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Calgary, Alberta – November 16, 2022 – Kiwetinohk Energy Corp. (TSX: KEC) today clarifies its current sales by providing updated corporate sales levels and fourth quarter 2022 guidance. The Company is also increasing its annual guidance for 2022 and providing an operational update on its new well performance, well costs and expected investment payouts on new well pads.
Sales averaged approximately 17,000 boe/d for the month of October. Total corporate sales are expected to average between approximately 26 – 27 thousand boe/d for each of November and December for an expected fourth quarter average of approximately 23 – 24 thousand boe/d. This is a 40 – 46% increase over third quarter sales volumes of 16,486 boe/d reported on November 10, 2022. The six new Simonette wells are now producing through permanent production facilities and have contributed to recent peak daily sales rates of approximately 30 thousand boe/d.
The four well 04-34 pad at Simonette has been producing at approximately 12,500 boe/d (~55% natural gas and ~45% condensate) and the two well 07-17 pad at North Simonette has been producing at approximately 3,100 boe/d (~25% natural gas and ~75% condensate). Strong initial performance of these wells may result in steep decline rates typical of prolific shale wells. The Company’s ultimate goal in modifying well designs is to achieve high initial productivity and larger recovery. Preliminary drilling, completion, equipment and tie-in (DCET) costs for the four well 04-34 pad are estimated at ~$70 million while the two well 07-17 pad are estimated at ~$27 million. The expected payout on these pads, based on current commodity pricing, is approximately six months for pad 04-34 and approximately eight months for pad 07-17. Management will be looking for additional DCET cost efficiencies going forward through improved execution and optimized well design.
With the addition of the new wells, the Simonette plants are operating near full capacity (including recycled gas lift volumes). This supports the Company’s announced expansion plans to increase Simonette processing capacity by approximately 40 MMcf/d for a cost of $45 – $55 million as part its 2023 capital program. The capacity additions are expected to be available by year-end 2023, supporting further production growth opportunities into 2024. In addition to the plant expansions, Kiwetinohk will electrify the 05-31 plant to reduce Scope 1 emissions and is advancing grid access for the 10-29 facility.
“We are pleased with the performance of these new wells located in some of the deepest, highest pressure and highest temperature areas of the Kaybob Duvernay. The new production adds to continued low-decline base performance,” said CEO Pat Carlson. “This production growth suggests good progress towards our mid-term goal of improved well economics and our 10-year strategic target of 300 MMcf/d of natural gas sales.”
Sales for the fourth quarter are expected to average approximately 23 – 24 thousand boe/d, resulting in 2022 annual sales average of 17.4 – 17.6 thousand boe/d.
The Upstream division capital spending guidance range for the year has been reduced by $10 million, or ~3.5%, to a range of $265 – $280 million. Increased production volumes directed toward owned infrastructure are expected to drive down operating costs during the quarter to $8.00 – $9.00/boe.
Kiwetinohk spud three additional wells on the 04-34 pad in late October and plans to spud two Placid Montney wells in early December. These five new wells are expected to come on production late in the first quarter or early in the second quarter of 2023.
|Q4 2022||Updated||Annual 2022|
|Q4 2022 & annual 2022||annual 2022|
|November 16,||November 10,|
|financial & operational guidance||November 16,|
|Sales volumes1||Mboe/d||23||– 24||17.4||– 17.6||16.0||– 18.0|
|Oil & liquids||Mbbl/d||11.0||– 11.5||8.2||– 8.3||8.0||– 8.8|
|Natural gas||MMcf/d||72||– 75||55||– 56||48||– 52|
|Sales volumes by market2||%||100%||100%||100%|
|Chicago||%||87%||– 92%||80%||– 85%||80%||– 85%|
|AECO||%||8% – 13%||15%||– 20%||15%||– 20%|
|Royalty rate||%||9% – 11%||10%||– 12%||10%||– 12%|
|Operating costs||$/boe||$8.00||– $9.00||$10.00||– $11.00||$10.00||– $11.00|
|Transportation||$/boe||$5.75||– $6.25||$5.50||– $6.00||$5.50||– $6.00|
|Corporate G&A expense3||$MM||$5||– $7||$18||– $20||$18||– $20|
|Capital||$MM||109||– 129||280||– 300||290||– 310|
|Upstream||$MM||103||– 118||265||– 280||275||– 290|
|DCET||$MM||66||– 76||200||– 210|
|Other||$MM||37||– 42||65||– 70|
|Green Energy||$MM||6-11||15||– 20||15||– 20|
|Drilling – Fox Creek||wells||5||13||13|
|2022 Adjusted Funds Flow from Operations4,5|
|November 14 Strip||$MM||$88 – $102||$250||– $264||$225||– $240|
|2022 Net debt to Adjusted Funds Flow from Operations4,5|
|November 14 Strip||x||0.4x||– 0.6x||0.4x||– 0.6x||0.7x|
1 – Production and cash operating costs include Fox Creek plant turnarounds.
2 – Chicago sales of ~90% expected for rest of year.
3 – Includes G&A expenses for all divisions of the Company – Corporate, Upstream, Green Energy (power & hydrogen) and Business Development.
4 – Strip pricing as of November 14, 2022. November 10, 2022 Guidance used Q3/22 actual prices with US$80/Bbl WTI flat; US$5.00/MMBtu HH flat; US$0.75/CAD flat thereafter for remainder of 2022. See “Non-GAAP Measures“.
5 – Non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please refer to the Corporation’s MD&A as at and for the three months ended September 30, 2022 under the section “Non-GAAP Measures” available on Kiwetinohk’s SEDAR profile at www.sedar.com
We, at Kiwetinohk, are passionate about addressing climate change and the future of energy. Kiwetinohk’s mission is to build a profitable energy transition business providing clean, reliable, dispatchable, affordable energy. Kiwetinohk develops and produces natural gas and related products and is in the process of developing renewable power, natural gas-fired power, carbon capture and hydrogen clean energy projects. We view climate change with a sense of urgency, and we want to make a difference.
Kiwetinohk’s common shares trade on the Toronto Stock Exchange under the symbol KEC.
Additional details are available within the year-end documents available on Kiwetinohk’s website at www.kiwetinohk.com and SEDAR at www.sedar.com.
Oil and Gas Advisories
For the purpose of calculating unit costs, natural gas is converted to a barrel of oil equivalent using six thousand cubic feet of natural gas equal to one barrel of oil unless otherwise stated. The term barrel of oil equivalent (boe) may be misleading, particularly if used in isolation. A boe conversion ratio for gas of 6 Mcf:1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
This news release contains disclosure regarding the expected payout of certain of the Company’s wells and well pads. Well payout means the anticipated time period of production from a well or well pad required to fully pay for the DCET costs of such well or well pad. Payout is achieved when the revenues from the production of a well or well pad, less the associated royalties, transportation, operating and other costs, are equal to the DCET costs for the well or well pad. Management considers well payout estimates an important measure to evaluate its operational performance and capital allocation processes. Well payout estimates are, however, subject to numerous assumptions and risks and actual well payout time periods could, as a result, be materially different than anticipated. Accordingly, investors should not place undue reliance on well payout estimates. The well payout estimates contained herein are based on the following principal assumptions in addition to assumptions regarding well performance being consistent with management’s expectations: (1) strip commodity pricing as of November 14, 2022, WTI being US$86/bbl for Q4 2022 and US$80/bbl for 2023 & HH being US$6.00/MMBtu for Q4 2022 and US$5.17/MMBtu for 2023, and exclusive of the Company’s current commodity hedges, (2) the well pad DCET cost estimates set forth herein and (3) the 2022 annual royalty and cost estimates set forth herein.
The November 14 strip pricing used herein for guidance purposes and well payout metrics is derived from Bloomberg.
FOR MORE INFORMATION ON KIWETINOHK, PLEASE CONTACT:
Mark Friesen, Director, Investor Relations
IR phone: (587) 392-4395
IR email: [email protected]
Address: Suite 1500, 250 – 2 Street S.W. Calgary, Alberta T2P 0C1
Pat Carlson, CEO
Jakub Brogowski, CFO
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