CALGARY, Alberta, May 05, 2022 (GLOBE NEWSWIRE) -- Crew Energy Inc. (TSX: CR, OTCQB: CWEGF) (“Crew” or the “Company”) is a growth-oriented natural gas weighted producer operating exclusively in the world-class Montney play in northeast British Columbia (“NEBC”). The Company is pleased to announce our operating and financial results for the three-month period ended March 31, 2022. Crew’s Financial Statements and Notes, as well as Management’s Discussion and Analysis (“MD&A”) are available on Crew’s website and filed on SEDAR at www.sedar.com.
“Our results for the first quarter of 2022 are indicative of the significant progress achieved to date on our two-year asset development plan (the “Two-Year Plan”). We have continued to responsibly develop our world-class Montney asset base, while striving to further reduce per unit costs and growing natural gas and condensate production. Crew has benefited from stronger commodity prices in concert with our focus on controlling costs, which has contributed to the generation of $22.3 million of Free Adjusted Funds Flow1 (“Free AFF”) in Q1/22. Our strong performance for the first three months of the year positions Crew to realize our goal of increasing production by over 20% and improving year-end leverage metrics, underpinning the Company’s long-term sustainability,” said Dale Shwed, President and CEO of Crew.
HIGHLIGHTS
- 33,399 boe per day2 (200 mmcfe) average production in Q1/22, a 27% increase over Q1/21 and a 15% sequential increase from Q4/21, marking a new Company record and reflecting the operational success of our drilling and completions program.
- Q1/22 natural gas production increased 33% to 159 mmcf per day, condensate production increased 45% to 3,926 bbls per day and natural gas liquids3,4 (“NGLs”) increased 19% to 2,856 bbls per day, compared to Q1/21.
- $77.7 million of Adjusted Funds Flow5 (“AFF”) ($0.51 per share basic share and $0.48 per fully diluted share) was generated in Q1/22, a 128% increase over Q1/21 and a 66% sequential increase from Q4/21, driven by significant production growth and strong operating netbacks1 of $28.83 per boe. The Company’s goal to improve margins was proven successful with an AFF5 to petroleum and natural gas sales ratio6 of 60% in Q1/22 compared to a 40% ratio in Q1/21.
- Free AFF1 of $22.3 million was generated in Q1/22, affording Crew flexibility in capital allocation with the ability to direct Free AFF to repay debt and fund future growth to enhance financial sustainability.
- 22% reduction in cash costs per boe1 to $9.61 per boe in Q1/22 from $12.25 in Q1/21, reflecting the successful advancement of one of the goals within our Two-Year Plan, to reduce cash costs per boe1 to between $9.00 and $10.00 per boe from 2020 to 2022. Net operating costs per boe1 were reduced by 25% in Q1/22 to total $3.50 per boe, compared to $4.65 per boe in Q1/21.
- $55.4 million of net capital expenditures1 in Q1/22, directed to an active exploration and development program that resulted in Crew drilling five (5.0 net) and completing six (6.0 net) natural gas wells. The Q1/22 capital program continued to leverage cost and operational improvements, with reduced drill times and strong capital efficiencies.
- 55% improvement in Crew’s net debt5 to last twelve-month (“LTM”) to EBITDA ratio6, which was 2.0 times at the end of Q1/22 compared to 4.4 times at the end of Q4/21. Net debt5 at quarter-end was reduced to $392.4 million, a $13.6 million improvement compared to year-end 2021.
- Increased bank facility, after completing the Company’s annual renewal, extending the facility’s maturity through to June 2024 and increased the borrowing base by 23% to $185 million.
FINANCIAL & OPERATING HIGHLIGHTS
| FINANCIAL ($ thousands, except per share amounts) | Three months ended Mar. 31, 2022 | Three months ended Mar. 31, 2021 | |||
| Petroleum and natural gas sales | 130,432 | 85,517 | |||
| Cash provided by operating activities | 55,082 | 30,447 | |||
| Adjusted funds flow5 | 77,660 | 33,995 | |||
| Per share6 – basic | 0.51 | 0.23 | |||
| - diluted | 0.48 | 0.22 | |||
| Net (loss) income | (1,377 | ) | 1,353 | ||
| Per share – basic | (0.01 | ) | 0.01 | ||
| - diluted | (0.01 | ) | 0.01 | ||
| Property, plant and equipment expenditures | 55,361 | 50,090 | |||
| Net capital expenditures1 | 55,361 | 50,090 |
| Capital Structure ($ thousands) | As at Mar. 31, 2022 | As at Dec. 31, 2021 |
| Working capital deficiency5 | 9,699 | 33,068 |
| Bank loan | 84,628 | 75,067 |
| 94,327 | 108,135 | |
| Senior unsecured notes | 298,080 | 297,834 |
| Net debt5 | 392,407 | 405,969 |
| Common shares outstanding (thousands) | 151,077 | 152,480 |
| OPERATIONAL | Three months ended Mar. 31, 2022 | Three months ended Mar. 31, 2021 | ||
| Daily production | ||||
| Light crude oil (bbl/d)7 | 116 | 155 | ||
| Heavy crude oil (bbl/d) | - | 1,055 | ||
| Natural gas liquids (“ngl”)3 (bbl/d) | 2,856 | 2,401 | ||
| Condensate (bbl/d) | 3,926 | 2,708 | ||
| Conventional natural gas (mcf/d) | 159,007 | 119,635 | ||
| Total (boe/d @ 6:1) | 33,399 | 26,258 | ||
| Average realized6 | ||||
| Light crude oil price ($/bbl) | 107.35 | 63.97 | ||
| Heavy crude oil price ($/bbl) | - | 52.69 | ||
| Natural gas liquids price ($/bbl) | 48.72 | 13.56 | ||
| Condensate price ($/bbl) | 116.27 | 69.75 | ||
| Natural gas price ($/mcf) | 5.29 | 5.54 | ||
| Commodity price ($/boe) | 43.39 | 36.19 |
| Three months ended Mar. 31, 2022 | Three months ended Mar. 31, 2021 | |||||
| Netback ($/boe) | ||||||
| Petroleum and natural gas sales | 43.39 | 36.19 | ||||
| Royalties | (2.78 | ) | (2.21 | ) | ||
| Realized loss on derivative financial instruments | (5.16 | ) | (7.34 | ) | ||
| Net operating costs1 | (3.50 | ) | (4.65 | ) | ||
| Transportation costs | (3.12 | ) | (4.17 | ) | ||
| Operating netback1 | 28.83 | 17.82 | ||||
| General and administrative (“G&A”) | (0.96 | ) | (0.93 | ) | ||
| Financing costs on debt1 | (2.03 | ) | (2.50 | ) | ||
| Adjusted funds flow5 | 25.84 | 14.39 | ||||
PLAN ON TARGET
Crew continues to advance on our Two-Year Plan that was launched in late 2020, and is proud to report on the following achievements to date in 2022:
- Continued Production Expansion – Average Q1/22 production of 33,399 boe per day2 (200 mmcfe) represented the highest quarterly production in Crew’s history. Forecast Q2/22 average production is estimated between 31,000 to 33,000 boe per day2 in Q2/22.
- Continued AFF Growth – AFF5 of $77.7 million in Q1/22 was supported by reduced cash costs per boe1, improved netbacks and higher production. Our full year 2022 AFF5 forecast has increased to between $245 and $265 million, improving target 2022 Free AFF1 to a range of $150 million to $185 million, based on the commodity prices and other material assumptions outlined in the Outlook section below.
- Capital Program Focused on High Return Projects – For the remainder of 2022, Crew’s capital program is expected to be directed to projects with robust returns, with five Groundbirch wells currently planned to be completed and tied-in during the last half of the year.
- Strengthening Leverage Profile – Crew expects leverage metrics to materially improve in 2022, with our target net debt5 to LTM EBITDA6 ratio now anticipated to be under 1.0 times by the end of 2022, based on the forecasted commodity prices outlined in the Outlook section, representing a significant improvement from 5.5 times at the end of 2020.
- Improved Efficiencies – Cash costs per boe1 associated with operating, transportation, G&A and interest expenses totaled $9.61 per boe as of Q1/22, a 22% decrease from $12.25 per boe in Q1/21. Crew is on-track to reduce cash costs per boe1 by over 25% from 2020 to 2022, as outlined in our Two-Year Plan, based largely on continuing to increase production into existing infrastructure and transportation capacity as over 50% of the Company’s expenses are fixed.
OPERATIONS & AREA OVERVIEW
NEBC Montney (Greater Septimus)
- Eight (8.0 net) extended reach horizontal ultra-condensate rich wells on the 4-14 pad, in the upper Montney “B" zone, were brought on stream in late Q4/21 and late Q1/22 and have now been flowing for an average of 45 days at an average per well sales rate of 1,339 boe per day comprised of 3,750 mcf per day of natural gas, 655 bbls per day of condensate and 59 bbls per day of NGLs4. The wells continue to clean up with the last full day single well production sales rates from the eight wells averaging 4,300 mcf per day of natural gas, 715 bbls per day of condensate and 64 bbls per day of NGLs4.
- At Crew’s 4-21 pad, two (2.0 net) Upper Montney “B” zone wells have now produced for 110 days (“IP110”) with average per well sales rates of 1,416 boe per day, comprised of 5,843 mcf per day of natural gas, 282 bbls per day of condensate and 160 bbls per day of NGLs4.
Groundbirch
- In Q1/22, Crew drilled five (5.0 net) wells that will evaluate two additional zones on the Groundbirch 4-17 pad, following the success of our first three wells in the area that were drilled and completed in 2021. The initial three (3.0 net) Groundbirch wells are exceeding the Proved plus Probable area type curve forecasts reflected in Crew’s year-end 2021 independent reserves evaluation8, with an average per well raw gas production rate after 180 days (“IP180”) of 8,593 mcf per day.
- Crew owns over 70,000 net acres of contiguous land in the Greater Groundbirch area. The Upper Montney at Groundbirch is approximately 470 feet in thickness and has four prospective zones, two of which have been tested on the initial three well pad. Two additional zones are expected to be evaluated in the last half of 2022 with the completion of our five well pad.
Other NE BC Montney
- We continue to evaluate encouraging offset operator activity in the Tower, Attachie and Oak/Flatrock areas.
SUSTAINABILITY AND ESG INITIATIVES
Crew's environmental, social and governance ("ESG") focus and initiatives are part of our corporate DNA and are integral contributors to our long-term sustainability. The Company expects to publish an updated ESG report in mid-2022, refreshing our inaugural report which was released in 2021. In the interim, we continue to advance our key ESG and corporate sustainability goals:
- Crew successfully participated in provincially funded dormant well programs, having abandoned 20 wells and initiated 12 site assessments to date in 2022. We expect to abandon 31 wells, or approximately 23% of the Company’s remaining idle wells in 2022.
- A total of $3.6 million was directed to abandonment and reclamation activities during Q1/22, allocated across well work, reclamation, facilities removal and remediation.
- Through Q1/22, Crew upheld our strong regulatory compliance record, achieving an 84% compliance rating with 25 regulatory inspections completed.
- Crew’s Board refresh initiatives continue to ensure an optimal mix of skill sets and fresh perspectives with Mr. John Hooks being appointed to the Board of Directors in April and standing for election at our annual meeting of shareholders to be held later this month. Following Mr. Hooks’ appointment, our Board is now 83% independent with non-management female representation of 40%.
OUTLOOK
- Full Year 2022 Guidance – Our previously announced 2022 capital and production guidance remains unchanged, with plans to invest between $80 and $95 million of net capital expenditures1 throughout the year resulting in average annual production of 31,000 to 33,000 boe per day2. At current forecasted commodity prices, Free AFF1 is now expected to be between $150 to $185 million.
| Previous 2022 Guidance and Material Assumptions | Updated 2022 Guidance and Material Assumptions9 | |
| Net capital expenditures1 ($MM) | 80-95 | 80-95 |
| Annual average production (boe/d) | 31,000-33,000 | 31,000-33,000 |
| AFF5 ($MM) | 190-210 | 245-265 |
| Free AFF1 ($MM) | 95-130 | 150-185 |
| EBITDA1 ($MM) | 214-234 | 269-289 |
| Oil price (WTI)($US per bbl) | 65.00 | 85.00 |
| Natural gas price (NYMEX) ($US per mmbtu) | 4.00 | 5.00 |
| Natural gas price (AECO 5A) ($C per mcf) | 3.50 | 4.50 |
| Natural gas price (Crew est. wellhead) ($C per mcf) | 4.00 | 5.10 |
| Foreign exchange ($US/$CAD) | 0.78 | 0.78 |
| Royalties | 5-7% | 5-7% |
| Net operating costs1 ($ per boe) | 3.50-4.00 | 3.50-4.00 |
| Transportation ($ per boe) | 2.75-3.25 | 2.75-3.25 |
| G&A ($ per boe) | 0.80-1.00 | 0.80-1.00 |
| Effective interest rate on long-term debt | 6.0-6.5% | 6.0-6.5% |
- 2022 Guidance Sensitivities
| AFF ($MM) | AFF/Share | FD AFF/Share | ||||
| 100 bbl per day Condensate10 | $3.2 | $0.02 | $0.02 | |||
| US$1.00 per bbl WTI | $1.5 | $0.01 | $0.01 | |||
| US $0.10 NYMEX (per mmbtu) | $3.1 | $0.02 | $0.02 | |||
| 1 mmcf per day natural gas | $1.8 | $0.01 | $0.01 | |||
| $0.10 AECO 5A (per mcf) | $2.4 | $0.02 | $0.02 | |||
| $0.01 FX CAD/US | $3.1 | $0.02 | $0.02 | |||
- Q2/22 Capital Program – The Q2/22 capital program is expected to range between $8 and $12 million, while quarterly production volumes are expected to average between 31,000 and 33,000 boe per day2. For the remainder of 2022, Crew’s capital program is expected to be directed to projects with superior returns, with five Groundbirch wells currently planned to be completed and tied-in the last half of the year.
- Near Term Initiatives
- Direct forecasted Free AFF in 2022 to reduce debt and improve leverage metrics;
- Invest in capital projects with strong rates of return and payouts expected under 12 months, which can be supported by an active hedging program;
- Continue to optimize transportation and facilities throughput to drive lower unit costs; and
- Actively monitor service industry efficiencies, costs, supply chain trends and commodity prices to assess potential budget adjustments as market conditions change throughout the year.
Our team remains enthusiastic and focused on the efficient execution of the Company’s business strategy. We plan to drive our Two-Year Plan to completion, further improving leverage metrics and financial flexibility by reducing debt and increasing AFF. Underpinning our strategy is Crew’s unwavering focus on meeting or exceeding our ESG goals and remaining a safe and responsible operator and a supportive corporate citizen. We would like to thank our stakeholders for their contribution, commitment and ongoing support.
ADVISORIES
Forward-Looking Information and Statements
This news release contains certain forward–looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" “forecast” and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: the ability to execute on its two-year development plan and underlying strategy and targets as described herein; as to our plan to optimize and increase production by over 20% in 2022 and infrastructure utilization, reduce unit costs, materially improve leverage metrics and generate increasing Adjusted Funds Flow and meaningful Free Adjusted Funds Flow; our 2022 annual capital budget range, associated drilling and completion plans and all associated near term initiatives and targets, and guidance and underlying assumptions in the outlook section of this press release; production estimates including forecast production per share growth, 2022 annual averages and Q2 2022 production estimates; our target to reduce unit costs by over 25% from 2020 to 2022; forecast 2022 AFF estimates and targeted 2022 Free AFF and improvement in debt metrics; commodity price expectations including Crew’s estimates of natural gas pricing exposure; Crew's commodity risk management programs and future hedging opportunities; well abandonment plans; marketing and transportation and processing plans and requirements; estimates of processing capacity and requirements; anticipated reductions in GHG emissions and decommissioning obligations; future liquidity and financial capacity; future results from operations and operating and leverage metrics; expected well payouts under 12 months; our targeted Net Debt to LTM EBITDA ratio of below 1.0x by the end of 2022; world supply and demand projections and long-term impact on pricing; future development, exploration, acquisition and disposition activities (including drilling and completion plans, anticipated on-stream dates and associated development timing and cost estimates); the potential of our Groundbirch area to be a core area of future development and the number of potential prospective zones to be drilled and the anticipated timing of evaluation of the various zones; infrastructure investment plans; the successful implementation of our ESG initiatives, and significant emissions intensity improvements going forward; the amount and timing of capital projects; and anticipated improvement in our long-term sustainability and the expected positive attributes discussed herein attributable to our two-year development plan.
The internal projections, expectations, or beliefs underlying our Board approved 2022 capital budget and associated guidance are subject to change in light of the impact of the COVID-19 pandemic, the Russia / Ukraine conflict and any related actions taken by businesses and governments, ongoing results, prevailing economic circumstances, commodity prices, and industry conditions and regulations. Crew's financial outlook and guidance provides shareholders with relevant information on management's expectations for results of operations, excluding any potential acquisitions or dispositions, for such time periods based upon the key assumptions outlined herein. Such information reflects internal targets used by management for the purposes of making capital investment decisions and for internal long-range planning and budget preparation. Readers are cautioned that events or circumstances could cause capital plans and associated results to differ materially from those predicted and Crew's guidance for 2022 and may not be appropriate for other purposes. Accordingly, undue reliance should not be placed on same.
In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of Crew which have been used to develop such statements and information but which may prove to be incorrect. Although Crew believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Crew can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: that Crew will continue to conduct its operations in a manner consistent with past operations; results from drilling and development activities consistent with past operations; the quality of the reservoirs in which Crew operates and continued performance from existing wells; the continued and timely development of infrastructure in areas of new production; the accuracy of the estimates of Crew’s reserve volumes; certain commodity price and other cost assumptions; continued availability of debt and equity financing and cash flow to fund Crew’s current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Crew operates; that future business, regulatory and industry conditions will be within the parameters expected by Crew; the general continuance of current industry conditions; the timely receipt of any required regulatory approvals; the ability of Crew to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Crew has an interest in to operate the field in a safe, efficient and effective manner; the ability of Crew to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Crew to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes, environmental and indigenous matters in the jurisdictions in which Crew operates; that regulatory authorities in British Columbia will resume granting approvals for oil and gas activities on time frames, and on terms and conditions, consistent with past practices; and the ability of Crew to successfully market its oil and natural gas products.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: the continuing and uncertain impact of COVID-19 and the Russia / Ukraine conflict; changes in commodity prices; changes in the demand for or supply of Crew's products, the early stage of development of some of the evaluated areas and zones and the potential for variation in the quality of the Montney formation; interruptions, unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates; climate change regulations, or other regulatory matters; changes in development plans of Crew or by third party operators of Crew's properties, increased debt levels or debt service requirements; inaccurate estimation of Crew's oil and gas reserve volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Crew's public disclosure documents (including, without limitation, those risks identified in this news release and Crew's MD&A and Annual Information Form).
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Crew's prospective capital expenditures, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. The actual results of operations of Crew and the resulting financial results will likely vary from the amounts set forth in this press release and such variation may be material. Crew and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments. However, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results. Except as required by applicable securities laws, Crew undertakes no obligation to update such FOFI. FOFI contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about Crew's anticipated future business operations. 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.
The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Crew does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
Information Regarding Disclosure on Oil and Gas Reserves and Operational Information
All amounts in this news release are stated in Canadian dollars unless otherwise specified. This press release contains metrics commonly used in the oil and natural gas industry. Each of these metrics are determined by Crew as specifically set forth in this news release. These terms do not have standardized meanings or standardized methods of calculation and therefore may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons. Such metrics have been included to provide readers with additional information to evaluate the Company’s performance however, such metrics are not reliable indicators of future performance and therefore should not be unduly relied upon for investment or other purposes. See "Non-IFRS and Other Financial Measures" below for additional disclosures.
BOE Conversions
Barrel of oil equivalents or 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. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of 6:1, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
Non-IFRS and Other Financial Measures
Throughout this press release and other materials disclosed by the Company, Crew uses certain measures to analyze financial performance, financial position and cash flow. These non-IFRS and other specified financial measures do not have any standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other entities. The non-IFRS and other specified financial measures should not be considered alternatives to, or more meaningful than, financial measures that are determined in accordance with IFRS as indicators of Crew’s performance. Management believes that the presentation of these non-IFRS and other specified financial measures provides useful information to shareholders and investors in understanding and evaluating the Company’s ongoing operating performance, and the measures provide increased transparency and the ability to better analyze Crew’s business performance against prior periods on a comparable basis.
Capital Management Measures
- Funds from Operations and Adjusted Funds Flow (“AFF”)
Funds from operations represents cash provided by operating activities before changes in operating non-cash working capital, accretion of deferred financing costs and transaction costs on property dispositions. Adjusted funds flow represents funds from operations before decommissioning obligations settled. The Company considers these metrics as key measures that demonstrate the ability of the Company’s continuing operations to generate the cash flow necessary to maintain production at current levels and fund future growth through capital investment and to service and repay debt. Management believes that such measures provide an insightful assessment of the Company's operations on a continuing basis by eliminating certain non-cash charges, actual settlements of decommissioning obligations and transaction costs on property dispositions, the timing of which is discretionary. Funds from operations and adjusted funds flow should not be considered as an alternative to or more meaningful than cash provided by operating activities as determined in accordance with IFRS as an indicator of the Company’s performance. Crew’s determination of funds from operations and adjusted funds flow may not be comparable to that reported by other companies. Crew also presents adjusted funds flow per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of income per share. The applicable reconciliation to the most directly comparable measure, cash provided by operating activities, is contained under “free adjusted funds flow” below. - Net debt and Working Capital Deficiency (Surplus)
Crew closely monitors its capital structure with a goal of maintaining a strong balance sheet to fund the future growth of the Company. The Company monitors net debt as part of its capital structure. The Company uses net debt (bank debt plus working capital deficiency or surplus, excluding the current portion of the fair value of financial instruments) as an alternative measure of outstanding debt. Management considers net debt and working capital deficiency (surplus) an important measure to assist in assessing the liquidity of the Company.
Non-IFRS Financial Measures and Ratios
- Net Property Acquisitions (Dispositions)
Net property acquisitions (dispositions) equals property acquisitions less property dispositions and transaction costs on property dispositions. Crew uses net property acquisitions (dispositions) to measure its total capital investment compared to the Company’s annual capital budgeted expenditures. The most directly comparable IFRS measures to net property acquisitions (dispositions) are property acquisitions and property dispositions.
| ($ thousands) | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months ended Mar 31, 2021 | ||
| Property acquisitions | - | - | - | ||
| Property dispositions | - | (460 | ) | - | |
| Transaction costs on property dispositions | - | - | - | ||
| Net property (dispositions) acquisitions | - | (460 | ) | - | |
b. Net Capital Expenditures
Net capital expenditures equals exploration and development expenditures less net property acquisitions (dispositions). Crew uses net capital expenditures to measure its total capital investment compared to the Company’s annual capital budgeted expenditures. The most directly comparable IFRS measure to net capital expenditures is property, plant and equipment expenditures.
| ($ thousands) | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months ended Mar 31, 2021 | |||
| Land | 324 | 503 | 604 | |||
| Seismic | 134 | 96 | 167 | |||
| Drilling and completions | 47,064 | 34,112 | 42,288 | |||
| Facilities, equipment and pipelines | 6,150 | 6,169 | 5,607 | |||
| Other | 1,689 | 1,461 | 1,424 | |||
| Total property, plant and equipment expenditures | 55,361 | 42,341 | 50,090 | |||
| Net property dispositions | - | (460 | ) | - | ||
| Net capital expenditures | 55,361 | 41,881 | 50,090 | |||
c. EBITDA
EBITDA is calculated as consolidated net income (loss) before interest and financing expenses, income taxes, depletion, depreciation and amortization, adjusted for certain non-cash, extraordinary and non-recurring items primarily relating to unrealized gains and losses on financial instruments and impairment losses. The Company considers this metric as key measures that demonstrate the ability of the Company’s continuing operations to generate the cash flow necessary to maintain production at current levels and fund future growth through capital investment and to service and repay debt. The most directly comparable IFRS measure to EBITDA is cash provided by operating activities.
| ($ thousands) | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months ended Mar 31, 2021 | ||||
| Cash provided by operating activities | 55,082 | 45,747 | 30,447 | ||||
| Change in operating non-cash working capital | 19,675 | (668 | ) | 2,708 | |||
| Accretion of deferred financing costs | (246 | ) | (246 | ) | (246 | ) | |
| Transaction costs on property dispositions | - | - | - | ||||
| Funds from operations | 74,511 | 44,833 | 32,909 | ||||
| Decommissioning obligations settled excluding government grants | 3,149 | 2,000 | 1,086 | ||||
| Adjusted funds flow | 77,660 | 46,833 | 33,995 | ||||
| Interest | 6,094 | 6,199 | 5,915 | ||||
| EBITDA | 83,754 | 53,032 | 39,910 | ||||
d. Free Adjusted Funds Flow
Free adjusted funds flow represents adjusted funds flow less capital expenditures, excluding acquisitions and dispositions. The Company considers this metric a key measure that demonstrates the ability of the Company’s continuing operations to fund future growth through capital investment and to service and repay debt. The most directly comparable IFRS measure to free adjusted funds flow is cash provided by operating activities.
| ($ thousands) | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months ended Mar 31, 2021 | ||||
| Cash provided by operating activities | 55,082 | 45,747 | 30,447 | ||||
| Change in operating non-cash working capital | 19,675 | (668 | ) | 2,708 | |||
| Accretion of deferred financing costs | (246 | ) | (246 | ) | (246 | ) | |
| Transaction costs on property dispositions | - | - | - | ||||
| Funds from operations | 74,511 | 44,833 | 32,909 | ||||
| Decommissioning obligations settled excluding government grants | 3,149 | 2,000 | 1,086 | ||||
| Adjusted funds flow | 77,660 | 46,833 | 33,995 | ||||
| Less: property, plant and equipment expenditures | 55,361 | 42,341 | 50,090 | ||||
| Free adjusted funds flow | 22,299 | 4,492 | (16,095 | ) | |||
e. Net Operating Costs
Net operating costs equals operating costs net of processing revenue. Management views net operating costs as an important measure to evaluate its operational performance. The most directly comparable IFRS measure for net operating costs is operating costs.
| ($ thousands, except per boe) | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months ended Mar 31, 2021 | ||||
| Operating costs | 11,359 | 10,287 | 11,539 | ||||
| Processing revenue | (830 | ) | (934 | ) | (554 | ) | |
| Net operating costs | 10,529 | 9,353 | 10,985 | ||||
| Per boe | 3.50 | 3.49 | 4.65 | ||||
f. Net Operating Costs per boe
Net operating costs per boe equals net operating costs divided by production. Management views net operating costs per boe as an important measure to evaluate its operational performance. The calculation of Crew’s net operating costs per boe can be seen in the non-IFRS measure entitled “Net Operating Costs” above.
g. Operating Netback per boe
Operating netback per boe equals petroleum and natural gas sales including realized gains and losses on commodity related derivative financial instruments, marketing income, less royalties, net operating costs and transportation costs calculated on a boe basis. Management considers operating netback per boe an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices.
($/boe) | Greater Septimus | Other NE BC | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months Ended Mar 31, 2021 | |||||
| Petroleum and natural gas sales | 43.92 | 35.47 | 43.39 | 38.47 | 36.19 | |||||
| Royalties | (2.69 | ) | (4.13 | ) | (2.78 | ) | (2.70 | ) | (2.21 | ) |
| Realized loss on derivative financial instruments | (5.18 | ) | (4.88 | ) | (5.16 | ) | (8.06 | ) | (7.34 | ) |
| Net operating costs(1) | (3.25 | ) | (7.28 | ) | (3.50 | ) | (3.49 | ) | (4.65 | ) |
| Transportation costs | (2.93 | ) | (6.04 | ) | (3.12 | ) | (3.52 | ) | (4.17 | ) |
| Operating netbacks(1) | 29.87 | 13.14 | 28.83 | 20.70 | 17.82 | |||||
| Production (boe/d) | 31,299 | 2,100 | 33,399 | 29,142 | 26,258 | |||||
h. Cash costs per boe
Cash costs per boe is comprised of net operating, transportation, general and administrative and financing costs on debt calculated on a boe basis. Management views cash costs per boe as an important measure to evaluate its operational performance.
| ($/boe) | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months ended Mar 31, 2021 | |
| Net operating costs | 3.50 | 3.49 | 4.65 | |
| Transportation costs | 3.12 | 3.52 | 4.17 | |
| General and administrative expenses | 0.96 | 0.91 | 0.93 | |
| Financing costs on debt | 2.03 | 2.31 | 2.50 | |
| Cash costs | 9.61 | 10.23 | 12.25 |
i. Financing costs on debt per boe
Financing costs on debt per boe is comprised of the sum of interest on bank loan and other, interest on senior notes and accretion of deferred financing charges, divided by production. Management views financing costs on debt per boe as an important measure to evaluate its cost of debt financing.
| ($ thousands, except per boe) | Three months ended Mar 31, 2022 | Three months ended Dec 31, 2021 | Three months ended Mar 31, 2021 | |
| Interest on bank loan and other | 1,040 | 1,038 | 861 | |
| Interest on senior notes | 4,808 | 4,915 | 4,808 | |
| Accretion of deferred financing charges | 246 | 246 | 246 | |
| Financing costs on debt | 6,094 | 6,199 | 5,915 | |
| Production (boe/d) | 33,399 | 29,142 | 26,258 | |
| Financing costs on debt per boe | 2.03 | 2.31 | 2.50 |
Supplementary Financial Measures
"Adjusted funds flow per basic share" is comprised of adjusted funds flow divided by the basic weighted average common shares.
"Adjusted funds flow per diluted share" is comprised of adjusted funds flow divided by the diluted weighted average common shares.
"Adjusted funds flow to petroleum and natural gas sales ratio" is comprised of adjusted funds flow divided by petroleum and natural gas sales.
"Average realized commodity price" is comprised of commodity sales from production, as determined in accordance with IFRS, divided by the Company's production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized light crude oil price" is comprised of light crude oil commodity sales from production, as determined in accordance with IFRS, divided by the Company's light crude oil production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized heavy crude oil price" is comprised of heavy crude oil commodity sales from production, as determined in accordance with IFRS, divided by the Company's heavy crude oil production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized ngl price" is comprised of ngl commodity sales from production, as determined in accordance with IFRS, divided by the Company's ngl production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized condensate price" is comprised of condensate commodity sales from production, as determined in accordance with IFRS, divided by the Company's condensate production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Average realized natural gas price" is comprised of natural gas commodity sales from production, as determined in accordance with IFRS, divided by the Company's natural gas production. Average prices are before deduction of transportation costs and do not include gains and losses on financial instruments.
"Net Debt to Last Twelve Months (“LTM”) EBITDA Ratio" is calculated as net debt at a point in time divided by EBITDA earned from that point back for the trailing twelve months.
Supplemental Information Regarding Product Types
References to gas or natural gas and NGLs in this press release refer to conventional natural gas and natural gas liquids product types, respectively, as defined in National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), except where specifically noted otherwise.
The following is intended to provide the product type composition for each of the production figures provided herein, where not already disclosed within tables above:
| Crude Oil | Natural Gas Liquids2 | Condensate | Conventional Natural Gas | Total (boe/d) | |
| Q1 2021 Average | 1,210 bbls/d | 2,401 bbls/d | 2,708 bbls/d | 119,635 mcf/d | 26,258 |
| Q4 2021 Average | 157 bbls/d | 2,458 bbls/d | 2,596 bbls/d | 143,584 mcf/d | 29,142 |
| 2021 Annual Average | 960 bbls/d | 2,442 bbls/d | 2,663 bbls/d | 122,021 mcf/d | 26,443 |
| Q1 2022 Average | 116 bbls/d | 2,856 bbls/d | 3,926 bbls/d | 159,007 mcf/d | 33,399 |
| Q2 2022 Average1 | 0% | 9% | 14% | 77% | 31,000-33,000 |
| 2022 Annual Average1 | 0% | 8% | 12% | 80% | 31,000-33,000 |
Notes:
1) With respect to forward looking production guidance, given the potential for variability in actual product type results, the issuer approximates percentages for budget planning purposes based on management's reasonable assumptions including, without limitation, historical well results.
2) Excludes condensate volumes which have been reported separately.
Test Results and Initial Production Rates
A pressure transient analysis or well-test interpretation has not been carried out and thus certain of the test results provided herein should be considered to be preliminary until such analysis or interpretation has been completed. Test results and initial production rates disclosed herein, particularly those short in duration, may not necessarily be indicative of long-term performance or of ultimate recovery.
Crew is a growth-oriented oil and natural gas producer, committed to pursuing sustainable per share growth through a balanced mix of financially and socially responsible exploration and development complemented by strategic acquisitions. The Company’s operations are primarily focused in the vast Montney resource, situated in northeast British Columbia, and include a large contiguous land base. Greater Septimus along with Groundbirch and the light oil area at Tower in British Columbia offer significant development potential over the long-term. The Company has access to diversified markets with operated infrastructure and access to multiple pipeline egress options. Crew’s common shares are listed for trading on the Toronto Stock Exchange (“TSX”) under the symbol “CR”.
FOR DETAILED INFORMATION, PLEASE CONTACT:
| Dale Shwed, President and CEO | Phone: (403) 266-2088 Email: investor@crewenergy.com |
| John Leach, Executive Vice President and CFO |
1 Non-IFRS financial measure or ratio that does not have any standardized meaning as prescribed by International Financial Reporting Standards, and therefore, may not be comparable with calculations of similar measures or ratios for other entities. See “Advisories - Non-IFRS and Other Financial Measures” contained within this press release and in our most recently filed MD&A, available on SEDAR at www.sedar.com.
2 See table in the Advisories for production breakdown by product type as detailed in NI 51-101.
3 Throughout this news release, NGLs comprise all natural gas liquids as defined in National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (“NI 51-101”), other than condensate, which is disclosed separately, and natural gas means conventional natural gas by NI 51-101 product type.
4 Excludes condensate volumes which have been reported separately.
5 Capital management measure that does not have any standardized meaning as prescribed by International Financial Reporting Standards, and therefore, may not be comparable with the calculations of similar measures for other entities. See “Advisories - Non-IFRS and Other Financial Measures” contained within this press release.
6 Supplementary financial measure that does not have any standardized meaning as prescribed by International Financial Reporting Standards, and therefore, may not be comparable with the calculations of similar measures for other entities. See “Advisories - Non-IFRS and Other Financial Measures” contained within this press release.
7 The Company does not have any medium crude oil as defined by NI 51-101.
8 Complete details of Crew’s year-end 2021 independent reserves evaluation are contained within our Annual Information Form, available on SEDAR at www.sedar.com.
9 The actual results of operations of Crew and the resulting financial results will likely vary from the estimates and material underlying assumptions set forth in this guidance by the Company and such variation may be material. The guidance and material underlying assumptions have been prepared on a reasonable basis, reflecting management's best estimates and judgments.
10 Condensate is defined as a mixture of pentanes and heavier hydrocarbons recovered as a liquid at the inlet of a gas processing plant before the gas is processed and pentanes and heavier hydrocarbons obtained from the processing of raw natural gas.
