Spartan Delta Corp. Announces Year-End 2020 Financial Results and Reserves and Provides Updated 2021 Guidance
Calgary, Alberta – March 12, 2021 – Spartan Delta Corp. (“Spartan” or the “Company”) (TSXV: SDE; SDE.R) is pleased to announce its financial and operating results for the fourth quarter and year ended December 31, 2020, as well as its independent oil and gas reserves evaluation as of December 31, 2020, prepared by McDaniel & Associates Consultants Ltd. (the “McDaniel Report”).
Corporate Milestones Achieved Since the Recapitalization of Spartan Delta Corp. in December 2019
- Completed a transformational Spirit River and Cardium asset acquisition in June 2020, which included ~25,000 boe/d of production in west central Alberta, consisting of ~250 bbls/d of crude oil, ~1,000 bbls/d of condensate, ~6,500 bbls/d of NGLs and ~103.5 MMcf/d of conventional natural gas.
- Maintained production at 26,141 boe/d on average during the second half of 2020, consisting of ~330 bbls/d of crude oil, ~1,100 bbls/d of condensate, ~6,800 bbls/d of NGLs and ~107.5 MMcf/d of conventional natural gas, through low-cost field optimization, which more than offset normal corporate declines.
- Reduced operating costs by 18% in less than three quarters of operating the properties acquired in June 2020.
- Established a $100 million syndicated credit facility and s uccessfully accessed capital markets raising aggregate gross proceeds of $213 million from equity financings since the inception in December 2019, inclusive of a $124 million financing expected to be completed in March 2021.
- Recently closed three small acquisitions and executed definitive agreements for two additional acquisitions which are collectively expected to add ~9,500 boe/d of run-rate production, consisting of ~2,090 bbls/d of crude oil, ~475 bbls/d of condensate, ~760 bbls/d of NGLs and ~37.05 MMcf/d of conventional natural gas.
- Added a new core development and consolidation area with a material entry into the Alberta Montney.
Selected Financial and Operational Information
Selected financial and operational information is set out below and should be read in conjunction with Spartan’s audited annual consolidated financial statements and related management’s discussion and analysis (“MD&A”) for the years ended December 31, 2020 and 2019, which are available on the Company’s website at www.spartandeltacorp.com and filed on SEDAR at www.sedar.com.
| Three months ended December 31 | Year ended December 31 | |||
| (CA$ thousands, except as otherwise indicated) | 2020 | 2019 | 2020 | 2019 |
| OPERATING | ||||
| Average daily production | ||||
| Crude oil (bbls/d) | 332 | 25 | 196 | 26 |
| Condensate (bbls/d) (1) | 1,131 | – | 656 | – |
| NGLs (bbls/d) (1) | 6,728 | 20 | 3,965 | 15 |
| Natural gas (Mcf/d) | 106,912 | 1,070 | 63,625 | 1,102 |
| Combined (boe/d) | 26,010 | 223 | 15,421 | 225 |
| Average realized prices, before financial instruments | ||||
| Crude oil ($/bbl) | 47.95 | 54.14 | 46.03 | 61.76 |
| Condensate ($/bbl) (1) | 54.46 | – | 51.39 | – |
| NGLs ($/bbl) (1) | 18.35 | 53.39 | 16.74 | 54.13 |
| Three months ended December 31 | Year ended December 31 | |||
| (CA$ thousands, except as otherwise indicated) | 2020 | 2019 | 2020 | 2019 |
| Natural gas ($/Mcf) | 2.72 | 2.20 | 2.42 | 1.51 |
| Combined average ($/boe) | 18.89 | 21.33 | 17.07 | 18.18 |
| Operating and Corporate Netbacks ($/boe) (2) | ||||
| Oil and gas sales, before financial instruments | 18.89 | 21.33 | 17.07 | 18.18 |
| Realized loss on financial instruments | (0.90) | – | (0.17) | – |
| Oil and gas sales, after financial instruments | 17.99 | 21.33 | 16.90 | 18.18 |
| Processing and other revenue | 0.66 | 1.78 | 0.60 | 1.66 |
| Royalties | (2.01) | (0.15) | (1.57) | 0.26 |
| Operating expenses | (5.68) | (30.91) | (6.11) | (24.58) |
| Transportation expenses | (1.37) | – | (1.36) | – |
| Operating Netback (2) | 9.59 | (7.95) | 8.46 | (4.48) |
| General and administrative expenses | (1.48) | (27.19) | (1.64) | (17.13) |
| Interest expense, net of interest income | (0.19) | – | (0.21) | – |
| Corporate Netback (2) | 7.92 | (35.14) | 6.61 | (21.61) |
| FINANCIAL | ||||
| Oil and gas sales | 45,206 | 437 | 96,324 | 1,491 |
| Cash provided by (used in) operating activities | 16,064 | (599) | 32,209 | (1,298) |
| Adjusted Funds from Operations (2) | 18,939 | (723) | 37,308 | (1,772) |
| $ per share, basic | 0.33 | (0.16) | 0.83 | (0.89) |
| $ per share, diluted | 0.28 | (0.16) | 0.67 | (0.89) |
| Net income (loss) and comprehensive income (loss) | 12,358 | (60) | 47,663 | (1,998) |
| $ per share, basic | 0.21 | (0.01) | 1.06 | (1.00) |
| $ per share, diluted | 0.18 | (0.01) | 0.86 | (1.00) |
| Capital expenditures, net of dispositions | 14,346 | 29 | 125,869 | (231) |
| Total assets | 331,430 | 34,245 | 331,430 | 34,245 |
| Net Debt (Surplus) (2) | 12,292 | (23,538) | 12,292 | (23,538) |
| Shareholders’ equity | 137,540 | 25,640 | 137,540 | 25,640 |
| Common shares outstanding (000s) (3) | ||||
| Weighted average, basic | 58,220 | 4,638 | 44,848 | 1,996 |
| Weighted average, diluted | 68,859 | 4,638 | 55,403 | 1,996 |
| End of period | 58,226 | 26,106 | 58,226 | 26,106 |
- Condensate is a natural gas liquid as defined by NI 51-101. See “Reader Advisories – Other Measurements”.
- “Operating Netback”, “Corporate Netback”, “Adjusted Funds from Operations” and “Net Debt (Surplus)” do not have standardized meanings under IFRS. See “Reader Advisories – Non-GAAP Measures”.
- See “Reader Advisories – Share Capital”.
Fourth Quarter 2020 Financial and Operational Highlights
- Development Execution: Spartan drilled four and brought on production two extended reach horizontal Spirit River wells at Ferrier, Alberta during the fourth quarter and subsequently drilled and completed the remainder of the eight-well winter program in the first quarter of 2021. The winter drilling program was delivered ahead of schedule and below budget with six wells having produced, on restricted production for operational efficiencies and decline management purposes, at an average IP30 of 1,580 boe/d, consisting of 93 bbls/d condensate, 370 bbls/d NGLs and 6.85 MMcf/d conventional natural gas. Two of these wells have produced for more than two months at an average IP60 of 1,526 boe/d, consisting of 82 bbls/d condensate, 345 bbls/d NGLs and 6.53 MMcf/d conventional natural gas.
- Production Optimization: Maintained fourth quarter 2020 production volumes of 26,010 boe/d, in-line with third quarter 2020 volumes, primarily through production optimization as the Company’s first two new wells were brought onstream in mid-December. (See “Selected Financial and Operational Information” for breakdown by product type)
- Improved Operating Netback: Spartan’s Operating Netback increased by 15% and averaged $9.59/boe for the fourth quarter of 2020, up from $8.32/boe in the third quarter of 2020. The improved operating netback reflects the decrease in per unit operating costs in conjunction with stronger commodity prices, partly offset by higher royalties. (See “Reader Advisories – Non-GAAP Measures”, below)
- Strong Cash Flows: The Company generated Adjusted Funds from Operations of $18.9 million ($0.33 per share, basic and $0.28 per share, diluted) during the fourth quarter of 2020, resulting in a Corporate Netback of $7.92/boe. Free Funds Flow was $2.8 million after leases, decommissioning and $14.0 million of capital expenditures. (See “Reader Advisories – Non-GAAP Measures”, below)
- Operational Excellence: Spartan generated meaningful cost savings and reduced its operating expenses each consecutive quarter during 2020, highlighting the successful integration of the acquired assets and impact of the Company’s strategic initiatives. Operating expenses averaged $5.68/boe for the quarter ended December 31, 2020, down 7% from $6.10/boe during the previous quarter and down 18% since the acquisition of the Company’s west central Alberta assets in the second quarter of 2020.
- Balance Sheet Strength: Spartan exited the fourth quarter with its credit facility undrawn and an authorized borrowing amount of $100.0 million. Spartan had Net Debt of $12.3 million as at December 31, 2020. (See “Reader Advisories – Non-GAAP Measures”, below)
2020 Reserve Evaluation Highlights
Spartan is pleased to provide highlights of the Company’s December 31, 2020 reserves from the McDaniel Report, below. The results of the McDaniel Report are reflective of Spartan’s significant acquisition in West Central Alberta, making up a majority of the Company’s reserves in 2020. The West Central reserves were reconfigured in 2020 to capitalize on extended reach horizontal drilling techniques (“ERH”) and to adjust booked locations to more accurately reflect the near-term development plans of the Company post-acquisition.
- 72% of the 101 booked locations and 56% of the total inventory are ERH.
- Reconfiguring to ERH has made booked locations more efficient, economic and reduced the environmental impact of the development:
o Approximately a 70% increase in IRR, while only increasing capital cost by 25% when compared to conventional bookings of one-mile horizontals; (See “Reader Advisories – Non-GAAP Measures”)
o Go-forward estimated undeveloped finding and development (“F&D”) costs has been decreased considerably with proved undeveloped F&D costs equal to $3.94 and proved plus probable undeveloped F&D costs equal to $3.35; and
o Go-forward proved undeveloped recycle ratio of 2.4x and proved plus probable undeveloped recycle ratio of 2.9x.
- Future development capital (“FDC”) totaled $266.5 million in the total proved category with 63 net locations and $417.3 million in the total proved plus probable category with 101 net locations.
- The Company has over 425 Spirit River and Cardium locations in inventory (>75% unbooked).
- Before-tax net present value (“NPV”) of reserves, discounted at 10%, is $375.9 million on a proved developed producing basis, $777.3 million on a total proved basis, and $1.1 billion on a total proved plus probable basis.
- Approximately 33% of the Company’s reserves are in the proved developed producing category and 65% of the reserves are in the total proved category.
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