Questerre Energy Corporation (“Questerre” or the “Company”)
(TSX,OSE:QEC) reported today on its financial and operating results
for the second quarter ended June 30, 2022.
Michael Binnion, President, and Chief Executive
Officer, commented, “During the quarter, three new Kakwa wells were
brought on production. Leveraging the strong commodity prices, we
recorded adjusted funds flow from operations of over $12 million
for the period.”
Commenting on Quebec, he added, “Protecting our
legal rights is our top priority after the Government of Quebec
announced its plans to enact Bill 21 and revoke our licenses
without meaningful compensation. We filed our primary claim in the
Superior Court of Quebec this winter. Our litigation counsel
recently engaged one of the Big 4 accounting firms as an expert
witness to quantify our damages. Based on the value of the
multi-Tcf discovery, we expect this claim will be substantially
larger than the notional $100 million the Government has suggested
as a settlement. We are also supporting other stakeholders
including First Nations and Quebec royalty holders to ensure their
rights are also protected against the Government’s actions.”
Reporting on the Company’s 40% investment in Red
Leaf, he added, “They also made progress on their new technology
with a successful third-party review completed early in the third
quarter. The granting of the final permit for a short line railroad
that terminates on their land is also very good news for Red Leaf
and its refinery permit in the Uinta Basin in Utah.”
Highlights
- Average daily production of 1,909
boe/d(1) and adjusted funds flow from operations of $12.2 million
for the quarter
- Government of Quebec announces
plans to enact Bill 21 and revoke exploration licenses
- Red Leaf completes third-party
engineering validation of new design
Consistent with prior periods, Kakwa continued
to account for 80% of corporate production. With three (0.75 net)
wells brought on production in the quarter, production increased
materially over the prior year. For the second quarter, daily
production averaged 1,909 boe/d (2021: 1,479 boe/d) and for the six
months ended June 30, 2022, it averaged 1,600 boe/d (2021: 1,579
boe/d).
The improvement in commodity prices over the
same period last year materially improved revenue and adjusted
funds flow from operations in 2022. For the quarter, petroleum and
natural gas sales increased to $17 million from $7.1 million last
year and $26.6 million year to date from $14.1 million in the prior
year. The higher revenue contributed to adjusted funds flow from
operations of $12.2 million (2021: $4.2 million) in the quarter and
$16.5 million for the first six months of the year (2021: $7.1
million).
The higher revenue also contributed to net
income of $9.1 million for the quarter (2021: $2.9 million) and
$11.5 million (2021: $3.8 million) for the first half of the year.
Capital expenditures in the quarter were $2.8 million (2021: $0.5
million) and $7.8 million year to date (2021: $0.9 million).
The Company also reported on the pending renewal
of its credit facility with a Canadian chartered bank. Following a
preliminary review conducted in the second quarter, the Company
anticipates its $16 million revolving operating demand facility
will remain unchanged at $16 million. The renewal will take effect
upon receipt of the final requisite approvals in the third quarter.
The effective interest rate on the facility for the first half of
2022 was 4.08% (2021: 3.45%). As at June 30, 2022, effectively no
amounts were drawn on the facility and the Company held
unrestricted cash and term deposits of $13.8 million. The Company
had a net working capital surplus of $10.6 million (2021: $1.2
million deficit).
The term “adjusted funds flow from operations”
and “working capital surplus (deficit)” are non-IFRS measures.
Please see the reconciliation elsewhere in this press release.
Questerre is an energy technology and innovation
company. It is leveraging its expertise gained through early
exposure to low permeability reservoirs to acquire significant
high-quality resources. We believe we can successfully transition
our energy portfolio. With new clean technologies and innovation to
responsibly produce and use energy, we can sustain both human
progress and our natural environment.
Questerre is a believer that the future success
of the oil and gas industry depends on a balance of economics,
environment, and society. We are committed to being transparent and
are respectful that the public must be part of making the important
choices for our energy future.
Advisory Regarding Forward-Looking
Statements
This news release contains certain statements
which constitute forward-looking statements or information
(“forward-looking statements”) including the Company’s plans to
protect its legal rights in Quebec, its expectations that the claim
will be substantially larger than the notional amount proposed by
the Government of Quebec, its support for other stakeholders and
its views on the potential impact of the final railroad permit on
Red Leaf’s refinery permit.
Forward-looking statements are based on several
material factors, expectations, or assumptions of Questerre which
have been used to develop such statements and information, but
which may prove to be incorrect. Although Questerre believes that
the expectations reflected in these forward-looking statements are
reasonable, undue reliance should not be placed on them because
Questerre can give no assurance that they will prove to be correct.
Since forward-looking statements address future events and
conditions, by their very nature they involve inherent risks and
uncertainties. Further, events or circumstances may cause actual
results to differ materially from those predicted as a result of
numerous known and unknown risks, uncertainties, and other factors,
many of which are beyond the control of the Company, including,
without limitation: the implementation of Bill 21 by the Government
of Quebec and certain other risks detailed from time-to-time in
Questerre's public disclosure documents. Additional information
regarding some of these risks, expectations or assumptions and
other factors may be found under in the Company's Annual
Information Form for the year ended December 31, 2021, and other
documents available on the Company’s profile at www.sedar.com. The
reader is cautioned not to place undue reliance on these
forward-looking statements. The forward-looking statements
contained in this news release are made as of the date hereof and
Questerre undertakes no obligations to update publicly or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise, unless so required by
applicable securities laws.
Certain information set out herein may be
considered as “financial outlook” within the meaning of applicable
securities laws. The purpose of this financial outlook is to
provide readers with disclosure regarding Questerre’s reasonable
expectations as to the anticipated results of its proposed business
activities for the periods indicated. Readers are cautioned that
the financial outlook may not be appropriate for other
purposes.
(1) For the three-month period ended June 30,
2022, liquids production including light crude and natural gas
liquids accounted for 1,157 bbls/d (2021: 887 bbls/d) and natural
gas including conventional and shale gas accounted for 4,510 Mcf/d
(2021: 3,549 Mcf/d). For the six-month period ended June 30, 2022,
liquids production including light crude and natural gas liquids
accounted for 987 bbls/d (2021: 929 bbls/d) and natural gas
including conventional and shale gas accounted for 3,682 Mcf/d
(2021: 3,898 Mcf/d).
Barrel of oil equivalent (“boe”) amounts may be
misleading, particularly if used in isolation. A boe conversion
ratio has been calculated using a conversion rate of six thousand
cubic feet of natural gas to one barrel of oil and the conversion
ratio of one barrel to six thousand cubic feet is based on an
energy equivalent conversion method application at the burner tip
and does not necessarily represent an economic value equivalent at
the wellhead. Given that the value ratio based on the current price
of crude oil as compared to natural gas is significantly different
from the energy equivalent of 6:1, utilizing a conversion on a 6:1
basis may be misleading as an indication of value.
This press release contains the terms “adjusted
funds flow from operations” and “working capital surplus (deficit)”
which are non-GAAP terms. Questerre uses these measures to help
evaluate its performance.
As an indicator of Questerre’s performance,
adjusted funds flow from operations should not be considered as an
alternative to, or more meaningful than, cash flows from operating
activities as determined in accordance with GAAP. Questerre’s
determination of adjusted funds flow from operations may not be
comparable to that reported by other companies. Questerre considers
adjusted funds flow from operations to be a key measure as it
demonstrates the Company’s ability to generate the cash necessary
to fund operations and support activities related to its major
assets.
|
Three months ended June 30, |
Six months ended June 30, |
($ thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net cash from operating activities |
$ |
10,162 |
|
$ |
3,006 |
|
$ |
15,066 |
|
$ |
6,085 |
|
Interest received |
|
(69 |
) |
|
(48 |
) |
|
(108 |
) |
|
(98 |
) |
Interest paid |
|
10 |
|
|
123 |
|
|
39 |
|
|
256 |
|
Change in non-cash operating working capital |
|
2,080 |
|
|
1,143 |
|
|
1,476 |
|
|
866 |
|
Adjusted Funds Flow from Operations |
$ |
12,183 |
|
$ |
4,224 |
|
$ |
16,473 |
|
$ |
7,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital surplus is a non-GAAP measure
calculated as current assets less current liabilities excluding
risk management contracts and lease liabilities.
For further information, please contact:
Questerre Energy Corporation
Jason D’Silva, Chief Financial Officer
(403) 777-1185 | (403) 777-1578 (FAX) | Email: info@questerre.com
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