During the quarter and year ended
- Produced 60,888 Boe/d in the quarter, well above the guidance range of 56,000 – 58,000 Boe/d, and 19% higher than third quarter 2021 production. Fourth quarter production consisted of 35% condensate, 10% NGLs, and 55% natural gas. Full year production was 4% higher than the prior year at 52,345 Boe/d consisting of 31% condensate, 11% NGLs, and 58% natural gas;
- 2021 net earnings totaled
$264.7 million ($1.17 /share, basic) compared to a net loss of$197.9 million (($0.88 )/share, basic) in 2020; - Achieved
$151.7 million of adjusted funds flow(1) in the fourth quarter ($0.67 /share, basic), including over$64.5 million of free adjusted funds flow(1). Full year adjusted funds flow was$321.0 million , or$1.42 /share (basic). The fourth quarter adjusted funds flow represented more than a threefold increase over comparable figure for the prior year, and full year 2021 adjusted funds flow was two times the prior year amount; - Improved upon our net debt(1) reduction target with
$118.6 million of reduction during 2021,$65.1 million of which was in the fourth quarter alone. NuVista closed the year with a favorable net debt to annualized fourth quarter adjusted funds flow ratio of 0.8x; - Successfully extended the tenure of our outstanding senior unsecured notes to
July 2026 in the third quarter of 2021; - Executed a successful 2021 capital expenditure(2) program of
$288.8 million , including the drilling of 38 (38.0 net) wells and the completion of 44 (44.0 net) wells in our condensate rich Wapiti Montney play; and - Continued to significantly advance our progress in the areas of environmental, social and governance (“ESG”), including continued positive strides in reducing GHG and methane emissions.
Notes:
(1) Each of "adjusted funds flow" and "net debt" are capital management measures. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release.
(2) Each of "free adjusted funds flow" and "capital expenditures" are non-GAAP financial measures that do not have any standardized meanings under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release.
Record Achievements in Reserve Metrics
NuVista is pleased to report the year end 2021 independent evaluation of our reserves by
Highlights of our 2021 reserves report include:
- Proved Developed Producing (“PDP”) reserves increased a record 26% to 122MMBoe;
- PDP Finding and Development Costs (“F&D”) (1) achieved record lows for the fourth consecutive year, reaching
$6.12 /Boe which is a 36% improvement over 2020; - PDP Recycle Ratio(1) also achieved new record levels at 4.4x based on our 2021 operating netback(1) of
$27.13 /Boe; - Replaced 220% of our production on a PDP basis while only spending 90% of adjusted funds flow;
- PDP NPV10 increased to
$1.5 Billion , an increase of 96% from 2020 underpinned by the dramatic growth in reserve volumes and the increase in commodity prices; - PDP Finding, Development and Acquisition Costs (“FD&A”) (1) were
$4.31 /Boe after accounting for the Wembley Disposition; - Technical revisions of +5% were made to 2020 PDP reserves due to continued outperformance of wells and an increase in economic limit due to higher forecast commodity prices; and
- Total proved plus probable additional (“TP+PA”) reserve volumes are 568MMBoe which includes 340 undeveloped locations. An additional 824 Best Estimate Contingent Resource Undeveloped Locations are also booked.
Notes:
(1) Each of FD&A costs, F&D costs, recycle ratio and operating netback are non-GAAP financial ratios. See "Oil and Gas Advisories" and "Non-GAAP and Other Financial Measures" in this press release for information relating to these specified financial measures.
The detailed summary of our year end 2021 reserves disclosure is included below, and will be included in our Annual Information Form which will be filed on or before
Excellence in Operations
As noted in our press release dated
Activity levels in the
Remaining activity in 2022 is planned to include five additional pads with approximately 25 wells, of which two thirds are expected to be in the
Balance Sheet Strength and Rapid Debt Reduction
In the fourth quarter of 2021, NuVista reduced bank debt by
ESG Progress Continues
We are proud to continue to demonstrate our commitment to transparency and ethical practices through our ESG performance, and we issued an updated full report to highlight our progress in August of 2021.
Approximately 60% of our current production is comprised of natural gas which has the lowest carbon footprint of any hydrocarbon, leading to our greenhouse gas (“GHG”) performance being better than the North American benchmark. But we will always strive to do more. In our 2021 report, we set seven long term targets for accountability and transparency of the progress we continue to make, and we continue to execute projects in environment, social, and governance to ensure we meet these targets. These include projects to eliminate methane venting, reduce flaring, reduce water consumption, and to responsibly abandon and reclaim legacy wells and facilities. We also progressed in matters of Social and Governance including continued headway on diversity and inclusion on several fronts. More details are available in our fourth quarter 2021 MD&A and our annual ESG report.
2022 Guidance Update
As discussed above, NuVista is pleased to note that operations and performance have been strong while both condensate and natural gas prices have increased significantly. This results in a material increase to projected adjusted funds flows and tremendous progress in reducing our net debt.
NuVista’s recent well performance has exceeded expectations, and in addition the on-stream dates for new wells have been ahead of schedule. As a result, first quarter production guidance is increased to 64,000 - 65,000 Boe/d as compared to the original guidance range of 60,000 - 62,000 Boe/d. Both of these ranges include condensate at approximately 32%, NGLs at 8%, and natural gas at 60%. Full year 2022 production guidance is unchanged at 65,000 – 68,000 Boe/d (condensate 30%, NGLs 8%, natural gas 62%), with a reminder that NuVista has some planned facility maintenance downtime in the second quarter. Capital expenditure guidance for 2022 is unchanged with a range of
We intend to continue our track record of carefully directing additional available adjusted funds flow towards a prudent balance of debt reduction and production growth until our existing facilities are filled to maximum efficiency. Capital expenditures will continue to be weighted towards
NuVista has an exceptional business plan that maximizes free adjusted funds flow and the return of capital to shareholders when our existing facilities are filled to capacity and maximum efficiency at production levels of approximately 85,000 – 90,000 Boe/d. We are confident that the actions described above accelerate the Company towards that goal by as early as 2023, while still providing free adjusted funds flow and net debt reduction concurrent with growing production through 2022-2023. With facilities optimized, returns are enhanced further with corporate netbacks which are expected to grow by approximately
NuVista has top quality assets and a management team focused on relentless improvement. We have the necessary foundation and liquidity to continue adding significant value for our shareholders. We have set the table for returns-focused profitable growth to between 85,000 – 90,000 Boe/d with only half-cycle spending, since the required facility infrastructure is now in place. We will continue to adjust to this environment in order to maximize the value of our asset base and ensure the long-term sustainability of our business. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their continued guidance and support. Please note that our corporate presentation is being updated and will be available at www.nuvistaenergy.com on
Financial and Operating Highlights | ||||||||||||
Three months ended | Year ended | |||||||||||
($ thousands, except otherwise stated) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||
FINANCIAL | ||||||||||||
Petroleum and natural gas revenues | 323,355 | 124,378 | 160 | 885,290 | 424,637 | 108 | ||||||
Cash provided by operating activities | 110,063 | 44,719 | 146 | 338,578 | 147,200 | 130 | ||||||
Adjusted funds flow(1) (4) | 151,665 | 49,399 | 207 | 320,974 | 156,866 | 105 | ||||||
Per share, basic | 0.67 | 0.22 | 205 | 1.42 | 0.70 | 103 | ||||||
Per share, diluted | 0.64 | 0.22 | 191 | 1.38 | 0.70 | 97 | ||||||
Net earnings (loss) | 113,159 | 715,435 | (84 | ) | 264,672 | (197,879 | ) | 234 | ||||
Per share, basic | 0.50 | 3.17 | (84 | ) | 1.17 | (0.88 | ) | 233 | ||||
Per share, diluted | 0.48 | 3.17 | (85 | ) | 1.14 | (0.88 | ) | 230 | ||||
Capital expenditures(2) | 86,402 | 23,864 | 262 | 288,846 | 180,442 | 60 | ||||||
Net proceeds on property dispositions | (1,034 | ) | — | — | 92,544 | — | — | |||||
Net debt(1) (4) | 480,275 | 598,835 | (20 | ) | ||||||||
OPERATING | ||||||||||||
Daily Production | ||||||||||||
Natural gas (MMcf/d) | 202.7 | 183.3 | 11 | 183.5 | 185.7 | (1 | ) | |||||
Condensate & oil (Bbls/d) | 21,072 | 12,928 | 63 | 16,465 | 14,067 | 17 | ||||||
NGLs (Bbls/d) | 6,028 | 5,863 | 3 | 5,298 | 5,420 | (2 | ) | |||||
Total (Boe/d) | 60,888 | 49,348 | 23 | 52,345 | 50,443 | 4 | ||||||
Condensate, oil & NGLs weighting | 45% | 38% | 42% | 39% | ||||||||
Condensate & oil weighting | 35% | 26% | 31% | 28% | ||||||||
Average realized selling prices(6) | ||||||||||||
Natural gas ($/Mcf) | 6.09 | 3.14 | 94 | 4.63 | 2.43 | 91 | ||||||
Condensate & oil ($/Bbl) | 96.15 | 52.59 | 83 | 84.35 | 45.50 | 85 | ||||||
NGLs ($/Bbl)(5) | 42.38 | 16.44 | 158 | 35.38 | 12.68 | 179 | ||||||
Netbacks ($/Boe) | ||||||||||||
Petroleum and natural gas revenues | 57.73 | 27.40 | 111 | 46.34 | 23.00 | 101 | ||||||
Realized gain (loss) on financial derivatives | (6.69 | ) | 2.77 | (342 | ) | (6.05 | ) | 3.83 | (258 | ) | ||
Royalties | (4.89 | ) | (0.83 | ) | 489 | (3.41 | ) | (0.92 | ) | 271 | ||
Transportation expenses | (5.20 | ) | (4.97 | ) | 5 | (5.27 | ) | (4.46 | ) | 18 | ||
Operating expenses | (10.53 | ) | (9.68 | ) | 9 | (10.65 | ) | (9.83 | ) | 8 | ||
Operating netback(3) | 30.42 | 14.69 | 107 | 20.96 | 11.62 | 80 | ||||||
Corporate netback(3) | 27.08 | 10.88 | 149 | 16.81 | 8.49 | 98 | ||||||
SHARE TRADING STATISTICS | ||||||||||||
High ($/share) | 7.71 | 1.08 | 614 | 7.71 | 3.36 | 129 | ||||||
Low ($/share) | 5.06 | 0.64 | 691 | 0.89 | 0.24 | 271 | ||||||
Close ($/share) | 6.96 | 0.94 | 640 | 6.96 | 0.94 | 640 | ||||||
Average daily volume ('000s) | 827 | 1,479 | (44 | ) | 1,133 | 2,030 | (44 | ) | ||||
Common shares outstanding ('000s) | 227,578 | 225,837 | 1 |
(1) Refer to Note 16 “Capital management” in NuVista's financial statements and to the sections entitled “Adjusted funds flow” and “Liquidity and capital resources” contained in this MD&A.
(2) Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures”.
(3) Non-GAAP ratio that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures”.
(4) Capital management measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures”.
(5) Natural gas liquids (“NGLs”) include butane, propane, ethane and sulphur revenue.
(6) Product prices exclude realized gains/losses on financial derivatives.
Detailed Summary of Corporate Reserves Data
The following table provides summary reserve information based upon the GLJ Report using the published 3 Consultants’ Average
Natural Gas(2) | Natural Gas Liquids | Oil(3) | Total | |
Reserves category(1) | Company Gross | Company Gross | Company Gross | Company Gross |
Interest | Interest | Interest | Interest | |
(MMcf) | (MBbls) | (MBbls) | (MBoe) | |
Proved | ||||
Developed producing | 464,819 | 44,136 | - | 121,605 |
Developed non-producing | 43,883 | 4,459 | - | 11,773 |
Undeveloped | 750,605 | 66,446 | - | 191,547 |
Total proved | 1,259,308 | 115,041 | - | 324,925 |
Probable | 983,600 | 78,683 | - | 242,616 |
Total proved plus probable | 2,242,907 | 193,723 | - | 567,541 |
NOTES:
(1) Numbers may not add due to rounding.
(2) Includes conventional natural gas and shale gas.
(3) Includes light and medium crude oil.
The following table is a summary reconciliation of the 2021 year end working interest reserves with the working interest reserves reported in the 2020 year end reserves report:
Company Gross Interest | Natural Gas(1)(3) (MMcf) | Liquids(1) (MBbls) | Oil(1)(4) (MBbls) | Total Oil Equivalent(1) (MBoe) | ||||
Total proved | ||||||||
Balance, | 1,272,751 | 115,684 | 5,228 | 333,038 | ||||
Exploration and development(2) | 93,646 | 9,811 | - | 25,419 | ||||
Technical revisions | (18,317 | ) | (108 | ) | - | (3,161 | ) | |
Acquisitions | - | - | - | - | ||||
Dispositions(5) | (26,718 | ) | (2,820 | ) | (5,194 | ) | (12,467 | ) |
Economic Factors | 4,923 | 382 | - | 1,203 | ||||
Production | (66,977 | ) | (7,909 | ) | (34 | ) | (19,106 | ) |
Balance, | 1,259,308 | 115,041 | - | 324,925 | ||||
Total proved plus probable Total proved plus probable | ||||||||
Balance, | 2,284,051 | 197,819 | 11,339 | 589,833 | ||||
Exploration and development(2) | 116,399 | 11,786 | - | 31,186 | ||||
Technical revisions | (49,757 | ) | (3,078 | ) | - | (11,371 | ) | |
Acquisitions | - | - | - | - | ||||
Dispositions(5) | (49,770 | ) | (5,565 | ) | (11,305 | ) | (25,166 | ) |
Economic Factors | 8,962 | 671 | - | 2,165 | ||||
Production | (66,977 | ) | (7,909 | ) | (34 | ) | (19,106 | ) |
Balance, | 2,242,908 | 193,723 | - | 567,541 |
NOTES:
(1) Numbers may not add due to rounding.
(2) Reserve additions for drilling extensions, infill drilling and improved recovery.
(3) Includes conventional natural gas and shale gas.
(4) Includes light, medium crude oil.
(5) During the first quarter of 2021, we completed the divestiture of our non-core
The following table summarizes the future development capital included in the GLJ Report:
($ thousands, undiscounted) | Proved | Proved plus probable |
2022 | 281,018 | 299,318 |
2023 | 352,608 | 352,608 |
2024 | 210,351 | 210,351 |
2025 | 249,029 | 249,029 |
2026 | 189,488 | 203,769 |
Remaining | - | 896,552 |
Total (Undiscounted) | 1,282,495 | 2,211,627 |
NOTE:
(1) Numbers may not add due to rounding.
The following table outlines NuVista's corporate finding, development and acquisition (“FD&A”) costs in more detail:
3 Year-Average(1) | 2021(1) | 2020(1) | ||||||||||
Proved plus | Proved plus | Proved plus | ||||||||||
Proved | probable | Proved | probable | Proved | probable | |||||||
Finding and development costs ($/Boe) | ( | ( | ||||||||||
Finding, development and acquisition costs ($/Boe) | ( | ( |
NOTE:
(1) F&D costs and FD&A are used as a measure of capital efficiency. The calculation for F&D costs includes all exploration and development capital for that period as outlined in the Company’s year-end financial statements plus the change in future development capital for that period. This total capital including the change in the future development capital is then divided by the change in reserves for that period including revisions for that same period. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during the year in estimated future development costs generally will not reflect total finding and development costs related to reserve additions for the year. FD&A costs are calculated in the same manner except in addition to exploration and development capital and the change in future development capital, acquisition capital is also included in the calculation.
Summary of Corporate Net Present Value Data
The estimated net present values of future net revenue before income taxes associated with NuVista’s reserves effective
The estimated future net revenue contained in the following table does not necessarily represent the fair market value of the reserves. There is no assurance that the forecast price and cost assumptions contained in the GLJ Report will be attained and variations could be material. The recovery and reserve estimates described herein are estimates only. Actual reserves may be greater or less than those calculated.
Before Income Taxes | |||||
Discount Factor (%/year) | |||||
Reserves category(1)($ thousands) | 0% | 5% | 10% | 15% | 20% |
Proved | |||||
Developed producing | 2,254,686 | 1,801,273 | 1,492,256 | 1,286,702 | 1,143,080 |
Developed non-producing | 260,110 | 201,077 | 166,303 | 143,790 | 128,043 |
Undeveloped | 3,236,061 | 2,096,926 | 1,481,707 | 1,112,397 | 871,240 |
Total proved | 5,750,857 | 4,099,276 | 3,140,266 | 2,542,889 | 2,142,363 |
Probable | 4,553,171 | 2,150,210 | 1,216,339 | 783,022 | 551,939 |
Total proved plus probable | 10,304,028 | 6,249,487 | 4,356,606 | 3,325,911 | 2,694,302 |
(1) Numbers may not add due to rounding.
The following table is a summary of pricing and inflation rate assumptions based on published 3 Consultants’ Average forecast prices and costs as at
Year | Edmonton Butane ($Cdn/Bbl) | WTI Cushing Oklahoma ($US/Bbl) | Edmonton Par Price 40 API ($Cdn/Bbl) | Exchange Rate(2)($US/$Cdn) | |||||||||||
Forecast | |||||||||||||||
2022 | 3.56 | 3.85 | 3.71 | 91.85 | 43.39 | 57.49 | 72.83 | 86.82 | 0.797 | ||||||
2023 | 3.20 | 3.44 | 3.30 | 85.53 | 35.92 | 50.17 | 68.78 | 80.73 | 0.797 | ||||||
2024 | 3.05 | 3.17 | 3.03 | 82.98 | 34.62 | 48.53 | 66.76 | 78.01 | 0.797 | ||||||
2025 | 3.10 | 3.24 | 3.09 | 84.63 | 35.31 | 49.50 | 68.09 | 79.57 | 0.797 | ||||||
2026 | 3.17 | 3.30 | 3.16 | 86.33 | 36.02 | 50.49 | 69.45 | 81.16 | 0.797 | ||||||
2027 | 3.23 | 3.37 | 3.22 | 88.05 | 36.74 | 51.50 | 70.84 | 82.78 | 0.797 | ||||||
2028 | 3.30 | 3.44 | 3.29 | 89.82 | 37.47 | 52.53 | 72.26 | 84.44 | 0.797 | ||||||
2029 | 3.36 | 3.51 | 3.36 | 91.61 | 38.22 | 53.58 | 73.70 | 86.13 | 0.797 | ||||||
2030 | 3.43 | 3.57 | 3.43 | 93.44 | 38.99 | 54.65 | 75.18 | 87.85 | 0.797 | ||||||
2031 | 3.50 | 3.65 | 3.50 | 95.32 | 39.77 | 55.74 | 76.68 | 89.60 | 0.797 | ||||||
2031+ | +2.0%/yr | +2.0%/yr | +2.0%/yr | +2.0%/yr | +2.0%/yr | +2.0%/yr | +2.0%/yr | +2.0%/yr | 0.797 | ||||||
NOTES:
(1) Costs are inflated at 2% per annum.
(2) Exchange rate used to generate the benchmark reference prices in this table.
(3) NuVista’s future realized gas prices are forecasted based on a combination of various benchmark prices in addition to the AECO benchmark in order to reflect the favorable price diversification to other markets which NuVista has undertaken. Pricing at these markets has been accounted for in the GLJ Report. Additional information on NuVista’s gas marketing diversification will be available in our corporate presentation.
Advisories Regarding Oil And Gas Information
BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil 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.
This press release contains a number of oil and gas metrics prepared by management, including F&D costs, FD&A costs, recycle ratio and DC&E costs, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate NuVista's performance on a comparable basis with prior periods; however, such measures are not reliable indicators of the future performance of NuVista and future performance may not compare to the performance in previous periods. Details of how F&D costs, FD&A costs and recycle ratios are calculated are set forth under the heading "Non-GAAP and Other Financial Measure – Non-GAAP Ratios". DCET includes all capital spent to drill, complete and equip a well.
NuVista has presented certain well economics based on type curves for the
NuVista has presented the term "payout" based on the type curves for the
Economics presented are based on pricing assumptions of:
This press release discloses NuVista's drilling locations in two categories: (i) undeveloped proved plus probable (2P) drilling locations; and (ii) undeveloped contingent resources (2C) drilling locations. Undeveloped 2P drilling locations are derived from a report prepared by GLJ, NuVista's independent qualified reserves evaluator, evaluating NuVista's reserves as of
Any references in this press release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for NuVista.
Basis of presentation
Unless otherwise noted, the financial data presented in this press release has been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) also known as International Financial Reporting Standards (“IFRS”). The reporting and measurement currency is the Canadian dollar. National Instrument 51-101 - "Standards of Disclosure for Oil and Gas Activities" includes condensate within the product type of natural gas liquids. NuVista has disclosed condensate values separate from natural gas liquids herein as NuVista believes it provides a more accurate description of NuVista's operations and results therefrom.
Production split for Boe/d amounts referenced in the press release are as follows:
Reference | Total Boe/d | % Natural Gas | % Condensate | % NGLs |
Q4 2021 production - actual | 60,888 | 55% | 35% | 10% |
Q4 2021 production guidance | 56,000 - 58,000 | 62% | 30% | 8% |
2021 annual production - actual | 52,345 | 58% | 31% | 11% |
2021 annual production guidance | 51,000 - 52,000 | 60% | 30% | 10% |
Q1 2022 revised production guidance | 64,000 - 65,000 | 60% | 32% | 8% |
Q1 2022 original production guidance | 60,000 - 62,000 | 60% | 32% | 8% |
2022 annual production guidance | 65,000 - 68,000 | 62% | 30% | 8% |
2024+ production range | 85,000 - 90,000 | 62% | 30% | 8% |
Reserves advisories
The reserves estimates prepared herein have been evaluated by an independent qualified reserves evaluator in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities and the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and are effective as of
Advisory regarding forward-looking information and statements
This press release contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable securities laws. The use of any of the words “will”, “expects”, “believe”, “plans”, “potential” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements, including management's assessment of: NuVista’s future focus, strategy, plans, opportunities and operations; projected adjusted funds flows at current strip prices; our plans to continue to balance debt repayment, increasing adjusted funds flow through prudent production and growth; guidance with respect to 2022 capital expenditure amounts, spending timing and allocation; guidance with respect to average daily production for 2022; expectations with respect to future net debt to adjusted funds flow ratio; expectations with respect to achieving our net debt milestone of less than $400MM; expectations with respect to achieving our sustainable net debt target of less than 1.0 times adjusted funds flow in the stress test price environment of
By their nature, forward-looking statements are based upon certain assumptions and are subject to numerous risks and uncertainties, some of which are beyond NuVista’s control, including the impact of general economic conditions, industry conditions, current and future commodity prices and inflation rates, the projectory of the Covid-19 pandemic and its effects, including with respect to commodity prices, currency and interest rates, anticipated production rates, borrowing, operating and other costs and adjusted funds flow, the timing, allocation and amount of capital expenditures and the results therefrom, anticipated reserves and the imprecision of reserve estimates, the performance of existing wells, the success obtained in drilling new wells, the sufficiency of budgeted capital expenditures in carrying out planned activities, access to infrastructure and markets, competition from other industry participants, availability of qualified personnel or services and drilling and related equipment, stock market volatility, effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties, the ability to access sufficient capital from internal sources and bank and equity markets, that we will complete the announced dispositions on the terms and timing contemplated, that we will be able to execute our 2022 drilling plans as expected and including, without limitation, those risks considered under “Risk Factors” in our Annual Information Form. 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 and, as such, undue reliance should not be placed on forward-looking statements. NuVista’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the forward-looking statements in this press release in order to provide readers with a more complete perspective on NuVista’s future operations and such information may not be appropriate for other purposes. NuVista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This press release also contains future-oriented financial information and financial outlook information (collectively, "FOFI") about NuVista's prospective results of operations including, without limitation, its ability to repay debt, expectations with respect to future net debt to adjusted funds flow ratios, projected adjusted funds flows at current strip prices, capital expenditures and corporate netbacks, which are 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 and, as such, undue reliance should not be placed on FOFI. NuVista's actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the FOFI in order to provide readers with a more complete perspective on NuVista's future operations and such information may not be appropriate for other purposes.
These forward-looking statements and FOFI are made as of the date of this press release and NuVista disclaims any intent or obligation to update any forward-looking statements and FOFI, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities law.
Non-GAAP and other financial measures
This press release uses various specified financial measures (as such terms are defined in National Instrument 52-112 – Non-GAAP Disclosure and Other Financial Measures Disclosure ("NI 51-112")) including "non-GAAP financial measures", "non-GAAP ratios”, “capital management measures" and “supplementary financial measures” (as such terms are defined in NI 51-112), which are described in further detail below. Management believes that the presentation of these non-GAAP measures provide useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.
Non-GAAP financial measures
NI 52-112 defines a non-GAAP financial measure as a financial measure that: (i) depicts the historical or expected future financial performance, financial position or cash flow of an entity; (ii) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the entity; (iii) is not disclosed in the financial statements of the entity; and (iv) is not a ratio, fraction, percentage or similar representation.
These non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these measures should not be construed as alternatives to or more meaningful than the most directly comparable IFRS measures as indicators of NuVista's performance. Set forth below are descriptions of the non-GAAP financial measures used in this press release.
(1) Free adjusted funds flow
Free adjusted funds flow is adjusted funds flow less capital and asset retirement expenditures. Refer to disclosures under the headings "Adjusted funds flow" and "Capital expenditures" for a description of each component of free adjusted funds flow, which components are a capital management measure and a non-GAAP financial measure, respectively. Management uses free adjusted funds flow as a measure of the efficiency and liquidity of its business, measuring its funds available for capital investment to manage debt levels, pay dividends, and return capital to shareholders. By removing the impact of current period capital and asset retirement expenditures, management believes this measure provides an indication of the funds the Company has available for future capital allocation decisions.
The following tables set out our free adjusted funds flows compared to the most directly comparable GAAP measure of cash provided by operating activities less cash used in investing activities for the period:
Three months ended | Year ended | |||||||
($ thousands) | 2021 | 2020 | 2021 | 2020 | ||||
Cash provided by operating activities | 110,063 | 44,719 | 338,578 | 147,200 | ||||
Cash used in investing activities | (42,620 | ) | (13,825 | ) | (176,258 | ) | (201,425 | ) |
Excess (deficiency) of cash provided by operating activities over cash used in investing activities | 67,443 | 30,894 | 162,320 | (54,225 | ) | |||
Adjusted funds flow | 151,665 | 49,399 | 320,974 | 156,866 | ||||
Capital expenditures | (86,402 | ) | (23,864 | ) | (288,846 | ) | (180,442 | ) |
Asset retirement expenditures | (809 | ) | (750 | ) | (5,478 | ) | (11,106 | ) |
Free adjusted funds flow | 64,454 | 24,785 | 26,650 | (34,682 | ) |
(2) Capital expenditures
Capital expenditures are equal to cash used in investing activities, excluding changes in non-cash working capital, other receivable and property dispositions. Any expenditures on the other receivable are being refunded to NuVista and are therefore included under current assets. NuVista considers capital expenditures to be a useful measure of cash flow used for capital reinvestment.
The following table provides a reconciliation between the non-GAAP measure of capital expenditures to the most directly comparable GAAP measure of cash used in investing activities for the period:
Three months ended | Year ended | |||||||
($ thousands) | 2021 | 2020 | 2021 | 2020 | ||||
Cash used in investing activities | (42,620 | ) | (13,825 | ) | (176,258 | ) | (201,425 | ) |
Changes in non-cash working capital | (44,254 | ) | (5,572 | ) | (15,249 | ) | 25,813 | |
Other receivable | (562 | ) | (4,467 | ) | (4,795 | ) | (4,830 | ) |
Property acquisitions/(dispositions) | 1,034 | — | (92,544 | ) | — | |||
Capital expenditures | (86,402 | ) | (23,864 | ) | (288,846 | ) | (180,442 | ) |
Non-GAAP ratios
NI 52-112 defines a non-GAAP ratio as a financial measure that: (i) is in the form of a ratio, fraction, percentage or similar representation; (ii) has a non-GAAP financial measure as one or more of its components; and (iii) is not disclosed in the financial statements of the entity. Set forth below is a description of the non-GAAP ratios used in this press release.
These non-GAAP ratios are not standardized financial measures under IFRS and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these ratios should not be construed as alternatives to or more meaningful than the most directly comparable IFRS measures as indicators of NuVista's performance.
Non-GAAP ratios presented on a "per Boe" basis may also be considered to be supplementary financial measures (as such term is defined in NI 51-112).
(1) Operating netback and corporate netback ("netbacks"), per Boe
NuVista calculated netbacks per Boe by dividing the netbacks by total production volumes sold in the period. Each of operating netback and corporate netback are non-GAAP financial measures. Operating netback is calculated as petroleum and natural gas revenues including realized financial derivative gains/losses, less royalties, transportation and operating expenses. Corporate netback is operating netback less general and administrative, deferred share units, interest and lease finance expense.
Management feels both operating and corporate netbacks are key industry benchmarks and measures of operating performance for NuVista that assists management and investors in assessing NuVista's profitability, and are commonly used by other petroleum and natural gas producers. The measurement on a Boe basis assists management and investors with evaluating NuVista's operating performance on a comparable basis.
(2) F&D costs
NuVista calculated F&D costs as the sum of development costs plus the change in future development costs ("FDC") for the period when appropriate, divided by the change in reserves within the applicable reserves category, excluding those reserves acquired or disposed.
NuVista calculated TP+PA 3-year average F&D costs as the arithmetical average of the F&D costs over the last three completed financial years.
(3) FD&A costs
NuVista calculated FD&A costs are calculated as the sum of development costs plus net acquisition costs plus the change in FDC for the period when appropriate, divided by the change in reserves within the applicable reserves category, inclusive of changes due to acquisitions and dispositions.
(4) Recycle Ratio
NuVista calculates recycle ratio as the sum of changes in reserves (exploration and development, technical revisions, acquisitions, dispositions and economic factors) divided by annual production for the applicable period and reserve category.
Capital management measures
NI 52-112 defines a capital management measure as a financial measure that: (i) is intended to enable an individual to evaluate an entity’s objectives, policies and processes for managing the entity’s capital; (ii) is not a component of a line item disclosed in the primary financial statements of the entity; (iii) is disclosed in the notes to the financial statements of the entity; and (iv) is not disclosed in the primary financial statements of the entity.
Please refer to Note 16 "Capital Management" in NuVista's financial statements for additional disclosure net debt and adjusted funds flow, each of which are capital management measures used by the Company in this press release.
Supplementary financial measures
This press release may contain certain supplementary financial measures. NI 52-112 defines a supplementary financial measure as a financial measure that: (i) is intended to be disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of an entity; (ii) is not disclosed in the financial statements of the entity; (iii) is not a non-GAAP financial measure; and (iv) is not a non-GAAP ratio.
FOR FURTHER INFORMATION CONTACT: | ||||
President and CEO | VP, Finance and CFO | Chief Operating Officer | ||
(403) 538-8501 | (403) 538-8539 | (403) 538-1936 |
Source:
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