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Drilling & Completions | Quarterly / Earnings Reports | First Quarter (1Q) Update | Financial Results | Capital Markets | Capital Expenditure

Spartan Delta Corp. First Quarter 2023 Results

Wednesday,May 17,2023

Spartan Delta Corp. announced first quarter 2023 results.

Highlights

  • The Company achieved 10% growth in production from an average of 72,588 BOE/d in Q1 2022 to 80,200 BOE/d in Q1 2023. Despite facing third party outages in Q1 2023 which, curtailed production by approximately 1,000 BOE/d, production was on target with 2023 guidance of 80,000 to 82,000 BOE/d.
  • Spartan successfully executed a $139.8 MM capital program in Q1 2023, with specific focus placed on the development of its Gold Creek and Karr assets located in the Montney oil window as well as continued development across multiple horizons in the Deep Basin.
    • In the Deep Basin, Spartan drilled 6.0 net wells, of which 2.0 net wells were drilled in the Cardium Formation and 4.0 net wells were drilled in the Falher Formations. A total of 9.5 net Deep Basin wells were completed in Q1 2023, including 2.0 net wells drilled in Q4 2022, and 9.5 net wells were brought on production, inclusive of 3.5 net wells drilled in Q4 2022.
    • In the Montney, Spartan drilled 2.0 net wells from a 2 well pad in Gold Creek West, 8.0 net wells over two well pads in Gold Creek East and 1.0 net well off a 3 well pad in Karr which are expected to bring on production in Q2 2023. In addition, the Company brought on production a 3.3 net well pad in Gold Creek West that was drilled and completed in Q4 2022.
  • The Company’s production growth partly mitigated the impact of reduced oil and gas prices which drove the 2% decrease in oil and gas sales revenue to $316.2 MM in Q1 2023 compared to $322.4 MM in Q1 2022.
  • Spartan reported net income of $86.4 MM ($0.49 per share, diluted) in Q1 2023, up 41% from $61.2 MM ($0.36 per share, diluted) in Q1 2022. Unrealized gains on commodity derivatives primarily drove the increase in net income.
  • The Company’s operations generated Adjusted Funds Flow of $182.3 MM ($1.03 per share, diluted) in Q1 2023, up 14% from $159.7 MM ($0.92 per share, diluted) in Q1 2022. Cash provided by operating activities increased to $214.7 MM in Q1 2023 from $137.8 MM in Q1 2022 due to the impact of changes in non-cash working capital.
  • Spartan used existing cash on hand to fund $76.6 MM of an eligible dividend paid to shareholders in the first quarter of 2023, relating to the special dividend of $0.50 per share declared in Q4 2022.
  • Spartan generated Free Funds Flow of $42.4 MM in Q1 2023, down 18% from $51.7 MM in Q1 2022.
  • On May 10, 2023, the Company completed the sale of its Gold Creek and Karr Montney properties for cash consideration of approximately $1.7 billion (the “Asset Sale“) and, concurrently, Spartan’s revolving credit facility (“Credit Facility“) and second lien term facility (“Term Facility“) were amended to reduce the authorized borrowing amount under the Credit Facility to $250 MM and to accelerate the maturity of the Term Facility to December 2023. Repayment of the $150 MM Term Facility is expected to be funded by cash on hand of $133 MM, future cash flows from operations and access to the undrawn Credit Facility.
Spartan Delta Corp. (“Spartan” or the “Company“) (TSX: SDE) is pleased to report its unaudited financial and operating results for the three months ended March 31, 2023.

2023 GUIDANCE

The Company expects to release updated guidance concurrent with results of the May 16, 2023 annual meeting of shareholders, before markets open on May 17, 2023.

The table below summarizes the Company’s financial and operating results for the three months ended March 31, 2023 and March 31, 2022:

(CA$ thousands, except as otherwise noted)

  

Three months ended March 31
       

2023

2022

%

FINANCIAL HIGHLIGHTS

            

Oil and gas sales

      

316,212

322,424

(2)

Net income and comprehensive income

      

86,449

61,177

41

     $ per share, basic (a)

      

0.50

0.40

25

     $ per share, diluted (a)

      

0.49

0.36

36

Cash provided by operating activities

      

214,718

137,840

56

Adjusted Funds Flow (b)

      

182,276

159,721

14

     $ per share, basic (a)(b)

      

1.06

1.04

2

     $ per share, diluted (a)(b)

      

1.03

0.92

12

Free Funds Flow (b)

      

42,443

51,737

(18)

Cash used in investing activities

      

127,352

104,362

22

     Capital Expenditures before A&D (b)

      

139,833

107,984

29

     Adjusted Net Capital A&D (b)

      

769

(567)

(236)

Total assets

      

2,155,052

1,811,765

19

Debt

      

145,752

356,570

(59)

Net Debt (b)

      

138,706

405,691

(66)

     Net Debt to Annualized AFF Ratio (b)

      

0.2 x

0.6 x

(67)

Shareholders’ equity

      

1,582,999

950,734

67

Common shares outstanding (000s), end of period (a)

      

171,426

153,469

12

OPERATING HIGHLIGHTS AND NETBACKS (e)

            

Average daily production

            

     Crude oil (bbls/d)

      

15,034

11,270

33

     Condensate (bbls/d) (c)

      

2,994

2,414

24

     Natural gas liquids (bbls/d) (c)

      

13,202

12,971

2

     Natural gas (mcf/d)

      

293,822

275,596

7

     BOE/d

      

80,200

72,588

10

     % Liquids (d)

      

39 %

37 %

5

Average realized prices, before financial instruments

            

     Crude oil ($/bbl)

      

99.94

116.35

(14)

     Condensate ($/bbl) (c)

      

104.65

120.17

(13)

     Natural gas liquids ($/bbl) (c)

      

41.91

49.59

(15)

     Natural gas ($/mcf)

      

3.89

4.85

(20)

     Combined average ($/BOE)

      

43.81

49.35

(11)

Netbacks ($/BOE) (e)

            

     Oil and gas sales

      

43.81

49.35

(11)

     Processing and other revenue

      

0.46

0.36

28

     Royalties

      

(4.65)

(4.86)

(4)

     Operating expenses

      

(8.26)

(8.36)

(1)

     Transportation expenses

      

(2.83)

(2.76)

3
   

Three months ended March 31

Netbacks continued from previous page

      

2023

2022

%

Operating Netback, before hedging ($/BOE) (e)

      

28.53

33.73

(15)

     Settlements on Commodity Derivative Contracts(e)(f)

      

(1.36)

(6.74)

(80)

     Net Pipeline Transportation Margin (e)(g)

      

–

(0.05)

(100)

Operating Netback, after hedging ($/BOE) (e)

      

27.17

26.94

1

     General and administrative expenses

      

(0.67)

(0.88)

(24)

     Cash Financing Expenses (e)(h)

      

(0.70)

(1.04)

(33)

     Realized foreign exchange gain (loss)

      

0.04

–

 nm

     Other income

      

–

0.10

(100)

     Settlement of decommissioning obligations

      

(0.16)

(0.19)

(16)

     Lease payments (i)

      

(0.43)

(0.48)

(10)

Adjusted Funds Flow Netback ($/BOE) (e)

      

25.25

24.45

3
   


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