NuVista Energy Ltd. ("
NuVista" or the
"
Company") (TSX:
NVA) is pleased
to announce strong financial and operating results for the three
and nine months ended September 30, 2024, and to provide an update
on our operational performance. The quality and composition of our
asset base consistently enables us to generate strong returns
across commodity price cycles. Subsequent to the third quarter, our
daily production has reached new record levels, as we continue to
invest in new high-return wells and infrastructure projects to
support our development plans. We also added LNG market access to
our diversified natural gas portfolio and made significant progress
on our return of capital to shareholders program through our normal
course issuer bid (the “2024 NCIB”), while maintaining a financial
position with low debt.
Financial Highlights
During the third quarter of 2024, NuVista:
- Delivered adjusted
funds flow(1) of $139.5 million ($0.68/share, basic(3)), and free
adjusted funds flow(2) of $19.4 million. Adjusted funds flow and
free adjusted funds flow remained strong relative to the second
quarter, supported by condensate rich production and lower cash
costs, despite softer commodity prices;
- Generated net
earnings of $59.8 million ($0.29/share, basic), resulting in
year-to-date net earnings of $206.6 million ($1.00/share,
basic);
- Completed a
well-executed capital expenditures(2) program, investing $118.4
million in well and facility activities including the drilling of
14 wells and completion of 12 wells in our condensate rich Wapiti
Montney asset base. Year-to-date, the capital expenditures program
has totaled $427.8 million, with 34 wells drilled and 38 wells
completed, in addition to completing several infrastructure
projects;
- Added LNG sales to
our natural gas diversification portfolio by gaining exposure to
the Japan/Korea marker (“JKM”) through a netback agreement with
Trafigura based on 21,000 MMbtu/d of LNG for a period of up to
thirteen years commencing January 1, 2027;
- Exited the quarter
with $37.5 million drawn on our $450 million credit facility and
net debt(1) of $261.9 million, maintaining a favorable net debt to
annualized third quarter adjusted funds flow(1) ratio of 0.5x;
-
Repurchased and subsequently cancelled 816,800 common shares under
its 2024 NCIB program at a weighted average price of $13.81 per
share for a total cost of $11.3 million. Since the inception of our
NCIB programs in 2022, NuVista has repurchased and subsequently
cancelled 33.2 million common shares for an aggregate cost of
$394.6 million or $11.89 per share; and
- Recognized as
part of the TSX30 for the third consecutive year. The TSX30
recognizes the thirty top-performing companies on the Toronto Stock
Exchange (“TSX”) over the prior three-year period
(see www.tsx.com/tsx30). NuVista ranked a notable sixth place
overall.
Notes:(1) Each of "adjusted funds flow", "net
debt", "net debt to annualized third quarter adjusted funds flow"
are capital management measures. Reference should be made to the
section entitled "Non-GAAP and Other Financial Measures" in this
press release. (2) “Free adjusted funds flow” and "capital
expenditures" are non-GAAP financial measures that do not have
standardized meanings under IFRS Accounting Standards and therefore
may not be comparable to similar measures presented by other
companies where similar terminology is used. Reference should be
made to the section entitled "Non-GAAP and Other Financial
Measures" in this press release.(3) "Adjusted funds flow per share"
is a supplementary financial measure. Reference should be made to
the section entitled "Non-GAAP and Other Financial Measures" in
this press release.
Operational Excellence
During the third quarter of 2024, NuVista:
- Produced an average
of 83,475 Boe/d, within the third quarter guidance range of 83,000
– 86,000 Boe/d, and consistent with the second quarter production
despite unplanned downtime at third-party facilities, which
negatively impacted the quarter by approximately 5,000 Boe/d. All
impacted production has since been brought back online, with daily
production levels in late October reaching record levels above
90,000 Boe/d. It is expected that production will stabilize around
this new level throughout much of the fourth quarter;
- Production for the
third quarter comprised 31% condensate, 9% NGLs and 60% natural
gas, a favorable outcome despite the fact that the production
outage occurred in our richest condensate area. This was mainly due
to outperformance of the most recent pad brought online at
Pipestone;
- Realized strong
production milestones for both pads brought online during the
second quarter in the Pipestone area. A 4-well pad at Pipestone
South has reached its IP90 at average rates per well of 1,300 Boe/d
including 40% condensate, in line with historic averages for the
area despite flowing at restricted rates since coming on production
due to infrastructure capacity. In addition, the most southerly pad
drilled at Pipestone North to-date has reached its IP60 milestone,
producing 1,650 Boe/d including 50% condensate over the period.
This pad included co-development of the Lower Montney and is
important as it illustrates the continued repeatability in
condensate yields as we progress development to the south.
Completion operations in Pipestone will resume in the new year
where we will begin on the 14-well pad that is scheduled to come on
production at the end of the first quarter;
- Commenced the
production ramp-up of two new pads in the Wapiti area, as planned
during the third quarter, following the completion of our
infrastructure expansion projects in the first half of the year.
With firm transportation capacity in place, area production has
reached record levels. Both the 6-well pad in Elmworth and a 4-well
pad in Gold Creek have reached IP90 milestones and with facilities
very recently expanded, they have now been able to produce
consistently. The pad on the southern end of Elmworth co-developed
the entire stack including one well in the Lower Montney which
averaged 1,675 Boe/d including 15% condensate over the period and
reflects over 25% more production than the other 5 wells on the pad
which averaged 1,300 Boe/d per well including 26% condensate. The
4-well pad on the western side of Gold Creek also has reached IP90
averaging 1,500 Boe/d per well including 35% condensate over the
period. This pad was also co-developed in the Lower and Middle
Montney and exhibited exceptional consistency in deliverability
across the zones which reinforces our view on inventory expansion
in Gold Creek area; and
- Brought on
production a 6-well pad between Gold Creek and Elmworth. Notably,
this pad was co-developed across the entire stack of 4 zones, and
included one Lower Montney pilot. The pad has reached its IP30
milestone producing on average 1,725 Boe/d per well including 40%
condensate. Importantly, the Lower Montney well exhibited robust
productivity compared to the other benches, producing 1,850 Boe/d
including 38% condensate.
Balance Sheet Strength and Return of
Capital to Shareholders
At the end of the third quarter, our net debt
was $261.9 million, resulting in a net debt to annualized third
quarter adjusted funds flow ratio of 0.5x, which supports our
strong financial position. The net debt level is also well below
the $350 million limit set by management, to ensure that our net
debt to adjusted funds flow ratio remains comfortably below 1.0x in
a stress test price environment of US$45/Bbl WTI oil and
US$2.00/MMBtu NYMEX natural gas.
We remain focused on our disciplined
value-adding growth strategy, balanced with providing significant
shareholder returns. We continue to believe the best way to return
capital to shareholders is through the repurchase of shares,
although we will continue to consider other options in tandem with
our longer term, high return growth plans. This evaluation will
consider commodity prices, the economic and tax environment, and
will include all options including share repurchases and dividend
payments.
Presently, our Board has set a target of
returning approximately 75% of free adjusted funds flow to
shareholders through the repurchase of the NuVista’s common shares
pursuant to our NCIB programs.
2024 Guidance Reaffirmed
We are extremely well-positioned with top-tier
assets and highly favorable economics. Our disciplined execution
has enabled us to achieve growth in production and adjusted funds
flow, while also generating positive free adjusted funds flow. This
has allowed us to continue to return capital to our shareholders
through the repurchase of shares. Our high condensate weighting,
for which pricing has remained supportive, continues to drive
superior economics despite the weakness in natural gas prices
experienced for much of 2024. We continue to execute according to
our plans, with well and facility outperformance in several areas.
As such, we reaffirm our 2024 capital expenditure guidance target
of approximately $500 million, allowing us to maintain the
efficiencies of a steady 2-drill-rig execution.
Recent average weekly production has reached a
record level above 90,000 Boe/d and our guidance for the fourth
quarter of 2024 is 89,000 – 91,000 Boe/d. This includes the minor
impact associated with our decision to temporarily shut in the very
small amount of our production which was exposed to AECO when those
prices reached historically low levels at the start of the fourth
quarter. We are pleased that despite the unplanned impacts of
third-party downtime in the third quarter, we are able to reaffirm
our previously announced full-year 2024 guidance range of 83,500 –
86,000 Boe/d.
2025 Budget Further Enhances Priority of Return of
Capital to Shareholders
With well outperformance continuing to drive
strong capital efficiencies, and with commodity prices retreating
from the highs of 2022, we have taken this as a market signal to
moderate capital spending and production growth in order to
increase the priority of at least triple-digit return of cash to
shareholders via share buybacks. We are fortunate that our business
has the flexibility and superior asset quality to afford this. We
have set our 2025 capital expenditure guidance at approximately
$450 million to grow production volumes by 7% to a 2025 annual
average of approximately 90,000 Boe/d. This includes a planned
six-week turnaround for maintenance and expansion of major third
party facilities in Wapiti which will impact the second and third
quarters. Production volumes are expected to approach 100,000 Boe/d
in the second half of the year. Our budget is based on commodity
price assumptions of $65/Bbl WTI oil and $3/MMBtu Nymex natural
gas. In this base scenario we would expect to generate
approximately $175 million of free adjusted funds flow, of which we
will target at least 75% for return to shareholders. This capital
budget is approximately $125 million lower than our previous
outlook with only a modest tempering of our production growth from
10% to 7%. Superior ongoing execution and new well performance are
the main drivers that provide us the flexibility to exercise this
discipline and reduce capital substantially with only a modest
growth impact.
Substantially all of our production growth in
2025 will come from the Pipestone North area, beginning with the
startup of the CSV Midstream Albright gas plant which is
anticipated to be commissioned during the first quarter. 14 wells
will be completed in Pipestone to ramp into this additional
capacity of 8,000 to 10,000 Boe/d by the second quarter. Looking
further ahead, Gold Creek area production growth will be a high
focus for 2026 and 2027.
We will monitor the economic environment, and if
commodity prices are averaging higher than our base assumptions, we
have the ability and intention to increase returns to shareholders
and 2025 capital expenditures for future growth concurrently to
maximize long term value per share. If in an environment where
commodity prices soften, we have the flexibility to further
moderate production growth and reduce 2025 capital expenditures to
act counter-cyclically and ensure our return of capital to
shareholders remains intact. Underlying our commitment to
shareholder returns is a pristine balance sheet. We expect to enter
2025 with approximately $250 million of net debt.
We intend to continue our track record of
carefully directing free adjusted funds flow towards a prudent
balance of capital return to shareholders and debt reduction, while
investing in high return growth projects. NuVista's top quality
asset base, deep inventory, and management's relentless focus on
value maximization supports our medium-term plans for value-adding
growth to the plateau level of 125,000 Boe/d. We will continue to
closely monitor and adjust to the environment in order to maximize
the value of our asset base and ensure the long-term sustainability
of our business. We would like to thank our staff, contractors, and
suppliers for their continued dedication and delivery, and we thank
our Board of Directors and our shareholders for their continued
guidance and support.
Please note that our corporate presentation will
be available at www.nuvistaenergy.com on November 8, 2024.
NuVista's management's discussion and analysis, condensed
consolidated interim financial statements for the three and nine
months ended September 30, 2024 and notes thereto, will be filed on
SEDAR+ (www.sedarplus.ca) on November 8, 2024 and can also be
obtained at www.nuvistaenergy.com.
FINANCIAL AND
OPERATING HIGHLIGHTS |
|
|
|
|
|
Three months ended September 30 |
Nine months ended September 30 |
($ thousands, except otherwise stated) |
|
2024 |
|
|
2023 |
|
% Change |
|
2024 |
|
|
2023 |
|
% Change |
FINANCIAL |
|
|
|
|
|
|
Petroleum and natural gas revenues |
|
301,406 |
|
|
360,373 |
|
|
(16 |
) |
|
933,780 |
|
|
1,032,600 |
|
|
(10 |
) |
Cash provided by operating
activities |
|
150,249 |
|
|
160,194 |
|
|
(6 |
) |
|
464,422 |
|
|
509,581 |
|
|
(9 |
) |
Adjusted funds flow(3) |
|
139,478 |
|
|
202,010 |
|
|
(31 |
) |
|
415,137 |
|
|
554,956 |
|
|
(25 |
) |
Per share, basic(6) |
|
0.68 |
|
|
0.94 |
|
|
(28 |
) |
|
2.01 |
|
|
2.55 |
|
|
(21 |
) |
Per share, diluted(6) |
|
0.67 |
|
|
0.91 |
|
|
(26 |
) |
|
1.98 |
|
|
2.47 |
|
|
(20 |
) |
Net earnings |
|
59,823 |
|
|
110,323 |
|
|
(46 |
) |
|
206,566 |
|
|
278,165 |
|
|
(26 |
) |
Per share, basic |
|
0.29 |
|
|
0.51 |
|
|
(43 |
) |
|
1.00 |
|
|
1.28 |
|
|
(22 |
) |
Per share, diluted |
|
0.29 |
|
|
0.50 |
|
|
(42 |
) |
|
0.99 |
|
|
1.24 |
|
|
(20 |
) |
Total assets |
|
|
|
|
3,339,971 |
|
|
3,009,291 |
|
|
11 |
|
Net capital
expenditures(1) |
|
118,433 |
|
|
110,036 |
|
|
8 |
|
|
427,786 |
|
|
405,036 |
|
|
6 |
|
Net debt(3) |
|
|
|
|
261,898 |
|
|
150,158 |
|
|
74 |
|
OPERATING |
|
|
|
|
|
|
Daily Production |
|
|
|
|
|
|
Natural gas (MMcf/d) |
|
297.2 |
|
|
283.1 |
|
|
5 |
|
|
296.6 |
|
|
264.4 |
|
|
12 |
|
Condensate (Bbls/d) |
|
26,204 |
|
|
26,704 |
|
|
(2 |
) |
|
25,398 |
|
|
23,873 |
|
|
6 |
|
NGLs (Bbls/d) |
|
7,735 |
|
|
6,491 |
|
|
19 |
|
|
7,395 |
|
|
6,295 |
|
|
17 |
|
Total (Boe/d) |
|
83,475 |
|
|
80,382 |
|
|
4 |
|
|
82,228 |
|
|
74,240 |
|
|
11 |
|
Condensate & NGLs
weighting |
|
41 |
% |
|
41 |
% |
|
|
40 |
% |
|
41 |
% |
|
Condensate weighting |
|
31 |
% |
|
33 |
% |
|
|
31 |
% |
|
32 |
% |
|
Average realized selling
prices(5) |
|
|
|
|
|
|
Natural gas ($/Mcf) |
|
1.92 |
|
|
3.36 |
|
|
(43 |
) |
|
2.41 |
|
|
4.49 |
|
|
(46 |
) |
Condensate ($/Bbl) |
|
95.51 |
|
|
103.92 |
|
|
(8 |
) |
|
98.20 |
|
|
100.33 |
|
|
(2 |
) |
NGLs ($/Bbl)(4) |
|
26.09 |
|
|
29.19 |
|
|
(11 |
) |
|
26.90 |
|
|
31.54 |
|
|
(15 |
) |
Netbacks ($/Boe) |
|
|
|
|
|
|
Petroleum and natural gas
revenues |
|
39.25 |
|
|
48.73 |
|
|
(19 |
) |
|
41.45 |
|
|
50.95 |
|
|
(19 |
) |
Realized gain (loss) on
financial derivatives |
|
1.53 |
|
|
1.30 |
|
|
18 |
|
|
0.55 |
|
|
0.39 |
|
|
41 |
|
Other income |
|
0.34 |
|
|
— |
|
|
— |
|
|
0.14 |
|
|
— |
|
|
— |
|
Royalties |
|
(4.64 |
) |
|
(3.64 |
) |
|
27 |
|
|
(4.71 |
) |
|
(4.92 |
) |
|
(4 |
) |
Transportation expense |
|
(5.13 |
) |
|
(4.91 |
) |
|
4 |
|
|
(4.85 |
) |
|
(4.86 |
) |
|
— |
|
Net operating expense(2) |
|
(11.43 |
) |
|
(11.49 |
) |
|
(1 |
) |
|
(11.47 |
) |
|
(11.69 |
) |
|
(2 |
) |
Operating netback(2) |
|
19.92 |
|
|
29.99 |
|
|
(34 |
) |
|
21.11 |
|
|
29.87 |
|
|
(29 |
) |
Corporate netback(2) |
|
18.17 |
|
|
27.30 |
|
|
(33 |
) |
|
18.44 |
|
|
27.37 |
|
|
(33 |
) |
SHARE TRADING STATISTICS |
|
|
|
|
|
|
High ($/share) |
|
14.86 |
|
|
13.55 |
|
|
10 |
|
|
14.86 |
|
|
13.55 |
|
|
10 |
|
Low ($/share) |
|
10.70 |
|
|
10.34 |
|
|
3 |
|
|
9.59 |
|
|
9.93 |
|
|
(3 |
) |
Close ($/share) |
|
11.12 |
|
|
13.00 |
|
|
(14 |
) |
|
11.12 |
|
|
13.00 |
|
|
(14 |
) |
Common
shares outstanding (thousands of shares) |
|
|
|
|
205,381 |
|
|
213,209 |
|
|
(4 |
) |
(1) Non-GAAP financial measure that does not
have any standardized meaning under IFRS Accounting Standards and
therefore may not be comparable to similar measures presented by
other companies where similar terminology is used. Reference should
be made to the section entitled “Non-GAAP and other financial
measures”. (2) Non-GAAP ratio that does not have any standardized
meaning under IFRS Accounting Standards and therefore may not be
comparable to similar measures presented by other companies where
similar terminology is used. Reference should be made to the
section entitled “Non-GAAP and other financial measures”. (3)
Capital management measure. Reference should be made to the section
entitled “Non-GAAP and other financial measures”. (4) Natural gas
liquids (“NGLs”) include butane, propane and ethane revenue and
sales volumes, and sulphur revenue. (5) Product prices exclude
realized gains/losses on financial derivatives.(6) Supplementary
financial measure. Reference should be made to the section entitled
“Non-GAAP and other financial measures”.
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 press 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 and are not indicative of long-term performance or
ultimate recovery. While encouraging, readers are cautioned not to
place reliance on such rates in calculating the aggregate
production for NuVista.
This press release contains certain oil and gas
metrics, which 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
NuVista's performance; however, such measures are not reliable
indicators of NuVista's future performance and future performance
may not compare to NuVista's 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 security holders with measures to compare the
NuVista'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 presentation, should not be relied
upon for investment or other purposes.
NuVista has presented certain well economics
based on type curves for the Pipestone development block. The type
curves are based on historical production in respect of NuVista's
Pipestone assets as well as drilling results from analogous
development located in close proximity to such area. Such type
curves and well economics are useful in understanding management's
assumptions of well performance in making investment decisions in
relation to development drilling in the Montney area and for
determining the success of the performance of development wells;
however, such type curves and well economics are not necessarily
determinative of the production rates and performance of existing
and future wells and such type curves do not reflect the type
curves used by our independent qualified reserves evaluator in
estimating our reserves volumes.
Basis of presentation
Unless otherwise noted, the financial data
presented in this news release has been prepared in accordance with
Canadian generally accepted accounting principles ("GAAP") also
known as International Financial Reporting Standards ("IFRS").
Natural gas liquids are defined by National
Instrument 51-101 – Standards of Disclosure for Oil and Gas
Activities" to include ethane, butane, propane, pentanes plus and
condensate. Unless explicitly stated in this press release,
references to "NGL" refers only to ethane, butane and propane and
references to "condensate" refers to only to condensate and
pentanes plus. NuVista has disclosed condensate and pentanes plus
values separately from ethane, butane and propane values as NuVista
believes it provides a more accurate description of NuVista's
operations and results therefrom.
Production split for Boe/d amounts referenced in
the news release are as follows:
Reference |
Total Boe/d |
Natural Gas% |
Condensate% |
NGLs% |
|
|
|
|
|
Q3 2024 production - actual |
83,475 |
60 |
% |
31 |
% |
9 |
% |
Q3 2024 production guidance |
83,000 – 86,000 |
61 |
% |
30 |
% |
9 |
% |
Q4 2024 production guidance |
89,000 – 91,000 |
61 |
% |
30 |
% |
9 |
% |
2024 annual production guidance |
83,500 – 86,000 |
61 |
% |
30 |
% |
9 |
% |
2025 annual production guidance |
~90,000 |
61 |
% |
30 |
% |
9 |
% |
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 but not limited to:
- our expectations that production
will stabilize around 90,000 Boe/d for much of the fourth
quarter;
- our assumption that completion
operations in Pipestone will resume in 2025 beginning with a
14-well pad scheduled to come on production at the end of the first
quarter;
- the expectation that recent lower
Montney results at Pipestone will be an important indicator for
future development plans;
- our expectations regarding the
consistency in deliverability of inventory in the Gold Creek
area;
- that our soft ceiling net debt will
allow our current production levels to be sustainable and maintain
an adjusted funds flow ratio below 1.0x in a stress test price
environment of US$45/Bbl WTI oil and US$2.00/MMBtu NYMEX natural
gas;
- NuVista's ability to continue
directing free adjusted funds flow towards a prudent balance of
return of capital to shareholders and debt reduction, while
investing in high return growth projects;
- the anticipated allocation of free
adjusted funds flow;
- that 75% of NuVista's free adjusted
funds flow will be put towards the repurchase of the Company's
common shares pursuant to the 2024 NCIB;
- our 2024 full year production and
capital expenditures guidance ranges;
- our plan to continue to maintain an
efficient drilling program by employing 2-drill-rig execution;
- guidance with respect to our
updated 2024 full year production mix;
- guidance with respect to fourth
quarter 2024 production and production mix;
- future commodity prices;
- our expectation with respect to our
2025 capital expenditures, free adjusted funds flow and average
annual production guidance;
- expectations that the Company will
exit 2024 with net debt significantly below $300 million;
- our expectation that growth in 2025
will be largely supported by Pipestone North;
- the expected timing of start-up of
a third-party gas plant in the Pipestone area and the anticipated
benefits thereof;
- that production volumes in the
second half of 2025 will approach approximately 100,000 Boe/d;
- that production during the second
and third quarters of 2025 will be impacted due to planned
turnaround activity at third-party facilities which is expected to
be at least six weeks in duration;
- the exception that more detailed
quarterly production guidance will be released throughout 2025,
once more detailed information in known;
- our expectation that the Gold Creek
area will be an important area of development focus in 2026 and
2027;
- our expectation that our
value-adding growth plateau level will be approximately 125,000
Boe/d;
- our future focus, strategy, plans,
opportunities and operations; and
- other such similar statements.
The future acquisition of our common shares
pursuant to a share buyback (including through our normal course
issuer bid), if any, and the level thereof is uncertain. Any
decision to acquire common shares pursuant to a share buyback will
be subject to the discretion of the Board of Directors and may
depend on a variety of factors, including, without limitation, the
Company'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 Company under applicable corporate
law. There can be no assurance of the number of common shares that
the Company will acquire pursuant to a share buyback, if any, in
the future.
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 and inflation
rates; the impact of ongoing global events, including Middle East
and European tensions, with respect to commodity prices, currency
and interest rates, anticipated production rates, borrowing,
operating and other costs and adjusted funds 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 bank and equity
markets; that we will be able to execute our 2024 drilling plans as
expected; our ability to carry out our 2024 production and capital
guidance as expected 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. NuVista has
included the forward-looking statements in this press release in
order to provide readers with a more complete perspective on
NuVista's future operations and such information may not be
appropriate for other purposes. NuVista disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
This press release also contains financial
outlook and future oriented financial information (together,
"FOFI") relating to NuVista including, without limitation, capital
expenditures in 2024, capital expenditures in 2025, net debt, free
adjusted funds flow and production which are based on, among other
things, the various assumptions disclosed in this press release
including under "Advisory regarding forward-looking information and
statements" and including assumptions regarding benchmark pricing
as it relates to free adjusted funds flow and the 2024 and 2025
capital allocation framework. 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. NuVista's actual results, performance or achievement could
differ materially from those expressed in, or implied by, these
FOFI, or if any of them do so, what benefits NuVista will derive
therefrom. NuVista has included the FOFI in order to provide
readers with a more complete perspective on NuVista's future
operations and such information may not be appropriate for other
purposes.
These forward-looking statements and FOFI are
made as of the date of this press release and NuVista disclaims any
intent or obligation to update any forward-looking statements and
FOFI, whether as a result of new information, future events or
results or otherwise, other than as required by applicable
securities law.
Non-GAAP and other financial
measures
This press release uses various specified
financial measures (as such terms are defined in National
Instrument 52-112 – Non-GAAP Disclosure and Other Financial
Measures Disclosure ("NI 52-112")) including
"non-GAAP financial measures", "non-GAAP ratios", "capital
management measures" and "supplementary financial measures" (as
such terms are defined in NI 52-112), which are described in
further detail below. Management believes that the presentation of
these non-GAAP measures provides 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.
(1) Non-GAAP financial
measures
NI 52-112 defines a non-GAAP financial measure
as a financial measure that: (i) depicts the historical or expected
future financial performance, financial position or cash flow of an
entity; (ii) with respect to its composition, excludes an amount
that is included in, or includes an amount that is excluded from,
the composition of the most directly comparable financial measure
disclosed in the primary financial statements of the entity; (iii)
is not disclosed in the financial statements of the entity; and
(iv) is not a ratio, fraction, percentage or similar
representation.
These non-GAAP financial measures are not
standardized financial measures under IFRS Accounting Standards and
might not be comparable to similar measures presented by other
companies where similar terminology is used. Investors are
cautioned that these measures should not be construed as
alternatives to or more meaningful than the most directly
comparable GAAP measures as indicators of NuVista's performance.
Set forth below are descriptions of the non-GAAP financial measures
used in this press release.
Free adjusted funds flow is adjusted funds flow
less net capital expenditures, power generation expenditures, and
asset retirement expenditures. Each of the components of free
adjusted funds flow are non-GAAP financial measures. Management
uses free adjusted funds flow as a measure of the efficiency and
liquidity of its business, measuring its funds available for
additional capital allocation to manage debt levels and return
capital to shareholders through its NCIB program and/or dividend
payments. By removing the impact of current period net capital and
asset retirement expenditures, management believes this measure
provides an indication of the funds NuVista has available for
future capital allocation decisions.
The following table sets out our free adjusted
funds flow compared to the most directly comparable GAAP measure of
cash provided by operating activities less cash used in investing
activities for the applicable periods:
|
Three months ended September 30 |
|
Nine months ended September 30 |
|
($ thousands) |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Cash provided by operating activities |
150,249 |
|
160,194 |
|
464,422 |
|
509,581 |
|
Cash
used in investing activities |
(124,352 |
) |
(120,713 |
) |
(428,489 |
) |
(398,940 |
) |
Excess (deficit) cash provided by operating activities over cash
used in investing activities |
25,897 |
|
39,481 |
|
35,933 |
|
110,641 |
|
|
|
|
|
|
Adjusted funds flow |
139,478 |
|
202,010 |
|
415,137 |
|
554,956 |
|
Net capital expenditures |
(118,433 |
) |
(110,036 |
) |
(427,786 |
) |
(405,036 |
) |
Power generation
expenditures |
— |
|
— |
|
(1,680 |
) |
— |
|
Asset
retirement expenditures |
(1,636 |
) |
(773 |
) |
(8,478 |
) |
(9,987 |
) |
Free adjusted funds flow |
19,409 |
|
91,201 |
|
(22,807 |
) |
139,933 |
|
Capital expenditures are equal to cash used in
investing activities, excluding changes in non-cash working
capital, other asset expenditures, power generation expenditures,
proceeds on property dispositions and costs of acquisitions.
NuVista considers capital expenditures to represent its organic
capital program and 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 used in investing
activities for the applicable periods:
|
Three months ended September 30 |
Nine months ended September 30 |
($ thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Cash used in investing activities |
|
(124,352 |
) |
|
(120,713 |
) |
|
(428,489 |
) |
|
(398,940 |
) |
Changes in non-cash working
capital |
|
5,919 |
|
|
10,677 |
|
|
(977 |
) |
|
(15,596 |
) |
Other asset expenditures |
|
— |
|
|
— |
|
|
— |
|
|
9,500 |
|
Power generation
expenditures |
|
— |
|
|
— |
|
|
1,680 |
|
|
— |
|
Proceeds on property disposition |
|
— |
|
|
— |
|
|
— |
|
|
(26,000 |
) |
Capital expenditures |
|
(118,433 |
) |
|
(110,036 |
) |
|
(427,786 |
) |
|
(431,036 |
) |
Net capital expenditures are equal to cash used
in investing activities, excluding changes in non-cash working
capital, other asset expenditures, and power generation
expenditures. The Company includes funds used for property
acquisitions or proceeds from property dispositions within net
capital expenditures as these transactions are part of its
development plans. NuVista considers net capital expenditures to
represent its organic capital program inclusive of capital spending
for acquisition and disposition proposes and a useful measure of
cash flow used for capital reinvestment.
The following table provides a reconciliation
between the non-GAAP measure of net capital expenditures to the
most directly comparable GAAP measure of cash used in investing
activities for the applicable periods:
|
Three months ended September 30 |
|
Nine months ended September 30 |
|
($ thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Cash used in investing activities |
|
(124,352 |
) |
|
(120,713 |
) |
|
(428,489 |
) |
|
(398,940 |
) |
Changes in non-cash working
capital |
|
5,919 |
|
|
10,677 |
|
|
(977 |
) |
|
(15,596 |
) |
Other asset expenditures |
|
— |
|
|
— |
|
|
— |
|
|
9,500 |
|
Power
generation expenditures |
|
— |
|
|
— |
|
|
1,680 |
|
|
— |
|
Net capital expenditures |
|
(118,433 |
) |
|
(110,036 |
) |
|
(427,786 |
) |
|
(405,036 |
) |
NuVista considers that any incremental gross
costs incurred to process third party volumes at its facilities are
offset by the applicable fees charged to such third parties.
However, under IFRS Accounting Standards, NuVista is required to
reflect operating costs and processing fee income separately on its
statements of earnings. Management believes that net operating
expense, calculated as gross operating expense less processing
income and other recoveries, is a meaningful measure for investors
to understand the net impact of the NuVista’s operating
activities.
The following table sets out net operating
expense compared to the most directly comparable GAAP measure of
operating expenses for the applicable periods:
|
Three months ended September 30 |
|
Nine months ended September 30 |
|
($ thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Operating expense |
|
90,091 |
|
|
85,952 |
|
|
265,899 |
|
|
238,989 |
|
Other
income(1) |
|
(2,293 |
) |
|
(1,003 |
) |
|
(7,496 |
) |
|
(2,020 |
) |
Net operating expense |
|
87,798 |
|
|
84,949 |
|
|
258,403 |
|
|
236,969 |
|
(1) Processing income and other recoveries,
included within Other Income as presented in the table below:
|
Three months ended September 30 |
|
Nine months ended September 30 |
|
($ thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Other income |
|
2,642 |
|
|
— |
|
|
3,178 |
|
|
— |
|
Processing income and other recoveries |
|
2,293 |
|
|
1,003 |
|
|
7,496 |
|
|
2,020 |
|
Other Income |
|
4,935 |
|
|
1,003 |
|
|
10,674 |
|
|
2,020 |
|
Non-GAAP ratios
NI 52-112 defines a non-GAAP ratio as a
financial measure that: (i) is in the form of a ratio, fraction,
percentage or similar representation; (ii) has a non-GAAP financial
measure as one or more of its components; and (iii) is not
disclosed in the financial statements of the entity. Set forth
below is a description of the non-GAAP ratios used in this press
release.
These non-GAAP ratios are not standardized
financial measures under IFRS Accounting Standards and might not be
comparable to similar measures presented by other companies where
similar terminology is used. Investors are cautioned that these
ratios should not be construed as alternatives to or more
meaningful than the most directly comparable GAAP measures as
indicators of NuVista's performance.
Per Boe disclosures for petroleum and natural
gas revenues, realized gains/losses on financial derivatives,
royalties, transportation expense, G&A expense, financing
costs, and DD&A expense are non-GAAP ratios that are calculated
by dividing each of these respective GAAP measures by NuVista's
total production volumes for the period.
Non-GAAP ratios presented on a "per Boe" basis
may also be considered to be supplementary financial measures (as
such term is defined in NI 52-112).
- Operating
netback and corporate netback ("netbacks"), per Boe
NuVista calculated netbacks per Boe by dividing
the netbacks by total production volumes sold in the period. Each
of operating netback and corporate netback are non-GAAP financial
measures. Operating netback is calculated as petroleum and natural
gas revenues including realized financial derivative gains/losses,
less royalties, transportation expense and net operating expense.
Corporate netback is operating netback less general and
administrative expense, cash share-based compensation expense,
financing costs excluding accretion expense, and current income tax
expense (recovery).
Management believes 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.
- Net operating expense, per
Boe
NuVista has calculated net operating expense per
Boe by dividing net operating expense by NuVista's production
volumes for the period.
Management believes that net operating expense,
calculated as gross operating expense less processing income and
other recoveries, which are included in other income on the
statement of income and comprehensive income, is a meaningful
measure for investors to understand the net impact of the Company's
operating activities. The measurement on a Boe basis assists
management and investors with evaluating NuVista's operating
performance on a comparable basis.
(2) Capital
management measures
NI 52-112 defines a capital management measure
as a financial measure that: (i) is intended to enable an
individual to evaluate an entity's objectives, policies and
processes for managing the entity's capital; (ii) is not a
component of a line item disclosed in the primary financial
statements of the entity; (iii) is disclosed in the notes to the
financial statements of the entity; and (iv) is not disclosed in
the primary financial statements of the entity.
NuVista has defined net debt, adjusted funds
flow, and net debt to annualized third quarter adjusted funds flow
ratio as capital management measures used by the Company in this
press release.
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. NuVista has calculated adjusted
funds flow based on cash flow provided by operating activities,
excluding changes in non-cash working capital and asset retirement
expenditures, 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
performance 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, while
environmental remediation recovery relates to an incident that
management doesn't expect to occur on a regular basis. The
settlement of asset retirement obligations is managed through
NuVista's capital budgeting process which considers its available
adjusted funds flow.
A reconciliation of adjusted funds flow is
presented in the following table:
|
Three months ended September 30 |
|
Nine months ended September 30 |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Cash provided by operating activities |
$ |
150,249 |
|
$ |
160,194 |
|
$ |
464,422 |
|
$ |
509,581 |
|
Asset retirement
expenditures |
|
1,636 |
|
|
773 |
|
|
8,478 |
|
|
9,987 |
|
Change
in non-cash working capital |
|
(12,407 |
) |
|
41,043 |
|
|
(57,763 |
) |
|
35,388 |
|
Adjusted funds flow |
$ |
139,478 |
|
$ |
202,010 |
|
$ |
415,137 |
|
$ |
554,956 |
|
- Net debt
and Net debt to annualized current quarter adjusted funds
flow
Net debt is used by management to provide a more
complete understanding of NuVista's capital structure and provides
a key measure to assess the Company's liquidity. NuVista has
calculated net debt based on accounts receivable and prepaid
expenses, other receivable, accounts payable and accrued
liabilities, long-term debt (credit facility) and senior unsecured
notes and other liabilities. NuVista calculated annualized current
quarter adjusted funds flow ratio by dividing net debt by the
annualized adjusted funds flow for the current quarter.
The following is a summary of total market
capitalization, net debt, annualized current quarter adjusted funds
flow, and net debt to annualized current quarter adjusted funds
flow:
|
September 30, 2024 |
|
December 31, 2023 |
|
Basic common shares outstanding (thousands of shares) |
|
205,381 |
|
|
207,584 |
|
Share
price(1) |
$ |
11.12 |
|
$ |
11.04 |
|
Total market capitalization |
$ |
2,283,837 |
|
$ |
2,291,727 |
|
Accounts receivable and prepaid expenses |
|
(133,904 |
) |
|
(163,987 |
) |
Inventory |
|
(12,080 |
) |
|
(20,705 |
) |
Accounts payable and accrued
liabilities |
|
176,123 |
|
|
157,711 |
|
Current portion of other
liabilities |
|
14,805 |
|
|
14,082 |
|
Long-term debt (credit
facility) |
|
37,529 |
|
|
16,897 |
|
Senior unsecured notes |
|
163,080 |
|
|
162,195 |
|
Other
liabilities |
|
16,345 |
|
|
17,358 |
|
Net debt |
$ |
261,898 |
|
$ |
183,551 |
|
Annualized current quarter
adjusted funds flow |
$ |
557,912 |
|
$ |
807,948 |
|
Net
debt to annualized current quarter adjusted funds flow |
|
0.5 |
|
|
0.2 |
|
(3) Supplementary
financial measures
This press release may contain certain
supplementary financial measures. NI 52-112 defines a supplementary
financial measure as a financial measure that: (i) is intended to
be disclosed on a periodic basis to depict the historical or
expected future financial performance, financial position or cash
flow of an entity; (ii) is not disclosed in the financial
statements of the entity; (iii) is not a non-GAAP financial
measure; and (iv) is not a non-GAAP ratio.
NuVista calculates "adjusted funds flow per
share" by dividing adjusted funds flow for a period by the number
of weighted average common shares of NuVista for the specified
period.
FOR FURTHER INFORMATION
CONTACT: |
|
|
|
Jonathan A. Wright |
Mike J. Lawford |
Ivan J. Condic |
CEO |
President and COO |
VP, Finance and CFO |
(403) 538-8501 |
(403) 538-1936 |
(403) 538-1945 |
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