Advantage Announces Third Quarter 2024 Financial and Operating Results, 2024 Capital Spending Reduction
(TSX:AAV)
CALGARY, AB, Oct. 24, 2024 /CNW/ - Advantage Energy Ltd. ("Advantage" or the "Corporation") is pleased to report 2024 third quarter financial and operating results including record production, strong liquids performance, and lower operating costs.
2024 Third Quarter Financial Highlights
Cash provided by operating activities of $46.7 million.
Adjusted funds flow ("AFF")(a) of $54.7 million or $0.33/share(a) for Advantage(b) and $52.3 million or $0.31/share (a) consolidated.
Cash used in investing activities was $52.8 million.
Net capital expenditures(a) were $54.9 million for Advantage(b) and $66.7 million consolidated.
Net debt(a) of $621.9 million for Advantage(b) and $694.0 million consolidated.
2024 Third Quarter Operating Highlights
Third quarter average production was 74,371 boe/d, an increase of 12% over the second quarter of 2024 and 16% over third quarter of 2023.
Natural gas production was 369.3 mmcf/d, an increase of 4% over the second quarter of 2024 and 9% over third quarter of 2023. An average of approximately 5,000 boe/d of dry gas was curtailed during periods of very low AECO prices during the quarter.
Liquids production was 12,820 bbls/d (8,144 bbls/d oil, 1,055 bbls/d condensate, and 3,621 bbls/d NGLs), an increase of 80% over the second quarter of 2024, and represented 71% of sales revenue.
(a)
Specified financial measure which is not a standardized measure under International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") and may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures" for the composition of such specified financial measure, an explanation of how such specified financial measure provides useful information to a reader and the purposes for which Management of Advantage uses the specified financial measure, and where required, a reconciliation of the specified financial measure to the most directly comparable IFRS Accounting Standards measure.
(b)
"Advantage" refers to Advantage Energy Ltd. only and excludes its subsidiary Entropy Inc.
Acquisition Integration and Development Plan Update
Since the closing of our acquisition in June (see our June 10, 2024 press release), we have focused on integration of the assets and we are pleased with our initial results. Operating costs in the third quarter averaged $5.55/boe, well below our expectation of $6.00/boe, despite having curtailed very low-cost gas volumes at Glacier. In addition, base decline rates(a) of the new assets are trending shallower than expected.
Advantage's initial Charlie Lake drilling program began in September, and includes seven net wells before the end of 2024 targeting development locations with strong economics. Our initial focus for the assets is to keep production steady while generating significant free cash flow, supporting debt reduction. Additional details of our development plan will be provided in December with our 2025 budget.
Construction continues on our 75 mmcf/d Progress 4-21 gas plant, which we expect to be on-stream in the second quarter of 2025. The completion of this facility will unlock significant synergies from the acquisition through regional infrastructure and production optimization, resulting in lower operating costs and stronger operating netbacks. The Progress gas plant will also provide incremental processing capacity for our next phase of low-cost production growth at Glacier into 2026 and 2027.
Operational and Financial Discipline, Capital Guidance Update
Glacier is amongst the lowest-cost natural gas assets in North America. However, daily prices at key regional hubs, including at AECO and Empress, fell to as low as $0.05/GJ at times during September and early October. As such, Advantage responsibly chose to curtail production by as much as 130 mmcf/d on certain days to maximize free cash flow and reduce depletion.
Production curtailments by Advantage and a small number of its peers, combined with increasing seasonal demand, supported in a sharp recovery in Western Canadian cash prices in October, which allowed us to restore production to capacity quickly. We expect market conditions for natural gas to improve in 2025 and beyond as a result of growing exports and increasing Western Canadian natural gas demand.
Along with production curtailments, Advantage has been prudently managing its capital program during periods of low natural gas prices by deferring drilling and completions on certain wells that had previously been planned for the second half of 2024. As a result, our 2024 capital spending guidance range has been reduced by $15 million (now $245 million to $275 million) with production guidance unchanged.
On June 21, 2024, Canadian Parliament's Bill C-59 was approved into law, establishing a path for Advantage to receive a credit from the CCUS ITC program. This credit is expected to be accrued against our 2024 capital spending; however, the exact timing of those proceeds is not certain.
Marketing Update
Advantage has hedged approximately 37% of its forecasted natural gas production through the end of 2024, as well as 36% for calendar 2025 and 22% for calendar 2026. Advantage has also hedged approximately 65% of its oil and condensate production in the second half of 2024, as well as 50% in the first half of 2025 and 15% in the second half of 2025.
Looking Forward
Advantage's long-term focus is on maximizing AFF per share(a) growth. As a result of the acquisition, Advantage now expects to exceed our per-share growth targets, so our strategy has temporarily shifted towards maximizing the pace of de-levering, with a focus on achieving our net debt(a) target of $450 million.
Debt reduction is Advantage's top priority, and we are evaluating various options to reach our net debt target more quickly, including non-core asset sales. We anticipate providing investors with an update early this winter. While Advantage is focused on reaching our net debt target as quickly as possible, we may consider opportunistic share buybacks if our share price becomes temporarily disconnected from fundamentals.
Advantage plans to host a virtual Investor Day on December 10, 2024, to discuss our 2025 budget and our refreshed three-year plan.
Conference call
Advantage's management team will discuss third quarter 2024 financial and operational results in a conference call and webcast presentation on Friday, October 25, 2024 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time).
To participate by phone, please call 1-888-510-2154 (North American toll-free) or 1-437-900-0527 (International). A recording of the conference call will be available for replay by calling 1-888-390-0541 and entering the conference replay code 45421#. The replay will be available until November 1, 2024.
To join the conference call without operator assistance, you may enter your details and phone number at https://emportal.ink/47XgccX to receive an instant automated call back. You may also stream the event via webcast at https://app.webinar.net/VWbRzWXy0ek.
Below are complete tables showing financial and operating highlights.
Financial Highlights
Three months ended
September 30
Nine months ended
September 30
($000, except as otherwise indicated)
2024
2023
2024
2023
Financial Statement Highlights
Natural gas and liquids sales
139,840
140,724
379,818
393,963
Net income (loss) and comprehensive income (loss)(3)
(6,490)
28,314
4,589
60,571
per basic share(2)
(0.04)
0.17
0.03
0.36
per diluted share(2)
(0.04)
0.16
0.03
0.35
Basic weighted average shares (000)
166,972
167,702
162,941
167,434
Diluted weighted average shares (000)
166,972
172,182
166,116
172,979
Cash provided by operating activities
46,719
90,376
161,183
234,297
Cash provided by (used in) financing activities
(1,097)
(3,562)
458,288
(18,143)
Cash used in investing activities
(52,765)
(49,886)
(626,523)
(223,915)
Other Financial Highlights
Adjusted funds flow (1)
52,260
81,862
160,007
231,076
per boe (1)
7.64
13.86
8.47
14.57
per basic share (1)(2)
0.31
0.49
0.98
1.38
per diluted share (1)(2)
0.31
0.48
0.96
1.34
Net capital expenditures (1)
66,727
61,234
637,749
242,858
Free cash flow (negative) (1)
(14,668)
20,628
(32,468)
(11,782)
Bank indebtedness
469,551
226,127
469,551
226,127
Net debt (1)
693,959
236,311
693,959
236,311
(1)
Specified financial measure which is not a standardized measure under IFRS Accounting Standards and may not be comparable to similar specified financial measures used by other entities. Please see "Specified Financial Measures" for the composition of such specified financial measure, an explanation of how such specified financial measure provides useful information to a reader and the purposes for which Management of Advantage uses the specified financial measure, and/or where required, a reconciliation of the specified financial measure to the most directly comparable IFRS Accounting Standards measure.
(2)
Based on basic and diluted weighted average shares outstanding.
(3)
Net income and comprehensive income attributable to Advantage Shareholders.
Operating Highlights
Three months ended
September 30
Nine months ended
September 30
2024
2023
2024
2023
Operating
Production
Crude oil (bbls/d)
8,144
3,035
4,615
2,527
Condensate (bbls/d)
1,055
1,368
1,162
1,134
NGLs (bbls/d)
3,621
3,174
3,042
2,913
Total liquids production (bbls/d)
12,820
7,577
8,819
6,574
Natural gas (Mcf/d)
369,306
339,709
360,791
309,060
Total production (boe/d)
74,371
64,195
68,951
58,083
Average realized prices (including realized derivatives) (2)
Natural gas ($/Mcf)
1.65
2.96
2.10
3.40
Liquids ($/bbl)
85.05
77.91
83.74
77.03
Operating Netback ($/boe)
Natural gas and liquids sales (1)
20.44
23.83
20.10
24.85
Realized gains on derivatives (1)
2.44
1.02
1.62
1.84
Processing and other income (1)
0.15
0.39
0.27
0.32
Net sales of purchased natural gas (1)
-
-
-
(0.02)
Royalty expense (1)
(2.83)
(1.55)
(1.88)
(2.03)
Operating expense (1)
(5.55)
(3.85)
(4.67)
(3.89)
Transportation expense (1)
(3.88)
(3.70)
(3.94)
(4.10)
Operating netback (1)
10.77
16.14
11.50
16.97
(1)
Specified financial measure which is not ...
