GFR Greenfire Resources Ltd

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of May 2024.

 

Commission File Number 001-41810

 

Greenfire Resources Ltd.

(Exact name of Registrant as specified in its charter)

 

N/A

(Translation of Registrant’s name)

 

Suite 1900, 205 – 5^th Avenue SW
Calgary, Alberta T2P 2V7

(403) 264-9046

(Address and telephone number of registrant’s principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒      Form 40-F ☐

 

 

 

INCORPORATION BY REFERENCE

 

Exhibits 99.1 and 99.2 of this report on Form 6-K shall be deemed filed with the Securities and Exchange Commission (“SEC”) solely for purposes of incorporation by reference into and as part of the registration statement on Form S-8 (Registration No. 333-277054) of the registrant on file with the SEC.

 

 

GREENFIRE RESOURCES LTD.

 

DOCUMENTS INCLUDED AS PART OF THIS REPORT

 

Exhibit
99.1		Interim Consolidated Financial Statements (unaudited) for the period ended March 31, 2024
99.2		Management’s Discussion and Analysis for the period ended March 31, 2024
99.3		News Release dated May 15, 2024 – Greenfire Resources Announces Q1 2024 Results and Reiterates 2024 Outlook
99.4		News Release dated May 15, 2024 - Greenfire Resources Reports Voting Results from 2024 Annual Meeting of Shareholders

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Greenfire Resources Ltd.
	By:	/s/ Tony Kraljic
	Name:	Tony Kraljic
	Title:	Chief Financial Officer

 

Date: May 16, 2024

 

 

3

 

 

 

 

 

Exhibit 99.1

 

 

 

 

 

 

 

CONDENSED INTERIM CONSOLIDATES
FINANCIAL STATEMENTS (UNAUDITED)

 

For the three month period ended March 31, 2024

 

Greenfire Resources Ltd.

 

 

 

 

 

Condensed Interim Consolidated Balance Sheets

 

(Unaudited)

 

As at				March 31				December 31
($CAD thousands)		note		2024				2023
Asset
Current assets
Cash and cash equivalents				$	90,234			$	109,525
Accounts receivable		4			52,557				34,680
Inventories					12,472				13,863
Prepaid expenses and deposits					3,041				5,746
					158,304				163,814
Non-current assets
Property, plant and equipment		6			967,354				941,374
Deferred income tax asset					68,295				68,295
					1,035,649				1,009,669
					1,193,953				1,173,483
Liabilities
Current liabilities
Accounts payable and accrued liabilities		4			60,587				59,850
Current portion of long-term debt		9			74,593				44,321
Warrant liability		12			25,009				18,630
Taxes payable					1,063				1,063
Current portion of lease liabilities					7,392				6,002
Risk management contracts		8			39,154				417
					207,798				130,283
Non-current liabilities
Long-term debt		9			313,373				332,029
Lease liabilities					5,425				7,722
Decommissioning liabilities		7			19,201				8,449
					337,999				348,200
					545,797				478,483
Shareholders’ equity
Share capital		10, 11			159,510				158,515
Contributed surplus		10, 11			8,864				9,788
Retained earnings (deficit)					479,782				526,697
					648,156				695,000
				$	1,193,953			$	1,173,483

 

Related Party Transactions (note 14)

See accompanying notes to the unaudited condensed interim consolidated financial statements.

These Condensed Interim Consolidated Financial Statements were approved by the Board of Directors.

 

 

Condensed Interim Consolidated Statements of Comprehensive Loss

 

(Unaudited)

 

Three months ended March 31
($CAD thousands, except per share amounts)		note		2024				2023
Revenues
Oil sales		5		$	200,990			$	179,668
Royalties					(6,315	)			(4,502	)
Oil sales, net of royalties					194,675				175,166
Risk management contracts gains (losses)					(47,534	)			4,843
Total revenue and other income					147,141				180,009
Expenses
Diluent expense					91,682				101,856
Transportation and marketing					13,199				16,014
Operating expenses					36,348				39,764
General and administrative					4,749				2,501
Stock-based compensation		11			852				325
Financing and interest					15,456				15,316
Depletion and depreciation		6			18,003				20,915
Exploration expenses					554				1,585
Other income					(1,441	)			-
Transaction costs					-				2,327
Loss on revaluation of warrants		12			6,379				-
Foreign exchange (gain) loss					8,275				(303	)
					194,056				200,300
Net loss before taxes				$	(46,915	)		$	(20,291	)
Income tax recovery					-				3,613
Net loss and comprehensive loss				$	(46,915	)		$	(16,678	)
Net loss per share
Basic1		10		$	(0.68	)		$	(0.34	)
Diluted1		10		$	(0.68	)		$	(0.34	)

 

1

For the periods ended March 31, 2023, the Company’s basic and diluted earnings per share is the net loss per common share of Greenfire Resources Inc (see Note 1) and the weighted average common shares outstanding has been recast by the applicable exchange ratio following the completion of the De-Spac Transaction with MBSC (Note3.)

 

See accompanying notes to the unaudited condensed interim consolidated financial statements.

 

 

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity

 

(Unaudited)

 

Three months ended March 31
($CAD Thousands)		note		2024				2023
Share capital
Balance, beginning of period				$	158,515			$	15
Issuance of share on exercise of performance warrants		10, 11			877
Issuance of shares on vested RSUs		10, 11			118				-
Balance, end of period					159,510				15
Contributed surplus
Balance, beginning of period					9,788				44,674
Stock-based compensation		11			852				325
Issuance of shares on vested RSUs		11			(118	)			-
Exercise of performance warrants		11			(1,658	)			-
Balance, end of period					8,864				44,999
Retained earnings
Balance, beginning of period					526,697				793,082
Net loss and comprehensive loss					(46,915	)			(16,678	)
Balance, end of period					479,782				776,404
Total shareholders’ equity				$	648,156			$	821,418

 

See accompanying notes to the unaudited condensed interim consolidated financial statements.

 

 

Condensed Interim Consolidated Statements of Cash Flows

 

(Unaudited)

 

Three months ended March 31
($CAD Thousands)		note		2024				2023
Operating activities
Net loss				$	(46,915	)		$	(16,678	)
Items not affecting cash:
Deferred income taxes					-				(3,613	)
Unrealized (gain) loss on risk management contracts		8			38,737				(5,023	)
Depletion and depreciation		6			17,799				20,403
Stock-based compensation		11			852				325
Accretion		7			549				217
Other non-cash expenses					17				16
Foreign exchange (gain) loss					8,275				(303	)
Amortization of debt issuance costs		9			1,896				5,386
Loss on revaluation of warrants		12			6,379				-
Change in non-cash working capital		13			(10,525	)			(5,225	)
Cash provided (used) by operating activities					17,064				(4,495	)
Financing activities
Lease payments					(51	)			(6	)
Cash used by financing activities					(51	)			(6	)
Investing activities
Property, plant and equipment expenditures		6			(31,920	)			(2,518	)
Acquisitions		6			(2,529	)			-
Restricted cash					-				(4,050	)
Change in non-cash working capital (accrued additions to PP&E)		13			(3,232	)			(1,953	)
Cash used in investing activities					(37,681	)			(8,521	)
Exchange rate impact on cash and cash equivalents held in foreign currency					1,377				62
Change in cash and cash equivalents					(19,291	)			(12,960	)
Cash and cash equivalents, beginning of period					109,525				35,363
Cash and cash equivalents, end of period					90,234				22,403

 

See accompanying notes to the unaudited condensed interim consolidated financial statements.

 

 

Notes to the Condensed Interim Consolidated Financial Statements

 

As at March 31, 2024 and for the three months ended March 31, 2024 and 2023 

(Unaudited)

 

1.

CORPORATE INFORMATION

 

Greenfire Resources Ltd. (the “Company” or “Greenfire”) was incorporated under the laws of Alberta on December 9, 2022. On September 20, 2023, the Company participated in a De-Spac transaction involving a number of entities, including Greenfire Resources Inc. (“GRI”) and M3-Brigade Acquisition III Corp (“MBSC”) (the “De-Spac Transaction”). Refer to Note 3 De-Spac Transaction for additional information. As of January 1, 2024, GRI was amalgamated with Greenfire Resources Operation Corporation (“GROC”). These unaudited condensed interim consolidated financial statements are comprised of the accounts of Greenfire and its wholly owned direct subsidiaries, GROC and MBSC. The prior period amounts presented are those of GRI, which continued as the operating entity, concurrent with recapitalization. As of April 4, 2024, MBSC was legally amalgamated into Greenfire.

 

The Company and its subsidiaries are engaged in the exploration, development and operation of oil and gas properties, focused primarily in the Athabasca oil sands region of Alberta. The Company’s corporate head office is located at 1900, 205 5th Avenue SW, Calgary, AB T2P 2V7.

 

2.

BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE

 

These unaudited condensed interim consolidated financial statements (“interim consolidated financial statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) using International Accounting Standard IAS 34: “Interim Financial Reporting”. They are condensed as they do not include all of the information required for full annual consolidated financial statements, and they should be read in conjunction with the audited annual consolidated financial statements of GRL for the year ended December 31, 2023 (the “Annual Financial Statements”). The interim consolidated financial statements have been prepared on a basis consistent with the accounting, estimation and valuation policies described in the Annual Financial Statements, except as described below. The unaudited condensed interim financial statements reflect all normal and reoccurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented.

 

In these interim consolidated financial statements, all amounts are expressed in Canadian dollars (“$CAD”), which is the Company’s functional currency, unless otherwise indicated. These Interim Consolidated Financial Statements have been prepared on a historical cost basis, except for certain financial instruments which are measured at their estimated fair value.

 

The Company has one reportable operating segment which is made up of its oil sands operations based on geographic location (Athabasca oil sands region of Alberta, Canada), nature of the products sold and integration of facilities and operations. The chief operating decision maker is the President and CEO, who reviews operating results at this level to assess financial performance and make resource allocation decisions. The Company determines its operating segments based on the differences in the nature of operations, products sold, economic characteristics and regulatory environments and management. All of the Company’s non-current assets are located in and revenue is earned in Canada.

 

These Interim Consolidated Financial Statements were approved by Greenfire’s board of directors on May 15, 2024.

 

 

3.

De-Spac Transaction

 

On September 20, 2023, Greenfire, GRI, MBSC, DE Greenfire Merger Sub Inc. (“DE Merger Sub”) and 2476276 Alberta ULC (“Canadian Merger Sub”), completed a De-Spac Transaction pursuant to a business combination agreement dated December 14, 2022, as amended (the “Business Combination Agreement”) with MBSC. DE Merger Sub and Canadian Merger Sub were incorporated in December 2022 for the purposes of completing the De-Spac Transaction.

 

Pursuant to the De-Spac Transaction, Canadian Merger Sub amalgamated with and into GRI, with GRI continuing as the surviving corporation and becoming a direct, wholly-owned subsidiary of Greenfire and DE Merger Sub merged with and into MBSC with MBSC continuing as the surviving corporation and becoming a direct, wholly-owned subsidiary of Greenfire.

 

Greenfire has been identified as the acquirer for accounting purposes. As MBSC does not meet the definition of a business under IFRS 3 Business Combinations, the transaction was accounted for pursuant to IFRS 2, Share Based Payment. On closing of the De-Spac Transaction, the Company accounted for the excess of the fair value of Greenfire common shares issued to MBSC shareholders as consideration, over the fair value of MBSC’s identifiable net assets at the date of closing, resulting in $106.5 million (US$79.4 million) being recognized for the year ended December 31, 2023 as a listing expense.

 

For the three months ended March 31, 2024, the Company expensed $nil million (March 31, 2023 - $2.3 million) in transaction costs related to the De-Spac Transaction.

 

4.

FINANCIAL INSTRUMENTS, FAIR VALUES AND RISK MANAGEMENT

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants who are independent, knowledgeable and willing and able to transact would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. The Company is able to classify fair value balances based on the observability of these inputs. The authoritative guidance for fair value measurements establishes three levels of the fair value hierarchy, defined as follows:

 

●

Level 1: Unadjusted, quoted prices for identical assets or liabilities in active markets;

 

●

Level 2: Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly for substantially the full term of the asset or liability; and

 

●

Level 3: Significant, unobservable inputs for use when little or no market data exists, requiring a significant degree of judgment.

 

The carrying values of cash and cash equivalents, restricted cash, accounts receivable and accounts payable and accrued liabilities included on the condensed interim consolidated balance sheets approximates the fair values of the respective assets and liabilities due to the short-term nature of those instruments.

 

Derivative financial instruments are used by the Company to manage risks related to commodity prices. All derivatives are classified at fair value through profit and loss. Derivative financial instruments are included on the condensed interim consolidated balance sheet and are classified as current or non-current based on the contractual terms specific to the instrument. Gains and losses on re-measurement of derivatives are shown separately on the condensed interim consolidated statement of comprehensive loss in the period in which they arise.

 

 

The warrants issued were classified as financial liabilities due to a cashless exercise feature and are measured at fair value upon issuance and at each subsequent reporting period, with the changes in fair value and recorded in the condensed interim consolidated statement of comprehensive loss. The fair value of these warrants is determined using the Black-Scholes option valuation model (level 2).

 

The estimated fair value of long-term debt has been determined based on period-end trading prices of long-term debt on the secondary market (level 2).

 

The Company is exposed to a number of different financial risks arising from normal course business exposures, as well as the Company’s use of financial instruments. There have been no changes in the Company’s objectives, policies or risks surrounding financial instruments.

 

Commodity price risk

 

The Company is exposed to commodity price risk on its oil sales due to fluctuations in market prices. The Company continues to execute a consistent risk management program that is primarily designed to reduce the volatility of revenue and cash flow, generate sufficient cash flows to service debt obligations, and fund the Company’s operations. The Company’s risk management liabilities may consist of hedging instruments such as fixed price swaps and option structures, including costless collars on WTI, WCS differentials, condensate differential, natural gas and electricity swaps. The Company does not use financial derivatives for speculative purposes.

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s objective in managing liquidity risk is to maintain sufficient available reserves to meet its financial obligations at any point in time. The Company expects to achieve this objective through prudent capital spending, an active commodity risk management program and through strategies such as continuously monitoring forecast and actual cash flows from operating, financing and investing activities, and available credit facilities. Management believes that future cash flows generated from these sources will be adequate to settle Greenfire’s financial liabilities.

 

The following table details the financial liabilities as at March 31, 2024:

 

(CAD$ thousands)		<1 year				1-2 years				2+ years				Total
Accounts payable and accrued liabilities			60,587				-				-				60,587
Lease liabilities1			7,392				6,173				1,444				15,009
Risk management contract			39,154				-				-				39,154
Long-term debt2			74,593				57,493				274,414				406,500
Total financial liabilities			181,726				63,666				275,858				521,250

 

1

These amounts include the notional principal and interest payments.

 

2

Amounts represent undiscounted principal only and exclude interest and transaction costs.

 

 

Credit risk

 

As at ($ thousands)		March 31, 2024				December 31, 2023
Trade receivables		$	41,505			$	22,452
Joint interest receivables			11,052				12,228
Accounts receivable		$	52,557			$	34,680

 

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s accounts receivable. The Company is primarily exposed to credit risk from receivables associated with its oil sales. The Company manages its credit risk exposure by transacting with high-quality credit worthy counterparties and monitoring credit worthiness and/or credit ratings on an ongoing basis. Trade receivables from oil sales are generally collected on 25th day of the month following production. Joint interest receivables are typically collected within one to three months of the invoice being issued. The Company has not previously experienced any material credit losses on the collection of accounts receivable.

 

At March 31, 2024, the Company was exposed to concentration risk associated with its outstanding trade receivables and joint interest receivables balances. Of the Company’s trade receivables at March 31, 2024, 100% was receivable from a single company (December 31, 2023- 100% was receivable from a single company). At March 31, 2024, 100% of the Company’s joint interest receivables were held by a single company (December 31, 2023- 100% by a single company). Maximum exposure to credit risk is represented by the carrying amount of accounts receivable on the balance sheet. There are no material financial assets that the Company considers past due and no accounts have been written off. Subsequent to March 31, 2024, the Company has received $5.1 million from its joint interest partner, with the remaining outstanding balance expected to be paid within a reasonable time, as a result there are no material financial assets that the Company considers past due and no accounts have been written off.

 

5.

REVENUE

 

($ thousands)		Three months ended March 31, 2024				Three months ended March 31, 2023
Diluted bitumen sales		$	196,980			$	175,345
Bitumen sales			4,010				4,323
Oil sales		$	200,990			$	179,668

 

The Company has long-term marketing agreements with a single counterparty (“Petroleum Marketer”), which has exclusive marketing rights over the Company’s production and diluent purchases at Hangingstone Expansion (“Expansion”), until October 2028 and at Hangingstone Demo (“Demo”), until April 2026. Fees paid to the Petroleum Marketer as part of these agreements include marketing, incentive and royalty fees. These fees are expensed as incurred as transportation and marketing expenses. As a result of these marketing agreements, the Company is exposed to concentration and credit risks, as all sales are to a single counterparty.

 

 

6.

PROPERTY, PLANT AND EQUIPMENT (“PP&E”)

 

($ thousands)		Developed and producing				Right-of-use assets				Corporate assets				Total
Cost
Balance as at December 31, 2022			1,057,316				969				629				1,058,914
Expenditures on PP&E			33,439				-				(11	)			33,428
Right-of-use asset additions			-				12,789				-				12,789
Balance as at December 31, 2023			1,090,755				13,758				618				1,105,131
Expenditures on PP&E(2)			31,920				-				-				31,920
Acquisitions			12,732				-				-				12,732
Balance as at March 31, 2024			1,135,407				13,758				618				1,149,783
Accumulated Depletion, Depreciation and Amortization
Balance as at December 31, 2022			95,572				60				232				95,864
Depletion and depreciation (1)			67,580				183				130				67,893
Balance as at December 31, 2023			163,152				243				362				163,757
Depletion and depreciation (1)			17,730				919				23				18,672
Balance as at March 31, 2024			180,882				1,162				385				182,429
Net book Value
Balance at December 31, 2023			927,603				13,515				256				941,374
Balance at March 31, 2024		$	954,525			$	12,596			$	233			$	967,354

 

(1)

As at March 31, 2024 $0.2 million of DD&A was capitalized to inventory (December 31, 2023- $0.2 million).

 

(2)

Includes capitalized lease payments and related interest of $0.9 million

 

During the three months ended March 31, 2024, the Company incurred $2.5 million on acquisitions, primarily on gas assets in the Hangingstone area for approximately $2.0 million and recognized an additional $10.2 million in decommissioning obligations.

 

No indicators of impairment were identified at March 31, 2024, and as such no impairment test was performed.

 

7.

DECOMMISSIONING LIABILITIES

 

The Company’s decommissioning liabilities result from net ownership interests in oil assets including well sites, gathering systems and processing facilities. During the three months ended March 31, 2024, the Company acquired producing gas assets in the Hangingstone area and recognized $10.2 million in decommissioning obligations. The Company estimates the total undiscounted escalated amount of cash flows required to settle its decommissioning liabilities to be approximately $234.0 million (December 31, 2023 - $206.5 million). For the three months ended March 31, 2024, a credit-adjusted discount rate of 12% (December 31, 2023 -12%) and an inflation rate of 2.0% (December 31, 2023 - 2.0%) were used to calculate the decommissioning liabilities. A 1.0% change in the credit-adjusted discount rate would impact the discounted value of the decommissioning liabilities by approximately $1.8 million with a corresponding adjustment to PP&E or net income (loss). The decommissioning liabilities are estimated to be settled in periods up to year 2071. 

 

 

A reconciliation of the decommissioning liabilities is provided below:

 

As at ($ thousands)		March 31, 2024				December 31, 2023
Balance, beginning of period		$	8,449			$	7,543
Acquisition			10,203				-
Accretion expense			549				906
Balance, end of period		$	19,201			$	8,449

 

8.	RISK MANAGEMENT CONTRACTS

 

The Company’s risk management liabilities may consist of hedging instruments such as fixed price swaps and option structures, including costless collars on WTI, WCS differentials, condensate differential, natural gas and electricity swaps. The Company does not use financial derivatives for speculative purposes.

 

The Company’s obligations under its New Notes (see note 9) includes a requirement to implement a 12-month forward commodity price risk management program encompassing not less than 50% of the hydrocarbon output under the proved developed producing reserves (“PDP”) forecast in the Company's most recent reserves report, as determined by a qualified and independent reserves evaluator. This requirement is assessed on a monthly basis for the duration of time that the New Notes remain outstanding.

 

The Company’s commodity price risk management program does not involve margin accounts that require posting of margin with increased volatility in underlying commodity prices. Financial risk management contracts are measured at fair value, with gains and losses on re-measurement included in the consolidated statements of comprehensive income (loss) in the period in which they arise.

 

The Company’s financial risk management contracts are subject to master netting agreements that create the legal right to settle the instruments on a net basis. The following table summarizes the gross asset and liability positions of the Company’s individual risk management contracts that are offset in the consolidated balance sheets:

 

		As at March 31, 2024				As at December 31, 2023
(CAD$ thousands)		Liability				Liability
Gross amount		$	(39,154	)		$	(417	)
Amount offset			-				-
Risk Management contracts		$	(39,154	)		$	(417	)

 

The following table summarizes the financial commodity risk management gains and losses:

 

		Three months ended				Three months ended
($ thousands)		March 31, 2024				March 31, 2023
Realized gain (loss) on risk management contracts		$	(8,797	)		$	(180	)
Unrealized gain (loss) on risk management contracts			(38,737	)			5,023
Gain (loss) on risk management contracts		$	(47,534	)		$	4,843

 

Subsequent to December 31, 2023, the Company implemented an updated WTI hedging program for 2024, including the replacement of previous WTI costless collar contracts with 11,500 bbls/d of WTI fixed price swaps with a swap price of US$70.94/bbl. There were no cash costs associated with the updated WTI hedging program for 2024, as the fair market value was reflected within the fixed swap price for the updated WTI hedges for 2024.

 

 

As at March 31, 2024, the following financial commodity risk management contracts were in place:

 

		WTI- Costless Collar												WTI Fixed Price Swaps
Term		Volume (bbls/d)				Put Strike Price (US$/Bbl)				Call Strike Price ($US/Bbl)				Volume (bbls/d)				Swap Price (US$/bbl))
April – Dec 2024			-				-				-				11,500			$	70.94
Q1 2025			8,600			$	58.23			$	84.46				-				-

 

Subsequent to March 31, 2024, Greenfire entered into the following financial commodity risk management contracts:

 

						WTI- Costless Collar
		Volume				Put Strike Price				Call Strike Price
Term		(bbls/d)				(US$/Bbl)				($US/Bbl)
April 2025			8,600			$	60.50			$	87.45
May 2025			4,300			$	58.50			$	84.40

 

The following table illustrates the potential impact of changes in commodity prices on the Company’s net loss, before tax, based on the financial risk management contracts in place at March 31, 2023:

 

		Change in WTI
As at March 31, 2024 ($thousands)		Increase of $5.00/bbl				Decrease of $5.00/bbl
Increase (decrease) to fair value of commodity risk management contracts		$	(15,813	)		$	15,813

 

The Company’s commodity risk management contracts are held with two large reputable financial institutions. As a result, the Company concluded that credit risk associated with its commodity risk management contracts is low.

 

9.	LONG-TERM DEBT

 

Senior Secured Notes

 

On September 20, 2023, Greenfire issued US$300 million of senior secured notes (the “New Notes”). The New Notes bear interest at the fixed rate of 12.00% per annum, payable semi-annually on April 1 and October 1 of each year commencing on April 1, 2024, and mature on October 1, 2028. The New Notes are secured by a first priority lien on substantially all the assets of the Company and its wholly owned subsidiaries. Subject to certain exceptions and qualifications, the indenture governing the New Notes contain certain covenants that limited the Company’s ability to, among other things, incur additional indebtedness, pay dividends, redeem stock, make certain restricted payments, and disposals and transfers of assets. The indenture governing the New Notes contains minimum hedging requirements of 50% of the forward 12 calendar month PDP forecasted production as prepared to the Canadian standard using NI 51-101 until principal debt is less than US$100 million and limit capital expenditures to CAD$100 million annually until the principal outstanding is less than US$150 million. The New Notes are not subject to any financial covenants.

 

 

Under the indenture governing the New Notes, the Company is required to redeem the New Notes at 105% of the principal amount plus accrued and unpaid interest with 75% of Excess Cash Flow (as defined in the New Notes Indenture) every six-months, with the first payment due by August 15, 2024. If consolidated indebtedness is less than US$150 million, the required redemption is reduced to 25% of Excess Cash Flow to be paid for every six-month period until the principal owing on the New Notes is US$100 million.

 

The Company is exposed to foreign exchange rate fluctuations on the principal value and interest payments in respect of its New Notes. As of March 31, 2024, a 10% change to the value of the Canadian dollar relative to the US dollar would result in a foreign exchange gain (loss) of approximately $40.7 million (December 31, 2023 - $39.7 million).

 

The New Notes are subject to fixed interest rates and are not exposed to changes in interest rates.

 

As at March 31, 2024, the carrying value of the Company’s long-term debt was $387.9 million and the fair value was $432.9 million (December 31, 2023 carrying value – $376.4 million, fair value - $394.1 million).

 

As at March 31, 2024 the Company was compliant with all covenants.

 

As at		March 31,				December 31,
($ thousands)		2024				2023
US dollar denominated debt:
New 12.00% senior notes issued at 98% of par (USD$300 million at March 31, 2024 and December 31, 2023)(1)		$	406,500			$	396,780
Unamortized debt discount and debt issue costs			(18,534	)			(20,430	)
Total term debt		$	387,966			$	376,350
Current portion of long-term debt			74,593				44,321
Long-term debt		$	313,373			$	332,029

 

(1)	The U.S. dollar denominated debt was translated into Canadian dollars as at period end exchange rates.

 

Greenfire may redeem some or all of the New Notes after October 1, 2025, at 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest plus a “make whole” premium, as set out in the table below. In addition, at any time before October 1, 2025, the Company may redeem up to 40% of the aggregate principal amount of the notes using the net proceeds from certain equity issuances as a redemption price equal to 112% of the principal amount plus accrued and unpaid interest.

 

The following table discloses the redemption amount including the “make whole” premium on redemption of the New Notes:

 

		US$300 million 12.00% senior notes
On or after October 1, 2025 to October 1, 2026			106.0
On or after October 1, 2026 to October 1, 2027			103.0
On or after October 1, 2027			100.0

 

Senior Credit Facility

 

On September 20, 2023, Greenfire entered into a reserve-based credit facility (the “Senior Credit Facility”) comprised of an operating facility and a syndicate facility. Total credit available under the Facility is $50 million comprising of $20 million operating facility and $30 million syndicated facility.

 

 

The Senior Credit Facility is a committed facility available on a revolving basis until September 20, 2024, which revolving period may be extended at the Company’s request, and subject to the lenders’ consent. If the revolving period is not extended, the undrawn portion of the facility will be cancelled and any amounts outstanding would be repayable at the end of the non-revolving term, being September 30, 2025. The Revolving Facility is subject to a semi-annual borrowing base review, occurring in May and November of each year. The borrowing base is determined based on the lenders’ evaluation of the Company’s proved developed producing petroleum and natural gas reserves and their commodity price outlook at the time of each renewal.

 

The Senior Credit Facility is secured by a first priority security interest on substantially all the assets of the Corporation and is senior in priority to the New Notes. The Senior Credit Facility contains certain covenants that limit the Company’s ability to, among other things, incur additional indebtedness, create or permit liens to exist, make certain restricted payments, and dispose of or transfer assets. The Senior Credit Facility is not subject to any financial covenants.

 

Amounts borrowed under the Senior Credit Facility bear interest at a floating rate based on the applicable Canadian prime rate, US base rate, secured overnight financing rate or bankers’ acceptance rate, plus a margin of 2.75% to 6.25% based on Debt to EBITDA ratio. A standby fee on the undrawn portion of the Senior Credit Facility ranges from 0.6875% to 1.5625% based on Debt to EBITDA ratio. As at March 31, 2024 and December 31, 2023, the Company had no amounts drawn under the Senior Credit Facility.

 

Letter of Credit Facility

 

During the fourth quarter of 2023, Greenfire entered into an unsecured $55 million letter of credit facility (the “EDC Facility”) with a Canadian bank that is supported by a performance security guarantee from Export Development Canada (“EDC”). The EDC Facility is available on a demand basis and letters of credit issued under this facility incur an issuance and performance guarantee fee of 4.25%. As at March 31, 2024, the Company had $54.3 million (December 31, 2023 - $54.3 million) in letters of credit outstanding under the Letter of Credit Facility.

 

10.

SHARE CAPITAL AND PER SHARE AMOUNTS

 

Share capital

 

As at March 31, 2024 the Company’s authorized share capital consists of an unlimited number of common shares without a nominal or par value. The following table summarizes the changes to the Company’s common share capital:

 

		Three months ended March 31, 2024								Year ended December 31, 2023
		Number of shares				Amount				Number of shares				Amount
Shares outstanding
Balance, beginning of period			68,642,515			$	158,515				1			$	15
Issuance of new common shares per De-Spac Transaction			-				-				43,690,533				-
Issuance for exercise of bond warrants			-				-				15,769,183				38,911
Issuance to MBSC shareholders – Class A and Class B			-				-				5,005,707				62,959
Issuance of new common shares for PIPE investment			-				-				4,177,091				56,630
Issued on exercise of performance warrants			313,944				877				-				-
Issued on vested RSUs			17,400				118				-				-
Balance, end of period			68,973,859			$	159,510				68,642,515			$	158,515

 

 

Per share amounts

 

The Company uses the treasury stock method to determine the dilutive effect of performance and bondholder warrants. Under this method, only “in-the-money" dilutive instruments impact the calculation of diluted income per share. Net loss per share was calculated using the historical weighted average shares outstanding, scaled by the applicable exchange ratio following the completion of the De-Spac Transaction.

 

The following table summarizes the Company’s basic and diluted net loss per share:

 

		Three months ended				Three months ended
		March 31, 2024				March 31, 2023
Weighted average shares outstanding- basic			68,684,273				48,911,099
Weighted average shares outstanding- diluted			68,684,273				48,911,099
Basic $ per share		$	(0.68	)		$	(0.34	)
Diluted $ per share		$	(0.68	)		$	(0.34	)

 

In computing the diluted net loss per share for the three months March 31, 2024, the Company excluded the effect of 7,526,667 New Greenfire Warrants, 3,004,291 Performance Warrants and 1,112,023 RSUs, PSUs and DSUs as their effect are anti-dilutive. (March 31, 2023 - 3,899,716 Performance Warrants and 17,601,959 Bond Warrants).

 

11.

WARRANTS AND SHARE UNITS

 

Performance warrants

 

As at March 31, 2024, the table below summarizes the outstanding Performance Warrants:

 

		Year ended March 31, 2024								Year ended December 31, 2023
		Number of Warrants				Weighted Average Exercise Price				Number of Warrants				Weighted Average Exercise Price
Performance Warrants outstanding
Balance, beginning of period			3,617,016			$	3.15				3,895,449			$	2.89
Performance warrants issued			-				-				186,257				8.35
Performance warrants exercised			(612,725	)			2.71				-				-
Performance warrants forfeited			-				-				(38,820	)			3.34
Performance warrants cancelled			-				-				(425,870	)			3.15
Balance, end of period			3,004,291			$	3.27				3,617,016			$	3.15
Common shares issuable on exchange			3,004,291				-				3,617,016				-

 

The Performance Warrants expire 10 years after the issuance date and became fully vested with the closing of the De-Spac Transaction on September 20, 2023. The Performance Warrants plan was replaced by the omnibus share incentive plan (the “Incentive Plan”). For the three months ended March 31, 2024, $nil were recorded in stock-based compensation in relation to the Performance Warrant plan (March 31, 2023 - $0.3 million).

 

 

Restricted Share Units, Performance Share Units and Deferred Share Units

 

The Incentive Plan provides for the granting of deferred share units (‘DSUs”), performance share units (“PSUs”), restricted share units (“RSUs”) and options and the aggregate maximum number of Common Shares reserved for issuance thereunder is limited to 10% of the Company’s issued and outstanding Common Shares, less any Common Shares underlying securities granted under any other share compensation arrangements of the Company, if any, including Common Shares issuable on exercise of Performance Warrants. RSUs, PSUs and DSUs can be settled in either cash or shares issued from treasury and is at the sole discretion of the Board of Directors. It is the Board of Director’s intention to settle all incentive units with shares issued from treasury, therefore the incentive units have been accounted for as an equity-settled stock-based plan.

 

RSUs granted under the Incentive Plan typically vest annually in thirds over a three-year period, have no exercise price and automatically settle at each vesting date in either cash or shares issued from treasury at the Board of Director’s discretion. Of the 163,012 RSUs granted on February 19, 2024, on a one-time basis 17,400 vested within 30 days.

 

		March 31				December 31
		2024				2023
RSUs outstanding, beginning of period			-				-
Granted			163,012				-
Vested and converted to shares			(17,400	)			-
Forfeited			(688	)			-
Balance, March 31, 2024			144,924				-

 

The average fair value of RSUs granted during the three months ended March 31, 2024 was based on current share price at time of grant. During the three months ended March 31, 2024, $0.3 million was recognized in stock-based compensation.

 

PSUs granted under the Incentive Plan vest on the third anniversary date of the grant date, provided that the Company satisfies certain performance criteria identified by the Board of Directors, which are set and measured to establish a performance multiplier from zero to two.

 

		March 31				December 31
		2024				2023
PSUs outstanding, beginning of period			-				-
Granted			830,288				-
Forfeited			(20,862	)			-
Balance, March 31, 2024			809,426				-

 

The average fair value of PSUs granted during the three months ended March 31, 2024 was based on current share price at date of grant along with estimates of the probability of certain production and share price targets being reached. During the three months ended March 31, 2024, $0.5 million was recognized in stock-based compensation.

 

DSUs are issued to independent members of the Board of Directors and vest immediately upon grant, however the units cannot be settled until the director ceases to be a director.

 

 

		March 31				December 31
		2024				2023
DSUs outstanding, beginning of period		-				-
Granted			10,213				-
Forfeited			-				-
Balance, March 31, 2024			10,213				-

 

The average fair value of DSUs granted during the three months ended March 31, 2024 was based on current share price at time of grant. During the three months ended March 31, 2024, $0.1 million was recognized in stock-based compensation.

 

12.

WARRANT LIABILITY

 

As at March 31, 2024, there were 7,526,667 Greenfire Warrants outstanding. The Greenfire Warrants are reassessed at the end of each reporting period with subsequent changes in fair value being recognized through the statement of comprehensive income (loss). As at March 31, 2024, the 7,526,667 outstanding Greenfire Warrants were revalued based on the closing share price of US$5.97 per common share of Greenfire. During the three months ended March 31, 2024, the fair value of the warrant liability increased by $6.4 million (March 31, 2023 - $nil). The following table reconciles the warrant liability.

 

		Three months ended								Year ended
		March 31, 2024								December 31, 2023
		Number of								Number of
($ thousands)		Warrants				Amount				Warrants				Amount
Balance, beginning of year			7,526,667			$	18,630				-			$	-
Warrants issued			-				-				5,000,000				35,644
MBSC warrants converted			-				-				2,526,667				17,959
Change in fair value			-				6,379				-				(34,973	)
Balance, end of period			7,526,667			$	25,009				7,526,667			$	18,630
Common shares issuable on exercise			7,526,667				-				7,526,667				-

 

The fair value of each Greenfire Warrant was estimated on its grant date and period end dates using the Black Scholes Merton valuation model with the following assumptions:

 

		March 31, 2024				December 31, 2023
		Assumptions				Assumptions
Share Price $USD		$	5.97			$	4.86
Average risk-free interest rate			3.5	%			3.17	%
Average expected dividend yield			-				-
Average expected volatility (1)			68	%			69	%
Average expected life (years)			4.5				4.75

 

(1)

Expected volatility has been based on historical share volatility of similar market participants

 

 

13.

SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table reconciles the net changes in non-cash working capital and other liabilities from the consolidated balance sheet to the consolidated statement of cash flows:

 

As at		March 31,				March 31,
($ thousands)		2024				2023
Change in accounts receivable		$	(17,877	)		$	(1,536	)
Change in inventories			1,391				3,808
Change in prepaid expenses and deposits			2,705				1,279
Change in accounts payable and accrued liabilities			737				(10,732	)
			(13,044	)			(7,181	)
Other items impacting changes in non-cash working capital:
Performance warrants withholding taxes			(780	)			-
Unrealized foreign exchange gain (loss) related to working capital			67				3
			(13,757	)			(7,178	)
Related to operating activities			(10,525	)			(5,225	)
Related to investing activities (accrued additions to PP&E)			(3,232	)			(1,953	)
Net change in non-cash working capital			(13,757	)			(7,178	)
Cash interest paid (included in operating activities)		$	(25,881	)		$	(17,430	)
Cash interest received (included in operating activities)		$	1,504			$	123

 

14.

RELATED PARTY TRANSACTION

 

In April 2024, the Company entered into a consulting agreement with M3-Brigage Sponsor III, LP (the "MBSC Sponsor") for the provision of consulting services to the Company relating to, among other things, the Company's transition to being a public company, maximizing the value of the Company, and educating the market about the Company and its value. Matthew Perkal, a member of the Company Board who was nominated to the Company Board by MBSC Sponsor pursuant to its rights under the Investor Rights Agreement, is Head of SPACs and Special Situations at Brigade Capital Management, LP, an affiliate of MBSC Sponsor and, prior to the Business Combination, served as the Chief Executive Officer of M3-Brigade Acquisition III Corp. The term of the MBSC Sponsor Consulting Agreement continues until the earlier of April 18, 2029 and the date MBSC Sponsor no longer holds any "Registrable Securities" in the Company (as defined in the Investor Rights Agreement). As compensation for the consulting services, the Company had originally agreed to issue 500,000 Common Shares which was subsequently amended to grant 500,000 RSUs under the Company’s Incentive Plan to MBSC Sponsor. The RSUs will vest in quarterly instalments of 125,000 each. The terms of the MBSC Sponsor Consulting agreement were reviewed and approved by the disinterested directors of the Company Board. The fair market value of the securities to be issued to MBSC Sponsor was $4.35 million, based on a five-day weighted average price immediately preceding the date of the date of grant.

 

 

Corporate Information

 

Directors		Solicitors
Julian McIntyre (1)		Burnet, Duckworth, & Palmer LLP
Jonathan Klesch		2400, 525 – 8th Avenue SW
Derek Aylesworth (2)(3)		Calgary, Alberta, Canada
Venkat Siva (3)		T2P 1G1
Matthew Perkal (3)
Robert Logan		Carter Ledyard & Milburn LLP
		41st Floor
(1)  Chair of the Board of Directors		28 Liberty Street
(2)  Chair of the Audit and Reserves Committee		New York, New York 10005
(3)  Audit and Reserves Committee
Officers		Bankers
Robert Logan MPBE, P.Eng		Bank of Montreal
President, and Chief Executive Officer		595-8 Avenue SW
		Calgary, Alberta, Canada
Tony Kraljic, CA		T2P 1G1
Chief Financial Officer
		Auditor
Kevin Millar C.E.T.
SVP Operations & Steam Chief		Deloitte LLP
		850 2nd Street SW
Albert MA P.Eng		Calgary, Alberta, Canada
SVP Engineering		T2P 0R8
		Reserve Engineers
Crystal Park P.Eng, MBA
SVP Corporate Development		McDaniel & Associates Consultants Ltd.
		2200, 255 – 5th Avenue SW
Charles R. Kraus		Calgary, Alberta, Canada
Corporate Secretary		T2P 3G6

 

Head Office

 

Suite 1900, 205 – 5th Avenue SW,

Calgary, Alberta, Canada

T2P 2V7

www.greenfireres.com

NYSE : GFR

TSX : GFR

 

 

Greenfire Resources Ltd.

2024 Q1 Financial Statements | 19

 

Exhibit 99.2

 

 

 

 

 

 

 

 

MANAGEMENT’S DISCUSSION & ANALYSIS

 

FOR THE THREE MONTHS ENDED MARCH 31, 2024

 

Greenfire Resources Ltd.

 

 

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of Greenfire Resources Ltd. (“Greenfire” or the “Company”) is dated May 15, 2024, which is the date this MD&A was approved by the Board of Directors of the Company, and should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements (“financial statements”) and notes thereto for the three months ended March 31, 2024 and 2023 and the audited consolidated financial statements for the years ended December 31, 2023 and December 31, 2022. The financial statements, including the comparative figures, were prepared in accordance with International Accounting Standards 34 “Interim Financial Reporting”.

 

This MD&A contains forward-looking information based on the Company’s current expectations and projections. For information on the material factors and assumptions underlying such forward-looking information, refer to the “Forward Looking Statements” section of this MD&A.

 

This MD&A contains non-GAAP measures which are detailed in the section entitled “Non-GAAP Measures”. They include adjusted EBITDA, adjusted EBITDA per barrel ($/bbl), operating netback, operating netback per barrel ($/bbl), operating netback, excluding realized gain (loss) risk management contracts, operating netback, excluding realized gain (loss) risk management contracts ($/bbl), adjusted funds flow, adjusted free cash flow, adjusted working capital surplus (deficit) and net debt.

 

All financial information included in this MD&A is presented in Canadian dollars (“CAD”), unless otherwise noted. Certain dollar amounts have been rounded to the nearest million dollars or thousand dollars, as noted, and tables may not add due to rounding.

 

Corporate Information

 

Greenfire is based in Canada with the Company’s registered office located in Calgary, Alberta. The Company’s principal business is the sustainable production and development of upstream energy resources from the oil sands in Canada, using in situ thermal oil production extraction techniques such as steam assisted gravity drainage (“SAGD”).

 

On December 14, 2022, Greenfire Resources Inc. (“GRI”), M3-Brigade Acquisition III Corp. (“MBSC”), a New York Stock Exchange (“NYSE”) listed special purpose acquisition company, and certain other parties entered into a definitive agreement for a business combination (the “De-Spac Transaction”), which valued Greenfire at an enterprise value of US$950.0 million. The De-Spac Transaction was consummated on September 20, 2023 and Greenfire’s common shares (“Common Shares”) commenced trading on the NYSE. On February 2, 2024, Greenfire filed a final non-offering prospectus with the Alberta Securities Commission resulting in the Company becoming a reporting issuer in the Province of Alberta. On February 8, 2024 the Common Shares commenced trading on the Toronto Stock Exchange (“TSX”) under the symbol “GFR” and Greenfire became a reporting issuer in the Province of Ontario.

 

The Company holds a 75% working interest in the Expansion Asset (as defined below) and a 100% working interest in the Demo Asset (as defined below). Unless indicated otherwise, production volumes and per unit statistics are presented throughout this MD&A on a “gross” basis as determined in accordance with National Instrument 51-101 – Standards for Disclosure for Oil and Gas Activities, which is the Company’s gross working interest basis before deduction of royalties. Dollar per barrel ($/bbl) figures presented throughout this MD&A are based upon sold bitumen barrels unless otherwise noted. The Company monitors and reviews financial information on a per barrel basis for comparability to prior period results and to analyze the Company’s competitiveness relative to its peer group.

 

GREENFIRE’S ASSETS, POSITIONING & STRATEGY

 

Greenfire is an intermediate, lower-cost and growth-oriented oil sands producer focused on the sustainable development of its Tier-1 assets in Western Canada using SAGD. Greenfire is pursuing capital-efficient and lower-risk growth through the optimization of existing production, facilities and reserves to maximize free cash flow generation. The Company has a large, long-life and relatively low decline oil sands resource base, with two producing and adjacent SAGD assets at the Hangingstone Facilities (as defined below), with expandable pipeline infrastructure in place for diluted bitumen and diluent at the Expansion Asset. These two assets are:

 

●

Expansion Asset (75% Working Interest, Operator).

 

●

Demo Asset (100% Working Interest, Operator).

 

The Company believes that the Expansion Asset and Demo Asset (together the “Hangingstone Facilities”) have a Tier-1 SAGD reservoir, meaning there is no top gas, bottom water, or lean zones (“thief zones”). Other SAGD reservoirs may have thief zones, which limit reservoir pressure and require the constant use and routine replacement of downhole pumps for production. Tier-1 SAGD reservoirs allow production to flow to the surface with natural lift, which reduces the Company’s capital and operating expenditure requirements compared to other SAGD producers, which the Company believes represents a structural cost advantage for Greenfire.

 

Greenfire’s strategy is to implement industry proven SAGD optimization techniques, concentrating on maximizing utilization of plant capacity, minimizing capital expenditure and controlling operating cost structures, to maximize the value of its Tier-1 SAGD assets. The Company believes that the Hangingstone Facilities have ample opportunities for additional value generation. Greenfire also plans to evaluate and consider additional potential prospects for further production growth, including external acquisitions that compete with the expected returns from its existing Tier-1 SAGD assets, if the Company believes they are accretive to Greenfire’s shareholders.

 

 

FIRST QUARTER 2024

 

Corporate Highlights:

 

●

Delivered consolidated bitumen production of 19,667 barrels per day (“bbls/d”) in Q1 2024 (20,586 bbls/d – Q1 2023), an increase of over 2,300 bbls/d from the Q4 2023 average of 17,335 bbls/d. These results reflect strong production performance from the Refill drilling program that began in August 2023 and surface facility optimizations at the Expansion Asset, partially offset by unplanned impacts from the five previously disclosed downhole temperature sensor failures.

 

●

Oil sales were $201.0 million during the first quarter of 2024, relative to $179.7 million in the same period of 2023.

 

●

Operating expenses were $36.3 million during the first quarter of 2024, compared to $39.8 million in the same period in 2023.

 

●

Cash provided by operating activities was $17.1 million during the first quarter of 2024, compared to cash used by operating activities of $4.5 million in the same period of 2023.

 

●

Adjusted funds flow(1) was $27.6 million during the first quarter of 2024, compared to $3.1 million for the same period in 2023.

 

●

Capital expenditures were $34.4 million during the first quarter of 2024, compared to $2.5 million for the same period of 2023.

 

●

Net loss totaled $46.9 million during the first quarter of 2024, compared to net loss of $16.7 million in the same period in 2023.

 

●

Adjusted EBITDA(1) was $39.3 million during the first quarter of 2024, compared to $13.3 million for the same period of 2023, included realized losses on commodity risk management contracts of $8.8 million ($0.2 million – Q1 2023).

 

●

The Company had available liquidity of approximately $140.2 million at March 31, 2024, consisting primarily of $90.2 million of cash and cash equivalents and $50.0 million of available credit under the Company’s senior reserve based credit facility provided by several financial institutions (“Senior Credit Facility”).

 

Operational Update:

 

●

In April 2024, consolidated bitumen production averaged approximately 18,360 bbls/d, reflecting temporary production impacts at the Expansion Asset owing to the previously disclosed failure of third-party downhole temperature sensors at five of the ten recently drilled Refill wells, along with production impacts from Refill well drilling operations and the ongoing shut-in of the disposal well at the Demo Asset.

 

●

In response to the recent wildfires in northern Alberta, out of an abundance of caution, Greenfire temporarily evacuated all non-essential personnel from its operated facilities on May 11th. The Company is actively monitoring the situation to ensure the protection and safety of our people and assets as the situation continues to evolve.

 

Expansion Asset

 

●

Greenfire’s working interest bitumen production at the Expansion Asset averaged approximately 16,020 bbls/d in April 2024, largely owing to the third-party downhole temperature sensor failures in five of the ten recently drilled Refill wells. The five Refill wells equipped with downhole temperature sensors that have not failed produced at an average of approximately 1,500 bbls/d per well, on a 100% working interest basis, in April 2024. Greenfire has replaced the failed downhole temperature sensors at three of five Refill wells and expects that the average productivity of these Refill wells will increase to align with the current average productivity of the remaining five Refill wells where temperature sensors have not failed.

 

●

In response to regulatory delays at the Demo Asset, Greenfire redeployed the drilling rig to focus on redevelopment activities at the Expansion Asset. This drilling program is anticipated to conclude in the third quarter of 2024, after which the Company will mobilize the drilling rig back to the Demo Asset to drill additional Refill wells.

 

●

Reservoir pressure and well productivity continue to increase at the Expansion Asset as a result of sustained high rates of non-condensable gas (“NCG”) co-injection following the Company’s debottlenecking initiatives undertaken in the second half of 2023. Greenfire expects that targeted reservoir pressure will be restored at the Expansion Asset around mid-2024.

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

 

 

Demo Asset

 

●

Greenfire’s working interest bitumen production at the Demo Asset averaged approximately 2,340 bbls/d in April 2024, primarily due to production impacts from Refill well drilling operations as well as the temporary shut-in of the disposal well.

 

●

The disposal well at the Demo Asset has been temporarily shut-in since the beginning of October 2023. With required remediation work complete, the disposal well is awaiting regulatory approval to recommence operations.

 

●

The Company successfully drilled three extended reach Refill wells with lateral lengths of approximately 2,300 meters, which is 700 meters longer than the Refills recently drilled by Greenfire at the Expansion Asset. A second disposal well was also drilled at the Demo Asset, which is awaiting regulatory approval to commence operations.

 

Financial & Operational Highlights

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Bitumen production – Expansion asset (bbls/d)			17,361				16,302
Bitumen production – Demo asset (bbls/d)			2,306				4,284
Bitumen production – Consolidated (bbls/d)			19,667				20,586
Oil sales			200,990				179,668
Oil sales ($/bbl)			75.41				64.92
Operating netback(1)			44,649				17,352
Operating netback ($/bbl)(1)			24.69				9.11
Operating expenses			36,348				39,764
Operating expenses ($/bbl)			20.10				20.87
Cash provided (used) by operating activities			17,064				(4,495	)
Adjusted funds flow(1)			27,589				3,057
Cash provided (used) by investing activities			(37,681	)			(8,521	)
Capital expenditures			34,449				2,518
Net income (loss) and comprehensive income (loss)			(46,915	)			(16,678	)
Per share – basic			(0.68	)			(0.34	)
Per share – diluted			(0.68	)			(0.34	)
Adjusted EBITDA(1)			39,346				13,266
Total assets(2)			1,193,953				1,147,984
Total non-current financial liabilities(2)			337,999				205,482
Common shares outstanding, end of period			68,973,859				48,911,099
Weighted average common shares outstanding- diluted			68,684,273				48,911,099

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

(2)

As at March 31, 2024 and March 31, 2023.

 

Liquidity and Balance Sheet

 

		Three months ended				Year ended
		March 31,				December 31,
($ thousands)		2024				2023
Cash and cash equivalents			90,234				109,525
Available credit facilities(1)			50,000				50,000
Face value of Long-term debt(2)			406,500				396,780

 

(1)

As at March 31, 2024 the Company had $50.0 million (December 31, 2023 - $50.0 million) of available credit under the Senior Credit Facility, of which nil was drawn as of March 31, 2024 (December 31, 2023 – nil).

(2)

As at March 31, 2024, the 2028 Notes (as defined below) had a face value of US$300.0 million (December 31, 2023 – US$300.0 million) and were converted into Canadian dollars as at period end exchange rates (see “Capital Resources and Liquidity - Long Term Debt”).

 

 

OUTLOOK

 

Corporate 2024 Outlook

 

●

Greenfire is pleased to reiterate the previously announced outlook for 2024 (“2024 Outlook”), including forecasted ranges for production and capital expenditures, which is underpinned by the Company’s production growth plan that is anticipated to result in meaningful adjusted free cash flow generation over the balance of 2024, assuming continued strong commodity pricing, particularly for heavy oil. The evolving wildfire situation in northern Alberta represents a risk to the Company’s 2024 Outlook.

 

●

The Company remains committed to prioritizing debt repayment and intends to reduce debt in the near-term using 75% of excess cash flow to semi-annually redeem a portion of the 2028 Notes (as defined below) until total indebtedness is less than US$150 million.

 

Reiterated 2024 Outlook and Projected Profitability Scenario:
			2024 Outlook
Annual Production Average			22,000 – 25,000 bbls/d
Production Growth Over Annual 2023			25% – 40%
Capital Expenditures			$70 – $90 million

 

DE-SPAC TRANSACTION

 

On September 20, 2023, Greenfire, GRI, MBSC, DE Greenfire Merger Sub Inc. (“DE Merger Sub”) and 2476276 Alberta ULC (“Canadian Merger Sub”), completed a De-Spac Transaction pursuant to a business combination agreement dated December 14, 2022, as amended (the “Business Combination Agreement”) with MBSC. DE Merger Sub and Canadian Merger Sub were incorporated in December 2022 for the purposes of completing the De-Spac Transaction.

 

Pursuant to the De-Spac Transaction, Canadian Merger Sub amalgamated with and into GRI, with GRI continuing as the surviving corporation and becoming a direct, wholly-owned subsidiary of Greenfire and DE Merger Sub merged with and into MBSC with MBSC continuing as the surviving corporation and becoming a direct, wholly-owned subsidiary of Greenfire. As of January 1, 2024 GRI was amalgamated with Greenfire Resources Operating Corporation, a wholly owned direct subsidiary of Greenfire. As of April 4, 2024, MBSC was legally dissolved into Greenfire.

 

Greenfire has been identified as the acquirer for accounting purposes. As MBSC does not meet the definition of a business under IFRS 3 Business Combinations, the transaction was accounted for pursuant to IFRS 2, Share Based Payment. On closing of the De-Spac Transaction, the Company accounted for the excess of the fair value of the Common Shares issued to MBSC shareholders as consideration, over the fair value of MBSC’s identifiable net assets at the date of closing, resulting in $106.5 million (US$79.4 million) being recognized for the year ended December 31, 2023 as a listing expense. For the three months ended March 31, 2024, the Company expensed nil (March 31, 2023 - $2.3 million) in transaction costs related to the De-Spac Transaction.

 

 

RESULTS OF OPERATIONS

 

Bitumen Production and Oil Sales

 

		Three months ended March 31,
(Average barrels per day, unless otherwise noted)		2024				2023
Bitumen Production – Expansion Asset			17,361				16,302
Bitumen Production – Demo Asset			2,306				4,284
Total Bitumen Production			19,667				20,586
Total Diluted Bitumen Sales			28,602				29,656
Total Non-diluted Bitumen Sales			685				1,093
Total Sales Volumes			29,287				30,749

 

Production

 

The Company’s average bitumen production was 19,667 bbls/d for the three months ended March 31, 2024 lower than 20,586 bbls/d for the same period in 2023.

 

●

At the Expansion Asset, average bitumen production was 17,361 bbls/d during the first quarter of 2024, higher than 16,302 bbls/d during the first quarter of 2023, mainly due to increased production from the extended Refill wells. Production was partially hampered during the first quarter of 2024 as the Company encountered third-party downhole temperature sensor failures in five of the recently drilled Refill wells. Greenfire has replaced the failed downhole temperature sensors at three of five Refill wells and expects that the average productivity of these Refill wells will increase in the second half of 2024 to align with the current average productivity of the remaining five Refill wells where temperature sensors have not failed.

 

●

At the Demo Asset, average bitumen production of 2,306 bbls/d for the first quarter of 2024 was lower than 4,284 bbls/d from the same period in 2023 mainly due to the temporary shut-in of the disposal well impacting production by approximately 1,000 bbls/d, combined with planned well reductions to facilitate the Refill wells drilling program. Subject to regulatory approval the disposal well is expected to recommence operations in 2024.

 

Commodity Prices

 

The prices received for Greenfire’s crude oil production directly impact earnings, cash flow and financial position.

 

		Three months ended March 31,
Benchmark Pricing		2024				2023
Crude oil (US$/bbl)
WTI(1)			76.96				76.13
WCS differential to WTI			(19.31	)			(24.88	)
WCS(2)			57.65				51.25
Edmonton Condensate (C5+)			73.31				80.00
Natural gas ($/GJ)
AECO 5A			2.36				3.05
Electricity ($/MWh)
Alberta power pool			98.89				141.42
Foreign exchange rate(3)
US$:CAD$			1.3488				1.3520

 

(1)

As per NYMEX oil futures contract

(2)

Reflects average heavy oil prices for the specified periods at Hardisty, Alberta

(3)

Average exchange rates for the specified periods as per the Bank of Canada.

 

WCS

 

Revenue from Greenfire’s bitumen production is closely linked to WCS, the pricing benchmark for Canadian heavy oil at Hardisty, Alberta. WCS trades at a discount to WTI known as the WCS differential, which fluctuates based on heavy oil production, inventory levels, infrastructure egress capacity, and refinery demand in Canada and the United States, among other factors.

 

 

Condensate

 

To facilitate pipeline transportation of Greenfire’s produced bitumen, the Company uses condensate as diluent for blending at the Expansion Asset, which is from Edmonton and delivered via the Inter Pipeline Polaris Pipeline. The price of condensate is historically within approximately 5% of the price of WTI and is typically higher in winter months owing to increased diluent requirements in colder temperatures relative to warmer summer months.

 

Oil Sales

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Diluted bitumen sales			196,980				175,345
Bitumen sales			4,010				4,323
Oil Sales			200,990				179,668
- ($/bbl)			75.41				64.92

 

Greenfire’s oil sales include blended bitumen sales from the Expansion Asset and diluted and non-diluted bitumen sales from the Demo Asset. At the Demo Asset volumes can be transported to multiple potential sales locations, including both pipeline and rail sales points, depending on the economics of each option at the time of sale. The Company commissioned a bitumen truck off-loading facility (“Truck Rack”) at the Expansion Asset that can receive up to approximately 5,000 bbls/d of bitumen production (non-diluted bitumen) from the Demo Asset that is blended with the Expansion Asset production and sold via pipeline.

 

The Company recorded oil sales of $201.0 million in the first quarter of 2024, compared to $179.7 million during the same period in 2023 mainly due to higher realized WCS benchmark oil prices, partially offset with lower production volumes.

 

Royalties

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Royalties			6,315				4,502
- ($/bbl)			3.49				2.36

 

Royalties paid by the Company are crown royalties to the Province of Alberta. Alberta oil sands royalty projects are based on government prescribed pre and post payout⁽¹⁾ royalty rates, which are determined on a sliding scale using the Canadian dollar equivalent WTI benchmark price.

 

Royalties for a pre-payout project are based on a monthly calculation that applies a royalty rate (ranging from one percent to nine percent, based on the Canadian dollar equivalent WTI benchmark price) to the gross revenues from the project. Gross revenues are a function of sales revenues less diluent costs and transportation costs. The Expansion Asset is a pre-payout project.

 

Royalties for a post-payout project are based on an annualized calculation that uses the greater of: (1) the gross revenues multiplied by the applicable royalty rate (one percent to nine percent, based on the Canadian dollar equivalent WTI benchmark price); or (2) the net revenues of the project multiplied by the applicable royalty rate (25 percent to 40 percent, based on the Canadian dollar equivalent WTI benchmark price). Net revenues are a function of sales revenues less diluent costs, transportation costs, and allowable operating and capital costs. While the Demo Asset is a post-payout project, due to the carry forward of previous years costs, it is currently assessed under scenario (1) discussed above, for three month period ended March 31, 2024. The Company’s Demo Asset may become assessable under scenario (2) later in 2024, depending on actual production performance, oil prices and costs.

 

First quarter 2024 royalties of $3.49/bbl were higher than $2.36/bbl for the same period in 2023, attributable to higher realized oil prices.

 

Risk Management Contracts

 

The Company is exposed to commodity price risk on its oil sales and energy operating costs due to fluctuations in market prices. The Company continues to execute a risk management program that is primarily designed to reduce the volatility of revenue and cash flow, generate sufficient cash flows to service debt obligations and fund the Company’s operations. The Company’s risk management liabilities may consist of hedging instruments such as fixed price swaps and option structures, including costless collars on WTI, WCS differentials, condensate differential, natural gas and electricity swaps. The Company does not use financial derivatives for speculative purposes.

 

(1)

The payout status will either be pre-payout (when cumulative costs exceed cumulative revenues) or post-payout (once cumulative revenues first equal or exceed cumulative costs).

 

 

The Company’s obligations under the indenture governing the 2028 Notes (as outlined in the “Capital Resources and Liquidity – Long Term Debt” section of this MD&A), includes a requirement to implement and maintain a twelve month forward commodity price risk management program encompassing not less than 50% of the hydrocarbon output under the proved developed producing reserves (“PDP”) forecast in the Company’s most recent reserves report, as determined by a qualified and independent reserves evaluator.

 

The Company’s commodity price risk management program does not involve margin accounts that require posting of margin, including in scenarios of increased volatility in underlying commodity prices. Financial risk management contracts are measured at fair value, with gains and losses on re-measurement included in the consolidated statements of comprehensive income (loss) in the period in which they arise.

 

Financial Management Contracts

 

The following table summarizes the gross liability positions of the Company’s individual risk management contracts that are offset in the consolidated balance sheets:

 

		As at March 31,				As at December 31,
		2024				2023
($ thousands)		Liability				Liability
Gross amount			(39,154	)			(417	)
Risk management contracts			(39,154	)			(417	)

 

The Company’s financial risk management contracts are subject to master netting agreements that create the legal right to settle the instruments on a net basis. The fair value of the risk management contracts resulted in a current liability of $39.2 million at March 31, 2024.

 

Subsequent to December 31, 2023, the Company implemented an updated WTI hedging program for 2024, including the replacement of previous WTI costless collar contracts with 11,500 bbls/d of WTI fixed price swaps with a swap price of US$70.94/bbl. There were no cash costs associated with the updated WTI hedging program for 2024, as the fair market value was reflected within the fixed swap price for the updated WTI hedges for 2024.

 

Outstanding Financial Risk Management Contracts at March 31, 2024

 

		WTI – Fixed Price Swaps								WTI – Costless Collar
Term		Volume (bbls/d)				Swap Price (US$/bbl				Volume (bbls/d)				Put Strike Price (US$/bbl)				Call Strike Price (US$/bbl)
Q2 2024			11,500			$	70.94				-				-				-
Q3 2024			11,500			$	70.94				-				-				-
Q4 2024			11,500			$	70.94				-				-				-
Q1 2025			-				-				8,600			$	58.23			$	84.46

 

Financial Risk Management Contracts subsequent to March 31, 2024

 

		WTI – Costless Collar
Term		Volume (bbls/d)				Put Strike Price (US$/bbl)				Call Strike Price (US$/bbl)
April 2025			8,600			$	60.50			$	87.45
May 2025			4,300			$	58.50			$	84.40

  

Realized and Unrealized Gain (Loss) on Risk Management Contracts

 

		Three months ended March 31,
($ thousands)		2024				2023
Realized gain (loss)			(8,797	)			(180	)
Unrealized gain (loss)			(38,737	)			5,023
Risk management contracts gains (losses)			(47,534	)			4,843

 

 

Financial contracts settled in the period result in realized gains or losses based on the market price compared to the contract price and the notional volume outstanding. Changes in the fair value of unsettled financial contracts are reported as unrealized gains or losses in the period as the forward markets for commodities fluctuate and as new contracts are executed.

 

In the three months ended March 31, 2024, the Company recorded total risk management contract losses of $47.5 million, compared to total risk management contract gains of $4.8 million for the same period in 2023.

 

●

$8.8 million realized risk management contracts loss ($0.2 million realized loss in the same period of 2023) as market prices for WTI settled at levels above the Company’s risk management contracts during the quarter.

 

●

$38.7 million unrealized loss on risk management contracts ($5.0 million unrealized gain in the same period of 2023) was primarily a result of the market prices for WTI settling at levels below those set at the end of the fourth quarter of 2023.

 

Diluent Expense

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Diluent expense			91,682				101,856
- ($/bbl)			14.97				24.08

 

In order to facilitate pipeline transportation of bitumen, the Company uses condensate as diluent for blending at the Expansion Asset and for trucked volumes from the Demo Asset that are delivered to the Truck Rack. Greenfire’s diluent expense includes the cost of diluent plus the pipeline transportation for the diluent from Edmonton to the Expansion Asset.

 

The Company’s diluent expense in the first quarter of 2024 was $14.97/bbl, lower than $24.08/bbl in the comparative period of 2023.

 

Transportation and Marketing Expense

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Marketing fees			2,282				3,001
Oil transportation expense			10,917				13,013
Transportation and marketing			13,199				16,014
Marketing fees ($/bbl)			1.26				1.57
Oil transportation expense ($/bbl)			6.04				6.83
Transportation and marketing ($/bbl)			7.30				8.40

 

Transportation expense at the Expansion Asset includes the costs to move production from the facility to the sales point in Edmonton, Alberta. At the Demo Asset, transportation expenses relate to the trucking of bitumen from the facility to various pipeline and rail sales points, including to the Truck Rack.

 

Greenfire has entered into exclusive marketing contracts with a large reputable international energy marketing company. The exclusive marketing services at the Expansion Asset expire in October 2028 and include the purchase of all blended bitumen produced, the supply of all diluent and the facilitation of all pipeline transportation and storage costs. The exclusive marketing services at the Demo Asset expire in April 2026 and include the purchase of all bitumen produced, and the facilitation of all bitumen transportation. In addition to the marketing fees, production at the Demo Asset is further subject to additional costs associated with the marketing contract that include royalty incentive and performance fees.

 

Transportation and marketing expense was $7.30/bbl in the first quarter of 2024, lower than $8.40/bbl for the same period in 2023, primarily due to lower pipeline supplier tariffs.

 

 

Operating Expenses

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Operating expenses – energy			12,506				17,111
Operating expenses – non-energy			23,842				22,653
Operating expenses			36,348				39,764
Operating expenses – energy ($/bbl)			6.92				8.98
Operating expenses – non-energy ($/bbl)			13.18				11.89
Operating expenses ($/bbl)			20.10				20.87

 

Operating expenses include energy operating expenses and non-energy operating expenses.

 

●

Energy operating expenses reflect the cost of natural gas to generate steam and to support reservoir pressure through NCG co-injection to enhance oil production and recovery as well as electricity to operate the Company’s facilities.

 

●

Non-energy operating expenses relate to production-related operating activities, including staff, contractors and associated travel and camp costs, chemicals and treating, insurance, equipment rentals, maintenance and site administration, among other costs.

 

The Company’s energy operating expenses for the three months ended March 31, 2024 were $6.92/bbl, which was lower than the comparative period in 2023 of $8.98/bbl. The lower per barrel energy operating expenses in 2024, were primarily related to lower natural gas and electricity prices.

 

Non-energy operating expenses for the three months ended March 31, 2024 were $13.18/bbl, higher than the comparative period in 2023 of $11.89/bbl. The higher per barrel non-energy operating expenses in 2024 was primarily the result of the remediation work on the disposal well at the Demo Asset, inflationary pressures on the costs of goods and services, combined with lower sales volumes for the three months ended March 31, 2024.

 

Operating Netback⁽¹⁾

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Oil sales			200,990				179,668
Diluent expense			(91,682	)			(101,856	)
Transportation and marketing			(13,199	)			(16,014	)
Royalties			(6,315	)			(4,502	)
Operating expenses			(36,348	)			(39,764	)
Operating netback(1), excluding realized gain (loss) risk management contracts			53,446				17,532
Realized gain (loss) risk management contracts			(8,797	)			(180	)
Operating netback(1)			44,649				17,352
Oil sales ($/bbl)			75.41				64.92
Diluent expense ($/bbl)			(14.97	)			(24.08	)
Transportation and marketing ($/bbl)			(7.30	)			(8.40	)
Royalties ($/bbl)			(3.49	)			(2.36	)
Operating expenses ($/bbl)			(20.10	)			(20.87	)
Operating netback(1), excluding realized gain (loss) risk management contracts ($/bbl)			29.55				9.21
Realized gain (loss) risk management contracts ($/bbl)			(4.86	)			(0.09	)
Operating netback ($/bbl)(1)			24.69				9.12

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

 

 

Oil sales is a GAAP measure that is the most directly comparable measure to operating netback⁽¹⁾, which is a non-GAAP measure.

 

During the three months ended March 31, 2024, the Company had oil sales of $201.0 million, compared to oil sales of $179.7 million, during the comparative period in 2023.

 

Operating netback⁽¹⁾ for the three months ended March 31, 2024 was $24.69/bbl, higher than the same period in 2023 of $9.12/bbl. The higher per barrel operating netback⁽¹⁾ in the first quarter of 2024, compared to the same period in 2023 was primarily due to higher realized WCS benchmark oil prices, in addition to lower diluent costs per barrel from lower Condensate prices, partially offset by higher realized risk management contract losses.

 

General & Administrative Expenses

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
General and administrative expenses			4,749				2,501
- ($/bbl)			2.63				1.31

 

General and administrative (“G&A”) expenses include head office and corporate costs such as salaries and employee benefits, office rent, independent third-party audit, engineering services and may also include expenses related to corporate strategic initiatives if any, among other costs. G&A expenses primarily fluctuate with head office staffing levels.

 

G&A expenses for the three months ended March 31, 2024, were $2.63/bbl, which was higher than the comparative period in 2023 of $1.31/bbl. The increase in G&A expenses per barrel was primarily due to the listing of the Common Shares on the TSX and other related public company expenditures, combined with higher employee-related costs. The increase in G&A expenses per barrel was also due to lower sales volumes for the three months ended March 31, 2024 compared to the same period in 2023.

 

Stock-based Compensation

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Stock-based compensation			852				325
- ($/bbl)			0.47				0.17

 

The Company recorded stock-based compensation of $0.9 million in relation to the deferred share units (“DSUs”), performance share units (“PSUs”) and restricted share units (“RSUs” and together with the DSUs and PSUs, the “Awards”) issued during the three months ended March 31, 2024, compared to $0.3 million for the same period during 2023, which was recorded in relation to performance warrants granted by GRI prior to the completion of the De-Spac Transaction (the “Performance Warrants”).

 

The Performance Warrants expire 10 years after the issuance date and became fully vested with the closing of the De-Spac Transaction on September 20, 2023 No additional Performance Warrants will be granted by the Company.

 

In September 2023 and concurrent with closing of the De-Space Transaction, the Company adopted an omnibus share incentive plan (the “Incentive Plan”), which was amended and restated in February 2024. The Incentive Plan provides for the granting of DSUs, PSUs, RSUs and options and the aggregate maximum number of Common Shares reserved for issuance thereunder is limited to 10% of the Company’s issued and outstanding Common Shares, less any Common Shares underlying securities granted under any other share compensation arrangements of the Company, if any, including Common Shares issuable on exercise of Performance Warrants. DSUs, PSUs and RSUs can be settled in either cash or Common Shares issued from treasury and is at the sole discretion of the Board of Directors. It is the Board of Directors’ current intention to settle all Awards with Common Shares issued from treasury, therefore the Awards have been accounted for as an equity-settled stock-based plan.

 

RSUs granted under the Incentive Plan typically vest annually in thirds over a three-year period, have no exercise price and automatically settle at each vesting date in either cash or shares issued from treasury at the Board of Directors’ discretion.

 

PSUs granted under the Incentive Plan vest on the third anniversary date of the grant date, provided that the Company satisfies certain performance criteria identified by the Board of Directors, which are set and measured to establish a performance multiplier from zero to two.

 

DSUs are issued to independent members of the Board of Directors and vest immediately upon grant, however the units cannot be settled until the director ceases to be a director of the Company.

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

 

 

Interest and Finance Expenses

 

		Three months ended March 31,
($ thousands)		2024				2023
Accretion on long-term debt			14,658				14,844
Other interest			249				255
Accretion of decommissioning obligations			549				217
Total interest and finance expenses			15,456				15,316

 

Interest and finance expenses include coupon interest, amortization of debt issue costs and debt underwriter fees, issuer discount, redemption premiums on long term debt, interest on revolving credit facility, letter of credit facilities and other interest charges. Coupon interest and required redemption premiums related to long term debt are accrued and paid according to the indenture that governs the 2028 Notes.

 

Interest and finance expenses for the three months ended March 31, 2024 were $15.5 million, slightly higher than the comparative period in 2023 of $15.3 million.

 

Refer to the “Capital Resources and Liquidity” section in this MD&A for more details of Greenfire’s long-term debt, revolving credit facility and letter of credit facilities.

 

Depletion and Depreciation Expenses

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Depletion and depreciation expense			18,003				20,915
- ($/bbl)			9.96				10.98

 

The Company’s depletion and depreciation expense for the three months ended March 31, 2024 were $9.96/bbl, which was lower than the comparative period in 2023 of $10.98/bbl. The lower per barrel depletion and depreciation expense in the first quarter of 2024, was primarily due to a decrease in the estimated future development costs, combined with an increase to estimated proved and probable reserves in the Company’s most recent reserve report, relative to the prior reserve report.

 

Exploration Expenses

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Exploration expenses			554				1,585

 

The Company’s exploration expenses primarily consist of escalating mineral lease rentals on the undeveloped lands.

 

In the three months ended March 31, 2024, exploration expenses were $0.5 million, compared to $1.6 million for the same period in 2023. The decrease in the first quarter of 2024 was primarily due to a one-time regulatory expense associated with the implementation of the Oil Sands Tenure Regulation⁽³⁾ incurred during the three months ended March 31, 2023.

 

Other (Income) and Expense

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Other income			(1,441	)			-

 

Other income in the first quarter of 2024 reflected interest income of $1.4 million, compared to nil for the comparative period in 2023.

 

Foreign Exchange Loss (Gain)

 

The Company’s foreign exchange loss (gain) is driven by fluctuations in the US dollar to Canadian dollar exchange rate and is primarily related to the note principal and interest components of the Company’s US dollar denominated debt.

 

For the three months ended March 31, 2024, Greenfire recorded a foreign exchange loss of $8.3 million, compared to a gain of $0.3 million for the comparative period in 2023 due to the Canadian dollar weakening relative to the US dollar.

 

(1)

This regulation, made under the Mines and Minerals Act, is the primary regulation that deals with tenure of oil sands agreements in Alberta. The regulation provides for the issuance and continuation of primary oil sands leases, and the payment of escalating rental when a continued lease does not meet a minimum level of production.

 

 

Transaction Costs

 

The Company recognized nil in transaction costs during the three months ended March 31, 2024, compared to $2.3 million for the comparative period during 2023. Refer to the “De-Spac Transaction” section in this MD&A for more information.

 

Loss on Revaluation of Warrants

 

For the three months ended March 31, 2024, the Company incurred $6.4 million in losses on revaluation of the Company’s warrants to acquire Common Shares (as issued in connection with the De-Spac Transaction (“Greenfire Warrants”)), compared to nil for the comparative period in 2023. The loss relates to an increase of the warrant liability due to an increase of the closing price of the Common Shares on the NYSE from US$4.86 to US$5.97 as at December 31, 2023 and March 31, 2024, respectively. The Greenfire Warrants expire five years after issuance and entitle the holder of each Greenfire Warrant to purchase one Common Share at a price of US$11.50.

 

Taxes

 

Deferred income tax assets were recognized to the extent that the realization of the related tax benefit through future taxable profits is probable based on current tax pools and estimated future income. As at March 31, 2024 and December 31, 2023, a deferred tax asset in the amount of $68.3 million was recognized, and $104.0 million remains unrecognized, to the extent that it is probable that future taxable income will be available against which temporary differences can be utilized.

 

Included in the tax basis as at March 31, 2024 and December 31, 2023 are approximately $1.8 billion in tax pools and loss carry including approximately $1.4 billion in non-capital losses available for immediate deduction against future income. The Company’s non-capital loss carry forwards have an expiry profile between 2033 and 2043.

 

Net Income (loss) and comprehensive income (loss) and Adjusted EBITDA⁽¹⁾

 

		Three months ended March 31,
($ thousands)		2024				2023
Net income (loss)			(46,915	)			(16,678	)
Add (deduct):
Income tax expense (recovery)			-				(3,613	)
Unrealized (gain) loss risk management contracts			38,737				(5,023	)
Stock-based compensation			852				325
Financing and interest			15,456				15,316
Depletion and depreciation			18,003				20,915
Transaction costs			-				2,327
Gain on revaluation of warrants			6,379				-
Foreign exchange loss (gain)			8,275				(303	)
Other (income) and expenses			(1,441	)			-
Adjusted EBITDA(1)			39,346				13,266
Net income (loss) ($/bbl)			(25.94	)			(8.75	)
Add (deduct):
Income tax recovery (expense) ($/bbl)			-				(1.90	)
Unrealized (gain) loss risk management contracts ($/bbl)			21.42				(2.64	)
Stock based compensation ($/bbl)			0.47				0.17
Financing and interest ($/bbl)			8.55				8.04
Depletion and depreciation ($/bbl)			9.96				10.98
Transaction costs ($/bbl)			-				1.22
Gain on revaluation of warrants ($/bbl)			3.53				-
Foreign exchange loss (gain) ($/bbl)			4.58				(0.16	)
Other (income) and expenses ($/bbl)			(0.80	)			-
Adjusted EBITDA(1) ($/bbl)			21.77				6.96

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

 

 

During the three months ended March 31, 2024, the Company recorded a net loss of $46.9 million, compared to net loss of $16.7 million, during the same period in 2023. The $30.2 million reduction to net income (loss) and comprehensive income (loss) in 2024 was primarily due to $47.5 million in risk management contract losses in the current quarter, compared to $4.8 million in risk management contract gains during the same period in 2023, in addition to $8.3 million in foreign exchange losses in the current quarter, compared to $0.3 million in foreign exchange gains during the same period in 2023. The decrease in net income was partially offset by $21.3 million in higher oil sales in the current quarter, compared to the same period in 2023.

 

Net income (loss) and comprehensive income (loss) is a GAAP measure, which is the most directly comparable measure to adjusted EBITDA⁽¹⁾, which is a non-GAAP measure.

 

Adjusted EBITDA⁽¹⁾ was $39.3 million in the first quarter of 2024, compared to $13.3 million in the same period in 2023, with the year over year increase primarily due to higher oil sales revenue and reduced diluent expenses. The increase to Adjusted EBITDA⁽¹⁾ was partially offset by the recognition of $8.8 million of realized risk management contract losses in the first quarter of 2024, compared to $0.2 million of risk management contract losses during the same period in 2023.

 

CAPITAL RESOURCES AND LIQUIDITY

 

The Company’s capital management objective is to maintain financial flexibility and sufficient liquidity to execute on planned capital programs, while meeting short and long-term commitments, including servicing and repaying long term debt. The Company strives to actively manage its capital structure in response to changes in economic conditions and further deleverage its balance sheet.

 

At March 31, 2024, the Company’s capital structure primarily comprised of cash and cash equivalents, Adjusted Working Capital Surplus (Deficit)⁽¹⁾, long-term debt and shareholders’ equity.

 

Management believes its current capital resources and its ability to manage cash flow and working capital levels will allow the Company to meet its current and future obligations, to make scheduled interest and principal payments, and to fund the other needs of the business.

 

Long Term Debt

 

On September 20, 2023, the Company issued US$300.0 million of senior secured notes (the “2028 Notes”). The 2028 Notes are senior secured notes that bear interest at the fixed rate of 12.00% per annum, payable semi-annually on April 1 and October 1 of each year, commencing on April 1, 2024 and mature on October 1, 2028. The 2028 Notes are secured by a lien on substantially all the assets of the Company and its wholly owned subsidiaries, junior in priority to the Senior Credit Facility. Subject to certain exceptions and qualifications, the indenture governing the 2028 Notes contains certain covenants that limit the Company’s ability to, among other things, incur additional indebtedness, pay dividends, redeem stock, make certain restricted payments, and dispose of and transfer assets. The indenture governing the 2028 Notes has a minimum hedging requirement of 50% of the forward 12 calendar month proved developed producing forecasted production as prepared in accordance with the Canadian standards under National Instrument 51-101 – Standards for Disclosure for Oil and Gas Activities until principal debt under the 2028 Notes is less than US$100.0 million and limits capital expenditures to US$100.0 million annually until the principal outstanding is less than US$150.0 million.

 

Under the indenture governing the 2028 Notes, the Company is required to redeem the 2028 Notes at 105% of the principal amount plus accrued and unpaid interest with 75% of Excess Cash Flow (as defined in the indenture governing the 2028 Notes) in six-month periods, with the first period beginning on June 30, 2024. If Consolidated Indebtedness is less than US$150.0 million, the required redemption is reduced to 25% of Excess Cash Flow to be paid in every six-month period until the principal outstanding on the 2028 Notes is less than $100.0 million.

 

As at March 31, 2024, the carrying value of the Company’s long-term debt was $387.9 million⁽²⁾ and the fair value was $432.9 million (December 31, 2023 carrying value – $376.4 million, fair value $394.1 million) and the Company was in compliance with all covenants.

 

(2)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

(1)

The U.S. dollar denominated debt was translated into Canadian dollars as at period end exchange rates.

 

 

The Company is exposed to foreign exchange rate fluctuations on the principal value and interest payments in respect of the 2028 Notes. As of March 31, 2024, a 10% change to the value of the Canadian dollar relative to the US dollar would result in a foreign exchange gain (loss) of approximately $40.7 million (December 31, 2023 - $39.7 million).

 

Senior Credit Facility

 

On September 20, 2023, Greenfire entered into a credit agreement for the Senior Credit Facility which is a senior reserve-based credit facility comprised of an operating facility and a syndicated facility. Total credit available under the Senior Credit Facility is $50.0 million, comprising of a $20.0 million operating facility and a $30.0 million syndicated facility.

 

The Senior Credit Facility is a committed facility available on a revolving basis until September 20, 2024, which revolving period may be extended at the Company’s request, and subject to the lenders’ consent. If the revolving period is not extended, the undrawn portion of the facility will be cancelled and any amounts outstanding would be repayable at the end of the non-revolving term, being September 20, 2025. The Senior Credit Facility is subject to a semi-annual borrowing base review, occurring in May and November of each year. The borrowing base is determined based on the lenders evaluation of the Company’s proved developed producing petroleum and natural gas reserves and their commodity price outlook at the time of each renewal.

 

The Senior Credit Facility is secured by a first priority security interest on substantially all the assets of the Company and is senior in priority to the 2028 Notes. The Senior Credit Facility contains certain covenants that limit the Company’s ability to, among other things, incur additional indebtedness, create or permit liens to exist, make certain restricted payments, and dispose of or transfer assets. The Senior Credit Facility is not subject to any financial covenants.

 

Amounts borrowed under the Senior Credit Facility bear interest at a floating rate based on the applicable Canadian prime rate, US base rate, secured overnight financing rate or bankers’ acceptance rate, plus a margin of 2.75% to 6.25% based on Debt to EBITDA ratio. A standby fee on the undrawn portion of the Senior Credit Facility ranges from 0.6875% to 1.5625% based on Debt to EBITDA ratio. As at March 31, 2024, the Company had nil amounts drawn under the Senior Credit Facility and the Company was in compliance with all covenants.

 

Letter of Credit Facility

 

At December 31, 2023, Greenfire had entered into an unsecured $55.0 million letter of credit facility (the “EDC Facility”) with a Canadian bank that is supported by a performance guarantee from Export Development Canada (“EDC”). The EDC Facility is available on a demand basis and letters of credit issued under this facility incur an issuance and performance guarantee fee of 4.25%. As at March 31, 2024, the Company had $54.3 million drawn under the EDC Facility and the Company was in compliance with all covenants.

 

Adjusted Working Capital Surplus (Deficit)⁽¹⁾

 

		Year ended				Year ended
		March 31,				December 31,
($ thousands)		2024				2023
Current assets			158,304				163,814
Current liabilities			(207,798	)			(130,283	)
Working capital surplus (deficit)			(49,494	)			33,531
Current portion of risk management contracts			39,154				417
Current portion of long-term debt			74,593				44,321
Adjusted working capital surplus (deficit)(1)			64,253				78,269

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

 

 

Working capital surplus (deficit) is a GAAP measure that is the most directly comparable measure to adjusted working capital surplus (deficit)⁽¹⁾, which is a non-GAAP measure.

 

As at March 31, 2024, working capital decreased to a $49.5 million working capital deficit from a working capital surplus of $33.5 million as at December 31, 2023, a difference of $83.0 million, primarily due to an increase to the current liability portion of risk management contracts, an increase to the current portion of long-term debt reflecting the December 31, 2024 Excess Cash Flow redemption obligation payable in the first quarter of 2025, as well as a decrease to cash and cash equivalents.

 

Adjusted working capital surplus (deficit)⁽¹⁾ decreased to $64.3 million as at March 31, 2024, from $78.3 million as at December 31, 2023, a difference of $14.0 million, primarily due to a decrease in cash and cash equivalents, in addition to the recognition of the fair value increase of the Greenfire Warrants.

 

Refer to the “Capital Resources and Liquidity – Long Term Debt” section in this MD&A for more details of the Company’s long-term debt.

 

Share Capital

 

		May 15,				March 31,				December 31,
		2024				2024				2023
Common shares			69,101,961				68,973,859				68,642,515
Greenfire Warrants			7,526,667				7,526,667				7,526,667
Performance Warrants			2,770,907				3,004,291				3,617,016
Deferred share units			10,213				10,213				-
Performance share units			807,128				809,426				-
Restricted share units			643,392				144,924				-

 

The Company is authorized to issue an unlimited number of Common Shares without a nominal or par value. In April 2024, the Company granted 500,000 RSUs under the Company’s Incentive Plan to M3-Brigage Sponsor III, LP (the “MBSC Sponsor”) for the provision of consulting services to the Company. Refer to the “Related Party Transaction “section in this MD&A for further information.

 

Cash Flow Summary

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Cash provided (used) by:
Operating activities			17,064				(4,495	)
Financing activities			(51	)			(6	)
Investing activities			(37,681	)			(8,521	)
Exchange rate impact on cash and cash equivalents held in foreign currency			1,377				62
Change in cash and cash equivalents			(19,291	)			(12,960	)

 

Cash Provided (used) by Operating Activities

 

Cash provided by operating activities in the first quarter of 2024 was $17.1 million, compared to cash used by operating activities of $4.5 million in the same period in 2023, with the increase primarily due to higher oil sales revenues combined with lower diluent expense, partially offset by $8.8 million of realized risk management contract losses in the first quarter of 2024, compared to $0.2 million of realized risk management contract losses in the same period in 2023.

 

Based on current and forecasted production levels, operating expenses, capital expenditures, existing commodity price risk management contracts and current outlook for commodity prices, the Company expects cash from operating activities will be sufficient to cover its operational commitments and financial obligations under the indenture governing the 2028 Notes and the credit agreement governing the Senior Credit Facility in the next 12 months.

 

(1)	Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

 

 

Cash Provided (used) by Financing Activities

 

Cash used by financing activities in the first quarter of 2024 was $51.0 thousand, compared to $6.0 thousand in the same period in 2023.

 

Cash Provided (used) in Investing Activities

 

Cash used in investing activities was $37.7 million in the first quarter of 2024, compared to cash used in investing activities of $8.5 million in the same period in 2023, with the difference mainly due to $34.4 million of capital expenditures in the first quarter of 2024, compared to $2.5 million in capital expenditures in the same period in 2023.

 

Capital Expenditures

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Property, plant and equipment expenditures			31,920				2,518
Acquisitions			2,529				-
Total capital expenditures			34,449				2,518

 

Total capital expenditures for the three months ended March 31, 2024 was $34.4 million (Q1 2023 - $2.5 million). The Company spent $31.9 million in the first quarter of 2024 on property, plant and equipment, with $21.9 million related to the Refill wells for the drilling program at the Expansion Asset and Demo Asset, as well as $10.0 million spent on various facility projects at the Expansion Asset and the Demo Asset. The Company also spent $2.5 million in the first quarter of 2024 on acquisitions, primarily on acquiring gas assets in the Hangingstone area for approximately $2.0 million.

 

Adjusted Funds Flow⁽¹⁾ and Adjusted Free Cash Flow⁽¹⁾

 

		Three months ended March 31,
($ thousands)		2024				2023
Cash provided (used) by operating activities			17,064				(4,495	)
Transaction costs			-				2,327
Changes in non-cash working capital			10,525				5,225
Adjusted funds flow(1)			27,589				3,057
Property, plant and equipment expenditures			(31,920	)			(2,518	)
Acquisitions			(2,529	)			-
Adjusted free cash flow(1)			(6,860	)			539

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” in this MD&A for further information.

 

Cash provided (used) by operating activities is a GAAP measure that is the most directly comparable measure to adjusted funds flow⁽¹⁾ and adjusted free cash flow⁽¹⁾ which are non-GAAP measures.

 

During the three months ended March 31, 2024, the Company had cash provided by operating activities of $17.1 million, compared to cash used by operating activities of $4.5 million, during the comparative period in 2023.

 

Adjusted funds flow⁽¹⁾ was $27.6 million, during the three months ended March 31, 2024, compared to $3.1 million, during the same period in 2023. The increase in adjusted funds flow⁽¹⁾ during the first quarter of 2024 was primarily due to higher oil sales revenues combined with lower diluent expense, partially offset by $8.8 million of realized risk management contract losses in the first quarter of 2024, compared to $0.2 million of realized risk management contract losses in the same period in 2023.

 

During the three months ended March 31, 2024, Greenfire had negative adjusted free cash flow⁽¹⁾ of $6.9 million compared to positive adjusted free cash flow⁽¹⁾ of $0.5 million during the same period in 2023. The decrease in adjusted free cash flow⁽¹⁾ during the first quarter of 2024 was primarily due to higher property, plant and equipment expenditures, partially offset by higher oil sales revenues combined with lower diluent expense.

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” section in this MD&A for further information.

 

 

NON-GAAP MEASURES

 

In this MD&A, we refer to certain specified financial measures such as adjusted EBITDA, adjusted EBITDA per barrel ($/bbl), operating netback, operating netback per barrel ($/bbl), adjusted funds flow, adjusted free cash flow which do not have any standardized meaning prescribed by IFRS. While these measures are commonly used in the oil and natural gas industry, the Company’s determination of these measures may not be comparable with calculations of similar measures presented by other reporting issuers. This MD&A also contains the terms “adjusted working capital surplus (deficit)” and “net debt” which are non-GAAP measures. We believe that the inclusion of these specified financial measures provides useful information to financial statement users when evaluating the financial results of Greenfire however they should not be considered an alternative to, or more meaningful than, cash provided (used) by operating activities, net profits or other measures of financial performance calculated in accordance with IFRS.

 

Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Net income (loss) and comprehensive income (loss) is the most directly comparable GAAP measure for adjusted EBITDA, which is a non-GAAP measure. Adjusted EBITDA is calculated as net income (loss) before interest and financing, income taxes, depletion, depreciation and amortization, the transaction and financing cost impacts of the De-Spac Transaction and bond refinancing and is adjusted for certain non-cash items, or other items that are not considered part of normal business operations. Adjusted EBITDA is used to measure Greenfire’s profitability from its underlying asset base on a continuing basis. This measure is not intended to represent net income (loss) and comprehensive income (loss) in accordance with IFRS. For a reconciliation of net income (loss) and comprehensive income (loss) to adjusted EBITDA, see the “Results of Operations – Net Income (loss) and comprehensive income (loss) and Adjusted EBITDA” section in this MD&A.

 

Operating Netback and Operating Netback and Operating Netback, excluding realized gain (loss) risk management contracts

 

Oil sales is the most directly comparable GAAP measure for operating netback and operating netback, excluding realized (gain) loss risk management contracts which are non-GAAP measures. These measure are not intended to represent oil sales, net earnings or other measures of financial performance calculated in accordance with IFRS. Operating netback, excluding realized gain (loss) risk management contracts is comprised of oil sales, less diluent expense, royalties, operating expense, transportation and marketing expense, but before realized gain (loss) risk management contracts, while operating netback is further adjusted for realized gain (loss) risk management contracts, as appropriate. Operating netback and operating netback, excluding realized gain (loss) risk management contracts are financial measures widely used in the oil and gas industry as supplemental measures of a Company’s efficiency and ability to generate cash flow for debt repayments, capital expenditures or other uses. See the “Results of Operations – Operating Netback” section in this MD&A for a reconciliation of oil sales to operating netback and operating netback, excluding realized gain (loss) risk management contracts.

 

Adjusted Funds Flow

 

Cash provided (used) by operating activities is the most directly comparable GAAP measure for adjusted funds flow, which is a non-GAAP measure. This measure is not intended to represent cash provided (used) by operating activities calculated in accordance with IFRS.

 

The adjusted funds flow measure allows management and others to evaluate the Company’s ability to fund its capital programs and meet its ongoing financial obligations using cash flow internally generated from ongoing operating related activities. We compute adjusted funds flow as cash provided (used) by operating activities, excluding the impact of changes in non-cash working capital, less transaction costs. For a reconciliation of cash provided (used) by operating activities to adjusted funds flow, see the “Capital Resources and Liquidity – Adjusted Funds Flow and Adjusted Free Cash Flow” section in this MD&A.

 

 

Adjusted Free Cash Flow

 

Cash provided (used) by operating activities is the most directly comparable GAAP measure for adjusted free cash flow, which is a non-GAAP measure. Management uses adjusted free cash flow as an indicator of the efficiency and liquidity of its business, measuring its funds after capital investment that is available to manage debt levels and return capital to shareholders. By removing the impact of current period property, plant and equipment expenditures from adjusted free cash flow, management monitors its adjusted free cash flow to inform its capital allocation decisions. We compute adjusted free cash flow as cash provided (used) by operating activities, excluding the impact of changes in non-cash working capital, less transaction costs and property, plant and equipment expenditures. For a reconciliation of cash provided (used) by operating activities to adjusted free cash flow, see the “Capital Resources and Liquidity – Adjusted Funds Flow and Adjusted Free Cash Flow” section in this MD&A.

 

Non-GAAP Financial Ratios

 

Adjusted EBITDA ($/bbl)

 

Net income (loss) and comprehensive income (loss) is the most directly comparable GAAP measure for adjusted EBITDA ($/bbl), which is a non-GAAP measure. Adjusted EBITDA ($/bbl) is used to measure Greenfire’s profitability from its underlying asset base on a continuing basis. This measure is not intended to represent net income (loss) and comprehensive income (loss) in accordance with IFRS. Adjusted EBITDA ($/bbl) is calculated by dividing adjusted EBITDA by the Company’s total sales volume in a specified period.

 

Operating Netback ($/bbl) and Operating Netback, excluding realized gain (loss) risk management contracts ($/bbl)

 

Oil sales ($/bbl) is a ratio calculated using oil sales, which is the most directly comparable GAAP measure for operating netback and operating netback, excluding realized (gain) loss risk management contracts ($/bbl). Operating netback and Operating netback, excluding realized gain (loss) risk management contracts are the non-GAAP financial measures used to calculate Operating netback ($/bbl) and Operating netback, excluding realized gain (loss) risk management contracts ($/bbl), which are non-GAAP financial ratios. These measure are not intended to represent oil sales, net earnings or other measures of financial performance calculated in accordance with IFRS. Each ratio is calculated by dividing operating netback or operating netback, excluding realized gain (loss) risk management contracts, by the Company’s total oil sales volume, in a specified period. Operating netback ($/bbl) and operating netback, excluding realized gain (loss) risk management contracts ($/bbl) are non-GAAP financial ratios widely used in the oil and gas industry as supplemental measures of a Company’s efficiency and ability to generate cash flow for debt repayments, capital expenditures or other uses, isolated for the impact of changes in oil sales volume, in a specified period.

 

Capital Management and Liquidity Measures

 

Adjusted Working Capital Surplus (Deficit)

 

Working capital surplus (deficit) is a GAAP measure that is the most directly comparable measure to adjusted working capital surplus (deficit). These measures are not intended to represent current assets, net earnings or other measures of financial performance calculated in accordance with IFRS. Adjusted working capital surplus (deficit) is comprised of current assets less current liabilities on the Company’s balance sheet, and excludes the current portion of risk management contracts and current portion of long-term debt, the latter of which is subject to estimates in future commodity prices, production levels and expenses, among other factors. Adjusted working capital surplus (deficit) is included within the non-GAAP measures because it is a less volatile measure of current assets and current liabilities, after isolating for current portion of long-term debt and current portion of risk management contracts, a surplus of adjusted working capital surplus (deficit) will result in a future net cash inflow to the business that can be used by management to evaluate the Company’s short-term liquidity and its capital resources available at a point in time. A deficiency of adjusted working capital surplus (deficit) will result in a future net cash outflow, which may result in the Company not being able to settle short-term liabilities more than current assets.

 

Net debt

 

Reconciliation of Long-Term Debt to Net Debt

 

		Year ended				Year ended
		March 31,				December 31,
($ thousands)		2024				2023
Long-term debt			(313,373	)			(332,029	)
Current assets			158,304				163,814
Current liabilities			(207,798	)			(130,283	)
Current portion of risk management contracts			39,154				417
Current portion of warrant liability			25,009				18,630
Net debt			(298,704	)			(279,451	)

 

 

Long-term debt is a GAAP measure that is the most directly comparable financial statement measure to net debt. These measures are not intended to represent long-term debt calculated in accordance with IFRS. Net debt is comprised of long-term debt, adjusted for current assets and current liabilities on the Company’s balance sheet, and excludes the current portions of risk management contracts and warranty liability. Management uses net debt to monitor the Company’s current financial position and to evaluate existing sources of liquidity. Net debt is used to estimate future liquidity and whether additional sources of capital are required to fund planned operations.

 

Summary of Quarterly Results

 

		2024				2023																2022
($ thousands, unless otherwise noted)		Q1				Q4				Q3				Q2				Q1				Q4				Q3				Q2
BUSINESS ENVIRONMENT(1)
WTI (US$/bbl)			76.96				78.32				82.26				73.78				76.13				82.65				91.55				108.41
WTI (CAD$/bbl)			103.80				106.66				110.31				99.09				102.93				112.21				119.54				138.39
WCS (CAD$/bbl)			77.76				76.85				93.00				78.75				69.29				77.05				93.48				122.04
AECO (CAD$/GJ)			2.36				2.18				2.46				2.32				3.05				4.85				3.95				6.86
FX (USD:CAD)(2)			1.349				1.362				1.341				1.343				1.352				1.358				1.306				1.277
Operational – Expansion
Bitumen production (bbls/d)			17,361				14,079				11,052				13,939				16,302				15,710				14,926				17,910
Operational – Demo
Bitumen production (bbls/d)			2,306				3,256				3,618				4,097				4,284				3,869				2,922				3,830
Operational – Consolidated
Bitumen production (bbls/d)			19,667				17,335				14,670				18,036				20,586				19,579				17,848				21,740
OPERATING RESULTS
Oil sales			200,990				161,730				160,967				173,605				179,668				180,741				209,550				315,794
Oil sales ($/bbl)			75.41				71.04				89.96				75.12				64.92				72.18				97.37				119.24
Operating expenses			36,348				35,084				38,442				35,675				39,764				42,429				36,507				44,435
Operating expenses ($/bbl)			20.10				22.05				29.12				21.79				20.87				23.65				22.38				22.89
Operating netback(3)			44,649				27,353				50,254				37,747				17,352				34,567				42,244				72,707
Operating netback ($/bbl)(3)			24.69				17.19				38.07				23.05				9.11				19.27				25.90				37.46
Adjusted EBITDA(3)			39,346				23,434				46,434				34,389				13,266				32,528				38,651				70,445
Net income (loss)			(46,915	)			(4,659	)			(138,557	)			24,223				(16,678	)			87,995				111,594				45,473
Cash provided (used) by operating activities			17,064				25,530				41,873				23,640				(4,495	)			17,322				49,164				67,553
Adjusted funds flow(3)			27,589				10,517				36,173				23,460				3,056				16,902				27,447				57,745
Capital expenditures			34,449				19,413				9,587				1,911				2,518				12,361				14,325				7,706
Adjusted free cash flow(3)			(4,331	)			(8,896	)			26,586				21,549				539				4,541				13,122				50,039
FINANCIAL POSITION
Cash and cash equivalents			90,234				109,525				65,976				36,882				22,403				35,363				99,822				73,375
Restricted cash			-				-				43,779				47,363				39,363				35,313				27,413				22,017
Total assets			1,193,953				1,173,483				1,198,889				1,153,021				1,147,984				1,174,258				1,158,367				1,174,634
Total debt			387,966				376,350				382,842				246,805				259,555				254,408				320,607				289,604
Shareholders’ equity			648,156				695,000				699,657				846,098				821,418				837,771				748,593				647,937

 

(1)

These benchmark prices are not the Company’s realized sales prices and represent approximate values.

(2)

Annual or quarterly average exchange rates as per the Bank of Canada.

(3)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP Measures” in this MD&A for further information.

 

 

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

 

The Company enters into commitments and contractual obligations in the normal course of operations. The following table is a summary of management’s estimate of the contractual maturities of obligations as at March 31, 2024:

 

($ thousands)		1 Year				2-3 Years				4-5 Years				Thereafter				Total
Transportation			31,550				59,138				58.259				195,893				344,839
Office lease commitments(1)			299				598				598				1,421				2,916
Drilling services			7,240				6,424				-				-				13,664
Total annual commitments			31,374				66,539				58,812				204,694				361,420
Accounts payable and accrued liabilities			60,587				-				-				-				60,587
Long-term debt - Principal(2)			74,593				57,493				274,415				-				406,500
Long-term debt - Interest(2)			46,038				69,819				42,326				-				158,182
Risk management contracts			39,154				-				-				-				39,154
Lease obligations			152				284				333				968				1,737
Decommissioning obligations(3)			-				82				6,689				227,223				233,993
Total contractual obligations			220,523				127,677				323,762				228,191				900,154
Total future payments			259,613				193,837				382,619				425,504				1,261,574

 

(1)

Relates to non-lease components and variable operating cost payments.

(2)

This represents the estimated principal repayments of the 2028 Notes and associated interest payments based on foreign exchange rates in effect on March 31, 2024.

(3)

These values are undiscounted and will differ from the amounts presented in the Q1 2024 unaudited Condensed Interim Consolidated Financial Statements.

 

Management believes its current capital resources, combined with its ability to manage cash flow and working capital levels, will enable the Company to meet its current and future obligations, make scheduled interest and principal payments, and fund other business needs. In the short term, the Company anticipates meeting its cash requirements through a combination of cash on hand, operating cash flows, and potentially accessing available credit facilities. However, the Company acknowledges the potential impact of any adverse changes in economic conditions or unforeseen expenses on its ability to generate adequate cash in the short term.

 

CREDIT RISK

 

Accounts Receivable

 

		Month ended				Year ended
		March 31,				December 31,
($ thousands)		2024				2023
Trade receivables			41,505				22,452
Joint interest receivables			11,052				12,228
Accounts receivable			52,557				34,680

 

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s accounts receivable. The Company is primarily exposed to credit risk from receivables associated with its oil sales. The Company manages its credit risk exposure by transacting with high-quality credit worthy counterparties and monitoring credit worthiness and/or credit ratings on an ongoing basis. Trade receivables from oil sales are generally collected on 25th day of the month following production. Joint interest receivables are typically collected within one to three months of the invoice being issued. For the period ended March 31, 2024, the Company had oil sales to a single counterparty and the Company has not previously experienced any material credit losses on the collection of accounts receivable.

 

At March 31, 2024 credit risk from the Company’s outstanding accounts receivable and joint interest receivable balances was considered low due to a history of collections and the receivables that were held by credit worthy counterparties.

 

 

RELATED PARTY TRANSACTION

 

In April 2024, the Company entered into a consulting agreement, as amended, with M3-Brigage Sponsor III, LP (the “MBSC Sponsor”) for the provision of consulting services to the Company (the “MBSC Sponsor Consulting Agreement”) relating to, among other things, the Company’s transition to being a public company, maximizing the value of the Company, and educating the market about the Company and its value. Matthew Perkal, a member of the Board of Directors of the Company who was nominated to the Board by MBSC Sponsor pursuant to its rights under the investor rights agreement dated September 20, 2023 (the “Investor Rights Agreement”), is Head of SPACs and Special Situations at Brigade Capital Management, LP, an affiliate of MBSC Sponsor and, prior to the Business Combination served as the Chief Executive Officer of M3-Brigade Acquisition III Corp. The term of the MBSC Sponsor Consulting Agreement continues until the earlier of April 18, 2029 and the date MBSC Sponsor no longer holds any “Registrable Securities” in the Company (as defined in the Investor Rights Agreement). As compensation for the consulting services, the Company had originally agreed to issue 500,000 Common Shares which was subsequently amended to grant 500,000 RSUs under the Company’s Incentive Plan to MBSC Sponsor.  The RSUs will vest in quarterly instalments of 125,000 each. The terms of the MBSC Sponsor Consulting Agreement were reviewed and approved by the disinterested directors of the Board of Directors. The fair market value of the securities to be issued to MBSC Sponsor was $4.35 million, based on a five-day weighted average price of the Common Shares on the NYSE immediately preceding the date of the date of grant.

 

FORWARD LOOKING STATEMENTS

 

This MD&A contains “forward-looking information” within the meaning of the applicable United States federal securities laws and applicable Canadian securities laws (forward-looking information being collectively hereinafter referred to as “forward-looking statements”). Such forward-looking statements are based on expectations, estimates and projections as at the date of this MD&A. Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often but not always using phrases such as “expects”, “is expected”, “anticipates”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends”, or variations of such words and phrases (including negative and grammatical variations), or stating that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements and are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements and information concerning: the intentions, strategy, plans and future actions of the Company; that Greenfire is pursuing capital-efficient and lower-risk growth through the optimization of existing production, facilities and reserves to maximize free cash flow generation; Greenfire’s plans to evaluate and consider additional potential prospects for further production growth, including external acquisitions; that the additional production from the ten Refill wells completed at the Expansion Asset will continue to ramp up and meet expectations; estimated production impacts from the failure of third party downhole temperature sensors and the Company’s plans to replace those sensors; the Company’s expectation that average productivity of Refill wells with replaced downhole temperature sensor will increase in the second half of 2024 to align with the current average productivity of the remaining five Refill wells where temperature sensors have not failed; expectations as to timing for regulatory approval and recommencement of operations related to the disposal wells at the Demo Asset and expected impact on production; the 2024 Outlook, including expected production and forecasts for capital expenditures thereunder and 2024 projected profitability scenario for adjusted EBITDA, adjusted funds flow, adjusted free cash flow; future assessment of royalties at the Demo Asset; the Company’s drilling program; expectations with respect to restoring reservoir pressure at the Expansion Asset; the Board of Directors’ intention to settle all Awards with Common Shares issued from treasury; management’s intent to actively manage the Company’s capital structure in response to changes in economic conditions and its intention to further deleverage the Company’s balance sheet; management’s belief that the Company’s current capital resources and its ability to manage cash flow and working capital levels will allow the Company to meet its current and future obligations, to make scheduled interest and principal payments, and to fund the other needs of the business; expectations related to the Company’s risk management program; and statements relating to the business and future activities of the Company after the date of this MD&A.

 

 

Forward-looking statements are based on the beliefs of the Company’s management, as well as on assumptions, which management believes to be reasonable based on information available at the time such statements were made. In addition to other assumptions set out herein, the forward-looking statements contained herein are based on the following assumptions: Greenfire’s ability to compete with other companies; the anticipated future financial or operating performance of the Company; the expected results of operations; assumptions as to future drilling results; assumptions as to costs and commodity prices; the timing and amount of funding required to execute the Company’s business plans; assumptions about future capital expenditures; the effect on the Company of any changes to existing or new legislation or policy or government regulation; the length of time required to obtain permits, certifications and approvals; the availability of labor; estimated budgets; assumptions about future interest and currency exchange rates; requirements for additional capital; the timing and possible outcome of regulatory and permitting matters; goals; strategies; future growth; and the adequacy of financial resources. However, by their nature, forward-looking statements are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

Forward-looking statements are subject to a variety of risks, uncertainties and other factors which could cause actual results, performance or achievements to differ from those expressed or implied by the forward-looking statements, including, without limitation, a decline in oil prices or widening of differentials between various crude oil prices; lower than expected reservoir performance, including, but not limited to, lower oil production rates; the inability to recognize continued or increased efficiencies from the Company’s production enhancement program and processing plant enhancements, debottlenecking and brownfield expansions; reduced access to or an increase in the cost of diluent; an increase in the cost of natural gas or electricity; the reliability and maintenance of Greenfire’s facilities; equipment failures that result in a failure to achieve expected benefits of capital expenditure programs or result in reduced production or increased costs; supply chain disruption and risks of increases costs relating to inflation; the safety and reliability of pipelines and trucking services that transport Greenfire’s products; the need to replace significant portions of existing wells, referred to as “workovers”, or the need to drill additional wells; the cost to transport bitumen, diluent and bitumen blend, and the cost to dispose of certain by-products; the potential for the Trans Mountain Expansion Project to not result in improved pricing as expected; the availability and cost of insurance and the inability to insure against certain types of losses; severe weather or catastrophic events such as fires, droughts, lightning, earthquakes, extreme cold weather, storms or explosions; seasonal weather patterns and the corresponding effects of the spring thaw on equipment on Greenfire’s properties; the availability of pipeline capacity and other transportation and storage facilities for the Company’s bitumen blend; the cost of chemicals used in Greenfire’s operations, including, but not limited to, in connection with water and/or oil treatment facilities; the availability of and access to drilling equipment and key personnel; risks of cybersecurity threats including the possibility of potential breakdown, invasion, virus, cyber-attack, cyber-fraud, security breach, and destruction or interruption of the Company’s information technology systems; Canadian heavy and light oil export capacity constraints and the resulting impact on realized pricing; the impact of global wars and conflicts on global stability, commodity prices and the world economy, changes in the political landscape and/or legal, tax, royalty and regulatory regimes in Canada, and elsewhere; the cost of compliance with applicable regulatory regimes, including, but not limited to, environmental regulation and Government of Alberta production curtailments, if any; the ability to attract or access capital as a result of changing investor priorities and trends, including as a result of climate change, environmental, social and governance initiatives, the adoption of decarbonization policies and the general negative sentiment towards the oil and gas industry; hedging risks; variations in foreign exchange and interest rates; risks related to the Company’s indebtedness; failure to accurately estimate abandonment and reclamation costs; the potential for management estimates and assumptions to be inaccurate; and general economic, market and business conditions in Canada, the United States and globally.

 

The lists of risk factors set out in this MD&A or in the Company’s other public disclosure documents are not exhaustive of the factors that may affect any forward-looking statements of the Company. Forward-looking statements are statements about the future and are inherently uncertain. Actual results could differ materially from those projected in the forward-looking statements as a result of the matters set out in this MD&A generally and certain economic and business factors, some of which may be beyond the control of the Company. In addition, the global financial and credit markets have experienced significant debt and equity market and commodity price volatility which could have a particularly significant, detrimental and unpredictable effect on forward-looking statements. The Company does not intend, and does not assume any obligation, to update any forward-looking statements, other than as required by applicable law. For all of these reasons, the Company’s securityholders should not place undue reliance on forward-looking statements.

 

You should carefully consider all of the risks and uncertainties described in the “Risk Factors” section of the Company’s annual report on Form 20-F dated March 26, 2024, which is available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov/edgar.shtml and in other documents filed by Greenfire from time to time on SEDAR+ and with the United States Securities and Exchange Commission.

 

ADDITIONAL INFORMATION

 

Additional information relating to the Company is available on https://www.greenfireres.com and can also be found on a website maintained by the SEC at www.sec.gov and on Greenfire’s SEDAR+ profile at www.sedarplus.ca.

 

 

CORPORATE INFORMATION

 

Directors		Bankers
Julian McIntyre (1)		Bank of Montreal
Jonathan Klesch		595-8 Avenue SW
Derek Aylesworth (2)(3)		Calgary, Alberta, Canada
Venkat Siva (3)		T2P 1G1
Matthew Perkal (3)
Robert Logan		Auditor
(1)  Chair of the Board of Directors		Deloitte LLP
(2)  Chair of the Audit and Reserves Committee		850 2nd Street SW
(3)  Audit and Reserves Committee		Calgary, Alberta, Canada
		T2P 0R8
Officers
		Reserve Engineers
Robert Logan MPBE, P.Eng
President, and Chief Executive Officer		McDaniel & Associates Consultants Ltd.
		2200, 255 – 5th Avenue SW
Tony Kraljic, CPA		Calgary, Alberta, Canada
Chief Financial Officer		T2P 3G
Kevin Millar C.E.T.
SVP Operations & Steam Chief
Albert MA P.Eng
SVP Engineering
Crystal Park P.Eng, MBA
SVP Commercial
Charles R. Kraus
Corporate Secretary
Head Office
Suite 1900, 205 – 5th Avenue SW,
Calgary, Alberta, Canada
T2P 2V7
www.greenfireres.com
NYSE: GFR
TSX : GFR.TO
Solicitors
Burnet, Duckworth, & Palmer LLP
2400, 525 – 8th Avenue SW
Calgary, Alberta, Canada
T2P 1G1
Carter Ledyard & Milburn LLP
41st Floor
28 Liberty Street
New York, New York 10005

 

 

Greenfire Resources Ltd.

2024 Q1 Management’s Discussion and Analysis | 24

Exhibit 99.3

 

PRESS RELEASE

 

Greenfire Resources Announces Q1 2024 Results and Reiterates 2024 Outlook

 

CALGARY, ALBERTA – May 15, 2024 – Greenfire Resources Ltd. (NYSE and TSX: GFR) (“Greenfire” or the “Company”), a Calgary-based energy company focused on the sustainable production and development of thermal energy resources from the Athabasca region of Alberta, Canada, is pleased to announce its operating and financial results for the quarter ended March 31, 2024 (“Q1 2024”) and an operational outlook for the second quarter of 2024. The unaudited condensed interim consolidated financial statements and notes thereto for the three months ended March 31, 2024 and 2023 as well as related Management’s Discussion and Analysis (“MD&A”) will be available on SEDAR+ at www.sedarplus.ca, on EDGAR at www.sec.gov/edgar.shtml and on Greenfire’s website at www.greenfireres.com.

 

A conference call to discuss the Q1 2024 results has been scheduled for Thursday, May 16, 2024 at 7:00 a.m. Mountain Time (9:00 a.m. Eastern Time). Access details for the conference call are provided below.

 

“After successfully drilling three redevelopment infill (“Refill”) wells at the Demo Asset, the Company reallocated the drilling rig to the Expansion Asset to continue the redevelopment drilling program given regulatory delays restarting the disposal well at the Demo Asset. This program is expected to be highly economic and is anticipated to have a significant impact on Greenfire’s bitumen production in 2024, particularly as reservoir pressure continues to increase at the Expansion Asset following sustained non-condensable gas (“NCG”) co-injection activities” said Robert Logan, President and Chief Executive Officer of Greenfire.

 

“We are pleased to reiterate the Company’s previously announced 2024 Outlook, which is expected to drive continued production growth, commence debt repayment and positively position the Company to benefit from a potential re-rating of the Canadian heavy oil barrel as the Trans Mountain Expansion Project (“TMX”) became operational in May 2024.

 

The current wildfire situation in Northern Alberta has not yet had any material impact on our operations. We have taken all prudent steps to minimize any risks to our staff and our assets, however, should the fires extend into our field for an extended period, there may be negative implications to our business.” concluded Mr. Logan.

 

All dollar amounts reported in this press release are in Canadian dollars unless otherwise noted.

 

The Company holds a 75% working interest in the Hangingstone Expansion Facility (the “Expansion Asset”) and a 100% working interest in the Hangingstone Demonstration Facility (the “Demo Asset” and together with the Expansion Asset, the “Hangingstone Facilities”). Unless indicated otherwise, production volumes and per unit statistics are presented throughout this press release on a “gross” basis as determined in accordance with National Instrument 51-101 – Standards for Disclosure for Oil and Gas Activities, which is the Company’s gross working interest basis before deduction of royalties.

 

Q1 2024 Highlights

 

●

Delivered consolidated bitumen production of 19,667 barrels per day (“bbls/d”) in Q1 2024 (20,586 bbls/d – Q1 2023), an increase of over 2,300 bbls/d from the Q4 2023 average of 17,335 bbls/d. These results reflect strong production performance from the Refill drilling program that began in August 2023 and surface facility optimizations at the Expansion Asset, partially offset by unplanned impacts from the five previously disclosed downhole temperature sensor failures.

 

●

Generated Adjusted EBITDA(1) of $39.3 million in Q1 2024 ($13.3 million – Q1 2023), and adjusted funds flow(1) of $27.6 million in Q1 2024 ($3.1 million – Q1 2023). Adjusted EBITDA(1) and adjusted funds flow(1) in the period included realized losses on commodity risk management contracts of $8.8 million ($0.2 million – Q1 2023).

 

●

Invested capital on property, plant and equipment of $31.9 million in Q1 2024 ($2.5 million – Q1 2023), with approximately two thirds of capital expenditures in the period allocated to Refill drilling activities at the Hangingstone Facilities, with the balance of capital spending primarily directed to various facility projects.

 

●

Maintained available liquidity of $140.2 million at March 31, 2024, consisting of:

 

o

$90.2 million of cash and cash equivalents; and

 

o

$50.0 million of available credit under a reserve-based credit facility (“Senior Credit Facility”).

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS”) and may not be comparable with the calculation of similar measures presented by other entities. Refer to the discussion under the heading “Non-GAAP and Other Financial Measures” in this press release for further information.

 

 

Financial & Operational Highlights

 

						Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Bitumen Production - Expansion Asset (bbls/d)			17,361				16,302
Bitumen Production - Demo Asset (bbls/d)			2,306				4,284
Total Bitumen Production (bbls/d)			19,667				20,586
WTI (US$/bbl)			76.96				76.13
WCS differential to WTI (US$/bbl)			(19.31	)			(24.88	)
WCS (US$/bbl)			57.65				51.25
Edmonton Condensate (C5+)($/bbl)			73.31				80.00
AECO 5A ($/GJ)			2.36				3.05
Oil sales			200,990				179,668
Oil sales ($/bbl)			75.41				64.92
Operating netback(1)			44,649				17,352
Operating netback ($/bbl)(1)			24.69				9.11
Operating expenses			36,348				39,764
Operating expenses ($/bbl)			20.10				20.87
Cash provided (used) by operating activities			17,064				(4,495	)
Adjusted EBITDA(1)			39,346				13,266
Adjusted funds flow(1)			27,589				3,057
Cash provided (used) by investing activities			(37,681	)			(8,521	)
Capital expenditures			34,449				2,518
Adjusted free cash flow(1)			(6,860	)			539
Net income (loss) and comprehensive income (loss)			(46,915	)			(16,678	)
Per share – basic			(0.68	)			(0.34	)
Per share – diluted			(0.68	)			(0.34	)
Total assets(2)			1,193,953				1,147,984
Total non-current financial liabilities(2)			337,999				205,482
Common shares outstanding, end of period			68,973,859				48,911,099
Weighted average shares outstanding – diluted			68,684,273				48,911,099

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP and Other Financial Measures” in this press release for further information.

 

(2)

As at March 31, 2024 and March 31, 2023.

 

 

Liquidity and Balance Sheet

 

As at ($ thousands)		Three months ended March 31, 2024				Year ended December 31, 2023
Cash and cash equivalents			90,234				109,525
Available credit facilities (1)			50,000				50,000
Face value of Long-term debt (2)			406,500				396,780

 

(1)

As at March 31, 2024 the Company had $50.0 million (December 31, 2023 - $50.0 million) of available credit under the Senior Credit Facility, of which nil (December 31, 2023 – nil) was drawn as of March 31, 2024.

 

(2)

As at March 31, 2024, the 2028 Notes (as defined below) had a face value of US$300.0 million (December 31, 2023 – US$300.0 million) and were converted into Canadian dollars as at period end exchange rates.

 

Operational Update

 

●

In April 2024, consolidated bitumen production averaged approximately 18,360 bbls/d, reflecting temporary production impacts at the Expansion Asset owing to the previously disclosed failure of third-party downhole temperature sensors at five of the ten recently drilled Refill wells, along with production impacts from Refill well drilling operations and the ongoing shut-in of the disposal well at the Demo Asset.

 

●

In response to the recent wildfires in northern Alberta, out of an abundance of caution, Greenfire temporarily evacuated all non-essential personnel from its operated facilities on May 11th. The Company is actively monitoring the situation to ensure the protection and safety of our people and assets as the situation continues to evolve.

 

Expansion Asset (75% Working Interest, Operator)

 

●

Working Interest Bitumen Production at the Expansion Asset Averaged Approximately 16,020 bbls/d in April 2024: The Company’s production in April was impacted by the previously disclosed failure of third-party downhole temperature sensors in five of the ten recently drilled Refill wells. The five Refill wells equipped with downhole temperature sensors that have not failed produced at an average of approximately 1,500 bbls/d per well, on a 100% working interest basis, in April 2024. Greenfire has replaced the failed downhole temperature sensors at three of five Refill wells and expects that the average productivity of these Refill wells will increase to align with the current average productivity of the remaining five Refill wells where temperature sensors have not failed.

 

●

Drilling Rig Redeployed to Maintain Redevelopment Drilling: In response to continued regulatory delays at the Demo Asset, Greenfire redeployed the drilling rig to focus on redevelopment activities at the Expansion Asset. This drilling program is anticipated to conclude in the third quarter of 2024, after which the Company plans to mobilize the drilling rig back to the Demo Asset to drill additional Refill wells.

 

●

NCG Co-injection Continues to Support Higher Reservoir Pressure: Reservoir pressure and well productivity continue to increase at the Expansion Asset as a result of sustained high rates of NCG co-injection following the Company’s debottlenecking initiatives undertaken in the second half of 2023. Greenfire expects that targeted reservoir pressure will be restored at the Expansion Asset around mid-2024.

 

Demo Asset (100% Working Interest, Operator)

 

●

Working Interest Bitumen Production at the Demo Asset Averaged Approximately 2,340 bbls/d in April 2024: The Company’s production in April was impacted by Refill well drilling operations as well as the temporary shut-in of the disposal well.

 

●

Timing to Recommence Disposal Well Operations Impacted by Delayed Regulatory Approval: The disposal well at the Demo Asset has been temporarily shut-in since the beginning of October 2023. With required remediation work complete, the disposal well is awaiting regulatory approval to recommence operations.

 

 

●

Three Refill Wells Drilled; Drilling Rig Reallocated to the Expansion Asset: The Company successfully drilled three extended reach Refill wells with lateral lengths of approximately 2,300 meters, which is 700 meters longer than the Refills recently drilled by Greenfire at the Expansion Asset. A second disposal well was also drilled at the Demo Asset, which is awaiting regulatory approval to commence operations.

 

Reiterates 2024 Outlook and Reaffirms Commitment to Prioritize Near-Term Debt Repayment

 

●

Greenfire reiterates the previously announced 2024 Outlook, including forecasted ranges for production and capital expenditures, which is underpinned by the Company’s production growth plan that is anticipated to result in meaningful adjusted free cash flow generation over the balance of 2024, assuming continued strong commodity pricing, particularly for heavy oil. The evolving wildfire situation in northern Alberta represents a risk to the Company’s 2024 Outlook.

 

●

The Company remains committed to prioritizing debt repayment and intends to reduce debt in the near-term using 75% of excess cash flow (as defined in the indenture for the Company’s Senior Secured Notes due 2028, the “2028 Notes”) to semi-annually redeem a portion of the 2028 Notes until total indebtedness is less than US$150 million.

 

o

The outstanding principal amount of the 2028 Notes is US$300 million or approximately $407 million assuming the U.S. to Canadian dollar exchange rate at the Q1 2024 period end.

 

Reiterated 2024 Outlook:
2024 Outlook
Annual Production Average		22,000 – 25,000 bbls/d
Production Growth Over Annual 2023		25% – 40%
Capital Expenditures		$70 – $90 million

 

●

The table below provides a sensitivity for 2024 adjusted funds flow to select market variables relative to the 2024 Outlook and commodity price scenario outlined above, inclusive of Greenfire’s existing 2024 hedging program (“2024 Hedging Program”).

 

Sensitivity on 2024 Adjusted Funds Flow(1)(2)   Variable		Range		2024 Adjusted Funds Flow Sensitivity
Net Bitumen Production		+/- 1,000 bbls/d		+/- $24 million
WCS Differential to WTI		+/- US$1.00/bbl		+/- $12 million
Condensate Differential to WTI		+/- US$1.00/bbl		+/- $4 million
AECO Natural Gas		+/- C$0.25/GJ		+/- $3 million
Exchange Rate C$/US$		+/- $0.01		+/- $3 million
WTI		+/- US$1.00/bbl		+/- $2 million
Power		+/- C$25/MWh		+/- $2 million

 

(1)

The base case for the 2024 adjusted funds flow sensitivity assumes the midpoint of the 2024 Outlook production range of 23,500 bbls/d, WTI of US$80/bbl, WCS differential of US$15/bbl, AECO price of $2.00/GJ, F/X rate of C$1.35/$US, condensate purchased at 100% of WTI and one bbl of bitumen per 1.45 bbls of diluted bitumen sold.

 

(2)	Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP and Other Financial Measures” in this press release for further information.

 

 

Greenfire’s Growth-oriented Strategy Underpinned by Concentrated Tier-1 SAGD Assets

 

Greenfire has a large, long-life and relatively low decline Tier-1 oil sands resource base, with two producing and adjacent SAGD assets at the Hangingstone Facilities and expandable pipeline infrastructure in place for diluted bitumen and diluent at the Expansion Asset. The Company’s structural cost advantages from its Tier-1 SAGD reservoir at the Hangingstone Facilities, combined with its relatively lower forecasted capital expenditure profile due to its projected multi- year inventory of Refill well targets, is anticipated to result in continued near-term production growth and potential meaningful free cash flow generation. The Company believes that the Hangingstone Facilities offer ample opportunities for additional value generation. In addition to Greenfire’s existing commitment to repay debt, the Company intends to formalize and initiate a policy to return capital to its shareholders over time. Greenfire also plans to evaluate and consider additional potential prospects for further production growth, including external acquisitions that compete with the expected returns from its existing Tier-1 SAGD assets, if the Company believes they are accretive to Greenfire’s shareholders.

 

Conference Call Details

 

Greenfire plans to host a conference call on Thursday, May 16, 2024 at 7:00 a.m. Mountain Time (9:00 a.m. Eastern Time), during which members of the Company’s executive team will discuss its Q1 2024 results as well as host a question- and-answer session with investors.

 

●

Date: Thursday, May 16, 2024

 

●

Time: 7:00 a.m. Mountain Time (9:00 a.m. Eastern Time)

 

●

Webcast Link:

 

o

https://www.gowebcasting.com/13210

 

●

Dial In:

 

o

North America: 1-844-763-8274

 

o

International: +1-647-484-8814

 

About Greenfire

 

Greenfire is an intermediate, lower-cost and growth-oriented Athabasca oil sands producer with concentrated Tier-1 assets that use steam assisted gravity drainage extraction methods. The Company is focused on responsible and sustainable energy development in Canada, with its registered office located in Calgary, Alberta. Greenfire is an operationally focused company with an emphasis on an entrepreneurial environment and employee ownership. Greenfire common shares are listed on the New York Stock Exchange and Toronto Stock Exchange under the symbol “GFR”. For more information, visit greenfireres.com or find Greenfire on LinkedIn and X.

 

Non-GAAP and Other Financial Measures

 

Certain financial measures in this news release including Adjusted EBITDA (in total, and per bbl), Operating Netback (in total, and per bbl), Adjusted Funds Flow, Adjusted Free Cash Flow), are non-GAAP financial measures or ratios, supplementary financial measures or ratios and capital management measures. These measures are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-GAAP and other financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS.

 

For further details of these non-GAAP financial measures or ratios, please refer to the Corporation’s MD&A for the three months ended March 31, 2024, which is available on the Corporation’s website at www.greenfireres.com and is also available on the EDGAR and SEDAR+ websites.

 

 

 

Non-GAAP Financial Measures

 

Adjusted EBITDA

 

Net income (loss) and comprehensive income (loss) is the most directly comparable GAAP measure for adjusted EBITDA, which is a non-GAAP measure. Adjusted EBITDA is calculated as net income (loss) before interest and financing, income taxes, depletion, depreciation and amortization, the transaction and financing cost impacts of the Company’s business combination with M3-Brigade Acquisition III Corp. and bond refinancing and is adjusted for certain non-cash items, or other items that are not considered part of normal business operations. Adjusted EBITDA is used to measure Greenfire’s profitability from its underlying asset base on a continuing basis. This measure is not intended to represent net income (loss) and comprehensive income (loss) in accordance with IFRS.

 

The following table is a reconciliation of net income (loss) net income (loss) and comprehensive income (loss) to adjusted EBITDA⁽¹⁾.

 

Adjusted EBITDA⁽¹⁾

 

		Three months ended March 31,
($ thousands)		2024				2023
Net income (loss)			(46,915	)			(16,678	)
Add (deduct):
Income tax expense (recovery)			-				(3,613	)
Unrealized (gain) loss risk management contracts			38,737				(5,023	)
Stock-based compensation			852				325
Financing and interest			15,456				15,316
Depletion and depreciation			18,003				20,915
Transaction costs			-				2,327
Gain on revaluation of warrants			6,379				-
Foreign exchange loss (gain)			8,275				(303	)
Other (income) and expenses			(1,441	)			-
Adjusted EBITDA(1)			39,346				13,266
Net income (loss) ($/bbl)			(25.94	)			(8.75	)
Add (deduct):
Income tax recovery (expense) ($/bbl)			-				(1.90	)
Unrealized (gain) loss risk management contracts ($/bbl)			21.42				(2.64	)
Stock based compensation ($/bbl)			0.47				0.17
Financing and interest ($/bbl)			8.55				8.04
Depletion and depreciation ($/bbl)			9.96				10.98
Transaction costs ($/bbl)			-				1.22
Gain on revaluation of warrants ($/bbl)			3.53				-
Foreign exchange loss (gain) ($/bbl)			4.58				(0.16	)
Other (income) and expenses ($/bbl)			(0.80	)			-
Adjusted EBITDA(1) ($/bbl)			21.77				6.96

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP and Other Financial Measures” in this press release for further information.

 

 

 

Operating Netback

 

Oil sales is the most directly comparable GAAP measure for operating netback, which is a non-GAAP measure. This measure is not intended to represent oil sales, net earnings or other measures of financial performance calculated in accordance with IFRS. Operating netback is comprised of oil sales, less diluent expense, royalties, operating expense, transportation and marketing expense, adjusted for realized commodity risk management gains or losses, as appropriate. Operating netback is a financial measure widely used in the oil and gas industry as a supplemental measure of a Company’s efficiency and ability to generate cash flow for debt repayments, capital expenditures or other uses.

 

The following table is a reconciliation of oil sales to operating netback.

 

Operating Netback⁽¹⁾

 

		Three months ended March 31,
($ thousands, unless otherwise noted)		2024				2023
Oil sales			200,990				179,668
Diluent expense			(91,682	)			(101,856	)
Transportation and marketing			(13,199	)			(16,014	)
Royalties			(6,315	)			(4,502	)
Operating expenses			(36,348	)			(39,764	)
Operating netback(1), excluding realized gain (loss) risk management contracts			53,446				17,532
Realized gain (loss) risk management contracts			(8,797	)			(180	)
Operating netback(1)			44,649				17,352
Oil sales ($/bbl)			75.41				64.92
Diluent expense ($/bbl)			(14.97	)			(24.08	)
Transportation and marketing ($/bbl)			(7.30	)			(8.40	)
Royalties ($/bbl)			(3.49	)			(2.36	)
Operating expenses ($/bbl)			(20.10	)			(20.87	)
Operating netback(1), excluding realized gain (loss) risk management contracts ($/bbl)			29.55				9.21
Realized gain (loss) risk management contracts ($/bbl)			(4.86	)			(0.09	)
Operating netback ($/bbl)(1)			24.69				9.12

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP and Other Financial Measures” in this press release for further information.

 

Adjusted Funds Flow and Adjusted Free Cash Flow

 

Cash provided (used) by operating activities is the most directly comparable GAAP measure for adjusted funds flow and adjusted free cash flow, which are non-GAAP measures. These measures are not intended to represent cash provided (used) by operating activities calculated in accordance with IFRS.

 

The adjusted funds flow measure allows management and others to evaluate the Company’s ability to fund its capital programs and meet its ongoing financial obligations using cash flow internally generated from ongoing operating related activities. We compute adjusted funds flow as cash provided (used) by operating activities, excluding the impact of changes in non-cash working capital, less transaction costs.

 

Management uses adjusted free cash flow as an indicator of the efficiency and liquidity of its business, measuring its funds after capital investment that is available to manage debt levels and return capital to shareholders. By removing the impact of current period capital expenditures from adjusted free cash flow, management monitors its adjusted free cash flow to inform its capital allocation decisions. We compute adjusted free cash flow as cash provided (used) by operating activities, excluding the impact of changes in non-cash working capital, less transaction costs and capital expenditures.

 

 

 

The following table is a reconciliation of cash provided (used) by operating activities to adjusted funds flow and adjusted free cashflow.

 

Adjusted Funds Flow⁽¹⁾ and Adjusted Free Cash Flow⁽¹⁾

 

		Three months ended March 31,
($ thousands)		2024				2023
Cash provided (used) by operating activities			17,064				(4,495	)
Transaction costs			-				2,327
Changes in non-cash working capital			10,525				5,225
Adjusted funds flow(1)			27,589				3,057
Property, plant and equipment expenditures			(31,920	)			(2,518	)
Acquisitions			(2,529	)			-
Adjusted free cash flow(1)			(6,860	)			539

 

(1)

Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the “Non-GAAP and Other Financial Measures” in this press release for further information.

 

Non-GAAP Financial Ratios

 

Adjusted EBITDA ($/bbl)

 

Net income (loss) and comprehensive income (loss) is the most directly comparable GAAP measure for adjusted EBITDA ($/bbl), which is a non-GAAP measure. Adjusted EBITDA ($/bbl) is used to measure Greenfire’s profitability from its underlying asset base on a continuing basis. This measure is not intended to represent net income (loss) and comprehensive income (loss) in accordance with IFRS. Adjusted EBITDA ($/bbl) is calculated by dividing adjusted EBITDA by the Company’s total sales volume in a specified period.

 

Operating Netback ($/bbl)

 

Oil sales ($/bbl) is a ratio calculated using oil sales, which is the most directly comparable GAAP measure for operating netback. Operating netback is the non-GAAP financial measure used to calculate operating netback ($/bbl), which is a non-GAAP financial ratio. This measure is not intended to represent oil sales, net earnings or other measures of financial performance calculated in accordance with IFRS. Operating netback ($/bbl) is calculated by dividing operating netback by the Company’s total oil sales volume, in a specified period. Operating netback ($/bbl) is a non-GAAP financial ratio widely used in the oil and gas industry as a supplemental measure of a Company’s efficiency and ability to generate cash flow for debt repayments, capital expenditures or other uses, isolated for the impact of changes in oil sales volume, in a specified period.

 

Forward-Looking Statements

 

This press release may contain “forward-looking information” within the meaning of applicable Canadian securities laws (forward-looking information being collectively hereinafter referred to as “forward-looking statements”). Such forward- looking statements are based on expectations, estimates and projections as at the date of this press release. Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often but not always using phrases such as “expects”, “is expected”, “anticipates”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends”, or variations of such words and phrases (including negative and grammatical variations), or stating that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements and are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements and information concerning: the intentions, strategy, plans and future actions of the Company; the expectation that the Refill drilling program is highly economic and is expected to significantly increase Greenfire’s bitumen production; Greenfire’s intention to drive continued production growth, accelerate debt repayment and positioning to benefit from the Trans Mountain Expansion Project; the Company’s redevelopment drilling plans at the Expansion Asset and expectation for drilling to conclude in the third quarter of 2024; the Company’s expectation that higher reservoir pressure will be restored at the Expansion Asset around mid-2024, which management anticipates will support increased production rates; the Company’s expectation that average productivity of Refill wells with replaced downhole temperature sensor will increase in the second half of 2024 to align with the current average productivity of the remaining five Refill wells where temperature sensors have not failed; Greenfire’s 2024 Outlook, including the amount of capital expenditures at the Hangingstone Facilities; the evolving wildfire situation in northern Alberta and the potential impact the Company’s 2024 Outlook; Greenfire’s intent to continue to prioritize debt repayment and to reduce debt in the near-term using 75% of excess cash flow; Greenfire’s expected benefits from completion of the Trans Mountain expansion project, which become operational in May 2024; the expectation that at the mid-point of Greenfire’s 2024 Outlook production range and assuming a US$15/bbl differential, the Company estimates that each US$1/bbl change in the WCS differential would impact 2024 adjusted EBITDA by approximately $12 million; Greenfire’s view that the Company is positively positioned with $1.8 billion of corporate tax pools, lower pre-payout royalty rates at the Expansion Asset owing to sizable unrecovered royalty balances and no gross overriding royalty obligations at the Hangingstone Facilities, and the expectation that these attributes will support heighted free cash flow generation potential, particularly at higher commodity prices; the Company’s belief that the Hangingstone Facilities offer ample opportunities for additional value generation; and statements relating to the business and future activities of the Company after the date of this press release.

 

 

 

Forward-looking statements are based on the beliefs of the Company’s management, as well as on assumptions, which management believes to be reasonable based on information available at the time such statements were made. In addition to other assumptions set out herein, the forward-looking statements contained herein are based on the following assumptions: Greenfire’s ability to compete with other companies; the anticipated future financial or operating performance of the Company; the expected results of operations; assumptions as to future drilling results; assumptions as to costs and commodity prices; the timing and amount of funding required to execute the Company’s business plans; assumptions about future capital expenditures; the effect on the Company of any changes to existing or new legislation or policy or government regulation; the length of time required to obtain permits, certifications and approvals; the availability of labor; estimated budgets; assumptions about future interest and currency exchange rates; requirements for additional capital; the timing and possible outcome of regulatory and permitting matters; goals; strategies; future growth; and the adequacy of financial resources. However, by their nature, forward-looking statements are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

Forward-looking statements are subject to a variety of risks, uncertainties and other factors which could cause actual results, performance or achievements to differ from those expressed or implied by the forward-looking statements, including, without limitation, a decline in oil prices or widening of differentials between various crude oil prices; lower than expected reservoir performance, including, but not limited to, lower oil production rates; the inability to recognize continued or increased efficiencies from the Company’s production enhancement program and processing plant enhancements, debottlenecking and brownfield expansions; equipment failures that result in a failure to achieve expected benefits of capital expenditure programs or result in reduced production or increased costs; reduced access to or an increase in the cost of diluent; an increase in the cost of natural gas or electricity; the reliability and maintenance of Greenfire’s facilities; the potential for the Trans Mountain Expansion Project to not result in improved pricing as expected; supply chain disruption and risks of increases costs relating to inflation; the safety and reliability of pipelines and trucking services that transport Greenfire’s products; the need to replace significant portions of existing wells, referred to as “workovers”, or the need to drill additional wells; the cost to transport bitumen, diluent and bitumen blend, and the cost to dispose of certain by-products; the availability and cost of insurance and the inability to insure against certain types of losses; severe weather or catastrophic events such as fires, droughts, lightning, earthquakes, extreme cold weather, storms or explosions; seasonal weather patterns and the corresponding effects of the spring thaw on equipment on Greenfire’s properties; the availability of pipeline capacity and other transportation and storage facilities for the Company’s bitumen blend; the cost of chemicals used in Greenfire’s operations, including, but not limited to, in connection with water and/or oil treatment facilities; the availability of and access to drilling equipment and key personnel; risks of cybersecurity threats including the possibility of potential breakdown, invasion, virus, cyber-attack, cyber-fraud, security breach, and destruction or interruption of the Company’s information technology systems; Canadian heavy and light oil export capacity constraints and the resulting impact on realized pricing; the impact of global wars and conflicts on global stability, commodity prices and the world economy, changes in the political landscape and/or legal, tax, royalty and regulatory regimes in Canada, and elsewhere; the cost of compliance with applicable regulatory regimes, including, but not limited to, environmental regulation, if any; the ability to attract or access capital as a result of changing investor priorities and trends, including as a result of climate change, environmental, social and governance initiatives, the adoption of decarbonization policies and the general negative sentiment towards the oil and gas industry; hedging risks; variations in foreign exchange and interest rates; risks related to the Company’s indebtedness; failure to accurately estimate abandonment and reclamation costs; the potential for management estimates and assumptions to be inaccurate; and general economic, market and business conditions in Canada, the United States and globally.

 

 

 

You should carefully consider all of the risks and uncertainties described in the “Risk Factors” section of the Company’s annual report on Form 20-F dated March 26, 2024, which is available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov/edgar.shtml and in other documents filed by Greenfire from time to time on SEDAR+ and with the United States Securities and Exchange Commission. The lists of risk factors set out in this press release or in the Company’s other public disclosure documents are not exhaustive of the factors that may affect any forward-looking statements of the Company. Forward-looking statements are statements about the future and are inherently uncertain. Actual results could differ materially from those projected in the forward-looking statements as a result of the matters set out in this press release generally and certain economic and business factors, some of which may be beyond the control of the Company. In addition, the global financial and credit markets have experienced significant debt and equity market and commodity price volatility which could have a particularly significant, detrimental and unpredictable effect on forward- looking statements. The Company does not intend, and does not assume any obligation, to update any forward-looking statements, other than as required by applicable law. For all of these reasons, the Company’s securityholders should not place undue reliance on forward-looking statements.

 

Financial Information

 

The financial information and data contained in this press release is unaudited and does not conform to Regulation S-X promulgated under the United States Securities Act of 1933. While Greenfire’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”), the financial information and data contained in this press release have not been prepared in accordance with IFRS. Greenfire believes the measures that are not defined under IFRS provide useful information to management and investors regarding certain financial and business trends relating to Greenfire’s financial condition and results of operations. Greenfire believes that the use of these non-IFRS financial measures provides an additional tool for investors to use in evaluating projected operating results and trends relating to Greenfire’s financial condition and results of operations. These non-IFRS measures may not be indicative of Greenfire’s historical operating results, nor are such measures meant to be predictive of future results. These measures may not be comparable to measures under the same or similar names used by other similar companies. Management does not consider these non-IFRS measures in isolation or as an alternative to financial measures determined in accordance with IFRS.

 

Oil and Gas Terms

 

This press release uses the term Tier-1 SAGD reservoir to describe the bitumen reservoirs that Greenfire has an interest in. The term Tier-1 SAGD reservoir refers to SAGD reservoirs that have no top gas, bottom water, or lean zones, commonly referred to as “thief zones”. Thief zones provide an unwanted outlet for steam and reservoir pressure. Thief zones require costly downhole pumps and recurring pump replacements to achieve targeted production rates, leading to higher capital and operating expenditures. Tier-1 wells flow to surface with natural lift; not requiring downhole pumps or gas lift.

 

Contact Information

 

Greenfire Resources Ltd.

 

205 5th Avenue SW
Suite 1900

Calgary, AB T2P 2V7
investors@greenfireres.com
greenfireres.com

 

 

 

Exhibit 99.4

 

PRESS RELEASE

 

Greenfire Resources Reports Voting Results from 2024
Annual Meeting of Shareholders

 

CALGARY, ALBERTA – May 15, 2024 - Greenfire Resources Ltd. (NYSE and TSX: GFR) (“Greenfire” or the “Company”), a Calgary-based energy company focused on the sustainable production and development of thermal energy resources from the Athabasca region of Alberta, Canada, is pleased to announce the voting results from its annual meeting of shareholders held May 15, 2024 in Calgary, Alberta (the “Meeting”).

 

Voting Results from the Meeting

 

Each of the matters voted upon at the Meeting is discussed in detail in the Company’s Management Information Circular dated April 2, 2024, which is available on SEDAR+ at www.sedarplus.ca and on the Company’s website at www.greenfireres.com/investors/#meetings.com.

 

A total of 51,699,992 Common Shares representing approximately 75 percent of the Company’s issued and outstanding Common Shares were voted in person and by proxy at the Meeting. The voting results for each matter presented at the Meeting are provided below.

 

1. Election of Directors

 

The following six nominees were appointed as directors of Greenfire to serve until the next annual meeting of the shareholders of the Company, or until their successors are elected or appointed, subject to the provisions of the Business Corporations Act (Alberta) and the by-laws of the Company:

 

Nominee		Votes For				Votes Withheld
Robert Logan			100	%			NIL
Julian McIntyre			99.89	%			0.11	%
Matthew Perkal			100	%			NIL
Jonathan Klesch			99.68	%			0.32	%
Venkat Siva			99.97	%			0.03	%
W. Derek Aylesworth			100	%			NIL

 

2. Appointment of Auditors

 

Deloitte LLP, Chartered Professional Accountants, were appointed to serve as the auditors of the Company until the next annual meeting of the shareholders of the Company, at remuneration to be fixed by the directors of the Company.

 

 

 

About Greenfire

 

Greenfire is an intermediate, lower-cost and growth-oriented Athabasca oil sands producer with concentrated Tier-1 assets that use steam assisted gravity drainage extraction methods. The Company is focused on responsible and sustainable energy development in Canada, with its registered office located in Calgary, Alberta. Greenfire is an operationally focused company with an emphasis on an entrepreneurial environment and employee ownership. Greenfire common shares are listed on the New York Stock Exchange and Toronto Stock Exchange under the symbol “GFR”. For more information, visit greenfireres.com or find Greenfire on LinkedIn and X.

 

Contact Information

 

Greenfire Resources Ltd.

 

205 5th Avenue SW

Suite 1900

Calgary, AB T2P 2V7

investors@greenfireres.com

greenfireres.com

 

 

 

 

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