NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is
pleased to announce financial and operating results for the three
and nine months ended September 30, 2021, and provide a number of
updates which demonstrate continued successful advancement of our
Pipestone and Wapiti Montney play development. This was
a successful quarter for NuVista, with results that included the
continued ramp-up of production in the new Pipestone North
compressor station facility, the drilling of 14 and startup of 6
new wells, and the delivery of production and cash flow results
which were ahead of expectations. We are pleased to note that both
condensate and natural gas future strip prices have increased
significantly, resulting in a material increase to cash flows and
decreasing projected net debt levels. Our continuing efforts will
be to focus on a disciplined capital program to maximize economic
returns from our existing facilities combined with net debt
reduction.
During the quarter ended September 30, 2021, NuVista:
- Produced 51,005 Boe/d, versus the
guidance range of 50,000 – 52,000 Boe/d. The production consisted
of 31% condensate, 9% NGL’s, and 60% natural gas;
- Achieved $80.6 million of cash flow
in the quarter ($0.36/share basic), above expectations due to
increased commodity pricing, partially offset by hedging losses.
This figure is an increase of 45% versus the prior quarter, and an
increase of 94% compared to the third quarter of 2020;
- Achieved an operating netback of
$28.06/Boe excluding hedging, an improvement of 28% and 235% as
compared to the previous quarter and the third quarter of 2020,
respectively. Corporate netback after hedging and all corporate
costs also improved significantly to $17.18/Boe, an increase of 45%
as compared to the prior quarter;
- Reduced net G&A expenses to
$0.99/Boe, a reduction of 11% compared to the prior quarter;
- Executed a successful capital
program of $77.2 million, including 14 new wells drilled, 12
completed, and 6 new brought online. Well results are exceeding
management expectations, and our average year to date costs to
drill and complete per horizontal meter are more than 15% lower
than the 2020 all-well average;
- Continued to significantly advance
our progress and plans in environmental, social and governance
items (“ESG”), including the release of our 2019 & 2020 ESG
report and 2025 targets; and
- Successfully refinanced and
redeemed our $220 million of senior unsecured notes, as previously
reported. The notes were due 2023, and they were retired with the
issuance of $230 million 5 year senior unsecured notes due July
2026, at a coupon rate of 7.875%.
The world is in an inflationary environment
right now, and the control of costs and assurance of reliable
supply of people and equipment is of high importance. We have made
significant efforts to smooth and flatten out our rig schedule, and
therefore our personnel and equipment needs. This helps to ensure
steady work for all and therefore the maximum predictability to
NuVista’s people and equipment supply chain. It also leads to the
maximization of efficiency, cost, and safety performance. NuVista
has continued to drill and complete wells ever more quickly, which
reduces cost per well and reduces cycle times to first production.
It also leads to more wells being drilled per rig per year, which
requires slightly earlier spend phasing.
Excellence in Operations and Cost
Reductions
Wapiti
Activity in the Greater Wapiti area has been
directed to maintaining flat production levels while generating
material free cash flow to fund the ramp up in Pipestone and
contribute to net debt reduction. Quarterly production was 26,750
Boe/d (30% condensate) with accompanying free cash flow generation
of $47MM. During the quarter the latest Elmworth IP365 milestone
was reached. The 4-well pad averaged 5.6 MMcf/d and 205 Bbls/d
condensate for a total of 1,105 Boe/d, which is a 22% improvement
over the historic average first-year production per well. Also, in
the quarter we finished drilling a new 4-well pad on the Elmworth
Property, which we have subsequently completed and begun testing
with excellent early flowback results. Drill costs for this pad
were $949/Hz meter, while completion costs were $499/Tonne of sand.
These costs are approximately 15% below those achieved on the pad
referenced earlier that has just reached IP365. In an effort to
maintain steady and flat drilling rig counts we have accelerated
the drilling of the next Elmworth 6-well pad from 2022 into
2021.
Pipestone
Activity in Pipestone is proceeding well and
exceeding expectations. Production in the quarter averaged 24,000
Boe/d (34% condensate), approximately flat from the prior quarter,
and has already begun to ramp up through the fourth quarter. Well
costs, productivity and cycle times are all continuing to improve.
Our latest 6-well pad to come on production (Pipestone Pad #6) was
drilled and completed for costs of $830/Hz meter and $420/Tonne of
sand, with total drill, complete, equipping and tie-in (“DCET”)
costs which averaged $5.6 million per well. Production over the
first 30 days averaged 6.1 MMcf/d including approximately 70%
condensate (240 Bbls/MMcf). Based on field estimates, this pad has
reached pay out of capital invested within the first three months
of production, a NuVista record.
Pipestone Pad #7, a 6-well pad, achieved
drilling and completion costs of $720/Hz meter and $460/Tonne of
sand and has been brought on-stream in November with excellent
early flowback results. In addition, Pipestone Pad #8, also a
6-well pad, is currently drilling. In order to maintain continuous
frac crew operations, the completion of this pad will be
accelerated from 2022 into late 2021. For similar operational
continuity reasons, we plan to commence drilling on Pipestone Pad
#9 immediately after Pad #8, which was originally scheduled to spud
in early 2022.
Significant Commodity Price
Diversification and Risk Management
Global oil prices continued to strengthen
significantly through the third quarter as advances in vaccine
delivery have spurred increased demand and expectations. The supply
outlook looks tight as a consequence of reduced global capital
spending and OPEC production discipline. Condensate
pricing differentials have continued strong due to increased demand
and moderated supply growth. With natural gas storage levels
reducing partially due to a large increase in LNG shipments,
impactful and sustained strength in NYMEX gas pricing has been
occurring and is expected to continue through 2022. Propane and
butane are also experiencing improved pricing levels. As commodity
prices have now returned to levels in excess of what we require to
drive our near term strategic priorities, we have re-engaged our
rolling hedge program to ensure partial attenuation of future price
volatility.
We have primarily been using a combination of
collars, swaps and three-way collars in order to provide downside
protection while maintaining upside for price growth.
For the full year of 2022, we have hedged approximately 28% of
projected liquids production at an average floor price of
C$71.14/Bbl using three-way collars. The average ceiling price is
C$86.03/Bbl. We have hedged approximately 22% of projected natural
gas production for 2022 with floor and ceiling prices of C$3.04/Mcf
and $5.00/Mcf (hedged and exported volumes converted to an AECO
equivalent price). All of the preceding percentage figures relate
to production net of royalty volumes, and the hedge volumes are
front end loaded in the year.
ESG Progress Continues
We continue to execute upon our stated GHG and
methane emission reduction projects, and we were proud to issue our
newest ESG report during the quarter, covering 2019 and 2020. In
this report we detailed the significant progress that we continue
to make, and we committed to 2025 targets in all key areas of ESG
to ensure our continued progress.
2021 Guidance Update and 2022 Budget
In order to maintain a smooth unbroken 3-rig
drilling schedule and to optimize value, NuVista is shifting a
small amount of 2022 capital spending into the fourth quarter of
2021. NuVista’s capital spending guidance for 2021 has been
increased to a range of $275 - $285 million, from the original top
of range of $250 million. Our 2022 capital spending budget
has been set at the reduced level of $290 - $310 million, which is
$25 million less than the original outlook. The
aforementioned numbers have been adjusted to account for expected
inflation in the range of 5-10%, offset by continued engineering
and efficiency gains. NuVista retains the flexibility to
adjust capital spending upwards or downwards to maximize value and
to suit the ongoing economic environment as it unfolds.
Excellent well results and a slight acceleration
of capital phasing leads to enhanced production, cash flow, and
overall value. Full year 2021 production guidance is
increased and tightened to 51,000 – 52,000 Boe/d versus the prior
range of 50,000 – 52,000 Boe/d. Fourth quarter production
guidance is 56,000 – 58,000 Boe/d***. Full year 2022
production guidance is set at 65,000 – 68,000 Boe/d, an increase
from our prior outlook of 62,500 – 67,500 Boe/d.
At strip prices* we anticipate exiting 2021 with
a net debt to annualized fourth quarter cash flow ratio of well
under 1.0x and absolute net debt levels below $485 million. This is
a reduction of almost $175 million from the peak during the 2020
pandemic and is well below our previous year end 2021 expected debt
level of $520 million despite the shifting of capital into 2021
from 2022.
* 2021 full year pricing projection
incorporating actual year to date pricing and October 22nd strip
pricing: WTI US$69.25/Bbl, NYMEX US$3.75/MMBtu, AECO $3.35/GJ,
CAD:USD FX 1.25
Our 2022 budget is anticipated to achieve our
significant growth objectives in production and cashflow while
enabling a continued material reduction in net debt. At current
strip prices**, NuVista’s 2022 free cash flow (forecast cash flow
net of forecast capital spending) is projected to be approximately
$315 million. 100% of free cash flow will be directed towards debt
reduction until our net debt is reduced below $400 million. This is
expected to be achieved as early as the second quarter of 2022.
Free cash flow remaining after passing below this milestone is
anticipated to be allocated between further debt reduction, return
of capital to shareholders and continued optimization of the
business. The specific nature of shareholder return will be
determined and communicated as this milestone approaches.
2022 Guidance Highlights Table |
|
|
Capital Expenditures $MM |
$290 - $310 |
Average Production, Boe/d |
65,000 – 68,000 |
% Condensate |
~30% |
% NGL |
~8% |
% Natural Gas (conversion 6:1) |
~62% |
Free Cash Flow, $MM** |
$315 |
Average YoY Production Growth |
30% |
All in Capital Efficiency, $/Boed **** |
~$9,100 |
Year on Year Cash Cost Reduction, per Boe |
~10% |
** 2022 pricing reflects October 22nd strip
pricing: WTI US$75.25/Bbl, NYMEX US$4.35/MMBtu, AECO $3.95/GJ,
CAD:USD FX 1.24*** Note: production splits for the fourth quarter
of 2021 are the same as the 2022 ones above**** Capital efficiency
is a measure of forecast capital expenditures divided by forecast
production additions in the first year
We intend to carefully direct available cash
flow towards a prudent balance of net debt reduction, shareholder
return, and production growth until our existing facilities are
filled to maximum efficiency, and net debt to cash flow levels
reach approximately 0.5x. That maximum efficiency point
is 85,000 – 90,000 Boe/d, and we are confident that the actions
described above accelerate the Company towards that goal by as
early as 2023. With facilities filled, returns and netbacks are
enhanced significantly due to efficiencies of scale, with overall
cash costs per Boe which are expected to reduce by over 25%, or
approximately $6/Boe by 2023 as compared to the first quarter of
2021. Capital spending will continue to be weighted
heavily towards Pipestone, as our highest return area, with
expected well payouts well below a year.
NuVista has top quality assets and a management
team focused on value and relentless improvement. We have the
necessary foundation and liquidity to add significant value as
commodity prices continue with strength. We have set the table for
returns-focused profitable growth to between 85,000 – 90,000 Boe/d
with only half-cycle spending, since the required processing and
transportation infrastructure is now in place. We will continue to
adjust to this environment in order to maximize the value of our
asset base and ensure the long term sustainability of our business.
We would like to thank our staff, contractors, and suppliers for
their continued dedication and delivery, and we thank our board of
directors and our shareholders for their continued guidance and
support. Please note that our corporate presentation, including our
outlook for 2022 and beyond, is being updated and will be available
at www.nuvistaenergy.com on November 10, 2021. NuVista’s financial
statements, notes to the financial statements and management’s
discussion and analysis (“MD&A”) for the quarter ended
September 30, 2021, will be filed on SEDAR (www.sedar.com) under
NuVista Energy Ltd. on November 10, 2021 and can also be accessed
on NuVista’s website.
Financial and
Operating Highlights |
|
|
|
|
|
Three months ended September 30 |
Nine months ended September 30 |
(Cdn
$000s, except otherwise indicated) |
2021 |
2020 |
% Change |
2021 |
|
2020 |
|
% Change |
FINANCIAL |
|
|
|
|
|
|
Petroleum and natural gas revenues |
222,601 |
|
105,708 |
|
111 |
|
561,935 |
|
300,260 |
|
87 |
|
Cash flow from operating
activities |
124,007 |
|
36,581 |
|
239 |
|
228,515 |
|
102,481 |
|
123 |
|
Adjusted funds flow (1)
(2) |
80,602 |
|
41,484 |
|
94 |
|
169,311 |
|
107,467 |
|
58 |
|
Per share - basic |
0.36 |
|
0.18 |
|
100 |
|
0.75 |
|
0.48 |
|
56 |
|
Per share - diluted |
0.35 |
|
0.18 |
|
94 |
|
0.73 |
|
0.48 |
|
52 |
|
Net income (loss) |
147,065 |
|
(44,144 |
) |
(433 |
) |
151,512 |
|
(913,313 |
) |
117 |
|
Per share - basic |
0.65 |
|
(0.20 |
) |
(425 |
) |
0.67 |
|
(4.05 |
) |
117 |
|
Per share - diluted |
0.63 |
|
(0.20 |
) |
(415 |
) |
0.65 |
|
(4.05 |
) |
116 |
|
Capital expenditures (2) |
77,152 |
|
7,081 |
|
990 |
|
202,444 |
|
156,578 |
|
29 |
|
Proceeds on property
dispositions |
— |
|
— |
|
— |
|
93,578 |
|
— |
|
— |
|
Net debt (1) (2) |
|
|
|
545,410 |
|
623,324 |
|
(12 |
) |
OPERATING |
|
|
|
|
|
|
Daily Production |
|
|
|
|
|
|
Natural gas (MMcf/d) |
184.1 |
|
183.7 |
|
— |
|
177.0 |
|
186.5 |
|
(5 |
) |
Condensate & oil
(Bbls/d) |
15,779 |
|
13,790 |
|
14 |
|
14,912 |
|
14,450 |
|
3 |
|
NGLs (Bbls/d) |
4,534 |
|
5,034 |
|
(10 |
) |
5,052 |
|
5,271 |
|
(4 |
) |
Total (Boe/d) |
51,005 |
|
49,443 |
|
3 |
|
49,467 |
|
50,810 |
|
(3 |
) |
Condensate, oil & NGLs
weighting |
40 |
% |
38 |
% |
|
40 |
% |
39 |
% |
|
Condensate & oil
weighting |
31 |
% |
28 |
% |
|
30 |
% |
28 |
% |
|
Average realized selling
prices (4) |
|
|
|
|
|
|
Natural gas ($/Mcf) |
4.88 |
|
2.16 |
|
126 |
|
4.07 |
|
2.20 |
|
85 |
|
Condensate & oil
($/Bbl) |
84.59 |
|
49.09 |
|
72 |
|
78.72 |
|
43.37 |
|
82 |
|
NGLs ($/Bbl) (3) |
41.36 |
|
14.65 |
|
182 |
|
32.57 |
|
11.28 |
|
189 |
|
Netbacks ($/Boe) |
|
|
|
|
|
|
Petroleum and natural gas
revenues |
47.44 |
|
23.24 |
|
104 |
|
41.61 |
|
21.57 |
|
93 |
|
Realized gain (loss) on
financial derivatives |
(6.04 |
) |
3.87 |
|
(256 |
) |
(5.78 |
) |
4.17 |
|
(239 |
) |
Royalties |
(3.51 |
) |
(0.69 |
) |
409 |
|
(2.79 |
) |
(0.94 |
) |
197 |
|
Transportation expenses |
(5.38 |
) |
(4.38 |
) |
23 |
|
(5.31 |
) |
(4.29 |
) |
24 |
|
Operating expenses |
(10.49 |
) |
(9.80 |
) |
7 |
|
(10.70 |
) |
(9.88 |
) |
8 |
|
Operating netback (2) |
22.02 |
|
12.24 |
|
80 |
|
17.03 |
|
10.63 |
|
60 |
|
Corporate netback (2) |
17.18 |
|
9.12 |
|
88 |
|
12.54 |
|
7.72 |
|
62 |
|
SHARE TRADING STATISTICS |
|
|
|
|
|
|
High ($/share) |
5.35 |
|
1.02 |
|
425 |
|
5.35 |
|
3.36 |
|
59 |
|
Low ($/share) |
2.90 |
|
0.61 |
|
375 |
|
0.89 |
|
0.24 |
|
271 |
|
Close ($/share) |
5.14 |
|
0.63 |
|
716 |
|
5.14 |
|
0.63 |
|
716 |
|
Average daily volume
('000s) |
781 |
|
1,663 |
|
(53 |
) |
1,201 |
|
2,214 |
|
(46 |
) |
Common
shares outstanding ('000s) |
|
|
|
226,420 |
|
225,727 |
|
— |
|
(1) Refer to Note 15 “Capital management” in
NuVista's financial statements and to the sections entitled
“Adjusted funds flow” and “Liquidity and capital resources”
contained in NuVista's Management, Discussion & Analysis. (2)
Non-GAAP measure that does not have any standardized meaning under
IFRS and therefore may not be comparable to similar measures
presented by other companies where similar terminology is used.
Reference should be made to the “Non-GAAP measurements”. (3)
Natural gas liquids (“NGLs”) include butane, propane and ethane and
an immaterial amount of sulphur revenue. (4) Product prices exclude
realized gains/losses on financial derivatives.
Advisories Regarding Oil And Gas
Information
BOEs may be misleading, particularly if used in
isolation. A BOE conversion ratio of 6 Mcf: 1 Bbl is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead. As the value ratio between natural gas and crude oil
based on the current prices of natural gas and crude oil is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
Any references in this news release to initial
production rates are useful in confirming the presence of
hydrocarbons, however, such rates are not determinative of the
rates at which such wells will continue production and decline
thereafter. While encouraging, readers are cautioned not to place
reliance on such rates in calculating the aggregate production for
NuVista.
Payout means the anticipated years of production
from a well required to fully pay for the drilling, completion,
equipping and tie-in of such well.
Basis of presentation
Unless otherwise noted, the financial data
presented in this press release has been prepared in accordance
with Canadian generally accepted accounting principles (“GAAP”)
also known as International Financial Reporting Standards (“IFRS”).
The reporting and measurement currency is the Canadian dollar.
National Instrument 51-101 - "Standards of Disclosure for Oil and
Gas Activities" includes condensate within the product type of
natural gas liquids. NuVista has disclosed condensate values
separate from natural gas liquids herein as NuVista believes it
provides a more accurate description of NuVista's operations and
results therefrom.
Advisory regarding forward-looking
information and statements
This press release contains forward-looking
statements and forward-looking information (collectively,
“forward-looking statements”) within the meaning of applicable
securities laws. The use of any of the words “will”, “expects”,
“believe”, “plans”, “potential” and similar expressions are
intended to identify forward-looking statements. More particularly
and without limitation, this press release contains forward looking
statements, including management's assessment of: NuVista’s future
focus, strategy, plans, opportunities and operations; plans to
focus on a disciplined capital program to maximize economic returns
from existing facilities combined with net debt reduction; plans to
control costs and ensure a reliable supply of people and equipment;
that NuVista will move forward through to 2022 with strength and
increasing momentum; expectations with respect to when certain well
pads at Pipestone North, Pipestone South and at Elmworth will be
drilled and or completed; industry conditions and commodity prices;
effect of our financial, commodity, and natural gas risk management
strategy and market diversification; ESG plans and initiatives;
guidance with respect to 2021 and 2022 capital spending amounts and
spending plans; that the shift in 2021 capital spending will
optimize value, NuVista is shifting a small amount of 2022 capital
spending into the fourth quarter of 2021; expected capital spending
inflation in the range of 5-10%, anticipated continued engineering
and capital spending efficiency gains; fourth quarter and full year
2021 production guidance; anticipated reductions in net debt and
net debt to cash flow ratio alongside significant production and
cash flow growth into 2022; 2021 year end net debt and net debt to
annualized fourth quarter cash flow ratio; 2022 guidance with
respect to free cash flow, capital spending, production, capital
efficiency, cash costs and production mix; plans to carefully
direct available cash flow towards a prudent balance of net debt
reduction, shareholder return, and production growth until existing
facilities are filled to maximum efficiency, and net debt to cash
flow levels reach approximately 0.5x; that NuVista's maximum
production efficiency point is 85,000 – 90,000 Boe/d, and that the
Company will achieve that goal by as early as 2023; that returns
and netbacks will be enhanced significantly when NuVista's
facilities are filled, due to efficiencies of scale, that overall
cash costs will be reduced by approximately $6/Boe by 2023; that
capital spending will continue to be weighted heavily towards
Pipestone; that Pipestone will continue to be the Company's highest
return area; expected well payouts at Pipestone; the
quality of NuVista's asset base; NuVista's focus on value and
relentless improvement; that NuVista has the necessary foundation
and liquidity to add significant value if commodity prices continue
with strength; that NuVista will experience returns-focused
profitable growth to between 80,000 – 90,000 Boe/d with only
half-cycle spending; that NuVista has the required facility
infrastructure in place to support its growth plans and that
NuVista will continue to adjust to industry conditions in order to
maximize the value of its asset base and ensure the long term
sustainability of its business.
By their nature, forward-looking statements are
based upon certain assumptions and are subject to numerous risks
and uncertainties, some of which are beyond NuVista’s control,
including the impact of general economic conditions, industry
conditions, current and future commodity prices, currency and
interest rates, anticipated production rates, borrowing, operating
and other costs and cash flow, the timing, allocation and amount of
capital expenditures and the results therefrom, anticipated
reserves and the imprecision of reserve estimates, the performance
of existing wells, the success obtained in drilling new wells, the
sufficiency of budgeted capital expenditures in carrying out
planned activities, access to infrastructure and markets,
competition from other industry participants, availability of
qualified personnel or services and drilling and related equipment,
stock market volatility, effects of regulation by governmental
agencies including changes in environmental regulations, tax laws
and royalties, the ability to access sufficient capital from
internal sources and debt and equity markets; and including,
without limitation, those risks considered under “Risk Factors” in
our Annual Information Form. Readers are cautioned that the
assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be
imprecise and, as such, undue reliance should not be placed on
forward-looking statements. NuVista’s actual results, performance
or achievement could differ materially from those expressed in, or
implied by, these forward-looking statements, or if any of them do
so, what benefits NuVista will derive therefrom.
This press release also contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about our prospective
results of operations, all of which are subject to the same
assumptions, risk factors, limitations, and qualifications as set
forth in above. Readers are cautioned that the assumptions used in
the preparation of such information, although considered reasonable
at the time of preparation, may prove to be imprecise and, as such,
undue reliance should not be placed on FOFI and forward-looking
statements. Our actual results, performance or achievement could
differ materially from those expressed in, or implied by, these
FOFI and forward-looking statements, or if any of them do so, what
benefits we will derive therefrom.
We have included the FOFI and forward-looking
statements in this press release in order to provide readers with a
more complete perspective on our prospective results of operations
and such information may not be appropriate for other purposes. The
FOFI and forward-looking statements and information contained in
this press release are made as of the date hereof and we undertake
no obligation to update publicly or revise any FOFI or
forward-looking statements, whether as a result of new information,
future events or otherwise, unless so required by applicable
securities laws.
Non-GAAP measurements
Within the press release, references are made to
terms commonly used in the oil and natural gas industry, but do not
have any standardized meaning as prescribed by IFRS and therefore
may not be comparable with the calculations of similar measures for
other entities. Management believes that the presentation of these
non-GAAP measures provide useful information to investors and
shareholders as the measures provide increased transparency and the
ability to better analyze performance against prior periods on a
comparable basis. Management uses "cash flow", "cash flow per
share", "operating netback", "corporate netback", "capital
expenditures", "cash costs", "free cash flow", "net debt", "net
debt to cash flow ratio" and "net debt to annualized cash flow
ratio" to analyze performance and leverage.
For ease of readability, in this press release,
we have used the term "cash flow" instead of "adjusted funds flow"
as defined in our MD&A. Free cash flow is forecast cash flow
less forecast capital expenditures. Cash costs are defined as the
total of operating expenses, transportation expenses, general and
administrative expenses and financing costs.
The following list identifies certain non-GAAP
measures included in this press release, a description of how the
measure has been calculated, a discussion of why management has
deemed the measure to be useful and a reconciliation to the most
comparable GAAP measure.
Adjusted funds flow
NuVista has calculated adjusted funds flow based
on cash flow provided by operating activities, excluding changes in
non-cash working capital, asset retirement expenditures and
environmental remediation recovery, as management believes the
timing of collection, payment, and occurrence is variable and by
excluding them from the calculation, management is able to provide
a more meaningful measure of NuVista's operations on a continuing
basis. More specifically, expenditures on asset retirement
obligations may vary from period to period depending on the
Company's capital programs and the maturity of its operating areas.
The settlement of asset retirement obligations is managed through
NuVista's capital budgeting process which considers its available
adjusted funds flow.
Adjusted funds flow as presented is not intended
to represent operating cash flow or operating profits for the
period nor should it be viewed as an alternative to cash flow from
operating activities, per the statement of cash flows, net earnings
(loss) or other measures of financial performance calculated in
accordance with GAAP. Adjusted funds flow per share is calculated
based on the weighted average number of common shares outstanding
consistent with the calculation of net earnings (loss) per share.
Refer to Note 15 “Capital Management” in the financial
statements.
NuVista considers adjusted funds flow to be a
key measure that provides a more complete understanding of the
Company's ability to generate cash flow necessary to finance
capital expenditures, expenditures on asset retirement obligations,
and meet its financial obligations.
The following table provides a reconciliation
between the non-GAAP measure of adjusted funds flow to the more
directly comparable GAAP measure of cash flow from operating
activities:
|
Three months ended September 30 |
Nine months ended September 30 |
($ thousands) |
2021 |
2020 |
2021 |
2020 |
Cash provided by operating activities |
124,007 |
|
36,581 |
|
228,515 |
|
102,481 |
|
Add back: |
|
|
|
|
Asset retirement
expenditures |
571 |
|
382 |
|
4,669 |
|
10,356 |
|
Change
in non-cash working capital (1) |
(43,976 |
) |
4,521 |
|
(63,873 |
) |
(5,370 |
) |
Adjusted funds flow |
80,602 |
|
41,484 |
|
169,311 |
|
107,467 |
|
Adjusted funds flow,
$/Boe |
17.18 |
|
9.12 |
|
12.54 |
|
7.72 |
|
Adjusted funds flow per share,
basic |
0.36 |
|
0.18 |
|
0.75 |
|
0.48 |
|
Adjusted funds flow per share, diluted |
0.35 |
|
0.18 |
|
0.73 |
|
0.48 |
|
(1) Refer to Note 19 “Supplemental cash flow
information” in the financial statements.
Operating netback and corporate netback
(“netbacks”)
NuVista reports netbacks on a total dollar and
per Boe basis. Operating netback is calculated as petroleum and
natural gas revenues including realized financial derivative
gains/losses, less royalties, transportation and operating
expenses. Corporate netback is operating netback less general and
administrative, deferred share units, interest and lease finance
expense. Netbacks per Boe are calculated by dividing the netbacks
by total production volumes sold in the period.
Management feels both operating and corporate
netbacks are key industry benchmarks and measures of operating
performance for NuVista that assists management and investors in
assessing NuVista's profitability, and are commonly used by other
petroleum and natural gas producers. The measurement on a Boe basis
assists management and investors with evaluating NuVista's
operating performance on a comparable basis.
The following table provides a reconciliation
between the non-GAAP measures of operating and corporate netback to
the most directly comparable GAAP measure of net earnings (loss)
for the period:
|
Three months ended September 30 |
Nine months ended September 30 |
($ thousands) |
2021 |
2020 |
2021 |
2020 |
Net earnings (loss) and comprehensive income (loss) |
147,065 |
|
(44,144 |
) |
151,512 |
|
(913,313 |
) |
Add back: |
|
|
|
|
Other Income |
(138 |
) |
— |
|
(1,024 |
) |
— |
|
Depletion, depreciation,
amortization and impairment |
(125,026 |
) |
39,581 |
|
(51,441 |
) |
1,044,686 |
|
Loss (gain) on property
dispositions |
— |
|
(2,000 |
) |
(35,375 |
) |
759 |
|
Share-based compensation |
2,604 |
|
1,023 |
|
9,190 |
|
2,611 |
|
Unrealized loss (gain) on
financial derivatives |
11,817 |
|
46,561 |
|
55,234 |
|
39,423 |
|
Deferred income tax expense
(recovery) |
45,002 |
|
— |
|
44,984 |
|
(69,174 |
) |
General and administrative
expenses |
4,634 |
|
2,978 |
|
14,861 |
|
10,296 |
|
Financing costs |
17,381 |
|
11,686 |
|
42,026 |
|
32,667 |
|
Operating netback |
103,339 |
|
55,685 |
|
229,967 |
|
147,955 |
|
Deduct: |
|
|
|
|
General and administrative
expenses |
(4,634 |
) |
(2,978 |
) |
(14,861 |
) |
(10,296 |
) |
Share-based compensation
expense (recovery) |
(1,286 |
) |
94 |
|
(5,508 |
) |
1,396 |
|
Interest and lease finance
expense |
(16,817 |
) |
(11,317 |
) |
(40,287 |
) |
(31,588 |
) |
Corporate netback |
80,602 |
|
41,484 |
|
169,311 |
|
107,467 |
|
Capital expenditures
Capital expenditures are equal to cash flow used
in investing activities, excluding changes in non-cash working
capital, other receivable and property dispositions. Any
expenditures on the other receivable are being refunded to NuVista
and are therefore included under current assets. NuVista considers
capital expenditures to be a useful measure of cash flow used for
capital reinvestment.
The following table provides a reconciliation
between the non-GAAP measure of capital expenditures to the most
directly comparable GAAP measure of cash flow used in investing
activities for the period:
|
Three months ended September 30 |
Nine months ended September 30 |
($ thousands) |
2021 |
2020 |
2021 |
2020 |
Cash flow used in investing activities |
(107,155 |
) |
(625 |
) |
(133,638 |
) |
(187,600 |
) |
Changes in non-cash working
capital |
31,160 |
|
6,185 |
|
29,005 |
|
31,385 |
|
Other receivable |
(1,157 |
) |
(12,641 |
) |
(4,233 |
) |
(363 |
) |
Property dispositions |
— |
|
— |
|
(93,578 |
) |
— |
|
Capital expenditures |
(77,152 |
) |
(7,081 |
) |
(202,444 |
) |
(156,578 |
) |
Net debt
NuVista has calculated net debt based on cash
and cash equivalents, accounts receivable and prepaid expenses,
accounts payable and accrued liabilities, other receivable,
long-term debt (credit facility) and senior unsecured notes.
Net debt is used by management to provide a more
complete understanding of the Company's capital structure and
provides a key measure to assess the Company's liquidity.
Management has excluded the current and long term financial
instrument commodity contracts as they are subject to a high degree
of volatility prior to ultimate settlement. Similarly, management
has excluded the current and long term portion of asset retirement
obligations as these are estimates based on management's
assumptions and subject to volatility based on changes in cost and
timing estimates, the risk-free rate and inflation rate.
The following table shows the composition of the
non-GAAP measure of net debt with GAAP components from the balance
sheet:
($ thousands) |
September 30, 2021 |
December 31, 2020 |
Cash and cash equivalents, accounts receivable and prepaid
expenses |
(80,220 |
) |
(53,093 |
) |
Other receivable |
(1,238 |
) |
(5,471 |
) |
Accounts payable and accrued
liabilities |
131,476 |
|
75,142 |
|
Long-term debt (credit
facility) |
265,225 |
|
362,673 |
|
Senior unsecured notes |
222,874 |
|
217,724 |
|
Other
liabilities |
7,293 |
|
1,860 |
|
Net debt |
545,410 |
|
598,835 |
|
FOR FURTHER INFORMATION
CONTACT: |
|
Jonathan A. Wright |
Ross
L. Andreachuk |
Mike
J. Lawford |
President and CEO |
VP, Finance and CFO |
Chief Operating Officer |
(403) 538-8501 |
(403) 538-8539 |
(403) 538-1936 |
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