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Hammerhead Energy Inc. First Quarter 2023 Results

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   |    Wednesday,May 17,2023

Hammerhead Energy Inc. announced first quarter 2023 results.


  • Produced a record 39,992 boe/d (47% liquids)1, in line with annual guidance for 2023. This quarterly production represents 35% and 22% growth on a sequential and year over year (“y-o-y”) basis, respectively. Crude oil production of 14,813 bbl/d in the quarter represents 65% and 50% growth on a sequential and y-o-y basis, respectively.
  • Generated record adjusted funds from operations2 of $128.8 million, representing a corporate netback3 of $35.78/boe which reflects the combined benefit of the production performance highlighted above and achievement of outstanding natural gas pricing realizations due to the Company’s marketing strategy for natural gas. Adjusted funds from operations during the quarter represented 18% and 28% growth on a sequential and y-o-y basis, respectively. Net cash from operating activities for the quarter was $115.5 million.
  • Continued a two-rig development program with quarterly capital expenditures4 and net cash used in investing activities of $172.4 million and $142.3 million, respectively. The capital program included (i) the drilling of 12.0 gross (12.0 net), completion of 10.0 gross (8.1 net), and on-stream of 10.0 gross (8.1 net) Montney crude oil wells, (ii) continued investments in new surface infrastructure at Karr, and (iii) new water disposal wells throughout the land base. Surface infrastructure expansion at North Karr (to allow for production capacity to exceed 30,000 boe/d) has been completed, and the South Karr infrastructure new-build (to allow for production capacity to exceed 20,000 boe/d) will be complete by the end of Q4 2023.
  • The recent nine-well pad at North Karr 5-12 continues to materially exceed performance expectations, with average production of 14,733 boe/d (58% liquids)5 in the 90 day period of the quarter. Average well costs for the pad came in at $10.0 million for an average lateral length of 2,519 meters.
  • Operationally the Company delivered a number of new drills at North Karr that have matched past pacesetter drill results.   Continuous improvement in drilling and completions efforts at Karr remain at early stages, allowing for cost improvement potential in the future despite industry inflationary pressures.
  • The Company exited the quarter with net debt6 of $379.8 million and a net debt to annualized adjusted EBITDA ratio of 0.7 times7.
  • During the quarter the Company added 7,000 bbl/d of new crude oil hedges at an average price of US$75.28/bbl WTI for the period of March 1, 2023 to September 30, 2023. These hedges provide additional balance sheet protection for the large infrastructure and production growth that the Company is delivering in 2023. Hammerhead is exceptionally well hedged on oil and gas production in 2023.

CALGARY, Alberta – Hammerhead Energy Inc. is pleased to announce record financial and operating results for the first quarter of 2023. The Company continued to progress critical investments in infrastructure expansions that should allow for continuing record performance, achievement of half-cycle economics from new wells and material free cash flow generation going forward. The Company expects its oil production growth rates to exceed total corporate production growth, given the continued strength of the higher liquids-weighted Karr asset, which remains the Company’s key area of focus for development.

To date, Hammerhead production operations have not been meaningfully impacted by the wildfires in Alberta. Hammerhead is extremely thankful for all the efforts of those fighting these dangerous fires and supporting the people and communities directly impacted by the fires. Hammerhead will be active in supporting our communities and hopes for the continued safety for all those affected.

Scott Sobie, President and CEO of Hammerhead, notes “Hammerhead is delivering peer-leading growth while investing in infrastructure to provide operational flexibility in the future. Surface infrastructure expansions throughout our Karr core area are on schedule to being completed in 2023 which will allow for peer-leading production and cash flow per share growth in 2023 and 2024. Hammerhead is well on its way to commence generation of significant annual free cash flow that we intend to return to our shareholders. Continued improvement in our drilling and completions efficiencies and heightened focus on the Lower Montney are critical innovations for the second half of 2023.”

Reaffirming 2023 Corporate Outlook and Guidance

Based on results to date, Hammerhead is well positioned to deliver on its 2023 annual guidance. Subsequent to the first quarter, the Company finished drilling and completion operations on new seven-well pads at each of Gold Creek and North Karr. Drilling has also commenced on a new 12-well pad at North Karr with a number of wells drilled to date matching past pacesetter results for various lateral well lengths at Karr.

Hammerhead is targeting greater than 25% production growth in 2023, with oil production growth expected to exceed 40%.

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