Quarterly / Earnings Reports | First Quarter (1Q) Update

Bonterra Reports Q1 2019 Results

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Bonterra Energy Corp. reported its Q1 2019 results.

Highlights:

During the first quarter of 2019, Bonterra continued to focus on the development of its high-quality, light oil-weighted, Pembina Cardium assets in Alberta. Through the period, the Company benefitted from higher realized oil prices due to a more favourable Canadian oil price differential environment supporting stronger funds flow compared to the previous quarter.  Bonterra drilled 12 gross (10.8 net) Cardium wells, completed 10 gross (9.1 net) wells and tied-in and placed on production seven gross (6.1 net) wells, with the remaining five wells placed on production in April 2019. Production averaged 12,020 BOE per day for Q1 2019, reflecting the impact of extreme cold weather conditions on operations in February resulting in freeze-offs and the timing of new wells that were drilled and completed in the first quarter.  The full impact of Bonterra's first quarter drilling program will be realized in the second quarter, as production volumes for the month of April averaged approximately 13,200 BOE per day, 10 percent higher than the Q1 2019 average.

Q1 2019 Highlights

• Achieved average quarterly production of 12,020 BOE per day, eight percent lower than Q1 2018 volumes of 13,051 BOE per day due to weather-related delays and wells coming on production after quarter end. 
  
  
• Generated funds flow of $24.4 million ($0.73 per share) a 129 percent increase over the $10.6 million ($0.32 per share) in Q4 2018 largely due to significantly improved oil price differentials, but lower than Q1 2018 funds flow of $28.0 million ($0.84 per share).  
  
  
• Derived 88 percent of Q1 2019 revenue from oil and NGLs, realizing an average Canadian realized price for crude oil of $64.87 per bbl and $31.40 per bbl for NGLs.
  
  
• Invested $19.4 million in net capital expenditures to drill 12 gross (10.8 net) Cardium wells, complete 10 gross (9.1 net) wells and tie-in and place on production seven gross (6.1 net) Cardium wells.  In addition, the Company invested $1.7 million on related infrastructure costs, recompletions and other capital expenditures.
  
  
• Relative to production from the fourth quarter of 2018 which averaged 12,789 BOE per day, the Company's first quarter 2019 volumes were lower due to the timing of new wells coming on production and 560 BOE per day of shut-in production. Shut-in production was the result of extremely cold weather through most of February, a third-party downstream pipeline failure and pressure issues from new wells backing out existing wells.  Of the 11 gross (10.7 net) operated wells drilled in the first quarter, three came on production in February and three came on production in mid-March, with the remaining five wells on production in April 2019.  The Company also drilled and completed one gross (0.1 net) non-operated well which came on production in Q1 2019.
  
  
• Bonterra's commitment to delivering strong operational execution continued through the first quarter, demonstrated by the following:
  
  
  
• Stronger cash netbacks averaging $22.53 per BOE compared to $8.07 per BOE in Q4 2018, and five percent below Q1 2018 cash netbacks of $23.81per BOE; 
  
  
• All-in costs (including royalties, operating costs, general and administrative and interest) were five percent lower at $23.54 per BOE in Q1 2019 compared to $24.82 per BOE in Q1 2018;
  
  
• Q1 2019 production costs on a per unit basis of $14.85 per BOE increased from $14.23 per BOE in Q4 2018 and increased slightly compared to $14.49 per BOE in Q1 2018.  Overall spending on production costs in Q1 2019 declined relative to Q4 2018 and Q1 2018, however, did increase on a per unit basis driven by shut-in production and the deferred benefit from new production resulting in slightly lower production volumes in the quarter; and 
  
  
• Realized an average crude oil price of C$64.87 per bbl and an average overall price of C$46.07 per BOE in Q1 2019. 
  
  
• Paid out $0.03 per share in cash dividends to shareholders in the first quarter, resulting in a payout ratio of four percent of funds flow.
  
  
• Reduced net debt to $326.7 million as at March 31, 2019, a reduction of $2.2 million compared to $328.9 million at December 31, 2018, a meaningful achievement given the first quarter historically has the highest capital spending of all periods during the year.

To date in the first quarter of 2019, Alberta's mandated curtailment has contributed to a narrowing of Canadian light, sweet crude oil differentials back to normalized ranges and the improved prices positively supported Bonterra's realized oil prices in the first quarter.  The Company will continue to regularly monitor commodity price changes and funds flow with the primary objective of reducing debt and as appropriate, adjusting capital expenditures and dividend levels. 

Subsequent to the end of the quarter, the Company's syndicate of Canadian financial institutions have agreed to extend the borrowing base redetermination date until May 31, 2019. At March 31, 2019 the Company had $296.6 million drawn of the Company's $380.0 million syndicated credit facility.

Outlook

Bonterra's original 2019 capital budget of $57 to $77 million remains unchanged and is intended to maintain a balance between funds flow and capital spending with excess cash being directed to strengthen the balance sheet.  Annual production volumes in 2019 are forecast to be in the range of 12,600 to 13,200 BOE per day, of which approximately 62 percent would be sweet crude oil, with a forecast exit rate between 13,000 and 14,000 BOE per day, positioning Bonterra well for a strong start to 2020.  

In order to protect funds flow, the Company has layered on 2,000 bbls per day of various physical oil delivery sales contracts through the end of September, 2019 at various Canadian realized oil pricing ranging from C$72.99 to C$77.35 per bbl and will continue to evaluate opportunities to secure prices for both WTI and light sweet oil differentials. 

The Company intends to remain focused on financial discipline and cost control, including taking steps to further reduce debt levels relative to peers and strengthening the balance sheet.  With one of the lowest annual production decline rates and one of the largest inventory of economic undrilled locations, the Company is well positioned to continue returning capital to shareholders in the form of dividends while focusing on measured per share growth in cash flow, production and reserves.