Journey announces that it has closed the acquisition for the purchase of petroleum and natural gas assets (the "Acquisition") is currently producing approximately 4,000 boe/d (71% oil and NGL's) as of
In addition to the long-life stable production Journey has identified numerous near term optimization projects, infill drilling opportunities, along with waterflood and tertiary enhancements that will mitigate future declines. The acquisition comes with 1,847 square kilometers of 3D seismic data, and 18,666 linear kilometers of 2D seismic data, more than tripling Journey's total seismic data base. As part of the closing, Journey's largest shareholder and sole term debt provider, AIMCo, has not only consented to the Acquisition, but has also agreed to extend the maturity of its
Immediately after closing the Acquisition, Journey's estimated net debt will be approximately
- Produced 9,504 boe/d in the third quarter comprised of 53% natural gas; 37% crude oil; and 10% NGL's. For the nine months ended
September 30 sales volumes increased 16% year over year. - Generated Adjusted Funds Flow of
$22.7 million or$0.43 per basic weighted average share in the third quarter and$76.5 million ($1.49 per share) for the year-to-date. - On
September 29, 2022 Alberta Investment Management Corporation , on behalf of its clients ("AIMCo") exercised warrants to acquire 1.14 million shares of Journey at a purchase price of$3.15 /share. - Reduced
September 30, 2022 net debt by 76% to$16.8 million from$69.3 million at the end of the third quarter of 2021. Year-over-year Journey achieved production growth of 1,340 boe/d and a$62.5 million reduction in net debt with the corresponding addition of only 6.4 million basic shares. - Generated 7,610 megawatts of electricity at the Countess power plant at an average price of
$232.24 /MW in the third quarter. To date in 2022, Journey has effectively converted 248,152 gj of natural gas for an equivalent selling price of$15.13 /gj by using its natural gas to generate electricity.
Three and Nine Month Financial & Operating Highlights
Three months ended September 30, | Nine months ended September 30, | |||||
Financial ( | 2022 | 2021 | % change | 2022 | 2021 | % change |
Production revenue | 54,265 | 33,083 | 64 | 168,052 | 84,179 | 100 |
Net income | 15,479 | 92,243 | (83) | 57,445 | 93,589 | (39) |
Basic ($/share) | 0.29 | 2.02 | (85) | 1.12 | 2.10 | (47) |
Diluted ($/share) | 0.26 | 1.79 | (85) | 0.99 | 1.89 | (48) |
Adjusted Funds Flow | 22,715 | 11,970 | 90 | 76,497 | 29,712 | 157 |
Basic ($/share) | 0.43 | 0.26 | 65 | 1.49 | 0.67 | 122 |
Diluted ($/share) | 0.38 | 0.23 | 65 | 1.32 | 0.60 | 120 |
Cash flow provided by operating activities | 33,422 | 11,271 | 197 | 81,277 | 24,923 | 226 |
Basic ($/share) | 0.63 | 0.25 | 152 | 1.58 | 0.56 | 182 |
Diluted ($/share) | 0.56 | 0.22 | 155 | 1.40 | 0.56 | 182 |
Capital expenditures, before A&D | 12,158 | 642 | 1,794 | 35,607 | 1,446 | 2,362 |
Net debt | 16,781 | 69,340 | (76) | 16,781 | 69,340 | (76) |
Share Capital (000's) | ||||||
Basic, weighted average | 52,735 | 45,661 | 15 | 51,317 | 44,552 | 15 |
Basic, end of period | 52,722 | 47,525 | 11 | 52,722 | 47,525 | 11 |
Fully diluted | 59,908 | 56,927 | 5 | 59,908 | 56,927 | 5 |
Daily Sales Volumes | ||||||
Natural gas (Mcf/d) | ||||||
Conventional | 25,424 | 21,073 | 21 | 24,671 | 19,997 | 23 |
Coal bed methane | 4,564 | 4,825 | (5) | 4,388 | 4,973 | (12) |
Total natural gas | 29,988 | 25,898 | 16 | 29,059 | 24,970 | 16 |
Crude oil (bbl/d) | ||||||
Light/medium | 2,908 | 2,499 | 16 | 2,769 | 2,323 | 19 |
Heavy | 648 | 675 | (4) | 663 | 693 | (4) |
Total crude oil | 3,556 | 3,174 | 12 | 3,432 | 3,016 | 14 |
Natural gas liquids (Bbl/d) | 951 | 674 | 41 | 924 | 641 | 44 |
Barrels of oil equivalent (boe/d) | 9,504 | 8,164 | 16 | 9,199 | 7,819 | 18 |
Average Realized Prices | ||||||
Natural gas ($/mcf)1 | 5.20 | 3.56 | 46 | 5.78 | 3.20 | 81 |
Crude Oil ($/bbl) | 104.96 | 74.02 | 42 | 112.56 | 66.83 | 68 |
Natural gas liquids ($/bbl) | 63.96 | 48.09 | 33 | 66.32 | 41.80 | 59 |
Barrels of oil equivalent ($/boe) | 62.06 | 44.05 | 41 | 66.92 | 39.44 | 70 |
Operating Netback ($/boe) | ||||||
Realized prices1 | 62.06 | 44.05 | 41 | 66.92 | 39.44 | 70 |
Royalties | (12.90) | (7.25) | 78 | (13.33) | (5.51) | 142 |
Operating expenses | (21.19) | (17.08) | 24 | (18.86) | (16.28) | 16 |
Transportation expenses | (0.73) | (0.53) | 38 | (0.63) | (0.51) | 24 |
Operating netback | 27.24 | 19.19 | 42 | 34.10 | 17.14 | 99 |
Notes: |
1. Natural gas prices include physical hedging gains |
The Company spent
The recent softening in commodity prices, and in particular natural gas and WCS oil, as well as the near term spike in power pricing has continued to pressure Journey's business model for 2022. This has resulted in a reduction to forecasted capital of
In the third quarter of 2022, Journey produced 9,504 boe/d (47% liquids), which was 16% higher than the 8,164 boe/d (47% liquids) in the same quarter of 2021. Journey's third quarter volumes were impacted by the following:
- phasing of capital expenditures to later in 2022 in order to ensure sufficient cash reserves are available at closing in an uncertain commodity price environment;
- deferring approximately
$6 million of capital projects into 2023 from 2022; - minor third quarter production curtailments associated with NGTL's maintenance related mainline restrictions; and
- a larger turnaround on the recently acquired
Carrot Creek facility than previously planned.
Year-over-year, Journey achieved production growth of 1,380 boe/d and a
Operating costs for the third quarter were also higher than previously forecast. These operating costs were influenced by one-time factors including but not limited to:
- a spike in power costs for August and September. These higher costs continued into early October and although power costs are declining Journey has increased its operating cost forecast for the combined business in 2023 in order to account for this;
- a larger than anticipated turnaround in
Carrot Creek ; - a minor one time increase in repair and maintenance costs; and
- increased downtime resulting in slightly higher costs on a per unit basis.
Journey has incorporated minor increases in operating costs for its 2023 guidance to account for escalation in input costs such as power prices and chemicals.
Journey's 2022 capital program will see Journey participating in 15 (12.6 net) wells in six different areas, versus the original planned program of 17 (15 net) wells in seven areas. This has resulted in a reduction in Journey's E&D portion of the 2022 capital program from
Previously, Journey announced two farm-ins, which provide significant optionality on over 19,000 acres of undeveloped land. These transactions, along with the equity financing, which closed in March have helped shape the 2022 capital program. Journey satisfied its drilling requirements on the
Between
Journey is currently planning to drill 18 (13.4 net) wells in 2023 with locations distributed between multiple core areas. Journey's production guidance reflects the fact that the
Journey has received preliminary approval to install its second power generation facility, a 15.5 megawatt facility, which will be located at Gilby. The Company has proactively acquired 17 megawatts (three 2.8 megawatt units; and one 8.6 megawatt unit) of generation capacity and is currently in the process of transporting these generators to Gilby. Journey is in the process of procuring additional, longer delivery items and has also commenced the detailed engineering for this project. The on-stream date for this project is currently expected to be in late 2023. Total costs for this project are estimated at
The theme for the third quarter was to bolster Journey's finances in preparation for the closing of the Acquisition that was announced on
All of the field operating costs (royalties, operating and transportation expenses) experienced increases during the third quarter of 2022 as compared to the same quarter of 2021. These increases were due to the combination of a 16% increase in average sales volumes; higher reference prices used for royalties and for operating expenses there were inflationary cost escalations. Royalty expense was higher by 107% in the third quarter in 2022 as compared to the same quarter in 2021 as was expected with the strong appreciation in commodity prices. On a per boe basis royalty expense was
Journey's general and administrative ("G&A") costs were higher in 2022 by 15% as compared to the same quarter in 2021. G&A increased to
Finance expenses related to borrowings, or interest costs, decreased by 15% to
Journey realized net income of
Journey continued to be prudent with its capital spending during the third quarter. Total capital expenditures in the third quarter were
With the Acquisition now closed, Journey has updated its guidance. The guidance is preliminary in nature and incorporates many material underlying assumptions including but not limited to:
- Forecasted commodity prices by month
- Assumptions of VTB principle payments based upon forecasted commodity prices
- Forecasted operating costs, including forecasted prices for power
- Forecasted costs for the capital program
- Forecasted results and phasing of production additions from the capital program
2022 Revised | 2023 Preliminary | |
Annual average daily sales volumes | 9,800-10,100boe/d (49% crude oil & NGL's) | 14,000-14,500boe/d (54% crude oil & NGL's) |
Adjusted Funds Flow | ||
Adjusted Funds Flow per basic weighted average share | ||
E&D plus ARO capital spending | ||
Power asset capital spending | ||
Capital spending (A&D): Cash portion Equity portion | - - | |
Year-end net debt | ||
Commodity prices1: WTI (USD $/bbl) MSW oil differentials (USD $/bbl) AECO AECO natural gas (CAD $/mcf) CAD/USD foreign exchange |
Note: |
1. Commodity prices represent full year averages. |
In 2021 and now in 2022 Journey has embarked on a careful and prudent expansion of its business plan. Journey has achieved or exceeded all of its internal targets and created significant value for all stakeholders. This expansion has been buoyed by commodity price tailwinds and would not be possible without the talented team at Journey, both in the office and the field. Journey also recognizes the steady guidance supplied by its Board of Directors and the unyielding support of AIMCo, the Company's term debt provider and largest shareholder. Together, with the support of this team, your Company is extremely well positioned to continue its journey of value creation and maintain its growth trajectory for years to come. The Company looks forward to updating you on Journey's progress as we continue on this exciting development path.
Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western
This press release contains forward-looking statements and forward-looking information (collectively "forward looking information") within the meaning of applicable securities laws relating to the Company's plans and other aspects of the anticipated future operations, management focus, strategies, financial, operating and production results, industry conditions, commodity prices and business opportunities. In addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding decline rates, anticipated netbacks, drilling inventory, estimated average drill, complete and equip and tie-in costs, anticipated potential of the Assets including, but not limited to, EOR performance and opportunities, capacity of infrastructure, potential reduction in operating costs, production guidance, total payout ratio, capital program and allocation thereof, future production, decline rates, funds flow, net debt, net debt to funds flow, exchange rates, reserve life, development and drilling plans, well economics, future cost reductions, potential growth, and the source of funding Journey's capital spending. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future.
The forward-looking information is based on certain key expectations and assumptions made by management, including expectations and assumptions concerning prevailing commodity prices and differentials, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; the ability to efficiently integrate assets and employees acquired through acquisitions, including the Acquisition, the ability to market oil and natural gas successfully and the ability to access capital. Although we believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Journey can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. The actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that we will derive therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide security holders with a more complete perspective on future operations and such information may not be appropriate for other purposes.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).These forward looking statements are made as of the date of this press release and we disclaim any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Journeys prospective results of operations, funds flow, netbacks, debt, payout ratio well economics and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was made as of the date of this press release and was provided for providing further information about Journey's anticipated future business operations. Journey disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein. Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the Annual Information Form filed on www.SEDAR.com on
Non-IFRS Measures
The Company uses the following non-IFRS measures in evaluating corporate performance. These terms do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures by other companies.
(1) | "Adjusted Funds Flow" is calculated by taking "cash flow provided by operating activities" from the financial statements and adding or deducting: changes in non-cash working capital; non-recurring "other" income; transaction costs; and decommissioning costs. Adjusted Funds Flow per share is calculated as Adjusted Funds Flow divided by the weighted-average number of shares outstanding in the period. Because Adjusted Funds Flow and Adjusted Funds Flow per share are not impacted by fluctuations in non-cash working capital balances, we believe these measures are more indicative of performance than the GAAP measured "cash flow generated from operating activities". In addition, Journey excludes transaction costs from the definition of Adjusted Funds Flow, as these expenses are generally in respect of capital acquisition transactions. The Company considers Adjusted Funds Flow a key performance measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Journey's determination of Adjusted Funds Flow may not be comparable to that reported by other companies. Journey also presents "Adjusted Funds Flow per basic share" where per share amounts are calculated using the weighted average shares outstanding consistent with the calculation of net income (loss) per share, which per share amount is calculated under IFRS and is more fully described in the notes to the audited, year-end consolidated financial statements. |
(2) | "Netback(s)". The Company uses netbacks to help evaluate its performance, leverage, and liquidity; comparisons with peers; as well as to assess potential acquisitions. Management considers netbacks as a key performance measure as it demonstrates the Company's profitability relative to current commodity prices. Management also uses them in operational and capital allocation decisions. Journey uses netbacks to assess its own performance and performance in relation to its peers. These netbacks are operating, Funds Flow and net income (loss). "Operating netback" is calculated as the average sales price of the commodities sold (excluding financial hedging gains and losses), less royalties, transportation costs and operating expenses. There is no GAAP measure that is reasonably comparable to netbacks. |
(3) | "Net debt" is calculated by taking current assets and then subtracting accounts payable and accrued liabilities; the principal amount of term debt; other loans; and the principal amount of the contingent bank liability. Net debt is used to assess the capital efficiency, liquidity and general financial strength of the Company. In addition, net debt is used as a comparison tool to assess financial strength in relation to Journey's peers. |
|
| % | 2022 | 2021 | % Change | |
Principal amount of term debt | 67,580 | 71,784 | (6) | 67,580 | 81,697 | (17) |
Accounts payable and accrued liabilities | 37,020 | 16,765 | 121 | 37,020 | 20,441 | 81 |
Other liability - contingent bank debt1 | 5,000 | 5,750 | (13) | 5,000 | 5,750 | (13) |
Other loans | 419 | 156 | 169 | 419 | 156 | 169 |
Deduct: | ||||||
Cash in bank (incl. restricted cash) | (41,571) | (7,897) | 426 | (41,571) | (15,677) | 165 |
Accounts receivable | (23,407) | (14,178) | 65 | (23,407) | (20,180) | 16 |
Prepaid expenses | (28,260) | (3,040) | 830 | (28,260) | (1,049) | 2,594 |
Net debt | 16,781 | 69,340 | (76) | 16,781 | 57,021 | (71) |
(4) | Journey uses "Capital Expenditures" to measure its capital investment level compared to the Company's annual budgeted capital expenditures for its organic capital program, excluding acquisitions or dispositions. The directly comparable GAAP measure to capital expenditures is cash used in investing activities. Journey then adjusts its capital expenditures for A&D activity to give a more complete analysis for its capital spending used for FD&A purposes. The capital spending for A&D proposes has been adjusted to reflect the non-cash component of the consideration paid (i.e. shares issued). The following table details the composition of capital expenditures and its reconciliation to cash flow used in investing activities: |
Three months ended | Nine months ended | |||||
2022 | 2021 | % Change | 2022 | 2021 | % Change | |
Cash expenditures: | ||||||
Land and lease rentals | 240 | 83 | 190 | 806 | 305 | 164 |
Geological and geophysical | 16 | - | - | 63 | - | - |
Drilling and completions | 9,365 | 147 | 6,271 | 25,788 | 139 | 18,452 |
Well equipment and facilities | 2,187 | 412 | 431 | 6,272 | 813 | 671 |
Power generation | 350 | - | - | 2,678 | 189 | 1,317 |
Total capital expenditures | 12,158 | 642 | 1,794 | 35,607 | 1,446 | 2,362 |
Corporate acquisition (cash plus equity) | - | 2,530 | - | 18,920 | 2,530 | 6,478 |
PP&E acquisitions | 2,945 | - | - | 7,897 | - | - |
PP&E dispositions | (2,641) | - | - | (3,000) | (47) | 6,283 |
Net capital expenditures | 12,462 | 3,132 | 298 | 59,424 | 3,929 | 1,412 |
Other expenditures: | ||||||
Decommissioning liability costs incurred | 1,228 | 3,347 | (73) | 2,526 | 4,176 | (40) |
Total capital expenditures | 13,690 | 6,479 | 111 | 61,950 | 8,105 | 664 |
Measurements
All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.
Where amounts are expressed in a barrel of oil equivalent ("boe"), or barrel of oil equivalent per day ("boe/d"), natural gas volumes have been converted to barrels of oil equivalent at nine (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term boe may be misleading particularly if used in isolation. The boe conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
Abbreviations
The following abbreviations are used throughout these MD&A and have the ascribed meanings:
A&D | acquisition and divestiture of petroleum and natural gas assets |
bbl | barrel |
bbls | barrels |
boe | barrels of oil equivalent (see conversion statement below) |
boe/d | barrels of oil equivalent per day |
E&D | exploration and development activities as defined in the COGE Handbook |
Gj & gj/d | Gigajoules and gigajoules per day respectively |
GAAP | Generally Accepted Accounting Principles |
IFRS | International Financial Reporting Standards |
mbbls | thousand barrels |
mmbtu | million British thermal units |
mboe | thousand boe |
mcf | thousand cubic feet |
mmcf | million cubic feet |
mmcf/d | million cubic feet per day |
MSW | Mixed sweet |
NGL's | natural gas liquids (ethane, propane, butane and condensate) |
WCS | Western Canada Select benchmark oil price |
WI | Working interest |
WTI | West Texas Intermediate benchmark Oil price |
All volumes in this press release refer to the sales volumes of crude oil, natural gas and associated by-products measured at the point of sale to third-party purchasers. For natural gas, this occurs after the removal of natural gas liquids.
No securities regulatory authority has either approved or disapproved of the contents of this press release.
SOURCE
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