Journey is also pleased to provide preliminary guidance for 2024 with a focus on eliminating over 80% of remaining indebtedness, advancing its power business, and improving long term sustainability.
- Increased daily sales volumes for November to 12,700 boe/d (55% liquids) based on field estimates.
- Finished drilling the final well of a 12.0 well (10.3 net) program.
- 8.0 wells (6.8 net) were placed on-production with overall program results exceeding type curve expectations.
- 2.0 wells (1.8 net) drilled in
Cherhill are expected to come on-production inJanuary 2024 with 2.0 wells (1.7 net) inPoplar Creek being completed inJanuary 2024 . - Total program costs of
$11.4 million are 31% lower than originally budgeted, allowing Journey to drill an additional 1.0 well in Matziwin (fourth quarter 2023), 1.7 net wells inPoplar Creek (fourth quarter 2023/first quarter 2024), and 2.9 net wells inMedicine Hat (first quarter of 2024).
During the third quarter, Journey began its 2023 exploration and development program, starting with a drilling program in the
The lower costs associated with the
On
The 2023 program is being funded from the flow-through share issuance, which was closed in the spring of 2023. Journey has until the first quarter of 2024 to complete the expenditures under this program. To date, the program costs are well below forecast and therefore Journey is preparing 4 (2.9 net) additional wells in
In the third quarter of 2023, Journey had sales volumes of 11,756 boe/d. This volume was below what the Company had forecast due to several one-time items. Restoration of shut-in production along with new production from the capital program has resulted in production increasing to 12,700 boe/d (55% liquids) for November of 2023, based upon field estimates. The ability to maintain production rates above 12,000 boe/d with limited capex is a testament to Journey's very low corporate decline rate.
Throughout 2023, Journey has maintained a conservative posture with respect to capital expenditures. The Company continues to prioritize its balance sheet strength along with the expansion of the power business. Due to the extensive regulatory timelines associated with adding power to the grid, Journey forecasts power-related capital expenditures of
Journey is pleased to report that it has entered into an agreement with its largest shareholder and term debt provider,
Journey CEO
This new repayment schedule is aligned with Journey's current repayment commitment to Enerplus Corporation under the vendor-take-back ("VTB") obligation from the acquisition in October of 2022. The repayments under the VTB are sensitive to the price of WTI oil and Journey has reduced the principal amount from the initial
Journey has demonstrated, through the operation of its existing Countess power plant, that it is far more profitable to convert its natural gas into electricity, than to merely sell the natural gas at current spot prices. The currently operating 4 MW Countess facility, which was originally commissioned in the fourth quarter of 2020, has already paid out the original investment. Based on Journey's realized power prices in 2022, the average, effective, net realized price for natural gas used to generate power for the year was approximately
Journey has budgeted
In the second quarter of 2023 Journey purchased the 16.5 MW power generation facility at Mazeppa through an open auction process that started in
Journey is planning to increase its power sales to the
In 2024, Journey forecasts reducing leverage by
Of the
The below guidance incorporates many material underlying assumptions including but not limited to:
- Forecasted commodity prices;
- Assumptions of vendor-take-back principal payments, as these repayments are based upon realized WTI oil prices;
- Forecast operating costs, including forecasted prices for power;
- Forecast costs for the capital program; and
- Forecast results and phasing in of production additions from the capital program.
2024 Initial Guidance | |
Annual average daily sales volumes | 11,500–12,000 boe/d (55% |
Adjusted Funds Flow | |
Adjusted Funds Flow per weighted average share | |
Capital spending | |
Year end 2024 Net Debt Net Debt to Adjusted Funds Flow ratio | 0.4x |
Reference commodity prices: WTI (USD $/bbl) MSW oil differentials (USD $/bbl) WCS oil differentials (USD $/bbl) AECO natural gas (CAD $/mcf) CAD/USD foreign exchange |
|
Notes: | ||||
1. | The weighting of the corporate sales volumes guidance is as follows: | |||
a. | Heavy oil: 19% | |||
b. | Light/medium gravity crude oil: 25% | |||
c. | NGL's: 11% | |||
d. | Coal-bed methane natural gas: 5% | |||
e. | Conventional natural gas: 40% |
Journey has embarked on a careful and prudent expansion of its business plan to grow the Company profitably. This includes executing on acquisitions the timing of which can be unpredictable and when executed on, can defer drilling plans.
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.
- "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.
- "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.
- "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.
- 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).
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:
AIMCo | |
API | |
bbl | Barrel |
bbls | Barrels |
boe | barrels of oil equivalent (see conversion statement below) |
boe/d | barrels of oil equivalent per day |
gj | Gigajoules |
GAAP | Generally Accepted Accounting Principles |
IFRS | International Financial Reporting Standards |
Mbbls | thousand barrels |
Mboe | thousand boe |
Mcf | thousand cubic feet |
Mmcf | million cubic feet |
Mmcf/d | million cubic feet per day |
MSW | Mixed sweet |
MW | One million watts of power |
NGL's | natural gas liquids (ethane, propane, butane and condensate) |
VTB | Vendor-take-back term debt issued by Journey to Enerplus Corporation as partial |
WCS | Western Canada Select benchmark oil price. This crude oil is heavy/sour with API gravity |
WTI | West Texas Intermediate benchmark Oil price. This crude oil is light/sweet with API |
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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