Selected financial and operational information is set out below and should be read in conjunction with Spartan's unaudited consolidated interim financial statements and related management's discussion and analysis ("MD&A") for the three and nine months ended
THIRD QUARTER 2023 HIGHLIGHTS
- Spartan successfully closed the previously announced spin-out of its early stage
Montney assets (the "Spin-Out") toLogan Energy Corp. ("Logan"). - The Company reported production of 37,518 BOE/d in the third quarter of 2023. The reduction in production quarter over quarter was a result of the previously announced sale of its
Montney assets to Crescent Point Energy Corp. (the "Asset Sale") and the Spin-Out. - Spartan successfully executed a
$27.5 million capital program in the third quarter of 2023, with specific focus placed on continued development across multiple horizons in theDeep Basin . - o Spartan drilled 5.0 net wells, completed 4.0 net wells, and brought 6.0 net wells on production.
- Adjusted Funds Flow of
$63.9 million ($0.37 per share diluted) in the third quarter of 2023. - Free Funds Flow of
$36.4 million in the third quarter of 2023. - Spartan continues to have a fortified balance sheet with Net Debt of
$64.5 million resulting in a 0.3X Net Debt to Annualized AFF ratio.
OUTLOOK
- Spartan, through its foundational
Deep Basin asset, continues to offer economic drilling inventory, strategic operated infrastructure, free funds flow generation, and a clean balance sheet. Additionally, Spartan intends to further discuss its 2024 capital program and guidance prior to year-end 2023.
The table below summarizes the Company's financial and operating results for the three and nine months ended
(CA$ thousands, except as otherwise noted) | Three months ended | Nine months ended | ||||
2023 | 2022 | % | 2023 | 2022 | % | |
FINANCIAL HIGHLIGHTS | ||||||
Oil and gas sales | 81,878 | 347,218 | (76) | 566,937 | 1,107,341 | (49) |
Net income and comprehensive income | 9,005 | 285,250 | (97) | 552,523 | 528,167 | 5 |
$ per share, basic (a) | 0.05 | 1.84 | (97) | 3.21 | 3.42 | (6) |
$ per share, diluted (a) | 0.05 | 1.64 | (97) | 3.19 | 3.06 | 4 |
Cash provided by operating activities | 63,180 | 221,161 | (71) | 424,380 | 595,008 | (29) |
Adjusted Funds Flow (b) | 63,875 | 200,733 | (68) | 369,451 | 592,828 | (38) |
$ per share, basic (a)(b) | 0.37 | 1.29 | (71) | 2.14 | 3.84 | (44) |
$ per share, diluted (a)(b) | 0.37 | 1.15 | (68) | 2.12 | 3.41 | (38) |
Free Funds Flow (b) | 36,380 | 124,346 | (71) | 106,330 | 317,821 | (67) |
Cash (provided by) used in investing activities | 42,501 | 100,708 | (58) | (1,393,387) | 308,255 | (552) |
Capital Expenditures before A&D (b) | 27,495 | 76,387 | (64) | 263,121 | 275,007 | (4) |
Adjusted Net Capital A&D (b) | 837 | 5,893 | (86) | (1,702,858) | 4,952 | nm |
Total assets | 862,245 | 1,964,638 | (56) | 862,245 | 1,964,638 | (56) |
Debt | 148,197 | 144,608 | 2 | 148,197 | 144,608 | 2 |
Net Debt (b) | 64,513 | 142,820 | (55) | 64,513 | 142,820 | (55) |
Net Debt to Annualized AFF Ratio (b) | 0.3X | 0.2X | 50 | 0.3X | 0.2X | 50 |
Shareholders' equity | 318,328 | 1,428,733 | (78) | 318,328 | 1,428,733 | (78) |
Common shares outstanding (000s), end of period (a) | 173,201 | 155,482 | 11 | 173,201 | 155,482 | 11 |
OPERATING HIGHLIGHTS AND NETBACKS (e) | ||||||
Average daily production | ||||||
Crude oil (bbls/d) | 478 | 13,874 | (97) | 7,614 | 12,728 | (40) |
Condensate (bbls/d) (c) | 1,653 | 1,986 | (17) | 2,300 | 2,253 | 2 |
Natural gas liquids (bbls/d) (c) | 8,670 | 12,354 | (30) | 10,994 | 12,564 | (12) |
Natural gas (mcf/d) | 160,301 | 263,519 | (39) | 224,992 | 270,098 | (17) |
BOE/d | 37,518 | 72,134 | (48) | 58,407 | 72,561 | (20) |
% Liquids (d) | 29 % | 39 % | (26) | 36 % | 38 % | (5) |
Average realized prices, before financial instruments | ||||||
Crude oil ($/bbl) | 115.85 | 116.15 | - | 100.18 | 123.64 | (19) |
Condensate ($/bbl) (c) | 102.52 | 111.27 | (8) | 100.82 | 122.94 | (18) |
Natural gas liquids ($/bbl) (c) | 30.21 | 49.67 | (39) | 34.78 | 52.34 | (34) |
Natural gas ($/mcf) | 2.52 | 5.04 | (50) | 3.11 | 5.73 | (46) |
Combined average ($/BOE) | 23.72 | 52.32 | (55) | 35.56 | 55.90 | (36) |
Netbacks ($/BOE) (e) | ||||||
Oil and gas sales | 23.72 | 52.32 | (55) | 35.56 | 55.90 | (36) |
Processing and other revenue | 0.48 | 0.34 | 41 | 0.47 | 0.33 | 42 |
Royalties | (3.02) | (4.89) | (38) | (3.70) | (6.15) | (40) |
Operating expenses | (5.39) | (8.79) | (39) | (7.46) | (8.78) | (15) |
Three months ended | Nine months ended | |||||
Netbacks continued from previous page | 2023 | 2022 | % | 2023 | 2022 | % |
Transportation expenses | (1.71) | (2.88) | (41) | (2.50) | (2.81) | (11) |
Operating Netback, before hedging ($/BOE) (e) | 14.08 | 36.10 | (61) | 22.37 | 38.49 | (42) |
Settlements on Commodity Derivative Contracts(e)(f) | 9.02 | (3.36) | (368) | 3.10 | (6.06) | (151) |
Net Pipeline Transportation Margin (e)(g) | - | - | - | - | (0.02) | (100) |
Operating Netback, after hedging ($/BOE) (e) | 23.10 | 32.74 | (29) | 25.47 | 32.41 | (21) |
General and administrative expenses | (1.50) | (0.98) | 53 | (0.97) | (0.95) | 2 |
Cash financing expense (e)(h) | (1.48) | (0.94) | 57 | (0.48) | (1.01) | (52) |
Realized foreign exchange gain (loss) | (0.14) | 0.02 | (800) | (0.04) | 0.05 | (180) |
Other income | 0.03 | 0.02 | 50 | 0.02 | 0.04 | (50) |
Settlement of decommissioning obligations | (0.64) | (0.17) | 276 | (0.25) | (0.16) | 56 |
Lease payments (i) | (0.86) | (0.44) | 95 | (0.58) | (0.45) | 29 |
Adjusted Funds Flow Netback ($/BOE) (e) | 18.51 | 30.25 | (39) | 23.17 | 29.93 | (23) |
a) | Refer to "Share Capital" section of this press release. |
b) | "Adjusted Funds Flow", "Free Funds Flow", "Capital Expenditures before A&D", "Adjusted Net Capital A&D", "Net Debt" and "Net Debt to Annualized AFF Ratio" do not have standardized meanings under IFRS, refer to "Non-GAAP Measures and Ratios" section of this press release. |
c) | Condensate is a natural gas liquid ("NGL") as defined by NI 51-101. See "Other Measurements". |
d) | "Liquids" includes crude oil, condensate and NGLs. |
e) | "Netbacks" are non-GAAP financial ratios calculated per unit of production. "Operating Netback", "Settlements on Commodity Derivative Contracts", "Net Pipeline Transportation Margin", "Cash Financing Expenses" and "Adjusted Funds Flow Netback" do not have standardized meanings under IFRS, refer to "Non-GAAP Measures and Ratios" section of this press release. |
f) | Includes realized gains or losses on derivative financial instruments plus settlements of acquired derivative liabilities. |
g) | Pipeline transportation revenue, net of pipeline transportation expense. |
h) | Includes interest and fees on current and long-term debt, net of interest income. |
i) | Includes total lease payments comprised of the principal portion and financing cost of lease liabilities. |
ABOUT
Spartan is committed to creating value for its shareholders, focused on sustainability both in operations and financial performance. The Company's ESG-focused culture is centered on generating Free Funds Flow through responsible oil and gas exploration and development. The Company has established a portfolio of high-quality production and development opportunities in the
Spartan's corporate presentation as of
READER ADVISORIES
Non-GAAP Measures and Ratios
This press release contains certain financial measures and ratios which do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") or Generally Accepted Accounting Principles ("GAAP"). As these non-GAAP financial measures and ratios are commonly used in the oil and gas industry, Spartan believes that their inclusion is useful to investors. The reader is cautioned that these amounts may not be directly comparable to measures for other companies where similar terminology is used.
The non-GAAP measures and ratios used in this press release, represented by the capitalized and defined terms outlined below, are used by Spartan as key measures of financial performance, and are not intended to represent operating profits nor should they be viewed as an alternative to cash provided by operating activities, net income or other measures of financial performance calculated in accordance with IFRS.
The definitions below should be read in conjunction with the "Non-GAAP Measures and Ratios" section of the Company's MD&A dated
Operating Income and Operating Netback
Operating Income, a non-GAAP financial measure, is a useful supplemental measure that provides an indication of the Company's ability to generate cash from field operations, prior to administrative overhead, financing, and other business expenses. "Operating Income, before hedging" is calculated by Spartan as oil and gas sales, net of royalties, plus processing and other revenue, less operating and transportation expenses. "Operating Income, after hedging" is calculated by adjusting Operating Income for: (i) realized gains or losses on derivative financial instruments including settlements on acquired derivative financial instrument liabilities (together a non-GAAP financial measure "Settlements on Commodity Derivative Contracts"), and (ii) pipeline transportation revenue, net of pipeline transportation expense (the "Net Pipeline Transportation Margin"). The Company refers to Operating Income expressed per unit of production as an "Operating Netback" and reports the Operating Netback before and after hedging, both of which are non-GAAP financial ratios. Spartan considers Operating Netback an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices.
Adjusted Funds Flow and Free Funds Flow
Cash provided by operating activities is the most directly comparable measure to Adjusted Funds Flow. "Adjusted Funds Flow" is a non-GAAP financial measure reconciled to cash provided by operating activities by excluding changes in non-cash working capital, adding back transaction costs on acquisitions, and deducting the principal portion of lease payments. Spartan utilizes Adjusted Funds Flow as a key performance measure in the Company's annual financial forecasts and public guidance. Transaction costs, which primarily include legal and financial advisory fees, regulatory and other expenses directly attributable to execution of acquisitions and dispositions, are added back because the Company's definition of Free Funds Flow excludes capital expenditures related to acquisitions and dispositions. For greater clarity, incremental overhead expenses related to ongoing integration and restructuring post-acquisition are not adjusted and are included in Spartan's general and administrative expenses. Lease liabilities are not included in Spartan's definition of Net Debt therefore lease payments are deducted in the period incurred to determine Adjusted Funds Flow.
The Company refers to Adjusted Funds Flow expressed per unit of production as an "Adjusted Funds Flow Netback".
"Free Funds Flow" is a non-GAAP financial measure calculated by Spartan as Adjusted Funds Flow less Capital Expenditures before A&D. Spartan believes Free Funds Flow provides an indication of the amount of funds the Company has available for future capital allocation decisions such as to repay current and long-term debt, reinvest in the business or return capital to shareholders.
Adjusted Funds Flow per share
Adjusted Funds Flow ("AFF") per share is a non-GAAP financial ratio used by the Spartan as a key performance indicator. AFF per share is calculated using the same methodology as net income per share ("EPS"), however the diluted weighted average common shares ("WA Shares") outstanding for AFF may differ from the diluted weighted average determined in accordance with IFRS for purposes of calculating EPS due to non-cash items that impact net income only. The dilutive impact of stock options and share awards is more dilutive to AFF than EPS because the number of shares deemed to be repurchased under the treasury stock method is not adjusted for unrecognized share based compensation expense as it is non-cash (see also, "Share Capital").
Capital Expenditures, before A&D
"Capital Expenditures before A&D" is a non-GAAP financial measure used by Spartan to measure its capital investment level compared to the Company's annual budgeted capital expenditures for its organic drilling program. It includes capital expenditures on exploration and evaluation assets and property, plant and equipment, before acquisitions and dispositions. The directly comparable GAAP measure to capital expenditures before A&D is cash provided by (used in) investing activities.
Adjusted Net Capital A&D
"Adjusted Net Capital A&D" is a supplemental measure disclosed by Spartan which aggregates the total amount of cash, debt and share consideration used to acquire crude oil and natural gas assets during the period, net of cash proceeds received on dispositions. The Company believes this is useful information because it is more representative of the total transaction value than the cash acquisition costs or total cash used in investing activities, determined in accordance with IFRS. The most directly comparable GAAP measures are acquisition costs and disposition proceeds included as components of cash used in investing activities.
References to "Net Debt" includes current and long-term debt under Spartan's revolving credit facility and second lien term facility, net of
Spartan uses Net Debt as a key performance measure to manage the Company's targeted debt levels. The Company believes its presentation of
References to "Cash Financing Expenses" includes interest and fees on current and long-term debt, net of interest income, and excludes financing costs related to lease liabilities and accretion of decommissioning obligations. Cash Financing Expenses is a non-GAAP financial measure used by Spartan in its budget and guidance as it corresponds to the Company's definition of Net Debt, however it should not be viewed as an alternative to total financing expenses presented in accordance with IFRS.
Net Debt to Annualized AFF Ratio
The Company monitors its capital structure using a "Net Debt to Annualized AFF Ratio", which is a non-GAAP financial ratio calculated as the ratio of the Company's "Net Debt" to its "Annualized Adjusted Funds Flow" which is calculated by multiplying Adjusted Funds Flow for the most recent quarter, normalized for significant non-recurring items, by a factor of 4.
Other Measurements
All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.
This press release contains various references to the abbreviation "BOE" which means barrels of oil equivalent. Where amounts are expressed on a BOE basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet (Mcf) per barrel (bbl). The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and is significantly different than the value ratio based on the current price of crude oil and natural gas. This conversion factor is an industry accepted norm and is not based on either energy content or current prices. Such abbreviation may be misleading, particularly if used in isolation.
References to "oil" in this press release include light crude oil and medium crude oil, combined. NI 51-101 includes condensate within the product type of "natural gas liquids". References to "natural gas liquids" or "NGLs" include pentane, butane, propane, and ethane. References to "gas" or "natural gas" relates to conventional natural gas.
References to "liquids" includes crude oil, condensate and NGLs.
Share Capital
Spartan's common shares are listed on the
As at
The table below summarizes the weighted average number of common shares outstanding (000s) used in the calculation of diluted EPS (as defined herein) and diluted AFF per share:
Three months ended | Nine months ended | ||||||
(000s) | 2023 | 2022 | % | 2023 | 2022 | % | |
WA Shares outstanding, basic | 173,201 | 155,412 | 11 | 172,302 | 154,562 | 11 | |
Dilutive effect of outstanding securities | 1,100 | 18,313 | (94) | 1,107 | 18,160 | (94) | |
WA Shares, diluted – for EPS | 174,301 | 173,725 | - | 173,409 | 172,722 | - | |
Incremental dilution for AFF (a) | - | 1,287 | (100) | 1,014 | 1,337 | (24) | |
WA Shares, diluted – for AFF (a) | 174,301 | 175,012 | - | 174,423 | 174,059 | - | |
a) AFF per share does not have a standardized meaning under IFRS, refer to "Non-GAAP Measures and Ratios". |
Forward-Looking and Cautionary Statements
Certain statements contained within this press release constitute forward-looking statements within the meaning of applicable Canadian securities legislation. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "budget", "plan", "endeavor", "continue", "estimate", "evaluate", "expect", "forecast", "monitor", "may", "will", "can", "able", "potential", "target", "intend", "consider", "focus", "identify", "use", "utilize", "manage", "maintain", "remain", "result", "cultivate", "could", "should", "believe" and similar expressions. Spartan believes that the expectations reflected in such forward-looking statements are reasonable as of the date hereof, but no assurance can be given that such expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Without limitation, this press release contains forward-looking statements pertaining to: the business plan, cost model and strategy of Spartan, including commodity diversification and oil weighted production, and risk management activities. Spartan's strategies to deliver strong operational performance and to generate long term sustainable Free Funds Flow, organic growth, and enhanced returns, including periodic special dividends, and being well positioned to take advantage of opportunities in the current business environment, and to continue pursuing immediate production optimization, responsible future growth with organic drilling, cash settlement of 1.1 MM RSAs and the timing thereof, and opportunistic acquisitions.
The forward-looking statements and information are based on certain key expectations and assumptions made by Spartan, including expectations and assumptions concerning the business plan of Spartan, the timing of and success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of Spartan's properties, the successful integration of the recently acquired assets into Spartan's operations, the successful application of drilling, completion and seismic technology, prevailing weather conditions, prevailing legislation affecting the oil and gas industry, prevailing commodity prices, price volatility, price differentials and the actual prices received for the Company's products, impact of inflation on costs, royalty regimes and exchange rates, the application of regulatory and licensing requirements, the availability of capital, labour and services, the creditworthiness of industry partners, and the ability to source and complete acquisitions.
Although Spartan believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Spartan can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to, fluctuations in commodity prices, changes in industry regulations and political landscape both domestically and abroad, wars (including
Please refer to Spartan's MD&A and AIF for the year ended
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Spartan's prospective results of operations and production, generating Free Funds Flow, organic growth and periodic special dividends 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 document was approved by management as of the date of this document and was provided for the purpose of providing further information about Spartan's future business operations. Spartan and its management believe that FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments, and represent, to the best of management's knowledge and opinion, the Company's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results. Spartan disclaims any intention or obligation to update or revise any FOFI contained in this document, 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 document should not be used for purposes other than for which it is disclosed herein. Changes in forecast commodity prices, differences in the timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in Spartan's guidance. The Company's actual results may differ materially from these estimates.
Abbreviations
A&D | acquisitions and dispositions |
AECO | |
AFF | Adjusted Funds Flow |
AIF | refers to the Company's Annual Information Form dated |
bbl | barrel |
bbls/d | barrels per day |
BOE | barrels of oil equivalent |
BOE/d | barrels of oil equivalent per day |
CA$ or CAD | Canadian dollar |
ESG | Environment, Social and Governance |
GJ | gigajoule |
mcf | one thousand cubic feet |
mcf/d | one thousand cubic feet per day |
MMbtu | one million British thermal units |
MMcf | one million cubic feet |
MD&A | refers to Management's Discussion and Analysis of the Company dated |
MM | millions |
$MM | millions of dollars |
NI 51-101 | National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities |
NGL(s) | natural gas liquids |
NM | not meaningful |
NYMEX | |
TSX | |
US$ or USD | |
WTI | West Texas Intermediate, the reference price paid in |
SOURCE
© Canada Newswire, source