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Headwater Exploration Inc. First Quarter 2023 Results

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   |    Thursday,May 18,2023

Headwater Exploration Inc. announced first quarter 2023 results.


  • Declared second cash dividend of $0.10 per common share and returned $23.5 million to shareholders in April 2023.
  • Production averaged 17,004 boe/d (consisting of 14,777 bbls/d of heavy oil, 12.8 mmcf/d of natural gas and 91 bbls/d of natural gas liquids) representing an increase of 37% from the first quarter of 2022.
  • Realized adjusted funds flow from operations (1) of $59.2 million ($0.25 per share basic).
  • Achieved an operating netback inclusive of financial derivatives (2) of $44.60/boe and an adjusted funds flow netback (2) of $38.75/boe.
  • Achieved net income of $30.0 million ($0.13 per share basic).
  • Executed a $69.5 million capital expenditure (3) program inclusive of 31.5 net sections of land in the West Nipisi area and drilled 24 crude oil wells including 9 exploration wells in Greater Peavine and West Nipisi.
  • As at March 31, 2023, Headwater had adjusted working capital (1) of $70.5 million, working capital of $77.4 million, and no outstanding bank debt.
Headwater Exploration Inc.  pleased to announce its financial results for the three months ended March 31, 2023, operations update and quarterly dividend.  Selected financial and operational information is outlined below and should be read in conjunction with the unaudited interim condensed financial statements and the related management’s discussion and analysis (“MD&A”). These filings will be available at and the Company’s website at


Marten Hills West

Headwater has continued to experience exceptional success in the Marten Hills West area.  Over the last 18 months, production has grown from less than 100 bbls/d to current levels of approximately 5,000 bbls/d.  A total of 17 wells have been drilled into the Marten Hills West pool this year.  To date, eight of these wells are on production at an average 30-day initial production (“IP’) rate of 250 bbls/d.  The remaining nine wells are currently in various stages of load recovery.

Key highlights of the drilling program are as follows:  The 02/06-13-075-02W5 well has achieved an IP50 of 295 bbls/d. This well has validated our geotechnical interpretation of a continued southern extension of this pool.  The 00/01-03-76-02W5 well has achieved an IP15 of 170 bbls/d proving an eastern extension of our pool boundaries.  A third step out well at 00/14-16-075-02W5 came off load recovery May 3rd and is currently producing 400 bbls/d, validating a further western extension of our pool boundaries.  The culmination of these tests continues to validate the scope of the Marten Hills West Clearwater A pool which is now interpreted to have the potential to be larger than our Marten Hills Core pool.

Testing of enhanced oil recovery is progressing on the Marten Hills West Clearwater A pool.  Our first pilot injector has been on injection for 50 days with encouraging results.  Our second injection well at 16-22-75-02W5 is currently being produced as an oil well and will commence injection early in the third quarter of 2023.

Our excitement around the Marten Hills West area continues to grow.  The Headwater team has identified three additional prospective Clearwater zones that are currently untested.  We are in the process of licensing locations to test these zones and anticipate having results prior to year-end.

West Nipisi

Subsequent to our last update on March 9th, Headwater has continued expanding the pool boundaries on this new Clearwater discovery.  A 3-leg multi-lateral well drilled at 01-05-078-09W5 has achieved an IP45 of 110 bbls/d and extended the play to the southern edge of Headwater’s lands. Current production from this area has exceeded 750 bbls/d.

Headwater has identified multiple Clearwater prospects on the recently acquired 31.5 sections of land and are currently preparing to license two tests that are expected to be drilled later this year.

Greater Peavine

Our first two Peavine exploration wells were shut-in for the majority of April due to spring break-up but have recently returned to production.  Consistent with our expectations for the area, the wells are each producing at 75-100 bbls/d.

Our first exploration well at Seal, 13-06-083-15W5, has achieved an IP50 of 70 bbls/d of 13-degree API oil with a low water cut, which has confirmed economic hydrocarbons in the area.

Headwater remains extremely encouraged about the multi-zone potential of this area and has plans to return and test two additional Clearwater sands in the fourth quarter.  Given the large oil resource throughout the area, Headwater has plans to test fishbone multi-lateral wells as a method to enhance productivity and improve recovery factor throughout this area.

Marten Hills Core

The core area continues to produce consistently at approximately 11,000 boe/d.  The enhanced oil recovery implemented to date has resulted in approximately 2,800 bbls/d of stabilized oil production. As our implementation of waterflood continues throughout 2023, it is expected that the stabilized production within the core area will continue to grow.


McCully contributed $12.1 million in free cash flow (1) through the first quarter of 2023. Headwater’s structured hedging program for its McCully asset has protected the asset’s cash flow against the highly volatile gas pricing experienced this winter. Consistent with prior years and to optimize adjusted funds flow, Headwater shut-in production May 1, 2023, to await next winter’s premium pricing season (2).


The Board of Directors of Headwater has declared a quarterly cash dividend to shareholders of $0.10 per common share payable on July 17, 2023, to shareholders of record at the close of business on June 30, 2023. This dividend is an eligible dividend for the purposes of the Income Tax Act (Canada).


Although we continue to see extreme volatility in commodity prices, Headwater’s positive working capital provides us the optionality to continue to execute on our focused business plan of shareholder returns through strong production growth and our stable dividend stream.  For 2023, we remain committed to our previously guided capital budget of $200 million to achieve average annual production of 18,000 boe/d.

Our success across our Clearwater asset base increases the depth of Headwater’s drilling inventory providing the pathway for continued success in the future.

Headwater focuses on total shareholder returns through a combination of growth and return of capital through a consistent and growing dividend stream. Based on current strip pricing and our projected growth rate, we anticipate having the optionality to increase our quarterly dividend in 2024 and beyond.

Additional corporate information can be found in the Company’s corporate presentation and on Headwater’s website at

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