(TSX: AAV)
CALGARY,
AB, Nov. 30, 2023 /CNW/ - Advantage Energy
Ltd. ("Advantage", the "Corporation", "us", "we" or "our") is
pleased to announce our 2024 budget and provide an update as we
enter the second year of our three-year strategic plan.
Advantage's 2024 capital program continues our focus on growing
adjusted funds flow ("AFF")a per share via high
rate-of-return development drilling. Top-line production is planned
to grow by 10% with all free cash flow ("FCF")a
allocated to our share buyback program.
2024 Budget Highlights
- AFF per sharea is expected to grow by approximately
20% year-over-year, based on strip pricing dated November 16, 2023 and planned share
buybacks.
- Production is expected to average between 65,000 and 68,000
boe/d and the corporate decline rate is expected to remain at
approximately 24%.
- Cash used in investing activities is planned to be between
$260 million and $290 million. Inflation pressures continue to
moderate; however, Advantage has included a 10% provision for
inflation in its budget.
- Net debta target is revised to between $200 million and $250
million from its prior range of $170
million to $230 million,
commensurate with Advantage's increasing scale and cash flow
generation. As of the end of the third quarter, Advantage's net
debta was $206.7
millionb. Any increase in debt is expected to be
allocated to increasing share buybacks.
- Approximately 23 net wells are planned with a single rig
program, focused primarily at Glacier to maintain production near
plant capacity. The remaining wells are planned to target liquids
at Wembley.
- At Progress, construction of a new 75 mmcf/d gas plant is
expected to begin in the second half of the year with commissioning
anticipated in 2025.
___________________________
|
a
Specified financial measure which is not a standardized measure
under International Financial Reporting Standards ("IFRS") and may
not be comparable to similar specified financial measures used by
other entities. Please see "Specified Financial Measures" for the
composition of such specified financial measure, an explanation of
how such specified financial measure provides useful information to
a reader and the purposes for which Management of Advantage uses
the specified financial measure, and where required, a
reconciliation of the specified financial measure to the most
directly comparable IFRS measure.
b Excludes Entropy Inc.
("Entropy").
|
Three-Year Strategic Plan Update
- Advantage will continue to plan for top-line production growth
of 10% each year through 2025. Corporate production is expected to
exceed 75,000 boe/d by 2025.
- Cash used in investing activities is planned to remain between
$250 million and $300 million per year, including provisions for
inflation and infrastructure investments.
- On average, Advantage plans to drill approximately 25 net wells
per year to achieve growth targets. Current tier 1 inventory is
estimated at 550 wells, and over 1,000 additional economic
locations delineated.
- The expansion of Advantage's processing capacity has been
progressing in phased developments and is expected to reach 500
mmcf/d by 2025. Anticipated spending on processing capacity will
continue to be approximately $45
million per year and is included within the capital
estimates.
- Production growth will be managed in conjunction with
transportation service growth and hedging, with a focus on non-AECO
markets prior to the commissioning of LNG Canada.
- Advantage expects it will not be subject to cash taxes until
calendar 2026.
2024 Guidance Summary (1)(2)
|
|
Cash Used in Investing
Activities (millions) (3)
|
$260 to
$290
|
Average Production
(boe/d)
|
65,000
to 68,000
|
Liquids Production
(%)
|
~10%
|
Royalty Rate
(%)
|
7% to 9%
|
Operating Expense
($/boe) (4)
|
$3.85
|
Transportation Expense
($/boe) (4)
|
$3.95
|
G&A/Finance Expense
($/boe) (4)
|
$1.90
|
Notes:
|
(1)
|
Forward-looking
statements and information representing Management estimates.
Refer to Advisory for cautionary statements regarding
Advantage's budget including material assumptions and risk
factors.
|
(2)
|
Budget and guidance
numbers are for Advantage Energy Ltd. only and exclude Entropy
Inc.
|
(3)
|
Cash Used in
Investing Activities is the same as Net Capital Expenditures as no
change in non-cash working capital is assumed between years and
other differences are immaterial. See
Advisory.
|
(4)
|
Specified financial
measure which is not a standardized measure under IFRS and may not
be comparable to similar specified financial measures used by other
entities. Please see "Specified Financial Measures" for the
composition of such specified financial measure, an explanation of
how such specified financial measure provides useful information to
a reader and the purposes for which Management of Advantage uses
the specified financial measure, and where required, a
reconciliation of the specified financial measure to the most
directly comparable IFRS measure.
|
|
|
Marketing Update
Advantage has hedged 18% of its forecasted natural gas
production in winter 2023/24, along with 16% in summer 2024 and 5%
in winter 2024/25. Total exposure to AECO is now less than 15% of
our production between now and winter 2024/25.
Looking Forward
Advantage's priority remains AFF per-share growth to maximize
shareholder returns. To achieve this, our first priority is
delivering high-return organic production growth of 10%; all FCF
remains allocated to our share buyback program. Advantage has
repurchased approximately 18% of its shares outstanding since the
initiation of its buyback program in April
2022c.
Capital efficiency continues to be a key component of
Advantage's corporate strategy. In 2024, we expect to deliver
production growth and capital spending comparable to 2023 levels,
despite a higher production base, thanks to continuously improving
well productivity and capital discipline.
Advantage is encouraged by improving natural gas fundamentals in
2025 and beyond due to increasing North American LNG export
capacity. With this outlook, the Corporation will focus its 2024
capital program on efficient gas-weighted drilling at Glacier,
accompanied by infrastructure spending to support further growth in
2025. Advantage has a range of high-return development options
beyond 2025 and will monitor market conditions before formalizing
the next phase of our corporate strategy.
With modern, low emissions-intensity assets and ownership of
80%d of Entropy, the Corporation continues to
proudly deliver clean, reliable, sustainable energy, contributing
to a reduction in global emissions by displacing high-carbon
fuels. Advantage wishes to thank our employees, Board of
Directors and our shareholders for their ongoing support.
Advantage looks forward to advancing the Corporation's strategy
through the dynamic markets ahead.
For more details, Advantage has posted an updated corporate
presentation at www.advantageog.com.
_______________________
|
c Shares bought back from
April 13, 2022 to November 30, 2023. Percentage based on shares
repurchased compared to the 190.8 million shares outstanding on
March 31, 2022.
|
d
Advantage currently owns 92% of Entropy's common shares.
Assuming Brookfield Global Transition Fund's currently-held
unsecured debentures are exchanged for common shares according to
the terms of the investment agreement, Advantage will own 80% of
Entropy's common shares.
|
Forward Looking Information Advisory
The information in this press release contains certain
forward-looking statements, including within the meaning of
applicable securities laws. These statements relate to future
events or our future intentions or performance. All statements
other than statements of historical fact may be forward looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "guidance", "anticipate",
"target", "objectives", "estimates", "continue", "demonstrate",
"expect", "may", "can", "will", "believe", "would" and similar
expressions and include statements relating to, among other things,
Advantage's focus, strategy, priorities and development plans; the
focus of Advantage's 2024 capital program including growing cash
flow per share and high rate-of-return development drilling;
Advantage's anticipated top-line production growth; Advantage's
expectations that it will allocate all FCF to the Corporation's
share buyback program; anticipated growth in corporate production
and the anticipated timing thereof; anticipated corporate decline
rate; anticipated cash used in investing activities; anticipated
inflation; Advantage's anticipated drilling plans in 2024 and the
focus thereof; the anticipated timing of the construction of
Advantage's new gas plant at Progress; anticipated net debt and
Advantage's expectations that any increase in debt will be
allocated to increasing share buybacks; that Advantage will manage
its production growth in conjunction with transportation service
growth and hedging, with a focus on non-AECO markets prior to the
commissioning of LNG Canada; anticipated growth in AFF; Advantage's
expectations that it will not be subject to cash taxes until
calendar year 2026; Advantage's three-year strategic plan,
including its anticipated annual average production, annual cash
used in investing activities, annual drilling activities, and
growth in gas processing capacity; the anticipated costs to be
incurred by the Corporation over the next two years towards growing
its gas processing capacity; Advantage's 2024 capital guidance,
including its anticipated cash used in investing activities,
average production, liquids production, royalty rate, operating
expense per boe, transportation expense per boe and G&A/finance
expense per boe; Advantage's hedging program; Advantage's priority
of growing AFF per share and the anticipated means of achieving
such growth and the anticipated timing thereof; Advantage's focus
on efficient gas-weighted drilling at Glacier, accompanied by
infrastructure spending to support further growth from its
Progress/Valhalla complex in 2025;
that Advantage has a range of high-return development options
beyond 2025; and expectations that Entropy will pursue rapid growth
in CCS projects. Advantage's actual decisions, activities, results,
performance, or achievement could differ materially from those
expressed in, or implied by, such forward-looking statements and
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur or, if any of them do, what benefits that Advantage will
derive from them.
With respect to forward-looking statements contained in this
press release, Advantage has made assumptions regarding, but not
limited to: future oil and gas prices; anticipated NYMEX and WTI
prices; anticipated strip pricing; the third party processing
revenue available to Advantage; foreign exchange rates; conditions
in general economic and financial markets; the impact and duration
thereof that the COVID-19 pandemic will have on (i) the demand for
crude oil, NGLs and natural gas, (ii) the supply chain including
the Corporation's ability to obtain the equipment and services it
requires, and (iii) the Corporation's ability to produce, transport
and/or sell its crude oil, NGLs and natural gas; effects of
regulation by governmental agencies; current and future commodity
prices and royalty regimes; the Corporation's current and future
hedging program; future exchange rates; royalty rates; future
operating costs; future transportation costs and availability of
product transportation capacity; availability of skilled labor;
availability of drilling and related equipment; timing and amount
of net capital expenditures; the number of new wells required to
achieve the budget objectives; that the Corporation will have
sufficient adjusted funds flow, debt or equity sources or other
financial resources required to fund its capital and operating
expenditures and requirements as needed; that the Corporation's
conduct and results of operations will be consistent with its
expectations; that the Corporation will have the ability to develop
the Corporation's properties in the manner currently contemplated;
current or, where applicable, proposed assumed industry conditions,
laws and regulations will continue in effect or as anticipated;
that Entropy will have the ability to develop its technology in the
manner currently contemplated; that pursuing high rate-of-return
development drilling into existing infrastructure will lead to cash
flow per share growth; Advantage's infrastructure spending will
support further growth from its Progress/Valhalla complex in 2025; and the estimates of
the Corporation's production and reserves volumes and the
assumptions related thereto (including commodity prices and
development costs) are accurate in all material respects.
Management has included the above summary of assumptions and risks
related to forward-looking information in order to provide
shareholders with a more complete perspective on Advantage's future
operations and such information may not be appropriate for other
purposes. Advantage's actual results, performance or achievement
could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurance can
be given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what
benefits that Advantage will derive therefrom. Readers are
cautioned that the foregoing lists of factors are not exhaustive.
These forward-looking statements are made as of the date of this
press release and Advantage disclaims any intent or obligation to
update publicly any forward-looking statements, whether as a result
of new information, future events or results or otherwise, other
than as required by applicable securities laws.
This press release contains forward-looking statements which
are estimates of Advantage's annual production growth, annual cash
used in investing activities, annual drilling activity, average
processing capacity and annual tax expense for the next two years.
The foregoing estimates are based on various assumptions and are
provided for illustration only and are based on budgets and
estimates that have not been finalized and are subject to change
and a variety of contingencies including prior years' results. In
addition, the foregoing estimates and assumptions underlying
these 2024 and 2025 forward-looking statements are
management prepared only and have not been approved by the Board of
Directors of Advantage. These estimates are made as of the date of
this press release and except as required by applicable securities
laws, Advantage undertakes no obligation to update such
estimates.
These statements involve substantial known and unknown risks
and uncertainties, certain of which are beyond Advantage's control,
including, but not limited to: changes in general economic, market
and business conditions; industry conditions, including as a result
of demand and supply effects resulting from the COVID-19 pandemic;
actions by governmental or regulatory authorities including
increasing taxes and changes in investment or other regulations;
changes in tax laws, royalty regimes and incentive programs
relating to the oil and gas industry; Advantage's success at
acquisition, exploitation and development of reserves; unexpected
drilling results; changes in commodity prices, currency exchange
rates, net capital expenditures, reserves or reserves estimates and
debt service requirements; the occurrence of unexpected events
involved in the exploration for, and the operation and development
of, oil and gas properties, including hazards such as fire,
explosion, blowouts, cratering, and spills, each of which could
result in substantial damage to wells, production and processing
facilities, other property and the environment or in personal
injury; changes or fluctuations in production levels; delays in
anticipated timing of drilling and completion of wells; individual
well productivity; competition from other producers; the lack of
availability of qualified personnel or management; credit risk;
changes in laws and regulations including the adoption of new
environmental laws and regulations and changes in how they are
interpreted and enforced; Advantage's ability to comply with
current and future environmental or other laws; stock market
volatility and market valuations; liabilities inherent in oil and
natural gas operations; competition for, among other things,
capital, acquisitions of reserves, undeveloped lands and skilled
personnel; incorrect assessments of the value of acquisitions;
geological, technical, drilling and processing problems and other
difficulties in producing petroleum reserves; ability to obtain
required approvals of regulatory authorities; ability to access
sufficient capital from internal and external sources; the risk
that pursuing high rate-of-return development drilling into
existing infrastructure may not lead to cash flow per share growth;
the risk that Advantage's top-line production growth year-over-year
may be less than anticipated; the risk that Advantage may not
allocate all FCF to the Corporation's share buyback program; the
risk that Advantage may not grow its AFF per share when
anticipated, or at all; the risk that Advantage may drill less
wells than anticipated; the risk that the construction of
Advantage's new gas plant at Progress may occur later than
anticipated; the risk that Advantage's net debt may be greater than
anticipated; the risk that Advantage may be subject to cash taxes
prior calendar year 2026; the risk that Advantage's gas processing
capacity may be less than anticipated; the risk that Advantage's
cash flow per share, corporate production, cash used in investing
activities and AFF may be less than anticipated; the risk that
Advantage may not manage its production growth in conjunction with
transportation service growth and hedging; the risk that
Advantage's annual production, cash used in investing activities,
drilling activities, and growth in gas processing capacity over the
next two years may be less than anticipated; the risk that
Advantage's operating expense per boe, transportation expense per
boe and G&A/finance expense per boe may be greater than
anticipated; the risk that Advantage may not have a range of
high-return development options beyond 2025; and the risk that
Entropy may not pursue rapid growth in CCS projects.
Many of these risks and uncertainties and additional risk
factors are described in the Corporation's Annual Information Form
which is available at
www.sedarplus.ca ("SEDAR+") and www.advantageog.com.
Readers are also referred to risk factors described in other
documents Advantage files with Canadian securities
authorities.
The future acquisition by the Corporation of the
Corporation's common shares pursuant to its share buyback program,
if any, and the level thereof is uncertain. Any decision to acquire
common shares of the Corporation pursuant to the share buyback
program will be subject to the discretion of the board of directors
of the Corporation and may depend on a variety of factors,
including, without limitation, the Corporation's business
performance, financial condition, financial requirements, growth
plans, expected capital requirements and other conditions existing
at such future time including, without limitation, contractual
restrictions and satisfaction of the solvency tests imposed on the
Corporation under applicable corporate law. There can be no
assurance of the number of common shares of the Corporation that
the Corporation will acquire pursuant to its share buyback program,
if any, in the future.
This press release contains information that may be
considered a financial outlook under applicable securities laws
about the Corporation's potential financial position, including,
but not limited to, Advantage's expectations that it will allocate
all FCF to the Corporation's share buyback program; anticipated
cash used in investing activities; anticipated inflation;
anticipated net debt and Advantage's expectations that any increase
in debt will be allocated to increasing share buybacks; anticipated
growth in AFF; Advantage's expectations that it will not be subject
to cash taxes until calendar year 2026; Advantage's three-year
strategic plan, including its anticipated annual cash used in
investing activities; the anticipated costs to be incurred by the
Corporation over the next two years towards growing its gas
processing capacity; Advantage's 2024 capital guidance, including
its anticipated cash used in investing activities, royalty rate,
operating expense per boe, transportation expense per boe and
G&A/finance expense per boe; and Advantage's hedging program;
all of which are subject to numerous assumptions, risk factors,
limitations and qualifications, including those set forth in the
above paragraphs. The actual results of operations of the
Corporation and the resulting financial results will vary from the
amounts set forth in this press release and such variations may be
material. This information has been provided for illustration only
and with respect to future periods are based on budgets and
forecasts that are speculative and are subject to a variety of
contingencies and may not be appropriate for other purposes.
Accordingly, these estimates are not to be relied upon as
indicative of future results. Except as required by applicable
securities laws, the Corporation undertakes no obligation to update
such financial outlook. The financial outlook contained in this
press release was made as of the date of this press release and was
provided for the purpose of providing further information about the
Corporation's potential future business operations. Readers are
cautioned that the financial outlook contained in this press
release is not conclusive and is subject to change.
Specified Financial Measures
Throughout this news release, Advantage discloses certain
measures to analyze financial performance, financial
position, and cash flow. These specified financial measures do
not have any standardized meaning prescribed under IFRS and
therefore may not be comparable to similar measures presented by
other entities. The specified financial measures should not be
considered to be more meaningful than GAAP measures which are
determined in accordance with IFRS, such as "net income",
"comprehensive income", "cash provided by operating activities",
"cash used in investing activities", or "bank indebtedness" as
indicators of Advantage's performance. Management believes that
these measures provide an indication of the results generated by
the Corporation's principal business activities and provide useful
supplemental information for analysis of the Corporation's
operating performance and liquidity. Refer to the Corporation's
most recent Management's Discussion and Analysis for the three and
nine months ended September 30, 2023,
which is available at www.sedarplus.ca and
www.advantageog.com for additional information about
certain specified financial measures, including reconciliations to
the nearest GAAP measures and disclosures of historical specified
financial measures, as applicable.
Non-GAAP Financial Measures
Adjusted Funds Flow
The Corporation considers adjusted funds flow to be a useful
measure of Advantage's ability to generate cash from the production
of natural gas and liquids, which may be used to settle outstanding
debt and obligations, support future capital expenditures plans or
return capital to shareholders. Changes in non-cash working capital
are excluded from adjusted funds flow as they may vary
significantly between periods and are not considered to be
indicative of the Corporation's operating performance as they are a
function of the timeliness of collecting receivables and paying
payables. Expenditures on decommissioning liabilities are excluded
from the calculation as the amount and timing of these expenditures
are unrelated to current production and are partially discretionary
due to the nature of our low liability.
Net Capital Expenditures
Net capital expenditures include total capital expenditures
related to property, plant and equipment and exploration and
evaluation assets incurred during the period. Management considers
this measure reflective of actual capital activity for the period
as it excludes changes in working capital related to other
periods.
Free Cash Flow
Advantage computes free cash flow as adjusted funds flow less
net capital expenditures. Advantage uses free cash flow as an
indicator of the efficiency and liquidity of Advantage's business
by measuring its cash available after net capital expenditures to
settle outstanding debt and obligations and potentially return
capital to shareholders by paying dividends or buying back common
shares.
Non-GAAP Ratios
Payout Ratio
Payout ratio is calculated by dividing cash used in investing
activities or net capital expenditures by adjusted funds flow.
Advantage uses payout ratio as an indicator of the efficiency and
liquidity of Advantage's business by measuring its cash available
after cash used in investing activities or net capital expenditures
to settle outstanding debt and obligations and potentially return
capital to shareholders by paying dividends or buying back common
shares.
Adjusted Funds Flow per Share
Adjusted funds flow per share is derived by dividing adjusted
funds flow by the basic weighted average shares outstanding of the
Corporation. Management believes that adjusted funds flow per share
provides investors an indicator of funds generated from the
business that could be allocated to each shareholder's equity
position.
Capital Management Measures
Working Capital
Working capital includes cash and cash equivalents, trade and
other receivables, prepaid expenses and deposits and trade and
other accrued payables at the reporting date. Working capital
provides Management and users with a measure of the Corporation's
operating liquidity.
Net Debt
Net debt is comprised of bank indebtedness and working
capital. Net debt provides Management and users with a measure of
the Corporation's liquidity.
Supplementary Financial Measures
Dollars per BOE figures
Throughout this press release, the Corporation presents
certain financial figures, in accordance with IFRS, stated in
dollars per boe. These figures are determined by dividing the
applicable financial figure as prescribed under IFRS by the
Corporation's total production for the respective period. Below is
a list of figures which have been presented in this press release
in $ per boe:
- G&A/Finance expense per boe
- Operating expense per boe
- Transportation expense per boe
Oil and Gas Information
Barrels of oil equivalent (boe) and thousand cubic feet of
natural gas equivalent (mcfe) may be misleading, particularly if
used in isolation. Boe and mcfe conversion ratios have been
calculated using a conversion rate of six thousand cubic feet of
natural gas equivalent to one barrel of oil. A boe and mcfe
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. Given that the
value ratio based on the current price of crude oil as compared to
natural gas 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.
Production estimates contained herein are expressed as
anticipated average production over the calendar year. In
determining anticipated production for the years 2024 and 2025
Advantage considered historical drilling, completion and production
results for prior years and took into account the estimated impact
on production of the Corporation's 2024 and 2025 expected drilling
and completion activities.
This press release discloses drilling inventory in three
categories: (i) proved locations; (ii) probable locations; and
(iii) unbooked locations. Proved locations and probable locations
are derived from Sproule Associates Limited reserves evaluation
effective December 31, 2022 and
account for drilling locations that have associated proved and/or
probable reserves, as applicable. Unbooked locations are internal
estimates based on our prospective acreage and an assumption as to
the number of wells that can be drilled per section based on
industry practice and internal review. Unbooked locations do not
have attributed reserves or resources. Of the over 1,550 total
drilling locations identified herein, 272 are proved locations, 53
are probable locations and over 1,225 are unbooked locations.
Unbooked locations have been identified by management as an
estimation of our multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that the
Corporation will drill all unbooked drilling locations and if
drilled there is no certainty that such locations will result in
additional oil and gas reserves, resources or production. The
drilling locations on which we actually drill wells will ultimately
depend upon the availability of capital, regulatory approvals,
seasonal restrictions, oil and natural gas prices, costs, actual
drilling results, additional reservoir information that is obtained
and other factors. While certain of the unbooked drilling locations
have been de-risked by drilling existing wells in relative close
proximity to such unbooked drilling locations, other unbooked
drilling locations are farther away from existing wells where
management has less information about the characteristics of the
reservoir and therefore there is more uncertainty whether wells
will be drilled in such locations and if drilled there is more
uncertainty that such wells will result in additional oil and gas
reserves, resources or production.
The following terms and abbreviations used in this press
release have the meanings set forth below:
AECO
|
A notational market
point on TransCanada Pipeline Limited's NGTL system where the
purchase and sale of natural gas is transacted
|
bbl
|
one
barrel
|
boe
|
barrels of oil
equivalent of natural gas, on the basis of one barrel of oil or
NGLs for six thousand cubic feet of natural gas
|
boe/d
|
barrels of oil
equivalent per day
|
Crude oil and
condensate
|
Light crude oil and
medium crude oil as defined in National Instrument
51-101
|
Liquids
|
Includes crude oil
and condensate and NGLs
|
mcfe
|
thousand cubic feet
equivalent on the basis of six thousand cubic feet of natural gas
for one barrel of oil or NGLs
|
mmcf/d
|
million cubic feet
per day
|
Natural
gas
|
Conventional Natural
Gas as defined in National Instrument 51-101
|
NGLs
|
Natural Gas Liquids
as defined in National Instrument 51-101
|
NGTL
|
NOVA Gas
Transmission Ltd.
|
SOURCE Advantage Energy Ltd.