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Clearview Resources First Quarter 2020 Results

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Clearview Resources Ltd. reported its financial and operational results for the three months ended March 31, 2020.

Production

Production for the three months ended March 31, 2020 was down 9% to 2,299 barrels of oil equivalent per day (“boe/d”) versus the comparative period of 2019.  The decrease in production was primarily due to lower oil production of 24% as the two oil wells drilled in 2018 continued to naturally decline. No new wells were drilled in 2019 and Q1 2020 as the Company continued to focus on acquiring assets and applying adjusted funds flow, in excess of capital expenditures, towards its net debt.  Natural gas liquids, generally associated with natural gas production, decreased 9% for the quarter ended March 31, 2020 versus the comparative period.  Natural gas production increased by 1% in the three months ended March 31, 2020 versus the comparative period.  The slight increase is due to higher natural gas production associated with oil production and the start-up of a shut-in well in the fourth quarter of the prior year.

Realized Prices

During the first quarter of 2020, Clearview’s realized price per boe was lower by 34% than the comparative period of 2019, due to lower prices being realized for all of the Company’s products as compared to the same period of 2019.  Crude oil and natural gas liquids prices were lower due to a significant drop in benchmark pricing, as certain OPEC and non-OPEC nations initiated a price war and demand was significantly reduced as a result of the COVID-19 pandemic which affected selling prices particularly in the later part of the quarter .  Natural gas prices were lower as a result of a milder winter than in the comparative period of 2019.

Financials

Revenue, net of royalties, decreased by $2.6 million in the first quarter, a 39% decrease from the comparative period.  This decrease was largely due to lower realized prices and lower production volumes.  The Company’s cost structure was reduced in the three months ended March 31, 2020 with total costs for transportation, operating costs and general and administrative expenses down $0.3 million versus the comparative period.   Also offsetting the decrease in revenue was a $0.7 million change in realized gains on commodity contracts from the comparative period.  As a result of a reduced cost structure and the realized gains on commodity contracts, adjusted funds flow was reduced by $1.6 million versus the $2.6 million drop in net revenue.  The Company’s corporate netback decreased by 73% to $2.45 per boe for the current quarter versus $9.12 per boe in the comparative period of 2019.

Adjusted funds flow for the current quarter ended March 31, 2020 was $0.5 million.  Capital expenditures and abandonment capital were $0.2 million which enabled the Company to reduce its net debt by $0.3 million during the quarter.  At March 31, 2020, the Company had net debt of $15.1 million.

Financial and Operating Highlights

Ops Update

During the quarter ended March 31, 2020, Clearview incurred minimal net capital expenditures of $0.2 million. The Company spent $62 thousand on abandonment and reclamation projects including the abandonment of one gross (0.5) net wells as part of its annual Area Based Closure (“ABC”) obligation with the Alberta Energy Regulator (“AER”) for 2020.

With the unparalleled collapse in oil prices in early March of 2020, Clearview immediately began the implementation of cost reducing operating practices and minimized capital spending. Excess adjusted funds flow of $0.3 million was applied towards the reduction of net debt.

Outlook

During the quarter ended March 31, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization.  The events surrounding the COVID-19 pandemic are unprecedented resulting in a situation that is dynamic and unpredictable with governments (federal, provincial and municipal) worldwide, responding in different ways to combat the spread of the virus.  These measures have caused material disruption to businesses resulting in a global economic slowdown.

The economic slowdown caused by the pandemic and the resulting over supply in the global oil markets combined with a price war amongst OPEC and non-OPEC members has resulted in an unprecedented and precipitous drop in oil prices.

Clearview is taking appropriate safety precautions to protect its valued employees and the communities in which they live and work.  Clearview office staff are encouraged to work remotely from home and practice social distancing to keep people safe while ensuring business continuity.  Field operations continue uninterrupted with all field staff ensuring contact-free interactions with each other and third-party services.

Clearview has made significant reductions in its capital and operations to preserve cash flow from operations in these challenging times while at the same time not compromising on the core principles of environmental protection, health and safety and regulatory compliance.

In April of 2020, the Company made the decision to shut-in approximately 50% of its production, comprising of primarily oil volumes and the associated natural gas.  The Company has chosen to preserve the value of its reserves to be produced at a later date when better economic conditions and better pricing have returned.  The Company is monitoring recent trends in pricing and spreads for its products and has the flexibility to reasses the shut in decision should market circumstances work in the Company’s favour. The potential impact of a prolonged low oil price environment on the Company’s future operations is discussed in more detail in the March 31, 2020 financial statements and in management’s discussion and analysis for the quarter ended March 31, 2020.