NuVista Energy Ltd. Announces Strong Third Quarter 2024 Financial and Operating Results, LNG Agreement, 2025 Budget, and Enhanced Shareholder Return Strategy

Press Release

CALGARY, Alberta, Nov. 08, 2024– NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX: NVA) is pleased to announce strong financial and operating results for the three and nine months ended September 30, 2024, and to provide an update on our operational performance. The quality and composition of our asset base consistently enables us to generate strong returns across commodity price cycles. Subsequent to the third quarter, our daily production has reached new record levels, as we continue to invest in new high-return wells and infrastructure projects to support our development plans. We also added LNG market access to our diversified natural gas portfolio and made significant progress on our return of capital to shareholders program through our normal course issuer bid (the “2024 NCIB”), while maintaining a financial position with low debt.

Financial Highlights

During the third quarter of 2024, NuVista:

• Delivered adjusted funds flow⁽¹⁾ of $139.5 million ($0.68/share, basic⁽³⁾), and free adjusted funds flow⁽²⁾ of $19.4 million. Adjusted funds flow and free adjusted funds flow remained strong relative to the second quarter, supported by condensate rich production and lower cash costs, despite softer commodity prices;
• Generated net earnings of $59.8 million ($0.29/share, basic), resulting in year-to-date net earnings of $206.6 million ($1.00/share, basic);
• Completed a well-executed capital expenditures⁽²⁾ program, investing $118.4 million in well and facility activities including the drilling of 14 wells and completion of 12 wells in our condensate rich Wapiti Montney asset base. Year-to-date, the capital expenditures program has totaled $427.8 million, with 34 wells drilled and 38 wells completed, in addition to completing several infrastructure projects;
• Added LNG sales to our natural gas diversification portfolio by gaining exposure to the Japan/Korea marker (“JKM”) through a netback agreement with Trafigura based on 21,000 MMbtu/d of LNG for a period of up to thirteen years commencing January 1, 2027;
• Exited the quarter with $37.5 million drawn on our $450 million credit facility and net debt⁽¹⁾ of $261.9 million, maintaining a favorable net debt to annualized third quarter adjusted funds flow⁽¹⁾ ratio of 0.5x;
• Repurchased and subsequently cancelled 816,800 common shares under its 2024 NCIB program at a weighted average price of $13.81 per share for a total cost of $11.3 million. Since the inception of our NCIB programs in 2022, NuVista has repurchased and subsequently cancelled 33.2 million common shares for an aggregate cost of $394.6 million or $11.89 per share; and
• Recognized as part of the TSX30 for the third consecutive year. The TSX30 recognizes the thirty top-performing companies on the Toronto Stock Exchange (“TSX”) over the prior three-year period (see www.tsx.com/tsx30). NuVista ranked a notable sixth place overall.

Notes:
(1) Each of “adjusted funds flow”, “net debt”, “net debt to annualized third 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) “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 third quarter of 2024, NuVista:

• Produced an average of 83,475 Boe/d, within the third quarter guidance range of 83,000 – 86,000 Boe/d, and consistent with the second quarter production despite unplanned downtime at third-party facilities, which negatively impacted the quarter by approximately 5,000 Boe/d. All impacted production has since been brought back online, with daily production levels in late October reaching record levels above 90,000 Boe/d. It is expected that production will stabilize around this new level throughout much of the fourth quarter;
• Production for the third quarter comprised 31% condensate, 9% NGLs and 60% natural gas, a favorable outcome despite the fact that the production outage occurred in our richest condensate area. This was mainly due to outperformance of the most recent pad brought online at Pipestone;
• Realized strong production milestones for both pads brought online during the second quarter in the Pipestone area. A 4-well pad at Pipestone South has reached its IP90 at average rates per well of 1,300 Boe/d including 40% condensate, in line with historic averages for the area despite flowing at restricted rates since coming on production due to infrastructure capacity. In addition, the most southerly pad drilled at Pipestone North to-date has reached its IP60 milestone, producing 1,650 Boe/d including 50% condensate over the period. This pad included co-development of the Lower Montney and is important as it illustrates the continued repeatability in condensate yields as we progress development to the south. Completion operations in Pipestone will resume in the new year where we will begin on the 14-well pad that is scheduled to come on production at the end of the first quarter;
• Commenced the production ramp-up of two new pads in the Wapiti area, as planned during the third quarter, following the completion of our infrastructure expansion projects in the first half of the year. With firm transportation capacity in place, area production has reached record levels. Both the 6-well pad in Elmworth and a 4-well pad in Gold Creek have reached IP90 milestones and with facilities very recently expanded, they have now been able to produce consistently. The pad on the southern end of Elmworth co-developed the entire stack including one well in the Lower Montney which averaged 1,675 Boe/d including 15% condensate over the period and reflects over 25% more production than the other 5 wells on the pad which averaged 1,300 Boe/d per well including 26% condensate. The 4-well pad on the western side of Gold Creek also has reached IP90 averaging 1,500 Boe/d per well including 35% condensate over the period. This pad was also co-developed in the Lower and Middle Montney and exhibited exceptional consistency in deliverability across the zones which reinforces our view on inventory expansion in Gold Creek area; and
• Brought on production a 6-well pad between Gold Creek and Elmworth. Notably, this pad was co-developed across the entire stack of 4 zones, and included one Lower Montney pilot. The pad has reached its IP30 milestone producing on average 1,725 Boe/d per well including 40% condensate. Importantly, the Lower Montney well exhibited robust productivity compared to the other benches, producing 1,850 Boe/d including 38% condensate.

Balance Sheet Strength and Return of Capital to Shareholders

At the end of the third quarter, our net debt was $261.9 million, resulting in a net debt to annualized third quarter adjusted funds flow ratio of 0.5x, which supports our strong financial position. The net debt level is also well below the $350 million limit 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.

2024 Guidance Reaffirmed

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. This 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 supportive, continues to drive superior economics despite the weakness in natural gas prices experienced for much of 2024. We continue to execute according to our plans, with well and facility outperformance in several areas. As such, we reaffirm our 2024 capital expenditure guidance target of approximately $500 million, allowing us to maintain the efficiencies of a steady 2-drill-rig execution.

Recent average weekly production has reached a record level above 90,000 Boe/d and our guidance for the fourth quarter of 2024 is 89,000 – 91,000 Boe/d. This includes the minor impact associated with our decision to temporarily shut in the very small amount of our production which was exposed to AECO when those prices reached historically low levels at the start of the fourth quarter. We are pleased that despite the unplanned impacts of third-party downtime in the third quarter, we are able to reaffirm our previously announced full-year 2024 guidance range of 83,500 – 86,000 Boe/d.

2025 Budget Further Enhances Priority of Return of Capital to Shareholders

With well outperformance continuing to drive strong capital efficiencies, and with commodity prices retreating from the highs of 2022, we have taken this as a market signal to moderate capital spending and production growth in order to increase the priority of at least triple-digit return of cash to shareholders via share buybacks. We are fortunate that our business has the flexibility and superior asset quality to afford this. We have set our 2025 capital expenditure guidance at approximately $450 million to grow production volumes by 7% to a 2025 annual average of approximately 90,000 Boe/d. This includes a planned six-week turnaround for maintenance and expansion of major third party facilities in Wapiti which will impact the second and third quarters. Production volumes are expected to approach 100,000 Boe/d in the second half of the year. Our budget is based on commodity price assumptions of $65/Bbl WTI oil and $3/MMBtu Nymex natural gas. In this base scenario we would expect to generate approximately $175 million of free adjusted funds flow, of which we will target at least 75% for return to shareholders. This capital budget is approximately $125 million lower than our previous outlook with only a modest tempering of our production growth from 10% to 7%. Superior ongoing execution and new well performance are the main drivers that provide us the flexibility to exercise this discipline and reduce capital substantially with only a modest growth impact.

Substantially all of our production growth in 2025 will come from the Pipestone North area, beginning with the startup of the CSV Midstream Albright gas plant which is anticipated to be commissioned during the first quarter. 14 wells will be completed in Pipestone to ramp into this additional capacity of 8,000 to 10,000 Boe/d by the second quarter. Looking further ahead, Gold Creek area production growth will be a high focus for 2026 and 2027.

We will monitor the economic environment, and if commodity prices are averaging higher than our base assumptions, we have the ability and intention to increase returns to shareholders and 2025 capital expenditures for future growth concurrently to maximize long term value per share. If in an environment where commodity prices soften, we have the flexibility to further moderate production growth and reduce 2025 capital expenditures to act counter-cyclically and ensure our return of capital to shareholders remains intact. Underlying our commitment to shareholder returns is a pristine balance sheet. We expect to enter 2025 with approximately $250 million of net debt.

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 November 8, 2024. NuVista’s management’s discussion and analysis, condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and notes thereto, will be filed on SEDAR+ (www.sedarplus.ca) on November 8, 2024 and can also be obtained at www.nuvistaenergy.com.

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