Mr. David Burghardt reports
ALTURA ENERGY INC. ANNOUNCES Q1 2020 FINANCIAL AND OPERATING RESULTS
Altura Energy Inc. has released its financial and operating results for the three months ended March 31, 2020. The unaudited interim condensed consolidated financial statements and related management's discussion and analysis ("MD&A") are available at www.sedar.com and www.alturaenergy.ca. Selected financial and operating information for the three months ended March 31, 2020 appear below and should be read in conjunction with the related financial statements and MD&A.
FIRST QUARTER 2020 REVIEW
The crude oil demand destruction caused by the COVID-19 global pandemic and the actions of OPEC and Russia abandoning production quotas resulted in an unprecedented decline in crude oil prices in the first quarter of 2020. The decline in oil prices has negatively impacted Altura's first quarter results and financial position at March 31, 2020. The Corporation's crude oil hedging contracts of 300 barrels per day, however, have mitigated Altura's exposure to the severe price decline and help protect its balance sheet in the current volatile commodity price environment.
In the first quarter, prior to the COVID-19 pandemic, Altura invested $7.1 million to further develop its core Leduc-Woodbend property and advance its exploration play at Entice. At Leduc-Woodbend, Altura completed a horizontal oil well (0.9 net) that was drilled in the third quarter of 2019. The well was equipped for production and brought on stream in February 2020. Additionally, Altura drilled a horizontal oil well (0.9 net) in January 2020 at Leduc-Woodbend. At Entice, Altura's capital expenditures included land acquisition costs and drilling, completing, and equipping a horizontal well (0.9 net) targeting the Pekisko Formation.
In March 2020, Altura halted all discretionary capital expenditures due to the impact of the COVID-19 pandemic on the global economy and left one Leduc-Woodbend well (0.9 net) drilled but uncompleted on an existing pad which can be completed and brought on production at any time.
Production volumes averaged 1,250 boe per day in the first quarter, a 20% decrease from the fourth quarter of 2019. Production in the quarter was impacted by natural declines, well down time from repairs and maintenance, the 7.0% working interest disposition that closed on December 4, 2019 and Altura's voluntary production curtailment during the month of March.
Altura's Entice well was equipped with artificial lift and temporary facilities on March 5, 2020 and produced 771 gross (717 net) barrels of sweet 25degreeAPI oil, 6.5 MMcf of natural gas, which was flared, and 4,500 barrels of water before it was shut-in on March 18, 2020. Approximately 73% of the total water volume used in the completion has been recovered to date. The well was shut-in due to the severe decline in oil prices and management plans to continue the production test once oil prices improve.
Altura's realized heavy oil price decreased 39% to $33.06 per barrel in the first quarter compared to $54.40 per barrel in the fourth quarter of 2019. The realized heavy oil price decreased from $48.64 per barrel in January 2020 to $14.00 per barrel in March 2020 due to the COVID-19 pandemic and the abandonment of production quotas by OPEC and Russia.
The Corporation realized a gain on financial instruments of $629,000 ($5.53 per boe) which reflected cash settlements received on a Western Canadian Select ("WCS") contract of 300 barrels per day at CAD $57.00 per barrel in the quarter.
Operating expenses in the first quarter were $12.19 per boe, compared to $8.63 per boe in the fourth quarter of 2019. The increase was due to lower production volumes, increased repairs and maintenance and increased power costs. Transportation expenses were $2.49 per boe, consistent with $2.45 per boe in the fourth quarter of 2019.
The Corporation's operating netback1 averaged $13.35 per boe, down 43% from the fourth quarter of 2019 due mainly to lower crude oil prices and higher per unit operating expenses, partially offset by the gain on financial instruments and lower royalty expenses.
Adjusted funds flow1 was $1.1 million in the first quarter of 2020, down 63% from the fourth quarter of 2019 primarily due to lower production volumes, lower crude oil prices and higher per unit operating expenses.
Altura recorded a net loss of $31.5 million in the first quarter. Independent reserve evaluators materially decreased their forward oil price forecasts which resulted in a non-cash impairment charge of $34.7 million as the carrying value of Altura's oil and gas properties exceeded their current estimated recoverable amounts. Management believes the reserve evaluators' forward oil price forecasts will increase over time which may result in impairment reversals in the future.
Altura's net debt1 was $6.2 million at March 31, 2020, resulting in a ratio of net debt to annualized first quarter adjusted funds flow1 of 1.40. In April 2020, Altura's credit facility was amended on an interim basis to $7.5 million from $9.0 million due to the unprecedented decline and volatility in crude oil prices. Due to the ongoing economic volatility from the COVID-19 pandemic, Altura and its lender have agreed to extend the credit facility renewal from May 31, 2020 to June 30, 2020.
Altura had the following crude oil contracts at March 31, 2020 for 300 barrels of oil per day hedged to December 31, 2020:
Period CommodityType of ContractQuantity Pricing Point Contract Price
Apr 1/20?Jun 30/20Crude OilFixed 300 bbls/dWTI CAD $70.20
Apr 1/20?Jun 30/20Crude OilFixed 300 bbls/dWCS-WTI DifferentialCAD ($28.00)
Jul 1/20?Sep 30/20Crude OilFixed 300 bbls/dWCS CAD $43.75
Oct 1/20?Dec 31/20Crude OilFixed 300 bbls/dWTI CAD $71.35
Oct 1/20?Dec 31/20Crude OilFixed 300 bbls/dWCS-WTI DifferentialCAD ($24.00)
Subsequent to March 31, 2020, Altura unwound the May 2020 fixed price contracts for West Texas Intermediate ("WTI") and the WCS-WTI Differential realizing a gain of $356,000. Altura's hedging gains for 2020 are forecasted at $2.1 million based on settlements to April 30, 2020 and strip pricing at May 27, 2020, providing the Corporation with positive forecasted adjusted funds flow.
Altura eliminated all discretionary capital spending for the remainder of the year and voluntarily curtailed production volumes in April 2020 to its hedged oil production of 300 barrels per day, which was approximately 550 boe per day including NGLs and natural gas. As crude oil prices continued to rapidly decline in April, Altura made the decision to unwind its May 2020 hedging contracts, realizing a gain of $356,000, and shut in all corporate production for the month of May 2020.
Since shutting in production at the beginning of May, there has been some optimism in respect to the global crude oil supply/demand balance and oil prices have improved significantly. Given this improvement in prices, Altura is planning to restart production and sell crude oil into the spot market beginning in June.
Further to the December 4, 2019 definitive agreement, Altura expects to close the second transaction of its previously announced asset disposition in the second half of 2020. The definitive agreement requires the proceeds from the second transaction to be used primarily to fund the drilling of a horizontal well in either the Entice area or the Leduc-Woodbend area before December 31, 2020 with no anticipated net capital outlay by Altura.
In May 2020, Altura began receiving funds from the Government of Canada related to the Canadian Emergency Wage Subsidy program, which has been extended to August 29, 2020. Additionally, Altura has submitted applications for 15 wells under the Government of Alberta's Site Rehabilitation Program.
The Corporation is focused on protecting balance sheet strength during the current volatile commodity price environment.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
Altura's Board of Directors has established an ESG Committee to assist the Board in carrying out its responsibilities by having responsible persons ensure that Altura's activities are conducted in an environmentally responsible manner and that the Corporation maintains the integrity of its social and governance policies. Altura has posted its ESG Committee Mandate, Corporate Social Responsibility Policy and 2019 Sustainability Report on its website at www.alturaenergy.ca.
ANNUAL GENERAL MEETING
The Annual General Meeting ("AGM") of shareholders will be held at the Corporation's offices at 2500, 605 - 5th Avenue S.W., Calgary, Alberta, on Thursday, June 4, 2020 at 10:30 am (Mountain Time). In view of the COVID-19 pandemic and the restrictions on mass gatherings implemented by the Government of Alberta, the Corporation strongly encourages shareholders to consider voting their shares via proxy rather than attending the AGM in person, particularly if they are experiencing any of the described COVID-19 symptoms. Subject to the Corporation's by-laws, access to the AGM will be limited to essential personnel and registered shareholders and proxyholders entitled to attend and vote at the AGM. No external guests will be allowed to attend the AGM.
A link to a live audio webcast of the AGM will be available on the Corporation's website at www.alturaenergy.ca. Following the formal business of the AGM, the Corporation is planning a brief presentation by management. A recording of the webcast will be available on Altura's website following the AGM.
On behalf of the Board of Directors and the Altura management team, we would like to thank our shareholders for their ongoing support during these very difficult times.
ABOUT ALTURA ENERGY INC.
Altura is a junior oil and gas exploration, development and production company with operations in central Alberta. Altura predominantly produces from the Rex member in the Upper Mannville group and is focused on delivering per share growth and attractive shareholder returns through a combination of organic growth and strategic acquisitions.
We seek Safe Harbor.
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