CALGARY, AB, Nov. 3, 2021 /CNW/ - Surge Energy Inc.
("Surge" or the "Company") (TSX: SGY) is pleased to
announce its financial and operating results for the quarter ended
September 30, 2021.
The Company's financial and operating results for the third
quarter of 2021 include only a partial quarter of operational and
financial contribution from the previously announced acquisition of
Astra Oil Corp. ("Astra"), which closed on August 18, 2021. Additionally, Surge's
financial and operating results for the third quarter of 2021
include no impact from the previously announced acquisition of Fire
Sky Energy Inc. ("Fire Sky"), which closed on November 1, 2021.
MESSAGE TO SHAREHOLDERS
During the third quarter of 2021, Surge completed the strategic
acquisition of Astra Oil Corp. ("Astra"), adding highly
concentrated light oil reserves, production, land, and operations
in SE Saskatchewan. Subsequent to
the quarter, on November 1, 2021 the
Company announced the closing of the acquisition of Fire Sky Energy
Inc. ("Fire Sky"), a private company with light oil assets focused
in SE Saskatchewan for total
consideration of $58 million. The
Fire Sky acquisition expands Surge's position in its new
SE Saskatchewan core area, adding
an additional 1,500 boepd of light oil production.
These two strategic acquisitions are consistent with Surge's
defined business model of acquiring high quality, operated, light
and medium gravity, conventional crude oil reservoirs with large
original oil in place ("OOIP1) and low recovery
factors. Following these acquisitions, Surge is now a 21,500 boepd
(86 percent liquids) intermediate light and medium gravity oil
producer, with over 975 internally estimated net development
drilling locations2, providing an estimated 13 year
development drilling inventory2.
In addition to the acquisitions the Company has now completed
its 2H/21 23 gross (23.0 net) well Sparky drilling program, with a
100% success rate. All of the wells from the 2H/21 Sparky
drilling program are scheduled to be on stream and optimized prior
to the end of November 2021.
During the third quarter of 2021, Surge's cash flow from
operating activities increased by 218 percent, from $8.3 million in Q2/21 to $26.3 million in Q3/21. Additionally, the
Company's adjusted funds flow3 also increased by 105
percent, from $13.6 million in Q2/21
to $27.8 million in Q3/21.
Surge's cash flow from operating activities and adjusted funds
flow in Q3/21 were negatively impacted by realized losses on fixed
price commodity contracts, totaling $23.2
million. These required fixed priced oil hedge positions
were primarily entered into during the volatile price environment
in 2020. Surge projects that, at current strip oil prices, the cash
flow impact from these hedge positions will moderate significantly
in the coming months as the hedges expire.
Production in Q3/21 averaged 17,642 boepd, up 17 percent from
Q2/21 production levels of 15,132 boe per day. The Company's
Q3/21 production levels included only a partial quarter of
production from the Astra acquisition and no impact from the Fire
Sky acquisition.
FINANCIAL AND
OPERATING HIGHLIGHTS
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
($000s except per
share amounts)
|
2021
|
2020
|
%
Change
|
2021
|
2020
|
%
Change
|
Financial
highlights
|
|
|
|
|
|
|
Oil sales
|
97,272
|
54,000
|
80 %
|
243,639
|
143,643
|
70 %
|
NGL sales
|
2,663
|
1,161
|
129 %
|
6,437
|
2,868
|
124 %
|
Natural gas
sales
|
5,170
|
1,770
|
192 %
|
16,606
|
4,631
|
259 %
|
Total oil, natural
gas, and NGL revenue
|
105,104
|
56,931
|
85 %
|
266,682
|
151,142
|
76 %
|
Cash flow from
operating activities
|
26,263
|
15,082
|
74 %
|
50,067
|
61,190
|
(18)%
|
Per share - basic
($)
|
0.46
|
0.38
|
21 %
|
1.07
|
1.55
|
(31)%
|
Per share diluted
($)
|
0.45
|
0.38
|
18 %
|
1.05
|
1.55
|
(32)%
|
Adjusted funds
flow1
|
27,804
|
12,523
|
122 %
|
57,118
|
51,405
|
11 %
|
Per share - basic
($)1
|
0.48
|
0.32
|
50 %
|
1.22
|
1.31
|
(7)%
|
Per share diluted
($)
|
0.47
|
0.32
|
47 %
|
1.20
|
1.31
|
(8)%
|
Net income
(loss)
|
67,612
|
(13,184)
|
(613)%
|
364,740
|
(689,570)
|
(153)%
|
Per share basic
($)
|
1.18
|
(0.33)
|
(458)%
|
7.82
|
(17.51)
|
(145)%
|
Per share diluted
($)
|
1.15
|
(0.33)
|
(448)%
|
7.63
|
(17.51)
|
(144)%
|
Total exploration and
development expenditures
|
33,932
|
2,477
|
nm2
|
81,330
|
38,497
|
111 %
|
Total acquisitions
& dispositions
|
90,000
|
(762)
|
nm
|
(12,591)
|
(6,038)
|
109 %
|
Total capital
expenditures
|
123,932
|
1,715
|
nm
|
68,739
|
32,459
|
112 %
|
Net debt1,
end of period
|
319,790
|
369,993
|
(14)%
|
319,790
|
369,993
|
(14)%
|
|
|
|
|
|
|
|
Operating
highlights
|
|
|
|
|
|
|
Production:
|
|
|
|
|
|
|
Oil (bbls per
day)
|
14,264
|
13,759
|
4 %
|
13,299
|
14,817
|
(10)%
|
NGLs (bbls per
day)
|
575
|
582
|
(1)%
|
560
|
558
|
- %
|
Natural gas (mcf per
day)
|
16,815
|
16,503
|
2 %
|
15,582
|
16,857
|
(8)%
|
Total (boe per day)
(6:1)
|
17,642
|
17,092
|
3 %
|
16,456
|
18,185
|
(10)%
|
Average realized
price (excluding hedges):
|
|
|
|
|
|
|
Oil ($ per
bbl)
|
74.12
|
42.66
|
74 %
|
67.11
|
35.38
|
90 %
|
NGL ($ per
bbl)
|
50.31
|
21.68
|
132 %
|
42.13
|
18.76
|
125 %
|
Natural gas ($ per
mcf)
|
3.34
|
1.17
|
185 %
|
3.90
|
1.00
|
290 %
|
|
|
|
|
|
|
|
Netback ($ per
boe)
|
|
|
|
|
|
|
Petroleum and natural
gas revenue
|
64.76
|
36.21
|
79 %
|
59.36
|
30.33
|
96 %
|
Realized gain (loss)
on commodity and FX contracts
|
(14.30)
|
(1.67)
|
756 %
|
(13.57)
|
5.29
|
(357)%
|
Royalties
|
(9.55)
|
(4.00)
|
139 %
|
(7.80)
|
(3.61)
|
116 %
|
Net operating
expenses1
|
(16.83)
|
(14.16)
|
19 %
|
(17.57)
|
(14.32)
|
23 %
|
Transportation
expenses
|
(1.11)
|
(1.39)
|
(20)%
|
(1.03)
|
(1.58)
|
(35)%
|
Operating
netback1
|
22.97
|
14.99
|
53 %
|
19.39
|
16.11
|
20 %
|
G&A
expense
|
(2.06)
|
(1.91)
|
8 %
|
(2.08)
|
(1.91)
|
9 %
|
Interest
expense
|
(3.78)
|
(5.11)
|
(26)%
|
(4.60)
|
(3.88)
|
19 %
|
Adjusted funds
flow1
|
17.13
|
7.97
|
115 %
|
12.71
|
10.32
|
23 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
outstanding, end of period3
|
72,177
|
39,975
|
81 %
|
72,177
|
39,975
|
81 %
|
Weighted average
basic shares outstanding3
|
57,380
|
39,661
|
45 %
|
46,662
|
39,388
|
18 %
|
Stock option
dilution
|
1,243
|
-
|
nm
|
1,127
|
-
|
nm
|
Weighted average
diluted shares outstanding3
|
58,623
|
39,661
|
48 %
|
47,789
|
39,388
|
21 %
|
|
|
|
|
|
|
|
1 This is
a non-GAAP financial measure which is defined in the Non-GAAP
Financial Measures section of this document.
|
|
|
|
|
2 The
Company views this change calculation as not meaningful, or
"nm".
|
|
|
|
|
|
3 The
number of common shares has been adjusted retrospectively to
reflect the 8:5:1 share consolidation that was approved by the
Corporation's shareholders on August 17, 2021.
|
|
UPDATE ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE MATTERS
("ESG")
Surge continues to reduce the impact of its operations on the
environment and is pleased to report that it has abandoned over 190
wells in the first nine months of 2021. The Company spent
$3.0 million on abandonment
activities during the third quarter of 2021 and has now spent
$6.6 million to date during 2021.
These activities included the abandonment of inactive well bores
and the decommissioning of inactive pipelines throughout its
operating areas.
Additionally, Surge has now completed the previously announced
45-kilometer gas gathering infrastructure system in SE Saskatchewan. This pipeline allows the
Company to conserve gas at critical facilities and is anticipated
to reduce emissions by over 95 percent from its main operating
fields in the area.
Surge strives to be a leader in reducing the impact of its
operations on the environment and is committed to producing energy
in a safe, responsible, and sustainable manner.
OUTLOOK – A TOP PERFORMER IN 2022
Management remains excited regarding the Company's exposure to
rising crude oil prices in 2022, following its strategic
positioning activities throughout 2021. The Company anticipates
generating significantly higher operating netbacks and cash flow
from operating activities in 2022 at current commodity prices.
Surge is now a 21,500 boepd (86 percent liquids) intermediate
light and medium gravity oil producer, with over 975 net internally
estimated development drilling locations, providing an estimated 13
year development drilling inventory.
Surge's upwardly revised exit 2021 and preliminary 2022 guidance
is reconfirmed as follows:
Guidance
|
@ US $70
WTI*
|
@ US $75
WTI*
|
@ US $80
WTI*
|
Exit 2021
production
|
21,500 boepd (86%
liquids)
|
Average 2022
production
|
21,500 boepd (86%
liquids)
|
2022 Exploration and
Development Capital Expenditures
|
$120
million
|
2022 Adjusted funds
flow ($MM)
|
$245
|
$270
|
$295
|
Per
share
|
$2.94/share
|
$3.23/share
|
$3.53/share
|
2022 Cash flow from
operating activities ($MM)
|
$230
|
$255
|
$280
|
Per
share
|
$2.76/share
|
$3.05/share
|
$3.35/share
|
2022 Free cash flow
($MM)4
|
$110
|
$135
|
$160
|
Per
share
|
$1.32/share
|
$1.62/share
|
$1.92/share
|
2022 All-in payout
ratio4
|
52%
|
47%
|
43%
|
2022 Net debt to
annualized Q4/22 adjusted funds flow4
|
0.7x
|
0.6x
|
0.5x
|
*All additional
pricing assumptions (WCS: US$13.50, EDM US$4.00), Fx of $0.80 and
AECO of $3.00 per mcf remain constant. Adjusted funds flow and cash
flow from operating activities includes estimated realized gain
(loss) on financial contracts, and assumes a nil change in non-cash
working capital.
|
__________________________________
|
4
|
This is a non-GAAP
financial measure which is defined in the Non-GAAP Financial
Measures section of this document.
|
FORWARD LOOKING STATEMENTS:
This press release contains forward-looking statements. The use
of any of the words "anticipate", "continue", "estimate", "expect",
"may", "will", "project", "should", "believe" and similar
expressions are intended to identify forward-looking statements.
These statements involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements. More particularly, this press release contains
statements with respect to management's expectations regarding
commodity prices; Surge's declared focus and primary goals; the
acquisition of all of the outstanding shares of Fire Sky and the
anticipated benefits and timing thereof; management's expectations
regarding the reduction of net debt and free cash flow generation;
guidance regarding exit 2021 production and exit 2022 net debt;
Surge's hedging program; Surge's planned drilling program; Surge's
drilling inventory and locations; management's expectations and
plans with respect to the development of its assets and the timing
thereof; netbacks; production levels; amendments to Surge's credit
facilities; and Surge's ongoing ESG initiatives, including
abandonment activities and Surge's participation in emissions
reduction and gas conservation programs.
The forward-looking statements are based on certain key
expectations and assumptions made by Surge, including expectations
and assumptions the performance of existing wells and success
obtained in drilling new wells; anticipated expenses, cash flow and
capital expenditures; the application of regulatory and royalty
regimes; prevailing commodity prices and economic conditions;
development and completion activities; the performance of new
wells; the successful implementation of waterflood programs; the
availability of and performance of facilities and pipelines; the
geological characteristics of Surge's properties; the successful
application of drilling, completion and seismic technology; the
determination of decommissioning liabilities; prevailing weather
conditions; exchange rates; licensing requirements; the impact of
completed facilities on operating costs; the availability and costs
of capital, labour and services; and the creditworthiness of
industry partners.
Although Surge believes that the expectations and assumptions on
which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements because Surge can give no assurance that they will prove
to be correct. Since forward-looking statements address future
events and conditions, by their very nature they involve inherent
risks and uncertainties. Actual results could differ materially
from those currently anticipated due to a number of factors and
risks. These include, but are not limited to, risks associated with
the condition of the global economy, including trade, public health
(including the impact of COVID-19) and other geopolitical risks;
risks associated with the oil and gas industry in general (e.g.,
operational risks in development, exploration and production;
delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to production, costs and expenses, and health, safety and
environmental risks); commodity price and exchange rate
fluctuations and constraint in the availability of services,
adverse weather or break-up conditions; uncertainties resulting
from potential delays or changes in plans with respect to
exploration or development projects or capital expenditures; and
failure to obtain the continued support of the lenders under
Surge's bank line. Certain of these risks are set out in more
detail in Surge's AIF dated March 9,
2021 and in Surge's MD&A for the period ended
December 31, 2020, both of which have
been filed on SEDAR and can be accessed at www.sedar.com.
The forward-looking statements contained in this press release
are made as of the date hereof and Surge undertakes no obligation
to update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.
Oil and Gas Advisories
The term "boe" means barrel of oil equivalent on the basis of 1
boe to 6,000 cubic feet of natural gas. Boe may be misleading,
particularly if used in isolation. A boe conversion ratio of 1 boe
for 6,000 cubic feet of natural gas is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
"Boe/d" and "boepd" mean barrel of oil equivalent per day. Bbl
means barrel of oil and "bopd" means barrels of oil per day. NGLs
means natural gas liquids.
This press release contains certain oil and gas metrics and
defined terms which do not have standardized meanings or standard
methods of calculation and therefore such measures may not be
comparable to similar metrics/terms presented by other issuers and
may differ by definition and application. All oil and gas
metrics/terms used in this document are defined below:
Original Oil in Place ("OOIP") means Discovered Petroleum
Initially In Place ("DPIIP"). DPIIP is derived by Surge's internal
Qualified Reserve Evaluators ("QRE") and prepared in accordance
with National Instrument 51-101 and the Canadian Oil and Gas
Evaluations Handbook ("COGEH"). DPIIP, as defined in COGEH, is that
quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations prior to production. The
recoverable portion of DPIIP includes production, reserves and
Resources Other Than Reserves (ROTR). OOIP/DPIIP and potential
recovery rate estimates are based on current recovery technologies.
There is significant uncertainty as to the ultimate recoverability
and commercial viability of any of the resource associated with
OOIP/DPIIP, and as such a recovery project cannot be defined for a
volume of OOIP/DPIIP at this time. "Internally estimated" means an
estimate that is derived by Surge's internal QRE's and prepared in
accordance with National Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities. All internal estimates
contained in this new release have been prepared effective as of
Jan 1, 2021.
Drilling Inventory
This press release discloses drilling locations in two
categories: (i) booked locations; and (ii) unbooked locations.
Booked locations are proved locations and probable locations
derived from an external evaluation using standard practices as
prescribed in the Canadian Oil and Gas Evaluations Handbook and
account for drilling locations that have associated proved and/or
probable reserves, as applicable.
Unbooked locations are internal estimates based on prospective
acreage and assumptions as to the number of wells that can be
drilled per section based on industry practice and internal review.
Unbooked locations do not have attributed reserves or resources.
Unbooked locations have been identified by Surge's internal
certified Engineers and Geologists (who are also Qualified Reserve
Evaluators) as an estimation of our multi-year drilling activities
based on evaluation of applicable geologic, seismic, engineering,
production and reserves information. There is no certainty that the
Company will drill all unbooked drilling locations and if drilled
there is no certainty that such locations will result in additional
oil and gas reserves, resources or production. The drilling
locations on which the Company actually drills wells will
ultimately depend upon the availability of capital, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results, additional reservoir information
that is obtained and other factors. While certain of the unbooked
drilling locations have been de-risked by drilling existing wells
in relative close proximity to such unbooked drilling locations,
the majority of other unbooked drilling locations are farther away
from existing wells where management has less information about the
characteristics of the reservoir and therefore there is more
uncertainty whether wells will be drilled in such locations and if
drilled there is more uncertainty that such wells will result in
additional oil and gas reserves, resources or production.
Net of Surge March 25, 2021
disposition, the pro forma Company (Surge + Astra + Fire Sky) will
have over >1,050 gross (>975 net) drilling locations
identified herein, of these >450 gross (>400 net) are
unbooked locations. Of the 562 net booked locations identified
herein, 415 net are Proved locations and 147 net are Probable
locations based on Sproule's 2020YE reserves. Assuming an average
number of net wells drilled per year of 75, Surge's >975 net
locations provide 13 years of drilling.
Surge's internally developed type curves (for Surge, Astra and
Fire Sky) were constructed using a representative, factual and
balanced analog data set, as of Jan 1,
2021 for Surge type curves, April 15,
2021 for Astra type curves and July
1, 2021 for Fire Sky type curves. All locations were
risked appropriately, and EUR's were measured against OOIP
estimates to ensure a reasonable recovery factor was being achieved
based on the respective spacing assumption. Other assumptions, such
as capital, operating expenses, wellhead offsets, land
encumbrances, working interests and NGL yields were all reviewed,
updated and accounted for on a well by well basis by Surge's
Qualified Reserve Evaluators. All type curves fully comply with
Part 5.8 of the Companion Policy 51 – 101CP.
Non-GAAP Financial Measures
Certain secondary financial measures in this press release –
namely, "adjusted funds flow", "adjusted funds flow per share",
"all-in payout ratio", "free cash flow", "net debt", "operating
netback", "net debt to annualized Q4/22 adjusted fund flow", "net
operating expenses" and "adjusted funds flow per boe" are not
prescribed by GAAP. These non-GAAP financial measures are included
because management uses the information to analyze business
performance, cash flow generated from the business, leverage and
liquidity, resulting from the Company's principal business
activities and it may be useful to investors on the same basis.
None of these measures are used to enhance the Company's reported
financial performance or position. The non-GAAP measures do not
have a standardized meaning prescribed by IFRS and therefore are
unlikely to be comparable to similar measures presented by other
issuers. They are common in the reports of other companies but may
differ by definition and application. All non-GAAP financial
measures used in this document are defined below:
Adjusted Funds Flow & Adjusted Funds Flow per
Share
The Company adjusts cash flow from operating activities in
calculating adjusted funds flow for changes in non-cash working
capital, decommissioning expenditures, and cash settled transaction
and other costs. Management believes the timing of collection,
payment or incurrence of these items involves a high degree of
discretion and as such may not be useful for evaluating Surge's
cash flows.
Changes in non-cash working capital are a result of the timing
of cash flows related to accounts receivable and accounts payable,
which management believes reduces comparability between periods.
Management views decommissioning expenditures predominately as a
discretionary allocation of capital, with flexibility to determine
the size and timing of decommissioning programs to achieve greater
capital efficiencies and as such, costs may vary between periods.
Transaction and other costs represent expenditures associated with
acquisitions and employee severance costs, which management
believes do not reflect the ongoing cash flows of the business, and
as such reduces comparability. Each of these expenditures, due to
their nature, are not considered principal business activities and
vary between periods, which management believes reduces
comparability.
Adjusted funds flow per share is calculated using the same
weighted average basic and diluted shares used in calculating
income per share.
The following table reconciles cash flow from operating
activities to adjusted funds flow and adjusted funds flow per share
for the three and nine months ended September 30, 2021:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
($000s except per
share amounts)
|
2021
|
2020
|
2021
|
2020
|
Cash flow from
operating activities
|
26,263
|
15,082
|
50,067
|
61,190
|
Change in non-cash
working capital
|
(2,866)
|
(2,622)
|
(2,485)
|
(11,637)
|
Decommissioning
expenditures
|
2,105
|
63
|
4,649
|
1,754
|
Cash settled
transaction and other costs
|
2,303
|
-
|
4,888
|
98
|
Adjusted funds
flow
|
$
|
27,804
|
$
|
12,523
|
$
|
57,118
|
$
|
51,405
|
Per share -
basic
|
$
|
0.48
|
$
|
0.32
|
$
|
1.22
|
$
|
1.31
|
The following table reconciles forecast cash flow from operating
activities to adjusted funds flow along with operating netback
|
2022e
|
($millions)
|
@ US $70
WTI
|
@ US $75
WTI
|
@ US $80
WTI
|
Petroleum and natural
gas revenue
|
495
|
539
|
580
|
Royalties
|
(68)
|
(74)
|
(79)
|
Net operating
expenses
|
(118)
|
(118)
|
(118)
|
Transportation
expenses
|
(9)
|
(9)
|
(9)
|
Loss on financial
contracts
|
(21)
|
(34)
|
(45)
|
Operating
netback
|
279
|
304
|
329
|
G&A
expense
|
(14)
|
(14)
|
(14)
|
Interest
expense
|
(20)
|
(20)
|
(20)
|
Adjusted funds
flow
|
245
|
270
|
295
|
Changes in non-cash
working capital
|
-
|
-
|
-
|
Lease
repayments
|
(9)
|
(9)
|
(9)
|
Abandonments
|
(6)
|
(6)
|
(6)
|
Cash flow from
operating activities
|
230
|
255
|
280
|
Barrels of oil
equivalent (mmboe)
|
7.8
|
7.8
|
7.8
|
All-in payout ratio
All-in payout ratio is calculated as exploration and development
expenditures divided by adjusted funds flow.
Free Cash Flow and Free Cash Flow per Share
Free cash flow is calculated as cash flow from operating
activities less exploration and development capital expenditures.
Management uses free cash flow to determine the amount of funds
available to the Company for future capital allocation
decisions.
Free cash flow per share is calculated using the same weighted
average basic and diluted shares used in calculating income per
share and adjusted funds flow per share.
Net Debt and Net Debt to Annualized Q4/22 Adjusted
Fund Flow
There is no comparable measure in accordance with IFRS for net
debt. Net debt is calculated as bank debt, term debt, plus the
liability component of the convertible debentures plus or minus
working capital, however, excluding the fair value of financial
contracts, decommissioning obligations, and lease and other
obligations. This metric is used by management to analyze the level
of debt in the Company including the impact of working capital,
which varies with timing of settlement of these balances.
($000s)
|
As at Sep 30,
2021
|
As at Jun 30,
2021
|
As at Sep 30,
2020
|
Accounts
receivable
|
58,968
|
29,244
|
25,205
|
Prepaid expenses and
deposits
|
4,044
|
4,595
|
4,900
|
Accounts payable and
accrued liabilities
|
(73,009)
|
(50,641)
|
(33,507)
|
Bank debt
|
(189,371)
|
(162,318)
|
(296,055)
|
Term debt
|
(47,203)
|
(41,164)
|
-
|
Convertible
debentures
|
(73,219)
|
(72,522)
|
(70,536)
|
Net Debt
|
(319,790)
|
(292,806)
|
(369,993)
|
Net debt to annualized Q4/22 adjusted funds flow is calculated
as net debt divided by annualized three month adjusted funds flow
(adjusted funds flow for the quarter multiplied by four).
Management uses this ratio to assess the period of time that it
would take to fund net debt based on the adjusted funds flow from
the quarter.
Operating Netback & Adjusted Funds Flow per
boe
Operating netback and adjusted funds flow per boe for the three
and nine months ended September 30,
2021 are calculated on a per unit basis as follows:
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
($000s)
|
2021
|
2020
|
2021
|
2020
|
Petroleum and natural
gas revenue
|
105,104
|
56,931
|
266,682
|
151,142
|
Processing and other
income
|
978
|
934
|
3,239
|
3,766
|
Royalties
|
(15,501)
|
(6,285)
|
(35,051)
|
(18,005)
|
Realized gain (loss)
on commodity and FX contracts
|
(23,209)
|
(2,627)
|
(60,942)
|
26,346
|
Operating
expenses
|
(28,288)
|
(23,204)
|
(82,156)
|
(75,109)
|
Transportation
expenses
|
(1,798)
|
(2,187)
|
(4,630)
|
(7,874)
|
Operating
netback
|
37,286
|
23,562
|
87,142
|
80,266
|
G&A
expense
|
(3,346)
|
(3,000)
|
(9,344)
|
(9,518)
|
Interest
expense
|
(6,135)
|
(8,039)
|
(20,679)
|
(19,343)
|
Adjusted funds
flow
|
27,804
|
12,523
|
57,118
|
51,405
|
Barrels of oil
equivalent (boe)
|
1,623,036
|
1,572,407
|
4,492,511
|
4,982,521
|
Operating netback ($
per boe)
|
$
|
22.97
|
$
|
14.99
|
$
|
19.39
|
$
|
16.11
|
Adjusted funds flow
($ per boe)
|
$
|
17.13
|
$
|
7.97
|
$
|
12.71
|
$
|
10.32
|
Net Operating Expenses
Net operating expenses are determined by deducting processing
income primarily generated by processing third party volumes at
processing facilities where the Company has an ownership interest.
It is common in the industry to earn third party processing revenue
on facilities where the entity has a working interest in the
infrastructure asset. Under IFRS this source of funds is required
to be reported as revenue. However, the Company's principal
business is not that of a midstream entity whose activities are
dedicated to earning processing and other infrastructure payments.
Where the Company has excess capacity at one of its facilities, it
will look to process third party volumes as a means to reduce the
cost of operating/owning the facility. As such, third party
processing revenue is netted against operating costs in the
MD&A.
Additional information relating to non-GAAP measures can be
found in the Company's most recent management's discussion and
analysis MD&A, which may be accessed through the SEDAR website
(www.sedar.com).
Neither the TSX nor its Regulation Services Provider (as that
term is defined in the policies of the TSX) accepts responsibility
for the adequacy or accuracy of this release.
_______________________________
|
1 See
the Oil and Gas Advisories section of this document for further
details.
|
2 See
the Drilling Inventory section of this document for further
information.
|
3 This is
a non-GAAP financial measure which is defined in the Non-GAAP
Financial Measures section of this document.
|
SOURCE Surge Energy Inc.