Veren Announces Q3 2024 Results & Updated Outlook
CALGARY, AB, Oct. 31, 2024 /PRNewswire/ - Veren Inc. ("Veren" or the "Company") (TSX:VRN) (NYSE:VRN) is pleased to announce its operating and financial results for the quarter ended September 30, 2024, revised 2024 guidance, 2025 budget and updated five-year outlook.
KEY HIGHLIGHTS
Generated third quarter excess cash flow of $114 million, with full year 2024 excess cash flow expected to total $625 million.
Returned $290 million to shareholders in dividends and share repurchases year-to-date, including $85 million in third quarter.
Entered into a strategic infrastructure transaction, directing $400 million of net cash proceeds to debt reduction.
Expect year-end net debt of $2.5 billion, or 1.1x debt to funds flow, reflecting $1.3 billion of total debt reduction in 2024.
Production results from Gold Creek West pad in the Alberta Montney rank in the top one percent of wells in North America.
Disciplined and returns-focused 2025 budget expected to generate excess cash flow of $575 million to $775 million.
"We continue to be excited about the quality of the resource and excess cash flow deliverability of our Kaybob Duvernay and Alberta Montney assets," said Craig Bryksa, President and CEO of Veren. "We have successfully enhanced our drilling efficiencies since entering each of these plays and are making adjustments to our completions design in the Alberta Montney to further enhance deliverability and returns. Under our disciplined and returns-focused budget for 2025 and five-year plan, we expect to generate significant excess cash flow and returns for shareholders."
FINANCIAL HIGHLIGHTS
Adjusted funds flow totaled $548.3 million during third quarter 2024, or $0.89 per share diluted, driven by a strong operating netback of $34.09 per boe.
For the quarter ended September 30, 2024, development capital expenditures, which included drilling and development, facilities and seismic costs, totaled $395.9 million.
Veren's net debt as at September 30, 2024 was $3.0 billion. During the quarter, the Company announced a strategic transaction related to the sale of certain infrastructure assets in the Alberta Montney to Pembina Gas Infrastructure ("PGI"), which included net cash proceeds of $400 million. Subsequent to the quarter, Veren successfully closed the transaction and directed all proceeds toward its balance sheet. The Company now expects its net debt to be $2.5 billion by year-end 2024.
Subsequent to the quarter, Veren successfully renewed and extended its unsecured, covenant-based credit facilities with a maturity date of November 2028. The Company also elected to cancel its $400 million unsecured syndicated credit facility, decreasing the size of its combined facilities to $2.4 billion. Veren currently has an unutilized credit capacity of $1.5 billion.
The Company continues to hedge a portion of its production as part of its ongoing commodity marketing and diversification program. Veren has hedged 50 percent of its oil and liquids production and 30 percent of its natural gas production for the remainder of 2024, net of royalty interest. In the first half of 2025, Veren has hedged 35 percent of its oil and liquids production and over 30 percent of its natural gas production, net of royalty interest. The Company has also diversified its pricing exposure for natural gas, resulting in the majority of its production through 2026 receiving a combination of fixed prices and pricing related to major U.S. markets.
Veren reported net income of $277.2 million, or $0.45 per share diluted, for the quarter ended September 30, 2024.
RETURN OF CAPITAL HIGHLIGHTS
During third quarter 2024, the Company returned $84.6 million to shareholders, including the base dividend, for a total of $290 million year-to-date. Veren remains committed to returning 60 percent of its annual excess cash flow to shareholders through a combination of dividends and share repurchases.
The Company repurchased 1.3 million shares for $13.7 million through its normal course issuer bid ("NCIB") during third quarter. Year-to-date, Veren has repurchased 6.9 million shares under its NCIB.
Subsequent to the quarter, the Company's Board of Directors declared a quarterly cash base dividend of $0.115 per share payable on January 2, 2025, to shareholders of record on December 15, 2024.
OPERATIONAL UPDATE
Average production in third quarter 2024 was 184,829 boe/d (65% oil and liquids). Veren's third quarter production reflects the full impact of the disposition of non-core assets in Saskatchewan, which closed in late second quarter, in addition to unplanned third-party facilities downtime and capacity constraints within some of the Company's Alberta Montney infrastructure. Veren plans to accelerate incremental capital spending during the remainder of the year to implement several recently identified facilities projects to improve infrastructure and reduce future downtime in the play. Excluding the impact of the disposition and downtime, Veren's production grew by approximately 6,000 boe/d between second and third quarter 2024.
Veren tested a plug-and-perforation ("P&P") completions design on wells in the Gold Creek area of its Alberta Montney in 2024 as part of its efforts to continuously seek additional efficiencies. The Company brought on stream two multi-well pads in this area with average peak 30-day rates of 600 to 900 boe/d per well (60% light oil, 10% NGLs) and recently brought on stream two additional multi-well pads that have been flowing for less than 30 days, using the P&P design. These wells are economic and were completed at a lower cost than wells completed using the single-point entry ("SPE") design in this area. However, production has underperformed the SPE completed wells which generated an average peak 30-day rate of 1,200 boe/d per well in 2023. While significantly enhancing the Company's knowledge of the play, Veren has determined that the results do not support moving away from using SPE design in this area. The Company's development plan going forward, as reflected in its revised 2024 guidance, 2025 guidance and the five-year plan, incorporates the use of SPE design in the Gold Creek area.
In the Karr area of the Alberta Montney, Veren has brought on stream two multi-well pads to date which were completed using the P&P design, generating average peak 30-day rates of 1,000 to 1,300 boe/d per well (70% light oil, 5% NGLs). The Company is testing SPE completions design in this area with three additional multi-well pads that are expected to be on stream between late 2024 and early 2025.
Wells within the Company's most recent Gold Creek West pad in the Alberta Montney ranked amongst the top one percent of all oil and liquids wells brought on stream in North America over the last three years based on an initial production rate of 180 days. This four well pad was originally brought on stream in first quarter 2024 and generated a peak 30-day rate of 2,000 boe/d per well (80% light oil, 5% NGLs). Strong performance from this pad has resulted in average cumulative production of 450,000 boe (70% light oil, 5% NGLs) per well over its first nine months, while currently producing at a rate of 1,800 boe/d per well. The Company expects to bring on stream an adjacent seven well pad in early 2025. Veren is also expanding capacity at its facility in the area in fourth quarter 2024 to accommodate increasing expected production from future pads. Veren has over 300 net internally identified drilling locations in this area.
In the Kaybob Duvernay, Veren brought three multi-well pads on stream in the Volatile Oil window during third quarter with average peak 30-day rates of 800 to 1,300 boe/d per well (70% condensate, 5% NGLs), further demonstrating the consistency of Veren's operational execution and results in the play. These pads included wells drilled on the eastern portion of the Company's land position, further delineating Veren's acreage in the area. The Company is currently completing additional delineation wells on the western portion of its land position which it expects to bring on stream in fourth quarter 2024.
Veren continues to target efficiency improvements through knowledge transfer across its assets to enhance overall returns. In the Alberta Montney and Kaybob Duvernay, the Company has reduced average drilling days per 1,000 meter lateral length by approximately 20 percent and 30 percent, respectively, since entering these plays.
In its Southeast Saskatchewan operations, the Company continues to progress its open-hole multi-lateral ("OHML") development. Veren recently brought on stream a step-out well on the eastern portion of its lands which generated a strong peak 30-day rate of 250 bbl/d (100% light oil) and plans to bring additional wells on stream through the remainder of the year.
Adjusted funds flow, adjusted funds flow per share diluted, excess cash flow, operating netback, development capital expenditures, total return of capital, net debt, net debt to adjusted funds flow and base dividends are specified financial measures - refer to the Specified Financial Measures section in this press release for further information. All financial figures are approximate and in Canadian dollars unless otherwise noted. This press release contains forward-looking information and references to specified financial measures. Significant related assumptions and risk factors, and reconciliations are described under the Specified Financial Measures, Forward-Looking Statements and Reserves and Drilling Data sections of this press release, respectively. Further information breaking down the production information contained in this press release by product type can be found in the "Product Type Production Information" section of this press release.
UPDATED 2024 GUIDANCE
Veren now expects to generate annual average production of 191,000 boe/d (65% oil and liquids) in 2024. The Company also expects its 2024 annual development capital expenditures to be $1.45 billion to $1.50 billion, reflecting incremental capital spending on facilities projects and changes to further optimize its completions design in the Alberta Montney, partially offset by a reallocation of development capital from its Saskatchewan assets.
Based on US$75/bbl WTI and $1.50/Mcf AECO for the full year, the Company expects to generate excess cash flow of $625 million in 2024. Veren expects to exit the year with net debt of $2.5 billion, reflecting a total reduction of $1.3 billion in 2024.
2025 GUIDANCE
Based on the current commodity price outlook, Veren expects its development capital expenditures to total $1.48 billion to $1.58 billion in 2025, generating annual average production of 188,000 to 196,000 boe/d (65% oil and liquids). Adjusting for non-core asset dispositions in 2024, the mid-point of the 2025 production guidance range represents growth of 10,000 boe/d, or five percent, year-over-year.
Approximately 85 percent of the Company's 2025 budget is allocated to its Alberta Montney and Kaybob Duvernay plays, which provide top quartile returns, scalability and quick well payouts. In the Alberta Montney, the company has allocated incremental capital for recently identified facilities projects to increase capacity in the play. The remaining capital budget is allocated to Veren's long-cycle, low-decline Saskatchewan assets, which generate among the highest operating netbacks in the portfolio and significant excess cash flow. Consistent with its capital allocation framework, the Company's annual budget also includes a portion of capital allocated to long-term projects, such as decline mitigation, and various environmental initiatives.
Under its 2025 budget, the Company expects to generate excess cash flow of $575 million to $775 million at US$70/bbl to US$75/bbl WTI and $2.50/Mcf AECO, allowing for significant returns to shareholders and further strengthening of the balance sheet. Veren will continue to target the return of 60 percent of its excess cash flow to shareholders, with plans to increase the percentage of excess cash flow returned as the Company further reduces its debt. Veren maintains a strong balance sheet with ample liquidity, access to the investment-grade institutional debt market and an active hedging program to mitigate against commodity price volatility.
Veren will monitor the macroeconomic environment, including results from the upcoming OPEC meeting, and will retain flexibility to lower its overall capital budget and allocation in response to weakness in commodity prices. The Company will continue to prioritize operational execution, strengthening and optimizing its balance sheet and increasing its return of capital to shareholders.
UPDATED FIVE-YEAR PLAN
Veren's annual average production is forecast to grow to 250,000 boe/d in 2029 under its updated five-year plan, driven by its Alberta Montney and Kaybob Duvernay assets. The Company expects to generate $3.9 billion of cumulative after-tax excess cash flow at US$70/bbl WTI and $3.00/Mcf AECO. Under the updated five-year plan, the Company expects to generate excess cash flow per share growth of over 10 percent on a compounded annual basis, similar to its prior plan.
CONFERENCE CALL DETAILS
Veren's management will host a conference call on Thursday, October 31, 2024 at 10:00 a.m. MT (12:00 p.m. ET) to discuss the Company's results and outlook. A slide deck will accompany the conference call and can be found on Veren's website.
Participants can listen to this event online via webcast. To join the call without operator assistance, participants may register online by entering their phone number to receive an instant automated call back. Alternatively, the conference call can be accessed with operated assistance by dialing 1‑888‑510‑2154. Participants will be able to take part in a question and answer session through both the webcast dashboard and the conference line following management's opening remarks.
The webcast will be archived for replay and can be accessed online. The replay will be available shortly after the call's completion.
The Company's most recent investor presentation is available on Veren's website.
2024 GUIDANCE
The Company's guidance for 2024 is as follows:
Prior
Revised
Total Annual Average Production (boe/d) (1)
192,500 - 197,500
191,000
Development Capital Expenditures ($ millions) (2)
$1,400 - $1,500
$1,450 - $1,500
Other Information for 2024 Guidance
Annual operating expenses ($/boe)
$12.50 - $13.50
$13.50
Royalties
10.00% - 11.00%
10.00% - 11.00%
1)
Revised total annual average production (boe/d) is comprised of approximately 65% Oil, Condensate & NGLs and 35% Natural Gas
2)
Specified financial measure that does not have any standardized meaning prescribed by IFRS and, therefore may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section for further information. Excludes capitalized administration of approximately $40 million, in addition to land expenditures and net property acquisitions and dispositions. Revised development capital expenditures spend is allocated on an approximate basis as follows: 90% drilling & development and 10% facilities & seismic
2025 GUIDANCE
The Company's guidance for 2025 is as follows:
Total Annual Average Production (boe/d) (1)
188,000 - 196,000
Development Capital Expenditures ($ millions) (2)
$1,475 - $1,575
Other Information for 2025 Guidance
Annual operating expenses ($/boe)
$12.75 - $13.75
Royalties
10.75% - 11.75%
1)
Total annual average production (boe/d) is comprised of approximately 65% Oil, Condensate & NGLs and 35% Natural Gas
2)
Specified financial measure that does not have any standardized meaning prescribed by IFRS and, therefore may not be comparable with the calculation of similar measures presented by other entities. Refer to the Specified Financial Measures section for further information Excludes capitalized administration of approximately $40 million, in addition to land expenditures and net property acquisitions and dispositions. Development capital expenditures spend is allocated on an approximate basis as follows: 85% drilling & development and 15% facilities & seismic
RETURN OF CAPITAL OUTLOOK
Base Dividend
Current quarterly base dividend per share
$0.115
Total Return of Capital
% of excess cash flow (1)
60 %
1)
Total return of capital is based on a framework that targets to return to shareholders 60% of excess cash flow on an annual basis
The Company's unaudited consolidated financial statements and management's discussion and analysis for the quarter ended September 30, 2024, will be available on the System for Electronic Document Analysis and Retrieval ("SEDAR+") at www.sedarplus.ca, on EDGAR at www.sec.gov and on Veren's website at www.vrn.com.
CONSOLIDATED FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended September 30
Nine months ended September 30
(Cdn$ millions except per share and per boe amounts)
2024
2023
2024
2023
Financial
Cash flow from operating activities
561.7
648.9
1,598.7
1,584.4
Adjusted funds flow from operations (1)
548.3
687.1
1,728.2
1,764.6
Per share (1) (2)
0.89
1.28
2.79
3.24
Net income (loss)
277.2
(809.9)
126.5
(380.9)
Per share (2)
0.45
(1.52)
0.20
(0.70)
Adjusted net earnings from operations (1)
177.0
315.5
601.8
739.8
Per share (1) (2)
0.29
0.59
0.97
1.36
Dividends declared
70.9
71.7
213.9
143.6
Per share (2)
0.115
0.135
0.345
0.267
Net debt (1)
2,959.4
2,876.2
2,959.4
2,876.2
Net debt to adjusted funds flow from operations (1) (3)
1.3
1.3
1.3
1.3
Weighted average shares outstanding
Basic
616.6
534.3
618.4
542.0
Diluted
617.5
536.9
620.0
544.8
Operating
Average daily production
Crude oil and condensate (bbls/d)
102,373
114,997
108,769
103,094
NGLs (bbls/d)
16,859
21,635
17,656
19,519
Natural gas (mcf/d)
393,582
263,694
393,347
215,012
Total (boe/d)
184,829
180,581
191,983
158,448
Average selling prices (4)
Crude oil and condensate ($/bbl)
95.05
105.24
95.65
97.72
NGLs ($/bbl)
34.64
27.45
35.99
30.40
Natural gas ($/mcf)
1.21
2.81
1.97
3.19
Total ($/boe)
58.39
74.42
61.54
71.65
Netback ($/boe)
Oil and gas sales
58.39
74.42
61.54
71.65
Royalties
(6.36)
(9.67)
(6.43)
(9.46)
Operating expenses
(13.48)
(14.58)
(13.68)
(14.75)
Transportation expenses
(4.46)
(3.03)
(4.51)
(2.99)
Operating netback(1)
34.09
47.14
36.92
44.45
Realized gain (loss) on commodity derivatives
1.98
(0.57)
0.66
0.20
Other (5)
(3.83)
(5.21)
(4.73)
(3.86)
Adjusted funds flow from operations netback (1)
32.24
41.36
32.85
40.79
Capital Expenditures
Capital acquisitions (6)
26.4
1.1
26.4
2,075.8
Capital dispositions (6)
(1.4)
(0.2)
(648.3)
(11.2)
Development capital expenditures (1)
Drilling and development
354.7
285.1
1,023.4
777.8
Facilities and seismic
41.2
30.4
121.7
