Kiwetinohk reports third quarter 2024 results and provides Duvernay and Montney operations update
CALGARY, AB, Nov. 6, 2024 /CNW/ - Kiwetinohk Energy Corp. (TSX:KEC) today reported its third quarter 2024 financial and operational results. As companion documents to this news release, please review the third quarter 2024 management discussion and analysis (MD&A) and condensed consolidated interim financial statements (available on kiwetinohk.com or www.sedarplus.ca) for additional financial and operational details.
"In the third quarter, Kiwetinohk's upstream business continued to deliver strong performance in three key profitability drivers: Production increased 23% from the third quarter of 2023. Third quarter operating netback is strong and consistent in a volatile pricing environment with $28.98/boe achieved in 2024. Wells continue to deliver as we build our Duvernay production base and demonstrate the productivity of an underdeveloped Simonette Montney resource," said Pat Carlson, Chief Executive Officer.
"Continued success in our upstream development program has encouraged us to expand our plans to include a second drilling rig to accelerate three wells previously planned to begin in the second half of 2025. Incremental capital is expected to result in a higher ratio of net debt to adjusted funds from operations in the short-term as we exit the year. With nine wells anticipated to come on-stream between now and the end of the first quarter 2025, we expect to be in a position to begin to deliver free cash flow and repay debt early in 2025. Advancing this investment provides us with flexibility to determine optimal growth levels depending on the commodity price environment. Work on our 2025 budget is well underway, and we anticipate releasing guidance later in the fourth quarter.
"In our power division, we continue to remain cautious and capital disciplined given the uncertain regulatory environment."
Third Quarter Highlights
Average production of 25,996 boe/d with increased liquids yields (51% natural gas + 49% condensate and NGLs).
Seven new Duvernay wells and one successful Simonette Montney well on stream. On average, new development wells are producing in-line with expectations.
Temporarily impacted by planned outages to equip the new wells and unplanned third party restrictions.
Average peak 30-day production rates from new wells is summarized below:
Pad
On-stream
# wells
Natural gas + associated liquids (MMcf/d)
Condensate (bbl/d)
Averageproduction per well(boe/d)
% Condensate
11-24 (Tony Creek)
July
3 Duvernay
1.2
750
950
79 %
10-29 (Tony Creek)
August
3 Duvernay
3.5
1,100
1,680
65 %
1-27 (Simonette)
September
1 Duvernay
11.8
450
2,420
19 %
1-27 (Simonette)
September
1 Montney
6.7
400
1,520
26 %
In the Simonette area, our high-pressure, high liquids position continues to deliver some of the top performing wells in the Duvernay. Montney development is focused on two main benches within the formation. To date, most wells targeted the upper bench. Kiwetinohk's recent Simonette Montney well was drilled in the lower bench. The well continues to be choked back and while it is very early days, the promising results provide confidence to proceed with additional delineation wells, which could convert unbooked locations into proved reserves.
Strong operating netback1 of $28.98/boe drove adjusted funds flow from operations1 of $64.7 million, bringing total year-to-date adjusted funds flow from operations to $200.4 million or $4.59/share.
Operating costs of $7.19/boe slightly increased from previous quarters as a result of planned maintenance but remain on track to achieve the low end of full year targets.
Transportation costs of $6.04/boe remain consistent with previous quarters. Kiwetinohk extended its Alliance capacity for an additional seven year period providing access to the Chicago market until 2032.
Capital expenditures (before acquisitions/dispositions)1 of $91.0 million were in-line with budget, and included:
Completion and equipping costs for the 8 new wells noted above.
A continued two-rig drilling program in Simonette at Pads 8-23 (2 Duvernay, 1 Montney) and 9-11 (3 Duvernay).
Exited with a 0.91x net debt to annualized adjusted funds flow from operations ratio2.
As of September 30, 2024, after accounting for current borrowing and outstanding letters of credit, Kiwetinohk had $232 million of available borrowing capacity under its recently renewed and expanded credit facilities.
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1 Operating netback, adjusted funds flow from operations and capital expenditures (before acquisitions/dispositions) are Non-GAAP measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please refer to the section "Non-GAAP and other financial measures" herein for further information.
2 Net debt to annualized adjusted funds flow from operations is a non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please refer to the section "Non-GAAP and other financial measures" herein for further information.
Fourth quarter 2024 plans include:
Drilling another three wells (2 Duvernay / 1 Montney) in Simonette at the 14-29 pad, which will finish drilling and be completed in early 2025.
Completion of the three well (2 Duvernay / 1 Montney) program at the 8-23 pad. These wells are expected to be on stream later in the fourth quarter.
Completion of the three Duvernay wells at 9-11 which are expected to be on stream early in the new year.
Drilling three wells at the reoccupied 1-27 pad as part of an accelerated drilling program outlined below.
Guidance update
Kiwetinohk plans to accelerate its 2025 drilling program by reoccupying the 1-27 pad in Simonette and commence drilling three Duvernay wells late in the fourth quarter. This acceleration is expected to enhance 2025 production growth while retaining flexibility to adapt to volatile commodity prices and to reduce capital expenditures in 2025, if needed. Kiwetinohk expects incremental capital spending of up to $10.0 million in 2024, with remaining capital to be included in its 2025 capital budget. Full-year capital guidance for 2024 is updated to a range of $330 - $350 million.
Kiwetinohk has also updated sensitivities for expected adjusted funds flow from operations and projected ratio of net debt to adjusted funds flow from operations to account for this capital acceleration assuming realized pricing for WTI Crude Oil and Henry Hub (HH) natural gas of US$70/MMBtu and US$2.50/MMBtu, respectively, for the remainder of the year.
All other financial and operational guidance remain as previously presented on July 30, 2024.
2024 Financial & Operational Guidance
Current
November 5, 2024
Previous
July 30, 2024
Capital guidance
$MM
$330 - $350
$320 - $340
Upstream
$MM
$325 - $342
$315 - $332
DCET
$MM
$305 - $320
$295 - $310
Infrastructure, production maintenance and other
$MM
$20 - $22
$20 - $22
Power 1
$MM
$5 - $8
$5 - $8
2024 Adjusted Funds Flow from Operations commodity pricing sensitivity 2, 3
US$70/bbl WTI & US$2.50/MMBtu HH
$MM
$260 - $280
Not previously provided 3
2024 Net debt to Adjusted Funds Flow from Operations sensitivity 2, 3
US$70/bbl WTI & US$2.50/MMBtu HH
X
1.0x - 1.1x
Not previously provided 3
1, The company incurred $3.4 million of costs within the first six months of 2024 prior to recognizing an impairment on the power portfolio (excluding Homestead). Expenditures on impaired projects will be expensed for the remainder of the year. Guidance reflected includes capitalized costs and expensed project development costs.
2, Non-GAAP and other financial measures that do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please refer to the section "Non-GAAP Measures" herein.
3 - Sensitivities for adjusted funds flow from operations and net debt to adjusted funds flow from operations were previously provided at US$70/bbl WTI & US$2.00/MMBtu HH and US$80/bbl WTI and US$3.00/MMBtu HH. Sensitivities have been revised to $US70/bbl WTI and US$2.50/MMBtu HH to approximate forward strip pricing for the remainder of the year. Assumes actual realized pricing to date and flat pricing for the remainder of the year.
A detailed breakdown of current full-year guidance, can be found in the MD&A for this quarter available on SEDAR+ at www.sedarplus.ca. The revised 2024 annual guidance and related sensitivity provides information relevant to expectations for financial and operational results. This corporate guidance is based on commodity price assumptions and economic ...
