NuVista Energy LTD. Announces Positive Second Quarter 2024 Financial and Operating Results
Press Release
CALGARY, Alberta, Aug. 08, 2024 — NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX: NVA) is pleased to announce strong financial and operating results for the three and six months ended June 30, 2024, and to provide an update on our operational performance. The quality and composition of our asset base has enabled us to consistently deliver strong returns through the natural gas commodity cycles, benefiting from the continued strength in condensate pricing. We continue to invest in new high-return wells and infrastructure projects to support our ongoing production growth. We also renewed our Normal Course Issuer Bid (“NCIB”) and continued to return capital to shareholders under that program.
Financial Highlights
During the second quarter of 2024, NuVista:
- Generated adjusted funds flow(1) of $140.2 million ($0.68/share, basic(4)), which includes $18.4 million of free adjusted funds flow(2) despite a decline in natural gas commodity prices;
- Achieved net earnings of $111.0 million ($0.54/share, basic);
- Maintained a strong operating netback(3) at $21.59/Boe and corporate netback(3) at $18.52/Boe, supported by continued condensate price strength;
- Executed a successful capital expenditures(2) program, investing $121.5 million in well and facility activities including the drilling of 11 gross (11.0 net) wells and the completion of 8 gross (8.0 net) wells in our condensate rich Wapiti Montney asset base. During the first half of the year, we also completed several infrastructure projects including the significant expansion of our Elmworth compressor station to serve growth in the Gold Creek and Elmworth areas;
- Exited the quarter with $49.7 million drawn on our $450 million credit facility, maintaining a favorable net debt to annualized second quarter adjusted funds flow(1) ratio of 0.5x; and
- Announced our 2024 NCIB on June 17, 2024, allowing for the repurchase of up to 14,234,451 common shares, prior to June 19, 2025. During the quarter, we repurchased and subsequently cancelled 1.1 million common shares under our 2023 NCIB at a weighted average price of $13.52 per share for a total cost of $15.3 million. Since the inception of our NCIB programs in 2022, we have repurchased and subsequently cancelled 32.0 million common shares for an aggregate cost of $381.6 million or $11.91 per share.
| Notes: | |
| (1) | Each of “adjusted funds flow” and “net debt to annualized second quarter adjusted funds flow” are capital management measures. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
| (2) | “Free adjusted funds flow” and “capital expenditures” are non-GAAP financial measures that do not have standardized meanings under IFRS Accounting Standards and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
| (3) | Each of “operating netback” and “corporate netback” are non-GAAP financial ratios that do not have any standardized meaning under IFRS Accounting Standards and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
| (4) | “Adjusted funds flow per share” is a supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
Operational Excellence
During the second quarter of 2024, NuVista:
- Produced 83,152 Boe/d, just above the top end of our guidance range of 80,000 – 83,000 Boe/d for the quarter. This reflects a 4% increase in production from the first quarter of 2024 and a 17% increase in production from the second quarter of 2023. Production volumes in the quarter were strong despite the temporary outages caused by completion activities as well as planned third party and owned infrastructure projects. The production composition for the second quarter was 31% condensate, 9% NGLs and 60% natural gas;
- Completed a 12-well pad in Pipestone North on budget and on time, during the first half of 2024. This pad reached the IP90 milestone early in the second quarter. Production per well has averaged 1,750 Boe/d (42% condensate) which reflects an improvement of approximately 25% on a Boe/d basis compared to our historic average in Pipestone North. Importantly, the pad contains two infill wells drilled between legacy wells on the pad. The infill wells have averaged 1,125 Boe/d (20% condensate). Both wells exhibited strong deliverability on a gas basis, producing at gas rates of approximately 85% of that of the non-infill wells. Encouragingly the infill well targeted lower in the Middle Montney produced approximately 30% condensate in the first 90 days, which is an important data point for future infill development potential on our asset base;
- Completed drilling and completion operations for two additional pads at Pipestone. Drilling and completion costs came in as planned and in line with Type-Curve on a length and tonnage normalized basis at $863 per horizontal meter and $658 per tonne of sand, respectively. These pads are both expected to reach their IP90 milestones in the third quarter. Activity for the remainder of the year will include the drilling of a 14-well pad in Pipestone North, which is expected to be completed in the first quarter of 2025 along with the start-up of a third-party gas plant in the Pipestone area; and
- Completed the expansion of our Elmworth facility and brought two pads in Wapiti on production that include a 6-well pad in Elmworth and a 4-well pad in Gold Creek. Rates are restricted on these pads in advance of a fourth quarter increase in firm service capacity at midstream infrastructure, but initial indications are strong. Both pads are expected to reach their IP90 milestones in the fourth quarter. The 6-well pad at Elmworth contained our first Lower Montney well in that area. Despite flowing at restricted rates, over its IP30 the well averaged over 2,000 Boe/d and almost 20% condensate, a strong initial Lower Montney result in the area. Activity for the remainder of 2024 in Wapiti will include the drilling of two additional pads and completion of one pad.
Balance Sheet Strength and Return of Capital to Shareholders
At the end of the second quarter, our net debt(1) was $267.9 million, resulting in a net debt to annualized second quarter adjusted funds flow ratio of 0.5x, which supports our strong financial position. The net debt level is also well below the limits set by management, to ensure that our net debt to adjusted funds flow ratio remains comfortably below 1.0x in a stress test price environment of US$45/Bbl WTI oil and US$2.00/MMBtu NYMEX natural gas.
We remain focused on our disciplined value-adding growth strategy, balanced with providing significant shareholder returns. We continue to believe the best way to return capital to shareholders is through the repurchase of shares, although we will continue to consider other options in tandem with our longer term, high return growth plans. This evaluation will consider commodity prices, the economic and tax environment, and will include all options including share repurchases and dividend payments.
Presently, our Board has set a target of returning approximately 75% of free adjusted funds flow to shareholders through the repurchase of the NuVista’s common shares pursuant to our NCIB programs.
| Notes: | |
| (1) | “Net debt” is a capital management measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release. |
Environment, Social and Governance (“ESG”) Update
Recent amendments to the Competition Act introduced in Bill C-59, which received Royal Assent in June, have created considerable uncertainty around ESG reporting. These amendments raise uncertainty about how Canadian companies can publicly communicate their environmental and climate performance and progress. As a result, we have decided to temporarily suspend our ESG reporting until further clarity is provided by the Canadian Competition Bureau regarding the application and interpretation of these new amendments. Nevertheless, we remain fully committed to ESG performance and transparency with our stakeholders and plan to publish at least a basic ESG performance table on our website in the fall of this year.
Executive and Board Retirement Update
After 21 years of leadership at NuVista, Keith MacPhail has elected to retire this summer from our Board of Directors. Keith’s retirement will be effective as of August 8th, 2024. Keith has been a prominent leader and advocate for the oil and gas industry over his four and a half-decade career, leaving a lasting impression on everyone he’s worked with and mentored over the years. As a co-founder of NuVista, Keith has played a crucial role on our board, chairing various committees, including as previous Board Chair for almost two decades. He has been instrumental in transforming NuVista into the Montney player we are today, helping shape our strategy and positioning us for continued growth.
After 16 years with NuVista and 34 years in the industry, Kevin Asman has elected to retire as our Vice President of Marketing, effective December 31st, 2024. Kevin joined NuVista in 2008 to build the marketing team and to transform the Company’s commodity sales business. Throughout his time with NuVista, Kevin has skillfully led our strategic marketing efforts through various commodity cycles, moving NuVista to a place of long term strength and a diversified commodity sales footprint. The backfill for Kevin’s position will be the subject of a future announcement.
The NuVista Board of Directors and management team are deeply grateful for the long and impactful service of Keith and Kevin, and we wish them and their families every success and happiness in retirement.
2024 Guidance Update
We are extremely well-positioned with top-tier assets and highly favorable economics. Our disciplined execution has enabled us to achieve growth in production and adjusted funds flow, while also generating positive free adjusted funds flow, which has allowed us to continue to return capital to our shareholders through the repurchase of shares. Our high condensate weighting, for which pricing has remained strong, continues to drive superior economics despite the weakness in natural gas prices through the first half of 2024. We continue to execute according to our plans, with well and facility outperformance in several areas. As such, we are making no changes to our 2024 capital expenditure guidance target of approximately $500 million, allowing us to maintain the efficiencies of a steady 2-drill-rig execution.
Weekly production has recently reached a new record of 88,000 Boe/d with strong new well performance and we continue to expect monthly volumes to reach over 90,000 Boe/d at some point in the second half of 2024. Due to the unusually long stretch of hot weather in Alberta, we have incurred cooling restrictions in July at Company and third-party facilities. These have had an impact of approximately 2,400 Boe/d on third quarter average production volumes thus far. With low natural gas prices, we have limited any costly efforts to maximize production through this hot period. We therefore provide production guidance for the third quarter of 83,000 – 86,000 Boe/d, with the lower end of that range allowing contingency in case of hot weather through August. Longer term, ongoing third-party facility expansions will provide the cushion needed for most hot weather events. Commensurate with the above, full year 2024 average production guidance is tightened to 83,500 – 86,000 Boe/d from 83,000 – 87,000 Boe/d.
We intend to continue our track record of carefully directing free adjusted funds flow towards a prudent balance of capital return to shareholders and debt reduction, while investing in high return growth projects. NuVista’s top quality asset base, deep inventory, and management’s relentless focus on value maximization supports our medium-term plans for value-adding growth to the plateau level of 125,000 Boe/d. We will continue to closely monitor and adjust to the environment in order to maximize the value of our asset base and ensure the long-term sustainability of our business. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our Board of Directors and our shareholders for their continued guidance and support.
Please note that our corporate presentation will be available at www.nuvistaenergy.com on August 8, 2024. NuVista’s management’s discussion and analysis, condensed consolidated interim financial statements for the three and six months ended June 30, 2024 and notes thereto, will be filed on SEDAR+ (www.sedarplus.ca) on August 8, 2024 and can also be obtained at www.nuvistaenergy.com.
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