2019 Year-End Highlights
- Generated
$78.1 million of free funds flow in 2019, an increase from$13.3 million in 2018. - Achieved record annual average production of 77,977 boe/d, a 1% increase from 2018.
- Liquids accounted for approximately 22% of Birchcliff’s total production in 2019 as compared to approximately 20% in 2018, with total liquids production increasing by 14% from 2018.
- Delivered
$334.5 million of adjusted funds flow, or$1.26 per basic common share, each a 7% increase from 2018. - Recorded a net loss to common shareholders of
$59.6 million , or$0.22 per basic common share, as compared to net income to common shareholders of$98.0 million and$0.37 per basic common share in 2018. - Achieved record low annual operating expense of
$3.09 /boe, a 12% decrease from 2018. - Realized an operating netback of
$13.07 /boe, a 3% decrease from 2018. - Successfully executed the Corporation’s 2019 capital program, drilling a total of 30 (30.0 net) wells and bringing 33 (33.0 net) wells on production. F&D capital expenditures were
$256.4 million in 2019. - Total capital expenditures were
$300.2 million in 2019, which included the$39 million acquisition of 18 gross (15.1 net) contiguous sections ofMontney land located between Birchcliff’s existingPouce Coupe and Gordondale properties (the “Acquisition”). Birchcliff drilled 8 (8.0 net) wells and completed and brought on production 6 (6.0 net) successful condensate-rich natural gas wells on the acquired lands in 2019. - Paid
$27.9 million in common share dividends in 2019.
Q4 2019 Highlights
- Achieved quarterly average production of 77,962 boe/d, a 2% increase from Q4 2018.
- Liquids accounted for approximately 22% of Birchcliff’s total production in Q4 2019 as compared to approximately 21% in Q4 2018, with total liquids production increasing by 9% from Q4 2018.
- Delivered
$80.9 million of adjusted funds flow, or$0.30 per basic common share, a 1% decrease and a 3% decrease, respectively, from Q4 2018. - Generated
$24.1 million of free funds flow in Q4 2019, a decrease from$29.2 million in Q4 2018. - Recorded a net loss to common shareholders of
$19.0 million , or$0.07 per basic common share, as compared to net income to common shareholders of$70.9 million and$0.27 per basic common share in Q4 2018. - Achieved operating expense of
$3.06 /boe, a 13% decrease from Q4 2018. - Realized an operating netback of
$14.25 /boe, a 6% increase from Q4 2018. - Total capital expenditures of
$58.1 million . During the quarter, Birchcliff drilled 7 (7.0 net) wells.
2019 Reserves, F&D Costs and Recycle Ratio Highlights
- The following table summarizes the estimates of Birchcliff’s gross reserves at
December 31, 2019 andDecember 31, 2018 , as estimated by Birchcliff’s independent qualified reserves evaluators using the forecast price and cost assumptions in effect as at the effective dates of the applicable reserves evaluations:
Reserves Category | (Mboe) | (Mboe) | Change from |
Proved Developed Producing | 206,922.4 | 203,631.0 | 2% |
Total Proved | 709,061.2 | 689,674.1 | 3% |
Probable | 323,133.5 | 312,396.0 | 3% |
Total Proved Plus Probable | 1,032,194.7 | 1,002,070.1 | 3% |
- Birchcliff’s proved developed producing reserves increased by 29,649.3 Mboe during 2019, before including the effects of acquisitions and dispositions and adding back 2019 actual production of 28,461.6 Mboe.
- Birchcliff’s proved developed producing reserves increased by 1.04 boe for each boe that was produced in 2019, before including the effects of acquisitions and dispositions and adding back 2019 actual production.
- Birchcliff’s NGLs reserves, which include condensate, increased by 29% on a proved basis and 24% on a proved plus probable basis, as a result of its focus on extracting more high-value liquids in 2019.
- Birchcliff’s total light and medium crude oil and NGLs weighting of its proved developed producing, proved and proved plus probable reserves increased to 20%, 16% and 17% of total boes, respectively.
- The estimated net present value at
December 31, 2019 (before taxes, discounted at 10%) was$1.9 billion for Birchcliff’s proved developed producing reserves (December 31, 2018 :$2.3 billion ),$4.1 billion for its proved reserves (December 31, 2018 :$4.7 billion ) and$5.3 billion for its proved plus probable reserves (December 31, 2018 :$6.1 billion ). - Reserves life index of 7.0 years on a proved developed producing basis, 24.0 years on a proved basis and 34.9 years on a proved plus probable basis, based on a forecast production rate of 81,000 boe/d (which represents the mid-point of Birchcliff’s annual average production guidance range for 2020).
- During 2019, Birchcliff’s F&D capital expenditures were
$256.4 million and its FD&A capital expenditures were$297.8 million . The following table sets forth Birchcliff’s F&D costs and FD&A costs per boe for 2019, 2018 and 2017, excluding and including FDC:
Excluding FDC($/boe)(1) | 2019 | 2018 | 2017 | 3-Year Average | ||||
F&D – Proved Developed Producing | ||||||||
F&D – Proved | ||||||||
F&D – Proved Plus Probable | ||||||||
FD&A – Proved Developed Producing | ||||||||
FD&A – Proved | ||||||||
FD&A – Proved Plus Probable | ||||||||
Including FDC ($/boe)(1) | 2019(2) | 2018(3) | 2017(4) | 3-Year Average | ||||
F&D – Proved | ||||||||
F&D – Proved Plus Probable | ||||||||
FD&A – Proved | ||||||||
FD&A – Proved Plus Probable |
(1) See “Advisories – Oil and Gas Metrics” for a description of the methodology used to calculate F&D and FD&A costs.
(2) Reflects the 2019 increase in FDC from 2018 of
(3) Reflects the 2018 decrease in FDC from 2017 of
(4) Reflects the 2017 increase in FDC from 2016 of
- Birchcliff had positive recycle ratios for its proved developed producing reserves, notwithstanding that its F&D capital expenditures included
$57 million of facilities and infrastructure and drilling and development capital spent in 2019, which did not result in the addition of proved developed producing reserves at year-end 2019. - The following table sets forth Birchcliff’s recycle ratios for its operating and adjusted funds flow netbacks for 2019 and 2018, excluding and including FDC:
Operating Netback Recycle Ratio(1)(2) | Adjusted Funds Flow Netback Recycle Ratio(1)(3) | |||
2019 | 2018 | 2019 | 2018 | |
Excluding FDC | ||||
F&D – Proved Developed Producing | 1.5 | 1.5 | 1.4 | 1.3 |
FD&A – Proved Developed Producing | 1.4 | 1.5 | 1.3 | 1.3 |
F&D – Proved | 2.5 | 2.4 | 2.3 | 2.0 |
FD&A – Proved | 2.1 | 2.4 | 1.9 | 2.0 |
F&D – Proved Plus Probable | 3.7 | 2.4 | 3.3 | 2.0 |
FD&A – Proved Plus Probable | 2.6 | 2.6 | 2.3 | 2.2 |
Including FDC | ||||
F&D – Proved | 1.7 | 21.2 | 1.5 | 17.4 |
FD&A – Proved | 1.5 | 30.3 | 1.3 | 24.9 |
F&D – Proved Plus Probable | 2.1 | 10.7 | 1.9 | 8.8 |
FD&A – Proved Plus Probable | 1.8 | 9.2 | 1.6 | 7.6 |
(1) See “Advisories – Oil and Gas Metrics” for a description of the methodology used to calculate recycle ratios.
(2) Birchcliff’s operating netback was
(3) Birchcliff’s adjusted funds flow netback was
Birchcliff anticipates filing its annual information form and audited financial statements and related management’s discussion and analysis for the year ended
This press release contains forward-looking statements within the meaning of applicable securities laws. For further information regarding the forward-looking statements contained herein, see “Advisories – Forward-Looking Statements”. In addition, this press release contains references to “adjusted funds flow”, “adjusted funds flow per basic common share”, “free funds flow”, “operating netback”, “adjusted funds flow netback”, “total cash costs”, “adjusted working capital deficit” and “total debt”, which do not have standardized meanings prescribed by GAAP. For further information regarding these non-GAAP measures, including reconciliations to the most directly comparable GAAP measure where applicable, see “Non-GAAP Measures”. This press release also contains metrics commonly used in the oil and natural gas industry, including “netbacks”, “reserves life index”, “recycle ratio”, “reserves replacement”, “F&D costs” and “FD&A costs”, which do not have any standardized meanings. See “Advisories – Oil and Gas Metrics”. All financial and operating information for the fourth quarter and year ended
2019 UNAUDITED FINANCIAL AND OPERATIONAL HIGHLIGHTS
Three months ended | Twelve months ended | |||||||
2019 | 2018(5) | 2019 | 2018(5) | |||||
OPERATING | ||||||||
Average production | ||||||||
Light oil – (bbls/d) | 4,435 | 4,788 | 4,742 | 4,873 | ||||
Condensate – (bbls/d)(1) | 4,906 | 4,207 | 5,145 | 4,072 | ||||
NGLs – (bbls/d)(1) | 7,814 | 6,814 | 7,264 | 6,123 | ||||
Natural gas – (Mcf/d) | 364,847 | 363,596 | 364,958 | 372,170 | ||||
Total – boe/d | 77,962 | 76,408 | 77,977 | 77,096 | ||||
Average realized sales price (CDN$)(2) | ||||||||
Light oil – (per bbl) | 67.58 | 41.39 | 68.29 | 68.66 | ||||
Condensate – (per bbl)(1) | 68.80 | 55.99 | 68.06 | 77.36 | ||||
NGLs – (per bbl)(1) | 16.62 | 21.60 | 13.76 | 22.92 | ||||
Natural gas – (per Mcf) | 2.81 | 3.03 | 2.48 | 2.45 | ||||
Total – per boe | 22.97 | 22.01 | 21.55 | 22.08 | ||||
NETBACK AND COST ($/boe) | ||||||||
Petroleum and natural gas revenue(2) | 22.97 | 22.01 | 21.56 | 22.08 | ||||
Royalty expense | (1.15 | ) | (0.96 | ) | (0.96 | ) | (1.36 | ) |
Operating expense | (3.06 | ) | (3.51 | ) | (3.09 | ) | (3.52 | ) |
Transportation and other expense | (4.51 | ) | (4.07 | ) | (4.44 | ) | (3.68 | ) |
Operating netback ($/boe) | 14.25 | 13.47 | 13.07 | 13.52 | ||||
G&A expense, net | (1.26 | ) | (1.08 | ) | (0.94 | ) | (0.87 | ) |
Interest expense | (0.82 | ) | (1.06 | ) | (0.88 | ) | (0.99 | ) |
Realized gain (loss) on financial instruments | (0.92 | ) | 0.24 | 0.48 | (0.56 | ) | ||
Other income | 0.03 | 0.03 | 0.02 | 0.02 | ||||
Adjusted funds flow netback ($/boe) | 11.28 | 11.60 | 11.75 | 11.12 | ||||
Depletion and depreciation expense | (7.49 | ) | (7.29 | ) | (7.50 | ) | (7.42 | ) |
Unrealized gain (loss) on financial instruments | (6.50 | ) | 11.02 | (6.77 | ) | 2.28 | ||
Other expenses(3) | (0.28 | ) | (1.21 | ) | (0.51 | ) | (0.79 | ) |
Dividends on preferred shares | (0.27 | ) | (0.26 | ) | (0.27 | ) | (0.27 | ) |
Income tax recovery (expense) | 0.61 | (3.77 | ) | 1.21 | (1.44 | ) | ||
Net income (loss) to common shareholders ($/boe) | (2.65 | ) | 10.09 | (2.09 | ) | 3.48 | ||
FINANCIAL | ||||||||
Petroleum and natural gas revenue ($000s)(2) | 164,759 | 154,720 | 613,559 | 621,421 | ||||
Cash flow from operating activities ($000s) | 85,557 | 92,200 | 327,066 | 324,434 | ||||
Adjusted funds flow ($000s) | 80,941 | 81,517 | 334,504 | 312,922 | ||||
Per basic common share ($) | 0.30 | 0.31 | 1.26 | 1.18 | ||||
Net income (loss) to common shareholders ($000s) | (18,984 | ) | 70,900 | (59,579 | ) | 98,025 | ||
Per basic common share ($) | (0.07 | ) | 0.27 | (0.22 | ) | 0.37 | ||
End of period basic common shares (000s) | 265,935 | 265,911 | 265,935 | 265,911 | ||||
Weighted average basic common shares (000s) | 265,935 | 265,910 | 265,930 | 265,852 | ||||
Dividends on common shares ($000s) | 6,981 | 6,648 | 27,923 | 26,586 | ||||
Dividends on preferred shares ($000s) | 1,922 | 1,922 | 7,687 | 7,687 | ||||
Total capital expenditures ($000s)(4) | 58,136 | 52,886 | 300,246 | 298,018 | ||||
Long-term debt ($000s) | 609,177 | 605,267 | 609,177 | 605,267 | ||||
Total debt ($000s) | 632,582 | 626,454 | 632,582 | 626,454 |
(1) Beginning in Q1 2019, Birchcliff began presenting condensate and NGLs separately. Prior period sales and volumes have been adjusted to conform to this current period presentation. See “Advisories – Production”.
(2) Excludes the effects of financial instruments but includes the effects of physical delivery contracts.
(3) Includes non-cash expenses such as compensation, accretion, amortization of deferred financing fees and other losses.
(4) Total capital expenditures for the year ended
(5) Birchcliff adopted IFRS 16: Leases effective
Q4 AND FULL-YEAR 2019 UNAUDITED FINANCIAL AND OPERATIONAL RESULTS
Production
Birchcliff’s production averaged 77,962 boe/d in Q4 2019, a 2% increase from 76,408 boe/d in Q4 2018. Birchcliff’s full-year 2019 production averaged 77,977 boe/d, a 1% increase from 77,096 boe/d in 2018, in line with its guidance of 77,000 to 79,000 boe/d. The increases were primarily due to the success of Birchcliff’s capital program which resulted in incremental production from new horizontal oil wells brought on production in Gordondale and horizontal condensate-rich natural gas wells in
Liquids accounted for approximately 22% of Birchcliff’s total production in Q4 2019 (12% light oil and condensate and 10% NGLs) as compared to approximately 21% in Q4 2018 (12% light oil and condensate and 9% NGLs), with total liquids production increasing by 9% from Q4 2018. For the full-year 2019, liquids accounted for approximately 22% of Birchcliff’s total production (13% light oil and condensate and 9% NGLs) as compared to approximately 20% in 2018 (11% light oil and condensate and 9% NGLs), in line with its guidance of 22% liquids. Total liquids production for the full-year 2019 increased by 14% from 2018. The change in the commodity production mix was primarily due to the addition of condensate-rich natural gas wells in
Adjusted Funds Flow
Birchcliff’s adjusted funds flow for Q4 2019 was
Birchcliff’s full-year 2019 adjusted funds flow was
Net Loss to Common Shareholders
Birchcliff recorded a net loss to common shareholders of
Birchcliff recorded a net loss to common shareholders of
Operating Expense
The Corporation remained focused on reducing its operating costs in 2019, resulting in a quarterly operating expense of
Operating Netback
Birchcliff’s operating netback was
Total Cash Costs
Birchcliff’s total cash costs were
Pouce Coupe Gas Plant Netbacks
During 2019, Birchcliff processed approximately 72% of its total corporate natural gas production and 62% of its total corporate production through the Pouce Coupe Gas Plant as compared to 67% and 57%, respectively, during 2018. The following table sets forth Birchcliff’s average daily production and operating netback for wells producing to the Pouce Coupe Gas Plant for the periods indicated:
2019 | 2018 | |||||||||||
Average production: | ||||||||||||
Condensate (bbls/d) | 3,801 | 2,430 | ||||||||||
NGLs (bbls/d) | 934 | 179 | ||||||||||
Natural gas (Mcf/d) | 263,108 | 250,011 | ||||||||||
Total (boe/d) | 48,587 | 44,278 | ||||||||||
Liquids-to-gas ratio (bbls/MMcf)(1) | 18.0 | 10.4 | ||||||||||
Netback and cost: | $/Mcfe | $/boe | $/Mcfe | $/boe | ||||||||
Petroleum and natural gas revenue(2) | 3.20 | 19.17 | 3.02 | 18.11 | ||||||||
Royalty expense | (0.07 | ) | (0.42 | ) | (0.05 | ) | (0.29 | ) | ||||
Operating expense(3) | (0.34 | ) | (2.05 | ) | (0.34 | ) | (2.02 | ) | ||||
Transportation and other expense | (0.76 | ) | (4.54 | ) | (0.59 | ) | (3.56 | ) | ||||
Operating netback | $2.03 | $12.16 | $2.04 | $12.24 | ||||||||
Operating margin(4) | 63 | % | 63 | % | 68 | % | 68 | % |
(1) “Liquids” consists of NGLs, including condensate.
(2) Excludes the effects of financial instruments but includes the effects of physical delivery contracts.
(3) Represents plant and field operating expense.
(4) Operating margin is calculated by dividing the operating netback for the period by the petroleum and natural gas revenue for the period.
Birchcliff’s liquids-to-gas ratio increased by 73% as compared to 2018 primarily due to: (i) specifically targeted condensate-rich natural gas wells that were brought on production in
Debt
At
Birchcliff’s credit facilities mature on
Commodity Prices
The following table sets forth the average benchmark index prices for the periods indicated:
Three months ended | Twelve months ended | |||||||
2019 | 2018 | % Change | 2019 | 2018 | % Change | |||
Average benchmark index prices: | ||||||||
Light oil – WTI Cushing (US$/bbl) | 56.96 | 58.81 | (3 | %) | 57.03 | 64.77 | (12 | %) |
Light oil – MSW (Mixed Sweet) (CDN$/bbl) | 67.66 | 42.42 | 60 | % | 68.72 | 69.04 | - | |
Natural gas – NYMEX HH (US$/MMBtu)(1) | 2.50 | 3.76 | (34 | %) | 2.63 | 3.07 | (14 | %) |
Natural gas – AECO 5A Daily (CDN$/GJ) | 2.35 | 1.48 | 59 | % | 1.67 | 1.42 | 18 | % |
Natural gas – AECO 7A Month Ahead (US$/MMBtu)(1) | 1.77 | 1.45 | 22 | % | 1.22 | 1.54 | (21 | %) |
Natural gas – Dawn Day Ahead (US$/MMBtu)(1) | 2.23 | 3.78 | (41 | %) | 2.40 | 3.12 | (23 | %) |
Natural gas – ATP 5A Day Ahead (CDN$/GJ) | 1.92 | 2.57 | (25 | %) | 1.66 | 2.07 | (20 | %) |
Exchange rate (CDN$ to | 1.3201 | 1.3215 | - | 1.3269 | 1.2961 | 2 | % | |
Exchange rate (US$ to | 0.7575 | 0.7567 | - | 0.7536 | 0.7715 | (2 | %) |
(1)
Risk Management
Birchcliff engages in risk management activities by utilizing various financial instruments and physical delivery contracts to diversify its sales points or fix commodity prices and market interest rates, including NYMEX/AECO basis swaps which fix the basis differential between AECO and NYMEX HH prices, effectively providing for a floating NYMEX HH price.
Birchcliff realized a cash loss on financial instruments of
Birchcliff recorded an unrealized non-cash loss on financial instruments of
The unrealized gains and losses on financial NYMEX HH basis contracts can fluctuate materially from period-to-period due to movement in the forward NYMEX HH and AECO 7A strip prices. Unrealized gains and losses on financial instruments do not impact adjusted funds flow and may differ materially from the actual gains or losses realized on the eventual cash settlement of financial contracts in a period.
Marketing and Natural Gas Market Diversification
Birchcliff’s physical natural gas sales exposure primarily consists of the AECO,
The following table details Birchcliff’s effective sales, production and average realized sales price for natural gas and liquids for Q4 2019, after taking into account the Corporation’s financial instruments:
Three months ended | ||||||
| Effective sales (CDN$000s) | Percentage of total sales (%) | Effective production (per day) | Percentage of total natural gas production (%) | Percentage of total corporate production (%) | Effective average realized sales price (CDN$) |
Markets | ||||||
AECO(1) | 27,536 | 17 | 113,196 Mcf | 31 | 24 | 2.64/Mcf |
Dawn(2) | 43,706 | 28 | 152,115 Mcf | 42 | 33 | 3.12/Mcf |
Alliance(3) | 1,507 | 1 | 8,271 Mcf | 2 | 2 | 1.98/Mcf |
NYMEX HH(1) | 14,875 | 9 | 91,265 Mcf | 25 | 19 | 1.77/Mcf |
Total natural gas | 87,624 | 55 | 364,847 Mcf | 100 | 78 | 2.61/Mcf |
Light oil | 27,571 | 17 | 4,435 bbls | 6 | 67.58/bbl | |
Condensate | 31,050 | 20 | 4,906 bbls | 6 | 68.80/bbl | |
NGLs | 11,944 | 8 | 7,814 bbls | 10 | 16.62/bbl | |
Total liquids | 70,565 | 45 | 17,155 bbls | 22 | 44.71/bbl | |
Total corporate | 158,189 | 100 | 77,962 boe | 100 | 22.05/boe |
(1) A portion of AECO 5A sales and production that effectively received NYMEX HH pricing under Birchcliff’s long-term physical and financial NYMEX/AECO 7A basis swap contracts has been included as effective sales and production in NYMEX HH markets. Birchcliff sold financial and physical AECO 7A basis swaps for 100,000 MMBtu/d at an average contract price of NYMEX HH less
(2) Birchcliff has agreements for the firm service transportation of an aggregate of 175,000 GJ/d of natural gas on TCPL’s Canadian Mainline, whereby natural gas is transported to the Dawn trading hub in
(3) Birchcliff has sales agreements with a third party marketer to sell and deliver into the Alliance pipeline system until
Effectively 83% of the Corporation’s sales revenue, representing 69% of its total natural gas production and 76% of its total corporate production, was generated from markets outside of AECO in Q4 2019, after taking into account its liquids sales and long-term financial NYMEX/AECO basis swap position.
The following tables set forth Birchcliff’s sales, production, average realized sales price, transportation costs and natural gas sales netback by natural gas market for the periods indicated, before taking into account the Corporation’s financial instruments:
Three months ended | |||||||
Natural gas sales(1) ($000s) | Percentage of natural gas sales (%) | Natural gas production (Mcf/d) | Percentage of natural gas production (%) | Average realized natural gas sales price(1) ($/Mcf) | Natural gas transportation costs(2) ($/Mcf) | Natural gas sales netback(3) ($/Mcf) | |
AECO | 48,976 | 52 | 204,461 | 56 | 2.60 | 0.34 | 2.26 |
Dawn(4) | 43,706 | 46 | 152,115 | 42 | 3.12 | 1.37 | 1.75 |
Alliance(5) | 1,507 | 2 | 8,271 | 2 | 1.98 | - | 1.98 |
Total | 94,189 | 100 | 364,847 | 100 | 2.81 | 0.77 | 2.04 |
Three months ended | |||||||
Natural gas sales(1) ($000s) | Percentage of natural gas sales (%) | Natural gas production (Mcf/d) | Percentage of natural gas production (%) | Average realized natural gas sales price(1) ($/Mcf) | Natural gas transportation costs(2) ($/Mcf) | Natural gas sales netback(3) ($/Mcf) | |
AECO | 33,788 | 33 | 223,261 | 61 | 1.67 | 0.31 | 1.36 |
Dawn(4) | 64,969 | 64 | 127,211 | 35 | 5.55 | 1.34 | 4.21 |
Alliance(5) | 2,492 | 3 | 13,124 | 4 | 2.06 | - | 2.06 |
Total | 101,249 | 100 | 363,596 | 100 | 3.03 | 0.66 | 2.37 |
(1) Excludes the effects of financial instruments but includes the effects of physical delivery contracts.
(2) Reflects costs to transport natural gas from the field receipt point to the delivery sales trading hub.
(3) Natural gas sales netback denotes the average realized natural gas sales price less natural gas transportation costs.
(4) During Q4 2018, Birchcliff entered into physical natural gas delivery contracts at Dawn for 50,000 MMBtu/d at an average contract price of
(5) Alliance transportation tolls are recorded net of sales price.
Capital Activities and Investment
Birchcliff’s successful 2019 capital program (the “2019 Capital Program”) was focused on the drilling of high-value light oil wells in Gordondale and condensate-rich and low-cost natural gas wells in
During 2019, Birchcliff drilled 30 (30.0 net) horizontal wells, 7 (7.0 net) of which were drilled in Q4 2019 to help ensure the efficient execution of the Corporation’s 2020 capital program. Of these, 5 (5.0 net) were condensate-rich natural gas wells in
Area | Total wells drilled in 2019(1) | Total wells brought on production in 2019(2) | ||
9 | 14 | |||
5 | 2 | |||
Montney C horizontal natural gas wells | 2 | 1 | ||
Total – | 16 | 17 | ||
Gordondale | ||||
1 | 0 | |||
7 | 9 | |||
6 | 7 | |||
Total – Gordondale | 14 | 16 | ||
TOTAL – COMBINED | 30 | 33 |
(1) Includes the 6 additional wells drilled in Q4 2019.
(2) Does not include the 6 additional wells drilled in Q4 2019 as none of these wells were brought on production in 2019. In addition, the 2019 Capital Program included the capital associated with 9 Montney/Doig wells (5 in
Total capital expenditures for 2019 were
Key focus areas for
Birchcliff also initiated the construction of the Inlet Liquids-Handling Facility in 2019 in order to handle increased condensate volumes in the area. Once completed, this facility will give Birchcliff the ability to increase its condensate production in the
On
With the positive results of the first 6 wells on the acquired lands, specifically in the new
Gordondale
Key focus areas for Gordondale in 2019 were the drilling of crude oil wells and the further exploitation and delineation of oil in the
Due to the Corporation’s success in the southeastern part of the Gordondale field and the targeted activity expected in 2020, Birchcliff commenced the engineering and procurement for the addition of natural gas compression at both of its 100% owned and operated oil batteries in Gordondale in 2019. The Corporation also initiated the construction of a significant trunk line to transport oil, natural gas and water to these batteries from the southeastern portion of the field. Both projects are expected to be completed in Q2 2020, in conjunction with the bringing on production of 10 wells in the southeastern part of the field.
For details regarding Birchcliff’s drilling results, see its updated corporate presentation available on its website at www.birchcliffenergy.com/investors/corporate-presentation/.
Potential Future Drilling Opportunities on the
As at
Birchcliff’s consolidated reserves report effective
1 This does not include any potential net future horizontal drilling locations for the other prospective
2019 YEAR-END RESERVES
Birchcliff retained two independent qualified reserves evaluators,
The reserves data set forth below at
Deloitte also prepared an evaluation with an effective date of
All of the above-noted reserves reports were prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook (the “COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) in effect at the relevant time.
For additional information regarding the presentation of Birchcliff’s reserves disclosure contained herein, see “Presentation of Oil and Gas Reserves” and “Advisories” in this press release. The reserves data provided in this press release presents only a portion of the disclosure required under NI 51-101. The disclosure required under NI 51-101 will be contained in Birchcliff’s Annual Information Form for the year ended
Reserves Summary
The following table summarizes the estimates of Birchcliff’s gross reserves at
Summary of Gross Reserves
(Forecast Prices and Costs)
Reserves Category | (Mboe) | (Mboe) | Change from |
Proved Developed Producing | 206,922.4 | 203,631.0 | 2% |
Total Proved | 709,061.2 | 689,674.1 | 3% |
Probable | 323,133.5 | 312,396.0 | 3% |
Total Proved Plus Probable | 1,032,194.7 | 1,002,070.1 | 3% |
The following table sets forth Birchcliff’s light crude oil and medium crude oil, conventional natural gas, shale gas and NGLs reserves at
Summary of Reserves at
(Forecast Prices and Costs)
Reserves Category | Light Crude Oil and Medium Crude Oil | Conventional Natural Gas | NGLs(1) | Total Boe | |||||||||||||||||
Gross (Mbbls) | Net (Mbbls) | Gross (MMcf) | Net (MMcf) | Gross (MMcf) | Net (MMcf) | Gross (Mbbls) | Net (Mbbls) | Gross (Mboe) | Net (Mboe) | ||||||||||||
Proved | |||||||||||||||||||||
Developed Producing | 9,695.0 | 7,951.6 | 7,814.9 | 7,266.9 | 982,141.3 | 922,927.5 | 32,234.6 | 25,443.1 | 206,922.4 | 188,427.2 | |||||||||||
Developed Non-Producing | 0.0 | 0.0 | 781.0 | 726.3 | 21,756.0 | 20,362.1 | 650.9 | 547.0 | 4,407.1 | 4,061.8 | |||||||||||
Undeveloped | 11,358.3 | 9,801.8 | 2,870.5 | 2,624.0 | 2,576,268.7 | 2,414,085.0 | 56,516.9 | 46,590.6 | 497,731.7 | 459,177.2 | |||||||||||
Total Proved | 21,053.3 | 17,753.5 | 11,466.4 | 10,617.2 | 3,580,166.0 | 3,357,374.6 | 89,402.5 | 72,580.7 | 709,061.2 | 651,666.1 | |||||||||||
Probable | 12,543.4 | 10,172.4 | 8,348.4 | 7,850.7 | 1,553,306.8 | 1,437,876.2 | 50,314.2 | 39,829.8 | 323,133.5 | 290,956.6 | |||||||||||
Total Proved Plus Probable | 33,596.8 | 27,925.8 | 19,814.8 | 18,467.9 | 5,133,472.7 | 4,795,250.8 | 139,716.7 | 112,410.5 | 1,032,194.7 | 942,622.8 |
(1) NGLs includes condensate.
Net Present Values of Future Net Revenue
The following table sets forth the net present values of future net revenue attributable to Birchcliff’s reserves at
Summary of Net Present Values of Future Net Revenue at
(Forecast Prices and Costs)
Reserves Category | Before Income Taxes Discounted At (%/year) | ||||||||||||||
0 (MM$) | 5 (MM$) | 10 (MM$) | 15 (MM$) | 20(MM$) | Unit Value Discounted at 10%/year($/boe)(3) | ||||||||||
Proved | |||||||||||||||
Developed Producing | 3,258.4 | 2,462.2 | 1,938.5 | 1,594.6 | 1,357.2 | 10.29 | |||||||||
Developed Non-Producing | 79.2 | 39.8 | 19.5 | 7.7 | 0.3 | 4.80 | |||||||||
Undeveloped | 7,044.1 | 3,759.9 | 2,148.9 | 1,271.7 | 755.5 | 4.68 | |||||||||
Total Proved | 10,381.7 | 6,261.9 | 4,106.9 | 2,874.0 | 2,113.1 | 6.30 | |||||||||
Probable | 5,890.7 | 2,481.5 | 1,207.6 | 654.3 | 383.8 | 4.15 | |||||||||
Total Proved Plus Probable | 16,272.4 | 8,743.3 | 5,314.5 | 3,528.3 | 2,496.9 | 5.64 |
(1) Estimates of future net revenue, whether calculated without discount or using a discount rate, do not represent fair market value.
(2) Includes abandonment, decommissioning and reclamation costs for all oil and natural gas assets, including all wells, gathering systems, pipelines, facilities and surface land development.
(3) Unit values are based on net reserves.
Pricing Assumptions
The following table sets forth the 2019 IQRE Price Forecast used in the 2019 Consolidated Reserves Report:
2019 IQRE Price Forecast
Year | Crude Oil | Natural Gas(1) | NGLs | Currency Exchange Rate (CDN$/US$) | Price and Cost Inflation Rates(%) | |||||||||||||||||
WTI at | Alberta AECO Average Price (CDN$/Mcf) | Ontario Dawn (CDN$/Mcf) | NYMEX Henry Hub(US$/Mcf) | Edmonton Ethane(CDN$/bbl) | Edmonton Butane (CDN$/bbl) | Edmonton Pentanes + Condensate (CDN$/bbl) | ||||||||||||||||
2020 | 60.25 | 71.58 | 2.05 | 3.27 | 2.57 | 6.29 | 24.04 | 37.56 | 74.21 | 0.760 | 0.0 | |||||||||||
2021 | 63.11 | 75.33 | 2.32 | 3.62 | 2.79 | 7.17 | 28.75 | 44.41 | 78.15 | 0.768 | 2.0 | |||||||||||
2022 | 66.02 | 77.51 | 2.60 | 3.80 | 2.99 | 8.04 | 33.14 | 50.19 | 80.48 | 0.779 | 2.0 | |||||||||||
2023 | 67.64 | 79.77 | 2.74 | 3.94 | 3.15 | 8.45 | 34.16 | 51.67 | 82.77 | 0.789 | 2.0 | |||||||||||
2024 | 69.16 | 81.60 | 2.82 | 4.05 | 3.22 | 8.73 | 35.00 | 52.88 | 84.66 | 0.786 | 2.0 | |||||||||||
2025 | 70.69 | 83.46 | 2.91 | 4.14 | 3.29 | 8.97 | 35.85 | 54.09 | 86.56 | 0.789 | 2.0 | |||||||||||
2026 | 72.25 | 85.34 | 2.97 | 4.23 | 3.35 | 9.18 | 36.71 | 55.33 | 88.49 | 0.789 | 2.0 | |||||||||||
2027 | 73.77 | 87.19 | 3.03 | 4.31 | 3.43 | 9.38 | 37.55 | 56.53 | 90.40 | 0.789 | 2.0 | |||||||||||
2028 | 75.25 | 88.97 | 3.10 | 4.40 | 3.49 | 9.58 | 38.37 | 57.69 | 92.22 | 0.789 | 2.0 | |||||||||||
2029 | 76.76 | 90.79 | 3.16 | 4.48 | 3.56 | 9.81 | 39.19 | 58.87 | 94.09 | 0.789 | 2.0 | |||||||||||
2030 | 78.29 | 92.61 | 3.24 | 4.57 | 3.64 | 10.01 | 40.03 | 60.05 | 96.00 | 0.789 | 2.0 | |||||||||||
2031 | 79.86 | 94.46 | 3.30 | 4.67 | 3.71 | 10.22 | 40.83 | 61.25 | 97.91 | 0.789 | 2.0 | |||||||||||
2032 | 81.45 | 96.34 | 3.36 | 4.76 | 3.79 | 10.43 | 41.65 | 62.47 | 99.87 | 0.789 | 2.0 | |||||||||||
2033 | 83.08 | 98.27 | 3.44 | 4.85 | 3.86 | 10.62 | 42.48 | 63.72 | 101.87 | 0.789 | 2.0 | |||||||||||
2034 | 84.75 | 100.23 | 3.50 | 4.95 | 3.94 | 10.84 | 43.34 | 64.99 | 103.90 | 0.789 | 2.0 | |||||||||||
2035 | 86.44 | 102.25 | 3.57 | 5.05 | 4.01 | 11.06 | 44.20 | 66.29 | 105.99 | 0.789 | 2.0 | |||||||||||
2036 | 88.17 | 104.29 | 3.65 | 5.15 | 4.10 | 11.28 | 45.08 | 67.63 | 108.11 | 0.789 | 2.0 | |||||||||||
2037 | 89.93 | 106.37 | 3.71 | 5.26 | 4.17 | 11.50 | 45.98 | 68.97 | 110.26 | 0.789 | 2.0 | |||||||||||
2038 | 91.73 | 108.50 | 3.79 | 5.36 | 4.26 | 11.73 | 46.91 | 70.35 | 112.47 | 0.789 | 2.0 | |||||||||||
2039 | 93.57 | 110.66 | 3.86 | 5.47 | 4.34 | 11.98 | 47.84 | 71.76 | 114.71 | 0.789 | 2.0 | |||||||||||
2039+ | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 0.789 | 2.0 |
(1) 1 Mcf = 1 MMBtu.
In comparison to the 2018 Deloitte Price Forecast, the AECO natural gas price forecast for 2020 decreased by 7%, the Dawn natural gas price forecast for 2020 decreased by 21%, the NYMEX HH natural gas price forecast for 2020 decreased by 18% and the
Reconciliation of Changes in Reserves
The following table sets forth a reconciliation of Birchcliff’s gross reserves at
Reconciliation of Gross Reserves from
(Forecast Prices and Costs)
Factors | Light Crude Oil and Medium Crude Oil (Mbbls) | NGLs(Mbbls) | Oil Equivalent(Mboe) | |||||||||
GROSS TOTAL PROVED | ||||||||||||
Opening balance | 20,513.9 | 9,479.7 | 3,588,937.0 | 69,424.1 | 689,674.1 | |||||||
Extensions and Improved Recovery(1) | 2,700.4 | 0.0 | 274,162.5 | 9,974.3 | 58,368.5 | |||||||
Technical Revisions(2) | (494.6 | ) | 957.6 | (90,222.7 | ) | 14,979.7 | (392.4 | ) | ||||
Discoveries(3) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||||||
Acquisitions(4) | 257.4 | 2,805.3 | 11,985.5 | 402.8 | 3,125.3 | |||||||
Dispositions(5) | 0.0 | 0.0 | (29,912.5 | ) | (302.4 | ) | (5,287.8 | ) | ||||
Economic Factors(6) | (193.1 | ) | (779.2 | ) | (42,571.1 | ) | (546.8 | ) | (7,964.9 | ) | ||
Production(7) | (1,730.7 | ) | (996.9 | ) | (132,212.8 | ) | (4,529.3 | ) | (28,461.6 | ) | ||
Closing balance | 21,053.3 | 11,466.4 | 3,580,166.0 | 89,402.5 | 709,061.2 | |||||||
GROSS TOTAL PROBABLE | ||||||||||||
Opening balance | 14,318.3 | 8,546.2 | 1,519,533.0 | 43,397.8 | 312,396.0 | |||||||
Extensions and Improved Recovery(1) | 536.4 | 0.0 | 174,021.8 | 6,914.4 | 36,454.4 | |||||||
Technical Revisions(2) | (2,367.0 | ) | (439.8 | ) | (30,056.7 | ) | 2,762.1 | (4,687.7 | ) | |||
Discoveries(3) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||||||
Acquisitions(4) | 365.8 | 475.6 | 11,093.7 | 397.8 | 2,691.8 | |||||||
Dispositions(5) | (241.0 | ) | 0.0 | (69,341.2 | ) | (2,462.6 | ) | (14,260.5 | ) | |||
Economic Factors(6) | (69.0 | ) | (233.6 | ) | (51,943.8 | ) | (695.2 | ) | (9,460.4 | ) | ||
Production(7) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||||||
Closing balance | 12,543.4 | 8,348.4 | 1,553,306.8 | 50,314.2 | 323,133.5 | |||||||
GROSS TOTAL PROVED PLUS PROBABLE | ||||||||||||
Opening balance | 34,832.2 | 18,025.9 | 5,108,470.0 | 112,821.9 | 1,002,070.1 | |||||||
Extensions and Improved Recovery(1) | 3,236.8 | 0.0 | 448,184.3 | 16,888.7 | 94,822.9 | |||||||
Technical Revisions(2) | (2,861.6 | ) | 517.8 | (120,279.3 | ) | 17,741.8 | (5,080.1 | ) | ||||
Discoveries(3) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |||||||
Acquisitions(4) | 623.2 | 3,280.9 | 23,079.2 | 800.5 | 5,817.1 | |||||||
Dispositions(5) | (241.0 | ) | 0.0 | (99,253.8 | ) | (2,765.0 | ) | (19,548.3 | ) | |||
Economic Factors(6) | (262.2 | ) | (1,012.8 | ) | (94,514.9 | ) | (1,241.9 | ) | (17,425.4 | ) | ||
Production(7) | (1,730.7 | ) | (996.9 | ) | (132,212.8 | ) | (4,529.3 | ) | (28,461.6 | ) | ||
Closing balance | 33,596.8 | 19,814.8 | 5,133,472.7 | 139,716.7 | 1,032,194.7 |
(1) Additions to volumes resulting from capital expenditures for: (i) step-out drilling in previously discovered reservoirs; (ii) infill drilling in previously discovered reservoirs that were not drilled as part of an enhanced recovery scheme; and (iii) the installation of improved recovery schemes.
(2) Positive or negative volume revisions to an estimate resulting from new technical data or revised interpretations on previously assigned volumes, performance and operating costs.
(3) Additions to volumes in reservoirs where no reserves were previously booked.
(4) Positive additions to volume estimates because of purchasing interests in oil and gas properties.
(5) Reductions in volume estimates because of selling all or a portion of an interest in oil and gas properties.
(6) Changes to volumes resulting from different price forecasts, inflation rates and regulatory changes.
(7) Reductions in the volume estimates due to actual production.
Key highlights include the following:
- Extensions and Improved Recovery – Reserves were added due to the wells that were drilled and brought on production pursuant to the Corporation’s successful 2019 Capital Program, which also resulted in the assignment of reserves to potential future drilling locations offsetting those wells.
- Technical Revisions – The technical revisions in all reserves categories for light and medium crude oil were mainly a result of: (i) the performance of the existing producing oil wells; (ii) adjustments to the future well layouts in the development plan; and (iii) future well location adjustments based on offsetting well performance. The technical revisions in all reserves categories for shale gas were mainly a result of: (i) gas shrinkage as a result of higher NGLs extraction in the Pouce Coupe Gas Plant; and (ii) adjustments to the producing oil and gas wells and future oil and gas locations. The technical revisions in all reserves categories for NGLs were a mainly result of: (i) improved performance of the existing C3+ recoveries at Phases V and VI of the Pouce Coupe Gas Plant; (ii) increased condensate from the producing wells and future locations in
Pouce Coupe ; and (iii) additional C3+ extraction assumed for Phases I to IV of the Pouce Coupe Gas Plant. - Acquisitions – Changes were the result of the Acquisition, which occurred in
January 2019 , as well as various other minor acquisitions Birchcliff completed in the Gordondale andPouce Coupe areas in 2019. - Dispositions – Changes were the result of various non-core dispositions Birchcliff completed in 2019.
- Economic Factors – The forecast prices for each product type were lower in the 2019 IQRE Price Forecast than the 2018 Deloitte Price Forecast, which resulted in the economic limit at the end of a well’s life being achieved earlier and therefore a reduction of the reserves volumes in all reserves categories. The reduced price forecast also resulted in the loss of reserves for 4 gross (2.5 net) proved undeveloped future natural gas locations and 11 gross (6.6 net) probable future natural gas locations, primarily in Elmworth, that did not generate a positive net present value at a 10% discount rate.
Future Development Costs
FDC reflects the independent reserves evaluators’ best estimate of what it will cost to bring the proved and proved plus probable reserves on production. Changes in forecast FDC occur annually as a result of development activities, acquisition and disposition activities and capital cost estimates. The following table sets forth development costs deducted in the estimation of Birchcliff’s future net revenue attributable to the reserves categories noted below:
Future Development Costs
(Forecast Prices and Costs)
Proved(MM$) | Proved Plus Probable(MM$) | ||
2020 | 322.5 | 322.5 | |
2021 | 411.8 | 475.4 | |
2022 | 555.8 | 611.9 | |
2023 | 775.8 | 818.0 | |
2024 | 405.0 | 508.3 | |
Thereafter | 609.7 | 1,682.8 | |
Total undiscounted | 3,080.6 | 4,418.9 |
FDC for total proved reserves increased to
The FDC for both proved and proved plus probable reserves are primarily the capital costs required to drill, complete, equip and tie-in the net undeveloped locations. The estimates of FDC on a proved and proved plus probable basis also include approximately
The following table sets forth the average cost to drill, complete, equip and tie-in a multi-stage fractured horizontal well as estimated by Deloitte and McDaniel:
Average Well Cost, as Estimated by Deloitte or McDaniel | (MM$) | (MM$) | ||
4.7 | 4.7 | |||
Gordondale(2) | 5.4 | 5.4 |
(1) Estimated by Deloitte.
(2) Estimated by McDaniel.
Reserves Replacement
The following table sets forth Birchcliff’s 2019 reserves replacement ratios:
Reserves Category | 2019 Reserves Replacement, Excluding the Effects of Acquisitions and Dispositions(1) | 2019 Reserves Replacement, Including the Effects of Acquisitions and Dispositions(1) | ||||
Proved Developed Producing | 104 | % | 112 | % | ||
Proved | 176 | % | 168 | % | ||
Proved Plus Probable | 254 | % | 206 | % |
(1) See “Advisories – Oil and Gas Metrics” for a description of the methodology used to calculate reserves replacement.
Reserves Life Index
The following table sets forth Birchcliff’s 2019 reserves life index:
Reserves Category | 2019 Reserves Life Index(1) | |
Proved Developed Producing | 7.0 years | |
Total Proved | 24.0 years | |
Total Proved Plus Probable | 34.9 years |
(1) Based on a forecast production rate of 81,000 boe/d, which represents the mid-point of Birchcliff’s annual average production guidance range for 2020. See “Advisories – Oil and Gas Metrics” for a description of the methodology used to calculate reserves life index.
Reserves on the
The following table summarizes the estimates of reserves attributable to Birchcliff’s horizontal wells on the
(Bcf) | Light Crude Oil and Medium Crude Oil Combined (Mbbls) | NGLs (Mbbls) | Total (Mboe) | Existing Horizontal Wells and Potential Future Horizontal Well Locations | ||||||||
(Gross) | (Net) | |||||||||||
Reserves Category | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 |
Proved Developed Producing | 969.2 | 973.4 | 9,620.4 | 9,239.1 | 31,793.7 | 27,923.0 | 202,945.5 | 199,396.1 | 410(3) | 368 | 403.2(3) | 364.3 |
Total Proved | 3,567.2 | 3,572.8 | 20,978.7 | 20,460.2 | 88,638.2 | 68,779.3 | 704,152.4 | 684,710.4 | 953 | 903 | 939.3 | 888.8 |
Total Proved Plus Probable | 5,117.5 | 5,088.6 | 33,502.5 | 34,758.7 | 138,737.4 | 111,985.9 | 1,025,152.8 | 994,848.1 | 1,199 | 1,154 | 1,175.1 | 1,121.8 |
(1) Estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
(2) At
(3) Does not include three 100% working interest proved non-producing wells.
ABBREVIATIONS
AECO | benchmark price for natural gas determined at the AECO ‘C’ hub in southeast |
bbl | barrel |
bbls | barrels |
bbls/d | barrels per day |
Bcf | billion cubic feet |
boe | barrel of oil equivalent |
boe/d | barrel of oil equivalent per day |
C3+ | propane plus |
condensate | pentanes plus (C5+) |
F&D | finding and development |
FD&A | finding, development and acquisition |
FDC | future development costs |
G&A | general and administrative |
GAAP | generally accepted accounting principles for Canadian public companies which are currently IFRS |
GJ | gigajoule |
GJ/d | gigajoules per day |
HH | |
IFRS | International Financial Reporting Standards as issued by the |
Mbbls | thousand barrels |
Mboe | thousand barrels of oil equivalent |
Mcf | thousand cubic feet |
Mcf/d | thousand cubic feet per day |
Mcfe | thousand cubic feet of gas equivalent |
MM$ | millions of dollars |
MMBtu | million British thermal units |
MMBtu/d | million British thermal units per day |
MMcf | million cubic feet |
MMcf/d | million cubic feet per day |
MSW | price for mixed sweet crude oil at |
NGLs | natural gas liquids |
NYMEX | |
TCPL | |
WTI | West Texas Intermediate, the reference price paid in |
000s | thousands |
$000s | thousands of dollars |
NON-GAAP MEASURES
This press release uses “adjusted funds flow”, “adjusted funds flow per basic common share”, “free funds flow”, “operating netback”, “adjusted funds flow netback”, “adjusted working capital deficit”, “total cash costs” and “total debt”. 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 operating working capital and “adjusted funds flow per basic common share” denotes adjusted funds flow divided by the basic weighted average number of common shares outstanding for the period. 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. Management believes that adjusted funds flow and adjusted funds flow per common share assist management and investors in assessing Birchcliff’s operating performance, as well as its ability to generate cash necessary to fund sustaining and/or growth capital expenditures, repay debt, settle decommissioning obligations and pay common share and preferred share dividends. 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 further generate shareholder returns through a number of initiatives, including but not limited to, potential debt repayment, common share repurchases, future 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:
| Three months ended | Twelve months ended | ||||||
($000s) | 2019 | 2018 | 2019 | 2018 | ||||
Cash flow from operating activities | 85,557 | 92,200 | 327,066 | 324,434 | ||||
Change in non-cash operating working capital | (5,058 | ) | (10,838 | ) | 5,153 | (12,591 | ) | |
Decommissioning expenditures | 442 | 155 | 2,285 | 1,079 | ||||
Adjusted funds flow | 80,941 | 81,517 | 334,504 | 312,922 | ||||
F&D capital expenditures | (56,800 | ) | (52,321 | ) | (256,395 | ) | (299,654 | ) |
Free funds flow | 24,141 | 29,196 | 78,109 | 13,268 |
“Operating netback” denotes petroleum and natural gas revenue less royalty expense, less operating expense and less transportation and other expense. “Adjusted funds flow netback” denotes petroleum and natural gas revenue less royalty expense, less operating expense, less transportation and other expense, less net G&A expense, less interest expense and less any realized losses (plus realized gains) on financial instruments and plus any other cash income sources. All netbacks are calculated on a per unit basis, unless otherwise indicated. Management believes that operating netback and adjusted funds flow netback assist management and investors in assessing Birchcliff’s operating results by isolating the impact of production volumes to better analyze its performance against prior periods on a comparable basis. The following table provides a breakdown of Birchcliff’s operating netback and adjusted funds flow netback for the periods indicated:
Three months ended | Twelve months ended | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
($000s) | ($/boe) | ($000s) | ($/boe) | ($000s) | ($/boe) | ($000s) | ($/boe) | |||||||||
Petroleum and natural gas revenue | 164,759 | 22.97 | 154,720 | 22.01 | 613,559 | 21.56 | 621,421 | 22.08 | ||||||||
Royalty expense | (8,263 | ) | (1.15 | ) | (6,763 | ) | (0.96 | ) | (27,452 | ) | (0.96 | ) | (38,306 | ) | (1.36 | ) |
Operating expense | (21,977 | ) | (3.06 | ) | (24,677 | ) | (3.51 | ) | (87,903 | ) | (3.09 | ) | (99,104 | ) | (3.52 | ) |
Transportation and other expense | (32,278 | ) | (4.51 | ) | (28,567 | ) | (4.07 | ) | (126,135 | ) | (4.44 | ) | (103,547 | ) | (3.68 | ) |
Operating netback | 102,241 | 14.25 | 94,713 | 13.47 | 372,069 | 13.07 | 380,464 | 13.52 | ||||||||
G&A, net | (9,035 | ) | (1.26 | ) | (7,618 | ) | (1.08 | ) | (26,815 | ) | (0.94 | ) | (24,602 | ) | (0.87 | ) |
Interest expense | (5,852 | ) | (0.82 | ) | (7,437 | ) | (1.06 | ) | (25,073 | ) | (0.88 | ) | (27,969 | ) | (0.99 | ) |
Realized gain (loss) on financial instruments | (6,565 | ) | (0.92 | ) | 1,658 | 0.24 | 13,673 | 0.48 | (15,771 | ) | (0.56 | ) | ||||
Other income | 152 | 0.03 | 201 | 0.03 | 650 | 0.02 | 800 | 0.02 | ||||||||
Adjusted funds flow netback | 80,941 | 11.28 | 81,517 | 11.60 | 334,504 | 11.75 | 312,922 | 11.12 |
(1) All per boe amounts are calculated by dividing each aggregate financial amount by the production (boe) in the respective period.
The reconciliation for the operating netback of the Pouce Coupe Gas Plant is provided under the heading “Q4 and Full-Year 2019 Unaudited Financial and Operational Results – Pouce Coupe Gas Plant Netbacks”.
“Total cash costs” are comprised of royalty, operating, transportation and other, G&A and interest expenses. Total cash costs are calculated on a per unit basis. Management believes that total cash costs assists management and investors in assessing Birchcliff’s efficiency and overall cash cost structure.
“Adjusted working capital deficit” is calculated as current assets minus current liabilities excluding the effects of any current portion of financial instruments and capital securities. In 2018, Birchcliff’s capital securities were long-term in nature and therefore no adjustment for capital securities was made to adjusted working capital deficit for that period. Management believes that adjusted working capital deficit assists management and investors in assessing Birchcliff’s short-term liquidity. The following table reconciles working capital deficit (current assets minus current liabilities), as determined in accordance with GAAP, to adjusted working capital deficit:
As at, ($000s) | ||||
Working capital deficit (surplus) | 100,199 | (15,611 | ) | |
Financial instrument – current asset | - | 36,798 | ||
Financial instrument – current liability | (26,949 | ) | - | |
Capital securities – current liability | (49,845 | ) | - | |
Adjusted working capital deficit | 23,405 | 21,187 |
“Total debt” is calculated as the revolving term credit facilities plus adjusted working capital deficit. Management believes that total debt assists management and investors in assessing Birchcliff’s liquidity. The following table provides a reconciliation of the revolving term credit facilities, as determined in accordance with GAAP, to total debt:
As at, ($000s) | ||
Revolving term credit facilities | 609,177 | 605,267 |
Adjusted working capital deficit | 23,405 | 21,187 |
Total debt | 632,582 | 626,454 |
PRESENTATION OF OIL AND GAS RESERVES
Deloitte prepared the 2019 Consolidated Reserves Report, the 2018 Consolidated Reserves Report, the 2019 Deloitte Reserves Report and the 2018 Deloitte Reserves Report. McDaniel prepared the 2019 McDaniel Reserves Report and the 2018 McDaniel Reserves Report. In addition, Deloitte prepared a reserves evaluation in respect of Birchcliff’s oil and natural gas properties effective
There are numerous uncertainties inherent in estimating quantities of oil, natural gas and NGLs reserves and the future net revenue attributed to such reserves, including many factors beyond the control of Birchcliff. The reserves and associated future net revenue information set forth in this press release are estimates only. In general, estimates of economically recoverable oil, natural gas and NGLs reserves and the future net revenue therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserves recovery, the timing and amount of capital expenditures, marketability of oil, natural gas and NGLs, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially from actual results. For these reasons, estimates of the economically recoverable oil, natural gas and NGLs reserves attributable to any particular group of properties, the classification of such reserves based on risk of recovery and estimates of future net revenue associated with reserves prepared by different engineers, or by the same engineer at different times, may vary. Birchcliff’s actual production, revenue, taxes and development and operating expenditures with respect to its reserves will vary from estimates thereof and such variations could be material.
It should not be assumed that the undiscounted or discounted net present value of future net revenue attributable to the Corporation’s reserves estimated by the Corporation’s independent qualified reserves evaluators represent the fair market value of those reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. Actual oil, natural gas and NGLs reserves may be greater than or less than the estimates provided herein and variances could be material. With respect to the disclosure of reserves contained herein relating to portions of Birchcliff’s properties, the estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
In this press release, unless otherwise stated all references to “reserves” are to Birchcliff’s gross company reserves (Birchcliff’s working interest (operating or non-operating) share before deduction of royalties and without including any royalty interests of Birchcliff).
The information set forth in this press release relating to the reserves, future net revenue and future development costs of Birchcliff constitutes forward-looking statements and is subject to certain risks and uncertainties. See “Advisories – Forward-Looking Statements”.
Certain terms used herein but not defined are defined in NI 51-101, CSA Staff Notice 51-324 – Revised Glossary to NI 51-101 Standards of Disclosure for Oil and Gas Activities (“CSA Staff Notice 51-324”) and/or the COGE Handbook and, unless the context otherwise requires, shall have the same meanings herein as in NI 51-101, CSA Staff Notice 51-324 and the COGE Handbook, as the case may be.
ADVISORIES
Unaudited Information
All financial and operating information contained in this press release for the fourth quarter and year ended
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
Boe and Mcfe Conversions
Boe amounts have been calculated by using the conversion ratio of 6 Mcf of natural gas to 1 bbl of oil and Mcfe amounts have been calculated by using the conversion ratio of 1 bbl of oil to 6 Mcf of natural gas. Boe and Mcfe amounts may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl and an Mcfe conversion ratio of 1 bbl: 6 Mcf 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.
MMBtu Pricing Conversions
Oil and Gas Metrics
This press release contains metrics commonly used in the oil and natural gas industry, including netbacks, reserves life index, recycle ratio, reserves replacement, F&D costs and FD&A costs, which have been determined by Birchcliff as set out below. These oil and gas metrics do not have any standardized meanings or standard methods of calculation and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. As such, they should not be used to make comparisons. Management uses these oil and gas metrics for its own performance measurements and to provide shareholders with measures to compare Birchcliff’s performance over time; however, such measures are not reliable indicators of Birchcliff’s future performance, which may not compare to Birchcliff’s performance in previous periods, and therefore should not be unduly relied upon.
- Reserves life index is calculated by dividing reserves estimated by Birchcliff’s independent qualified reserves evaluators at
December 31, 2019 by 81,000 boe/d, which production rate represents the mid-point of Birchcliff’s annual average production guidance range for 2020. Reserves life index may be used as a measure of a company’s sustainability. - Recycle ratios are calculated by dividing the average operating netback per boe or adjusted funds flow netback per boe, as the case may be, by F&D costs and FD&A costs, as the case may be. Recycle ratios may be used as a measure of a company’s profitability.
- Reserves replacement is calculated by dividing proved developed producing reserves, proved reserves or proved plus probable reserves additions, as the case may be, before production by total production in the applicable period. Reserves replacement ratios have been presented both including and excluding the effects of acquisitions and dispositions. Reserves replacement may be used as a measure of a company’s sustainability and its ability to replace its proved developed producing reserves, proved reserves or proved plus probable reserves, as the case may be.
- With respect to F&D and FD&A costs disclosed in this press release:
- F&D costs both including and excluding FDC have been presented herein. F&D costs for each reserves category in a particular period are calculated by taking the sum of: (i) exploration and development costs (F&D capital expenditures) incurred in the period; and (ii) where FDC has been included, the change during the period in FDC for the reserves category; divided by the additions to the reserves category before production during the period. F&D costs exclude the effects of acquisitions and dispositions. FD&A costs are calculated in the same manner as F&D costs but include the effects of acquisitions and dispositions.
- In calculating the amounts of F&D and FD&A costs for a year, the changes during the year in estimated reserves and estimated FDC are based upon the evaluations of Birchcliff’s reserves prepared by its independent qualified reserves evaluators, effective
December 31 of such year. - The aggregate of the exploration and development costs incurred in the most recent financial year and any change during that year in estimated FDC generally will not reflect total F&D costs related to reserves additions for that year.
- F&D and FD&A costs may be used as a measure of a company’s efficiency with respect to finding and developing its reserves.
- F&D costs both including and excluding FDC have been presented herein. F&D costs for each reserves category in a particular period are calculated by taking the sum of: (i) exploration and development costs (F&D capital expenditures) incurred in the period; and (ii) where FDC has been included, the change during the period in FDC for the reserves category; divided by the additions to the reserves category before production during the period. F&D costs exclude the effects of acquisitions and dispositions. FD&A costs are calculated in the same manner as F&D costs but include the effects of acquisitions and dispositions.
- For information regarding netbacks, see “Non-GAAP Measures”.
Drilling Locations
This press release discloses net existing horizontal wells and potential net future horizontal drilling locations in four categories: (i) proved locations; (ii) proved plus probable locations; (iii) unbooked locations; and (iv) an aggregate total of (ii) and (iii). Of the 7,462.0 net existing horizontal wells and potential net future horizontal drilling locations identified herein, 939.3 are proved locations, 1,175.1 are proved plus probable locations and 6,286.9 are unbooked locations.
Proved locations and probable locations consist of proposed drilling locations identified in the 2019 Consolidated Reserves Report that have proved and/or probable reserves, as applicable, attributed to them in the 2019 Consolidated Reserves Report. Unbooked locations are internal estimates based on Birchcliff’s prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal technical analysis review. Unbooked locations have been identified by management as an estimate of Birchcliff’s multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. Unbooked locations do not have proved or probable reserves attributed to them in the 2019 Consolidated Reserves Report.
Birchcliff’s ability to drill and develop these locations and the drilling locations on which Birchcliff actually drills wells depends on a number of uncertainties and factors, including, but not limited to, the availability of capital, equipment and personnel, oil and natural gas prices, costs, inclement weather, seasonal restrictions, drilling results, additional geological, geophysical and reservoir information that is obtained, production rate recovery, gathering system and transportation constraints, the net price received for commodities produced, regulatory approvals and regulatory changes. As a result of these uncertainties, there can be no assurance that the potential future drilling locations that Birchcliff has identified will ever be drilled and, if drilled, that such locations will result in additional oil, NGLs or natural gas production and, in the case of unbooked locations, additional reserves. As such, Birchcliff’s actual drilling activities may differ materially from those presently identified, which could adversely affect Birchcliff’s business. While certain of the unbooked drilling locations have been de-risked by drilling existing wells in relatively close proximity to such unbooked drilling locations, some of the other unbooked drilling locations are farther away from existing wells, where management has less information about the characteristics of the reservoir and there is therefore more uncertainty whether wells will be drilled in such locations and, if drilled, there is more uncertainty that such wells will result in additional proved or probable reserves, resources or production.
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 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.
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.
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”, “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, operations, focus, objectives, strategies, opportunities, priorities and goals (including: statements regarding Birchcliff’s estimated annual average production for the full-year 2020; the efficient execution of Birchcliff’s 2020 capital program; that 6 wells drilled in Q4 2019 will be brought on production in Q1 and Q2 2020; statements regarding the Inlet Liquids-Handling Facility (including the capacity of the facility, that the facility will be online in Q3 2020 and that the facility will give Birchcliff the ability to grow its condensate production in
Pouce Coupe to 10,000 bbls/d); plans for the drilling, completion and bringing on production of 6 additional wells in 2020 on the lands acquired in the Acquisition; and timing for completion of infrastructure projects and bringing on production of wells in Gordondale in Q2 2020); - Birchcliff’s market diversification and hedging activities, strategies and use of risk management techniques (including statements that Birchcliff engages in risk management activities by utilizing various financial instruments and physical delivery contracts to diversify its sales points or fix commodity prices and market interest rates);
- the performance and other characteristics of Birchcliff’s oil and natural gas properties and expected results from its assets (including statements regarding the potential or prospectivity of Birchcliff’s properties) and estimates of potential future drilling locations and opportunities;
- estimates of reserves and the net present values of future net revenue associated with Birchcliff’s reserves; price forecasts; FDC; and reserves life index; and
- that Birchcliff anticipates filing its annual information form and audited financial statements and related management’s discussion and analysis for the year ended
December 31, 2019 onMarch 11, 2020 .
Information relating to reserves is forward-looking as it involves the implied assessment, based on certain estimates and assumptions, that the reserves exist in the quantities predicted or estimated and that the reserves can profitably be produced in the future. See “Presentation of Oil and Gas Reserves”.
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, 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; the success of new wells drilled; 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 processing and transportation for its products; Birchcliff’s ability to successfully market natural gas and liquids; the availability of hedges on terms acceptable to Birchcliff; and Birchcliff’s 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:
- With respect to Birchcliff’s 2020 full-year production guidance, such guidance assumes:
- The following commodity prices and exchange rate: an average WTI spot price of
US$60.00 /bbl; an average WTI-MSW differential ofCDN$8.50 /bbl; an average AECO 5A spot price ofCDN$2.10 /GJ; an average Dawn spot price ofUS$2.50 /MMBtu; an average NYMEX HH spot price ofUS$2.50 /MMBtu; and an exchange rate (CDN$ toUS$1 ) of 1.32. - That Birchcliff’s 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.
- The following commodity prices and exchange rate: an average WTI spot price of
- With respect to statements of future wells to be drilled and brought on production and estimates of potential future drilling locations and opportunities, the key assumptions are: 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.
- With respect to statements regarding the future potential and prospectivity of properties and assets, such statements assume: the continuing validity of the geological and other technical interpretations determined by Birchcliff’s technical staff with respect to such properties; and that, over the long-term, commodity prices and general economic conditions will warrant proceeding with the exploration and development of such properties.
- With respect to estimates of reserves volumes and the net present values of future net revenue associated with Birchcliff’s reserves, the key assumption is the validity of the data used by Deloitte and McDaniel in their independent reserves evaluations.
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: 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 currency 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; 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 affecting Birchcliff or other parties whose operations or assets directly or indirectly affect Birchcliff; an inability to access sufficient water or other fluids needed for operations; uncertainty that development activities in connection with Birchcliff’s assets will be economical; an inability to access or implement some or all of the technology necessary to efficiently and effectively operate its assets and achieve expected future results; uncertainties associated with estimating oil and natural gas reserves and resources; 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, including delays in the completion of gas plants and other facilities; 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 and other actions by government authorities; 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, some of which the Corporation does not control; 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; a failure to comply with covenants under Birchcliff’s credit facilities; 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 credit facilities and counterparty credit risk; risks associated with Birchcliff’s risk management activities and the risk that hedges on terms acceptable to Birchcliff may not be available; 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, including transportation and hydraulic fracturing involving 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; the accuracy of the Corporation’s accounting estimates and judgments; and potential requirements under applicable accounting standards for the impairment or reversal of estimated recoverable amounts of the Corporation’s assets from time to time.
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 Birchcliff’s most recent Annual Information Form and in other reports filed with Canadian securities regulatory authorities.
This press release contains information that may constitute future-orientated financial information or financial outlook information (collectively, “FOFI”) about Birchcliff’s prospective results of operations, all of which is subject to the same assumptions, risk factors, limitations and qualifications as set forth above. 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 or inaccurate and, as such, undue reliance should not be placed on FOFI. Birchcliff’s actual results, performance and achievements could differ materially from those expressed in, or implied by, FOFI. Birchcliff has included FOFI 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 such information may not be appropriate for other purposes. FOFI contained herein was 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 FOFI statements, whether as a result of new information, future events or otherwise.
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.
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