Spartan Delta Corp. Announces 2022 Year-end Results and Reserves
Press Release
Calgary, Alberta – March 2, 2023 – Spartan Delta Corp. (“Spartan” or the “Company”) (TSX:SDE) is pleased to report its financial and operating results for the fourth quarter and year ended December 31, 2022, as well as highlights of the Company’s year-end reserves evaluation.
Selected financial and operational information is set out below and should be read in conjunction with Spartan’s audited consolidated annual financial statements and related management’s discussion and analysis (“MD&A”) for the years ended December 31, 2022 and 2021, which are filed on SEDAR at www.sedar.com and are available on the Company’s website at www.spartandeltacorp.com. The highlights reported in this press release include certain non-GAAP financial measures and ratios which have been identified using capital letters. The reader is cautioned that these measures may not be directly comparable to other issuers; refer to additional information under the heading “Reader Advisories – Non-GAAP Measures and Ratios”.
2022 FINANCIAL AND OPERATING HIGHLIGHTS
- The Company achieved 53% growth in average production from 47,674 BOE/d (33% liquids) in 2021 to 73,084 BOE/d (38% liquids) in 2022, which exceeded the high-end of the range of its 2022 production guidance of 71,000 to 73,000 BOE/d.
- Production averaged 74,639 BOE/d (39% liquids) during the fourth quarter of 2022.
- Spartan successfully executed a $434 million capital program in 2022, with specific focus placed on the development of its Gold Creek and Karr assets located in the Montney oil window as well as continued development across multiple horizons in the Deep Basin.
- In the Montney, Spartan drilled 24.2 net wells, completed 26.2 net wells and 2.0 disposals wells, and brought 23.9 net wells on production.
- In the Deep Basin, Spartan drilled and completed 21.0 net wells and brought 20.0 net wells on production.
- Oil and gas sales revenue increased by 141% to $1.464 billion in 2022 compared to $608 million in 2021, driven by the Company’s production growth and materially higher oil and gas prices.
- Spartan reported net income for 2022 of $681 million ($3.88 per share, diluted), up 104% from $334 million ($2.50 per share, diluted) in 2021.
- The Company’s operations generated Adjusted Funds Flow of $233 million ($1.31 per share, diluted) in the fourth quarter and $826 million ($4.66 per share, diluted) for the year ended December 31, 2022.
- Free Funds Flow of $392 million was used to:
- repay the Company’s bank debt in full and significantly reduce its Net Debt to $138 million at
December 31, 2022, down from $458 million at December 31, 2021;
- return capital to shareholders by declaring a special dividend of $86 million ($0.50 per share) payable on January 16, 2023, to eligible shareholders of record on December 15, 2022; and
- fund a strategic corporate acquisition for cash consideration of $6 million in August 2022, pursuant to which Spartan assumed approximately $625 million of non-capital loss tax pools which further extended the Company’s tax horizon. Spartan’s total available tax pools are estimated to be $2.1 billion at December 31, 2022.
The table below summarizes the Company’s financial and operating results for the fourth quarters and years ended December 31, 2022 and December 31, 2021:
| (CA$ thousands, except as otherwise noted) | Three months ended December 31 | Year ended December 31 | ||||||
| 2021 | % | 2021 | % | |||||
| 2022 | 2022 | |||||||
| FINANCIAL HIGHLIGHTS | ||||||||
| Oil and gas sales | 357,126 | 296,425 | 20 | 1,464,467 | 608,142 | 141 | ||
| Net income and comprehensive income | 152,919 | 128,455 | 19 | 681,086 | 334,220 | 104 | ||
| $ per share, basic (a) | 0.95 | 0.84 | 13 | 4.36 | 2.89 | 51 | ||
| $ per share, diluted (a) | 0.87 | 0.76 | 14 | 3.88 | 2.50 | 55 | ||
| Cash provided by operating activities | 200,363 | 147,975 | 35 | 795,371 | 279,766 | 184 | ||
| Adjusted Funds Flow (b) | 232,839 | 137,026 | 70 | 825,667 | 293,986 | 181 | ||
| $ per share, basic (a)(b) | 1.45 | 0.89 | 63 | 5.29 | 2.54 | 108 | ||
| $ per share, diluted (a)(b) | 1.31 | 0.80 | 64 | 4.66 | 2.18 | 114 | ||
| Free Funds Flow (b) | 73,689 | 21,344 | 245 | 391,510 | 105,011 | 273 | ||
| Cash used in investing activities | 134,048 | 98,225 | 36 | 442,303 | 925,713 | (52) | ||
| Capital Expenditures before A&D (b) | 159,150 | 115,682 | 38 | 434,157 | 188,975 | 130 | ||
| Adjusted Net Capital Acquisitions (b) | 231 | (1,437) | (116) | 5,183 | 956,763 | (99) | ||
| Total assets | 2,099,475 | 1,742,414 | 20 | 2,099,475 | 1,742,414 | 20 | ||
| Long-term debt | 145,180 | 387,564 | (63) | 145,180 | 387,564 | (63) | ||
| Net Debt (b) | 138,376 | 458,259 | (70) | 138,376 | 458,259 | (70) | ||
| Net Debt to Annualized AFF Ratio (b) | 0.2 x | 0.8 x | (75) | 0.2 x | 0.8 x | (75) | ||
| Shareholders’ equity | 1,516,821 | 886,649 | 71 | 1,516,821 | 886,649 | 71 | ||
| Common shares outstanding (000s), end of period (a) | 171,410 | 153,214 | 12 | 171,410 | 153,214 | 12 | ||
| OPERATING HIGHLIGHTS AND NETBACKS (e) | ||||||||
| Average daily production | ||||||||
| Crude oil (bbls/d) | 13,714 | 11,450 | 20 | 12,976 | 4,697 | 176 | ||
| Condensate (bbls/d) (c) | 2,549 | 2,373 | 7 | 2,328 | 1,924 | 21 | ||
| Natural gas liquids (bbls/d) (c) | 12,757 | 13,576 | (6) | 12,612 | 9,120 | 38 | ||
| Natural gas (mcf/d) | 273,716 | 270,176 | 1 | 271,010 | 191,596 | 41 | ||
| BOE/d | 74,639 | 72,428 | 3 | 73,084 | 47,674 | 53 | ||
| % Liquids (d) | 39% | 38% | 3 | 38% | 33% | 15 | ||
| Average realized prices, before financial instruments | ||||||||
| Crude oil ($/bbl) | 109.76 | 91.38 | 20 | 119.94 | 86.48 | 39 | ||
| Condensate ($/bbl) (c) | 111.19 | 96.63 | 15 | 119.70 | 85.15 | 41 | ||
| Natural gas liquids ($/bbl) (c) | 44.94 | 44.39 | 1 | 50.45 | 37.11 | 36 | ||
| Natural gas ($/mcf) | 5.55 | 4.97 | 12 | 5.69 | 3.95 | 44 | ||
| Combined average ($/BOE) | 52.01 | 44.48 | 17 | 54.90 | 34.95 | 57 | ||
| Netbacks ($/BOE) (e) | ||||||||
| Oil and gas sales | 52.01 | 44.48 | 17 | 54.90 | 34.95 | 57 | ||
| Processing and other revenue | 0.39 | 0.36 | 8 | 0.35 | 0.54 | (35) | ||
| Royalties | (5.53) | (4.91) | 13 | (5.99) | (3.83) | 56 | ||
| Operating expenses | (8.64) | (7.52) | 15 | (8.75) | (6.61) | 32 | ||
| Transportation expenses | (2.76) | (2.41) | 15 | (2.80) | (2.00) | 40 | ||
| Three months ended December 31 | Year ended December 31 | |||||||
| 2021 | % | 2021 | % | |||||
| Netbacks continued from previous page | 2022 | 2022 | ||||||
| Operating Netback, before hedging ($/BOE) (e) | 35.47 | 30.00 | 18 | 37.71 | 23.05 | 64 | ||
| Settlements on Commodity Derivative Contracts(e)(f) | (1.19) | (6.39) | (81) | (4.81) | (3.53) | 36 | ||
| Net Pipeline Transportation Margin (e)(g) | – | (0.25) | (100) | (0.01) | (0.12) | (92) | ||
| Operating Netback, after hedging ($/BOE) (e) | 34.28 | 23.36 | 47 | 32.89 | 19.40 | 70 | ||
| General and administrative expenses | (0.98) | (1.12) | (13) | (0.95) | (1.22) | (22) | ||
| Cash Financing Expenses (e)(h) | (0.76) | (1.08) | (30) | (0.94) | (0.59) | 59 | ||
| Realized foreign exchange gain (loss) | (0.01) | 0.04 | (125) | 0.03 | 0.02 | 50 | ||
| Other income | 2.08 | – | – | 0.56 | 0.03 | nm | ||
| Settlement of decommissioning obligations | (0.28) | (0.16) | 75 | (0.19) | (0.12) | 58 | ||
| Lease payments (i) | (0.42) | (0.48) | (13) | (0.45) | (0.62) | (27) | ||
| Adjusted Funds Flow Netback ($/BOE) (e) | 33.91 | 20.56 | 65 | 30.95 | 16.90 | 83 | ||
- Refer to “Share Capital” section of this press release.
- “Adjusted Funds Flow”, “Free Funds Flow”, “Capital Expenditures before A&D”, “Adjusted Net Capital Acquisitions”, “Net Debt” and “Net Debt to Annualized AFF Ratio” do not have standardized meanings under IFRS, refer to “Non-GAAP Measures and Ratios” section of this press release.
- Condensate is a natural gas liquid (“NGL”) as defined by NI 51-101. See “Other Measurements”.
- “Liquids” includes crude oil, condensate and NGLs.
- “Netbacks” are non-GAAP financial ratios calculated per unit of production. “Operating Netback”, “Settlements on Commodity Derivative Contracts”, “Net Pipeline Transportation Margin”, “Cash Financing Expenses” and “Adjusted Funds Flow Netback” do not have standardized meanings under IFRS, refer to “Non-GAAP Measures and Ratios” section of this press release.
- Includes realized gains or losses on derivative financial instruments plus settlements of acquired derivative liabilities.
- Pipeline transportation revenue, net of pipeline transportation expense.
- Includes interest and fees on long-term debt, net of interest income.
- Includes total lease payments comprised of the principal portion and financing cost of lease liabilities.
2022 RESERVES INFORMATION
Spartan is pleased to provide below select highlights from the results of its year end independent oil and gas reserves evaluation as of December 31, 2022 (the “McDaniel Report”), as prepared by its independent qualified reserves evaluator, McDaniel & Associates Consultants Ltd. (“McDaniel”). The evaluation of Spartan’s properties was prepared in accordance with the definitions, standards and procedures contained in the most recent publication of the Canadian Oil and Gas Evaluation Handbook (“COGEH”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”).
- Relative to year-end 2021, Spartan increased proved developed producing (“PDP”) reserves 8% to 134.9 MMBOE, total proved (“TP”) reserves 8% to 318.6 MMBOE, and total proved plus probable (“TPP”) reserves 6% to 578.6 MMBOE at year-end 2022.
- The before-tax net present value (“NPV”) of reserves, discounted at 10%, was approximately $1.624 billion on a PDP basis, $3.031 billion on a TP basis, and $5.011 billion on a TPP basis, representing an increase in NPV of 41% on a PDP basis, 28% on a TP basis and 26% on a TPP basis, year-over-year.
- The McDaniel Report includes future development capital (“FDC”) of approximately $2.238 billion in the TP category with 260.6 net locations and approximately $3.952 billion in the TPP category with 463.6 net locations.
The following tables highlight the findings of the McDaniel Report. The McDaniel Report was based on the published average forecast pricing of McDaniel, GLJ Ltd. and Sproule Associates Limited. See “Reader Advisories
– Reserves Disclosure” for more information. Additional reserves information as required under NI 51-101 will be included in Spartan’s Annual Information Form for the year ended December 31, 2022, which will be filed on or before March 31, 2022, on SEDAR at www.sedar.com. The numbers in the tables below may not add due to rounding.
Summary of Reserves Volumes as at December 31, 2022
The Company’s reserves volumes and undiscounted FDC costs as at December 31, 2022 are summarized below:
| SUMMARY OF RESERVE VOLUMES(1) | Crude Oil | NGL(2) | Natural Gas | Combined | FDC Costs | |
| (Mbbls) | (Mbbls) | (MMcf) | (MBOE) | ($MM) | ||
| Proved developed producing | 15,986 | 31,333 | 525,295 | 134,868 | 47.9 | |
| Proved developed non-producing | 44 | 71 | 1,905 | 433 | 0.3 | |
| Proved undeveloped | 44,094 | 37,042 | 612,713 | 183,255 | 2,189.8 | |
| Total Proved | 60,124 | 68,446 | 1,139,912 | 318,556 | 2,238.0 | |
| Probable | 58,262 | 55,083 | 880,473 | 260,091 | 1,714.1 | |
| Total Proved plus Probable | 118,386 | 123,529 | 2,020,386 | 578,647 | 3,952.1 |
- Gross working interest reserves before royalty deductions.
- Natural gas liquids include condensate volumes.
Net Present Value of Future Net Revenue as at December 31, 2022 (Before-Tax)
The following table summarizes the NPV of the Company’s reserves (before-tax) as at December 31, 2022. The reserves value on a $/BOE basis, discounted at 10% per year, is also summarized for each category.
| NET PRESENT VALUE | Unit Value (1) | ||||||||||||||||
| Before Tax | |||||||||||||||||
| BEFORE-TAX | 0% | 5% | 10% | 15% | 20% | ||||||||||||
| Discounted at | |||||||||||||||||
| ($MM) | ($MM) | ($MM) | ($MM) | ($MM) | 10%/Year | ||||||||||||
| ($/BOE) | |||||||||||||||||
| Developed Producing | 2,089.9 | 1,843.9 | 1,623.6 | 1,455.2 | 1,326.2 | 14.10 | |||||||||||
| Developed Non-Producing | 5.5 | 4.7 | 4.2 | 3.7 | 3.3 | 10.79 | |||||||||||
| Undeveloped | 2,698.6 | 1,913.8 | 1,403.2 | 1,056.1 | 810.7 | 8.99 | |||||||||||
| Total Proved | 4,794.0 | 3,762.5 | 3,031.0 | 2,515.0 | 2,140.3 | 11.16 | |||||||||||
| Probable | 5,080.2 | 3,020.2 | 1,980.2 | 1,398.4 | 1,045.6 | 9.38 | |||||||||||
| Total Proved plus Probable | 9,874.2 | 6,782.7 | 5,011.2 | 3,913.4 | 3,185.8 | 10.38 | |||||||||||
(1) Unit values are based on net reserves. Net reserves are the Company’s working interest reserves after deduction of royalties, plus its royalty interests in reserves.
Forecast Costs
The following table outlines estimated annual future development capital expenditures required to bring TP and
TPP reserves on production per the McDaniel Report:
| FUTURE DEVELOPMENT CAPITAL | TP Reserves ($MM) | TPP Reserves ($MM) | |
| 2023 | 387.6 | 387.6 | |
| 2024 | 454.3 | 458.3 | |
| 2025 | 467.7 | 471.9 | |
| 2026 | 454.8 | 454.8 | |
| 2027 | 429.3 | 429.3 | |
| Thereafter | 44.3 | 1,750.2 | |
| Total FDC, undiscounted | 2,238.0 | 3,952.1 | |
| Total FDC, discounted at 10% | 1,761.7 | 2,627.9 | |
2023 OUTLOOK
In the fourth quarter of 2022, Spartan announced that its Board of Directors had commenced a formal process to evaluate strategic positioning alternatives in an effort to enhance shareholder value (the “Repositioning Process”). The Repositioning Process is progressing as planned and includes the evaluation of a broad range of alternatives including, but not limited to, a corporate sale, merger, corporate restructuring, sale of select assets, sale of a royalty, purchase of assets, the spin-out of select assets into a newly-formed company whose securities would be distributed to shareholders or any combination of these potential alternatives in conjunction with a robust return of capital strategy.
Spartan’s business has not been impacted during this Repositioning Process and the Company continues to execute on the 2023 budget published in its press release dated November 30, 2022. The Company’s budget of $430 million of capital expenditures and forecast average production of between 80,000 to 82,000 BOE per day for 2023 remains unchanged.
ABOUT SPARTAN DELTA CORP.
Spartan is committed to creating a modern energy company, focused on sustainability both in operations and financial performance. The Company’s ESG-focused culture is centered on generating Free Funds Flow through responsible oil and gas exploration and development. The Company has established a portfolio of high-quality production and development opportunities in the Deep Basin and Montney. Spartan is focused on the execution of the Company’s organic drilling program, delivering operational synergies in a respectful and responsible manner to the environment and communities it operates in. The Company is well positioned to continue pursuing immediate production optimization, future growth with organic drilling, opportunistic acquisitions and the delivery of Free Funds Flow.
Spartan’s corporate presentation and updated ESG reporting as of March 2, 2023 can be accessed on the Company’s website at www.spartandeltacorp.com.
FOR ADDITIONAL INFORMATION PLEASE CONTACT:
Fotis Kalantzis
President and Chief Executive Officer
Richard F. McHardy
Executive Chairman
Spartan Delta Corp.1500, 308 – 4th Avenue SW
Calgary, Alberta, Canada T2P 0H7
Email: [email protected]
www.spartandeltacorp.com
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