88 |
|
82.29 |
|
0.80 |
|
2.0 |
|
2026 |
|
68.05 |
|
79.13 |
|
3.20 |
|
4.06 |
|
3.35 |
|
9.94 |
|
35.24 |
|
48.83 |
|
83.94 |
|
0.80 |
|
2.0 |
|
2027 |
|
69.42 |
|
80.73 |
|
3.26 |
|
4.15 |
|
3.43 |
|
10.13 |
|
35.94 |
|
49.80 |
|
85.62 |
|
0.80 |
|
2.0 |
|
2028 |
|
70.81 |
|
82.33 |
|
3.33 |
|
4.24 |
|
3.49 |
|
10.34 |
|
36.67 |
|
50.80 |
|
87.33 |
|
0.80 |
|
2.0 |
|
2029 |
|
72.22 |
|
83.98 |
|
3.40 |
|
4.31 |
|
3.57 |
|
10.56 |
|
37.39 |
|
51.81 |
|
89.07 |
|
0.80 |
|
2.0 |
|
2030 |
|
73.67 |
|
85.66 |
|
3.46 |
|
4.40 |
|
3.63 |
|
10.77 |
|
38.14 |
|
52.85 |
|
90.84 |
|
0.80 |
|
2.0 |
|
2031 |
|
75.14 |
|
87.37 |
|
3.54 |
|
4.49 |
|
3.71 |
|
10.99 |
|
38.91 |
|
53.91 |
|
92.67 |
|
0.80 |
|
2.0 |
|
2032 |
|
76.64 |
|
89.12 |
|
3.60 |
|
4.59 |
|
3.78 |
|
11.21 |
|
39.69 |
|
54.98 |
|
94.53 |
|
0.80 |
|
2.0 |
|
2033 |
|
78.17 |
|
90.91 |
|
3.68 |
|
4.68 |
|
3.86 |
|
11.44 |
|
40.48 |
|
56.08 |
|
96.41 |
|
0.80 |
|
2.0 |
|
2034 |
|
79.74 |
|
92.72 |
|
3.75 |
|
4.78 |
|
3.93 |
|
11.66 |
|
41.29 |
|
57.20 |
|
98.34 |
|
0.80 |
|
2.0 |
|
2035 |
|
81.33 |
|
94.57 |
|
3.83 |
|
4.87 |
|
4.01 |
|
11.89 |
|
42.12 |
|
58.35 |
|
100.30 |
|
0.80 |
|
2.0 |
|
2036 |
|
82.96 |
|
96.46 |
|
3.90 |
|
4.98 |
|
4.09 |
|
12.14 |
|
42.96 |
|
59.52 |
|
102.31 |
|
0.80 |
|
2.0 |
|
2037 |
|
84.62 |
|
98.40 |
|
3.98 |
|
5.08 |
|
4.17 |
|
12.38 |
|
43.81 |
|
60.71 |
|
104.36 |
|
0.80 |
|
2.0 |
|
2038 |
|
86.31 |
|
100.36 |
|
4.06 |
|
5.18 |
|
4.25 |
|
12.63 |
|
44.70 |
|
61.92 |
|
106.45 |
|
0.80 |
|
2.0 |
|
2039 |
|
88.03 |
|
102.37 |
|
4.14 |
|
5.28 |
|
4.34 |
|
12.87 |
|
45.58 |
|
63.16 |
|
108.58 |
|
0.80 |
|
2.0 |
|
2040 |
|
89.79 |
|
104.42 |
|
4.22 |
|
5.38 |
|
4.43 |
|
13.14 |
|
46.50 |
|
64.43 |
|
110.75 |
|
0.80 |
|
2.0 |
|
2041 |
|
91.59 |
|
106.51 |
|
4.31 |
|
5.49 |
|
4.52 |
|
13.40 |
|
47.43 |
|
65.71 |
|
112.97 |
|
0.80 |
|
2.0 |
|
2042+ |
|
2.0% |
|
2.0% |
|
2.0% |
|
2.0% |
|
2.0% |
|
2.0% |
|
2.0% |
|
2.0% |
|
2.0% |
|
0.80 |
|
2.0 |
(1) 1 Mcf = 1 MMBtu.
Reconciliation of Changes in
Reserves
The following table sets forth the
reconciliation of Birchcliff’s gross reserves at December 31,
2021 as set forth in the 2021 Reserves Report, estimated using the
2021 IQRE Price Forecast, to Birchcliff’s gross reserves at
December 31, 2020 as set forth in the 2020 Reserves Report,
estimated using the 2020 IQRE Price Forecast:
Reconciliation of Gross Reserves from
December 31, 2020 to December 31,
2021(Forecast Prices and Costs)
|
Factors |
|
Light Crude Oil andMedium Crude
Oil (Mbbls) |
|
Conventional Natural Gas(MMcf) |
|
Shale Gas(MMcf) |
|
NGLs(Mbbls) |
|
Oil Equivalent(Mboe) |
|
GROSS TOTAL PROVED |
|
|
|
|
|
|
|
Opening balance December 31, 2020 |
|
19,568 |
|
8,463 |
|
3,509,528 |
|
93,167 |
|
699,067 |
|
|
Extensions and Improved Recovery(1) |
|
1,476 |
|
0 |
|
228,078 |
|
13,314 |
|
52,803 |
|
|
Technical Revisions(2) |
|
(2,198 |
) |
(414 |
) |
(158,870 |
) |
(7,916 |
) |
(36,661 |
) |
|
Discoveries(3) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Acquisitions(4) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Dispositions(5) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Economic Factors(6) |
|
22 |
|
225 |
|
17,274 |
|
453 |
|
3,392 |
|
|
Production(7) |
|
(1,058 |
) |
(697 |
) |
(135,527 |
) |
(4,898 |
) |
(28,660 |
) |
|
Closing balance December 31, 2021 |
|
17,810 |
|
7,577 |
|
3,460,484 |
|
94,121 |
|
689,941 |
|
| GROSS
TOTAL PROBABLE |
|
Opening balance December 31, 2020 |
|
11,776 |
|
5,269 |
|
1,619,891 |
|
58,774 |
|
341,410 |
|
|
Extensions and Improved Recovery(1) |
|
1,120 |
|
0 |
|
8,513 |
|
411 |
|
2,950 |
|
|
Technical Revisions(2) |
|
(815 |
) |
(812 |
) |
(42,211 |
) |
(5,928 |
) |
(13,914 |
) |
|
Discoveries(3) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Acquisitions(4) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Dispositions(5) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Economic Factors(6) |
|
22 |
|
113 |
|
7,150 |
|
248 |
|
1,481 |
|
|
Production(7) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Closing balance December 31, 2021 |
|
12,103 |
|
4,569 |
|
1,593,344 |
|
53,505 |
|
331,927 |
|
|
GROSS TOTAL PROVED PLUS PROBABLE |
|
Opening balance December 31, 2020 |
|
31,344 |
|
13,732 |
|
5,129,420 |
|
151,941 |
|
1,040,477 |
|
|
Extensions and Improved Recovery(1) |
|
2,595 |
|
0 |
|
236,592 |
|
13,726 |
|
55,753 |
|
|
Technical Revisions(2) |
|
(3,014 |
) |
(1,226 |
) |
(201,080 |
) |
(13,844 |
) |
(50,575 |
) |
|
Discoveries(3) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Acquisitions(4) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Dispositions(5) |
|
0 |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Economic Factors(6) |
|
45 |
|
337 |
|
24,424 |
|
702 |
|
4,873 |
|
|
Production(7) |
|
(1,058 |
) |
(697 |
) |
(135,527 |
) |
(4,898 |
) |
(28,660 |
) |
|
Closing balance December 31, 2021 |
|
29,913 |
|
12,146 |
|
5,053,827 |
|
147,627 |
|
1,021,868 |
|
(1) Additions to volumes resulting from capital
expenditures for: (i) step-out drilling in previously discovered
reservoirs; (ii) infill drilling in previously discovered
reservoirs that were not drilled as part of an enhanced recovery
scheme; and (iii) the installation of improved recovery schemes.(2)
Positive or negative volume revisions to an estimate resulting from
new technical data or revised interpretations on previously
assigned volumes, performance and operating
costs.(3) Additions to volumes in reservoirs where no reserves
were previously booked.(4) Positive additions to volume estimates
because of purchasing interests in oil and gas properties.(5)
Reductions in volume estimates because of selling all or a portion
of an interest in oil and gas properties.(6) Changes to volumes
resulting from different price forecasts, inflation rates and
regulatory changes.(7) Reductions in the volume estimates due
to actual production.
Key highlights include the following:
Extensions and Improved
Recovery
Reserves were added from the 33 wells that were
brought on production pursuant to the Corporation’s successful 2021
capital program, which also resulted in the assignment of reserves
to potential future drilling locations offsetting the new wells. In
addition, potential future drilling locations that were not
included in 2020 Reserves Report were added based on available
infrastructure capacity, superior economics and COGE Handbook
development guidelines.
Technical Revisions
-
The technical revisions in all reserves categories for light and
medium crude oil were mainly a result of higher gas-to-oil ratios
for existing producing oil wells in the halo area in Gordondale and
potential future drilling location adjustments based on offsetting
well performance.
-
The technical revisions in all reserves categories for conventional
natural gas were mainly the result of the suspension of vertical
wells in Gordondale and Pouce Coupe.
-
The technical revisions in all reserves categories for shale gas
were mainly a result of: (i) updated full-field development plan
layouts with increased well lengths, combining multiple proved and
probable potential future drilling locations; (ii) increased well
performance of existing and potential future drilling locations in
the Basal Doig/Upper Montney interval in Pouce Coupe; (iii) the
prioritized removal of some proved and probable locations, which
were replaced with potential future drilling locations (extensions)
that either had superior reserves and economic value or where the
available plant capacity precluded their development within the
time frame mandated by the COGE Handbook; and (iv) adjustments to
existing wells and offsetting potential future drilling
locations.
-
The technical revisions in all reserves categories for NGLs were
mainly a result of: (i) a slight reduction of the C2+ recoveries at
the AltaGas deep-cut sour gas processing facility in Gordondale
(the “AltaGas Facility”) during full utilization;
(ii) a reduction in associated shale gas volumes; and (iii)
improved performance of the existing C3+ recoveries at the
Corporation’s 100% owned and operated natural gas processing plant
in Pouce Coupe (the “Pouce Coupe Gas Plant”).
Economic Factors
The forecast prices for each product type were
generally higher in the 2021 IQRE Price Forecast than the 2020 IQRE
Price Forecast, which resulted in the economic limit at the end of
a well’s life being achieved later, thereby increasing the reserves
volumes in all reserves categories.
Future Development Costs
FDC reflects Deloitte’s best estimate of what it
will cost to bring the proved and proved plus probable reserves on
production. Changes in forecast FDC occur annually as a result of
development activities, acquisition and disposition activities and
capital cost estimates. The following table sets forth development
costs deducted in the estimation of Birchcliff’s future net revenue
attributable to the reserves categories noted below:
Future Development Costs
(Forecast Prices and Costs)
|
Year |
|
Proved($000s) |
|
Proved Plus Probable($000s) |
| 2022 |
|
248,669 |
|
248,669 |
| 2023 |
|
361,763 |
|
429,051 |
| 2024 |
|
395,994 |
|
395,994 |
| 2025 |
|
761,449 |
|
802,997 |
| 2026 |
|
447,615 |
|
457,937 |
| Thereafter |
|
682,617 |
|
1,948,333 |
|
Total undiscounted |
|
2,898,106 |
|
4,282,980 |
FDC for total proved reserves decreased by $25.4
million to $2.90 billion at December 31, 2021 from $2.92 billion at
December 31, 2020. FDC for proved plus probable reserves decreased
by $94.0 million to $4.28 billion at December 31, 2021 from $4.38
billion at December 31, 2020. The decreases in FDC for both proved
and proved plus probable reserves were largely due to: (i) updated
full-field development plan layouts with increased well lengths,
combining multiple proved and probable potential future drilling
locations; and (ii) a decrease in DCCET costs for (halo area)
future locations in Gordondale to $5.0 million per well from $5.5
million per well at December 31, 2020. The decreases were partially
offset by increases in future sustaining, maintenance and gas
gathering infrastructure capital.
The FDC for both proved and proved plus probable
reserves are primarily the capital costs required to drill,
complete, equip and tie-in the net undeveloped locations. The
estimates of FDC on a proved and proved plus probable basis also
include approximately $256 million (unescalated) for the continued
expansion of the Pouce Coupe Gas Plant from the existing 340 MMcf/d
to 660 MMcf/d of total throughput. The FDC for the expansions of
the Pouce Coupe Gas Plant also include the costs of the related
gathering pipelines and maintenance capital.
The following table sets forth the average cost
to drill, complete, equip and tie-in a multi-stage fractured
horizontal well as estimated by Deloitte:
|
Average Well Cost |
|
December 31, 2021($ millions) |
|
December 31, 2020($ millions) |
| Pouce Coupe |
|
4.7 |
|
4.7 |
|
Gordondale |
|
5.1 |
|
5.4 |
Reserves Replacement
The following table sets forth Birchcliff’s 2021
reserves replacement ratios on a F&D basis:
|
Reserves Category |
|
2021 Reserves Replacement(1) |
|
Proved Developed Producing |
|
137 |
% |
|
Total Proved |
|
68 |
% |
|
Total Proved Plus Probable |
|
35 |
% |
(1) See “Advisories – Oil and Gas Metrics” for a
description of the methodology used to calculate reserves
replacement.
Reserves Life Index
The following table sets forth Birchcliff’s 2021
reserves life index:
|
Reserves Category |
|
2021 Reserves Life Index(1) |
|
Proved Developed Producing |
|
7.5 years |
|
Total Proved |
|
23.9 years |
|
Total Proved Plus Probable |
|
35.4 years |
(1) Based on a forecast production rate of
79,000 boe/d, which represents the mid-point of Birchcliff’s annual
average production guidance range for 2022. See “Advisories – Oil
and Gas Metrics” for a description of the methodology used to
calculate reserves life index.
Reserves on the Montney/Doig Resource
Play
The following table summarizes the estimates of
reserves attributable to Birchcliff’s horizontal wells on the
Montney/Doig Resource Play as contained in the 2021 Reserves Report
and the number of horizontal wells to which reserves were
attributed:
Montney/Doig Resource Play Reserves
Data(1)(2)
|
|
Shale Gas (Bcf) |
Light Crude Oil and Medium Crude Oil
Combined(Mbbls) |
NGLs(Mbbls) |
Total(Mboe) |
Existing Horizontal Wells and Potential Future Horizontal
Well Locations |
|
Gross |
Net |
|
Reserves Category |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 |
2021 |
2020 |
|
Proved Developed Producing |
1,016 |
948 |
6,575 |
9,262 |
37,790 |
35,889 |
213,712 |
203,109 |
472 |
437 |
469.7 |
434.7 |
|
Total Proved |
3,448 |
3,492 |
17,779 |
19,539 |
93,155 |
92,137 |
685,673 |
693,661 |
965 |
958 |
962.4 |
952.6 |
|
Total Proved Plus Probable |
5,038 |
5,106 |
29,874 |
31,309 |
146,334 |
150,528 |
1,015,869 |
1,032,884 |
1,205 |
1,219 |
1,201.4 |
1,206.6 |
(1) Estimates of reserves and future net revenue
for individual properties may not reflect the same confidence level
as estimates of reserves and future net revenue for all properties,
due to the effects of aggregation.(2) At December 31, 2021, the
estimated FDC for Birchcliff’s reserves on its Montney/Doig
Resource Play is $2,895 million on a total proved basis (as
compared to $2,921 million at December 31, 2020) and $4,278 million
on a total proved plus probable basis (as compared to $4,372
million at December 31, 2020).
POTENTIAL FUTURE DRILLING OPPORTUNITIES
ON THE MONTNEY/DOIG RESOURCE PLAY
Birchcliff’s operations are primarily
concentrated in its core areas of Pouce Coupe and Gordondale. At
December 31, 2021, Birchcliff held 227.7 (214.2 net) sections of
contiguous land that have potential for the Montney/Doig Resource
Play in Pouce Coupe and Gordondale. The 2021 Reserves Report
attributed proved plus probable reserves to 730.7 potential net
future horizontal drilling locations in Pouce Coupe and Gordondale.
In addition, at December 31, 2021, Birchcliff had approximately
3,084 potential net future horizontal drilling locations in Pouce
Coupe and Gordondale that have not had any proved or probable
reserves attributed to them by Deloitte. Based on Birchcliff’s five
year plan (announced on January 19, 2022), the Corporation is
targeting drilling 170 to 180 wells in the next five years to
achieve average annual production of 90,000 boe/d in 2026. Over the
past few years, Birchcliff has worked diligently to divest non-core
properties and to direct its production to the Pouce Coupe Gas
Plant and the AltaGas Facility, resulting in over 99% of
Birchcliff’s production being associated with Pouce Coupe and
Gordondale at December 31, 2021.
Birchcliff also owns 179.5 (179.5 net) sections
of land in the Elmworth area of Alberta with potential for the
Montney/Doig Resource Play. At December 31, 2021, the Corporation
had approximately 3,588 potential net future horizontal drilling
locations in Elmworth that have not had any proved or probable
reserves attributed to them by Deloitte. See “2021 Year-End
Reserves” and “Advisories – Drilling Locations”.
ABBREVIATIONS
|
AECO |
benchmark price for natural gas determined at the AECO ‘C’ hub in
southeast Alberta |
|
bbl |
barrel |
|
bbls |
barrels |
|
bbls/d |
barrels per day |
|
Bcf |
billion cubic feet |
|
boe |
barrel of oil equivalent |
|
boe/d |
barrel of oil equivalent per day |
|
C2+ |
ethane plus |
|
C3+ |
propane plus |
|
condensate |
pentanes plus (C5+) |
|
DCCET |
drill, case, complete, equip and tie-in |
|
F&D |
finding and development |
|
FD&A |
finding, development and acquisition |
|
FDC |
future development costs |
|
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 |
|
Mbbls |
thousand barrels |
|
Mboe |
thousand barrels of oil equivalent |
|
Mcf |
thousand cubic feet |
|
Mcf/d |
thousand cubic feet per day |
|
MMboe |
million barrels of oil equivalent |
|
MMBtu |
million British thermal units |
|
MMBtu/d |
million British thermal units per day |
|
MMcf |
million cubic feet |
|
MMcf/d |
million cubic feet per day |
|
MSW |
price for mixed sweet crude oil at Edmonton, Alberta |
|
NGLs |
natural gas liquids |
|
NPV |
net present value |
|
NYMEX |
New York Mercantile Exchange |
|
OPEC |
Organization of the Petroleum Exporting Countries |
|
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 AND OTHER
FINANCIAL MEASURES
This press release uses various “non-GAAP
financial measures”, “non-GAAP ratios”, “supplementary financial
measures” and “capital management measures” (as such terms are
defined in NI 52-112), which are described in further detail below.
These measures facilitate management’s comparisons to the
Corporation’s historical operating results in assessing its results
and strategic and operational decision-making and may be used by
financial analysts and others in the oil and natural gas industry
to evaluate the Corporation’s performance.
Non-GAAP Financial Measures
NI 52-112 defines a non-GAAP financial measure
as a financial measure that: (i) depicts the historical or expected
future financial performance, financial position or cash flow of an
entity; (ii) with respect to its composition, excludes an amount
that is included in, or includes an amount that is excluded from,
the composition of the most directly comparable financial measure
disclosed in the primary financial statements of the entity; (iii)
is not disclosed in the financial statements of the entity; and
(iv) is not a ratio, fraction, percentage or similar
representation. The non-GAAP financial measures used in this press
release are not standardized financial measures under GAAP and
might not be comparable to similar measures presented by other
companies where similar terminology is used. Investors are
cautioned that non-GAAP financial measures should not be construed
as alternatives to or more meaningful than the most directly
comparable GAAP measures as indicators of Birchcliff’s performance.
Set forth below is a description of the non-GAAP financial measures
used in this press release.
Adjusted Funds Flow and Free Funds
Flow
Birchcliff defines “adjusted funds flow” as cash
flow from operating activities before the effects of
decommissioning expenditures and changes in non-cash operating
working capital. 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. Adjusted funds flow can also be derived from
petroleum and natural gas revenue less royalty expense, operating
expense, transportation and other expense, net G&A expense,
interest expense and any realized losses (plus realized gains) on
financial instruments and plus any other cash income sources.
Management believes that adjusted funds flow assists management and
investors in assessing Birchcliff’s financial performance after
deducting all operating and corporate cash costs, as well as its
ability to generate the cash necessary to fund sustaining and/or
growth capital expenditures, repay debt, settle decommissioning
obligations, repurchase common shares and pay common share and
preferred share dividends.
Birchcliff defines “free funds flow” as 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, preferred share redemptions, common share
repurchases, 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 endedDecember
31, |
Twelve months endedDecember
31, |
|
($000s) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
Cash flow from operating activities |
196,142 |
|
71,431 |
|
515,369 |
|
188,180 |
|
|
Change in non-cash operating working capital |
(4,255 |
) |
(6,269 |
) |
21,161 |
|
(5,977 |
) |
|
Decommissioning expenditures |
1,762 |
|
1,347 |
|
3,203 |
|
2,323 |
|
|
Adjusted funds flow |
193,649 |
|
66,509 |
|
539,733 |
|
184,526 |
|
|
F&D capital expenditures |
(35,726 |
) |
(41,291 |
) |
(230,479 |
) |
(287,967 |
) |
|
Free funds flow |
157,923 |
|
25,218 |
|
309,254 |
|
(103,441 |
) |
Transportation and Other
Expense
Birchcliff defines “transportation and other
expense” as transportation expense plus marketing purchases less
marketing revenue. 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. The following table provides a
reconciliation of transportation expense, as determined in
accordance with GAAP, to transportation and other expense for the
periods indicated:
| |
Three months endedDecember
31, |
Twelve months endedDecember
31, |
|
($000s) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
Transportation expense |
37,454 |
|
36,427 |
|
151,263 |
|
140,574 |
|
| Marketing purchases |
5,413 |
|
1,152 |
|
18,034 |
|
11,127 |
|
|
Marketing revenue |
(6,169 |
) |
(1,889 |
) |
(20,722 |
) |
(13,687 |
) |
|
Transportation and other expense |
36,698 |
|
35,690 |
|
148,575 |
|
138,014 |
|
Operating Netback
Birchcliff defines “operating netback” as
petroleum and natural gas revenue less royalty expense, operating
expense and transportation and other expense. Management believes
that operating netback assists management and investors in
assessing Birchcliff’s operating profits after deducting the cash
costs that are directly associated with the sale of its production,
which can then be used to pay other corporate cash costs or satisfy
other obligations. The following table provides a breakdown of
Birchcliff’s operating netback for the periods indicated:
| |
Three months endedDecember
31, |
Twelve months endedDecember
31, |
|
($000s) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
Petroleum and natural gas revenue |
289,806 |
|
158,283 |
|
932,406 |
|
528,505 |
|
|
Royalty expense |
(28,452 |
) |
(6,522 |
) |
(76,271 |
) |
(18,204 |
) |
|
Operating expense |
(25,315 |
) |
(21,942 |
) |
(91,515 |
) |
(82,357 |
) |
|
Transportation and other expense |
(36,698 |
) |
(35,690 |
) |
(148,575 |
) |
(138,014 |
) |
|
Operating netback |
199,341 |
|
94,129 |
|
616,045 |
|
289,930 |
|
FD&A and Total Capital
Expenditures
Birchcliff defines “F&DA capital
expenditures” as F&D capital expenditures (see “Advisories –
F&D Capital Expenditures”) plus acquisitions and less
dispositions. Birchcliff defines “total capital expenditures” as
FD&A capital expenditures plus administrative assets.
Management believes that FD&A capital expenditures and total
capital expenditures assist management and investors in assessing
Birchcliff’s overall capital cost structure associated with its
petroleum and natural gas activities. The following table provides
a reconciliation of F&D capital expenditures, as determined in
accordance with GAAP, to FD&A capital expenditures and total
capital expenditures for the periods indicated:
| |
Three months endedDecember
31, |
Twelve months endedDecember
31, |
|
($000s) |
2021 |
2020 |
|
2021 |
2020 |
|
|
F&D capital |
35,726 |
41,291 |
|
230,479 |
287,967 |
|
|
Acquisitions |
56 |
10 |
|
175 |
10 |
|
|
Dispositions |
- |
(12,902 |
) |
108 |
(12,887 |
) |
|
FD&A capital |
35,782 |
28,399 |
|
230,762 |
275,090 |
|
|
Administrative assets |
293 |
379 |
|
1,718 |
1,695 |
|
|
Total capital expenditures |
36,075 |
28,778 |
|
232,480 |
276,785 |
|
Net Asset Value
Birchcliff defines “net asset value” as the net
present value of the future net revenue of its PDP, total proved or
total proved plus probable reserves, as the case may be, as
estimated by Deloitte effective December 31, 2021 or 2020, using
forecast prices and costs (before income taxes, discounted at 10%),
plus the value of unexercised in-the-money stock options and
performance warrants outstanding at the end of the period less
total debt and the redemption value of the Series A and Series C
preferred shares outstanding at the end of the period. Net asset
value excludes any fair value assigned to Birchcliff’s undeveloped
land and seismic. Net asset value is normally referred to as a
“produce-out” calculation under which the current value of the
Corporation’s reserves would be produced at forecast prices and
costs. The value is a snapshot in time based on various
assumptions, including commodity prices, future development capital
and foreign exchange rates, that vary over time. Management
believes that net asset value assists management and investors in
assessing the long-term fair value of Birchcliff’s underlying
reserves assets after settling its outstanding financial
obligations. The following table provides a reconciliation of net
assets, as determined in accordance with GAAP, to net asset value
for the periods indicated:
|
|
Proved Developed Producing |
Total Proved |
Total Proved Plus Probable |
|
($000s) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
Net assets(1) |
2,852,232 |
|
2,833,310 |
|
2,852,232 |
|
2,833,310 |
|
2,852,232 |
|
2,833,310 |
|
|
Reserves adjustment(2) |
(362,026 |
) |
(963,864 |
) |
2,114,688 |
|
902,927 |
|
3,515,052 |
|
1,998,383 |
|
|
Total debt |
(499,397 |
) |
(761,951 |
) |
(499,397 |
) |
(761,951 |
) |
(499,397 |
) |
(761,951 |
) |
|
Preferred shares(3) |
(88,268 |
) |
(89,930 |
) |
(88,268 |
) |
(89,930 |
) |
(88,268 |
) |
(89,930 |
) |
|
Value of unexercised securities |
50,392 |
|
- |
|
50,392 |
|
- |
|
50,392 |
|
- |
|
|
Net asset value |
1,952,933 |
|
1,017,565 |
|
4,429,647 |
|
2,884,356 |
|
5,830,011 |
|
3,979,812 |
|
(1) Reflects the net assets of the Corporation,
which is determined on a historical cost basis and is calculated as
total assets less total liabilities as disclosed on the financial
statements.(2) Represents the difference between the net present
value of future net revenue (before income taxes, discounted at
10%) of Birchcliff’s PDP, total proved and total proved plus
probable reserves, as the case may be, and the net assets disclosed
on the financial statements.(3) Represents the redemption value of
the Corporation’s Series A and Series C preferred shares.
Effective Sales – Total Corporate, Total
Natural Gas, AECO Market and NYMEX HH Market
Birchcliff defines “effective sales” in the AECO
market and NYMEX HH market as the sales amount received from the
production of natural gas that is effectively attributed to the
AECO and NYMEX HH market pricing, respectively, and does not
consider the physical sales delivery point in each case. Effective
sales in the NYMEX HH market includes realized gains and losses on
financial instruments and excludes the notional fixed basis costs
associated with the underlying financial contract in the period.
Birchcliff defines “effective total natural gas sales” as the
aggregate of the effective sales amount received in each natural
gas market. Birchcliff defines “effective total corporate sales” as
the aggregate of the effective total natural gas sales and the
sales amount received from the production of light oil, condensate
and NGLs. Management believes that disclosing effective sales for
each natural gas market assists management and investors in
assessing Birchcliff’s natural gas diversification and commodity
price exposure to each market. The following table provides a
reconciliation of natural gas sales, as determined in accordance
with GAAP, to effective total natural gas sales and effective total
corporate sales for the periods indicated:
|
|
Three months endedDecember
31 |
|
($000s) |
2021 |
2020(1) |
|
Natural gas sales |
192,553 |
97,293 |
|
|
Realized gain (loss) on financial instruments |
11,531 |
(10,232 |
) |
|
Notional fixed basis costs(2) |
21,687 |
23,090 |
|
|
Effective total natural gas sales |
225,771 |
110,151 |
|
|
Light oil sales |
22,232 |
16,261 |
|
|
Condensate sales |
48,377 |
32,406 |
|
|
NGLs sales |
26,634 |
12,320 |
|
|
Effective total corporate sales |
323,014 |
171,138 |
|
(1) Prior period amounts have been adjusted to
include the aggregate notional fixed basis cost for comparison
purposes.(2) Reflects the aggregate notional fixed basis cost
associated with Birchcliff’s financial and physical NYMEX HH/AECO
7A basis swaps in the period.
Non-GAAP Ratios
NI 52-112 defines a non-GAAP ratio as a
financial measure that: (i) is in the form of a ratio, fraction,
percentage or similar representation; (ii) has a non-GAAP financial
measure as one or more of its components; and (iii) is not
disclosed in the financial statements of the entity. The non-GAAP
ratios used in this press release are not standardized financial
measures under GAAP and might not be comparable to similar measures
presented by other companies where similar terminology is used. Set
forth below is a description of the non-GAAP ratios used in this
press release.
Adjusted Funds Flow Per
Boe and Adjusted Funds Flow Per Basic Common
Share
Birchcliff calculates “adjusted funds flow per
boe” as aggregate adjusted funds flow in the period divided by the
production (boe) in the period. Management believes that adjusted
funds flow per boe assists management and investors in assessing
Birchcliff’s financial profitability and sustainability on a cash
basis by isolating the impact of production volumes to better
analyze its performance against prior periods on a comparable
basis. The Corporation previously referred to adjusted funds flow
per boe as “adjusted funds flow netback”.
Birchcliff calculates “adjusted funds flow per
basic common share” as aggregate adjusted funds flow in the period
divided by the basic common shares outstanding at the end of the
period. Management believes that adjusted funds flow per basic
common share assists management and investors in assessing
Birchcliff’s financial strength on a per common share basis.
Free Funds Flow Per Basic Common
Share
Birchcliff calculates “free funds flow per basic
common share” as aggregate free funds flow in the period divided by
the basic common shares outstanding at the end of the period.
Management believes that free fund flow per basic common share
assists management and investors in assessing Birchcliff’s
financial strength and its ability to generate shareholder returns
on a per common share basis.
Transportation and Other Expense Per
Boe
Birchcliff calculates “transportation and other
expense per boe” as aggregate transportation and other expense in
the period divided by the production (boe) in the applicable
period. Management believes that transportation and other expense
per boe assists management and investors in assessing Birchcliff’s
cost structure as it relates to its transportation and marketing
activities by isolating the impact of production volumes to better
analyze performance against prior periods on a comparable
basis.
Operating Netback Per Boe
Birchcliff calculates “operating netback per
boe” as aggregate operating netback in the period divided by the
production (boe) in the period. Management believes that operating
netback per boe assists management and investors in assessing
Birchcliff’s operating profitability and sustainability by
isolating the impact of production volumes to better analyze its
performance against prior periods on a comparable basis.
Operating Netback Recycle Ratio and
Adjusted Funds Flow Recycle Ratio
Birchcliff calculates “recycle ratios” as
operating netback per boe or adjusted funds flow per boe in the
period, as the case may be, divided by F&D costs in the period.
Management believes that recycle ratios assist management and
investors in assessing Birchcliff’s ability to profitably find and
develop its PDP, proved and proved plus probable reserves.
Net Asset Value Per Basic Common
Share
Birchcliff calculates “net asset value per basic
common share” as the net asset value in each category of reserves
divided by the aggregate of the basic common shares and in-the
money dilutive common shares attributable to stock options and
performance warrants outstanding at the end of the period.
Management believes that net asset value per basic common share
assists management and investors in comparing Birchcliff’s common
share trading price to the underlying fair market value of its net
assets on a per common share basis.
Effective Average Realized Sales Price –
Total Corporate, Total Natural Gas, AECO Market and NYMEX HH
Market
Birchcliff calculates “effective average
realized sales price” as effective sales, in each of total
corporate, total natural gas, AECO market and NYMEX HH market, as
the case may be, divided by the effective production in each of the
markets during the period. Management believes that disclosing
effective average realized sales price for each natural gas market
assists management and investors in comparing Birchcliff’s
commodity price realizations in each natural gas market on a per
unit basis.
Supplementary Financial
Measures
NI 52-112 defines a supplementary financial
measure as a financial measure that: (i) is, or is intended to be,
disclosed on a periodic basis to depict the historical or expected
future financial performance, financial position or cash flow of an
entity; (ii) is not disclosed in the financial statements of the
entity; (iii) is not a non-GAAP financial measure; and (iv) is not
a non-GAAP ratio. The supplementary financial measures used in this
press release are either a per unit disclosure of a corresponding
GAAP measure, or a component of a corresponding GAAP measure,
presented in the financial statements. Supplementary financial
measures that are disclosed on a per unit basis are calculated by
dividing the aggregate GAAP measure (or component thereof) by the
applicable unit for the period. Supplementary financial measures
that are disclosed on a component basis of a corresponding GAAP
measure are a granular representation of a financial statement line
item and are determined in accordance with GAAP.
Capital Management Measures
NI 52-112 defines a capital management measure
as a financial measure that: (i) is intended to enable an
individual to evaluate an entity’s objectives, policies and
processes for managing the entity’s capital; (ii) is not a
component of a line item disclosed in the primary financial
statements of the entity; (iii) is disclosed in the notes to the
financial statements of the entity; and (iv) is not disclosed in
the primary financial statements of the entity. Set forth below is
a description of the capital management measure used in this press
release.
Total Debt
Birchcliff calculates “total debt” as the amount
outstanding under the Corporation’s revolving term credit
facilities plus adjusted working capital deficit (surplus).
Management believes that total debt assists management and
investors in assessing Birchcliff’s overall liquidity and financial
position at the end of the period. The following table provides a
reconciliation of the revolving term credit facilities, as
determined in accordance with GAAP, to total debt:
|
As at, ($000s) |
December 31, 2021 |
December 31, 2020 |
|
Revolving term credit facilities |
500,870 |
|
731,372 |
|
|
Working capital deficit |
53,312 |
|
93,988 |
|
|
Fair value of financial instruments |
(16,517 |
) |
(23,479 |
) |
|
Capital securities |
(38,268 |
) |
(39,930 |
) |
|
Adjusted working capital deficit (surplus)(1)(2) |
(1,473 |
) |
30,579 |
|
|
Total debt(2) |
499,397 |
|
761,951 |
|
(1) Capital management
measure. Management believes that adjusted working capital deficit
(surplus) assists management and investors in assessing
Birchcliff’s short-term liquidity
requirements.(2) Previously classified as a
non-GAAP measure under CSA Staff Notice 52-306 – Non-GAAP Financial
Measures.
PRESENTATION OF OIL AND GAS
RESERVES
Deloitte prepared the 2020 Reserves Report and
the 2021 Reserves Report. In addition, Deloitte and McDaniel
prepared reserves evaluations in respect of Birchcliff’s oil and
natural gas properties effective December 31, 2019. Such
evaluations were prepared in accordance with the standards
contained in NI 51-101 and the COGE Handbook that were in effect at
the relevant time. Reserves estimates stated herein are extracted
from the relevant evaluation.
There are numerous uncertainties inherent in
estimating quantities of oil, natural gas and NGLs reserves and the
future net revenue attributed to such reserves. The reserves and
associated future net revenue information set forth in this press
release are estimates only. In general, estimates of economically
recoverable oil, natural gas and NGLs reserves and the future net
revenue therefrom are based upon a number of variable factors and
assumptions, such as historical production from the properties,
production rates, ultimate reserves recovery, the timing and amount
of capital expenditures, marketability of oil, natural gas and
NGLs, royalty rates, the assumed effects of regulation by
governmental agencies and future operating costs, all of which may
vary materially from actual results. For these reasons, estimates
of the economically recoverable oil, natural gas and NGLs reserves
attributable to any particular group of properties, the
classification of such reserves based on risk of recovery and
estimates of future net revenue associated with reserves prepared
by different engineers, or by the same engineer at different times,
may vary. Birchcliff’s actual production, revenue, taxes and
development and operating expenditures with respect to its reserves
will vary from estimates thereof and such variations could be
material.
It should not be assumed that the undiscounted
or discounted net present value of future net revenue attributable
to the Corporation’s reserves estimated by the Corporation’s
independent qualified reserves evaluator represent the fair market
value of those reserves. There is no assurance that the forecast
prices and costs assumptions will be attained and variances could
be material. Actual oil, natural gas and NGLs reserves may be
greater than or less than the estimates provided herein and
variances could be material. With respect to the disclosure of
reserves contained herein relating to portions of Birchcliff’s
properties, the estimates of reserves and future net revenue for
individual properties may not reflect the same confidence level as
estimates of reserves and future net revenue for all properties,
due to the effects of aggregation.
In this press release, unless otherwise stated
all references to “reserves” are to Birchcliff’s gross company
reserves (Birchcliff’s working interest (operating or
non-operating) share before deduction of royalties and without
including any royalty interests of Birchcliff).
The information set forth in this press release
relating to the reserves, future net revenue and future development
costs of Birchcliff constitutes forward-looking statements and is
subject to certain risks and uncertainties. See “Advisories –
Forward-Looking Statements”.
Certain terms used herein but not defined are
defined in NI 51-101, CSA Staff Notice 51-324 – Revised Glossary to
NI 51-101 Standards of Disclosure for Oil and Gas Activities
(“CSA Staff Notice 51-324”) and/or the COGE
Handbook and, unless the context otherwise requires, shall have the
same meanings herein as in NI 51-101, CSA Staff Notice 51-324 and
the COGE Handbook, as the case may be.
ADVISORIES
Unaudited Information
All financial and operating information
contained in this press release for the fourth quarter and year
ended December 31, 2021, such as F&D costs, recycle ratio, net
asset value, adjusted funds flow, F&D capital expenditures,
free funds flow, operating expense, total debt and production
information, is based on unaudited estimated results and have not
been reviewed by the Corporation’s auditor. These estimated results
are subject to change upon completion of the audited financial
statements for the year ended December 31, 2021, and changes could
be material. Birchcliff anticipates filing its audited financial
statements and related management’s discussion and analysis for the
year ended December 31, 2021 on SEDAR on March 16, 2022.
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.
Boe Conversions
Boe amounts have been calculated by using the
conversion ratio of 6 Mcf of natural gas to 1 bbl of oil. Boe
amounts may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 Mcf: 1 bbl 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.
MMBtu Pricing Conversions
$1.00 per MMBtu equals $1.00 per Mcf based on a
standard heat value Mcf.
Oil and Gas Metrics
This press release contains metrics commonly
used in the oil and natural gas industry, including F&D costs,
reserves life index, reserves replacement, recycle ratio, net asset
value and netbacks, which have been determined by Birchcliff as set
out below. 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 shareholders 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.
-
With respect to F&D costs:
-
F&D costs for PDP, proved or proved plus probable reserves, as
the case may be, are calculated by taking the sum of: (i)
exploration and development costs (F&D capital expenditures)
incurred in the period; and (ii) where appropriate, the change
during the period in FDC for the reserves category; divided by the
change to the reserves category before production during the
period. F&D costs exclude the effects of acquisitions and
dispositions.
-
In calculating the amounts of F&D costs for a year, the changes
during the year in estimated reserves and estimated FDC are based
upon the evaluations of Birchcliff’s reserves prepared by its
independent qualified reserves evaluators, effective December 31 of
such year.
-
The aggregate of the exploration and development costs incurred in
the most recent financial year and any change during that year in
estimated FDC generally will not reflect total F&D costs
related to reserves additions for that year.
-
F&D costs may be used as a measure of a company’s efficiency
with respect to finding and developing its reserves.
-
Reserves life index is calculated by dividing PDP, proved or proved
plus probable reserves, as the case may be, estimated by
Birchcliff’s independent qualified reserves evaluator at December
31, 2021, by the mid-point of the average annual production
guidance range for the period indicated. Reserves life index may be
used as a measure of a company’s sustainability.
-
Reserves replacement is calculated by dividing PDP, proved or
proved plus probable reserves additions, as the case may be, before
production by total annual production in the applicable period.
Reserves replacement may be used as a measure of a company’s
sustainability and its ability to replace its PDP reserves, proved
reserves or proved plus probable reserves, as the case may be.
-
For information regarding recycle ratios and how such metrics are
calculated, see “Non-GAAP and Other Financial Measures”.
-
For information regarding net asset value and how such metric is
calculated, see “Non-GAAP and Other Financial Measures”.
-
For information regarding netbacks and how such metrics are
calculated, see “Non-GAAP and Other Financial Measures”.
Drilling Locations
This press release discloses potential net
future horizontal drilling locations, specifically: (i) in Pouce
Coupe and Gordondale, 730.7 potential net future horizontal
drilling locations to which proved plus probable reserves have been
attributed by Deloitte, and approximately 3,084 unbooked potential
net future horizontal drilling locations; and (ii) in Elmworth,
approximately 3,588 unbooked potential net future horizontal
drilling locations.
Proved plus probable locations consist of
proposed drilling locations identified in the 2021 Reserves Report
that have proved and/or probable reserves, as applicable,
attributed to them. Unbooked locations are internal estimates based
on Birchcliff’s prospective acreage and an assumption as to the
number of wells that can be drilled per section based on industry
practice and internal technical analysis review. Unbooked locations
have been identified by management as an estimate of Birchcliff’s
multi-year drilling activities based on evaluation of applicable
geologic, seismic, engineering, production and reserves
information. Unbooked locations do not have proved or probable
reserves attributed to them in the 2021 Reserves Report.
Birchcliff’s ability to drill and develop these
locations and the drilling locations on which Birchcliff actually
drills wells depends on a number of uncertainties and factors,
including, but not limited to, the availability of capital,
equipment and personnel, oil and natural gas prices, costs,
inclement weather, seasonal restrictions, drilling results,
additional geological, geophysical and reservoir information that
is obtained, production rate recovery, gathering system and
transportation constraints, the net price received for commodities
produced, regulatory approvals and regulatory changes. As a result
of these uncertainties, there can be no assurance that the
potential future drilling locations that Birchcliff has identified
will ever be drilled and, if drilled, that such locations will
result in additional oil, NGLs or natural gas production and, in
the case of unbooked locations, additional reserves. As such,
Birchcliff’s actual drilling activities may differ materially from
those presently identified, which could adversely affect
Birchcliff’s business. While certain of the unbooked drilling
locations have been de-risked by drilling existing wells in
relatively close proximity to such unbooked drilling locations,
some of the other unbooked drilling locations are farther away from
existing wells, where management has less information about the
characteristics of the reservoir and there is therefore more
uncertainty whether wells will be drilled in such locations and, if
drilled, there is more uncertainty that such wells will result in
additional proved or probable reserves, resources or
production.
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 NI 51-101; (ii) except where otherwise stated,
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. In certain cases, 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.
F&D Capital
Expenditures
Unless otherwise stated, references in this
press release to “F&D capital expenditures” denotes capital for
land, seismic, workovers, drilling and completions and well
equipment and facilities and excludes any net acquisitions and
dispositions, administrative assets and the capitalized portion of
annual cash incentive payments that have not been approved by the
board of directors. Management believes that F&D capital
expenditures assists management and investors in assessing
Birchcliff capital cost outlay associated with its exploration and
development activities for the purposes of finding and developing
its reserves.
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,
strategy, operations, 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 of operations, focus, objectives,
strategies, opportunities, priorities and goals, including:
statements regarding Birchcliff’s 2022 guidance and outlook
(including: that in 2022, Birchcliff remains committed to
maintaining capital discipline, maximizing free funds flow
generation and significantly reducing indebtedness; that free funds
flow generated in 2022 will be primarily allocated towards debt
reduction; and Birchcliff’s adjusted funds flow, F&D capital
expenditures, free funds flow, total debt and production guidance
for 2022); statements under the heading “Operations Update” and
elsewhere in this press release regarding Birchcliff’s 2022 capital
program and exploration, production and development activities
(including that the wells on the 13-29 pad are expected to be
onstream in early March 2022); and statements regarding
Birchcliff’s five year plan (including that the Corporation is
targeting drilling 170 to 180 wells in the next five years to
achieve average annual production of 90,000 boe/d in 2026);
-
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) and estimates of potential future drilling
locations and opportunities;
-
the information set forth under the heading “2021 Year-End
Reserves” and elsewhere in this press release relating to the
Corporation’s reserves (including: estimates of reserves; estimates
of the net present values of future net revenue associated with
Birchcliff’s reserves; forecasts for prices, inflation and exchange
rates; FDC; and reserves life index); and
-
that Birchcliff anticipates filing its annual information form and
audited financial statements and related management’s discussion
and analysis for the year ended December 31, 2021 on March 16,
2022.
Information relating to reserves is
forward-looking as it involves the implied assessment, based on
certain estimates and assumptions, that the reserves exist in the
quantities predicted or estimated and that the reserves can
profitably be produced in the future. See “Presentation of Oil and
Gas Reserves”.
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;
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, 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; 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 and market diversification
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 2022 guidance and five year plan assume the following
commodity prices and exchange rate: an average WTI price of
US$76.00/bbl; an average WTI-MSW differential of CDN$5.00/bbl; an
average AECO price of CDN$3.50/GJ; an average Dawn price of
US$3.90/MMBtu; an average NYMEX HH price of US$4.00/MMBtu; and an
exchange rate (CDN$ to US$1) of 1.26.
-
With respect to estimates of capital expenditures for 2022, such
estimates assume that the 2022 capital program will be carried out
as currently contemplated. 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 estimates of adjusted and free funds
flow for 2022, such estimates assume that: the 2022 capital program
will be carried out as currently contemplated and the level of
capital spending for 2022 set forth herein will be achieved; and
the targets for production, production commodity mix, expenses and
natural gas market exposure and the commodity price and exchange
rate assumptions are met.
-
With respect to Birchcliff’s estimate of total debt for 2022, such
estimate assumes that: (i) any free funds flow remaining after the
payment of dividends, asset retirement obligations and other
amounts for administrative assets, financing fees and capital lease
obligations is allocated towards debt reduction; (ii) the timing 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; (iii) there are approximately
265 million common, 2,000,000 series A preferred shares and
1,530,709 series C preferred shares outstanding, with no
redemptions of the Series A or the Series C preferred shares or
buybacks of common shares occurring during 2022; (iv) no
significant acquisitions are completed by the Corporation and there
is no repayment of debt using the proceeds from asset dispositions
or equity issuances; (v) there are no proceeds received from the
exercise of stock options or performance warrants during 2022; (vi)
the 2022 capital program will be carried out as currently
contemplated and the level of capital spending set forth herein
will be achieved; and (vii) 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 are met. Birchcliff’s 2022 total debt
estimate does not include the payment of annual cash incentive
payments that have not been approved by Birchcliff’s board of
directors.
-
With respect to Birchcliff’s production guidance for 2022 and
forecast production estimates in Birchcliff’s five year plan, such
guidance assumes that: the Corporation’s capital programs 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.
-
With respect to statements of future wells to be drilled and
brought on production and estimates of potential future drilling
locations and opportunities, such statements assume: the continuing
validity of the geological and other technical interpretations
performed by Birchcliff’s technical staff, which indicate that
commercially economic volumes can be recovered from Birchcliff’s
lands as a result of drilling future wells; and that commodity
prices and general economic conditions will warrant proceeding with
the drilling of such wells.
-
With respect to estimates of reserves volumes and the net present
values of future net revenue associated with Birchcliff’s reserves,
the key assumption is the validity of the data used by Deloitte in
the 2021 Reserves Report.
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 operate its assets and achieve expected future
results; the accuracy of estimates of reserves, future net revenue
and production levels; 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; 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;
actions by government authorities, including those with respect to
the COVID-19 pandemic; 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; 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 and market
diversification 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,
including from alternative energy sources; 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; and the accuracy of the Corporation’s
accounting estimates and judgments.
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 focused on
the Montney/Doig Resource Play in Alberta. Birchcliff’s common
shares and Series A and Series C preferred shares 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 – Chief Executive OfficerChris
Carlsen – President and Chief Operating
OfficerBruno Geremia – Executive 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
