CALGARY,
AB, May 17, 2023 /CNW/ - Spartan Delta
Corp. ("Spartan" or the "Company") (TSX: SDE) is
pleased to announce that its Board of Directors (the
"Board") has approved the pro forma capital expenditure
budget and updated guidance for 2023, following the recent sale of
the Company's Gold Creek and Karr
Montney assets (the "Asset Sale"). The Company also
announces the voting results from its annual general and special
meeting of shareholders held on May 16,
2023 (the "Meeting").
2023 BUDGET AND UPDATED
GUIDANCE
Spartan is pleased to provide its updated financial and
operating guidance for 2023.
The Company's capital expenditure budget and guidance for 2023
is presented on a pro forma basis, accounting for the forthcoming
distribution of the cash proceeds of the Asset Sale and the shares
and warrants of Logan Energy Corp. ("Logan") to Spartan's
shareholders.
Based on forecast annual 2023 average production of between
52,000 to 54,000 BOE/d and commodity price assumptions of
US$74/bbl for WTI crude oil and
$2.75/GJ for AECO natural gas average
for the year, Spartan expects to generate approximately
$398 million of Adjusted Funds Flow
in 2023. Free Funds Flow is forecast to be $118 million on a capital expenditure budget of
$280 million.
As part of the Company's 2023 capital budget, Spartan plans to
drill a total of 16.0 net wells targeting both light oil and
liquids-rich gas in the Spirit River, Cardium, and Rock Creek horizons within the Deep Basin.
Spartan is also on track to have drilled a total of 14.7 wells in
the Montney core area in the first half of 2023 that were divested
pursuant to the Asset Sale.
Spartan's 2023 guidance is summarized below:
GUIDANCE
|
H1
2023
|
H2
2023
|
Full Year
2023
|
Year ending December
31, 2023
|
Guidance
|
Guidance
|
Guidance
|
Average Production
(BOE/d) (a)(b)
|
68,000 to
70,000
|
36,000 to
38,000
|
52,000 to
54,000
|
% Liquids
|
37 %
|
30 %
|
35 %
|
Benchmark Average
Commodity Prices
|
|
|
|
WTI crude oil price
(US$/bbl)
|
76
|
72
|
74
|
NYMEX Henry Hub
natural gas price (US$/mmbtu)
|
2.80
|
2.99
|
2.89
|
AECO natural gas price
($/GJ)
|
3.20
|
2.30
|
2.75
|
Average exchange rate
(US$/CA$)
|
1.35
|
1.34
|
1.34
|
Operating Netback,
before hedging ($/BOE) (b)(c)
|
24.48
|
12.18
|
20.14
|
Operating Netback,
after hedging ($/BOE) (b)(c)
|
25.98
|
19.89
|
23.83
|
Adjusted Funds Flow
($MM) (b)(c)
|
306
|
93
|
398
|
Capital Expenditures,
before A&D ($MM) (c)
|
233
|
47
|
280
|
Free Funds Flow ($MM)
(c)
|
72
|
46
|
118
|
Net Debt, end of period
($MM) (c)
|
110
|
62
|
62
|
Common shares
outstanding, end of period (MM) (d)
|
173
|
173
|
173
|
|
|
a)
|
The financial
performance measures included in the Company's guidance for 2023 is
based on the midpoint of the average
production forecast; 69,000, 37,000, 53,000 BOE/d
respectively.
|
b)
|
Additional information
regarding the assumptions used in the forecasted Average
Production, Operating Netbacks and
Adjusted Funds Flow for 2023 are provided in the Reader Advisories
section of this press release.
|
c)
|
"Operating Netback",
"Adjusted Funds Flow", "Capital Expenditures, before A&D",
"Free Funds Flow" and "Net Debt (Surplus)"
do not have standardized meanings under IFRS, see "Non-GAAP
Measures and Ratios".
|
d)
|
The forecast of common
shares outstanding at the end of 2023 includes common shares
issuable in respect of the net effect
of accelerated vesting of stock options associated with the Asset
Sale but does not include shares associated with outstanding
restricted share awards that are not anticipated to vest in kind
(refer to "Share Capital" section of this press release for
additional information regarding dilutive securities).
|
OUTLOOK
With a robust inventory and numerous drilling opportunities,
Spartan's management team and Board look forward to the delivery of
a repositioned business model focused on highly capital efficient,
liquids rich gas development to sustain annual production levels of
~39,100 boe/d into its owned and operated deep cut gas processing
infrastructure in the Deep Basin.
With over 70% of Spartan's gas hedged at attractive levels well
above prevailing strip pricing through the balance of the year, the
Company expects to deliver meaningful Free Funds Flow in 2023.
Maintaining a strong balance sheet continues to be a core aspect
of Spartan's sustainable business model and the Company is
targeting a leverage ratio of approximately 0.5x debt to Adjusted
Fund Flow into the future.
SHAREHOLDER MEETING
A total of 110,834,450 common shares, representing
approximately 64.65% of Spartan's issued and outstanding shares,
were represented at the Meeting.
The following nominees were elected as directors of Spartan for
the ensuing year, with the specific voting results being as
follows:
|
Votes
For
|
Votes
Withheld
|
Director
|
#
|
%
|
#
|
%
|
Fotis
Kalantzis
|
108,448,058
|
99.55 %
|
495,121
|
0.45 %
|
Richard F.
McHardy
|
107,174,884
|
98.38 %
|
1,768,295
|
1.62 %
|
Donald
Archibald
|
104,235,622
|
95.68 %
|
4,707,557
|
4.32 %
|
Reginald J.
Greenslade
|
105,408,563
|
96.76 %
|
3,534,616
|
3.24 %
|
Kevin
Overstrom
|
103,850,036
|
95.32 %
|
5,093,143
|
4.68 %
|
Tamara
MacDonald
|
91,975,706
|
84.43 %
|
16,967,473
|
15.57 %
|
For voting results on the other matters considered at the
Meeting, all of which were approved, please see the Company's
report of voting results dated May 16,
2023 available on SEDAR at www.sedar.com.
ABOUT SPARTAN DELTA
CORP.
Spartan is committed to creating a modern energy company,
focused on sustainability both in operations and financial
performance. The Company's ESG-focused culture is centered on
generating Free Funds Flow through responsible oil and gas
exploration and development. The Company has established a
portfolio of high-quality production and development opportunities
in the Deep Basin of Alberta.
Spartan is focused on the execution of the Company's organic
drilling program, delivering operational synergies in a respectful
and responsible manner to the environment and communities it
operates in. The Company is well positioned with flexibility to
continue pursuing immediate production optimization, sustainable
growth with organic drilling, opportunistic acquisitions and a
focus on the generation of Free Funds Flow and periodic special
dividends to shareholders.
Spartan's corporate presentation dated May 17, 2023 can be accessed on the Company's
website at www.spartandeltacorp.com.
READER ADVISORIES
Non-GAAP Measures and Ratios
This press release contains certain financial measures and
ratios which do not have standardized meanings prescribed by
International Financial Reporting Standards ("IFRS") or
Generally Accepted Accounting Principles ("GAAP"). As these
non-GAAP financial measures and ratios are commonly used in the oil
and gas industry, Spartan believes that their inclusion is useful
to investors. The reader is cautioned that these amounts may not be
directly comparable to measures for other companies where similar
terminology is used.
The non-GAAP measures and ratios used in this press release,
represented by the capitalized and defined terms outlined below,
are used by Spartan as key measures of financial performance and
are not intended to represent operating profits nor should they be
viewed as an alternative to cash provided by operating activities,
net income or other measures of financial performance calculated in
accordance with IFRS.
The definitions below should be read in conjunction with the
"Non-GAAP Measures and Ratios" section of the Company's MD&A
dated May 12, 2023, which includes
discussion of the purpose and composition of the specified
financial measures and detailed reconciliations to the most
directly comparable GAAP financial measures as at March 31, 2023.
Operating Income and Operating Netback
Operating Income, a non-GAAP financial measure, is a useful
supplemental measure that provides an indication of the Company's
ability to generate cash from field operations, prior to
administrative overhead, financing and other business expenses.
"Operating Income, before hedging" is calculated by Spartan
as oil and gas sales, net of royalties, plus processing and other
revenue, less operating and transportation expenses. "Operating
Income, after hedging" is calculated by adjusting Operating
Income for: (i) realized gains or losses on derivative financial
instruments including settlements on acquired derivative financial
instrument liabilities (together a non-GAAP financial measure
"Settlements on Commodity Derivative Contracts"), and (ii)
pipeline transportation revenue, net of pipeline transportation
expense (the "Net Pipeline Transportation Margin"). The
Company refers to Operating Income expressed per unit of production
as an "Operating Netback" and reports the Operating Netback
before and after hedging, both of which are non-GAAP financial
ratios. Spartan considers Operating Netback an important measure to
evaluate its operational performance as it demonstrates its field
level profitability relative to current commodity prices.
Adjusted Funds Flow and Free Funds Flow
Cash provided by operating activities is the most directly
comparable measure to Adjusted Funds Flow. "Adjusted Funds
Flow" is reconciled to cash provided by operating activities by
excluding changes in non-cash working capital, adding back
transaction costs on acquisitions, and deducting the principal
portion of lease payments. Spartan utilizes Adjusted Funds Flow as
a key performance measure in the Company's annual financial
forecasts and public guidance. Transaction costs, which primarily
include legal and financial advisory fees, regulatory and other
expenses directly attributable to execution of acquisitions or
dispositions, are added back because the Company's definition of
Free Funds Flow excludes capital expenditures related to
acquisitions and dispositions. For greater clarity, incremental
overhead expenses related to ongoing integration and restructuring
post-acquisition are not adjusted and are included in Spartan's
general and administrative expenses. Lease liabilities are not
included in Spartan's definition of Net Debt (non-GAAP measure
defined herein) therefore lease payments are deducted in the period
incurred to determine Adjusted Funds Flow.
"Free Funds Flow" is calculated by Spartan as Adjusted
Funds Flow less Capital Expenditures before A&D, which is also
a non-GAAP financial measure (defined herein). Spartan believes
Free Funds Flow provides an indication of the amount of funds the
Company has available for future capital allocation decisions such
as to repay long-term debt, reinvest in the business or return
capital to shareholders.
Capital Expenditures, before A&D
"Capital Expenditures before A&D" is used by Spartan
to measure its capital investment level compared to the Company's
annual budgeted capital expenditures for its organic drilling
program. It includes capital expenditures on exploration and
evaluation assets and property, plant and equipment, before
acquisitions and dispositions. The directly comparable GAAP measure
to capital expenditures is cash used in investing activities.
Net Debt (Surplus) and Adjusted Working Capital
References to "Net Debt (Surplus)" includes debt
outstanding, if any, under Spartan's revolving credit facility and
second lien term facility, net of Adjusted Working Capital. Net
Debt (Surplus) and Adjusted Working Capital are both non-GAAP
financial measures. "Adjusted Working Capital" is calculated
as current assets less current liabilities, excluding lease
liabilities, derivative financial instrument assets and
liabilities, liabilities related to assets held for sale and
current debt.
Spartan uses Net Debt (Surplus) as a key performance measure to
manage the Company's targeted debt levels. The Company believes its
presentation of Net Debt (Surplus) is useful as supplemental
measures because lease liabilities and derivative financial
instrument assets and liabilities relate to contractual obligations
for future production periods. Lease payments and cash receipts or
settlements on derivative financial instruments are included in
Spartan's reported Adjusted Funds Flow in the production month to
which the obligation relates.
Other Measurements
All dollar figures included herein are presented in Canadian
dollars, unless otherwise noted.
This press release contains various references to the
abbreviation "BOE" which means barrels of oil equivalent.
Where amounts are expressed on a BOE basis, natural gas volumes
have been converted to oil equivalence at six thousand cubic feet
(Mcf) per barrel (bbl). The term BOE may be misleading,
particularly if used in isolation. A BOE conversion ratio of six
thousand cubic feet per barrel is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead and is
significantly different than the value ratio based on the current
price of crude oil and natural gas. This conversion factor is an
industry accepted norm and is not based on either energy content or
current prices. Such abbreviation may be misleading, particularly
if used in isolation.
References to "oil" in this press release include light crude
oil, medium crude oil, heavy oil and tight oil combined. NI 51-101
includes condensate within the product type of "natural gas
liquids". References to "natural gas liquids" or "NGLs" include
pentane, butane, propane and ethane. References to "gas" or
"natural gas" relates to conventional natural gas. References to
"liquids" includes crude oil, condensate and NGLs.
Assumptions for 2023 Guidance
The significant assumptions used in the forecast of Operating
Netbacks and Adjusted Funds Flow for 2023 are summarized below.
These key performance measures expressed per BOE are based on the
midpoint of calendar year average production guidance for 2023 of
53,000 BOE/d.
2023 PRODUCTION
GUIDANCE
|
H1
Guidance
|
H2
Guidance
|
Full Year
Guidance
|
Crude oil
(bbls/d)
|
11,300
|
800
|
6,000
|
Condensate
(bbls/d)
|
2,600
|
1,500
|
2,100
|
Crude oil and
condensate (bbls/d)
|
13,900
|
2,300
|
8,100
|
NGLs
(bbls/d)
|
11,900
|
8,600
|
10,200
|
Natural gas
(mcf/d)
|
259,200
|
157,200
|
207,800
|
Combined average
(BOE/d)
|
69,000
|
37,000
|
53,000
|
%
Liquids
|
37 %
|
30 %
|
35 %
|
2023 FINANCIAL
GUIDANCE ($/BOE)
|
H1
Guidance
|
H2
Guidance
|
Full Year
Guidance
|
Oil and gas
sales
|
39.44
|
23.27
|
33.73
|
Processing and other
revenue
|
0.43
|
0.28
|
0.37
|
Royalties
|
(4.70)
|
(3.94)
|
(4.43)
|
Operating
expenses
|
(8.01)
|
(5.70)
|
(7.20)
|
Transportation
expenses
|
(2.67)
|
(1.73)
|
(2.34)
|
Operating Netback,
before hedging
|
24.48
|
12.18
|
20.14
|
Settlements on
Commodity Derivative Contracts
|
1.50
|
7.72
|
3.69
|
Operating Netback,
after hedging
|
25.98
|
19.89
|
23.83
|
General and
administrative expenses
|
(1.00)
|
(1.49)
|
(1.17)
|
Cash financing
expenses
|
0.15
|
(3.48)
|
(1.14)
|
Settlements of
decommissioning obligations
|
(0.22)
|
(0.48)
|
(0.31)
|
Lease
payments
|
(0.48)
|
(0.86)
|
(0.62)
|
Adjusted Funds
Flow
|
24.45
|
13.58
|
20.61
|
Changes in forecast commodity prices, exchange rates,
differences in the amount and timing of capital expenditures, and
variances in average production estimates can have a significant
impact on the key performance measures included in Spartan's
guidance. The Company's actual results may differ materially from
these estimates. Holding all other assumptions constant, a
US$10/bbl increase (decrease) in the
forecasted average WTI crude oil price for 2023 would increase
Adjusted Funds Flow by approximately $12.5
million (decrease by $12.5
million). An increase (decrease) of CA$1.00/GJ in the
forecasted average AECO natural gas price for 2023, holding the
NYMEX-AECO basis differential and all other assumptions constant,
would increase Adjusted Funds Flow by approximately $10.5 million (decrease by $10.5 million). Holding U.S. dollar benchmark
commodity prices and all other assumptions constant, an increase
(decrease) of $0.10 in the US$/CA$
exchange rate would increase Adjusted Funds Flow by approximately
$7.0 million (decrease by
$7.0 million). Assuming capital
expenditures are unchanged, the impact on Free Funds Flow would be
equivalent to the increase or decrease in Adjusted Funds Flow. An
increase (decrease) in Free Funds Flow will result in an equivalent
decrease (increase) in the forecasted Net Debt (Surplus).
Share Capital
Spartan's common shares are listed on the Toronto Stock Exchange
("TSX") and trade under the symbol "SDE". As of the date hereof,
there are 171.4 MM common shares outstanding. There are no
preferred shares or special shares outstanding. The following
securities are outstanding as of the date of this press release:
3.7 MM restricted share awards; and 3.3 MM stock options
outstanding with an average exercise price of $4.56 per common share.
Forward-Looking and Cautionary
Statements
Certain statements contained within this press release
constitute forward-looking statements within the meaning of
applicable Canadian securities legislation. All statements other
than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "anticipate", "budget",
"plan", "endeavor", "continue", "estimate", "evaluate", "expect",
"forecast", "monitor", "may", "will", "can", "able", "potential",
"target", "intend", "consider", "focus", "identify", "use",
"utilize", "manage", "maintain", "remain", "result", "cultivate",
"could", "should", "believe" and similar expressions. Spartan
believes that the expectations reflected in such forward-looking
statements are reasonable as of the date hereof, but no assurance
can be given that such expectations will prove to be correct and
such forward-looking statements should not be unduly relied upon.
Without limitation, this press release contains forward-looking
statements pertaining to: the Company's 2023 capital budget and
updated guidance; Spartan's anticipated operational results for
2023 including, but not limited to, estimated or anticipated
production levels, capital expenditures and drilling plans; Spartan
plans to deliver strong operational performance and to generate
long term sustainable Free Funds Flow, organic growth and periodic
special dividends. All statements other than statements of
historical fact may be forward-looking statements. Future dividend
payments, if any, and the level thereof, are uncertain, as the
Company's return of capital framework and the funds available for
such activities from time to time is dependent upon, among other
things, free funds flow financial requirements for the Company's
operations and the execution of its growth strategy, fluctuations
in working capital and the timing and amount of capital
expenditures, debt service requirements and other factors beyond
the Company's control. Further, the ability of Spartan to pay
dividends will be subject to applicable laws (including the
satisfaction of the solvency test contained in applicable corporate
legislation) and contractual restrictions contained in the
instruments governing its indebtedness, including its credit
facility.
The forward-looking statements and information are based on
certain key expectations and assumptions made in respect of Spartan
or Logan, as the case may be, including expectations and
assumptions concerning the completion of the spin-out and the
distribution, the business plan of Spartan and Logan, the timing of
and success of future drilling, development and completion
activities, the performance of existing wells, the performance of
new wells, the availability and performance of facilities and
pipelines, the geological characteristics of Spartan's properties,
the successful integration of the recently acquired assets into
Spartan's operations, the successful application of drilling,
completion and seismic technology, prevailing weather conditions,
prevailing legislation affecting the oil and gas industry,
prevailing commodity prices, price volatility, price differentials
and the actual prices received for the Company's products, impact
of inflation on costs, royalty regimes and exchange rates, the
application of regulatory and licensing requirements, the
availability of capital, labour and services, the creditworthiness
of industry partners and the ability to source and complete
acquisitions.
Although Spartan believes that the expectations and assumptions
on which such forward-looking statements and information are based
are reasonable, undue reliance should not be placed on the
forward-looking statements and information because Spartan can give
no assurance that they will prove to be correct. By its nature,
such forward-looking information is subject to various risks and
uncertainties, which could cause the actual results and
expectations to differ materially from the anticipated results or
expectations expressed. These risks and uncertainties include, but
are not limited to, fluctuations in commodity prices, changes in
industry regulations and political landscape both domestically and
abroad, wars (including Russia's
military actions in Ukraine),
hostilities, civil insurrections, foreign exchange or interest
rates, increased operating and capital costs due to inflationary
pressures (actual and anticipated), volatility in the stock market
and financial system, impacts of the current COVID-19 pandemic, the
retention of key management and employees, risks with respect to
unplanned third-party pipeline outages and risks relating to the
Alberta wildfires, including in
respect of safety, asset integrity and shutting in production.
Ongoing military actions between Russia and Ukraine have the potential to threaten the
supply of oil and gas from the region. The long-term impacts of the
actions between these nations remains uncertain. The foregoing list
is not exhaustive. Additional information on these and other risks
that could affect completion of the spin-out and the distribution
are set forth in the information circular, which is available on
SEDAR at www.sedar.com.
Please refer to Spartan's MD&A for the period ended
March 31, 2023 and AIF for the year
ended December 31, 2022 for
discussion of additional risk factors relating to Spartan, which
can be accessed either on Spartan's website at
www.spartandeltacorp.com or under Spartan's SEDAR profile on
www.sedar.com. Readers are cautioned not to place undue reliance on
this forward-looking information, which is given as of the date
hereof, and to not use such forward-looking information for
anything other than its intended purpose. Spartan undertakes no
obligation to update publicly or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as required by law.
This press release contains future-oriented financial
information and financial outlook information (collectively,
"FOFI") about Spartan's prospective results of operations
and production, organic growth, operating costs, capital
expenditures, Adjusted Funds Flow, Free Funds Flow, Net Debt
(Surplus), Operating Netbacks, and Spartan's corporate outlook and
guidance for 2023 and components thereof, all of which are subject
to the same assumptions, risk factors, limitations, and
qualifications as set forth in the above paragraphs. FOFI contained
in this document was approved by management as of the date of this
document and was provided for the purpose of providing further
information about Spartan's proposed business activities in 2023.
Spartan and its management believe that FOFI has been prepared on a
reasonable basis, reflecting management's best estimates and
judgments, and represent, to the best of management's knowledge and
opinion, the Company's expected course of action. However, because
this information is highly subjective, it should not be relied on
as necessarily indicative of future results. Spartan disclaims any
intention or obligation to update or revise any FOFI contained in
this document, whether as a result of new information, future
events or otherwise, unless required pursuant to applicable law.
Readers are cautioned that the FOFI contained in this document
should not be used for purposes other than for which it is
disclosed herein. Changes in forecast commodity prices, differences
in the timing of capital expenditures, and variances in average
production estimates can have a significant impact on the key
performance measures included in Spartan's guidance. The Company's
actual results may differ materially from these estimates.
Abbreviations
A&D
|
acquisitions and
dispositions
|
AECO
|
Alberta Energy Company
"C" Meter Station of the NOVA Pipeline System
|
AFF
|
Adjusted Funds
Flow
|
AIF
|
refers to the Company's
Annual Information Form dated March 31, 2023
|
bbl
|
barrel
|
bbls/d
|
barrels per
day
|
BOE
|
barrels of oil
equivalent
|
BOE/d
|
barrels of oil
equivalent per day
|
CA$
|
Canadian
Dollars
|
COVID-19
|
refers to the outbreak
of the novel coronavirus, a public health crisis
|
ESG
|
Environment, Social and
Governance
|
G&A
|
general and
administrative expenses
|
GJ
|
gigajoule
|
mcf
|
one thousand cubic
feet
|
mmbtu
|
one million British
thermal units
|
mmcf
|
one million cubic
feet
|
mcf/d
|
one thousand cubic feet
per day
|
mmcf/d
|
one million cubic feet
per day
|
MM
|
millions
|
NI 51-101
|
National Instrument
51-101 – Standards of Disclosure for Oil and Gas
Activities
|
NGL(s)
|
natural gas
liquids
|
NYMEX
|
New York Mercantile
Exchange, with reference to the U.S. dollar "Henry Hub" natural
gas
price index
|
TSX
|
Toronto Stock
Exchange
|
US$
|
United States
dollar
|
WTI
|
West Texas
Intermediate, the reference price paid in U.S. dollars at Cushing,
Oklahoma
for crude oil of standard grade
|
SOURCE Spartan Delta Corp.