Quarterly / Earnings Reports | First Quarter (1Q) Update | Financial Results | Capital Markets | Capital Expenditure | Capital Expenditure - 2021

Altura Energy First Quarter 2021 Results

Email    |    Print    |    Bookmark

You Need to login first

   |    Friday,June 04,2021

Altura Energy Inc. reported its Q1 2021 results.

First Quarter Review

In the quarter, Altura completed its 102/16-14-049-26W4 Rex horizontal well (“16-14”) (89% working interest) that was drilled in February 2020 and not completed due to low commodity prices. The 16-14 well was designed with increased frac density of 74 fracs at 27 meter spacing. This completion is consistent with two Rex horizontal wells that were completed in 2018 with increased frac density that continue to outperform expectations. By comparison, this is a 57% increase in intervals compared to earlier wells with 47 fracs at 40 meter spacing. The 16-14 well commenced production at the end of February 2021 and initial production rates are consistent with and meeting Altura’s higher expectations of increased frac density wells.

Altura invested $1.5 million in capital expenditures in the quarter which included the completion and equipping of the 16-14 well for $1.0 million and capitalized workovers of $0.3 million related to rod upgrades to improve run-time efficiency on existing wells.

The Corporation closed a previously announced asset disposition on January 29, 2021, divesting of a 0.6875% working interest in Altura’s production, wells, lands and facilities for $437,500.

Production volumes averaged 942 boe per day in the first quarter, up three percent from the fourth quarter of 2020 due to new production from the 16-14 well that was placed on production in late February.

Altura’s realized heavy oil price increased 28% to $56.92 per barrel in the first quarter compared to $44.45 per barrel in the fourth quarter of 2020 and increased 72% compared to $33.06 per barrel in the first quarter of 2020.

Operating expenses in the first quarter were $13.16 per boe, compared to $12.75 per boe in the fourth quarter of 2020. The increase was mainly due to higher electricity costs. Transportation expenses were $1.96 per boe, consistent with $1.93 per boe in the fourth quarter of 2020.

The Corporation’s operating netback¹ averaged $21.02 per boe, up 47% from the fourth quarter of 2020 due to higher crude oil and natural gas prices, partially offset by higher royalties and operating expenses.

Adjusted funds flow¹ was $809,000 in the quarter, consistent with $818,000 in the fourth quarter of 2020. The increase in petroleum and natural gas sales of $781,000 in the quarter was offset by increased royalty expense and a realized loss on financial instruments of $403,000, compared to a gain of $125,000 in the fourth quarter of 2020.

Altura recorded a net loss of $908,000 in the quarter which was impacted by an unrealized loss on financial instruments of $866,000 in the quarter.

Altura’s net debt¹ was $4.1 million at March 31, 2021, compared to $3.9 million at December 31, 2020.

Production Update

The Corporation’s one (0.9 net) well that was shut-in in February 2021, due to third-party gas processing restrictions, was brought back on production on May 2, 2021. Altura’s current production is estimated at 977 boe per day² based on field estimates from May 9, 2021 to May 24, 2021 with approximately 100 boe per day³ to come back online once weather permits.

Outlook

Management is excited to get back to drilling in the Rex pool and plans to drill two (1.8 net) new wells at Leduc-Woodbend in the summer of 2021 with production additions in July and October, respectively. With added production from the two new wells, improving commodity prices and a more favorable hedge book, Altura is forecasting substantial adjusted funds flow¹ growth in the second half of 2021 and a decrease in net debt¹.

At current commodity prices, management believes that over the next five years the Corporation could double production at Leduc-Woodbend and completely eliminate debt while drilling only half of its booked locations⁴. Additionally, if conservative levels of debt continue to be utilized, management believes it has the economic inventory at Leduc-Woodbend to further accelerate production growth.

Altura has increased its capital expenditure budget for 2021 from $6.0 million to $7.5 million to advance several parallel initiatives:

• Altura will continue to improve its extended reach horizontal (“ERH”) well design by increasing the lateral length in one of the proposed wells from 2,000 to 2,300 meters (a 15% increase). This extension will accommodate a commensurate increase in total frac stages from 74 to 85. Previous success with longer horizontal laterals and increased frac stages in the Rex pool illustrates improved production and reserve capture. This further optimization is expected to result in even greater well performance which will reduce the number of required wells and decrease the capital required to develop the remainder of the Rex pool.
• The Corporation is excited to implement a waterflood pilot project at Leduc-Woodbend. Success of the pilot would result in gas/oil ratio (“GOR”) suppression, reservoir pressure maintenance and attenuated production declines which could add material upside to Altura’s Rex oil pool reserve recoveries.
• In the first quarter of 2021, Altura modified the artificial lift system in three (2.7 net) Rex wells to a more robust rod string resulting in improved runtime efficiency which is expected to reduce future workover costs. The expanded budget will enable the conversion of an additional nine (7.9 net) wells in 2021.

Altura expects to close the final disposition of a 1.375% working interest for $875,000 on June 30, 2021 as disclosed in the April 28, 2021 news release.

While 2020 was primarily a defensive year of survival for many junior oil weighted producers, 2021 is looking to be a year of opportunity. Altura’s Leduc-Woodbend asset has a large economic well inventory of 47 (36.6 net) booked locations⁴ and 104 (67 net) additional drilling opportunities⁴ and at current commodity prices can self-fund growth within cash flow while improving its strong balance sheet. The Altura team is very excited and poised to refocus efforts towards creating value for shareholders in 2021 and beyond.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

We believe that we can develop and produce oil and natural gas safely, responsibly and profitably, while making a positive contribution to society. We believe this sustainable approach is key to the long-term success of the Corporation. Altura has created a culture rooted in strong economic, environmental, social and governance performance which is the foundation for corporate sustainability. From senior leadership to our front-line consultants we focus on continuous improvement and leadership in all aspects of our business.

Altura has demonstrated operational strength and capital discipline while delivering on the safety performance commitment outlined in our Corporate Social Responsibility Policy. Our focus and commitment to hazard identification, emergency readiness and communication regarding safety standards and expectations has created a safety leadership culture that enables everyone to return home safely at the end of the day.

We have a vision of conservation and innovation to minimize environmental impacts and maximize value from the resources we produce. We have invested time and resources to reduce emissions and, although we are a small company, we believe the results have demonstrated leadership on this important objective. We also recognize the value of stakeholder feedback during this important transition phase in the energy industry and believe that disclosure of ESG topics provides a more in-depth picture of the sustainability of the Corporation.

Altura recognizes that to deliver consistent and long-term shareholder value we must operate in a safe, healthy, ethical, legal, and environmentally responsible manner. We look forward to stakeholder feedback as we find new and exciting ways to maximize value for all stakeholders.

Following its approval by the ESG Committee of Altura’s Board of Directors, the Corporation has posted its 2021 Sustainability Report on its website at www.alturaenergy.ca.