HIGHLIGHTS
- Production was 5,892 boe/d, 25% of which was comprised of crude oil and liquids for the three months ended
December 31, 2019 compared to 5,997 boe/d, 23% of which was comprised of crude oil and liquids for the same period in 2018. - The Company entered into a farm-in agreement in
December 2019 committing to equip and operate two shut-inMontney oil wells in Simonette in exchange for a 50% interest in 5 net sections (10 gross) ofMontney land surrounding the two wells.February 2020 gross production per calendar day for the two wells was approximately 570 bbls/d of oil and 1,150 mcf/d of natural gas. - Capital expenditures for the three months ended
December 31, 2019 were$1.9 million to complete natural gas lift optimization projects in Simonette started in the third quarter 2019.
SELECTED INFORMATION
(in thousands of dollars except production volumes, per share and $/boe amounts) | Three months ended | Twelve months ended | |||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||
Financial | |||||||||||||
Total revenue(1) | $ | 14,859 | $ | 12,184 | $ | 55,479 | $ | 58,921 | |||||
Net loss and comprehensive loss | (1,733 | ) | (3,802 | ) | (13,002 | ) | (9,699 | ) | |||||
Per share – basic and diluted | (0.04 | ) | (0.16 | ) | (0.39 | ) | (0.61 | ) | |||||
Funds flow from operations(1) | 4,254 | 2,071 | 11,844 | 13,087 | |||||||||
Per share - basic and diluted | 0.10 | 0.08 | 0.35 | 0.82 | |||||||||
Capital expenditures, before acquisitions (dispositions) | 1,941 | 13,397 | 8,920 | 23,800 | |||||||||
Total assets | 267,662 | 283,640 | |||||||||||
Net debt(1) | 54,778 | 62,523 | |||||||||||
Production volumes | |||||||||||||
Natural gas (Mcf/d) | 26,549 | 27,645 | 26,658 | 30,098 | |||||||||
Crude oil (bbls/d) | 527 | 736 | 679 | 763 | |||||||||
Natural gas liquids (bbls/d) | 353 | 227 | 230 | 250 | |||||||||
Condensate (bbls/d) | 587 | 427 | 455 | 478 | |||||||||
Total (boe/d) | 5,892 | 5,997 | 5,807 | 6,507 | |||||||||
Netback ($/boe) | |||||||||||||
Price, including realized hedges | $ | 27.41 | $ | 22.08 | $ | 26.18 | $ | 24.81 | |||||
Operating netback(1) | $ | 11.49 | $ | 7.05 | $ | 9.50 | $ | 9.99 | |||||
1 Refer to “Non-IFRS Measures” in this press release for further information.
For the twelve months ended
Benchmark pricing
Three months ended | Twelve months ended | ||||||||
Benchmark pricing | 2019 | 2018 | 2019 | 2018 | |||||
AECO-C spot gas (CDN$/Mcf) | $ | 2.48 | $ | 1.58 | $ | 1.76 | $ | 1.52 | |
Ontario Dawn gas (CDN$/Mcf) | 2.95 | 5.74 | 3.19 | 4.15 | |||||
WTI crude oil (US$/bbl) | 56.96 | 60.70 | 57.03 | 65.20 | |||||
67.99 | 44.14 | 69.05 | 68.89 | ||||||
US$/CDN$ exchange rate | 0.76 | 0.75 | 0.75 | 0.77 | |||||
Volatile and weak natural gas prices remain below thresholds where investment in natural gas wells is economically beneficial. AECO prices averaged
OPERATIONS
Three months ended | |||||||||||
2019 | 2018 | ||||||||||
($ thousands) | ($/boe) | ($ thousands) | ($/boe) | ||||||||
Sales of natural gas, crude oil and condensate | $ | 14,551 | $ | 26.84 | $ | 12,591 | $ | 22.82 | |||
Realized gain (loss) on commodity contracts | 308 | 0.57 | (407 | ) | (0.74 | ) | |||||
Total revenue(1) | 14,859 | 27.41 | 12,184 | 22.08 | |||||||
Royalties expense | 1,051 | 1.94 | 736 | 1.33 | |||||||
13,808 | 25.47 | 11,448 | 20.75 | ||||||||
Operating expense | 5,177 | 9.55 | 5,440 | 9.86 | |||||||
Transportation expense | 2,401 | 4.43 | 2,116 | 3.84 | |||||||
Operating netback(1) | 6,230 | 11.49 | 3,892 | 7.05 | |||||||
General and administrative expense | 1,349 | 2.49 | 1,143 | 2.07 | |||||||
Finance expense | 862 | 1.59 | 975 | 1.77 | |||||||
Cash netback(1) | 4,019 | $ | 7.41 | 1,774 | $ | 3.21 | |||||
Unrealized loss (gain) on derivative financial instruments | 836 | (4,309 | ) | ||||||||
Depletion and depreciation expense | 4,854 | 11,322 | |||||||||
Share-based payment expense | 87 | 114 | |||||||||
Other income | (25 | ) | (1,551 | ) | |||||||
Net loss and comprehensive loss | $ | (1,733 | ) | $ | (3,802 | ) | |||||
1 Refer to “Non-IFRS Measures” in this press release for further information.
Production for the three months ended
Operating netback(1) was
Twelve months ended | |||||||||||
2019 | 2018 | ||||||||||
($ thousands) | ($/boe) | ($ thousands) | ($/boe) | ||||||||
Sales of natural gas, crude oil and condensate | $ | 53,066 | $ | 25.04 | $ | 60,196 | $ | 25.34 | |||
Realized gain (loss) on commodity contracts | 2,413 | 1.14 | (1,275 | ) | (0.53 | ) | |||||
Total revenue(1) | 55,479 | 26.18 | 58,921 | 24.81 | |||||||
Royalties expense | 3,215 | 1.52 | 3,969 | 1.67 | |||||||
52,264 | 24.66 | 54,952 | 23.14 | ||||||||
Operating expense | 22,786 | 10.75 | 24,080 | 10.14 | |||||||
Transportation expense | 9,351 | 4.41 | 7,160 | 3.01 | |||||||
Operating netback(1) | 20,127 | 9.50 | 23,712 | 9.99 | |||||||
General and administrative expense | 5,532 | 2.61 | 5,267 | 2.22 | |||||||
Finance expense | 3,655 | 1.72 | 7,874 | 3.32 | |||||||
Cash netback(1) | 10,940 | $ | 5.17 | 10,571 | $ | 4.45 | |||||
Unrealized loss (gain) on derivative financial instruments | 3,523 | (3,303 | ) | ||||||||
Depletion and depreciation expense | 20,169 | 27,480 | |||||||||
Share-based payment expense | 432 | 300 | |||||||||
Other income | (182 | ) | (4,207 | ) | |||||||
Net loss and comprehensive loss | $ | (13,002 | ) | $ | (9,699 | ) | |||||
1 Refer to “Non-IFRS Measures” in this press release for further information.
Production for the twelve months ended
Operating netback(1) was
Operating expenses for the twelve months ended
Finance expenses for the twelve months ended
Capital Expenditures
Three months ended | Twelve months ended | ||||||||||
(in thousands of dollars) | 2019 | 2018 | 2019 | 2018 | |||||||
Land | $ | 296 | $ | 213 | $ | 898 | $ | 739 | |||
Geological & geophysical and capitalized overhead | 163 | 184 | 1,044 | 1,015 | |||||||
Drilling, completions and workovers | 725 | 10,426 | 2,937 | 17,209 | |||||||
Equipment, facilities and tie-ins | 757 | 2,573 | 4,026 | 4,836 | |||||||
Office furniture & equipment | - | 1 | 15 | 1 | |||||||
Capital expenditures | 1,941 | 13,397 | 8,920 | 23,800 | |||||||
Acquisitions | 4 | - | 1,522 | - | |||||||
Dispositions (i) | - | (934 | ) | (39 | ) | (2,863 | ) | ||||
Total capital expenditures | $ | 1,945 | $ | 12,463 | $ | 10,403 | $ | 20,937 | |||
(i) Represent the cash proceeds from the sale of assets.
Capital expenditures for the twelve months ended
The Company acquired a water disposal pipeline in the third quarter 2019 for
In
Due to oil price volatility, COVID-19 and concerns of a global economic slowdown, the Company is reviewing its 2020 budget and will not be providing an outlook for 2020 at this time.
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Following the completion of the 2019 financial year, management determined that as at
(in thousands of dollars) | ||||||
Accounts payable and accrued liabilities – As originally reported | $ | 35,736 | $ | 33,106 | ||
Accrual adjustment | (9,580 | ) | (9,580 | ) | ||
Accounts payable and accrued liabilities – As restated | $ | 26,156 | $ | 23,526 | ||
Deficit – As originally reported | $ | (523,269 | ) | $ | (513,570 | ) |
Accrual adjustment | (9,580 | ) | (9,580 | ) | ||
Deficit – As restated | $ | (513,689 | ) | $ | (503,990 | ) |
Management has concluded that a material weakness in its internal controls over financial reporting existed as at
RESERVES
The tables below are a summary of the crude oil, NGL and natural gas reserves attributable to the properties of Cequence and the net present value of future net revenue attributable to such reserves as evaluated in the GLJ Report based on forecast price and cost assumptions. The reserves attributable to the Company’s properties have been estimated assuming that development of each property in respect of which the estimate has been made will occur, regardless of the likely availability to the Company of funding required for such development. The calculated net present values include a deduction for estimated future well abandonment and reclamation costs. It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained, and variances could be material. The recovery and reserves estimates of Cequence's crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.
Summary of Oil, Natural Gas and NGL Reserves
Light and Medium Crude Oil | Tight Oil | NGL | Total Oil Equivalent | ||||||||||||||||||||
Reserves Category | Gross(2) | Net(3) | Gross(2) | Net(3) | Gross(2) | Net(3) | Gross(2) | Net(3) | Gross(2) | Net(3) | Gross(2) | Net(3) | |||||||||||
(Mbbl) | (Mbbl) | (Mbbl) | (Mbbl) | (MMcf) | (MMcf) | MMcf | MMcf | (Mbbl) | (Mbbl) | (MBOE) | (MBOE) | ||||||||||||
Proved | |||||||||||||||||||||||
Developed Producing | 506 | 408 | 5 | 4 | 22,886 | 21,245 | 29,238 | 24,735 | 1,344 | 890 | 10,541 | 9,966 | |||||||||||
Developed Non-Producing | 13 | 10 | 256 | 204 | 3,276 | 2,927 | 4,000 | 3,551 | 242 | 175 | 1,723 | 1,467 | |||||||||||
Undeveloped | 629 | 540 | 37 | 33 | 4,135 | 3,763 | 191,475 | 167,273 | 5,987 | 4,982 | 39,255 | 34,062 | |||||||||||
Total Proved | 1,148 | 958 | 298 | 241 | 30,297 | 27,935 | 224,712 | 195,559 | 7,572 | 6,047 | 51,518 | 44,495 | |||||||||||
Probable | 1,001 | 798 | 100 | 73 | 21,044 | 19,278 | 263,838 | 222,255 | 8,032 | 5,822 | 56,613 | 46,948 | |||||||||||
Total Proved plus Probable | 2,149 | 1756 | 398 | 314 | 51,340 | 47,212 | 488,549 | 417,815 | 15,603 | 11,869 | 108,132 | 91,443 | |||||||||||
Notes:
- Columns may not add due to rounding.
- "Gross" reserves means the Company's working interest (operated and non‐operated) share before deduction of royalties payable to others and without including any royalty interests of the Company.
- “Net” reserves means the Company’s working interest (operated and non-operated) share after deduction of royalty obligations plus the Company’s royalty interest in reserves.
Summary of Net Present Value of Future Net Revenue
Reserves Category | Before Future Income Tax Expenses Discounted at (%/year) | ||||||||||
0 | 5 | 10 | 15 | 20 | 10 | ||||||
(M$) | (M$) | (M$) | (M$) | (M$) | ($/mcfe) | ||||||
Proved | |||||||||||
Developed Producing | 39,165 | 39,801 | 38,521 | 36,661 | 34,717 | 0.72 | |||||
Developed Non-Producing | 17,765 | 14,404 | 11,803 | 9,850 | 8,371 | 1.34 | |||||
Undeveloped | 218,092 | 129,002 | 74,971 | 41,325 | 19,727 | 0.37 | |||||
Total Proved | 275,022 | 183,207 | 125,296 | 87,836 | 62,815 | 0.47 | |||||
Probable | 535,761 | 300,928 | 183,935 | 119,851 | 81,799 | 0.65 | |||||
Total Proved plus Probable | 810,783 | 484,135 | 309,230 | 207,687 | 144,614 | 0.56 | |||||
Reserves Category | After Future Income Tax Expenses Discounted at (%/year) | ||||||||
0 | 5 | 10 | 15 | 20 | |||||
(M$) | (M$) | (M$) | (M$) | (M$) | |||||
Proved | |||||||||
Developed Producing | 39,165 | 39,801 | 38,521 | 36,661 | 34,717 | ||||
Developed Non-Producing | 17,765 | 14,404 | 11,803 | 9,850 | 8,371 | ||||
Undeveloped | 218,092 | 129,002 | 74,971 | 41,325 | 19,727 | ||||
Total Proved | 275,022 | 183,207 | 125,296 | 87,836 | 62,815 | ||||
Probable | 482,688 | 280,269 | 175,199 | 115,898 | 79,907 | ||||
Total Proved plus Probable | 757,709 | 463,476 | 300,494 | 203,733 | 142,721 | ||||
OUTLOOK
Due to oil price volatility, COVID-19 and concerns of a global economic slowdown, the Company is reviewing its 2020 budget and will not be providing an outlook for 2020 at this time.
Forward-looking Statements or Information
Certain statements included in this press release constitute forward-looking statements or forward-looking information under applicable securities legislation. Such forward-looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking statements or information typically contain statements with words such as "believe", "expect", "plan", "estimate", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking statements or information in this press release may include, but are not limited to, statements with respect to: future capital investments the Company’s future cash flows, planned capital expenditures and the source of funding thereof; the Company’s guidance under the heading “Outlook”; projections with respect to the Company’s production, including the effects of well optimization and enhancements on production; future performance expectations of the farm-in to two shut-in
Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties may cause actual results to differ materially from the forward-looking statements or information. The material risk factors affecting the Company and its business are contained in the Company's Annual Information Form which is available on SEDAR at www.sedar.com.
The forward-looking statements or information contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise unless required by applicable securities laws. The forward-looking statements or information contained in this press release are expressly qualified by this cautionary statement.
Additional Advisories
(1) Non-IFRS Measures
Throughout this press release, certain terms that are not specifically defined in International Financial Reporting Standards (“IFRS”) are used to analyze Cequence’s operations. In addition to the primary measures of net income (loss) and comprehensive income (loss) and net income (loss) and comprehensive income (loss) per share in accordance with IFRS, Cequence believes that certain measures not recognized under IFRS assist both Cequence and the reader in assessing performance and understanding Cequence’s results. Each of these measures provides the reader with additional insight into the Company’s ability to fund principal debt repayments and capital programs. These terms and financial measures are therefore unlikely to be comparable to similar measures presented by other companies and should not be used to make comparisons between companies. These measures should not be considered alternatives to net income (loss) and comprehensive income (loss) and net income (loss) and comprehensive income (loss) per share as calculated in accordance with IFRS.
Cash netback is a measure used in the oil and gas industry to analyze profitability after general and administrative (“G&A”) and finance expenses. Cash netback equals operating netback less G&A and finance expenses. Management utilizes this measure to analyze the Company’s profitability for future capital investment or repayment of debt after considering costs not specifically attributable to its assets or operating areas. The “Operations” table in this press release reconciles cash netback to the IFRS measure net income (loss) and comprehensive income (loss).
Funds flow from operations is calculated as cash flow from operating activities before adjustments for decommissioning costs incurred and net change in non-cash working capital. The Company uses this measure to analyze operating performance and leverage and considers it a key measure as it demonstrates the Company’s ability to generate the cash flow necessary to fund future growth through capital investment and to repay debt. Funds flow from operations per share is calculated using the same weighted average number of shares outstanding used in the calculation of net income (loss) and comprehensive income (loss) per share.
The following table reconciles funds flow from operations, to the IFRS measure, cash flow from operating activities:
Three months ended | Twelve months ended | ||||||||||
(thousands of dollars) | 2019 | 2018 | 2019 | 2018 | |||||||
Cash flow from operating activities | $ | 3,226 | $ | 5,201 | $ | 6,561 | $ | 11,758 | |||
Decommissioning costs incurred | 716 | (246 | ) | 4,055 | 3,756 | ||||||
Net change in non-cash working capital | 312 | (2,884 | ) | 1,228 | (2,427 | ) | |||||
Funds flow from operations | $ | 4,254 | $ | 2,071 | $ | 11,844 | $ | 13,087 | |||
Net debt is a measure that provides Cequence’s total indebtedness. It is calculated as working capital deficiency (excluding commodity contracts and lease liability) plus amounts outstanding in the Company’s Credit Facility plus the principal value of the Company’s subordinated Term Loan. Cequence uses net debt as an estimate of the Company’s assets and obligations expected to be settled in cash. The “Liquidity and Capital Resources” table in the Company’s MD&A reconciles net debt.
Operating netback is a measure used in the oil and gas industry to analyze margin and cash flow. Operating netback equals revenue less royalties, operating and transportation expenses. Management utilizes this measure to analyze operating performance of its assets and operating areas, compare results to peers and to evaluate drilling prospects. The “Operations” table in this press release reconciles operating netback to the IFRS measure net income (loss) and comprehensive income (loss).
Total revenue equals production revenue gross of royalties and includes realized gains (losses) on commodity contracts. Management utilizes this measure to analyze revenue and commodity pricing and its impact on operating performance. The “Operations” table in this press release reconciles total revenue to the IFRS measure net income (loss) and comprehensive income (loss).
Oil and Gas Metrics
“boe” means barrels of oil equivalent. Boe’s are presented on the basis of one boe for six Mcf of natural gas. Disclosure provided herein in respect of boe 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.
“boe/d” means barrel of oil equivalent per day.
“bbl” means barrels and “bbls” means barrels.
Further definitions and explanations of certain oil and gas metrics can be found in the Company’s Annual Information Form, available under the Company’s issuer profile on SEDAR (www.sedar.com).
OVERVIEW OF CEQUENCE
Cequence is engaged in the exploration for and the development of oil and natural gas reserves. The Company’s primary focus is the development of its Simonette asset in the
The TSX has neither approved nor disapproved the contents of this news release.
For further information, please contact:
Chief Executive Officer
Phone: (403) 806-4049
tbrown@cequence-energy.com
Vice President, Finance and Chief Financial Officer
Phone: (403) 806-4041
amowbray@cequence-energy.com
Source:
2020 GlobeNewswire, Inc., source