Second Quarter 2023 Operational and Financial Highlights
During the second quarter of 2023, NuVista:
- Produced an average of 71,029 Boe/d in the quarter, in line with our guidance of 71,000 Boe/d following the impact of the wildfires in the
Grande Prairie region ofAlberta (the “Alberta wildfires”). This represented a 9% increase in production from the second quarter of 2022. Production benefited from the addition of 12 new wells brought online. Included in this figure is the temporary challenge due to theAlberta wildfires, which resulted in approximately 11,000 Boe/d of shut-in production during the quarter, along with delays in certain capital projects. Second quarter production consisted of 31% condensate, 9% NGLs and 60% natural gas; - Generated adjusted funds flow(1) of
$145.5 million ($0.67 /share, basic(3)), which includes$20.8 million of free adjusted funds flow(2) despite a decline in commodity prices, particularly natural gas. Adjusted funds flow was enhanced in the quarter due to positive one-time adjustments in royalties and taxes; - Achieved net earnings of
$87.1 million ($0.40 /share, basic) in the quarter; - Executed a successful net capital expenditures(2) program, investing
$125.1 million in well and facility activities including the drilling of 13 gross (12.8 net) wells and the completion of 14 gross (14.0 net) wells in our condensate rich Wapiti Montney play; - Expanded on our existing natural gas diversification strategy by successfully acquiring 50 MMcf/d of new Empress delivery capacity along with TC Energy Mainline capacity to deliver to the
U.S. Midwest and Central Canadian markets starting inApril 2026 ; - Exited the quarter with
$8.0 million drawn on our$450 million credit facility, maintaining a favorable net debt(1) to annualized second quarter adjusted funds flow(1) ratio of 0.3x; - Redeemed
$22.4 million of senior unsecured notes (“2026 Notes”) through open market repurchases, further reducing the outstanding principal to$165.4 million ; and - Completed our existing NCIB (the “2022 NCIB”), having repurchased and subsequently cancelled 3,646,761 of our outstanding common shares during the quarter. In the quarter, we received TSX approval for the renewal of our NCIB (the “2023 NCIB”) to allow for the repurchase of up to 16,793,779 common shares, being 10% of the public float at the time of renewal.
Notes: | |
(1) | Each of "adjusted funds flow", "net debt" and “net debt to annualized second quarter adjusted funds flow ratio” are capital management measures. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
(2) | Each of "free adjusted funds flow", "capital expenditures" and “net capital expenditures” are non-GAAP financial measures that do not have any standardized meanings under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
(3) | “Adjusted funds flow per share” is a supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
Excellence in Operations
We are pleased to provide another operational update that showcases NuVista’s consistent delivery and ability to adapt to various challenges. As previously announced, production at the end of the second quarter had rebounded to approximately 80,000 Boe/d after the
Although inflationary pressures have not been fully abated, execution on drilling and completion operations has gone exceptionally well in the first half of the year. In
In addition, new records have been set drilling on our most recent pad in the
Pipestone Area Full Cycle Payout – A
In the third quarter of this year we expect to reach a major long-term milestone in the
Balance Sheet Strength and Return of Capital to Shareholders
We remain committed to our disciplined and value-adding growth strategy, prioritizing low net debt levels and providing significant shareholder returns. Our target remains to return approximately 75% of free adjusted funds flow to shareholders. The remaining portion will be primarily allocated to further reducing our net debt, while also allowing us to take advantage of potential opportunities for facility repurchases and tuck-in acquisitions.
At the end of the second quarter, our net debt was
On
We continue to believe that the best method for return of capital to shareholders is initially to repurchase shares, however we will re-evaluate over the next year as our growth plan proceeds. This evaluation will consider commodity prices, the economic and tax environment, and will include all options including continued disciplined growth to facility capacity of 105,000 Boe/d, share repurchases, and dividend payments.
Environment, Social and Governance (“ESG”) Update
We have made significant progress on our ESG targets and continue to advance projects that support and enhance our objectives. Our 2022 ESG Report is expected to be released before the fall of this year.
2023 Guidance Update
We are extremely well positioned with top-tier assets and highly favorable economics. Our disciplined execution has allowed us to achieve growth in production and adjusted funds flow, while generating positive free adjusted funds flow, even amid the significant moderation of natural gas pricing in the first half of 2023. Due to our high condensate weighting, our execution economics remain very strong. Although the
Cost inflation remained limited but persistent through the first quarter of 2023, partially offset by improving execution and capital efficiency. Inflation appears to have moderated into the summer, but this will remain somewhat dependent on commodity prices. At this time, we are maintaining our outlook for full year spending by optimizing phasing toward the end of the year, and our 2023 net capital expenditure guidance is unchanged at
We intend to continue our track record of carefully directing free adjusted funds flow towards a prudent balance of return to shareholders and debt reduction, while investing in production growth until our existing facilities are filled and debottlenecked to maximum efficiency. NuVista has an exceptional business plan that targets production levels, reaching approximately 100,000 Boe/d in 2025.
NuVista possesses top-quality assets, supported by a management team dedicated to continuous improvement. With a strong balance sheet and ample liquidity, we are prepared to deliver significant value for our shareholders. We will continue to adjust to the environment in order to maximize the value of our asset base and ensure the long-term sustainability of our business. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our Board of Directors and our shareholders for their continued guidance and support.
Please note that our corporate presentation will be available at www.nuvistaenergy.com on
FINANCIAL AND OPERATING HIGHLIGHTS | ||||||||||||
Three months ended | Six months ended | |||||||||||
($ thousands, except otherwise stated) | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||
FINANCIAL | ||||||||||||
Petroleum and natural gas revenues | 282,064 | 463,273 | (39 | ) | 672,227 | 845,100 | (20 | ) | ||||
Cash provided by operating activities | 134,166 | 227,668 | (41 | ) | 349,387 | 390,110 | (10 | ) | ||||
Adjusted funds flow (3) | 145,482 | 199,833 | (27 | ) | 352,946 | 389,702 | (9 | ) | ||||
Per share, basic (6) | 0.67 | 0.87 | (23 | ) | 1.61 | 1.70 | (5 | ) | ||||
Per share, diluted (6) | 0.65 | 0.83 | (22 | ) | 1.56 | 1.63 | (4 | ) | ||||
Net earnings | 87,133 | 177,954 | (51 | ) | 167,842 | 248,209 | (32 | ) | ||||
Per share, basic | 0.40 | 0.78 | (49 | ) | 0.77 | 1.08 | (29 | ) | ||||
Per share, diluted | 0.39 | 0.74 | (47 | ) | 0.74 | 1.04 | (29 | ) | ||||
Net capital expenditures (1) | 125,130 | 115,023 | 9 | 295,000 | 234,987 | 26 | ||||||
Net debt (3) | 197,894 | 349,192 | (43 | ) | ||||||||
OPERATING | ||||||||||||
Daily Production | ||||||||||||
Natural gas (MMcf/d) | 256.6 | 225.1 | 14 | 254.9 | 227.0 | 12 | ||||||
Condensate (Bbls/d) | 21,990 | 21,058 | 4 | 22,435 | 21,367 | 5 | ||||||
NGLs (Bbls/d) | 6,277 | 6,463 | (3 | ) | 6,195 | 6,609 | (6 | ) | ||||
Total (Boe/d) | 71,029 | 65,032 | 9 | 71,119 | 65,811 | 8 | ||||||
Condensate & NGLs weighting | 40 | % | 42 | % | 40 | % | 43 | % | ||||
Condensate weighting | 31 | % | 32 | % | 32 | % | 32 | % | ||||
Average realized selling prices (5) | ||||||||||||
Natural gas ($/Mcf) | 3.29 | 7.83 | (58 | ) | 5.14 | 6.80 | (24 | ) | ||||
Condensate ($/Bbl) | 94.92 | 135.67 | (30 | ) | 98.16 | 127.37 | (23 | ) | ||||
NGLs ($/Bbl) (4) | 26.51 | 73.09 | (64 | ) | 32.78 | 61.00 | (46 | ) | ||||
Netbacks ($/Boe) | ||||||||||||
Petroleum and natural gas revenues | 43.64 | 78.28 | (44 | ) | 52.23 | 70.94 | (26 | ) | ||||
Realized gain (loss) on financial derivatives | 1.15 | (12.77 | ) | (109 | ) | (0.13 | ) | (10.14 | ) | (99 | ) | |
Royalties | (3.29 | ) | (12.11 | ) | (73 | ) | (5.65 | ) | (8.81 | ) | (36 | ) |
Transportation expense | (5.52 | ) | (5.59 | ) | (1 | ) | (4.83 | ) | (5.08 | ) | (5 | ) |
Operating expense | (11.91 | ) | (11.55 | ) | 3 | (11.81 | ) | (11.22 | ) | 5 | ||
Operating netback (2) | 24.07 | 36.26 | (34 | ) | 29.81 | 35.69 | (16 | ) | ||||
Corporate netback (2) | 22.51 | 33.76 | (33 | ) | 27.42 | 32.71 | (16 | ) | ||||
SHARE TRADING STATISTICS | ||||||||||||
High ($/share) | 12.02 | 14.29 | (16 | ) | 12.67 | 14.29 | (11 | ) | ||||
Low ($/share) | 9.93 | 9.26 | 7 | 9.93 | 6.94 | 43 | ||||||
Close ($/share) | 10.62 | 10.32 | 3 | 10.62 | 10.32 | 3 | ||||||
Average daily volume (thousands of shares) | 566 | 1,219 | (54 | ) | 622 | 1,396 | (55 | ) | ||||
Common shares outstanding (thousands of shares) | 216,215 | 228,460 | (5 | ) |
Notes: | |
(1) | Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and other financial measures”. |
(2) | Non-GAAP ratio that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and other financial measures”. |
(3) | Capital management measure. Reference should be made to the section entitled “Non-GAAP and other financial measures”. |
(4) | Natural gas liquids (“NGLs”) include butane, propane and ethane revenue and sales volumes, and sulphur revenue. |
(5) | Product prices exclude realized gains/losses on financial derivatives. |
(6) | Supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and other financial measures”. |
Advisories Regarding Oil and Gas Information
BOEs 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. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil 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.
Any references in this press release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for NuVista.
Basis of presentation
Unless otherwise noted, the financial data presented in this press release has been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) also known as International Financial Reporting Standards (“IFRS”). The reporting and measurement currency is the Canadian dollar. National Instrument 51-101 - "Standards of Disclosure for Oil and Gas Activities" includes condensate within the product type of natural gas liquids. NuVista has disclosed condensate values separate from natural gas liquids herein as NuVista believes it provides a more accurate description of NuVista's operations and results therefrom.
Production split for Boe/d amounts referenced in the press release are as follows:
Reference | Total Boe/d | Natural Gas % | Condensate % | NGLs % | |||
Q2 2023 actual production | 71,029 | 60 | % | 31 | % | 9 | % |
Q2 2023 production guidance(1) | 71,000 | 61 | % | 30 | % | 9 | % |
Q3 2023 production guidance | 80,000 – 82,000 | 61 | % | 30 | % | 9 | % |
2023 annual production guidance (revised) | 76,000 – 78,000 | 61 | % | 30 | % | 9 | % |
2023 annual production guidance (original)(1) | 76,000 – 79,000 | 61 | % | 30 | % | 9 | % |
Note: | |
(1) | Where the production guidance includes the impact of the |
Advisory regarding forward-looking information and statements
This press release contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable securities laws. The use of any of the words “will”, “expects”, “believe”, “plans”, “potential” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements, including management's assessment of: NuVista’s future focus, strategy, plans, opportunities and operations; NuVista’s commitment to returning capital to shareholders through its value-adding growth strategy; expectations that the 10-well pad in NuVista’s
By their nature, forward-looking statements are based upon certain assumptions and are subject to numerous risks and uncertainties, some of which are beyond NuVista’s control, including the impact of general economic conditions, industry conditions, current and future commodity prices and inflation rates, the impact of ongoing global events including European tensions, with respect to commodity prices, currency and interest rates, anticipated production rates, borrowing, operating and other costs and adjusted funds flow, allocation and amount of capital expenditures and the results therefrom, anticipated reserves and the imprecision of reserve estimates, the performance of existing wells, the success obtained in drilling new wells, the sufficiency of budgeted capital expenditures in carrying out planned activities, access to infrastructure and markets, competition from other industry participants, availability of qualified personnel or services and drilling and related equipment, stock market volatility, effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties, the ability to access sufficient capital from internal sources and bank and equity markets, that we will be able to execute our 2023 drilling plans as expected, our ability to carry-out our 2023 production and capital guidance as expected and including, without limitation, those risks considered under “Risk Factors” in our Annual Information Form. 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 and, as such, undue reliance should not be placed on forward-looking statements. NuVista’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the forward-looking statements in this press release in order to provide readers with a more complete perspective on NuVista’s future operations and such information may not be appropriate for other purposes. NuVista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This press release also contains future-oriented financial information and financial outlook information (collectively, "FOFI") about NuVista's prospective results of operations including, without limitation, its ability to repay debt, expectations with respect to future net debt to adjusted funds flow ratios, projected adjusted funds flows at current strip prices, capital expenditures and corporate netbacks, which are 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 and, as such, undue reliance should not be placed on FOFI. NuVista's actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the FOFI in order to provide readers with a more complete perspective on NuVista's future operations and such information may not be appropriate for other purposes.
These forward-looking statements and FOFI are made as of the date of this press release and NuVista disclaims any intent or obligation to update any forward-looking statements and FOFI, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities law.
Non-GAAP and other financial measures
This press release uses various specified financial measures (as such terms are defined in National Instrument 52-112 – Non-GAAP Disclosure and Other Financial Measures Disclosure ("NI 51-112")) including "non-GAAP financial measures", "non-GAAP ratios”, “capital management measures" and “supplementary financial measures” (as such terms are defined in NI 51-112), which are described in further detail below. Management believes that the presentation of these non-GAAP measures provide useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.
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.
These non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these measures should not be construed as alternatives to or more meaningful than the most directly comparable IFRS measures as indicators of NuVista's performance. Set forth below are descriptions of the non-GAAP financial measures used in this press release.
Capital expenditures
Capital expenditures are equal to cash used in investing activities, excluding changes in non-cash working capital, other asset expenditures and proceeds on property dispositions. NuVista considers capital expenditures to be a useful measure of cash flow used for capital reinvestment.
The following table provides a reconciliation between the non-GAAP measure of capital expenditures to the most directly comparable GAAP measure of cash used in investing activities for the period:
Three months ended | Six months ended | |||||||
($ thousands) | 2023 | 2022 | 2023 | 2022 | ||||
Cash used in investing activities | (134,454 | ) | (107,532 | ) | (278,227 | ) | (234,054 | ) |
Changes in non-cash working capital | 9,324 | (7,491 | ) | (26,273 | ) | (933 | ) | |
Other asset expenditures | — | — | 9,500 | — | ||||
Proceeds on property disposition | — | — | (26,000 | ) | — | |||
Capital expenditures | (125,130 | ) | (115,023 | ) | (321,000 | ) | (234,987 | ) |
Net capital expenditures
Net capital expenditures are equal to cash used in investing activities, excluding changes in non-cash working capital, and other asset expenditures. The Company includes funds used for property acquisition or proceeds from property dispositions within net capital expenditures as these transactions are part of its development plans. NuVista considers net capital expenditures to be a useful measure of cash flow used for capital reinvestment.
The following table provides a reconciliation between the non-GAAP measure of net capital expenditures to the most directly comparable GAAP measure of cash used in investing activities for the period:
Three months ended | Six months ended | |||||||
($ thousands) | 2023 | 2022 | 2023 | 2022 | ||||
Cash used in investing activities | (134,454 | ) | (107,532 | ) | (278,227 | ) | (234,054 | ) |
Changes in non-cash working capital | 9,324 | (7,491 | ) | (26,273 | ) | (933 | ) | |
Other asset expenditures | — | — | 9,500 | — | ||||
Net capital expenditures | (125,130 | ) | (115,023 | ) | (295,000 | ) | (234,987 | ) |
Free adjusted funds flow
Free adjusted funds flow is adjusted funds flow less net capital expenditures and asset retirement expenditures. Each of the components of free adjusted funds flow are non-GAAP financial measures. Please refer to disclosures under the headings "Capital management measures" and "Capital expenditures" for a description of each component of free adjusted funds flow. Management uses free adjusted funds flow as a measure of the efficiency and liquidity of its business, measuring its funds available for additional capital allocation to manage debt levels, pay dividends, and return capital to shareholders. By removing the impact of current period net capital and asset retirement expenditures, management believes this measure provides an indication of the funds the Company has available for future capital allocation decisions.
The following table sets out our free adjusted funds flow compared to the most directly comparable GAAP measure of cash provided by operating activities less cash used in investing activities for the period:
Three months ended | Six months ended | |||||||
($ thousands) | 2023 | 2022 | 2023 | 2022 | ||||
Cash provided by operating activities | 134,166 | 227,668 | 349,387 | 390,110 | ||||
Cash used in investing activities | (134,454 | ) | (107,532 | ) | (278,227 | ) | (234,054 | ) |
Excess cash provided by operating activities over cash used in investing activities | (288 | ) | 120,136 | 71,160 | 156,056 | |||
Adjusted funds flow | 145,482 | 199,833 | 352,946 | 389,702 | ||||
Net capital expenditures | (125,130 | ) | (115,023 | ) | (295,000 | ) | (234,987 | ) |
Asset retirement expenditures | 479 | (1,184 | ) | (9,214 | ) | (6,752 | ) | |
Free adjusted funds flow | 20,831 | 83,626 | 48,732 | 147,963 |
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. Set forth below is a description of the non-GAAP ratios used in this press release.
These non-GAAP ratios are not standardized financial measures under IFRS and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these ratios should not be construed as alternatives to or more meaningful than the most directly comparable IFRS measures as indicators of NuVista's performance.
Non-GAAP ratios presented on a "per Boe" basis may also be considered to be supplementary financial measures (as such term is defined in NI 51-112).
Operating netback and corporate netback ("netbacks"), per Boe
NuVista calculated netbacks per Boe by dividing the netbacks by total production volumes sold in the period. Each of operating netback and corporate netback are non-GAAP financial measures. Operating netback is calculated as petroleum and natural gas revenues including realized financial derivative gains/losses, less royalties, transportation expense and operating expense. Corporate netback is operating netback less general and administrative expense, cash share-based compensation expense, financing costs excluding accretion expense, and current tax expense.
Management believes both operating and corporate netbacks are key industry benchmarks and measures of operating performance for NuVista that assists management and investors in assessing NuVista's profitability, and are commonly used by other petroleum and natural gas producers. The measurement on a Boe basis assists management and investors with evaluating NuVista's operating performance on a comparable basis.
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.
Please refer to Note 14 "Capital Management" in NuVista's condensed consolidated interim financial statements for additional disclosure net debt and adjusted funds flow, and net debt to annualized second quarter adjusted funds flow ratio, each of which are capital management measures used by the Company in this press release.
NuVista calculated net debt to annualized second quarter adjusted funds flow ratio by dividing net debt by the annualized adjusted funds flow for the second quarter.
Supplementary financial measure
This press release may contain certain supplementary financial measures. NI 52-112 defines a supplementary financial measure as a financial measure that: (i) 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.
NuVista calculates “adjusted funds flow per share” by dividing adjusted funds flow for a period by the number of weighted average common shares of NuVista for the specified period.
FOR FURTHER INFORMATION CONTACT: | ||
President and CEO | VP, Finance and CFO | Chief Operating Officer |
(403) 538-8501 | (403) 538-1945 | (403) 538-1936 |
Source:
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