Spartan's go-forward strategy is to grow through the continued optimization of its
"I believe that the West
Spartan is pleased to provide its financial and operating guidance for 2024 for its foundational
For 2024, Spartan's Board has approved an initial capital budget of
Based on forecast average production of 39,500 BOE/d and commodity price assumptions of
Spartan's preliminary 2024 guidance is summarized below:
ANNUAL GUIDANCE | 2024 |
Year ending | Guidance |
Average Production (BOE/d) (a)(c) | 38,500 to 40,500 |
% Liquids | 31 % |
Benchmark Average Commodity Prices | |
WTI crude oil price (US$/bbl) | 75.00 |
AECO natural gas price ($/GJ) | 2.75 |
Average exchange rate (US$/CA$) | 1.37 |
Operating Netback, before hedging ($/BOE) (b)(c) | 14.78 |
Operating Netback, after hedging ($/BOE) (b)(c) | 14.97 |
Adjusted Funds Flow ($MM) (b)(c) | 177 |
Capital Expenditures, before A&D ($MM) (b) | 130 |
Free Funds Flow ($MM) (b) | 47 |
Net Debt (Surplus), end of year ($MM) (b) | 19 |
Common shares outstanding, end of year (MM) | 174 |
a) | The financial performance measures included in the Company's preliminary guidance for 2024 is based on the midpoint of the average production forecast. | |
b) | "Operating Netback", "Adjusted Funds Flow", "Capital Expenditures, before A&D", "Free Funds Flow" and "Net Debt (Surplus)" do not have standardized meanings under IFRS, see "Non-GAAP Measures and Ratios". | |
c) | Additional information regarding the assumptions used in the forecasted Average Production, Operating Netbacks and Adjusted Funds Flow for 2024 are provided in the Reader Advisories section of this press release. |
Spartan's 2023 guidance is unchanged except for the
The Acquisitions include a material Duvernay land position, extensive 3D seismic, and approximately 400 BOE/d of Duvernay production. Pursuant to the Acquisitions, Spartan accumulated approximately 137,000 gross acres (130,000 net acres) with the majority of the acreage residing in the volatile oil, condensate, and liquids-rich gas window of the Duvernay.
After over a decade of development, Spartan believes the Duvernay is poised to offer repeatable, economic results with a significant depth of inventory. Similar to Spartan's entry into the up-dip oil window of the
Spartan looks forward to providing additional details on its Duvernay strategy in the new year as it continues to advance its current position and solidify its future operating plans for the area.
The Company also announces Ms.
Effective
Spartan is committed to creating value for its shareholders, focused on sustainability both in operations and financial performance. The Company's ESG-focused culture is centered on generating Free Funds Flow through responsible oil and gas exploration and development. The Company has established a portfolio of high-quality production and development opportunities in the
Spartan's corporate presentation as of
Non-GAAP Measures and Ratios
This press release contains certain financial measures and ratios which do not have standardized meanings prescribed by International Financial Reporting Standards ("IFRS") or Generally Accepted Accounting Principles ("GAAP"). As these non-GAAP financial measures and ratios are commonly used in the oil and gas industry, Spartan believes that their inclusion is useful to investors. The reader is cautioned that these amounts may not be directly comparable to measures for other companies where similar terminology is used.
The non-GAAP measures and ratios used in this press release, represented by the capitalized and defined terms outlined below, are used by Spartan as key measures of financial performance, and are not intended to represent operating profits nor should they be viewed as an alternative to cash provided by operating activities, net income or other measures of financial performance calculated in accordance with IFRS.
The definitions below should be read in conjunction with the "Non-GAAP Measures and Ratios" section of the Company's MD&A, which includes discussion of the purpose and composition of the specified financial measures and detailed reconciliations to the most directly comparable GAAP financial measures.
Operating Income and Operating Netback
Operating Income, a non-GAAP financial measure, is a useful supplemental measure that provides an indication of the Company's ability to generate cash from field operations, prior to administrative overhead, financing, and other business expenses. "Operating Income, before hedging" is calculated by Spartan as oil and gas sales, net of royalties, plus processing and other revenue, less operating and transportation expenses. "Operating Income, after hedging" is calculated by adjusting Operating Income for: (i) realized gains or losses on derivative financial instruments including settlements on acquired derivative financial instrument liabilities (together a non-GAAP financial measure "Settlements on Commodity Derivative Contracts"), and (ii) pipeline transportation revenue, net of pipeline transportation expense (the "Net Pipeline Transportation Margin"). The Company refers to Operating Income expressed per unit of production as an "Operating Netback" and reports the Operating Netback before and after hedging, both of which are non-GAAP financial ratios. Spartan considers Operating Netback an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices.
Adjusted Funds Flow and Free Funds Flow
Cash provided by operating activities is the most directly comparable measure to Adjusted Funds Flow. "Adjusted Funds Flow" is a non-GAAP financial measure reconciled to cash provided by operating activities by excluding changes in non-cash working capital, adding back transaction costs on acquisitions, and deducting the principal portion of lease payments. Spartan utilizes Adjusted Funds Flow as a key performance measure in the Company's annual financial forecasts and public guidance. Transaction costs, which primarily include legal and financial advisory fees, regulatory and other expenses directly attributable to execution of acquisitions and dispositions, are added back because the Company's definition of Free Funds Flow excludes capital expenditures related to acquisitions and dispositions. For greater clarity, incremental overhead expenses related to ongoing integration and restructuring post-acquisition are not adjusted and are included in Spartan's general and administrative expenses. Lease liabilities are not included in Spartan's definition of Net Debt therefore lease payments are deducted in the period incurred to determine Adjusted Funds Flow.
The Company refers to Adjusted Funds Flow expressed per unit of production as an "Adjusted Funds Flow Netback".
"Free Funds Flow" is a non-GAAP financial measure calculated by Spartan as Adjusted Funds Flow less Capital Expenditures before A&D. Spartan believes Free Funds Flow provides an indication of the amount of funds the Company has available for future capital allocation decisions such as to repay current and long-term debt, reinvest in the business or return capital to shareholders.
Adjusted Funds Flow per share
Adjusted Funds Flow ("AFF") per share is a non-GAAP financial ratio used by the Company as a key performance indicator. AFF per share is calculated using the same methodology as net income per share ("EPS"), however the diluted weighted average common shares ("WA Shares") outstanding for AFF may differ from the diluted weighted average determined in accordance with IFRS for purposes of calculating EPS due to non-cash items that impact net income only. The dilutive impact of stock options and share awards is more dilutive to AFF than EPS because the number of shares deemed to be repurchased under the treasury stock method is not adjusted for unrecognized share based compensation expense as it is non-cash (see also, "Share Capital").
Capital Expenditures, before A&D
"Capital Expenditures before A&D" is a non-GAAP financial measure used by Spartan to measure its capital investment level compared to the Company's annual budgeted capital expenditures for its organic drilling program. It includes capital expenditures on exploration and evaluation assets and property, plant and equipment, before acquisitions and dispositions. The directly comparable GAAP measure to capital expenditures before A&D is cash provided by (used in) investing activities.
Adjusted Net Capital A&D
"Adjusted Net Capital A&D" is a supplemental measure disclosed by Spartan which aggregates the total amount of cash, debt and share consideration used to acquire crude oil and natural gas assets during the period, net of cash proceeds received on dispositions. The Company believes this is useful information because it is more representative of the total transaction value than the cash acquisition costs or total cash used in investing activities, determined in accordance with IFRS. The most directly comparable GAAP measures are acquisition costs and disposition proceeds included as components of cash used in investing activities.
References to "Net Debt" includes current and long-term debt under Spartan's revolving credit facility and second lien term facility, net of
Spartan uses Net Debt as a key performance measure to manage the Company's targeted debt levels. The Company believes its presentation of
References to "Cash Financing Expenses" includes interest and fees on current and long-term debt, net of interest income, and excludes financing costs related to lease liabilities and accretion of decommissioning obligations. Cash Financing Expenses is a non-GAAP financial measure used by Spartan in its budget and guidance as it corresponds to the Company's definition of Net Debt, however it should not be viewed as an alternative to total financing expenses presented in accordance with IFRS.
Net Debt to Annualized AFF Ratio
The Company monitors its capital structure using a "Net Debt to Annualized AFF Ratio", which is a non-GAAP financial ratio calculated as the ratio of the Company's "Net Debt" to its "Annualized Adjusted Funds Flow" which is calculated by multiplying Adjusted Funds Flow for the most recent quarter, normalized for significant non-recurring items, by a factor of 4.
Other Measurements
All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.
This press release contains various references to the abbreviation "BOE" which means barrels of oil equivalent. Where amounts are expressed on a BOE basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet (Mcf) per barrel (bbl). The term BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead and is significantly different than the value ratio based on the current price of crude oil and natural gas. This conversion factor is an industry accepted norm and is not based on either energy content or current prices.
References to "oil" in this press release include light crude oil and medium crude oil, combined. NI 51-101 includes condensate within the product type of "natural gas liquids". References to "natural gas liquids" or "NGLs" include pentane, butane, propane, and ethane. References to "gas" or "natural gas" relates to conventional natural gas.
References to "liquids" includes crude oil, condensate and NGLs.
The significant assumptions used in the forecast of Operating Netbacks and Adjusted Funds Flow for 2024 are summarized below. These key performance measures expressed per BOE are based on the midpoint of calendar year average production guidance for 2024 of 39,500 BOE/d.
2024 PRODUCTION GUIDANCE | Guidance |
Crude oil (bbls/d) | 1,000 |
Condensate (bbls/d) | 1,700 |
Crude oil and condensate (bbls/d) | 2,700 |
NGLs (bbls/d) | 9,700 |
Natural gas (mcf/d) | 162,500 |
Combined average (BOE/d) | 39,500 |
% Liquids | 31 % |
2024 FINANCIAL GUIDANCE ($/BOE) | Guidance | ||
Oil and gas sales | 26.59 | ||
Processing and other revenue | 0.33 | ||
Royalties | (3.70) | ||
Operating expenses | (6.68) | ||
Transportation expenses | (1.76) | ||
Operating Netback, before hedging | 14.78 | ||
Settlements on Commodity Derivative Contracts | 0.19 | ||
Operating Netback, after hedging | 14.97 | ||
General and administrative expenses | (1.39) | ||
Cash financing expenses | (0.31) | ||
Settlements of decommissioning obligations | (0.24) | ||
Lease payments | (0.78) | ||
Adjusted Funds Flow | 12.25 |
Changes in forecast commodity prices, exchange rates, differences in the amount and timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in Spartan's guidance. The Company's actual results may differ materially from these estimates. Holding all other assumptions constant, a
Spartan's common shares are listed on the
Certain statements contained within this press release constitute forward-looking statements within the meaning of applicable Canadian securities legislation. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "budget", "plan", "endeavor", "continue", "estimate", "evaluate", "expect", "forecast", "monitor", "may", "will", "can", "able", "potential", "target", "intend", "consider", "focus", "identify", "use", "utilize", "manage", "maintain", "remain", "result", "cultivate", "could", "should", "believe" and similar expressions. Spartan believes that the expectations reflected in such forward-looking statements are reasonable as of the date hereof, but no assurance can be given that such expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Without limitation, this press release contains forward-looking statements pertaining to: the business plan, cost model and strategy of Spartan, including commodity diversification, oil weighted production, continued optimization of its
The forward-looking statements and information are based on certain key expectations and assumptions made by Spartan, including expectations and assumptions concerning the business plan of Spartan, the timing of and success of future drilling, development and completion activities, the performance of existing wells, the performance of new wells, the availability and performance of facilities and pipelines, the geological characteristics of Spartan's properties, the successful integration of the recently acquired assets into Spartan's operations (including the assets acquired pursuant to the Acquisitions), the successful application of drilling, completion and seismic technology, prevailing weather conditions, prevailing legislation affecting the oil and gas industry, prevailing commodity prices, price volatility, price differentials and the actual prices received for the Company's products, impact of inflation on costs, royalty regimes and exchange rates, the application of regulatory and licensing requirements, the availability of capital, labour and services, the creditworthiness of industry partners, and the ability to source and complete acquisitions.
Although Spartan believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because Spartan can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. These risks and uncertainties include, but are not limited to, fluctuations in commodity prices, changes in industry regulations and political landscape both domestically and abroad, wars (including
Please refer to Spartan's MD&A and AIF for discussion of additional risk factors relating to the Company, which can be accessed either on Spartan's website at www.spartandeltacorp.com or under Spartan's SEDAR+ profile on www.sedarplus.ca. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward-looking information for anything other than its intended purpose. Spartan undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Spartan's prospective results of operations and production, 2023 and 2024 guidance, generating Free Funds Flow, organic growth and periodic special dividends, capital efficiency improvements and components thereof, including pro forma the Acquisitions, 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 document was approved by management as of the date of this document and was provided for the purpose of providing further information about Spartan's future business operations. Spartan and its management believe that FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments, and represent, to the best of management's knowledge and opinion, the Company's expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results. Spartan disclaims any intention or obligation to update or revise any FOFI contained in this document, 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 document should not be used for purposes other than for which it is disclosed herein. Changes in forecast commodity prices, differences in the timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in Spartan's guidance. The Company's actual results may differ materially from these estimates.
Abbreviations
A&D | acquisitions and dispositions |
AECO | |
AFF | Adjusted Funds Flow |
AIF | Annual Information Form for the year ended |
bbl | barrel |
bbls/d | barrels per day |
BOE | barrels of oil equivalent |
BOE/d | barrels of oil equivalent per day |
CA$ or CAD | Canadian dollar |
ESG | Environment, Social and Governance |
GJ | gigajoule |
mcf | one thousand cubic feet |
mcf/d | one thousand cubic feet per day |
MMbtu | one million British thermal units |
MMcf | one million cubic feet |
MD&A | Management's Discussion and Analysis for the period ended |
MM | millions |
$MM | millions of dollars |
NI 51-101 | National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities |
NGL(s) | natural gas liquids |
NYMEX | |
TSX | |
TSX-V | |
US$ or USD | |
WTI | West Texas Intermediate, the reference price paid in |
SOURCE
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