NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is
pleased to announce reserves, financial and operating results for
the three months and year ended December 31, 2020, and provide a
number of updates which demonstrate continued successful
advancement of our Pipestone and Wapiti Montney play development.
2020 was an unprecedented year where the world saw the COVID-19
pandemic deeply affecting all economies and temporarily reducing
the demand for oil and natural gas worldwide, and this was
compounded by the price pressures of the Saudi-Russian oil price
war early in the year. Commodity pricing for WTI oil and NYMEX
natural gas was highly volatile and averaged at decade low levels
for much of the year. NuVista responded quickly and positively by
significantly reducing capital, operating, and G&A expenditures
to ensure balance sheet protection. We maintained our credit
facility at $440 million and we renegotiated our midstream contract
minimum volume commitments (MVC’s) for the long term in order to
maximize short and long term flexibility for the volatile
environment. NuVista also reduced staff, executive, and board
compensation to lead in cost reduction discussions with contractors
and vendors. We used the resulting free cash flow to significantly
reduce net debt in the second half of the year as cash flow began
to increase with recovering commodity prices.
All of the aforementioned actions have placed
NuVista in the enviable position of moving forward through 2021
with strength and increasing momentum in the significantly improved
commodity price environment.
During the quarter and year ended December 31, 2020,
NuVista:
- Produced 49,300 Boe/d, well above
the guidance range of 47,000 – 48,000 Boe/d. Full year production
was 50,443 Boe/d, which was virtually flat versus the 2019 figure
of 50,803 Boe/d;
- Achieved $49.4 million of cash flow
in the quarter ($0.22/share), including over $25 million of free
cash flow (cash flow net of capital expenditures). Full year cash
flow was $156.9 million, or $0.70/share;
- Achieved our net debt reduction
target of $50 - $60 million in the second half of 2020 with free
cash flow achieving $58 million of net debt reduction;
- Executed a successful and
conservative 2020 capital expenditure program of $180.4 million,
including the drilling of 25 (25.0 net) wells and the completion of
15 (15.0 net) wells in our condensate rich Wapiti Montney play.
This includes $10 million of expenditures which were phased into
the fourth quarter of 2020 from the first quarter of 2021 in order
to facilitate an earlier commencement of our winter drilling
program. A total of 14 drilled uncompleted wells were held for
delayed completion in early 2021;
- Recognized an impairment recovery
of $720 million in the fourth quarter, which largely offsets
impairment expense of $909 million recognized in Q1 2020;
- Maintained total annual operating
expenses approximately flat at $9.83/Boe despite the deliberate
flattening of production during the COVID-19 crisis;
- Achieved record low G&A
expenses of $0.76/Boe in 2020, continuing our long term trend of
significant improvement with a reduction of 16% compared to the
2019 result; and
- Continued to significantly advance
our progress and plans in environmental, social and governance
(“ESG”), including continued positive strides in reducing GHG and
methane emissions.
Positive Reserves Revisions and Cost
Reductions Drive Continued Improvements in Finding Costs and
Reserves Value
NuVista is pleased to report the 2020 year end
independent evaluation of our reserves by GLJ Petroleum Consultants
Ltd. (“GLJ”) (the “GLJ Report”). NuVista continued its track record
of delivering high-quality reserve results, including continued
improvements in finding and development (“F&D”) costs and
significant improvement in base decline.
The quality of NuVista's reserves continues to
improve. We have pivoted in response to the collapse in commodity
prices in early 2020 and maintained our Proved Developed Producing
(“PDP”) reserve volumes, while drastically improving the economics
of the undeveloped wells in inventory. Looking forward, a greater
proportion of the PDP additions will be in the Pipestone area which
carry per-well F&D costs that are on average less than $5/Boe.
These achievements, when coupled with future annual budgets that
will include minimal capital for facility and infrastructure
spending, position us well for continued improvements in corporate
F&D costs. Highlights of our 2020 reserves include:
- Held PDP reserves slightly above
flat year over year via 103% PDP replacement ratio, at
approximately 96 million BOE despite a 40% reduction in annual
capital expenditures;
- Reduced corporate PDP F&D costs
for the third consecutive year, reaching $9.44/Boe. This was driven
by continued well cost reductions, positive technical revisions to
existing reserves of 2% and continued strong well results;
- Achieved Total Proved Plus Probable
(“TP+PA”) 3-year average F&D costs of $6.61/Boe; a reduction of
18% from 2019;
- Reduced base decline1 from 32% to
28%; and
- Based on well costs achieved to
date, average undeveloped well Drill, Complete, Equip & Tie-in
(“DCET”) cost was reduced by 22%.1Reflects the forecast first year
annual average PDP production decline in the 2020 year end GLJ
Report, compared against the forecast first year annual average PDP
production decline in the 2019 year end GLJ Report.
The detailed summary of our year end 2020
reserves disclosure is included below, and will be included in our
Annual Information Form which will be filed on or before March 30,
2021 at www.SEDAR.com.
Excellence in Operations
We are pleased to report that operations across
our entire asset base are currently proceeding ahead of schedule
and under budget. A total of 22 new Montney wells are expected to
be completed and brought on production from late in the first
quarter through early in the second quarter of 2021. 12 of the
wells are in our highest return Pipestone North area, 6 in
Pipestone South, and 4 in the Bilbo area. Drilling and completions
activities are nearing completion and costs are trending 10-15%
below our 2020 average on a length/tonnage normalized basis. This
is due to continued permanent structural design changes to our
drilling and completions programs based on ongoing learnings. In
addition, commissioning of the new Pipestone North Compressor
Station, the Veresen Hythe Gas Plant expansion, and the associated
pipeline are all progressing on schedule for commencement of
operations in April.
Divestitures and Keeping The Balance
Sheet Strong
The difficult world economic events of 2020
caused debt to rise and cash flow to fall for most exploration and
production companies in our industry. NuVista took rapid action by
adjusting capital expenditures and initiating cost cutting measures
to protect the balance sheet. As noted earlier, we used the
proceeds from free cash flow to reduce net debt by $58 million in
the second half of 2020. Our debt reduction focus continued with
the recently announced successful 2021 divestiture of our non-core
Charlie Lake and Cretaceous Unit assets, as well as selected water
infrastructure assets in the Wembley/Pipestone area, for total
proceeds of $94 million. There was no change to NuVista’s ownership
in our core Montney assets in Pipestone, Wapiti, and the
surrounding area and no material change to our ownership in the
Wembley gas plant. The total associated amount of 2021 production
divested was approximately 1,100 Boe/d and there was no material
impact on cash flow associated with either transaction. Pro forma
the dispositions, NuVista’s bank drawings as at December 31, 2020
were approximately $269 million, significantly expanding the
liquidity available within the $440 million credit facility. Pro
forma net debt was $505 million, and fourth quarter net debt to
annualized cash flow ratio was 2.6x. NuVista’s banking syndicate
has reaffirmed the borrowing facility at $440 million. NuVista
remains focused upon increasing cash flow as commodity prices
continue to recover, and rapidly driving net debt towards a newly
reduced long term target of less than 1x net debt to cash flow
ratio.
Significant Commodity Price
Diversification and Risk Management
NuVista has benefited from the discipline of our
strong rolling hedge program during this period of volatile
commodity prices. The unexpected onset of the COVID-19 pandemic had
an immediate negative effect on world oil demand and prices.
Natural gas pricing at NYMEX and other US hubs had in general been
weaker lately due to the mild winter, however the recent period of
significant cold weather in the US has temporarily increased demand
and pricing while reducing supply. With WTI oil and NYMEX natural
gas pricing at decade lows in 2020, NuVista relied on the
significant hedges we had in place, and we limited our hedging
activity during the commodity price lows.
The advances in vaccine delivery are now
spurring expectations of increased demand. This, combined with
reduced supply from reduced world investment, and OPEC production
discipline, have now resulted in significant ongoing recovery in
the price of WTI oil. With natural gas storage levels reducing on a
significant increase in LNG shipments and the recent cold weather,
improved and sustained strength in NYMEX gas pricing is expected
through 2021. As commodity prices have now returned to levels that
are profitable for NuVista, we have re-engaged our rolling hedging
program to ensure attenuation of future price volatility and to
underpin our prudently growing capital spending plans. We currently
possess hedges which, in aggregate, cover 53% of projected 2021
liquids production (primarily front of year loaded) using a
combination of swaps and three-way collars at an average WTI floor
price of C$60.76/Bbl. We have hedged 37% of projected 2021 gas
production (primarily summer season loaded) at an average floor
price of C$2.05/Mcf (hedged and exported volumes converted to an
AECO equivalent price) using a combination of swaps and collars.
These percentage figures relate to production net of royalty
volumes.
ESG Progress Continues
We are proud to continue to demonstrate our
commitment to transparency and ethical practices through our ESG
performance. Approximately 60% of our current production is
comprised of natural gas which has the lowest carbon footprint of
any hydrocarbon, leading to our GHG performance being well ahead of
the North American benchmark. Canadian ESG standards
are among the highest in the world, and NuVista continues to
execute projects throughout the year to enhance our ESG progress,
particularly in the areas of GHG and methane emissions reduction.
We look forward to providing much more information in our updated
annual ESG report in the third quarter of 2021.
At the new Pipestone compressor stations,
NuVista and its midstream partners have invested $1.2 million to
increase our count of waste heat recovery units from 7 to 10. These
new units recover waste heat from compressor exhaust, significantly
reducing fuel useage. This saves significant costs and avoids a
total of approximately 4,500 T CO2e per year of future GHG
emissions for the three new units alone. In our effort to reduce
greenhouse gas emissions further, another focus has been on
establishing ourselves as a frontrunner in eliminating methane
emissions. We’ve adopted the design philosophy of incorporating
centralized compressed air into the ongoing build out of our
Pipestone North and South fields. The new wells we are bringing
on-stream in Pipestone are therefore zero routine methane venting
emission sites. In our Wapiti field, where centralized compressed
air is less viable, we are piloting our first solar powered
compressed air solution at one of our well pads. More details on
our emissions reduction efforts can be found within our 2020
submission to the Carbon Disclosure Project, and will also be
available in our annual ESG report which will be released in late
summer.
We also continued our commitment to responsibly
abandoning and reclaiming inactive wells and facilities in our
legacy areas. In 2020, we spent over $11 million on abandonment and
reclamation work. Many of these dollars result in local economic
and employment benefits to remote parts of Alberta, and we are
actively working with our First Nation partners in these areas to
ensure they are participating in these benefits as well. With 2020,
COVID-19 became a big part of our normal high focus on Health and
Safety, and in addition the $350,000 which NuVista and staff
collectively donated to the communities and First Nations where we
work and live, was expanded to include a COVID-19 relief element
for those in need.
2021 Guidance Update
As discussed above, NuVista is pleased to note
that both condensate and natural gas future strip prices have
increased significantly in the past quarter, resulting in a
significant increase to projected cash flows at the same time as
tremendous progress has been made in reducing our net debt. Our
continuing efforts are focused on balancing rapid debt repayment,
increasing cash flow through prudent production growth, and
creating a comfortable cushion above midstream minimum volume
commitments. As such, the proceeds from the divestitures allow us
room to use up to half in order to prudently increase our capital
spending for 2021 and 2022 while maintaining spending below
projected 2021 and 2022 cash flow levels. The remainder of the
proceeds will continue to be applied towards permanent net debt
reduction.
NuVista’s capital spending for 2021 has been
increased to a range of $230 - $250 million from the original range
of $180 - $200 million. As the spending will be added in the third
and fourth quarters of 2021, there is a minimal production impact
on 2021 but offsets the reduction from the divested volumes. This
is then followed by a significant positive impact to our outlook
for 2022 production and corresponding cash flow. 2021 production
guidance is re-affirmed at 50,000 - 52,000 Boe/d. The preceding
spending level assumes that strip prices remain near current
levels, and is expected to result in significant ongoing reduction
of net debt as well as dramatic reduction in net debt to cash flow
ratio. We intend to continue our track record of carefully
directing additional available cash flow towards a prudent balance
of debt reduction and production growth until our existing
facilities are filled to maximum efficiency, and net debt to cash
flow levels reach 1.0x or less. Capital spending will continue to
be weighted heavily towards Pipestone, as our highest return area,
with expected well payouts well below a year. NuVista retains the
flexibility to revise capital spending from the second quarter
onwards, should commodity prices increase or retreat significantly
from the current positive trend.
NuVista has a solid business plan that maximizes
free cash flow and the return of capital to shareholders when our
existing facilities are filled to capacity and maximum efficiency
at flattened production levels of approximately 80,000 – 90,000
Boe/d. We are confident that the actions described above accelerate
the Company towards that goal by as early as 2023, while still
providing free cash flow and net debt reduction while growing
through 2021-2023. With facilities filled, returns are enhanced
further with corporate netbacks which are expected to grow by
approximately $2-$3/Boe due to the efficiencies of scale which will
reduce our unit operating, transportation, and interest costs by
this amount.
NuVista has top quality assets and a management
team focused on relentless improvement. We have the necessary
foundation and liquidity to add significant value as commodity
prices continue to recover. We have set the table for
returns-focused profitable growth to between 80,000 – 90,000 Boe/d
with only half-cycle spending, since the required facility
infrastructure is now in place. We will continue to adjust to this
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, including our outlook for
2022 and beyond, is being updated and will be available at
www.nuvistaenergy.com on March 2, 2021. NuVista’s financial
statements, notes to the financial statements and management’s
discussion and analysis for the year ended December 31, 2020, will
be filed on SEDAR (www.sedar.com) under NuVista Energy Ltd. on
March 2, 2021 and can also be accessed on NuVista’s website.
|
Financial and Operating Highlights |
|
Three months ended December 31 |
|
Year ended December 31 |
|
(Cdn $000s, except otherwise indicated) |
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
|
FINANCIAL |
|
|
|
|
|
|
Petroleum and natural gas
revenues |
124,378 |
|
163,278 |
|
(24 |
) |
424,637 |
|
585,484 |
|
(27 |
) |
Adjusted funds flow (1)
(2) |
49,399 |
|
70,080 |
|
(30 |
) |
156,866 |
|
265,851 |
|
(41 |
) |
Per share - basic |
0.22 |
|
0.31 |
|
(29 |
) |
0.70 |
|
1.18 |
|
(41 |
) |
Per share - diluted |
0.22 |
|
0.31 |
|
(29 |
) |
0.70 |
|
1.18 |
|
(41 |
) |
Net earnings (loss) |
715,435 |
|
(29,557 |
) |
(2,521 |
) |
(197,879 |
) |
(63,833 |
) |
210 |
|
Per share - basic |
3.17 |
|
(0.13 |
) |
(2,538 |
) |
(0.88 |
) |
(0.28 |
) |
214 |
|
Per share - diluted |
3.17 |
|
(0.13 |
) |
(2,538 |
) |
(0.88 |
) |
(0.28 |
) |
214 |
|
Capital expenditures (2) |
23,864 |
|
52,814 |
|
(55 |
) |
180,442 |
|
301,822 |
|
(40 |
) |
Net debt (1) (2) |
|
|
|
598,835 |
|
561,975 |
|
7 |
|
OPERATING |
|
|
|
|
|
|
Daily Production |
|
|
|
|
|
|
Natural gas (MMcf/d) |
183.3 |
|
204.3 |
|
(10 |
) |
185.7 |
|
182.3 |
|
2 |
|
Condensate & oil
(Bbls/d) |
12,928 |
|
17,195 |
|
(25 |
) |
14,067 |
|
15,170 |
|
(7 |
) |
NGLs (Bbls/d) |
5,863 |
|
5,769 |
|
2 |
|
5,420 |
|
5,246 |
|
3 |
|
Total (Boe/d) |
49,348 |
|
57,010 |
|
(13 |
) |
50,443 |
|
50,803 |
|
(1 |
) |
Condensate, oil & NGLs
weighting |
38% |
|
40% |
|
|
|
39% |
|
40% |
|
|
Condensate & oil
weighting |
26% |
|
30% |
|
|
|
28% |
|
30% |
|
|
Average realized selling
prices (4) |
|
|
|
|
|
|
Natural gas ($/Mcf) |
3.14 |
|
2.74 |
|
15 |
|
2.43 |
|
2.78 |
|
(13 |
) |
Condensate & oil
($/Bbl) |
52.59 |
|
65.78 |
|
(20 |
) |
45.50 |
|
67.44 |
|
(33 |
) |
NGLs ($/Bbl) (3) |
16.44 |
|
14.56 |
|
13 |
|
12.68 |
|
14.01 |
|
(9 |
) |
Netbacks ($/Boe) |
|
|
|
|
|
|
Petroleum and natural gas
revenues |
27.40 |
|
31.13 |
|
(12 |
) |
23.00 |
|
31.57 |
|
(27 |
) |
Realized gain on financial
derivatives |
2.77 |
|
0.75 |
|
269 |
|
3.83 |
|
0.94 |
|
307 |
|
Royalties |
(0.83 |
) |
(1.82 |
) |
(54 |
) |
(0.92 |
) |
(1.49 |
) |
(38 |
) |
Transportation expenses |
(4.97 |
) |
(4.13 |
) |
20 |
|
(4.46 |
) |
(4.35 |
) |
3 |
|
Operating expenses |
(9.68 |
) |
(9.63 |
) |
1 |
|
(9.83 |
) |
(9.61 |
) |
2 |
|
Operating netback (2) |
14.69 |
|
16.30 |
|
(10 |
) |
11.62 |
|
17.06 |
|
(32 |
) |
Corporate netback (2) |
10.88 |
|
13.37 |
|
(19 |
) |
8.49 |
|
14.34 |
|
(41 |
) |
SHARE TRADING STATISTICS |
|
|
|
|
|
|
High |
1.08 |
|
3.24 |
|
(67 |
) |
3.36 |
|
5.19 |
|
(35 |
) |
Low |
0.64 |
|
1.86 |
|
(66 |
) |
0.24 |
|
1.39 |
|
(83 |
) |
Close |
0.94 |
|
3.19 |
|
(71 |
) |
0.94 |
|
3.19 |
|
(71 |
) |
Average daily volume
('000s) |
1,479 |
|
770 |
|
92 |
|
2,030 |
|
1,212 |
|
67 |
|
Common
shares outstanding ('000s) |
|
|
|
225,837 |
|
225,592 |
|
— |
|
(1) Refer to Note 17 “Capital management” in
NuVista's financial statements and to the sections entitled
“Adjusted funds flow” and “Liquidity and capital resources”
contained in the MD&A for the year ended December 31, 2020. (2)
Non-GAAP measure that does not have any standardized meaning under
IFRS and therefore may not be comparable to similar measures
presented by other companies where similar terminology is used.
Reference should be made to “Non-GAAP measurements”. (3) Natural
gas liquids (“NGLs”) include butane, propane and ethane and an
immaterial amount of sulphur revenue. (4) Product prices exclude
realized gains/losses on financial derivatives.
Detailed Summary of Corporate Reserves
Data
The following table provides summary reserve
information based upon the GLJ Report using the published GLJ
January 1, 2021 price forecast:
|
Natural Gas(2) |
Natural GasLiquids |
Oil(3) |
Total |
Reserves category(1) |
CompanyGross |
CompanyGross |
CompanyGross |
CompanyGross |
Interest |
Interest |
Interest |
Interest |
(MMcf) |
(MBbls) |
(MBbls) |
(MBoe) |
Proved |
|
|
|
|
Developed producing |
366,852 |
33,965 |
398 |
95,505 |
Developed non-producing |
85,468 |
9,466 |
295 |
24,006 |
Undeveloped |
820,432 |
72,254 |
4,535 |
213,527 |
Total
proved |
1,272,751 |
115,684 |
5,228 |
333,038 |
Probable |
1,011,300 |
82,134 |
6,111 |
256,795 |
Total
proved plus probable |
2,284,051 |
197,819 |
11,339 |
589,833 |
NOTES:(1) Numbers may not add due to
rounding.(2) Includes conventional natural gas and shale
gas and coal bed methane.(3) Includes light and medium
crude oil.
The following table is a summary reconciliation
of the 2020 year end working interest reserves with the working
interest reserves reported in the 2019 year end reserves
report:
Company Gross Interest |
NaturalGas(1)(3)(MMcf) |
|
Liquids(1)(MBbls) |
|
Oil(1)(4)(MBbls) |
|
Total Oil Equivalent(1)(MBoe) |
|
Total proved |
|
|
|
|
Balance, December 31,
2019 |
1,393,425 |
|
118,180 |
|
3,021 |
|
353,438 |
|
Exploration and
development(2) |
72,977 |
|
8,963 |
|
1,969 |
|
23,095 |
|
Technical revisions |
(108,407 |
) |
(3,159 |
) |
328 |
|
(20,899 |
) |
Acquisitions |
1,721 |
|
170 |
|
339 |
|
796 |
|
Dispositions |
(12,941 |
) |
(1,074 |
) |
- |
|
(3,230 |
) |
Economic Factors |
(6,045 |
) |
(394 |
) |
(299 |
) |
(1,701 |
) |
Production |
(67,978 |
) |
(7,003 |
) |
(130 |
) |
(18,462 |
) |
Balance, December 31, 2020 |
1,272,751 |
|
115,684 |
|
5,228 |
|
333,038 |
|
Total proved plus probable |
|
|
|
|
Balance, December 31,
2019 |
2,353,534 |
|
195,407 |
|
6,087 |
|
593,749 |
|
Exploration and
development(2) |
71,338 |
|
9,446 |
|
3,686 |
|
25,021 |
|
Technical revisions |
(46,710 |
) |
1,743 |
|
1,082 |
|
(4,960 |
) |
Acquisitions |
7,383 |
|
562 |
|
755 |
|
2,547 |
|
Dispositions |
(23,547 |
) |
(1,793 |
) |
- |
|
(5,717 |
) |
Economic Factors |
(9,969 |
) |
(544 |
) |
(141 |
) |
(2,346 |
) |
Production |
(67,978 |
) |
(7,003 |
) |
(130 |
) |
(18,462 |
) |
Balance, December 31, 2020 |
2,284,051 |
|
197,819 |
|
11,339 |
|
589,833 |
|
NOTES:(1) Numbers may not add due to
rounding.(2) Reserve additions for drilling extensions,
infill drilling and improved recovery.(3) Includes
conventional natural gas, shale gas and coal bed
methane.(4) Includes light, medium crude oil.
The following table summarizes the future
development capital included in the GLJ Report:
($ thousands, undiscounted) |
Proved |
Proved plusprobable |
|
|
|
2021 |
186,744 |
194,144 |
2022 |
378,352 |
392,744 |
2023 |
362,699 |
392,431 |
2024 |
316,154 |
341,660 |
2025 |
247,780 |
279,261 |
Remaining |
13,454 |
919,141 |
Total (Undiscounted) |
1,505,182 |
2,519,382 |
NOTE:(1) Numbers may not add due to
rounding.
The following table outlines NuVista's corporate
finding, development and acquisition (“FD&A”) costs in more
detail:
|
3 Year-Average (1) |
|
2020 (1) |
|
2019 (1) |
|
|
|
Proved plus |
|
|
|
Proved plus |
|
|
|
Proved plus |
|
Proved |
|
probable |
|
Proved |
|
probable |
|
Proved |
|
probable |
Finding and development costs
($/Boe) |
$5.98 |
|
$4.20 |
|
$-680.31 |
|
$-23.06 |
|
$10.30 |
|
$8.94 |
Finding, development and acquisition costs ($/Boe) |
$8.85 |
|
$6.61 |
|
$173.67 |
|
$-28.08 |
|
$10.30 |
|
$8.94 |
NOTE:(1) F&D costs and FD&A
are used as a measure of capital efficiency. The calculation for
F&D costs includes all exploration and development capital for
that period as outlined in the Company’s year-end financial
statements plus the change in future development capital for that
period. This total capital including the change in the future
development capital is then divided by the change in reserves for
that period including revisions for that same period. The aggregate
of the exploration and development costs incurred in the most
recent financial year and the change during the year in estimated
future development costs generally will not reflect total finding
and development costs related to reserve additions for the year.
FD&A costs are calculated in the same manner except in addition
to exploration and development capital and the change in future
development capital, acquisition capital is also included in the
calculation.
Summary of Corporate Net Present Value
Data
The estimated net present values of future net
revenue before income taxes associated with NuVista’s reserves
effective December 31, 2020 and based on published GLJ future price
forecast as at January 1, 2021 as set forth below are summarized in
the following table:
The estimated future net revenue contained in
the following table does not necessarily represent the fair market
value of the reserves. There is no assurance that the forecast
price and cost assumptions contained in the GLJ Report will be
attained and variations could be material. The recovery and reserve
estimates described herein are estimates only. Actual reserves may
be greater or less than those calculated.
|
Before Income Taxes |
|
Discount Factor (%/year) |
Reserves category (1) ($ thousands) |
0% |
|
5% |
|
10% |
|
15% |
|
20% |
|
Proved |
|
|
|
|
|
Developed producing |
1,131,492 |
|
929,968 |
|
761,095 |
|
643,433 |
|
559,929 |
|
Developed non-producing |
410,806 |
|
306,475 |
|
246,387 |
|
208,111 |
|
181,669 |
|
Undeveloped |
2,465,039 |
|
1,498,026 |
|
975,515 |
|
668,302 |
|
473,810 |
|
Total proved |
4,007,337 |
|
2,734,469 |
|
1,982,997 |
|
1,519,846 |
|
1,215,407 |
|
Probable |
3,678,075 |
|
1,752,607 |
|
983,370 |
|
623,121 |
|
430,852 |
|
Total proved plus probable |
7,685,412 |
|
4,487,076 |
|
2,966,367 |
|
2,142,967 |
|
1,646,259 |
|
NOTE:(1) Numbers may not add due to
rounding.
The following table is a summary of pricing and inflation rate
assumptions based on published GLJ forecast prices and costs as at
January 1, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
AECOGas($Cdn/MMBtu) |
|
NYMEXGas($US/MMBtu) |
|
MidwestGas atChicago($US/MMBtu) |
|
EdmontonC5+($Cdn/Bbl) |
|
EdmontonPropane($Cdn/Bbl) |
|
EdmontonButane($Cdn/Bbl) |
|
WTICushingOklahoma($US/Bbl) |
|
EdmontonPar Price40 API($Cdn/Bbl) |
|
ExchangeRate(2)($US/$Cdn) |
|
Forecast |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
2.72 |
|
2.75 |
|
2.60 |
|
60.65 |
|
19.43 |
|
27.75 |
|
48.00 |
|
55.49 |
|
0.775 |
|
2022 |
|
2.67 |
|
2.80 |
|
2.65 |
|
65.36 |
|
24.31 |
|
36.47 |
|
51.50 |
|
60.78 |
|
0.765 |
|
2023 |
|
2.60 |
|
2.85 |
|
2.70 |
|
70.07 |
|
25.53 |
|
41.48 |
|
54.50 |
|
63.82 |
|
0.760 |
|
2024 |
|
2.60 |
|
2.90 |
|
2.75 |
|
74.72 |
|
27.26 |
|
44.29 |
|
57.79 |
|
68.14 |
|
0.760 |
|
2025 |
|
2.65 |
|
2.95 |
|
2.80 |
|
76.25 |
|
27.87 |
|
45.29 |
|
58.95 |
|
69.67 |
|
0.760 |
|
2026 |
|
2.71 |
|
3.01 |
|
2.86 |
|
77.80 |
|
28.49 |
|
46.30 |
|
60.13 |
|
71.22 |
|
0.760 |
|
2027 |
|
2.76 |
|
3.07 |
|
2.92 |
|
79.38 |
|
29.12 |
|
47.32 |
|
61.33 |
|
72.80 |
|
0.760 |
|
2028 |
|
2.81 |
|
3.13 |
|
2.98 |
|
81.00 |
|
29.77 |
|
48.37 |
|
62.56 |
|
74.42 |
|
0.760 |
|
2029 |
|
2.87 |
|
3.19 |
|
3.04 |
|
82.64 |
|
30.43 |
|
49.44 |
|
63.81 |
|
76.07 |
|
0.760 |
|
2030 |
|
2.92 |
|
3.25 |
|
3.10 |
|
84.30 |
|
31.03 |
|
50.43 |
|
65.09 |
|
77.59 |
|
0.760 |
|
2031+ |
|
+2.0%/yr |
|
+2.0%/yr |
|
+2.0%/yr |
|
+2.0%/yr |
|
+2.0%/yr |
|
+2.0%/yr |
|
+2.0%/yr |
|
+2.0%/yr |
|
0.760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES:(1) Costs are inflated at 2% per annum.(2)
Exchange rate used to generate the benchmark reference prices in
this table.(3) NuVista’s future realized gas prices are forecasted
based on a combination of various benchmark prices in addition to
the AECO benchmark in order to reflect the favorable price
diversification to other markets which NuVista has undertaken.
Pricing at these markets has been accounted for in the GLJ Report.
Additional information on NuVista’s gas marketing diversification
will be available in our corporate presentation.
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.
This news release contains a number of oil and
gas metrics prepared by management, including F&D costs,
FD&A costs and reserves replacement ratio, 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. Such metrics have been included herein to
provide readers with additional measures to evaluate NuVista's
performance on a comparable basis with prior periods; however, such
measures are not reliable indicators of the future performance of
NuVista and future performance may not compare to the performance
in previous periods. Details of how F&D and FD&A costs have
been calculated are included in the body of this news release.
Reserves replacement ratio is the sum of changes in reserves
(exploration and development, technical revisions, acquisitions,
dispositions and economic factors) divided by annual production for
the applicable period and reserve category.
NuVista has presented certain well economics
based on type curves for the Pipestone development block. The type
curves are based on initial drilling results but due to the early
stage of development, primarily on drilling results from analogous
Montney 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. The type curves used
in the GLJ Report for the Pipestone development blocks had an
estimate of estimated ultimate recovery that generally compared
well to the type curves used to generate the economics presented
herein.
The type curves and well economics associated
with the Pipestone development block wells have been risked by
taking a reduced expected resource recovery from increased
horizontal length and frac intensity based on applicable actual
well data and applying our planned well design.
NuVista has presented the term "payout" based on
the type curves for the Pipestone development block. Payout means
the anticipated years of production from a well required to fully
pay for the all capital spent to drill, complete, equip and tie-in
a well of such well.
Economics presented are based on pricing
assumptions of: US$55/Bbl WTI; US$3.00/MMBtu NYMEX; Fx (CAD:USD):
1.28:1, and; a $US0.75/MMBtu AECO to NYMEX basis.
Basis of presentation
Unless otherwise noted, the financial data
presented in this press release has been prepared in accordance
with Canadian generally accepted accounting principles (“GAAP”)
also known as International Financial Reporting Standards (“IFRS”).
The reporting and measurement currency is the Canadian dollar.
National Instrument 51-101 - "Standards of Disclosure for Oil and
Gas Activities" includes condensate within the product type of
natural gas liquids. NuVista has disclosed condensate values
separate from natural gas liquids herein as NuVista believes it
provides a more accurate description of NuVista's operations and
results therefrom.
Reserves advisories
The reserves estimates prepared herein have been
evaluated by an independent qualified reserves evaluator in
accordance with National Instrument 51-101 – Standards of
Disclosure for Oil and Gas Activities and the Canadian Oil and Gas
Evaluation Handbook ("COGE Handbook") and are effective as of
December 31, 2020. All reserves information has been presented on a
gross basis, which is the Company's working interest share before
deduction of royalties and without including any royalty interests
of the Company. The reserves have been categorized accordance with
the reserves definitions as set out in the COGE Handbook. The
recovery and reserve estimates contained herein are estimates only
and there is no guarantee that the estimated reserves will be
recovered.
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 management's assessment of: NuVista’s future
focus, strategy, plans, opportunities and operations; projected
cash flows at current strip prices; our plans to continue to
balance debt repayment, increasing cash flow through prudent
production growth, and creating a comfortable cushion above our
midstream minimum volume commitments; plans to increase our capital
spending for 2021 and 2022 while maintaining spending below
projected 2021 and 2022 cash flow levels; the anticipated proceeds
from the Wembley divestitures and uses of proceeds plans to reduce
net debt; guidance with respect to 2021 capital spending amounts,
spending timing and allocation; 2021 and 2022 production and cash
flow guidance at current strip prices; expectations with respect to
future net debt to cash flow ratio; plans to direct additional
available cash flow towards a prudent balance of debt reduction and
production growth until our existing facilities are filled to
maximum efficiency, and debt to cash flow levels reach 1.0x or
less; expectations that Pipestone will continue to be our highest
return area; expected well payouts at Pipestone; ESG plans, targets
and expected results from our ESG initiatives; that we will have
the flexibility to revise capital spending from the second quarter
onwards; future commodity prices; plans to maximize free cash flow
and the return of capital to shareholders; future capacity of our
facilities, that maximum efficiency will be achieved at flattened
production levels of approximately 80,000 – 90,000 Boe/d and that
this will be achieved as early as 2023; that we will generate free
cash flow and debt reduction while growing through 2021-2023; that
once existing facilities are filled; returns will be enhanced,
corporate netbacks will grow by approximately $2-$3/Boe and unit
operating, transportation, and interest costs will be reduced by
this amount; the effect of our financial, commodity, and natural
gas risk management strategy and market diversification; the
quality of our assets, our expectations that a greater proportion
of future PDP additions will be in the Pipestone area; expectations
with respect to continued improvements in corporate F&D costs;
2021 drilling and completion plans, timing and expected results;
anticipated drilling and completions costs; timing for the
completion of the Pipestone North Compressor Station, the Veresen
Hythe Gas Plant expansion, and the associated pipeline;
expectations that NuVista will add significant value if commodity
prices continue to recover and will experience returns-focused
profitable growth to between 80,000 – 90,000 Boe/d with only
half-cycle spending and plans to maximize the value of our asset
base and ensure the long term sustainability of our business.
Statements relating to "reserves" are also deemed to be
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and that
the reserves can be profitably produced 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, 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 complete
the announced dispositions on the terms and timing contemplated,
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.
Non-GAAP measurements
For ease of readability, in this press release,
we have used the term "cash flow" instead of "adjusted funds
flow".
Within the press release, references are made to
terms commonly used in the oil and natural gas industry. Management
uses "cash flow", "cash flow per share", "operating netback",
"corporate netback", "capital expenditures", "free cash flow",
"cash flow netback","net debt", "net debt to cash flow ratio" and
"net debt to annualized cash flow ratio" to analyze performance and
leverage. These terms do not have any standardized meaning
prescribed by IFRS and therefore may not be comparable to similar
measures presented by other companies where similar terminology is
used. For further information refer to the section "Non-GAAP
measures" in our MD&A.
Free cash flow is forecast cash flow less
capital expenditures required to maintain production.
FOR FURTHER INFORMATION CONTACT: |
|
|
|
Jonathan A. Wright |
Ross L. Andreachuk |
Mike J. Lawford |
President and CEO |
VP, Finance and CFO |
Chief Operating Officer |
(403) 538-8501 |
(403) 538-8539 |
(403) 538-1936 |
NuVista Energy (TSX:NVA)
Historical Stock Chart
From Mar 2024 to Apr 2024
NuVista Energy (TSX:NVA)
Historical Stock Chart
From Apr 2023 to Apr 2024