Bonterra Eneergy Corporation announced first quarter 2023 results.
Although Bonterra’s more active capital program contributed to slightly higher planned net debt at the end of the quarter relative to year end 2022, the first quarter operational performance positions the Company with strong momentum to build on for the balance of 2023. The Company anticipates significantly reduced capital spending and field activity combined with higher average production in Q2 2023 compared to Q1 2023, driving a projected reduction in net debt in the second and third quarters of 2023 with lower operating costs per BOE.
The Company’s realized oil and natural gas sales in Q1 2023 totaled $77.3 million, reflecting strong production volumes with lower realized commodity prices relative to both the previous quarter and the same period in 2022. Oil and liquids revenue represented 86 percent of the Company’s total realized oil and gas sales in Q1 2023, and contributed to field and cash netbacks1 of $34.90 per BOE and $24.21 per BOE, respectively, with field and cash netbacks that were 19 and 30 percent lower, respectively, compared to the previous quarter. Revenue and netbacks were muted by lower realized commodity prices in the quarter as global supply and demand imbalances caused downward pressure on oil prices, while a warmer winter in North America reduced natural gas demand into a period of growing supply from increased drilling activity, leading to a sharp price decline. The Company realized average prices of $95.71 per bbl for oil, $54.54 per bbl for NGL, and $3.78 per mcf for natural gas, declines of nine, eight and 29 percent from the previous quarter, respectively. The combination of pricing and production supported the generation of $29.3 million of funds flow1 ($0.79 per diluted share) in the quarter, a 29 percent decrease from Q4 2022.
Bonterra’s Q1 2023 capital program was executed safely and efficiently, with approximately 80 percent allocated to drilling and completions activities across its high-quality, light oil weighted Cardium asset base. Capital expenditures totaled $60.2 million in the quarter, with $48.4 million directed to the drilling of 22 gross (20.6 net) operated wells and the completion, equip and tie-in of 15 gross (14.2 net) operated wells. Of the wells drilled in Q1 2023, seven (6.4 net) have since been completed and placed on production in April, resulting in record field estimate volumes for the month. Bonterra also invested $3.6 million of its quarterly capital into expanding a wholly owned gas plant with the goal of eliminating current processing capacity limitations to support continued growth, while the remaining $8.1 million was directed to related infrastructure, recompletions and non-operated capital expenditures.
In concert with the active drilling and completions program, the Company continued to advance its abandonment and reclamation program with support of the Alberta Site Rehabilitation Program (“SRP”), by investing $4.2 million resulting in the abandonment of 46.2 net wells and 36 pipelines during Q1 2023. By the end of 2023, Bonterra expects that approximately 80 percent of all wells across the portfolio which are not expected to provide future economic contribution will have been abandoned.
Also during the quarter, Bonterra released its second Sustainability Report, following the guidance provided by the Task Force on Climate-related Financial Disclosures (TCFD) framework and guidance provided by the Sustainability Accounting Standards Board (SASB). The report highlights the Company’s success across environmental, social and governance initiatives through 2022, including Bonterra’s successful reduction of 26,000 tonnes of CO2 annually, the equivalent of removing 5,650 cars from the road for one year.
Following on a successful first quarter of 2023, Bonterra is pleased to reaffirm its previously released 2023 guidance:
Bonterra is actively monitoring the wildfire situation near to its operations in the Pembina area within Brazeau County. The Company has approximately 2,400 boe/d awaiting reactivation once access becomes available.
Bonterra wishes to thank its dedicated staff and emergency responders for their tireless efforts dealing with the wildfire situation and the Company sends thoughts and best wishes to everyone affected.
As a means of further supporting Bonterra’s stability during periods of continued market volatility, protecting future cash flows and aiming to diversify the Company’s commodity price exposure, hedges have been layered on approximately 30 percent of Bonterra’s expected crude oil and natural gas production through the end of December 2023. For the balance of 2023, Bonterra has secured the following:
With an increasingly robust financial and operating position, along with a proven track record of operational execution, Bonterra intends to carve a new path forward towards the implementation of a sustainable dividend-paying business model by the end of 2023. In support of this strategy, the Company will continue to actively pursue accretive acquisitions that can bolster production, expand the drilling inventory, contribute to free cash flow generation and further enhance the balance sheet. Based on Bonterra’s current projections at strip pricing, the Company forecasts having minimal bank debt and being in a position to fund its capital expenditures and dividends, while still generating free cash flow.
As one of Canada’s longest standing and most resilient junior oil and gas companies, Bonterra has established a strong position from which to build. In addition to benefiting from a moderate annual production decline rate, an extensive inventory of economically viable undrilled locations, and a strategic hedging program to reinforce economics, the Company intends to continue focusing on enhancing financial flexibility and undertaking safe, responsible and efficient operations to achieve measured growth.
Bonterra again wishes to sincerely thank Mr. George Fink, former founder, CEO and Director, for his contributions, vision and leadership of the Company over the past 25 years as he will not be standing for re-election at the Company’s upcoming Annual and Special Meeting of Shareholders on May 18, 2023. The Board has conferred on Mr. Fink the honorary title of Director Emeritus, which will take effect immediately following his formal retirement from the Board, and enable the Company to benefit from his insight, advice and guidance.
Bonterra Energy Corp. is a conventional oil and gas corporation with operations in Alberta, Saskatchewan and British Columbia, focused on its strategy of long-term, sustainable growth and value creation for shareholders. The Company’s shares are listed on The Toronto Stock Exchange under the symbol “BNE”.