(TSX: AAV)
CALGARY,
AB, March 4, 2024 /CNW/ - Advantage Energy
Ltd. ("Advantage" or the "Corporation") is pleased to report 2023
year-end financial and operating results as well as year-end 2023
reserves.
Advantage achieved exceptional results during 2023, including
record production, improved well results, and significant share
buybacks, while ending the year below our net debt target.
Additional achievements included an unbudgeted $10 million acquisition of 53 net Montney
sections at Conroy and successfully executing a 17-day Glacier
plant turnaround.
Following a comprehensive review of our capital program, we have
materially reduced our planned 2024 capital expenditures by
$40 million to between $220 million and $250
million. Thanks to continued outperformance of our recent
development program, we can deliver this reduced capital level
without changing our production guidance or compromising our
long-term adjusted funds flow ("AFF") per share focus.
2023 Year-End Financial Highlights
- Cash provided by operating activities of $323.3 million
- AFF(a) of $313.6
million or $1.88/share
($320.2 million
Advantage(b))
- Free cash flow ("FCF")(a) of $30.8 million ($54.0
million Advantage(b))
- Cash used in investing activities and net capital
expenditures(a) were $282.8
million ($266.2 million
Advantage(b))
- Net income of $101.6 million or
$0.61/share
- Operating expenses remained low at $3.81/boe
- Net debt(a) increased to $222.0 million ($195.9
million Advantage(b))
- Repurchased 13.1 million shares (8% of the outstanding shares
at December 31, 2022), returning
$117.3 million to shareholders.
Subsequent to year-end, Advantage purchased an additional 2.4
million shares, returning an additional $21
million to shareholders
(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)
|
"Advantage" refers to Advantage Energy Ltd. only and
excludes its subsidiary Entropy Inc.
|
2023 Operating Highlights
- Record annual average production of 60,678 boe/d (322.7 mmcf/d
natural gas, 6,897 bbls/d liquids), in-line with budget
- Liquids production of 6,897 bbls/d (2,710 bbls/d oil, 1,166
bbls/d condensate, and 3,021 bbls/d NGLs), an increase of 13% over
2022
- Of all Alberta Montney gas wells
drilled in 2023, 13 of the top 16 gas producers were Advantage's,
based on IP90 rates
- At Glacier, 18 gross (16.0 net) wells were drilled with
exceptional performance driving average well IP30 rates to 13.6
mmcf/d natural gas
- At Valhalla, 2 gross (2.0 net)
wells were drilled with an average IP30 of 1,936 boe/d (7.5 mmcf/d
natural gas, 499 bbls/d condensate and 180 bbls/d NGLs)
- At Wembley, 7 gross (7.0 net)
wells were drilled with an average IP30 of 1,549 boe/d (3.7 mmcf/d
natural gas, 605 bbls/d crude oil and 328 bbls/d NGLs)
- Phase 1b of Entropy's
post-combustion integrated carbon capture and storage project at
Glacier was commissioned in the fourth quarter of 2023 with costs
below budget
- Entropy achieved a global first in carbon markets with a
$1 billion, 15-year fixed price
carbon credit offtake agreement with Canada Growth Fund Inc.
("CGF") that has the potential to accelerate deployment of carbon
capture and storage in Canada
2023 Reserves Highlights
- Proved Developed Producing ("PDP") reserves increased 8%, with
finding and development ("F&D")(a) costs of
$7.67/boe.
- Net present value of PDP reserves of $1.4 billion (before tax, 10% discount rate) or
$8.58/share
- Total Proved ("1P") reserves increased 3%, with
F&D(a) costs of $8.50/boe
- Net present value of 1P reserves of $3.0
billion (before tax, 10% discount rate) or $18.19/share
- Proved plus Probable ("2P") reserves increased 4%, with
F&D(a) costs of $8.17/boe
- Net present value of 2P reserves of $4.2
billion (before tax, 10% discount rate) or $26.07/share
- PDP reserve additions replaced(a) 151% of
production
- Liquids reserves increased 26%, 10% and 10% for PDP, 1P and 2P,
respectively
- 3-year recycle ratios(a) were 2.4x for PDP, 2.0x for
1P and 2.2x for 2P based on fourth quarter 2023 operating
netback(a) of $15.43/boe
2024 Capital Program Update
Advantage continuously reviews its capital program to adjust to
rapidly changing supply/demand dynamics in North America. Our 2024 capital spending
guidance has been revised to a range of $220
million to $250 million (from
$260 million to $290 million). Budgetary reductions include
at least two fewer wells, the deferral of debottlenecking and
reliability projects, and a previously unbudgeted capital
recovery. Production guidance remains unchanged, thanks to
continued outperformance of our development program.
Significant discretionary capital remains in the budget for the
second half of 2024, including a steady one-rig drilling program
and the first phase of the 150 mmcf/d Progress gas plant project,
currently on-schedule to be commissioned mid-year 2025. In the
event that North American supply growth continues to overwhelm
demand and create further downward pressure on futures pricing, any
discretionary investments that fail to meet threshold metrics may
be deferred allowing incremental FCF to be redeployed to the share
buyback.
Based on current futures pricing, Advantage estimates capital
spending will be approximately 75% of forecasted total AFF for 2024
and 2025, preserving balance sheet flexibility and optionality for
opportunistic, counter-cyclical share repurchases.
Marketing Update
Advantage has hedged approximately 20% of its forecast natural
gas production for summer 2024, 11% for winter 2024/25, 5% for
summer 2025 and 6% for winter 2025/26. Advantage has only
approximately 8% exposure to AECO volatility this summer through a
combination of fixed price hedges and physical market
diversification.
Conference call
Advantage's management team will host a conference call to
discuss the Corporation's fourth quarter and full-year 2023 results
on Tuesday, March 5, 2024 at
8:00 am Mountain Time (10:00 am Eastern Time). Advantage plans to
regularly host quarterly earnings calls going forward.
To participate by phone, please call 1-888-664-6383 (North
American toll-free) or 1-416-764-8650 (International). A recording
of the conference call will be available for replay by calling
1-888-390-0541 and entering the conference replay code 665973#. The
replay will be available until March 19,
2024.
To join the conference call without operator assistance, you may
enter your details and phone number at
https://emportal.ink/3uKt3A7 to receive an instant automated
call back. You may also stream the event via webcast at
https://app.webinar.net/ojY4L9AL5vb.
Looking Forward
To maximize shareholder value, Advantage remains focused on
growing AFF per share(a) while maintaining a net
debt(a) target of $200
million to $250 million.
Advantage's three-year plan is to deliver compounding AFF per share
growth via careful capital allocation, with annual spending between
$220 million and $300 million and production growth capped at 10%.
All excess cash will be returned to shareholders via share
buybacks.
With modern, low emissions-intensity assets and the Glacier
carbon capture and sequestration asset, 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.
Below are complete tables showing financial highlights,
operating highlights and reserves results.
Financial
Highlights
|
Three months
ended
December
31
|
Year
ended
December
31
|
($000, except as
otherwise indicated)
|
2023
|
2022
|
2023
|
2022
|
Financial Statement
Highlights
|
|
|
|
|
Natural gas and liquids
sales
|
147,137
|
223,200
|
541,100
|
950,458
|
Net income and
comprehensive income (3)
|
41,026
|
113,962
|
101,597
|
338,667
|
per basic
share (2)
|
0.25
|
0.63
|
0.61
|
1.81
|
Basic weighted average
shares (000)
|
163,939
|
180,248
|
166,553
|
187,022
|
Cash provided by
operating activities
|
89,048
|
112,558
|
323,345
|
502,378
|
Cash used in financing
activities
|
(52,120)
|
(49,718)
|
(70,263)
|
(209,091)
|
Cash used in investing
activities
|
(58,846)
|
(69,060)
|
(282,761)
|
(269,585)
|
Other Financial
Highlights
|
|
|
|
|
Adjusted funds flow
(1)
|
82,494
|
124,205
|
313,570
|
516,790
|
per boe
(1)
|
13.11
|
24.29
|
14.16
|
25.39
|
per basic share
(1)(2)
|
0.50
|
0.69
|
1.88
|
2.76
|
Net capital
expenditures (1)
|
39,938
|
49,687
|
282,796
|
241,790
|
Free cash flow
(1)
|
42,556
|
74,518
|
30,774
|
275,000
|
Working capital surplus
(1)
|
18,651
|
71,564
|
18,651
|
71,564
|
Bank
indebtedness
|
212,854
|
177,200
|
212,854
|
177,200
|
Net debt
(1)
|
222,022
|
121,336
|
222,022
|
121,336
|
(1)
|
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.
|
(2)
|
Based on basic weighted
average shares outstanding.
|
(3)
|
Net income and
comprehensive income attributable to Advantage
Shareholders.
|
Operating
Highlights
|
Three months
ended
December
31
|
Year
ended
December
31
|
|
2023
|
2022
|
2023
|
2022
|
Operating
|
|
|
|
|
Production
|
|
|
|
|
Crude oil
(bbls/d)
|
3,254
|
1,854
|
2,710
|
1,972
|
Condensate
(bbls/d)
|
1,264
|
1,092
|
1,166
|
1,082
|
NGLs
(bbls/d)
|
3,345
|
2,680
|
3,021
|
3,039
|
Total
liquids production (bbls/d)
|
7,863
|
5,626
|
6,897
|
6,093
|
Natural
gas (Mcf/d)
|
363,124
|
299,684
|
322,687
|
298,053
|
Total
production (boe/d)
|
68,384
|
55,573
|
60,678
|
55,769
|
Average realized prices
(including realized derivatives)(2)
|
|
|
|
|
Natural
gas ($/Mcf)
|
2.84
|
5.65
|
3.24
|
5.55
|
Liquids
($/bbl)
|
81.55
|
86.39
|
78.35
|
92.48
|
Operating Netback
($/boe)
|
|
|
|
|
Natural
gas and liquids sales(2)
|
23.39
|
43.66
|
24.43
|
46.69
|
Realized
gain (losses) on derivatives(2)
|
0.98
|
(4.76)
|
1.59
|
(7.08)
|
Processing
and other income
|
0.39
|
0.60
|
0.34
|
0.45
|
Net sales
of purchased natural gas(2)
|
-
|
-
|
(0.01)
|
-
|
Royalty expense(2)
|
(1.64)
|
(5.31)
|
(1.92)
|
(5.22)
|
Operating
expense(2)
|
(3.61)
|
(3.39)
|
(3.81)
|
(3.16)
|
Transportation expense(2)
|
(4.08)
|
(4.43)
|
(4.09)
|
(4.43)
|
Operating
netback (1)
|
15.43
|
26.37
|
16.53
|
27.25
|
(1)
|
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.
|
(2)
|
Specified financial
measure which is a supplementary financial measure. Please see
"Specified Financial Measures" for the composition of such
supplementary financial measure.
|
Reserves
Highlights
|
PDP
|
1P
|
2P
|
2023 Reserves (million
boe)
|
150.3
|
430.2
|
608.9
|
2023 F&D Cost
($/per boe, including FDC) (1)
|
$7.67
|
$8.50
|
$8.17
|
2023 Recycle
ratio(1)
|
2.0
|
1.8
|
1.9
|
2022 Recycle
ratio(1)
|
4.3
|
3.5
|
4.0
|
2023 Reserves Increase
Over 2022
|
8.2 %
|
3.2 %
|
4.0 %
|
(1)
|
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.
|
RESERVES SUMMARY TABLES
Company Gross (before royalties) Working Interest Reserves
Summary as at December 31,
2023
|
Light
&
Medium
Crude Oil
(mbbls)
|
Conventional
Natural Gas
(mmcf)
|
Natural
Gas Liquids
(mbbls)
|
Total Oil
Equivalent
(mboe)
|
Proved
|
|
|
|
|
Developed
Producing
|
4,278
|
819,376
|
9,462
|
150,303
|
Developed
Non-producing
|
-
|
62,250
|
380
|
10,755
|
Undeveloped
|
8,343
|
1,455,505
|
18,210
|
269,137
|
Total
Proved
|
12,622
|
2,337,130
|
28,051
|
430,195
|
Probable
|
6,795
|
957,328
|
12,334
|
178,683
|
Total Proved +
Probable
|
19,416
|
3,294,457
|
40,385
|
608,878
|
(1)
|
Table may not add due
to rounding.
|
Company Net Present Value of Future Net Revenue using
the IQRE Average Forecasts (1)(2)(3)($000)
|
Before Income Taxes
Discounted at
|
|
0 %
|
10 %
|
15 %
|
Proved
|
|
|
|
Developed
Producing
|
2,489,682
|
1,392,412
|
1,139,988
|
Developed
Non-producing
|
187,858
|
91,048
|
70,802
|
Undeveloped
|
4,805,440
|
1,467,675
|
923,922
|
Total
Proved
|
7,482,980
|
2,951,135
|
2,134,712
|
Probable
|
4,287,209
|
1,277,958
|
870,359
|
Total Proved +
Probable
|
11,770,188
|
4,229,092
|
3,005,071
|
(1)
|
Advantage's light and
medium oil, conventional natural gas and natural gas liquid
reserves were evaluated using the IQRE Average Forecast (as defined
herein) effective December 31, 2023 prior to the provision for
income taxes, interests, debt services charges and general and
administrative expenses. It should not be assumed that the
discounted future net revenue estimated by Sproule (as defined
herein) represents the fair market value of the
reserves.
|
(2)
|
Assumes that
development of reserves will occur, without regard to the likely
availability to the Corporation of funding required for that
development.
|
(3)
|
Future Net Revenue
incorporates Managements' estimates of required abandonment and
reclamation costs, including expected timing such costs will be
incurred, associated with all wells, facilities and
infrastructure.
|
(4)
|
Table may not add due
to rounding.
|
IQRE Average Forecasts
The net present value of future net revenue at December 31, 2023 was based upon light and medium
oil, conventional natural gas and natural gas liquid pricing
assumptions, which were computed by using the average of the
forecasts ("IQRE Average Forecast") prepared by McDaniel
& Associates Consultants Ltd., GLJ Petroleum Consultants and
Sproule effective December 31,
2023. These forecasts are adjusted for reserves quality,
transportation charges and the provision of any applicable sales
contracts. The price assumptions used over the next seven years are
summarized in the table below:
Year
|
Canadian
Light Sweet
Crude 40o API
($Cdn/bbl)
|
Alberta
AECO-C
Natural Gas
($Cdn/mmbtu)
|
Edmonton
Propane
($Cdn/bbl)
|
Edmonton
Butane
($Cdn/bbl)
|
Edmonton
Pentanes
Plus
($Cdn/bbl)
|
Exchange
Rate
($US/$Cdn)
|
2024
|
92.91
|
2.20
|
29.65
|
47.69
|
96.79
|
0.75
|
2025
|
95.04
|
3.37
|
35.13
|
48.83
|
98.75
|
0.75
|
2026
|
96.07
|
4.05
|
35.43
|
49.36
|
100.71
|
0.76
|
2027
|
97.99
|
4.13
|
36.14
|
50.35
|
102.72
|
0.76
|
2028
|
99.95
|
4.21
|
36.86
|
51.35
|
104.78
|
0.76
|
2029
|
101.94
|
4.30
|
37.60
|
52.38
|
106.87
|
0.76
|
2030
|
103.98
|
4.38
|
38.35
|
53.43
|
109.01
|
0.76
|
Company Gross (before royalties) Working Interest Reserves
Reconciliation(2)
Proved
|
Light &
Medium
Crude Oil
(Mbbl)
|
Conventional
Natural Gas
(MMcf)
|
Natural Gas
Liquids
(Mbbl)
|
Total Oil
Equivalent
(Mboe)
|
Opening balance Dec.
31, 2022
|
12,432
|
2,278,778
|
24,650
|
416,879
|
Extensions and improved
recovery
|
2,607
|
502,415
|
7,752
|
94,095
|
Technical
revisions(1)
|
(1,440)
|
(325,118)
|
(2,822)
|
(58,448)
|
Discoveries
|
-
|
-
|
-
|
-
|
Acquisitions
|
-
|
-
|
-
|
-
|
Dispositions
|
-
|
-
|
-
|
-
|
Economic
factors
|
12
|
(1,164)
|
(1)
|
(184)
|
Production
|
(989)
|
(117,781)
|
(1,528)
|
(22,148)
|
Closing balance at
Dec. 31, 2023
|
12,622
|
2,337,130
|
28,051
|
430,195
|
Proved Plus
Probable
|
Light &
Medium
Crude Oil
(Mbbl)
|
Conventional
Natural Gas
(MMcf)
|
Natural Gas
Liquids
(Mbbl)
|
Total Oil
Equivalent
(Mboe)
|
Opening balance Dec.
31, 2022
|
19,456
|
3,186,329
|
35,137
|
585,648
|
Extensions and improved
recovery
|
4,028
|
484,625
|
9,859
|
94,658
|
Technical
revisions(1)
|
(3,079)
|
(258,568)
|
(3,085)
|
(49,258)
|
Discoveries
|
-
|
-
|
-
|
-
|
Acquisitions
|
-
|
-
|
-
|
-
|
Dispositions
|
-
|
-
|
-
|
-
|
Economic
factors
|
-
|
(146)
|
2
|
(22)
|
Production
|
(989)
|
(117,781)
|
(1,528)
|
(22,148)
|
Closing balance at
Dec. 31, 2023
|
19,416
|
3,294,458
|
40,385
|
608,878
|
|
|
|
|
|
|
(1)
|
Proved and Proved Plus
Probable reserves have been reassigned to different areas to align
with the Corporation's current development plan, which includes the
expansion of processing facilities at Progress and Valhalla to
develop reserves with higher liquid recoveries. Certain locations
at Glacier have been removed and replaced by new locations at
Valhalla. The removed locations are reported as negative technical
revisions and replaced new locations categorized as extensions and
improved recovery in the same table. Included in technical
revisions, but not apparent due to the large negative revisions,
are positive revisions at existing wells and locations due to
increased performance, amounting to 15,647.2 Mboe Gross Proved and
17,983.7 Mboe Gross Proved Plus Probable.
|
(2)
|
Tables may not add due
to rounding.
|
Company 2023 F&D Costs – Gross (before royalties)
Working Interest Reserves including FDC
(1)(2)(3)
|
Proved
|
Proved +
Probable
|
Net capital
expenditures ($000)(a)
|
266,187
|
266,187
|
Acquisitions
|
(10,159)
|
(10,159)
|
Net change in FDC
($000)
|
45,375
|
114,752
|
Total capital
($000)
|
301,403
|
370,780
|
|
|
|
Total mboe, end of
year
|
430,195
|
608,878
|
Total mboe, beginning
of year
|
416,879
|
585,648
|
Production,
mboe
|
(22,148)
|
(22,148)
|
Reserve additions,
mboe
|
35,464
|
45,378
|
|
|
|
2023 F&D costs
($/boe) (1)
|
$8.50
|
$8.17
|
2022 F&D costs
($/boe) (1)
|
$7.48
|
$6.62
|
Three-year average
F&D costs ($/boe) (1)
|
$7.60
|
$6.90
|
|
|
|
(1)
|
F&D costs are
calculated by dividing total capital by reserve additions during
the applicable period. Total capital includes both capital
expenditures incurred and changes in FDC required to bring the
proved undeveloped and probable undeveloped reserves to production
during the applicable period. Reserves additions are calculated as
the change in reserves from the beginning to the ending of the
applicable period excluding production.
|
(2)
|
The aggregate of the
exploration and development costs incurred in the most recent
financial year and the change during that year in estimated FDC
generally will not reflect total finding and development costs
related to reserves additions for that year. Changes in forecast
FDC occur annually as a result of development activities,
acquisition and disposition activities and capital cost estimates
that reflect Sproule's best estimate of what it will cost to bring
the proved undeveloped and probable undeveloped reserves on
production.
|
(3)
|
The change in FDC is
primarily from incremental undeveloped locations.
|
|
|
The reserves by category and year-over-year changes compared to
2022 are indicated below:
Reserve
Category
|
Light &
Medium
Crude Oil
Million
bbls
|
Conventional
Natural Gas
Tcf
|
Natural Gas
Liquids
Million
bbls
|
Total Oil
Equivalent
Million
boe
|
%
Change from
2022
|
PDP
|
4.28
|
0.82
|
9.46
|
150.3
|
8 %
|
1P
|
12.62
|
2.34
|
28.05
|
430.2
|
3 %
|
2P
|
19.42
|
3.29
|
40.39
|
608.9
|
4 %
|
The total number of 2P future well locations booked in the
Sproule 2023 Reserves Report are illustrated in the following
table:
Sproule Number of
Gross Wells Booked
|
|
Developed
|
Undeveloped
|
Total
|
Glacier
|
281
|
199
|
480
|
Valhalla
|
22
|
51
|
73
|
Wembley
|
24
|
36
|
60
|
Progress
|
8
|
15
|
23
|
Total
|
335
|
301
|
636
|
The Corporation's audited consolidated financial statements for
the fiscal year ended December 31,
2023 together with the notes thereto, and Management's
Discussion and Analysis for the year ended December 31, 2023 have been filed on SEDAR+ and
are available on the Corporation's website at
https://www.advantageog.com/investors/financial-reports. The
Corporation's audited consolidated financial statements for the
fiscal year ended December 31,
2023 are also available on the Corporation's website via the
same webpage. Upon request, Advantage will provide a hard copy of
any financial reports free of charge.
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 "anticipate", "continue",
"demonstrate", "expect", "may", "can", "will", "believe", "would"
and similar expressions and include statements relating to, among
other things, Advantage's position, strategy and development plans
and the benefits to be derived therefrom; that the Corporation will
grow its AFF per share while maintaining its net debt target;
Advantage's net debt target; Advantage's three-year plan including
its anticipated production growth and capital spending and its
expectations regarding share buybacks; that Advantage is well
positioned to generate significant shareholder value; Advantage's
expected capital spending; the anticipated timing of completion of
Advantage's Progress gas plant; that Advantage will preserve
balance sheet flexibility for counter-cyclical share repurchases;
and Advantage's natural gas hedging program, the percentage of its
natural gas production that is hedged, and Advantage's expected
exposure to AECO volatility. 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. In addition,
forward-looking statements contained in this document include,
statements relating to "reserves", which are by their nature
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions that the reserves
described can be profitably produced in the future. The recovery
and reserve estimates of Advantage's reserves provided herein are
estimates only and there is no guarantee that the estimated
reserves will be recovered.
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,
industry and business conditions; 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;
our 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; the risk that the Corporation may not have access to
sufficient capital from internal and external sources; the risk
that the Corporation may not grow its AFF per share while
maintaining its net debt target; the risk that Advantage's future
production may be less than anticipated; the risk that Advantage
may not complete the Progress gas plant when anticipated; the risk
that the Corporation may not buy back its shares with all excess
cash; the risk that the Corporation may not have sufficient
financial resources to acquire its common shares pursuant to its
share buyback program in the future; the risk that Advantage may
not generate significant shareholder value; and the risk that the
Corporation may not continue to deliver clean, reliable,
sustainable energy, or contribute to a reduction in global
emissions. 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.
With respect to forward-looking statements contained in this
press release, Advantage has made assumptions regarding, but not
limited to: conditions in general economic and financial markets;
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 impact of
increasing competition; the price of crude oil and natural gas; the
number of new wells required to achieve the budget objectives; that
the Corporation will have sufficient cash 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 the Corporation will have sufficient
financial resources to purchase its shares pursuant to its share
buyback program in the future; 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. Readers are cautioned that
the foregoing lists of factors are not exhaustive.
The future acquisition by the Corporation of the
Corporation's shares pursuant to a share buyback program, if any,
and the level thereof is uncertain. Any decision to implement a
share buyback program or acquire shares of the Corporation 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,
satisfaction of the solvency tests imposed on the Corporation under
applicable corporate law and receipt of regulatory approvals. There
can be no assurance that the Corporation will buyback any shares of
the Corporation in the future.
Management has included the above summary of assumptions and
risks related to forward-looking information above and in its
continuous disclosure filings on SEDAR+ 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 there from. 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 information that may be
considered a financial outlook under applicable securities laws
about the Corporation's potential financial position, including,
but not limited to, that the Corporation will grow its AFF per
share while maintaining its net debt target, and Advantage's
three-year plan including its anticipated capital spending,
anticipated production growth cap and its share buyback
expectations, 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.
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.
Sproule Associates Limited ("Sproule") was engaged as an
independent qualified reserve evaluator to evaluate Advantage's
year-end reserves as of December 31,
2023 ("Sproule 2023 Reserves Report") and as of December 31, 2022 ("Sproule 2022 Reserve Report")
in accordance with National Instrument 51-101 ("NI 51-101") and the
Canadian Oil and Gas Evaluation Handbook ("COGE Handbook"). The net
present value of future net revenue of reserves at December 31, 2023 was based upon light and medium
oil, conventional natural gas and natural gas liquid pricing
assumptions, which were computed by using the IQRE Average Forecast
effective December 31, 2023. Reserves
are stated on a gross (before royalties) working interest basis
unless otherwise indicated. It should not be assumed that the
estimates of future net revenues presented herein represent the
fair market value of the reserves. There are numerous uncertainties
inherent in estimating quantities of crude oil, reserves and the
future cash flows attributed to such reserves. Additional
details are provided in the accompanying tables to this release and
additional reserve information as required under NI 51-101 is
included in our Annual Information Form which is available on
SEDAR+ and at www.advantageog.com. The recovery and
reserve estimates of reserves provided in this press release are
estimates only, and there is no guarantee that the estimated
reserves will be recovered. Actual reserves may eventually prove to
be greater than, or less than, the estimates provided
herein.
This press release discloses undeveloped drilling locations
in two categories: (i) proved locations; and (ii) probable
locations. Proved locations and probable locations are derived from
the Sproule 2023 Reserves Report and account for drilling locations
that have associated proved and/or probable reserves, as
applicable. Of the 301 total undeveloped drilling locations
identified herein, 242 are proved locations with 153 in Glacier, 51
in Valhalla, 27 in Wembley and 11 in Progress. Of the 59 probable
locations, 46 are in Glacier, 0 in Valhalla, 9 in Wembley and 4 in Progress.
References in this press release to short-term production
rates, such as IP30 and IP90, are useful in confirming the presence
of hydrocarbons, however such rates are not determinative of the
rates at which such wells will commence production and decline
thereafter and are not indicative of long term performance or of
ultimate recovery. Additionally, such rates may also include
recovered "load oil" fluids used in well completion stimulation.
While encouraging, readers are cautioned not to place reliance on
such rates in calculating the aggregate production of
Advantage.
This press release contains several oil and gas metrics,
including reserve additions, F&D costs, operating netback and
recycle ratios. The following oil and gas metrics are described
below under "Specified Financial Measures": F&D costs, recycle
ratios, reserve additions and operating netback. Such oil and gas
metrics have been prepared by management and do not have
standardized meanings or standard methods of calculation and
therefore such measures may not be comparable to similar measures
used by other companies and should not be used to make comparisons.
Such metrics have been included herein to provide readers with
additional measures to evaluate the Corporation's performance;
however, such measures are not reliable indicators of the future
performance of the Corporation and future performance may not
compare to the performance in previous periods and therefore such
metrics should not be unduly relied upon. Management uses these oil
and gas metrics for its own performance measurements and to provide
shareholders with measures to compare the Corporation's operations
over time. Readers are cautioned that the information provided by
these metrics, or that can be derived from the metrics presented in
this press release, should not be relied upon for investment or
other purposes.
Specified Financial Measures
Throughout this press release, Advantage discloses certain
measures to analyze financial performance, financial position, and
cash flow. These non-GAAP and other 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 non-GAAP and other financial measures should not be considered
to be more meaningful than GAAP measures which are determined in
accordance with IFRS, such as net income (loss) and comprehensive
income (loss), cash provided by operating activities, and cash used
in investing activities, as indicators of Advantage's
performance.
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. Additionally, the
Corporation discloses adjusted funds flow by legal entity
(Advantage and Entropy) to allow users to assess the performance of
each entity on a standalone basis. A reconciliation of the most
directly comparable financial measure by legal entity has been
provided below:
|
|
Year
ended
December 31,
2023
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Cash provided by
operating activities
|
|
331,064
|
(7,719)
|
323,345
|
Expenditures on decommissioning liability
|
|
4,043
|
-
|
4,043
|
Changes in
non-cash working capital
|
|
(14,939)
|
1,121
|
(13,818)
|
Adjusted funds
flow
|
|
320,168
|
(6,598)
|
313,570
|
|
|
Year
ended
December 31,
2022
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Cash provided by
operating activities
|
|
505,285
|
(2,907)
|
502,378
|
Expenditures on decommissioning liability
|
|
2,215
|
-
|
2,215
|
Changes in
non-cash working capital
|
|
13,803
|
(1,606)
|
12,197
|
Adjusted funds
flow
|
|
521,303
|
(4,513)
|
516,790
|
Net Capital Expenditures
Net capital expenditures include total capital expenditures
related to property, plant and equipment, exploration and
evaluation assets and intangible assets. Management considers this
measure reflective of actual capital activity for the period as it
excludes changes in working capital related to other periods and
excludes cash receipts on government grants. Additionally, the
Corporation discloses net capital expenditures by legal entity
(Advantage and Entropy) to allow users to assess the performance of
each entity on a standalone basis. A reconciliation of the most
directly comparable financial measure by legal entity has been
provided below:
|
|
Year
ended
December 31,
2023
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Cash used in investing
activities
|
|
268,872
|
13,889
|
282,761
|
Changes in
non-cash working capital
|
|
(2,685)
|
2,720
|
35
|
Net capital
expenditures
|
|
266,187
|
16,609
|
282,796
|
|
|
Year
ended
December 31,
2022
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Cash used in investing
activities
|
|
265,769
|
3,816
|
269,585
|
Changes in
non-cash working capital
|
|
(27,853)
|
53
|
(27,800)
|
Project
funding received
|
|
5
|
-
|
5
|
Net capital
expenditures
|
|
237,921
|
3,869
|
241,790
|
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. Additionally, the Corporation discloses free cash flow by
legal entity (Advantage and Entropy) to allow users to assess the
performance of each entity on a standalone basis. A reconciliation
of the most directly comparable financial measure by legal entity
has been provided below:
|
|
Year
ended
December 31,
2023
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Cash provided by
operating activities
|
|
331,064
|
(7,719)
|
323,345
|
Cash used in investing
activities
|
|
(268,872)
|
(13,889)
|
(282,761)
|
Changes in non-cash working
capital
|
|
(12,254)
|
(1,599)
|
(13,853)
|
Expenditures on decommissioning
liability
|
|
4,043
|
-
|
4,043
|
Free cash
flow
|
|
53,981
|
(23,207)
|
30,774
|
|
|
Year
ended
December 31,
2022
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Cash provided by
operating activities
|
|
505,285
|
(2,907)
|
502,378
|
Cash used in investing
activities
|
|
(265,769)
|
(3,816)
|
(269,585)
|
Changes in non-cash working
capital
|
|
41,656
|
(1,659)
|
39,997
|
Expenditures on decommissioning
liability
|
|
2,215
|
-
|
2,215
|
Project
funding received
|
|
(5)
|
-
|
(5)
|
Free cash
flow
|
|
283,382
|
(8,382)
|
275,000
|
Operating Netback
Operating netback is comprised of sales revenue and realized
gains (losses) on derivatives, net of expenses resulting from field
operations, including royalty expense, operating expense and
transportation expense. Operating netback provides Management and
users with a measure to compare the profitability of field
operations between companies, development areas and specific wells.
The composition of operating netback is as follows:
|
Three months
ended
December
31
|
Year
ended
December
31
|
($000)
|
2023
|
2022
|
2023
|
2022
|
Natural gas and liquids
sales
|
147,137
|
223,200
|
541,100
|
950,458
|
Realized gains (losses)
on derivatives
|
6,140
|
(24,344)
|
35,243
|
(144,134)
|
Processing and other
income
|
2,484
|
3,091
|
7,627
|
9,082
|
Net sales of purchased
natural gas
|
-
|
-
|
(247)
|
70
|
Royalty
expense
|
(10,302)
|
(27,154)
|
(42,432)
|
(106,257)
|
Operating
expense
|
(22,724)
|
(17,344)
|
(84,453)
|
(64,269)
|
Transportation
expense
|
(25,664)
|
(22,637)
|
(90,603)
|
(90,093)
|
Operating
netback
|
97,071
|
134,812
|
366,235
|
554,857
|
Non-GAAP Ratios
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.
|
Three months
ended
December
31
|
Year
ended
December
31
|
($000, except as
otherwise indicated)
|
2023
|
2022
|
2023
|
2022
|
Adjusted funds
flow
|
82,494
|
124,205
|
313,570
|
516,790
|
Weighted average shares
outstanding (000)
|
163,939
|
180,248
|
166,553
|
187,022
|
Adjusted funds flow per
share ($/share)
|
0.50
|
0.69
|
1.88
|
2.76
|
Adjusted Funds Flow per boe
Adjusted funds flow per boe is derived by dividing adjusted
funds flow by the total production in boe for the reporting
period. Adjusted funds flow per boe is a useful ratio that
allows users to compare the Corporation's adjusted funds flow
against other competitor corporations with different rates of
production.
|
Three months
ended
December
31
|
Year
ended
December
31
|
($000, except as
otherwise indicated)
|
2023
|
2022
|
2023
|
2022
|
Adjusted funds
flow
|
82,494
|
124,205
|
313,570
|
516,790
|
|
|
|
|
|
Total production
(boe/d)
|
68,384
|
55,573
|
60,678
|
55,769
|
Days in
period
|
92
|
92
|
365
|
365
|
Total production
(boe)
|
6,291,328
|
5,112,716
|
22,147,470
|
20,355,685
|
Adjusted funds flow per
boe ($/boe)
|
13.11
|
24.29
|
14.16
|
25.39
|
Operating netback per boe
Operating netback per boe is derived by dividing each
component of the operating netback by the total production in boe
for the reporting period. Operating netback per boe provides
Management and users with a measure to compare the profitability of
field operations between companies, development areas and specific
wells against other competitor corporations with different rates of
production.
|
Three months
ended
December
31
|
Year
ended
December
31
|
($000, except as
otherwise indicated)
|
2023
|
2022
|
2023
|
2022
|
Operating
netback
|
97,071
|
134,812
|
366,235
|
554,857
|
|
|
|
|
|
Total production
(boe/d)
|
68,384
|
55,573
|
60,678
|
55,769
|
Days in
period
|
92
|
92
|
365
|
365
|
Total production
(boe)
|
6,291,328
|
5,112,716
|
22,147,470
|
20,355,685
|
Operating
netback per boe ($/boe)
|
15.43
|
26.37
|
16.53
|
27.25
|
Finding and Development Costs ("F&D")
F&D cost is calculated based on adding net capital
expenditures excluding acquisitions and dispositions, and the net
change in future development capital ("FDC"), divided by reserve
additions for the year from the Sproule 2023 Reserves Report and
2022 Reserves Report. Additionally, the Corporation
discloses Three-year average F&D cost, which is
calculated based on adding net capital expenditures excluding
acquisitions and dispositions from 2023, 2022 and 2021, and the net
change in FDC from 2023, 2022 and 2021, divided by reserve
additions from 2023, 2022 and 2021 from the respective Sproule
Reserve Reports.
Recycle Ratio
Recycle ratio is calculated by dividing Advantage's fourth
quarter operating netback by the calculated F&D cost or
FD&A cost of the applicable year and expressed as a ratio.
Management uses recycle ratio to relate the cost of adding reserves
to a recent operating netback.
Capital Management Measures
Working Capital
Working capital is a capital management financial measure
that provides Management and users with a measure of the
Corporation's short-term operating liquidity. By excluding short
term derivatives and the current portion of provision and other
liabilities, Management and users can determine if the
Corporation's energy operations are sufficient to cover the
short-term operating requirements. Working capital is not a
standardized measure and therefore may not be comparable with the
calculation of similar measures by other entities.
A summary of working capital as at December 31, 2023 and 2022 is as follows:
|
|
December
31
2023
|
December
31
2022
|
|
Cash and cash
equivalents
|
|
19,261
|
48,940
|
Trade and other
receivables
|
|
53,378
|
92,816
|
|
Prepaid expenses and
deposits
|
|
16,618
|
14,613
|
|
Trade and other accrued
liabilities
|
|
(70,606)
|
(84,805)
|
Working capital
surplus
|
|
18,651
|
71,564
|
Net Debt
Net debt is a capital management financial measure that
provides Management and users with a measure to assess the
Corporation's liquidity. Net debt is not a standardized measure and
therefore may not be comparable with the calculation of similar
measures by other entities. Additionally, the Corporation
discloses net debt by legal entity (Advantage and Entropy) to allow
users to assess the performance of each entity on a standalone
basis. A summary of the reconciliation of net debt as at
December 31, 2023 and 2022 is as
follows:
|
|
December 31,
2023
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Bank
indebtedness
|
|
212,854
|
-
|
212,854
|
Unsecured
debentures
|
|
-
|
27,819
|
27,819
|
Working capital
surplus
|
|
(16,912)
|
(1,739)
|
(18,651)
|
Net debt
|
|
195,942
|
26,080
|
222,022
|
|
|
December 31,
2022
|
($000)
|
|
Advantage
|
Entropy
|
Consolidated
|
Bank
indebtedness
|
|
177,200
|
-
|
177,200
|
Unsecured
debentures
|
|
-
|
15,700
|
15,700
|
Working capital
surplus
|
|
(60,450)
|
(11,114)
|
(71,564)
|
Net debt
|
|
116,750
|
4,586
|
121,336
|
Supplementary financial measures
"Corporate decline rate" is calculated by identifying
the actual or forecasted production of all the wells onstream at
the start of the year, then tracking their cumulative decline by
the end of the year, expressed as a percentage.
"Average realized prices (including realized derivatives)
natural gas" is comprised of natural gas sales, as determined in
accordance with IFRS, divided by the Corporation's natural gas
production.
"Average realized prices (including realized derivatives)
liquids" is comprised of crude oil, condensate and NGL's sales, as
determined in accordance with IFRS, divided by the Corporation's
crude oil, condensate and NGL's production.
"Natural gas and liquids sales per boe" is comprised of
natural gas sales and liquids sales, as determined in accordance
with IFRS, divided by the Corporation's total natural gas and
liquids production.
"Operating expense per boe" is comprised of operating
expense, as determined in accordance with IFRS, divided by the
Corporation's total production.
"Realized losses on derivatives per boe" is comprised of
realized losses on derivatives, as determined in accordance with
IFRS, divided by the Corporation's total production.
"Reserve additions replaced" is calculated by dividing
reserves net volume additions by the current annual production and
expressed as a percentage. Management uses this measure to
determine the relative change of its reserves base over a period of
time.
"Reserves life index" is calculated by dividing the total
volume of reserves by the fourth quarter production rate and
expressed in years.
"Royalty expense per boe" is comprised of royalty expense, as
determined in accordance with IFRS, divided by the Corporation's
total production.
"Transportation expense per boe" is comprised of
transportation expense, as determined in accordance with IFRS,
divided by the Corporation's total production.
The following abbreviations used in this press release
have the meanings set forth below:
bbl
|
one
barrel
|
bbls
|
barrels
|
bbls/d
|
barrels per
day
|
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 of natural gas per day
|
mbbl
|
thousand
barrels
|
mboe
|
thousand barrels of
oil equivalent of natural gas
|
mcf
|
thousand cubic
feet
|
mcf/d
|
thousand cubic feet
per day
|
mcfe
|
thousand cubic feet
equivalent on the basis of six thousand cubic feet of natural
gas for one barrel of oil or NGLs
|
mmcf
|
million cubic
feet
|
mmcf/d
|
million cubic feet
per day
|
mmbtu
|
million British
thermal units
|
tcf
|
trillion cubic
feet
|
Liquids
|
Includes NGLs,
condensate and crude oil
|
NGLs and
condensate
|
Natural Gas Liquids
as defined in National Instrument 51-101
|
Natural
Gas
|
Conventional Natural
Gas as defined in National Instrument 51-101
|
Crude
Oil
|
Light Crude Oil and
Medium Crude Oil as defined in National Instrument 51-
101
|
IP30
|
Average initial
production rate over 30 consecutive days
|
IP90
|
Average initial
production rate over 90 consecutive days
|
SOURCE Advantage Energy Ltd.