Highlights for the first quarter, and to-date are as follows:
- Generated sales volumes of 12,920 boe/d in the first quarter (45% crude oil; 11% NGL's; 44% natural gas). All of Journey's production is currently unhedged. Year-over-year sales volumes increased 52%.
- Generated adjusted funds flow of
$18.0 million or$0.31 per basic share and$0.28 per diluted share. Quarter-over-quarter, Adjusted Funds Flow was impacted by a 16% decrease in average, corporate, realized pricing per boe. The corresponding 39% reduction in operating netback was largely offset by the by the quarter over quarter increase in sales volumes. - Closed a Canadian Development Expense flow-through-share financing of 3.0 million shares at
$6.62 /share for gross proceeds of$20.1 million . The proceeds of the flow-through-share financing will be utilized to fund an 8 well drilling program in the second half of 2023. - Produced 5,603 megawatts of electricity at Journey's power generation facility in Countess, Alberta at an average price of
$159.65 /MWH. The run-rate during the first quarter was 64% of capacity. - Completed the purchase of the 16.5 MW power plant in
Mazeppa Alberta onApril 28 . Journey continues to make progress with plans to re-activate this facility in its current location, most recently entering into an agreement to purchase the land the power facility resides on. In addition, the Company continues to advance the approval process for reconnecting and reactivating the facility to the power grid.
Three months ended March 31, | ||||||
Financial ( | 2023 | 2022 | % change | |||
Production revenue | 58,443 | 45,858 | 27 | |||
Net income | 6,440 | 13,769 | (53) | |||
Per basic share | 0.11 | 0.28 | (61) | |||
Per diluted share | 0.10 | 0.25 | (60) | |||
Adjusted Funds flow | 17,959 | 20,401 | (12) | |||
Per basic share | 0.31 | 0.42 | (26) | |||
Per diluted share | 0.28 | 0.36 | (22) | |||
Cash flow from operations | 11,461 | 21,811 | (47) | |||
Per basic share | 0.20 | 0.45 | (56) | |||
Per diluted share | 0.18 | 0.39 | (54) | |||
Net capital expenditures | 6,818 | 12,162 | (44) | |||
Net debt | 71,071 | 38,481 | 85 | |||
Share Capital (000's) | ||||||
Basic, weighted average | 58,153 | 48,472 | 20 | |||
Diluted, weighted average | 64,036 | 55,998 | 14 | |||
Basic, end of period | 60,923 | 50,912 | 20 | |||
Fully diluted | 67,863 | 59,272 | 14 | |||
Daily Sales Volumes | ||||||
Natural gas (Mcf/d) | ||||||
Conventional | 30,608 | 22,836 | 34 | |||
Coal bed methane | 4,279 | 4,163 | 3 | |||
Total natural gas volumes | 34,887 | 26,999 | 29 | |||
Crude oil (Bbl/d) | ||||||
Light/medium | 3,564 | 2,531 | 41 | |||
Heavy | 2,175 | 629 | 246 | |||
Total crude oil volumes | 5,739 | 3,160 | 82 | |||
Natural gas liquids (Bbl/d) | 1,367 | 832 | 64 | |||
Barrels of oil equivalent (boe/d) | 12,920 | 8,492 | 52 | |||
Average Realized Prices1 | ||||||
Natural gas ($/mcf) | 3.66 | 4.74 | (23) | |||
Crude Oil ($/bbl) | 79.16 | 104.80 | (24) | |||
Natural gas liquids ($/bbl) | 49.32 | 60.59 | (19) | |||
Barrels of oil equivalent ($/boe) | 50.26 | 60.00 | (16) | |||
Operating Netback ($/boe) | ||||||
Realized prices1 | 50.26 | 60.00 | (16) | |||
Royalties | (10.38) | (10.63) | (2) | |||
Operating expenses | (19.78) | (17.40) | 14 | |||
Transportation expenses | (1.06) | (0.51) | 108 | |||
Operating netback | 19.04 | 31.46 | (39) | |||
Note: |
1. Realized prices include physical hedging gains. |
OPERATIONS
In the first quarter of 2023, Journey was busy continuing with the integration of its acquisition (the "Acquisition") from
Along with the continued integration of the Acquisition, Journey's activity levels in the first quarter of 2023 also included advancing the power business, and preparing for an active second half of the year. Journey's capital program has shifted more towards oil-weighted opportunities by replacing natural gas weighted drilling in
Even though Journey shifted its capital program towards oil weighted drilling, Journey continues to advance its repeatable plays in 2023. The Company is in final negotiations to enter into a farm-in agreement with a freehold mineral owner in the Gilby area of Alberta. This farm-in, combined with Journey's existing acreage will give the company access to approximately fifty contiguous, gross sections for
EXPANDING JOURNEY'S POWER BUSINESS
For 2023, Journey has continued to prioritize its emerging power generation business and has made significant strides in this regard. Journey allocated
Journey has demonstrated, through the operation of its existing Countess power plant, that it is far more profitable to convert its natural gas into electricity, than to merely sell the natural gas at spot prices. The currently operating, 4 MW Countess facility, which was originally commissioned in the fourth quarter of 2020, is already close to paying out the original investment. Based on Journey's realized power prices in 2022, the average, effective, net realized price for natural gas used to generate power for the year was approximately
Journey previously announced that it had entered into an agreement to purchase a 16.5 MW power generation facility through an open auction process that started in
The Mazeppa power facility acquisition closed in
Journey has received preliminary approval to construct a 15.5 MW generation facility at its Gilby gas plant and has procured 17 MW of generating capacity in support of this project. The Company has continued to advance the design and approval of this project. The primary construction phase of this facility is scheduled to begin after breakup and this power project is currently anticipated to commence operations in the first quarter of 2024.
When the Gilby and Mazeppa power projects are on-stream, Journey will be in a position to more than offset its corporate power usage with power sales to the Alberta power grid. This will help diversify the corporate revenue stream and improves the sustainability of the Company even when there is a volatile commodity pricing environment. The record power prices of
FINANCIAL
The first quarter of 2023 was the first full quarter operating the significant acquisition that closed on
As previously discussed, first quarter volumes and revenues were impacted by unplanned outages that are forecast to be resolved in the near term and full year guidance is still confirmed. First quarter revenues were also impacted by an unplanned maintenance outage at one of the power generation units at the Countess power plant. This resulted in an uncharacteristically low utilization rate of 64% for the quarter. This issue was resolved and utilization has returned to normal levels in March.
All of the field operating costs (royalties, operating and transportation expenses) experienced increases during the first quarter of 2023. Royalty expense was higher by 49% in the first quarter of 2023 compared to the first quarter of 2022. This was expected with the higher weighting to crude oil and the higher aggregate volumes sold. On a per boe basis royalty expense was
Journey's general and administrative ("G&A") costs were lower in 2023 as compared to the same quarter in 2022 as field-related cost recoveries mitigated additional staff costs related to the acquisitions in 2022. G&A was
Finance expenses related to borrowings, or interest costs, increased by 66% to
Journey realized net income of
In March, Journey closed a bought deal flow-through share financing. The full 15% over-allotment was exercised bringing the total equity issuance to 3,040,031 flow-through common shares at a price of
Journey continued to be prudent with its capital spending during the first quarter as it underspent its Adjusted Funds Flows to allow for the maximum flexibility in its cash position while integrating the Acquisition. Total capital expenditures in the first quarter were
OUTLOOK & GUIDANCE
Commensurate with the closing of its flow through share issuance on
The early start of the forest fire season in
This guidance incorporates many material underlying assumptions including but not limited to:
- Forecasted commodity prices by month;
- Assumptions of VTB principal payments since they are based upon realized commodity prices;
- Forecasted operating costs, including forecasted prices for power;
- Forecasted costs for the capital program; and
- Forecasted results and phasing of production additions from the capital program;
2023 Guidance | |
Annual average daily sales volumes | 12,500-13,000 boe/d (54% crude oil & NGL's1) |
Adjusted Funds Flow | |
Adjusted Funds Flow per weighted average share | |
Capital spending ( | |
2023 ending Net Debt | |
Commodity prices2: WTI (USD $/bbl) MSW oil differentials (USD $/bbl) WCS oil differentials (USD $/bbl) AECO natural gas (CAD $/mcf) CAD/USD foreign exchange |
Notes: | ||
1. | The weighting of the corporate sales volumes guidance is as follows: | |
a. | Heavy oil: 18% | |
b. | Light/medium crude oil: 25% | |
c. | NGL's: 11% | |
d. | Coal-bed methane natural gas: 6% | |
e. | Conventional natural gas: 40% | |
2. | Commodity prices represent 2023 forecast averages. |
Journey's goals for improving corporate sustainability in 2023 include:
- Reducing leverage created by the transformational acquisition in 2022;
- Adding inventory in repeatable plays;
- Advancing the power generation business;
- Managing its ARO; and
- Continuing to search for creative ways to expand the Company's business.
Journey's low corporate decline, high working interest project inventory, operated infrastructure, and favourable expiry profile allow the Company to weather periods of lower than forecast commodity prices by proactively deferring portions of the capital program on a temporary basis. Journey is focused on adjusting its capital program to meet its near term obligations without sacrificing the longer term priorities of sustainability and enhancing shareholder value.
Journey continues to embark on a careful and prudent expansion of its business plan. Journey has achieved or exceeded all of its internal targets and created significant value for all stakeholders since the bottom of the market in 2020. This expansion has been buoyed by commodity price tailwinds and would not be possible without the talented team at Journey, both in the office and the field. Journey also recognizes the steady guidance supplied by its Board of Directors and the unyielding support of AIMCo, the Company's term debt provider and largest shareholder. Together, with the support of this combined team, your Company is extremely well positioned to continue its journey of value creation and maintain its growth trajectory for years to come. The Company looks forward to updating you on Journey's progress as it continues on this exciting development path.
Annual General Meeting
Journey's annual general meeting ("AGM" or the "Meeting") is scheduled for
About the Company
Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western
ADVISORIES
This press release contains forward-looking statements and forward-looking information (collectively "forward looking information") within the meaning of applicable securities laws relating to the Company's plans and other aspects of the anticipated future operations, management focus, strategies, financial, operating and production results, industry conditions, commodity prices and business opportunities. In addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding decline rates, anticipated netbacks, drilling inventory, estimated average drill, complete and equip and tie-in costs, anticipated potential of the Assets including, but not limited to, EOR performance and opportunities, capacity of infrastructure, potential reduction in operating costs, production guidance, total payout ratio, capital program and allocation thereof, future production, decline rates, funds flow, net debt, net debt to funds flow, exchange rates, reserve life, development and drilling plans, well economics, future cost reductions, potential growth, and the source of funding Journey's capital spending. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future.
The forward-looking information is based on certain key expectations and assumptions made by management, including expectations and assumptions concerning prevailing commodity prices and differentials, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; the ability to efficiently integrate assets and employees acquired through acquisitions, including the Acquisition, the ability to market oil and natural gas successfully and the ability to access capital. Although we believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Journey can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. The actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that we will derive therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide security holders with a more complete perspective on future operations and such information may not be appropriate for other purposes.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).These forward looking statements are made as of the date of this press release and we disclaim any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Journeys prospective results of operations, funds flow, netbacks, debt, payout ratio well economics and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was made as of the date of this press release and was provided for providing further information about Journey's anticipated future business operations. Journey disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein. Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the Annual Information Form filed on www.SEDAR.com on
Non-IFRS Measures
The Company uses the following non-IFRS measures in evaluating corporate performance. These terms do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures by other companies.
(1) | "Adjusted Funds Flow" is calculated by taking "cash flow provided by operating activities" from the financial statements and adding or deducting: changes in non-cash working capital; non-recurring "other" income; transaction costs; and decommissioning costs. Adjusted Funds Flow per share is calculated as Adjusted Funds Flow divided by the weighted-average number of shares outstanding in the period. Because Adjusted Funds Flow and Adjusted Funds Flow per share are not impacted by fluctuations in non-cash working capital balances, Management believes these measures are more indicative of performance than the GAAP measured "cash flow generated from operating activities". In addition, Journey excludes transaction costs from the definition of Adjusted Funds Flow, as these expenses are generally in respect of capital acquisition transactions. The Company considers Adjusted Funds Flow a key performance measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Journey's determination of Adjusted Funds Flow may not be comparable to that reported by other companies. Journey also presents "Adjusted Funds Flow per basic share" where per share amounts are calculated using the weighted average shares outstanding consistent with the calculation of net income (loss) per share, which per share amount is calculated under IFRS and is more fully described in the notes to the audited, year-end consolidated financial statements. |
2023 | 2022 | |
Cash flow provided by operating activities | 11,461 | 21,811 |
Add (deduct): | ||
Changes in non-cash working capital | 4,280 | (2,320) |
Transaction costs | 2 | 8 |
Decommissioning costs incurred | 2,216 | 902 |
Adjusted Funds Flow | 17,959 | 20,401 |
Adjusted Funds Flow per basic (diluted) weighted average share |
(2) | "Netback(s)". The Company uses netbacks to help evaluate its performance, leverage, and liquidity; comparisons with peers; as well as to assess potential acquisitions. Management considers netbacks as a key performance measure as it demonstrates the Company's profitability relative to current commodity prices. Management also uses them in operational and capital allocation decisions. Journey uses netbacks to assess its own performance and performance in relation to its peers. These netbacks are operating, Funds Flow and net income (loss). "Operating netback" is calculated as the average sales price of the commodities sold (excluding financial hedging gains and losses), less royalties, transportation costs and operating expenses. There is no GAAP measure that is reasonably comparable to netbacks. |
(3) | "Net debt" is calculated by taking current assets and then subtracting accounts payable and accrued liabilities; the principal amount of term debt; and the carrying value of the other liability. Net debt is used to assess the capital efficiency, liquidity and general financial strength of the Company. In addition, it is used as a comparison tool to assess financial strength in relation to Journey's peers. |
NET DEBT RECONCILIATION ( | ||
Principal amount of term debt | 43,763 | 67,580 |
Principal amount of vendor-take-back debt | 37,000 | - |
Accounts payable and accrued liabilities | 44,065 | 26,885 |
Principal amount of contingent bank debt | 5,000 | 5,000 |
Other loans | 419 | 410 |
Deduct: | ||
Cash in bank | (19,440) | (35,368) |
Accounts receivable | (31,483) | (21,087) |
Prepaid expenses | (3,253) | (1,739) |
Net debt | 71,071 | 38,481 |
(4) | Journey uses "Capital Expenditures (excluding A&D)" and "Capital Expenditures (including A&D)" to measure its capital investment level compared to the Company's annual budgeted capital expenditures for its organic capital program, excluding acquisitions or dispositions. The directly comparable GAAP measure to capital expenditures is cash used in investing activities. Journey then adjusts its capital expenditures for A&D activity to give a more complete analysis for its capital spending used for FD&A purposes. The capital spending for A&D proposes has been adjusted to reflect the non-cash component of the consideration paid (i.e. shares issued). The following table details the composition of capital expenditures and its reconciliation to cash flow used in investing activities: |
3 Months ended | ||||||
2023 | 2022 | |||||
Land and lease rentals | 227 | 445 | ||||
Geological & geophysical | 225 | - | ||||
Drilling and completions | 2,156 | 9,148 | ||||
Well equipment and facilities | 3,716 | 2,520 | ||||
Power generation assets | 1,529 | - | ||||
Total capital expenditures | 7,854 | 12,113 | ||||
PP&E acquisitions | - | 73 | ||||
PP&E dispositions | (1,036) | (24) | ||||
Net capital expenditures | 6,818 | 12,162 | ||||
Other: | ||||||
Decommissioning expenditures1 | 2,383 | 1,016 | ||||
Total capital expenditures | 9,201 | 13,178 |
Measurements
All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.
Where amounts are expressed in a barrel of oil equivalent ("boe"), or barrel of oil equivalent per day ("boe/d"), natural gas volumes have been converted to barrels of oil equivalent at nine (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term boe may be misleading particularly if used in isolation. The boe conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
Abbreviations
The following abbreviations are used throughout these MD&A and have the ascribed meanings:
A&D | acquisition and divestiture of petroleum and natural gas assets |
bbl | barrel |
bbls | barrels |
boe | barrels of oil equivalent (see conversion statement below) |
boe/d | barrels of oil equivalent per day |
E&D | exploration and development activities as defined in the COGE Handbook |
gj | gigajoules |
GAAP | Generally Accepted Accounting Principles |
IFRS | International Financial Reporting Standards |
Mbbls | thousand barrels |
MMBtu | million British thermal units |
Mboe | thousand boe |
Mcf | thousand cubic feet |
Mmcf | million cubic feet |
Mmcf/d | million cubic feet per day |
MSW | Mixed sweet Alberta benchmark oil price |
NGL's | natural gas liquids (ethane, propane, butane and condensate) |
WCS | Western Canada Select benchmark oil price |
WTI | West Texas Intermediate benchmark Oil price |
All volumes in this press release refer to the sales volumes of crude oil, natural gas and associated by-products measured at the point of sale to third-party purchasers. For natural gas, this occurs after the removal of natural gas liquids.
No securities regulatory authority has either approved or disapproved of the contents of this press release.
SOURCE
© Canada Newswire, source