Paramount Resources Ltd. Announces Second Quarter 2024 Results

Press Release

CALGARY, AB, Aug. 1, 2024 – Paramount Resources Ltd. (“Paramount” or the “Company”) (TSX: POU) is pleased to announce its second quarter 2024 financial and operating results, highlighted by strong adjusted funds flow and well results at Kaybob North that continue to demonstrate the high quality of the Company’s Duvernay position.

HIGHLIGHTS

• Second quarter sales volumes averaged 95,609 Boe/d (48% liquids). ⁽¹⁾
  • Grande Prairie Region sales volumes averaged 63,480 Boe/d (51% liquids), consistent with Paramount’s expectations.  Sales volumes were restricted by planned maintenance outages and some unplanned downtime at key facilities.
  • Kaybob Region sales volumes increased to 23,946 Boe/d (41% liquids), driven by a new five well Duvernay pad brought onstream at Kaybob North.
  • Central Alberta and Other Region sales volumes averaged 8,183 Boe/d (49% liquids).
  • The continued strong results from Paramount’s drilling program at Kaybob North and Willesden Green grew the Company’s total Duvernay production in the quarter to an average of approximately 15,000 Boe/d (63% liquids).
  • The Company shut-in a total of 4,600 Boe/d of dry gas production in the quarter due to low natural gas prices.
• First half 2024 sales volumes averaged 98,293 Boe/d (48% liquids), in line with the midpoint of the Company’s guidance of 96,000 Boe/d to 100,000 Boe/d (47% liquids).
• Cash from operating activities was $221 million ($1.51 per basic share) in the second quarter.  Adjusted funds flow was $266 million ($1.82 per basic share).  Free cash flow was $20 million ($0.14 per basic share). ⁽²⁾

(1)In this press release, “natural gas” refers to shale gas and conventional natural gas combined, “condensate and oil” refers to condensate, light and medium crude oil, tight oil and heavy crude oil combined, “Other NGLs” refers to ethane, propane and butane and “liquids” refers to condensate and oil and Other NGLs combined.  See the “Product Type Information” section for a complete breakdown of sales volumes for applicable periods by the specific product types of shale gas, conventional natural gas, NGLs, light and medium crude oil, tight oil and heavy crude oil.  See also “Oil and Gas Measures and Definitions” in the Advisories section.

(2)Adjusted funds flow and free cash flow are capital management measures used by Paramount.  Cash from operating activities per basic share, adjusted funds flow per basic share and free cash flow per basic share are supplementary financial measures.  Refer to the “Specified Financial Measures” section for more information on these measures.

• Second quarter capital expenditures totaled $241 million.  Significant activities included:
  • Grande Prairie Region (Montney) – eleven (11.0 net) wells drilled, four (4.0 net) wells brought on production and the substantial completion of a new compressor node at Wapiti that will support the development of the western portion of the field;
  • Kaybob Region (Duvernay) – five (5.0 net) wells drilled and five (5.0 net) wells brought on production; and
  • Central Alberta and Other Region (Duvernay) – four (4.0 net) wells drilled and the ongoing construction of the Company’s second operated natural gas processing plant at Willesden Green.
• Asset retirement obligations settled in the second quarter totaled $2 million.
• As previously disclosed, Paramount sold 6 million shares of its investment in NuVista Energy Ltd. for cash proceeds of $75 million in the second quarter.  The carrying value of the Company’s investments in securities at June 30, 2024 was $580 million.  Paramount received total cash dividends of $8 million in the second quarter from its investments in securities.
• In June 2024, Paramount realized total cash proceeds of $38 million from the termination and close out of all of its then outstanding NYMEX WTI swaps (14,250 Bbl/d at C$111.67/Bbl for the balance of 2024).  Paramount has since hedged 5,000 Bbl/d of liquids sales from July 2024 to the end of 2025 at an average WTI price of C$105.00/Bbl.
• Revenue in the second quarter included $10 million related to an initial payment from insurers for 2023 Alberta wildfire losses.  The Company continues to advance its insurance claims process.
• At June 30, 2024, net debt was $29 million and Paramount’s $1.0 billion revolving credit facility was undrawn. ⁽¹⁾

GUIDANCE

Paramount is reaffirming its 2024 guidance for sales volumes.  The Company currently has approximately 4,600 Boe/d of dry gas production shut-in.  The 2024 sales volumes guidance assumes that this production, as well as certain new dry gas production, is brought online in the fourth quarter.  If natural gas prices do not improve later in the year, as anticipated, the Company may choose to defer bringing this production online.  In such a case, Paramount anticipates that 2024 sales volumes would be at the lower end of the forecast range.

The Company is reaffirming its 2024 guidance for capital expenditures and abandonment and reclamation expenditures.

Paramount is updating its forecast of 2024 free cash flow from $205 million to $100 million to reflect first half results and revised natural gas price assumptions for the second half of 2024 of US$2.50/MMBtu NYMEX and $1.50/GJ AECO (previously US$3.50/MMBtu NYMEX and $2.84/GJ AECO).  Assumed WTI pricing for the second half of 2024 remains unchanged at US$80.00/Bbl.

The Company’s midpoint 2024 sustaining and maintenance capital program, abandonment and reclamation expenditures and regular monthly dividend would remain fully funded down to an average WTI price for the second half of 2024 of about US$56/Bbl, assuming no changes to the other forecast assumptions.

AUGUST DIVIDEND

Paramount’s Board of Directors has declared a cash dividend of $0.15 per class A common share that will be payable on August 30, 2024 to shareholders of record on August 15, 2024.  The dividend will be designated as an “eligible dividend” for Canadian income tax purposes.

(1)Free cash flow is a capital management measure used by Paramount.  Refer to the “Specified Financial Measures” section for more information on this measure. The stated free cash flow forecast is based on the following assumptions for 2024: (i) the midpoint of stated capital expenditures and sales volumes, (ii) $40 million in abandonment and reclamation costs, (iii) $10 million in geological and geophysical expenses, (iv) realized pricing of $51.45/Boe; (v) a $US/$CAD exchange rate of $0.736, (vi) royalties of $7.55/Boe, (vii) operating costs of $13.30/Boe and (vii) transportation and NGLs processing costs of $3.55/Boe. The stated amounts have been adjusted to incorporate actual results for the first half of 2024.

REVIEW OF OPERATIONS

IBF4