Birchcliff Energy Ltd. (“
Birchcliff” or the
“
Corporation”) (TSX: BIR) is pleased to announce
that it has filed its annual audited financial statements (the
“
Financial Statements”) and related management’s
discussion and analysis and its annual information form (the
“
AIF”) for the financial year ended December 31,
2021 (collectively, the “
Annual Filings”) on the
System for Electronic Document Analysis and Retrieval
(“
SEDAR”).
The Financial Statements are consistent with the
unaudited financial results disclosed in the press release issued
by Birchcliff on February 9, 2022. The AIF includes the disclosure
and reports relating to reserves data and other oil and gas
information required pursuant to National Instrument 51-101 –
Standards of Disclosure for Oil and Gas Activities. The Annual
Filings are available electronically on Birchcliff’s website at
www.birchcliffenergy.com and on SEDAR at www.sedar.com.
2021 HIGHLIGHTS
2021 was a record year for all of the
Corporation’s cash flow metrics. Highlights included:
- Annual average production of 78,520
boe/d(1), a 3% increase from 2020. Liquids accounted for 21% of
Birchcliff’s total production in 2021.
- Record annual adjusted funds
flow(2) of $539.7 million, or $2.03 per basic common share(3), an
increase of 192% and 194%, respectively, from 2020. Cash flow from
operating activities was $515.4 million, a 174% increase from
2020.
- Record annual free funds flow(2) of
$309.3 million, or $1.16 per basic common share(3).
- Significantly reduced total debt(4)
at year-end to $499.4 million, a reduction of $262.6 million (34%)
from $762.0 million at December 31, 2020.
- Record annual net income to common
shareholders of $310.5 million, or $1.17 per basic common
share.
______________________________
(1) Consisted of 2,899 bbls/d of light oil,
5,715 bbls/d of condensate, 7,705 bbls/d of NGLs and 373,217 Mcf/d
of natural gas. See “Advisories – Boe Conversions” and “Advisories
– Production”.(2) Non-GAAP financial measure. See “Advisories –
Non-GAAP and Other Financial Measures”.(3) Non-GAAP ratio. See
“Advisories – Non-GAAP and Other Financial Measures”.(4) Capital
management measure. See “Advisories – Non-GAAP and Other Financial
Measures”.
2022 UPDATE
“Birchcliff has had a strong start to 2022. Our
production and capital expenditures guidance is on target and our
initial 2022 drilling results are very encouraging. Our cash flow
has been very strong as a result of the higher than anticipated
commodity prices that we have seen year-to-date. Birchcliff has
been able to benefit from these prices as none of our production is
subject to fixed price commodity hedges. We remain committed to
maintaining capital discipline, maximizing free funds flow and
reducing indebtedness. Birchcliff looks forward to announcing our
first quarter results on May 11, 2022,” commented Jeff Tonken,
Chief Executive Officer of Birchcliff.
Birchcliff’s 2022 capital program is focused on
the development of its low-cost natural gas and condensate
production in Pouce Coupe and Gordondale. The 2022 capital program
is designed to utilize two drilling rigs in order to bring 35 new
wells from 4 large pads onto production during the year (26 wells
in Pouce Coupe and 9 wells in Gordondale).
Birchcliff has successfully completed its 6-well
13-29 pad in Pouce Coupe, which was drilled in late Q4 2021 and
early January 2022. Flowback operations are complete and Birchcliff
has recently brought the pad onstream, with production flowing
through Birchcliff’s existing owned and operated infrastructure.
The Corporation has been encouraged by the initial flowback
performance of the pad. Four wells on the 13-29 pad were drilled in
the Montney D1 interval offsetting several of Birchcliff’s existing
high-productivity, low-cost natural gas wells, and two wells were
drilled in the Basal Doig/Upper Montney interval.
Birchcliff currently has two drilling rigs at
work in Pouce Coupe, drilling low-cost, condensate-rich natural gas
wells on the 10-well 01-08 pad. Wells on the 01-08 pad are being
drilled in three intervals (5 in the Montney D1, 4 in the Basal
Doig/Upper Montney and 1 in the Montney C). The 01-08 pad
demonstrates Birchcliff’s commitment to using scale and
repeatability to drive down per well costs and utilizing enhanced
completions techniques to improve well performance.
ADVISORIES
Abbreviations
bbl |
barrel |
bbls/d |
barrels per day |
boe |
barrel of oil equivalent |
boe/d |
barrel of oil equivalent per
day |
condensate |
pentanes plus (C5+) |
GAAP |
generally accepted accounting
principles for Canadian public companies, which are currently
International Financial Reporting Standards as issued by the
International Accounting Standards Board |
Mcf |
thousand cubic feet |
Mcf/d |
thousand cubic feet per day |
NGLs |
natural gas liquids consisting of
ethane (C2), propane (C3) and butane (C4) and specifically
excluding condensate |
$000s |
thousands of dollars |
Non-GAAP and Other Financial
Measures
This press release uses various “non-GAAP
financial measures”, “non-GAAP ratios” and “capital management
measures” (as such terms are defined in National Instrument 52-112
– Non-GAAP and Other Financial Measures Disclosure (“NI
52-112”)), which are described in further detail below.
These measures facilitate management’s comparisons to the
Corporation’s historical operating results in assessing its results
and strategic and operational decision-making and may be used by
financial analysts and others in the oil and natural gas industry
to evaluate the Corporation’s performance.
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. The non-GAAP financial measures used in this press
release are not standardized financial measures under GAAP and
might not be comparable to similar measures presented by other
companies where similar terminology is used. Investors are
cautioned that non-GAAP financial measures should not be construed
as alternatives to or more meaningful than the most directly
comparable GAAP measures as indicators of Birchcliff’s performance.
Set forth below is a description of the non-GAAP financial measures
used in this press release.
Adjusted Funds Flow and Free Funds Flow
Birchcliff defines “adjusted funds flow” as cash
flow from operating activities before the effects of
decommissioning expenditures and changes in non-cash operating
working capital. Birchcliff eliminates settlements of
decommissioning expenditures from cash flow from operating
activities as the amounts can be discretionary and may vary from
period to period depending on its capital programs and the maturity
of its operating areas. The settlement of decommissioning
expenditures is managed with Birchcliff’s capital budgeting process
which considers available adjusted funds flow. Changes in non-cash
operating working capital are eliminated in the determination of
adjusted funds flow as the timing of collection and payment are
variable and by excluding them from the calculation, the
Corporation believes that it is able to provide a more meaningful
measure of its operations and ability to generate cash on a
continuing basis. Adjusted funds flow can also be derived from
petroleum and natural gas revenue less royalty expense, operating
expense, transportation and other expense, net G&A expense,
interest expense and any realized losses (plus realized gains) on
financial instruments and plus any other cash income sources.
Management believes that adjusted funds flow assists management and
investors in assessing Birchcliff’s financial performance after
deducting all operating and corporate cash costs, as well as its
ability to generate the cash necessary to fund sustaining and/or
growth capital expenditures, repay debt, settle decommissioning
obligations, repurchase common shares and pay common share and
preferred share dividends.
Birchcliff defines “free funds flow” as adjusted
funds flow less F&D capital expenditures. Management believes
that free funds flow assists management and investors in assessing
Birchcliff’s ability to further generate shareholder returns
through a number of initiatives, including but not limited to,
potential debt repayment, preferred share redemptions, common share
repurchases, dividend increases and acquisitions.
The following table provides a reconciliation of
cash flow from operating activities, as determined in accordance
with GAAP, to adjusted funds flow and free funds flow for the
periods indicated:
|
|
Twelve months endedDecember
31, |
|
($000s) |
|
2021 |
|
2020 |
|
Cash flow from operating activities |
|
515,369 |
|
188,180 |
|
Change in non-cash operating working capital |
|
21,161 |
|
(5,977) |
|
Decommissioning expenditures |
|
3,203 |
|
2,323 |
|
Adjusted funds flow |
|
539,733 |
|
184,526 |
|
F&D capital expenditures |
|
(230,479) |
|
(287,967) |
|
Free funds flow |
|
309,254 |
|
(103,441) |
|
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. The non-GAAP
ratios used in this press release are not standardized financial
measures under GAAP and might not be comparable to similar measures
presented by other companies where similar terminology is used. Set
forth below is a description of the non-GAAP ratios used in this
press release.
Adjusted Funds Flow Per Basic Common Share
Birchcliff calculates “adjusted funds flow per
basic common share” as aggregate adjusted funds flow in the period
divided by the basic common shares outstanding at the end of the
period. Management believes that adjusted funds flow per basic
common share assists management and investors in assessing
Birchcliff’s financial strength on a per common share basis.
Free Funds Flow Per Basic Common Share
Birchcliff calculates “free funds flow per basic
common share” as aggregate free funds flow in the period divided by
the basic common shares outstanding at the end of the period.
Management believes that free fund flow per basic common share
assists management and investors in assessing Birchcliff’s
financial strength and its ability to generate shareholder returns
on a per common share basis.
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. Set forth below is
a description of the capital management measure used in this press
release.
Total Debt
Birchcliff calculates “total debt” as the amount
outstanding under the Corporation’s revolving term credit
facilities plus adjusted working capital deficit (surplus).
Management believes that total debt assists management and
investors in assessing Birchcliff’s overall liquidity and financial
position at the end of the period. The following table provides a
reconciliation of the revolving term credit facilities, as
determined in accordance with GAAP, to total debt:
As at December 31, ($000s) |
|
2021 |
|
2020 |
|
Revolving term credit facilities |
|
500,870 |
|
731,372 |
|
Working capital deficit |
|
53,312 |
|
93,988 |
|
Fair value of financial instruments |
|
(16,517) |
|
(23,479) |
|
Capital securities |
|
(38,268) |
|
(39,930) |
|
Adjusted working capital deficit (surplus)(1)(2) |
|
(1,473) |
|
30,579 |
|
Total debt(2) |
|
499,397 |
|
761,951 |
|
(1) Capital management
measure. Management believes that adjusted working capital deficit
(surplus) assists management and investors in assessing
Birchcliff’s short-term liquidity requirements.(2) Previously
classified as a non-GAAP measure under CSA Staff Notice 52-306
(Revised) – Non-GAAP Financial Measures.
Boe Conversions
Boe amounts have been calculated by using the
conversion ratio of 6 Mcf of natural gas to 1 bbl of oil. Boe
amounts 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. Given that the
value ratio based on the current price of crude oil as compared to
natural gas is significantly different from the energy equivalency
of 6:1, utilizing a conversion on a 6:1 basis may be misleading as
an indication of value.
Production
With respect to the disclosure of Birchcliff’s
production contained in this press release: (i) references to
“light oil” mean “light crude oil and medium crude oil” as such
term is defined in National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities (“NI
51-101”); (ii) except where otherwise stated, references
to “liquids” mean “light crude oil and medium crude oil” and
“natural gas liquids” (including condensate) as such terms are
defined in NI 51-101; and (iii) references to “natural gas” mean
“shale gas”, which also includes an immaterial amount of
“conventional natural gas”, as such terms are defined in NI 51-101.
In addition, NI 51-101 includes condensate within the product type
of natural gas liquids. In certain cases, Birchcliff has disclosed
condensate separately from other natural gas liquids as the price
of condensate as compared to other natural gas liquids is currently
significantly higher and Birchcliff believes presenting the two
commodities separately provides a more accurate description of its
operations and results therefrom.
Forward-Looking Statements
Certain statements contained in this press
release constitute forward‐looking statements and forward-looking
information (collectively referred to as “forward‐looking
statements”) within the meaning of applicable Canadian
securities laws. The forward-looking statements contained in this
press release relate to future events or Birchcliff’s future plans,
operations, strategy, performance or financial position and are
based on Birchcliff’s current expectations, estimates, projections,
beliefs and assumptions. Such forward-looking statements have been
made by Birchcliff in light of the information available to it at
the time the statements were made and reflect its experience and
perception of historical trends. All statements and information
other than historical fact may be forward‐looking statements. Such
forward‐looking statements are often, but not always, identified by
the use of words such as “seek”, “plan”, “focus”, “future”,
“outlook”, “position”, “expect”, “project”, “intend”, “believe”,
“anticipate”, “estimate”, “forecast”, “guidance”, “potential”,
“proposed”, “predict”, “budget”, “continue”, “targeting”, “may”,
“will”, “could”, “might”, “should”, “would”, “on track” and other
similar words and expressions.
By their nature, forward-looking 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. Accordingly,
readers are cautioned not to place undue reliance on such
forward-looking statements. Although Birchcliff believes that the
expectations reflected in the forward-looking statements are
reasonable, there can be no assurance that such expectations will
prove to be correct and Birchcliff makes no representation that
actual results achieved will be the same in whole or in part as
those set out in the forward-looking statements.
In particular, this press release contains
forward‐looking statements relating to the following: Birchcliff’s
plans and other aspects of its anticipated future financial
performance, results, operations, focus, objectives, strategies,
opportunities, priorities and goals; that Birchcliff’s production
and capital expenditures guidance is on target; that Birchcliff
remains committed to maintaining capital discipline, maximizing
free funds flow and reducing indebtedness; that Birchcliff will
announce its first quarter results on May 11, 2022; statements
relating to the Corporation’s 2022 capital program and its
exploration and development activities and the timing thereof
(including: that Birchcliff is focused on the development of its
low-cost natural gas and condensate production in Pouce Coupe and
Gordondale; the number of wells expected to be brought on
production in 2022; and the Corporation’s commitment to using scale
and repeatability to drive down per well costs and utilizing
enhanced completions techniques to improve well performance).
With respect to the forward‐looking statements
contained in this press release, assumptions have been made
regarding, among other things: the degree to which the
Corporation’s results of operations and financial condition will be
disrupted by circumstances attributable to the COVID-19 pandemic;
prevailing and future commodity prices and differentials, exchange
rates, interest rates, inflation rates, royalty rates and tax
rates; the state of the economy, financial markets and the
exploration, development and production business; the political
environment in which Birchcliff operates; the regulatory framework
regarding royalties, taxes, environmental, climate change and other
laws; the Corporation’s ability to comply with existing and future
environmental, climate change and other laws; future cash flow,
debt and dividend levels; future operating, transportation,
marketing, general and administrative and other expenses;
Birchcliff’s ability to access capital and obtain financing on
acceptable terms; the timing and amount of capital expenditures and
the sources of funding for capital expenditures and other
activities; the sufficiency of budgeted capital expenditures to
carry out planned operations; the successful and timely
implementation of capital projects and the timing, location and
extent of future drilling and other operations; results of
operations; Birchcliff’s ability to continue to develop its assets
and obtain the anticipated benefits therefrom; the performance of
existing and future wells; reserves volumes and Birchcliff’s
ability to replace and expand reserves through acquisition,
development or exploration; the impact of competition on
Birchcliff; the availability of, demand for and cost of labour,
services and materials; the ability to obtain any necessary
regulatory or other approvals in a timely manner; the satisfaction
by third parties of their obligations to Birchcliff; the ability of
Birchcliff to secure adequate processing and transportation for its
products; Birchcliff’s ability to successfully market natural gas
and liquids; the results of the Corporation’s risk management and
market diversification activities; and Birchcliff’s natural gas
market exposure. With respect to statements of future wells to be
drilled and brought on production, such statements assume: the
continuing validity of the geological and other technical
interpretations performed by Birchcliff’s technical staff, which
indicate that commercially economic volumes can be recovered from
Birchcliff’s lands as a result of drilling future wells; and that
commodity prices and general economic conditions will warrant
proceeding with the drilling of such wells.
Birchcliff’s actual results, performance or
achievements could differ materially from those anticipated in the
forward-looking statements as a result of both known and unknown
risks and uncertainties including, but not limited to: the risks
posed by pandemics (including COVID-19) and epidemics and their
impacts on supply and demand and commodity prices; actions taken by
OPEC and other major producers of crude oil and the impact such
actions may have on supply and demand and commodity prices; general
economic, market and business conditions which will, among other
things, impact the demand for and market prices of Birchcliff’s
products and Birchcliff’s access to capital; volatility of crude
oil and natural gas prices; fluctuations in exchange and interest
rates; stock market volatility; loss of market demand; an inability
to access sufficient capital from internal and external sources on
terms acceptable to the Corporation; risks associated with
Birchcliff’s credit facilities, including a failure to comply with
covenants under the agreement governing the credit facilities and
the risk that the borrowing base limit may be redetermined;
fluctuations in the costs of borrowing; operational risks and
liabilities inherent in oil and natural gas operations; the
occurrence of unexpected events such as fires, severe weather,
explosions, blow-outs, equipment failures, transportation incidents
and other similar events; an inability to access sufficient water
or other fluids needed for operations; uncertainty that development
activities in connection with Birchcliff’s assets will be economic;
an inability to access or implement some or all of the technology
necessary to operate its assets and achieve expected future
results; the accuracy of estimates of reserves, future net revenue
and production levels; geological, technical, drilling,
construction and processing problems; uncertainty of geological and
technical data; horizontal drilling and completions techniques and
the failure of drilling results to meet expectations for reserves
or production; uncertainties related to Birchcliff’s future
potential drilling locations; delays or changes in plans with
respect to exploration or development projects or capital
expenditures; the accuracy of cost estimates and variances in
Birchcliff’s actual costs and economic returns from those
anticipated; incorrect assessments of the value of acquisitions and
exploration and development programs; changes to the regulatory
framework in the locations where the Corporation operates,
including changes to tax laws, Crown royalty rates, environmental
laws, climate change laws, carbon tax regimes, incentive programs
and other regulations that affect the oil and natural gas industry;
actions by government authorities, including those with respect to
the COVID-19 pandemic; an inability of the Corporation to comply
with existing and future environmental, climate change and other
laws; the cost of compliance with current and future environmental
laws; political uncertainty and uncertainty associated with
government policy changes; dependence on facilities, gathering
lines and pipelines; uncertainties and risks associated with
pipeline restrictions and outages to third-party infrastructure
that could cause disruptions to production; the lack of available
pipeline capacity and an inability to secure adequate and
cost-effective processing and transportation for Birchcliff’s
products; an inability to satisfy obligations under Birchcliff’s
firm marketing and transportation arrangements; shortages in
equipment and skilled personnel; the absence or loss of key
employees; competition for, among other things, capital,
acquisitions of reserves, undeveloped lands, equipment and skilled
personnel; management of Birchcliff’s growth; environmental and
climate change risks, claims and liabilities; potential litigation;
default under or breach of agreements by counterparties and
potential enforceability issues in contracts; claims by Indigenous
peoples; the reassessment by taxing or regulatory authorities of
the Corporation’s prior transactions and filings; unforeseen title
defects; third-party claims regarding the Corporation’s right to
use technology and equipment; uncertainties associated with the
outcome of litigation or other proceedings involving Birchcliff;
uncertainties associated with counterparty credit risk; risks
associated with Birchcliff’s risk management and market
diversification activities; risks associated with the declaration
and payment of future dividends, including the discretion of
Birchcliff’s board of directors to declare dividends and change the
Corporation’s dividend policy; the failure to obtain any required
approvals in a timely manner or at all; the failure to complete or
realize the anticipated benefits of acquisitions and dispositions
and the risk of unforeseen difficulties in integrating acquired
assets into Birchcliff’s operations; negative public perception of
the oil and natural gas industry and fossil fuels; the
Corporation’s reliance on hydraulic fracturing; market competition,
including from alternative energy sources; changing demand for
petroleum products; the availability of insurance and the risk that
certain losses may not be insured; breaches or failure of
information systems and security (including risks associated with
cyber-attacks); risks associated with the ownership of the
Corporation’s securities; and the accuracy of the Corporation’s
accounting estimates and judgments.
Readers are cautioned that the foregoing lists
of factors are not exhaustive. Additional information on these and
other risk factors that could affect results of operations,
financial performance or financial results are included in the AIF
and in other reports filed with Canadian securities regulatory
authorities.
Management has included the above summary of
assumptions and risks related to forward-looking statements
provided in this press release in order to provide readers with a
more complete perspective on Birchcliff’s future operations and
management’s current expectations relating to Birchcliff’s future
performance. Readers are cautioned that this information may not be
appropriate for other purposes.
The forward-looking statements contained in this
press release are expressly qualified by the foregoing cautionary
statements. The forward-looking statements contained herein are
made as of the date of this press release. Unless required by
applicable laws, Birchcliff does not undertake any obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
About Birchcliff:
Birchcliff is a Calgary, Alberta based
intermediate oil and natural gas company with operations focused on
the Montney/Doig Resource Play in Alberta. Birchcliff’s common
shares and cumulative redeemable preferred shares Series A and
Series C are listed for trading on the Toronto Stock Exchange under
the symbols “BIR”, “BIR.PR.A” and “BIR.PR.C”, respectively.
For further information, please contact: |
Birchcliff Energy Ltd.Suite 1000, 600 – 3rdAvenue
S.W.Calgary, Alberta T2P 0G5Telephone: (403)
261-6401Email:info@birchcliffenergy.comwww.birchcliffenergy.com |
|
Jeff Tonken – Chief Executive
OfficerChris Carlsen – President and Chief
Operating OfficerBruno Geremia – Executive
Vice President and Chief Financial Officer |
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