CALGARY,
AB, August 10, 2023 /CNW/ - Tenaz Energy Corp.
("Tenaz", "We", "Our", "Us" or the "Company") (TSX: TNZ) is pleased
to announce its financial and operating results for the three and
six months ended June 30, 2023 and
provide a resources summary with an effective date of July 1, 2023 of its independent resources report
on the resource potential of our Dutch North Sea ("DNS") assets
(the "Resources Report"), prepared by McDaniel and Associates
Consultants Ltd. ("McDaniel").
The unaudited interim condensed consolidated financial
statements and related management's discussion and analysis
("MD&A") are available on SEDAR+ at www.sedarplus.ca and
on Tenaz's website at www.tenazenergy.com. Select financial and
operating information for the three and six months ended
June 30, 2023 appear below and should
be read in conjunction with the related financial statements and
MD&A.
A webcast presentation to accompany this release is available on
Tenaz's website at www.tenazenergy.com.
HIGHLIGHTS
Second Quarter Operating and Financial Results
- In June, Tenaz announced the signing of an agreement to
purchase XTO Netherlands Ltd ("XTO"), increasing our position in
the Dutch North Sea ("DNS"). We closed the XTO acquisition in early
July 2023. Accordingly, we will
recognize the operating and financial results from the XTO assets
beginning with our Q3 2023 report. In June
2023, production from the XTO assets were approximately 475
boe/d(1), with total Netherlands production at approximately 1,250
boe/d.
The XTO acquisition also increased our ownership in the NGT
midstream assets to 21.4%, making Tenaz the second-largest
shareholder in NGT. We consider the NGT infrastructure as integral
for Netherlands energy security
and the transition to cleaner energy in Europe.
- Production volumes averaged 1,903 boe/d in Q2 2023, 19% lower
than Q1 2023 and 70% higher than Q2 2022. Production was lower
compared to Q1 2023 due to facility turnarounds in both
Canada and Netherlands. Production was higher than Q2
2022 due to the acquisition of a private company with Netherlands assets at the end of 2022 and
continued organic growth in our Leduc-Woodbend field in
Canada. Production acquired from
XTO was not included in Q2 2023 results, with closing occurring
after the end of the quarter.
Production volumes averaged 2,119 boe/d in first half of 2023,
100% higher than the first six months of 2022. Production was
higher due to the acquisition of Netherlands assets at the end of 2022 and
development activity in Canada.
- Funds flow from operations ("FFO")(2) for the second
quarter was $3.4 million, 54% lower
than Q1 2023 and 60% higher than Q2 2022. Lower
quarter-over-quarter FFO resulted from lower production and higher
expenses due to facility turnarounds, coupled with lower prices for
TTF natural gas(3).
FFO for the six months ended June 30,
2023 was $10.6 million, 244%
higher than in the comparable 2022 period. Higher 2023 FFO
primarily resulted from contributions from the new Netherlands assets.
- Free cash flow(2) in the first half of 2023 was
$4.0 million, compared to negative
free cash flow of $1.1 million in the
first six months of 2022, with improved contributions from both our
Netherlands and Canadian
assets.
- Net income for Q2 2023 was a loss of $0.8 million, as compared to profit of
$2.9 million in Q1 2023 and profit of
$0.8 million in Q2 2022. Lower net
income resulted from lower production and higher expenses due to
turnarounds in both Canada and
Netherlands, as well as
transaction costs for closed and prospective M&A activities.
First half 2023 net income of $2.1
million was lower than net income of $4.3 million in the first half of 2022, primarily
because a $4.2 million impairment
reversal was recorded in Q1 2022.
- We ended the quarter with positive adjusted working capital
(net debt)(2) of $17.1
million, an increase of $3.1
million over year-end 2022 as a result of the free cash flow
generated in the first six months of 2023. Subsequent to the end of
the quarter, as a part of the XTO acquisition, we acquired positive
adjusted working capital of $46.7
million (subject to post-closing adjustments).
- Our Normal Course Issuer Bid ("NCIB") retired 716 thousand
common shares (2.5% of basic common shares) at an average cost of
$2.25 per share during the first six
months of 2023. As of the end of July
2023, we have retired 1.22 million common shares (4.3% of
basic common shares) at an average cost of $2.07 per share. During Q3 2023, we intend to
apply for the renewal of our NCIB program for an additional
year.
Budget and Outlook
- Capital expenditures(2) during the second quarter
totalled approximately $6.0 million,
as Canadian drilling was initiated ahead of schedule. First half
2023 capital expenditures totalled $6.7
million. Annual guidance for capital expenditures remains
unchanged at $20 to $24 million.
Our planned 2023 Canadian development program is underway with four
gross (3.35 net) wells now drilled and completions in progress. The
four wells are expected to be tied-in at the end of Q3 2023.
- Production in the second half of 2023 is expected to increase
as both Canada and the Netherlands are off turnarounds, XTO
volumes are recognized, and the new Leduc-Woodbend wells are
expected to come online at the end of Q3 2023.
Annual production guidance, as updated following the XTO
acquisition, is unchanged at 2,300 to 2,500 boe/d.
Netherlands Resources
- We engaged McDaniel to independently evaluate and prepare a
report on the resource potential of our DNS assets. The Resource
Report has an effective date of July 1,
2023 and was prepared in accordance with National Instrument
51-101 Standards of Disclosure for Oil and Gas Activities
("NI 51-101") and uses the resources and reserves definitions,
standards and procedures set forth in the Canadian Oil and Gas
Evaluation Handbook ("COGEH"). The Resource Report includes
contingent and prospective resources attributable to the
acquisitions of the Netherlands
offshore assets completed on December 20,
2022 and the recent acquisition of XTO completed on
July 3, 2023.
- The unrisked low, best, and high estimates for Tenaz's share of
contingent resources are 2.4, 4.3, and 6.9 million boe ("mmboe")
respectively, with a risked mean of 4.5 mmboe. McDaniel conducted
an economic analysis of the best estimate case for the contingent
resources using the three consultant average forecast prices and
costs as of July 1, 2023. The
Resource Report indicates after-tax net present values discounted
at 10% for the best estimate contingent resources (2C) of
$86.0 million (€58.5
million)(4).
- The unrisked low, best, and high estimates for Tenaz's share of
prospective resources are 8.9, 19.8, and 48.5 mmboe respectively,
with a risked mean of 10.2 mmboe after applying chance of discovery
on a prospect-by-prospect basis.
|
(1)
|
The term barrels of oil
equivalent ("boe") may be misleading, particularly if used in
isolation. Per boe amounts have been calculated by using the
conversion ratio of six thousand cubic feet (6 Mcf) of natural gas
to one barrel (1 bbl) of crude oil. Refer to "Barrels of Oil
Equivalent" section included in the "Advisories" section of this
press release.
|
|
(2)
|
This is a non-GAAP and
other financial measure. Refer to "Non-GAAP and Other Financial
Measures" included in the "Advisories" section of this press
release.
|
|
(3)
|
Dutch TTF Gas is a
leading European benchmark price as the volumes traded represent
more than 14 times the amount of gas used by the Netherlands for
domestic purposes.
|
|
(4)
|
Canadian dollar
equivalent calculated using an exchange rate of 1.47 Canadian
dollars per euro.
|
FINANCIAL AND OPERATIONAL SUMMARY
|
Three months
ended
|
|
Six months
ended
|
|
($000
CAD, except per share and per boe
amounts)
|
Jun
30,
2023
|
Mar 31,
2023
|
Jun 30,
2022
|
Jun 30,
2023
|
Jun 30,
2022
|
|
FINANCIAL
|
|
|
|
|
|
|
Petroleum and natural
gas sales
|
10,614
|
17,926
|
9,344
|
28,540
|
15,545
|
|
Cash flow from
operating activities
|
957
|
5,117
|
1,936
|
6,074
|
3,094
|
|
Funds flow from
operations(1)
|
3,361
|
7,274
|
2,104
|
10,635
|
3,096
|
|
Per share –
basic(1)(2)
|
0.12
|
0.26
|
0.07
|
0.38
|
0.11
|
|
Per share –
diluted(1)
|
0.12
|
0.25
|
0.07
|
0.37
|
0.11
|
|
Net income
(loss)
|
(757)
|
2,882
|
769
|
2,125
|
4,266
|
|
Per share – basic
|
(0.03)
|
0.10
|
0.03
|
0.08
|
0.15
|
|
Per share –
diluted
|
(0.03)
|
0.10
|
0.03
|
0.07
|
0.15
|
|
Capital
expenditures(1)
|
5,967
|
683
|
3,512
|
6,650
|
4,231
|
|
Adjusted working
capital (net debt)(1)
|
17,094
|
18,763
|
19,431
|
17,094
|
19,431
|
|
Common shares
outstanding (000)
|
|
|
|
|
|
|
End of period –
basic
|
27,378
|
27,733
|
28,548
|
27,378
|
28,548
|
|
Weighted average for the
period – basic
|
27,555
|
27,917
|
28,481
|
27,735
|
28,469
|
|
Weighted average for the
period – diluted
|
28,308
|
28,545
|
29,241
|
28,427
|
28,914
|
|
|
|
|
|
|
|
OPERATING
|
|
|
|
|
|
|
Average daily
production
|
|
|
|
|
|
|
Heavy crude oil
(bbls/d)
|
711
|
937
|
636
|
824
|
576
|
|
Natural gas liquids
(bbls/d)
|
57
|
63
|
61
|
60
|
61
|
|
Natural gas
(mcf/d)
|
6,802
|
8,022
|
2,524
|
7,409
|
2,551
|
|
Total
(boe/d)(2)
|
1,903
|
2,337
|
1,117
|
2,119
|
1,062
|
|
|
|
|
|
|
|
($/boe)(2)
|
|
|
|
|
|
|
Petroleum and natural
gas sales
|
61.31
|
85.23
|
91.90
|
74.43
|
80.84
|
|
Royalties
|
(4.80)
|
(6.28)
|
(17.11)
|
(5.61)
|
(13.93)
|
|
Transportation
expenses
|
(3.66)
|
(3.41)
|
(3.12)
|
(3.52)
|
(2.39)
|
|
Operating
expenses
|
(28.25)
|
(24.69)
|
(14.47)
|
(26.30)
|
(17.56)
|
|
Midstream
income(1)
|
5.21
|
4.36
|
-
|
4.74
|
-
|
|
Operating
netback(1)
|
29.81
|
55.21
|
57.20
|
43.74
|
46.96
|
|
|
|
|
|
|
|
BENCHMARK COMMODITY
PRICES
|
|
|
|
|
|
|
WTI crude oil
(US$/bbl)
|
73.77
|
76.11
|
108.41
|
74.94
|
101.35
|
|
WCS
(CAD$/bbl)
|
78.93
|
74.52
|
122.08
|
74.06
|
111.56
|
|
AECO daily spot
(CAD$/mcf)
|
2.43
|
3.24
|
6.88
|
2.84
|
5.70
|
|
TTF
(CAD$/mcf)
|
15.24
|
22.78
|
40.26
|
18.99
|
40.96
|
|
(1)
|
This is a non-GAAP and
other financial measure. Refer to "Non-GAAP and Other Financial
Measures" included in the "Advisories" section of this press
release.
|
|
(2)
|
The term barrels of oil
equivalent ("boe") may be misleading, particularly if used in
isolation. Per boe amounts have been calculated by using the
conversion ratio of six thousand cubic feet (6 mcf) of natural gas
to one barrel (1 bbl) of crude oil. Refer to "Barrels of Oil
Equivalent" section included in the "Advisories" section of this
press release.
|
PRESIDENT'S MESSAGE
We are pleased to provide this update along with our results for
the second quarter of 2023. During Q2 2023, we advanced our
overseas acquisition strategy, conducted turnarounds on our
facilities in both Canada and
Netherlands, and initiated our
2023 development program in Canada. We also commissioned an independent
assessment by McDaniel of the resource potential in our
Netherlands assets.
As announced prior to the end of Q2 2023, we acquired additional
Netherlands assets from XTO with
an effective date of January 1, 2023,
closing this acquisition in early July
2023. As of our last data in June
2023, these assets are producing at the mid-point of their
expected range of 475 boe/d(1). In combination with our
earlier acquisition of a private company in December 2022, our total production rate in
Netherlands as of June was
approximately 1,250 boe/d. In the XTO purchase, we also increased
our shareholding in the NGT midstream system by 10.1%, bringing our
ownership in this high-reliability gathering business to 21.4%.
Production averaged 1,903 boe/d in Q2 2023, down 19% from our Q1
2023 levels. The main driver of the quarter-over-quarter decrease
was facility turnaround work conducted in both Canada and Netherlands, during which time production was
idled. The operator of our Dutch North Sea assets completed its
annual maintenance and integrity management campaign, resulting in
26 days of downtime during April and May. Following the shut-down,
production has been delivering on the prior expectations for these
predictable reservoirs. The shutdown was timed to coincide with
seasonally low demand for European natural gas. In Canada, we also conducted turnarounds at our
two processing facilities, including an expansion of gas
compression capacity at one facility to accommodate future
production increases.
Despite the turnarounds, Q2 2023 production was still 70% higher
than in Q2 2022, due to successful drilling in Canada in the second half of 2022 and the
first Netherlands acquisition.
First half 2023 production was 2,119 boe/d, up 100% from the first
half of 2022, including an organic increase of 36% in Canada.
We generated FFO(2) of $3.4
million in Q2 2023, 54% below Q1 2023, primarily due to
lower production as a result of the turnarounds. FFO for Q2 2023
was 60% higher than in Q2 2022, driven by higher production,
including the impact of the first Netherlands acquisition.
We were able to get an earlier start than expected on our four
gross (3.35 net) well drilling program at Leduc-Woodbend in
Canada, taking advantage of
availability of suitable drilling services and dry weather at the
beginning of June. As a result, capital expenditures(2)
("CAPEX") in Canada was
$4.2 million in Q2 2023, reflecting
drilling of the first two wells. Because of wet weather in early
July, our rig move to the next pad was delayed, and the program is
back on its original schedule to deliver production at the end of
Q3 2023. Netherlands CAPEX was $1.7
million in Q2 2023, roughly evenly split between Exploration
& Development ("E&D") investment for facilities and
technical work by the operator on the potential for Carbon Capture
& Storage ("CCS").
Free cash flow(2) in the first half of 2023 was
$4.0 million, compared to negative
free cash flow of $1.1 million in the
first six months of 2022, with improved contributions from both our
Netherlands and Canadian
assets.
Looking forward, our production guidance for full-year 2023 for
both assets remains as previously announced, with Canada at 1,450 to 1,550 boe/d and
Netherlands at 850 to 950 boe/d,
for a corporate total of 2,300 to 2,500 boe/d. Capital guidance of
$20 to $24
million also remains unchanged.
With respect to liquidity, positive adjusted working capital
(net debt)(2) was $17.1
million as at June 30, 2023.
This working capital balance was prior to the addition of
approximately $46.7 million through
the XTO acquisition. In addition, we remain undrawn on our
$10 million bank facility.
Our Normal Course Issuer Bid ("NCIB") program retired 716
thousand common shares (2.5% of basic common shares) at an average
cost of $2.25 per share during the
first six months of 2023. As of the end of July 2023, we have retired 1.22 million common
shares (4.3% of basic common shares) at an average cost of
$2.07 per share. During Q3 2023, we
plan to apply for the renewal of our NCIB program for an additional
year.
Due to warm weather last winter and increased storage levels
this summer, pricing for European natural gas (as referenced by the
TTF index) was lower in Q2 2023. Despite higher storage levels,
there is uncertainty about the ability to meet demand for a typical
winter in 2023-2024, which is likely to support prices and maintain
elevated volatility in the coming months. One of the main sources
of supply for Europe is now
imported LNG, and the competitive global landscape for LNG
supply creates risks in the near-to-medium term. In addition, there
is significant uncertainty regarding long-term supply replacement
for historical imports of Russian gas, and risk of interruption of
the remaining Russian deliveries into Europe. Consequently, forward TTF prices are
at a meaningful premium to the prompt price of $16.24 per mcf. The forward price for Q4 2023 is
$20.21 per mcf, with calendar 2024 at
$22.50(3). Our view is
that the presence of European natural gas in our product mix is
differentiating and advantageous to Tenaz.
Our other major product is Canadian oil, for which WTI is
currently priced at US$83 per bbl
with WCS differentials contracting to approximately US$16 per bbl. Our crude typically sells at the
WCS price without the addition of diluent. While Canadian natural
gas is a less significant product in our mix, a meaningful portion
of our AECO gas exposure is fixed for summer 2023 at prices above
current market levels.
We view our recently-closed acquisitions as examples of our
approach to finding real value in the overseas M&A market for
producing properties. These transactions reflect our philosophy of
issuing as little equity as possible, while still improving our
balance sheet and liquidity. Our team of technical and finance
professionals is dedicated to securing additional value-adding
acquisitions and is fully aligned with the rest of our shareholder
group in pursuit of our shared success. As we have previously
stated, we can make no guarantees regarding the certainty or timing
of the next transaction, but we are optimistic about bringing
additional assets into the portfolio in the future. When we do so,
we are confident that our acquisition investment will be consistent
with our stated financial and strategic goals. We appreciate the
support of our shareholders as we pursue realization of the Tenaz
vision.
/s/ Anthony Marino
President and Chief Executive Officer
August 10, 2023
|
(1)
|
The term barrels of oil
equivalent ("boe") may be misleading, particularly if used in
isolation. Per boe amounts have been calculated by using the
conversion ratio of six thousand cubic feet (6 Mcf) of natural gas
to one barrel (1 bbl) of crude oil. Refer to "Barrels of Oil
Equivalent" section included in the "Advisories" section of this
press release.
|
|
(2)
|
This is a non-GAAP and
other financial measure. Refer to "Non-GAAP and Other Financial
Measures" included in the "Advisories" section of this press
release.
|
|
(3)
|
As of close of markets
on August 10, 2023.
|
NETHERLANDS RESOURCE
REPORT
Further to the integration of assets we have acquired in the
DNS, we engaged McDaniel to independently assess the resource
potential of the assets beyond the reserve volumes that we
currently recognize. The Resource Report showed the potential on
our licenses with undeveloped oil and gas discoveries that qualify
as contingent resources and exploration upside in the form of
prospective resources.
The Resource Report has an effective date of July 1, 2023 and was prepared in accordance with
National Instrument 51-101 Standards of Disclosure for Oil and
Gas Activities ("NI 51-101") and uses the resources and
reserves definitions, standards and procedures set forth in the
Canadian Oil and Gas Evaluation Handbook ("COGEH"). The Resource
Report includes contingent and prospective resources attributable
to the acquisitions of the
Netherlands offshore assets completed on December 20, 2022 and on July 3, 2023.
Contingent resources reflect the undeveloped Rembrandt and
Vermeer oil discoveries operated by Wintershall Noordzee B.V.
("Wintershall") and two undeveloped natural gas discoveries on the
Neptune Energy Netherlands B.V. ("Neptune") operated licenses. The
unrisked low, best, and high estimates for Tenaz's share of
contingent resources are 2.4, 4.3, and 6.9 mmboe respectively, with
a risked mean of 4.5 mmboe. McDaniel conducted an economic analysis
of the best estimate case for the contingent resources using the
average of the price decks of three independent engineering firms,
GLJ Ltd., Sproule Associates Limited and McDaniel & Associates
Consultants Ltd. (the "Consultant Average Price Forecast") at
July 1, 2023. The Resource Report
indicates after-tax net present values discounted at 10% for the
best estimate contingent resources (2C) of $86.0 million (€58.5 million). Contingent volumes
and economic estimates do not reflect any scaling factor for chance
of development.
Prospective resources reflect 21 exploration prospects on our
licenses that are operated by Wintershall and Neptune. The unrisked
low, best, and high estimates for Tenaz's share of prospective
resources are 8.9, 19.8, and 48.5 mmboe respectively, with a risked
mean of 10.2 mmboe after applying chance of discovery on a
prospect-by-prospect basis. Prospective volumes do not reflect any
scaling factor for chance of development.
In our current position as non-operator, we are unable to
guarantee that any of these resource projects will be pursued.
Nonetheless, the Resource Report illustrates that there is the
potential for investment activity on these blocks beyond the
project slate included in our reserve report as of December 31, 2022.
The tables below summarize the volumes and economic values in
the Resource Report.
Netherlands Summary of Prospective Resources Estimates as at
July 1, 2023
|
|
|
Company Gross
Values(1)(2)
Prospective
Resources - Unrisked(3)(7)
|
Risked
Resources
Mean(4)
(mboe)
|
|
Prospect
|
Type
|
Working
Interest
|
Low
(P90)(10)
(mboe)
|
P50(10)
(mboe)
|
Mean(10)
(mboe)
|
High
(P10)(10)
(mboe)
|
|
|
|
|
|
|
|
|
|
F10 Block
|
Crude
Oil(9)
|
5.00 %
|
1,425
|
4,963
|
8,027
|
18,028
|
1,814
|
|
F10 Block
|
Natural Gas
|
5.00 %
|
1,138
|
3,033
|
4,229
|
8,723
|
579
|
|
F17a Block
|
Natural Gas
|
5.00 %
|
373
|
675
|
752
|
1,232
|
379
|
|
L10 Block
|
Natural Gas
|
21.43 %
|
2,809
|
5,428
|
6,168
|
10,461
|
4,158
|
|
L11a Block
|
Natural Gas
|
21.43 %
|
1,309
|
2,334
|
2,563
|
4,120
|
1,845
|
|
N7b Block
|
Natural Gas
|
17.86 %
|
1,849
|
3,335
|
3,680
|
5,903
|
1,456
|
|
Total(5)(6)(7)(8)
|
|
|
|
8,902
|
19,770
|
25,418
|
48,467
|
10,230
|
|
(1)
|
Gross values are
Company working interest resources.
|
|
(2)
|
Based on the July 1,
2023 Consultant Average Price Forecast.
|
|
(3)
|
There is no
certainty that any portion of the prospective resources will be
discovered. If discovered, there is no certainty that it will be
economically viable or technically feasible to produce any portion
of the resources.
|
|
(4)
|
These are partially
risked prospective resources that take into account the chance of
discovery but not the chance which is defined as the probability of
a project being commercially viable. Quantifying the chance
of development requires consideration of both economic
contingencies and other contingencies such as legal, regulatory,
market access, political, social license, internal and external
approvals and commitment to project finance and development timing.
As many of these factors are extremely difficult to quantify, the
chance of development is uncertain and must be used with caution.
The chance of development was estimated to be 60 percent for crude
oil and 75 percent for natural gas.
Chance of Discovery
for the prospects in each block is as follows:
|
|
F10 Block (Crude
Oil)(9) CK1 West (29%), CK2 (20%), CK3 (20%)
|
|
F10 Block (Natural Gas)
MB1 (15%), MB2 (15%), MB3 (11%)
|
|
F17a Block (Natural
Gas) CK2 (50%)
|
|
L10 Block (Natural Gas)
Limonite (72%), Topaz (64%), Malachite (63%), Sapphire (64%),
L10-21 (72%)
|
|
L11a Block (Natural
Gas) Fresnel (72%), Obsidian (72%), L11-2 (2%)
|
|
N7b Block (Natural Gas)
Snapper (65%), Sole (57%), Crab East (49%), Crab West (49%), Crab
East Upper Sloch (29%), Crab West Upper Sloch
(29%)
|
|
(5)
|
Total based on the
arithmetic aggregation of the prospects. Numbers may not add due to
rounding.
|
|
(6)
|
The unrisked total
is not representative of the portfolio unrisked total and is
provided to give an indication of the resources range assuming all
the prospects are successful.
|
|
(7)
|
Volumes listed are
full life volumes, prior to any cutoffs due to
economics.
|
|
(8)
|
Based on a Mcf to
boe conversion of 6 to 1. A boe conversion of 6 to 1 is based on an
energy equivalency conversion method primarily applicable at
the burner tip and does not represent a value equivalency at the
wellhead.
|
|
(9)
|
Crude oil prospects
with expected quality consistent with prior
discoveries.
|
|
(10)
|
Refer to
"Information Regarding Disclosure on Crude Oil and Natural Gas
Resources" section included in the "Advisories" section
of this press release.
|
Netherlands Summary of Contingent Resources Estimates as at
July 1, 2023
|
|
|
Company Gross
Values(1)(2)
Contingent Resources
- Unrisked(3)(4)(6)
|
Chance
of
Discovery(5)
|
Risked
Resources
Mean
Pre-COD(5)
(mbbl)
|
|
Crude
Oil(8)
Property
|
|
Working
Interest
|
1C(10)
(mbbl)
|
2C(10)
(mbbl)
|
3C(10)
(mbbl)
|
|
|
|
|
|
|
|
|
|
Vermeer
|
|
5.00 %
|
323
|
982
|
1,902
|
100 %
|
1,060
|
|
Rembrandt
|
|
5.00 %
|
1,026
|
1,482
|
1,986
|
100 %
|
1,496
|
|
L11-07
|
|
21.43 %
|
-
|
-
|
-
|
100 %
|
-
|
|
L10-19
|
|
21.43 %
|
-
|
-
|
-
|
100 %
|
-
|
|
Total Crude
Oil(9)
|
|
1,349
|
2,464
|
3,888
|
|
2,557
|
|
|
|
Company Gross
Values(1)(2)
Contingent Resources
- Unrisked(3)(4)(6)
|
Chance of
Discovery(5)
|
Risked
Resources Mean
Pre-COD(5)
(mmcf)
|
|
Natural
Gas
Property
|
|
Working
Interest
|
1C(10)
(mmcf)
|
2C(10)
(mmcf)
|
3C(10)
(mmcf)
|
|
|
|
|
|
|
|
|
|
Vermeer
|
|
5.00 %
|
-
|
-
|
-
|
100 %
|
-
|
|
Rembrandt
|
|
5.00 %
|
-
|
-
|
-
|
100 %
|
-
|
|
L11-07
|
|
21.43 %
|
3,433
|
4,905
|
6,635
|
100 %
|
4,982
|
|
L10-19
|
|
21.43 %
|
3,070
|
6,239
|
11,635
|
100 %
|
6,907
|
|
Total Natural
Gas(9)
|
|
6,502
|
11,144
|
18,270
|
|
11,889
|
|
|
|
Company Gross
Values(1)(2)
Contingent Resources
- Unrisked(3)(4)(6)
|
Chance
of
Discovery(5)
|
Risked
Resources
Mean
Pre-COD(5)
(mboe)
|
|
Total Oil
Equivalent(5)
|
|
Working
Interest
|
1C(10)
(mboe)
|
2C(10)
(mboe)
|
3C(10)
(mboe)
|
|
|
|
|
|
|
|
|
|
Vermeer
|
|
5.00 %
|
323
|
982
|
1,902
|
100 %
|
1,060
|
|
Rembrandt
|
|
5.00 %
|
1,026
|
1,482
|
1,986
|
100 %
|
1,496
|
|
L11-07
|
|
21.43 %
|
572
|
817
|
1,106
|
100 %
|
830
|
|
L10-19
|
|
21.43 %
|
512
|
1,040
|
1,939
|
100 %
|
1,151
|
|
Total Oil
Equivalent(9)
|
|
2,432
|
4,322
|
6,933
|
|
4,538
|
|
(1)
|
Gross values are
Company working interest resources.
|
|
(2)
|
Based on the July 1,
2023 Consultant Average Price Forecast.
|
|
(3)
|
There is no
certainty that it will be commercially viable to produce any
portion of the resources.
|
|
(4)
|
Company gross
contingent resources are based on the working interest share of the
property gross resources.
|
|
(5)
|
These are unrisked
contingent resources that do not take into account the chance of
development (COD), which is defined as the probability of a project
being commercially viable. Quantifying the chance of development
requires consideration of both economic contingencies and other
contingencies such as legal, regulatory, market access, political,
social license, internal and external approvals and commitment to
project finance and development timing. As many of these factors
are extremely difficult to quantify, the chance of development is
uncertain and must be used with caution. The chance of development
was estimated to be 60 percent for crude oil and 75 percent for
natural gas.
|
|
(6)
|
These are economic
contingent resources and are sub-classified in terms of maturity as
development on hold.
|
|
(7)
|
Based on a Mcf to
BOE conversion of 6 to 1. A BOE conversion of 6 to 1 is based on an
energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the
wellhead.
|
|
(8)
|
Vermeer crude oil is
30o API and Rembrandt crude oil is 23o
API.
|
|
(9)
|
Numbers may not add
up due to rounding.
|
|
(10)
|
Denotes Contingent -
Low estimate ("1C"), Contingent - Best estimate ("2C") and
Contingent – High estimate ("3C"). Also refer to "Information
Regarding Disclosure on Crude Oil and Natural Gas Resources"
section included in the "Advisories" section of this
press release.
|
Netherlands Summary of Net Present Values as at July 1, 2023
|
Unrisked Net Present
Value Discounted at(1)(2)
|
|
Best Estimate
Contingent (2C) Resources Total(3)(4)
|
0%
(€000)
|
5%
(€000)
|
8%
(€000)
|
10%
(€000)
|
15%
(€000)
|
|
|
|
|
|
|
|
Before Tax Net
Present Values
|
|
|
|
|
|
|
L11-07 & L10-19
natural gas
|
75,992
|
56,028
|
46,982
|
41,882
|
31,660
|
|
Vermeer & Rembrandt
crude oil(5)
|
115,784
|
62,925
|
44,177
|
34,884
|
18,829
|
|
Best Estimate
Contingent Resources Total
|
191,776
|
118,954
|
91,159
|
76,765
|
50,489
|
|
|
|
|
|
|
|
After Tax Net
Present Values
|
|
|
|
|
|
|
Best Estimate
Contingent Resources Total
|
148,328
|
91,315
|
69,696
|
58,505
|
38,022
|
|
(1)
|
Based on the July 1,
2023 Consultant Average Price Forecast.
|
|
(2)
|
Numbers may not add
due to rounding.
|
|
(3)
|
There is no
certainty that it will be commercially viable to produce any
portion of the resources.
|
|
(4)
|
These are unrisked
values that do not take into account the chance of development,
which is defined as the probability of a project being commercially
viable. Quantifying the chance of development requires
consideration of both economic contingencies and other
contingencies such as legal, regulatory, market access, political,
social license, internal and external approvals and commitment to
project finance and development timing. As many of these factors
are extremely difficult to quantify, the chance of development is
uncertain and must be used with caution. The chance of development
was estimated to be 60 percent for crude oil and 75 percent
for natural gas.
|
|
(5)
|
Vermeer crude oil is
30o API and Rembrandt crude oil is 23o
API.
|
About Tenaz Energy Corp.
Tenaz is an energy company focused on the acquisition and
sustainable development of international oil and gas assets capable
of returning free cash flow to shareholders. Tenaz has domestic
operations in Canada along with
offshore natural gas assets in the
Netherlands. The domestic operations consist of a
semi-conventional oil project in the Rex member of the Upper
Mannville group at Leduc-Woodbend in central Alberta. The
Netherlands natural gas assets are located in the Dutch
sector of the North Sea.
Additional information regarding Tenaz is available on SEDAR+
and its website at www.tenazenergy.com. Further information on NGT
can be found at https://noordgastransport.nl. Tenaz's Common Shares
are listed for trading on the Toronto Stock Exchange under the
symbol "TNZ".
ADVISORIES
Non‐GAAP and Other Financial
Measures
This press release contains references to measures used in
the oil and natural gas industry such as "funds flow from
operations", "funds flow from operations per share", "funds flow
from operations per boe", "adjusted working capital (net debt)",
"free cash flow", "midstream income" and "operating netback". The
data presented in this press release is intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with International Financial Reporting Standards ("IFRS") as issued
by the International Accounting Standards Board and sometimes
referred to in this press release as Generally Accepted Accounting
Principles ("GAAP"). These reported non-GAAP measures and their
underlying calculations are not necessarily comparable or
calculated in an identical manner to a similarly titled measure of
other companies where similar terminology is used. Where these
measures are used, they should be given careful consideration by
the reader.
Funds flow from operations ("FFO")
Tenaz considers funds flow from operations to be a key
measure of performance as it demonstrates the Company's ability to
generate the necessary funds for sustaining capital, future growth
through capital investment, and settling liabilities. Funds flow
from operations is calculated as cash flow from operating
activities plus income from associate and before changes in
non-cash operating working capital and decommissioning liabilities
settled. Funds flow from operations is not intended to represent
cash flows from operating activities calculated in accordance with
IFRS. A summary of the reconciliation of cash flow from operating
activities to funds flow from operations, is set forth
below:
|
($000)
|
Q2
2023
|
Q1
2023
|
Q2
2022
|
YTD
2023
|
YTD
2022
|
|
Cash flow from
operating activities
|
957
|
5,117
|
1,936
|
6,074
|
3,094
|
|
Change in non-cash
operating working capital
|
1,294
|
907
|
168
|
2,201
|
2
|
|
Decommissioning
liabilities settled
|
209
|
333
|
-
|
542
|
-
|
|
Income from
associate
|
901
|
917
|
-
|
1,818
|
-
|
|
Funds flow from
operations
|
3,361
|
7,274
|
2,104
|
10,635
|
3,096
|
Funds flow from operations per share is calculated using
basic and diluted weighted average number of shares outstanding in
the period.
Funds flow from operations per boe is calculated as funds
flow from operations divided by total production sold in the
period.
Capital Expenditures
Tenaz considers capital expenditures to be a useful measure
of the Company's investment in its existing asset base calculated
as the sum of drilling and development costs and exploration and
evaluation costs. Exploration and evaluation asset additions (being
exploration and evaluation costs) and property, plant and equipment
additions (being drilling and development costs) from the
consolidated statements of cash flows that is most directly
comparable to cash flows used in investing activities. The
reconciliation to primary financial statement measures is set forth
below:
|
($000)
|
Q2
2023
|
Q1
2023
|
Q2
2022
|
YTD
2023
|
YTD
2022
|
|
Exploration and
evaluation
|
880
|
36
|
-
|
916
|
-
|
|
Property, plant and
equipment
|
5,087
|
647
|
3,512
|
5,734
|
4,231
|
|
Capital
expenditures
|
5,967
|
683
|
3,512
|
6,650
|
4,231
|
Free Cash Flow ("FCF")
Tenaz considers free cash flow to be a key measure of
performance as it demonstrates the Company's excess funds generated
after capital expenditures for potential shareholder returns,
acquisitions, or growth in available liquidity. FCF is a non-GAAP
financial measure most directly comparable to cash flows used in
investing activities and is comprised of funds flow from operations
less capital expenditures. A summary of the reconciliation of the
measure, is set forth below:
|
($000)
|
Q2
2023
|
Q1
2023
|
Q2
2022
|
YTD
2023
|
YTD
2022
|
|
Funds flow from
operations
|
3,361
|
7,274
|
2,104
|
10,635
|
3,096
|
|
Less: Capital
expenditures
|
(5,967)
|
(683)
|
(3,512)
|
(6,650)
|
(4,231)
|
|
Free cash
flow
|
(2,606)
|
6,591
|
(1,408)
|
3,985
|
(1,135)
|
Midstream Income
Tenaz considers midstream income an integral part of
determining operating netback. Operating netbacks assists
management and investors with evaluating operating performance.
Tenaz's midstream income consists of the income from its associate,
Noordtgastransport B.V. Under IFRS, investments in associates are
accounted for using the equity method of accounting. Income from
associate is Tenaz's share of the investee's net income and
comprehensive income. Also see "Operating Netback" section
below.
Adjusted working capital (net debt)
Management views adjusted working capital (net debt) as a key
industry benchmark and measure to assess the Company's financial
position and liquidity. Adjusted working capital (net debt) is
calculated as current assets less current liabilities, excluding
the fair value of derivative instruments. Tenaz's adjusted working
capital (net debt) as at June 30,
2023 and December 31, 2022 is
summarized as follows:
|
($000)
|
June
30
2023
|
December 31
2022
|
|
Current
assets
|
46,967
|
72,317
|
|
Current
liabilities
|
(30,162)
|
(58,749)
|
|
Net current
assets
|
16,805
|
13,568
|
|
Exclude fair value of
derivative instruments
|
289
|
476
|
|
Adjusted working
capital (net debt)(1)
|
17,094
|
14,044
|
Operating Netback
Tenaz calculates operating netback on a dollar and per boe
basis, as petroleum and natural gas sales less royalties, operating
costs and transportation costs. Operating netback is a key industry
benchmark and a measure of performance for Tenaz that provides
investors with information that is commonly used by other crude oil
and natural gas producers. The measurement on a per boe basis
assists management and investors with evaluating operating
performance on a comparable basis. Tenaz's operating netback is
disclosed in the "Financial and Operational Summary" section of
this press release.
Information Regarding Disclosure on Crude Oil and Natural
Gas Resources
The resources estimates in this press release are derived
from a resource report of Tenaz's Dutch North Sea assets with an
effective date of July 1, 2023
prepared by McDaniel and Associates Consultants Ltd., an
independent qualified reserves evaluator, in accordance with the
Canadian Oil and Gas Evaluation Handbook and National Instrument
51-101 Standards of Disclosure for Oil and Gas Activities. The
following provides the definitions of the various resource
categories used in this press release as set out in COGEH.
"Contingent resource" and "prospective resource" are not, and
should not be confused with, petroleum and natural gas reserves.
Contingent resource is defined in the COGEH as those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology
or technology under development, but which are not currently
considered to be commercially recoverable due to one or more
contingencies.
The primary contingencies which currently prevent the
classification of the contingent resource as reserves include but
are not limited to: preparation of firm development plans,
including determination of the specific scope and timing of the
project; project sanction; access to capital markets; stakeholder
and regulatory approvals; access to required services and field
development infrastructure; crude oil and natural gas prices
internationally in jurisdictions in which Tenaz operates;
demonstration of economic viability; future drilling program and
testing results; further reservoir delineation and studies;
facility design work; corporate commitment; limitations to
development based on adverse topography or other surface
restrictions; and the uncertainty regarding marketing and
transportation of petroleum from development areas.
Prospective resources are defined in the COGEH as those
quantities of petroleum estimated, as of a given date, to be
potentially recoverable from unknown accumulations by application
of future development projects. Prospective resources have both an
associated chance of discovery and a chance of development
(COD).
Prospective resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development
projects. Prospective resources have two risk components, the
chance of discovery and the chance of development. There is no
certainty that the prospective resources will be discovered. If
discovered, there is no certainty that it will be commercially
viable to produce any portion of the prospective resources.
Application of any geological and economic chance factor does not
equate prospective resources to contingent resources or reserves.
Low estimate is considered to be a conservative estimate of the
quantity that will actually be recovered. It is likely that the
actual remaining quantities recovered will exceed the low estimate.
If probabilistic methods are used, there should be at least a 90
percent probability (P90) that the quantities actually recovered
will equal or exceed the low estimate. Best estimate is considered
to be the best estimate of the quantity that will actually be
recovered. It is equally likely that the actual remaining
quantities recovered will be greater or less than the best
estimate. If probabilistic methods are used, there should be at
least a 50 percent probability (P50) that the quantities actually
recovered will equal or exceed the best estimate. High estimate is
considered to be an optimistic estimate of the quantity that will
actually be recovered. It is unlikely that the actual remaining
quantities recovered will exceed the high estimate. If
probabilistic methods are used, there should be at least a 10
percent probability (P10) that the quantities actually recovered
will equal or exceed the high estimate. Mean estimate is the
arithmetic average from the probabilistic assessment. Although the
Company has identified prospective resources, there are numerous
uncertainties inherent in estimating oil and gas resources,
including many factors beyond the Company's control and no
assurance can be given that the indicated level of resources or
recovery of hydrocarbons will be realized. In general, estimates of
recoverable resources are based upon a number of factors and
assumptions made as of the date on which the resource estimates
were determined, such as geological and engineering estimates which
have inherent uncertainties and the assumed effects of regulation
by governmental agencies and estimates of future commodity prices
and operating costs, all of which may vary considerably from actual
results. There are several significant negative factors relating to
the prospective resource estimate which include (i) structural
events that are well defined seismically and are low risk, however,
reservoir quality, seal, hydrocarbon migration and associated
hydrocarbon column estimates are more at risk than the former, (ii)
well costs are very high due to the exploratory nature of the
initial group of wells, (iii) due to limited infrastructure
proximate to the prospects, gas discoveries may be stranded for
some time until infrastructure is in place, which may take some
time due to the remoteness of the prospects and costs associated
with same, and (iv) other factors which are not within the control
of the Company.
There is no certainty that any portion of the prospective
resources will be discovered. There is no certainty that it will be
commercially viable to produce any portion of the contingent
resources or prospective resources or that Tenaz will produce any
portion of the volumes currently classified as contingent resources
or prospective resources. All contingent resources and prospective
resources evaluated by McDaniel were deemed economic at the
effective date of July 1, 2023. The
estimates of contingent resources and prospective resources involve
implied assessment, based on certain estimates and assumptions,
that the resources described exist in the quantities predicted or
estimated and that the resources can be profitably produced in the
future. The risked net present value of the future net revenue from
the contingent resources and prospective resources does not
represent the fair market value. Actual contingent resources and
prospective resources (and any volumes that may be reclassified as
reserves) and future production therefrom may be greater than or
less than the estimates provided herein.
The resource estimates are estimates only and there is no
guarantee that the estimated resources will be recovered.
Barrels of Oil Equivalent
The term barrels of oil equivalent ("boe") may be misleading,
particularly if used in isolation. Per boe amounts have been
calculated by using the conversion ratio of six thousand cubic feet
(6 mcf) of natural gas to one barrel (1 bbl) of crude oil. The boe
conversion ratio of 6 mcf to 1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency 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.
Forward‐looking Information
and Statements
This press release contains certain forward-looking
information and statements within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "budget", "forecast", "guidance", "continue",
"estimate", "objective", "ongoing", "may", "will", "project",
"should", "could", "believe", "plans", "potential", "intends",
"strategy" and similar expressions are intended to identify
forward-looking information or statements. In particular, but
without limiting the foregoing, this press release contains
forward-looking information and statements pertaining to: Tenaz's
capital plans, activities and budget for 2023, and our anticipated
operational and financial performance; expected well performance;
expected economies of scale; forecasted average production volumes
and capital expenditures for 2023; the ability to grow our assets
domestically and internationally; statements relating to a
potential CCS project; and the Company's strategy.
The forward-looking information and statements contained in
this press release reflect several material factors and
expectations and assumptions of the Company including, without
limitation: the continued performance of the Company's oil and gas
properties in a manner consistent with its past experiences; that
the Company will continue to conduct its operations in a manner
consistent with past operations; expectations regarding future
development; the general continuance of current industry
conditions; the continuance of existing (and in certain
circumstances, the implementation of proposed) tax, royalty and
regulatory regimes; expectations regarding future acquisition
opportunities; the accuracy of the estimates of the Company's
reserves volumes; certain commodity price, interest rate, inflation
and other cost assumptions; the continued availability of oilfield
services; and the continued availability of adequate debt and
equity financing and cash flow from operations to fund its planned
expenditures. The Company believes the material factors,
expectations and assumptions reflected in the forward-looking
information and statements are reasonable, but no assurance can be
given that these factors, expectations, and assumptions will prove
to be correct.
The forward-looking information and statements included in
this press release are not guarantees of future performance and
should not be unduly relied upon. Such information and statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward-looking information or statements
including, without limitation: changes in commodity prices; changes
in the demand for or supply of the Company's products;
unanticipated operating results or production declines; changes in
tax or environmental laws, royalty rates or other regulatory
matters; changes in development plans of the Company or by third
party operators of the Company's properties, increased debt levels
or debt service requirements; inaccurate estimation of the
Company's oil and gas reserve volumes; limited, unfavorable or a
lack of access to capital markets; increased costs; a lack of
adequate insurance coverage; the impact of competitors; and certain
other risks detailed from time to time in the Company's public
documents.
The forward-looking information and statements contained in
this press release speak only as of the date of this press release,
and the Company does not assume any obligation to publicly update
or revise them to reflect new events or circumstances, except as
may be required pursuant to applicable laws.
SOURCE Tenaz Energy Corp.
