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Cardinal Energy First Quarter 2021 Results

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   |    Friday,May 14,2021

Cardinal Energy Ltd. reported its Q1 2021 results.


  • Generated $16.1 million of adjusted funds flow, an 8% increase over the same period in 2020 and a 19% increase over the prior quarter. Excluding realized hedging losses, adjusted funds flow was $30 million;
  • Maintained discipline while executing a $9.5 million capital program focused on asset base optimization which included a minor consolidating acquisition of light oil production which closed at the end of March;
  • Demonstrated the continued resilience of our asset base with average production of 18,385 boe/d in the quarter;
  • Reduced net debt by $28.4 million in the quarter or 11% from year-end 2020. Net debt has decreased by $55.4 million or 20% as compared to the first quarter of 2020;
  • Subsequent to the end of the first quarter, Cardinal completed the annual renewal of our $225 million credit facility extending the maturity date to May 2023;
  • Higher forecasted prices have allowed us to increase our 2021 capital budget to approximately $46 million which we expect to contribute to incremental net debt reduction of approximately $40 million over the previously released 2021 budget.

Q1 Summary

The first quarter of 2021 marked a significant increase in global oil prices as the world continued its recovery from the coronavirus pandemic (“COVID-19”) with vaccine distributions and gradual re-opening of economies. West Texas Intermediate (“WTI”) oil prices averaged over US$58/bbl, a 36% increase over the average in the fourth quarter of 2020. While spending a modest $5.9 million on development capital expenditures, Cardinal continued its debt reduction strategy during the first quarter of 2021 lowering net debt by 11% over year-end 2020 levels. Since March 2020, Cardinal has reduced its net debt by $55.4 million or 20% through disciplined capital spending, cost reductions and the redemption of convertible debentures.

During the first quarter of 2021, we maintained financial discipline executing an optimization focused capital program. The low decline nature of our asset base kept first quarter production consistent with the prior quarter at 18,385 boe/d. First quarter 2021 operating costs per boe increased 4% over the same period in 2020 as Alberta electricity prices increased by 42% which was partially offset by Cardinal’s 13% reduction in power consumed from the Alberta power grid. The Company’s workover and reactivation activity was also increased in the first quarter as much of this work was deferred in 2020 due to the lower oil price environment. A combination of reduced staffing and consultants combined with certain government grants reduced our first quarter 2021 general and administrative (“G&A”) costs per boe by 30% over the first quarter of 2020.

Although oil prices significantly increased in the first quarter of 2021, the effect on Cardinal’s adjusted funds flow was reduced due to realized hedging losses. In order to protect the Company’s 2021 first half capital program, during the last half of 2020, Cardinal hedged approximately 59% (9,333 bbl/d) of its first quarter budgeted oil production.   Our oil hedging exposure reduces to 39% (6,000 bbl/d) in the second quarter of 2021 and in the second half of 2021, it drops significantly to approximately 13% (2,000 bbl/d) of budgeted oil production.

During the first quarter of 2021, all the outstanding convertible debentures were converted or redeemed which reduced net debt by approximately $28 million. On May 12, the Company completed the renewal of its credit facility with its syndicate of banks extending the maturity date to May 2023. We continue our focus on debt and risk reduction in 2021.

Updated Budget

With the increase in oil prices, the Company has revisited its initial conservative 2021 budget which did not contemplate drilling any wells during 2021. The Company’s Board of Directors has approved a revised capital budget increasing from $27 million to $46 million. The revised budget contemplates drilling eight wells across our operating areas which includes two CO2 injection wells planned at Midale, Saskatchewan for our enhanced oil recovery program. It is forecasted that the updated budget will allow the Company to increase production through the year with a fourth quarter average rate increasing by approximately 10% over the initial 2021 budget. Higher oil prices and increased production are expected to generate approximately $14 million more free cash flow in the updated budget which contemplates and average price for WTI of US$60 for the remainder of 2021. The incremental free cash flow is earmarked for additional debt repayment.


Cardinal continues to be a net zero emissions (scope 1) company. Through our world class Carbon Capture and Sequestration (“CCS”) enhanced oil recovery (“EOR”) operation at Midale, the Company has sequestered approximately 45,000 tonnes of CO2 year to date and is forecasting to sequester over 200,000 tonnes in 2021. Two additional injectors are included in our updated capital program which, over their first year of operation, are forecasted to sequester over 40,000 tonnes of CO2 while supporting incremental oil recovery from the Midale unit. To date, the Midale CCS EOR project has sequestered approximately five million tonnes of CO2 and reduced oil production decline rates to approximately 3% to 5%.

Cardinal’s safety record is in the top tier of the industry as is our regulatory compliance approval level.

In 2021, Cardinal continues to actively participate in various government programs focused on well and pipeline abandonments and facility decommissioning.  To date in 2021, Cardinal has abandoned approximately 100 wells, numerous pipeline segments and has initiated work on inactive facilities.


The first quarter of 2021 has brought a renewed confidence to the Canadian oil and gas market. Cardinal’s first quarter adjusted funds flow was somewhat muted by losses from hedges that were put in place during 2020. Our second quarter will see a significant reduction in outstanding hedges which will be further reduced in the second half of 2021.

We have made the decision to increase our capital program to $46 million which will see the Company drill two wells in each of its four operating areas. We are also preparing to drill our first Clearwater wells in early 2022.29dk2902l

As expected, we had our bank line renewed with our banking syndicate with no reduction to the size of our bank line. Cardinal will continue to prioritize debt repayment in 2021 with a goal of exiting the year with a net debt to fourth quarter annualized adjusted funds flow ratio of less than 1.0x.

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