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Spartan Delta Corp. announces Record Adjusted funds flow with Q1 2022 results and provides operations update

Press Release

Calgary, Alberta – May 10, 2022 – Spartan Delta Corp. (“Spartan” or the “Company”) (TSX:SDE) is pleased to report its unaudited financial and operating results for the three months ended March 31, 2022.

Selected financial and operational information is set out below and should be read in conjunction with Spartan’s unaudited interim financial statements and related management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2022, 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”.

HIGHLIGHTS

  • Spartan’s average Q1 2022 production volumes grew to 72,588 BOE/d, up 127% compared to 31,914 BOE/d in Q1 2021 and in line with Q4 2021; liquids increased to 37% in Q1 2022 from 28% in Q1 2021.
  • The Company’s Q1 2022 Operating Netback averaged $33.73 per BOE before hedging ($26.94 per BOE after hedging), up 12% from Q4 2021.
  • Spartan achieved record Adjusted Funds Flow of $160 MM ($0.92 per share, diluted), an increase of 17% compared to $137 MM in Q4 2021.
  • The Company had an active winter drilling program, investing $108 MM in Q1 2022 into the development of its Montney and Deep Basin core assets; drilled 12.0 net wells, completed 14.5 net wells and a total of 9.5 net wells were tied-in and brought on-production.
  • Free Funds Flow of $52 MM was used to reduce the Company’s Net Debt to $406 MM as at March 31, 2022; Spartan’s quarter-end Net Debt represents approximately 0.6 times its Q1 2022 Annualized Adjusted Funds Flow.

MESSAGE TO SHAREHOLDERS

Spartan achieved tremendous growth from 31,914 BOE/d (28% liquids) in the first quarter of 2021 to 72,588 BOE/d (37% liquids) during the first quarter of 2022. This was the result of the successful execution of its Deep Basin and Montney drilling programs together with effective integration of several accretive acquisitions completed during 2021.

Oil and gas sales revenue increased by 365% to $322 MM compared to $69 MM in the same quarter of 2021, driven by the Company’s oil-weighted production growth together with higher commodity prices. Spartan’s combined average realized price of $49.35 per BOE in the first quarter of 2022 more than doubled compared to the average price of $24.12 per BOE in the first quarter of 2021. To date in 2022, global crude oil and natural gas prices have risen to the highest levels seen over the past decade due to tight supply, a resurgence in energy demand and the war in Ukraine.

Spartan is proud of its team’s performance in the field. The Company’s active capital program was executed responsibly and safely during the quarter with strong uptime despite challenging weather conditions. The Company remains committed to ensuring the safety and integrity of its team, local communities, and the environment as part of its ongoing environmental, social and governance (“ESG”) priorities.

OPERATIONS UPDATE

Spartan’s corporate focus remained on operational execution during the first quarter of 2022, as demonstrated by strong performance from new wells drilled by the Company in its Deep Basin and Montney core development areas.

Deep Basin

In the Deep Basin, Spartan drilled 5.0 net wells, completed 8.5 net wells and brought 6.5 net wells on production during the first quarter of 2022. Highlights from the Q1 campaign are as follows:

  • Ferrier Spirit River 2-30 IP60 of 2,254 BOE/d per Pad (2.0 net wells) was brought onstream February 22, 2022 and achieved an well (40 bbls/d condensate, 434 bbls/d NGLs and 10.7 mmcf/d natural gas).
  • Brazeau 13-11 Cardium Pad (2.0 net wells) was brought onstream April 2, 2022 and achieved an IP30 of 833 BOE/d per well average (319 bbls/d oil, 22 bbls/d condensate, 133 bbls/d NGLs and 2.2 mmcf/d natural gas).

The Company’s existing capital expenditure budget includes 12.0 to 14.0 additional net Deep Basin wells to be drilled in the remainder of 2022.

Montney

In the Montney, Spartan drilled 7.0 net wells, completed 6.0 net wells and brought 3.0 net wells on production during the first quarter of 2022. Additionally, Spartan drilled and completed 1.0 disposal well. These results, plus additional details on the Gold Creek West 7-34 pad, are summarized below:

  • Gold Creek East 5-7 Phase 2 (3.0 net wells) was brought onstream February 13, 2022. Gold Creek wells typically take 60 to 90 days to reach peak rates. For the month of April, the pad average 1,566 BOE/d per well (760 bbls/d oil, 11 bbls/d condensate, 158 bbls/d NGLs and 3.8 mmcf/d natural gas) and through to the end of April the pad has been onstream for 76 days.
  • Gold Creek East 2-34 Phase 5, 2022. The pad continues to 1 (3.0 net wells) was brought onstream subsequent to the quarter on April clean up and early rates are exceeding expectations.
  • Gold Creek West 7-34 Phase 2 (4.0 net wells) was brought onstream November 8, 2021. Initial rates were constrained awaiting a pipeline expansion that was completed in March 2022. Following the pipeline expansion, for the month of April the pad averaged 793 BOE/d per well (345 bbls/d oil, 30 bbls/d condensate, 62 bbls/d NGLs and 2.1 mmcf/d natural gas) and through to the end of April the pad has been onstream for 173 days.

Spartan is encouraged by the success of its Montney drilling program to date. The Company’s existing capital expenditure budget includes 14.0 to 15.0 additional net Montney wells to be drilled from Q2 2022 through year end, which will see further development in the Gold Creek and Karr areas as well as Spartan’s first wells at Simonette.

FINANCIAL AND OPERATING HIGHLIGHTS

The tables below summarize the Company’s results for the quarter ended March 31, 2022 compared to the fourth quarter ended December 31, 2021 and the first quarter ended March 31, 2021.

(CA$ thousands, except as otherwise noted) Q1 2022 Q4 2021 % Q1 2022 Q1 2021 %
FINANCIAL HIGHLIGHTS
Oil and gas sales 322,424 296,425 9 322,424 69,283 365
Net income and comprehensive income 61,177 128,455 (52) 61,177 59,164 3
$ per share, basic (a) 0.40 0.84 (52) 0.40 0.87 (54)
$ per share, diluted (a) 0.36 0.76 (53) 0.36 0.73 (51)
Cash provided by operating activities 137,840 147,975 (7) 137,840 32,107 329
Adjusted Funds Flow (b) 159,721 137,026 17 159,721 34,617 361
$ per share, basic (a) 1.04 0.89 17 1.04 0.51 104
$ per share, diluted (a) 0.92 0.80 15 0.92 0.42 119
Free Funds Flow (b) 51,737 21,344 142 51,737 15,335 237
Cash used in investing activities 104,362 98,225 6 104,362 42,938 143
Capital Expenditures before A&D (b) 107,984 115,682 (7) 107,984 19,282 460
Adjusted Net Capital Acquisitions (b) (567) (1,437) (61) (567) 147,121 nm
Total assets 1,811,765 1,742,414 4 1,811,765 679,613 167
Long-term debt 356,570 387,564 (8) 356,570
Net Debt (b) 405,691 458,259 (11) 405,691 (98,303) (513)
Net Debt to Annualized AFF Ratio (b) 0.6x 0.8x (25) 0.6x n/a
Shareholders’ equity 950,734 886,649 7 950,734 414,230 130
Common shares outstanding (000s), end of period (a) 153,469 153,214 0 153,469 113,932 35
OPERATING HIGHLIGHTS AND NETBACKS (e)
Average daily production
Crude oil (bbls/d) 11,270 11,450 (2) 11,270 603 1,769
Condensate (bbls/d) (c) 2,414 2,373 2 2,414 1,338 80
Natural gas liquids (bbls/d) (c) 12,971 13,576 (4) 12,971 7,115 82
Natural gas (mcf/d) 275,596 270,176 2 275,596 137,146 101
BOE/d 72,588 72,428 0 72,588 31,914 127
% Liquids (d) 37% 38% (3) 37% 28% 32
Average realized prices, before financial instruments
Crude oil ($/bbl) 116.35 91.38 27 116.35 66.56 75
Condensate ($/bbl) (c) 120.17 96.63 24 120.17 72.01 67
Natural gas liquids ($/bbl) (c) 49.59 44.39 12 49.59 28.37 75
Natural gas ($/mcf) 4.85 4.97 (2) 4.85 3.15 54
Combined average ($/BOE) 49.35 44.48 11 49.35 24.12 105
Netbacks ($/BOE) (e)
Oil and gas sales 49.35 44.48 11 49.35 24.12 105
Processing and other revenue 0.36 0.36 0.36 0.62 (42)
Royalties (4.86) (4.91) (1) (4.86) (3.03) 60
Operating expenses (8.36) (7.52) 11 (8.36) (5.06) 65
Transportation expenses (2.76) (2.41) 15 (2.76) (1.34) 106
Operating Netback, before hedging ($/BOE) (e) 33.73 30.00 12 33.73 15.31 120

 

Netbacks continued from previous page Q1 2022 Q4 2021 % Q1 2022 Q1 2021 %
Settlements on Commodity Derivative Contracts(e)(f) (6.74) (6.39) 5 (6.74) (1.03) 554
Net Pipeline Transportation Margin (e)(g) (0.05) (0.25) (80) (0.05)
Operating Netback, after hedging ($/BOE) (e) 26.94 23.36 15 26.94 14.28 89
General and administrative expenses (0.88) (1.12) (21) (0.88) (1.22) (28)
Cash Financing Expenses (e)(h) (1.04) (1.08) (4) (1.04) (0.12) 767
Realized foreign exchange and other 0.10 0.04 150 0.10 0.19 (47)
Settlement of decommissioning obligations (0.19) (0.16) 19 (0.19) (0.23) (17)
Lease payments (i) (0.48) (0.48) (0.48) (0.85) (44)
Adjusted Funds Flow Netback ($/BOE) (e) 24.45 20.56 19 24.45 12.05 103

 

  1. Refer to “Share Capital” section of this press release.
  2. “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.
  3. Condensate is a natural gas liquid (“NGL”) as defined by NI 51-101. See “Other Measurements”.
  4. “Liquids” includes crude oil, condensate and NGLs.
  5. “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.
  6. Includes realized gains or losses on derivative financial instruments plus settlements of acquired derivative liabilities.
  7. Pipeline transportation revenue, net of pipeline transportation expense.
  8. Includes interest and fees on long-term debt, net of interest income.
  9. Includes total lease payments comprised of the principal portion and financing cost of lease liabilities.

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