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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Birchcliff Energy Ltd.    BIR   CA0906971035

BIRCHCLIFF ENERGY LTD.

(BIR)
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Birchcliff Energy : Announces Filing of Its 2018 Year-End Audited Financial Statements and Disclosure Documents and Provides Operational Update

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03/13/2019 | 03:34pm EDT

19-02

March 13, 2019

BIRCHCLIFF ENERGY LTD. ANNOUNCES FILING OF ITS 2018 YEAR-END AUDITED FINANCIAL STATEMENTS

AND DISCLOSURE DOCUMENTS AND PROVIDES OPERATIONAL UPDATE

Calgary, Alberta - Birchcliff Energy Ltd. ("Birchcliff") (TSX: BIR) is pleased to announce that it has filed its audited annual financial statements and related management's discussion and analysis (the "MD&A") and its annual information form (the "AIF") for the financial year ended December 31, 2018 (collectively, the "Annual Filings") on the System for Electronic Document Analysis and Retrieval ("SEDAR").

The audited annual financial statements are consistent with the unaudited financial results disclosed in the press release issued by Birchcliff on February 13, 2019.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, as well as supplemental information relating to Birchcliff's contingent and prospective resources. The Annual Filings are available electronically on Birchcliff's website atwww.birchcliffenergy.comand on SEDAR atwww.sedar.com.

Operational Update

Birchcliff's disciplined 2019 capital program (the "2019 Capital Program") is focused on its high-value light oil assets in Gordondale and its condensate-rich assets in Pouce Coupe. Wells that have been brought on production in 2019 to date have had encouraging initial production rates with strong oil and condensate volumes. These rates are summarized in Birchcliff's corporate presentation at www.birchcliffenergy.com/investors/corporate-presentation/.

Birchcliff currently has three drilling rigs at work, with two rigs in the Gordondale area and one in the Pouce Coupe area. Year-to-date, Birchcliff has drilled 10 (10.0 net) wells, consisting of 4 (4.0 net) Montney horizontal oil wells in the Gordondale area and 6 (6.0 net) Montney/Doig horizontal natural gas wells in the Pouce Coupe area. All of these wells were drilled on multi-well pads and none have been completed yet. With respect to the 9 wells Birchcliff drilled in Q4 2018, 7 of these wells have been brought on production and the remaining 2 wells are currently in various stages of completion. With 7 (7.0 net) wells left to drill under the 2019 Capital Program, Birchcliff expects to reduce the drilling rigs being utilized after break-up. Birchcliff anticipates that all 17 (17.0 net) wells to be drilled in 2019 will be brought on production by the end of Q3 2019.

The following tables summarize the wells that Birchcliff has drilled and brought on production year-to-date, as well as the remaining wells to be drilled and brought on production during 2019:

Wells Drilled - 2019

Total wells to be drilled in

Area

2019

Pouce Coupe

Montney D1 horizontal natural gas wells

6

Montney D2 horizontal natural gas wells

2

Montney C horizontal natural gas wells

1

Total - Pouce Coupe

9

Gordondale

Montney D2 horizontal oil wells

5

Montney D1 horizontal oil wells

3

Total - Gordondale

8

TOTAL - COMBINED

17

Wells drilled to-date

Remaining wells to be drilled in 2019

4 2 0

2 0 1

6

3 1

3

2 2

4

4

10

7

Wells Brought on Production - 2019

Total wells to be brought

Area

on production in 2019

Pouce Coupe

Montney D1 horizontal natural gas wells

11

Montney D2 horizontal natural gas wells

2

Montney C horizontal natural gas wells

1

Total - Pouce Coupe

14

Gordondale

Montney D2 horizontal oil wells

7

Montney D1 horizontal oil wells

5

Total - Gordondale

12

TOTAL - COMBINED

26(1)

(1)

Wells brought on production to-date

Remaining wells to be brought on production in 2019

3 0 0

8 2 1

3

2 2

11

5 3

4

8

7

19

Includes the 9 horizontal wells that were drilled in Gordondale and Pouce Coupe in Q4 2018 and have been or will be completed in 2019. Accordingly, a total of 26 (26.0 net) wells are expected to be brought on production during 2019.

2019 Guidance

Birchcliff is pleased to re-affirm its 2019 guidance. The following table sets forth its guidance and commodity price assumptions for 2019:

2019 Guidance and

Assumptions(1)

Production

Annual average production (boe/d)

76,000 - 78,000

% Natural gas

79%

% Light oil

7%

% Condensate

6%

% Other NGLs

8%

Average Expenses ($/boe)

Royalty

1.30 - 1.50

Operating

3.15 - 3.35

Transportation and other

4.65 - 4.85(2)

Adjusted Funds Flow (MM$)

330(3)

F&D Capital Expenditures (MM$)

204(4)

Free Funds Flow (MM$)(5)

126

Acquisition Purchase Price (MM$)

39(6)

Total Capital Expenditures (MM$)

245(4)

Natural Gas Market Exposure(7)

AECO exposure as a % of total natural gas production

35%

Dawn exposure as a % of total natural gas production

39%

NYMEX HH exposure as a % of total natural gas production

25%

Alliance pipeline exposure as a % of total natural gas production

1%

Commodity Prices

Average WTI price (US$/bbl)

56.00

Average WTI-MSW differential (CDN$/bbl)

10.00

Average AECO price (CDN$/GJ)

1.65

Average Dawn price (CDN$/GJ)

3.40

Average NYMEX HH price (US$/MMBtu)(8)

3.00

Exchange rate (CDN$ to US$1)

1.32

(1)Please see "Advisories - Forward-Looking Statements". Birchcliff's guidance for its commodity mix, average expenses, funds flow, capital expenditures and natural gas market exposure in 2019 is based on an annual average production rate of 77,000 boe/d during 2019, which is the mid-point of Birchcliff's annual average production guidance for 2019.

  • (2) Includes transportation tolls for 150,000 GJ/d of natural gas sold at the Dawn price from January 1, 2019 to October 31, 2019 and 175,000 GJ/d from November 1, 2019 to December 31, 2019. Also includes any new unused firm transportation costs associated with Birchcliff's commitments on the NGTL system, which is available for future production growth.

  • (3) Adjusted Funds Flow is calculated as cash flow from operating activities before the effects of decommissioning expenditures and changes in non-cash working capital. See "Non-GAAP Measures". Birchcliff's estimate of adjusted funds flow takes into account the settlement of financial and physical commodity risk management contracts outstanding as at March 13, 2019. See "Commodity Price Risk Management" in the MD&A.

  • (4) Birchcliff's estimate of F&D capital expenditures corresponds to Birchcliff's 2019 capital budget of $204 million. This estimate excludes the purchase price for the Corporation's recent acquisition of Montney land for total cash consideration of $39 million, which closed on January 3, 2019 (the "Acquisition") as described in the MD&A under "Subsequent Event", and any other net potential acquisitions and dispositions. Birchcliff's estimate of total capital expenditures includes the purchase price for the Acquisition; however, this estimate does not take into account any other potential acquisitions or dispositions as these amounts are unbudgeted. The estimate of total capital expenditures also includes minor administrative assets. See "Advisories - Capital Expenditures".

  • (5) Free funds flow is calculated as adjusted funds flow less F&D capital expenditures and is prior to administrative assets, acquisitions, dispositions, dividend payments and abandonment and reclamation obligations. See "Non-GAAP Measures". Free funds flow may be used by Birchcliff to reduce debt, pursue additional growth, pay dividends and/or to fund share buybacks under its normal course issuer bid. Any prolonged or significant decrease in commodity prices may leave insufficient free funds flow for debt reduction or the other foregoing purposes.

  • (6) Represents the purchase price for the Acquisition of $39 million.

  • (7) Birchcliff's guidance regarding its natural gas market exposure in 2019 assumes: (i) 150,000 GJ/d being sold at the Dawn index price from January 1, 2019 to October 31, 2019 and 175,000 GJ/d from November 1, 2019 to December 31, 2019; (ii) 5 MMcf/d being sold at Alliance's Trading Pool daily index price; and (iii) 100,000 MMBtu/d being hedged at a fixed basis differential between the AECO price and the NYMEX HH price.

  • (8) $1.00 per MMBtu equals $1.00 per Mcf based on a standard heat value of 37.4 MJ/m3 or a heat uplift of 1.055 when converting from $/GJ.

ABBREVIATIONS

AECO

benchmark price for natural gas determined at the AECO 'C' hub in southeast Alberta

bbl

barrel

boe

barrel of oil equivalent

boe/d

barrel of oil equivalent per day

F&D

finding and development

G&A

general and administrative

GAAP

generally accepted accounting principles for Canadian public companies which are currently International Financial Reporting

Standards as issued by the International Accounting Standards Board

GJ

gigajoule

GJ/d

gigajoules per day

HH

Henry Hub

m3

Cubic metres

Mcf

thousand cubic feet

MJ

megajoule

MM$

millions of dollars

MMBtu

million British thermal units

MMBtu/d

million British thermal units per day

MMcf/d

million cubic feet per day

MSW

price for mixed sweet crude oil at Edmonton, Alberta

NGLs

natural gas liquids

NGTL

NOVA Gas Transmission Ltd.

NYMEX

New York Mercantile Exchange

TCPL

TransCanada PipeLines Limited

WTI

West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma, for crude oil of standard grade

NON-GAAP MEASURES

This press release uses "adjusted funds flow" and "free funds flow". These measures do not have standardized meanings prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Management believes that these non-GAAP measures assist management and investors in assessing Birchcliff's profitability, efficiency, liquidity and overall performance. Each of these measures is discussed in further detail below.

"Adjusted funds flow" denotes cash flow from operating activities before the effects of decommissioning expenditures and changes in non-cash working capital. Birchcliff eliminates changes in non-cash working capital and 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 are managed with Birchcliff's capital budgeting process which considers available adjusted funds flow. Management believes that adjusted funds flow assists management and investors in assessing Birchcliff's profitability, as well as its ability to generate the cash necessaryto fund future growth through capital investments, decommission its assets, pay dividends and repay debt. Investors are cautioned that adjusted funds flow should not be construed as an alternative to or more meaningful than cash flow from operating activities or net income or loss as determined in accordance with GAAP as an indicator of Birchcliff's performance.

"Free funds flow" denotes adjusted funds flow less F&D capital expenditures. Management believes that free funds flow assists management and investors in assessing Birchcliff's ability to generate the cash necessary to repay debt, pay dividends, fund a portion of its future growth investments and/or fund share buybacks.

ADVISORIES

Currency

Unless otherwise indicated, all dollar amounts are expressed in Canadian dollars and all references to "$" and "CDN$" are to Canadian dollars and all references to "US$" are to United States dollars.

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.

Initial Production Rates

Any references in this press release to initial production rates or other short-term production rates are useful in confirming the presence of hydrocarbons; however, such rates are not determinative of the rates at which such wells will continue to produce and decline thereafter and are not indicative of the long-term performance or of the ultimate recovery of such wells. In addition, such rates may also include recovered "load oil" or "load water" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place undue reliance on such rates in calculating the aggregate production for Birchcliff. Such rates are based on field estimates and may be based on limited data available at this time.

Capital Expenditures

Unless otherwise stated, references in this press release to: (i) "F&D capital" denotes capital for land, seismic, workovers, drilling and completions and well equipment and facilities; and (ii) "total capital expenditures" denotes F&D capital plus acquisitions, less any dispositions, plus administrative assets. Birchcliff previously referred to total capital expenditures as "net capital expenditures" or "capital expenditures, net".

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 or performance 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", "expect", "project","intend", "believe", "anticipate", "estimate", "forecast", "potential", "proposed", "predict", "budget", "continue", "targeting", "may", "will", "could", "might", "should" 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, operations, focus, objectives, strategies, opportunities, priorities and goals; the information set forth under the heading "2019 Guidance" as it relates to Birchcliff's 2019 guidance (including: Birchcliff's estimates of annual average production, commodity mix, average expenses, adjusted and free funds flow, capital expenditures and natural gas market exposure in 2019; the possible uses of free funds flow; Birchcliff's guidance regarding its 2019 Capital Program and its proposed exploration and development activities and the timing thereof and the information set forth under the heading "Operational Update" (including: the number and types of wells to be drilled, completed and brought on production and the timing thereof; the focus of and the anticipated results from the program; and Birchcliff's marketing and transportation arrangements (including that an additional tranche of service on TCPL's Canadian Mainline will become available later in 2019 and the aggregate level of firm service on TCPL's Canadian Mainline that will become available on November 1, 2019).

With respect to the forward-looking statements contained in this press release, assumptions have been made regarding, among other things: prevailing and future commodity prices and differentials, currency 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 and environmental laws; future cash flow, debt and dividend levels; future operating, transportation, marketing, G&A 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; results of future operations; Birchcliff's ability to continue to develop its assets and obtain the anticipated benefits therefrom; the performance of existing and future wells, well production rates and well decline rates; success rates for future drilling; reserves and resource 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 transportation for its products; Birchcliff's ability to market oil and gas; the availability of hedges on terms acceptable to Birchcliff; and natural gas market exposure. In addition to the foregoing assumptions, Birchcliff has made the following assumptions with respect to certain forward-looking statements contained in this press release:

  • Birchcliff's 2019 guidance assumes the following commodity prices during 2019: an average WTI price of US$56.00/bbl; an average WTI-MSW differential of $10.00/bbl; an average AECO price of $1.65/GJ; an average Dawn price of $3.40/GJ; an average NYMEX HH price of US$3.00/MMBtu; and an exchange rate (CDN$ to US$1) of 1.32.

  • With respect to Birchcliff's production guidance for 2019, such guidance assumes that: the 2019 Capital Program will be carried out as currently contemplated; no unexpected outages occur in the infrastructure that Birchcliff relies on to produce its wells and that any transportation service curtailments or unplanned outages that occur will be short in duration or otherwise insignificant; the construction of new infrastructure meets timing and operational expectations; existing wells continue to meet production expectations; and future wells scheduled to come on production meet timing, production and capital expenditure expectations. Birchcliff's production guidance may be affected by acquisition and disposition activity and acquisitions and dispositions could occur that may impact expected production.

Disclaimer

Birchcliff Energy Ltd. published this content on 13 March 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 13 March 2019 20:33:05 UTC

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EBIT 2019 -
Net income 2019 26,7 M
Debt 2019 636 M
Yield 2019 4,56%
P/E ratio 2019 28,4x
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Average target price 4,81  CAD
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Spread / Highest target 170%
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Bruno P. Geremia Chief Financial Officer & Vice President
Christopher A. Carlsen Vice President-Engineering
James W. Surbey Non-Independent Director
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