/NOT FOR DISSEMINATION IN
The Acquisition generates the following advantages for Tenaz:
- Expands upstream and midstream free cash flow(1) by consolidating ownership in existing
Netherlands assets; - Significantly increases positive adjusted working capital(1);
- Accretive on key per share measures(1), including production, reserves, cash flow and free cash flow(1);
- Increases exposure to high-margin Dutch Title Transfer Facility ("TTF") gas; and
- Demonstrates ability to transact with an international major in a geographic region of focus.
Upstream Assets
The Acquisition increases Tenaz's working interest in each of the L10/L11a, K9, K12 and N7b license blocks. Upon completion, our interest in the producing licenses will increase as follows:
- L10/L11a: from 11.35% to 21.43%
- K9a and K9b: from 8.44% to 15.94%
- K9c: from 6.49% to 12.26%
- K12: from 5.67% to 10.71%
- N7b: from 9.45% to 17.86%
Tenaz's interest in the undeveloped F10, F11a, F17, and F18 licenses remains unchanged as a result of the Acquisition, as does our interest in the producing L10-O field, which XTO elected not to participate in when drilled.
Midstream Assets
Tenaz will also acquire an additional 10.1% ownership interest in
The entity to be acquired does not hold rights to the L10 Carbon Capture & Storage ("CCS") Project, which is currently being evaluated by the
In addition to the license interests and NGT equity held by XTO, XH will leave approximately
The acquired assets are expected to produce approximately 450 to 500 boe/d during 2023, which would represent an increase of 20% to production per share(1) relative to the midpoint of Tenaz's 2023 production guidance. Based upon year-to-date results plus forecasted cash flows at strip pricing(4) for the remainder of 2023 as at
Present value of decommissioning liability associated with the acquired assets is estimated to be approximately
CAPEX(1) for the acquired assets is estimated to be
The production increase from the Acquisition will depend on the timing of closing. Assuming that the closing occurs during Q3 2023, the anticipated calendar 2023 production increase would be approximately 100 to 200 boe/d.
Consequently, Tenaz is updating its previously announced 2023 capital and production guidance as follows:
Pro Forma 2023 | Previous 2023 Guidance | Updated 2023 Guidance |
Production (boe/d) | 2,200 – 2,300 | 2,300 – 2,500 |
Capital expenditure(1)($ million) |
Tenaz engaged with
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1 | This is a non-GAAP and other financial measure. Refer to "Non-GAAP and Other Financial Measures" included in the "Advisories" section of this press release. |
2 | Consultant Average Pricing assumed TTF gas pricing of €48.26/MWh for the second half of 2023, €56.91/MWh for 2024, and €50.44/MWh for 2025. |
3 | Cash balance of approximately |
4 | TTF strip pricing for the second half of 2023 of €42.82/MWh, €54.24/MWh for 2024, and €45.73/MWh for 2025, as at |
5 | Discounted liability based on assumptions that would have been applicable if the acquisition had occurred at the end of the first quarter of 2023. Using the Q1 2023 assumptions, the inflation rate would have been 2.5% and the credit-adjusted risk-free rate would have been 13.8%. |
Tenaz is an energy company focused on the acquisition and sustainable development of international oil and gas assets capable of returning free cash flow to shareholders. Tenaz has domestic operations in
For further information on Tenaz, the Acquisition and the acquired assets please go to the Tenaz website at www.tenazenergy.com. Further information on NGT can be found at https://noordgastransport.nl.
Non–GAAP and Other Financial Measures
This press release contains references to measures used in the oil and natural gas industry such as "funds flow from operations", "funds flow from operations per share", "funds flow from operations per boe", "adjusted working capital (net debt)", "free cash flow", "midstream income" and "operating netback". The data presented in this press release is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the
Free Cash Flow ("FCF")
Tenaz considers free cash flow to be a key measure of performance as it demonstrates the Company's excess funds generated after capital expenditures for potential shareholder returns, acquisitions, or growth in available liquidity. FCF is a non-GAAP financial measure most directly comparable to cash flows used in investing activities and is comprised of funds flow from operations less capital expenditures.
Free cash flow per share is calculated using basic and diluted weighted average number of shares outstanding in the period.
Funds flow from operations ("FFO")
Tenaz considers funds flow from operations to be a key measure of performance as it demonstrates the Company's ability to generate the necessary funds for sustaining capital, future growth through capital investment, and settling liabilities. Funds flow from operations is calculated as cash flow from operating activities plus income from associate and before changes in non-cash operating working capital and decommissioning liabilities settled. Funds flow from operations is not intended to represent cash flows from operating activities calculated in accordance with IFRS.
Funds flow from operations per share is calculated using basic and diluted weighted average number of shares outstanding in the period.
Per share accretion metrics
Management uses key per share numbers, including production, reserves, cash flow and free cash flow as acquisition metrics to determine the increase of consolidated pro forma production, reserves, cash flow and free cash flow attributable to Tenaz shareholders following the proposed Acquisition.
Production per share is calculated as the production guidance for 2023 attributable to Tenaz shareholders.
Reserves per share is calculated as the Company's 2P reserves attributable to Tenaz shareholders.
FCF per share is calculated as FFO attributable to Tenaz shareholders.
Capital Expenditures ("CAPEX")
Tenaz considers capital expenditures to be a useful measure of the Company's investment in its existing asset base calculated as the sum of exploration and evaluation asset expenditures and property, plant and equipment expenditures from the consolidated statements of cash flows that is most directly comparable to cash flows used in investing activities.
Working capital and Adjusted working capital (net debt)
Working capital is calculated as current assets less current liabilities. Management views adjusted working capital (net debt) as a key industry benchmark and measure to assess the Company's financial position and liquidity. Adjusted working capital (net debt) is calculated as current assets less current liabilities, excluding the fair value of derivative instruments.
Consultant Average Price Forecast
The forecast prices used are based on an average of the price decks of three independent engineering firms,
The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. Per boe amounts have been calculated by using the conversion ratio of six thousand cubic feet (6 mcf) of natural gas to one barrel (1 bbl) of crude oil. The boe conversion ratio of 6 mcf to 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 equivalent of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
This press release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "budget", "forecast", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this press release contains forward-looking information and statements and assumptions pertaining to: the Acquisition including, without limitation, the anticipated closing of the Acquisition, reserves associated with, and net present value and remaining productive life of, the upstream assets, estimated decommissioning liabilities, anticipated 2023 production, forecast FFO, cash balances following the completion of the Acquisition, anticipated Acquisition advantages, and estimated 2023 CAPEX for the acquired assets; tariff revenue generated through Tenaz's NGT ownership; the
The forward-looking information and statements included in this press release are not guarantees of future performance and should not be unduly relied upon. Such information and 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 information or statements including, without limitation: the ability of management to execute its business plan or realize anticipated benefits from the Acquisition; changes in commodity prices; changes in the demand for or supply of the Company's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of the Company or by third party operators of the Company's properties, increased debt levels or debt service requirements; inaccurate estimation of the Company's oil and gas reserve volumes; limited, unfavorable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time to time in the Company's public documents.
The forward-looking information and statements contained in this press release speak only as of the date of this press release, and the Company does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.
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