TENAZ ENERGY CORP. ANNOUNCES Q3 2024 RESULTS AND SENIOR UNSECURED NOTES ISSUE
CALGARY, AB, November 7, 2024 /CNW/ - Tenaz Energy Corp. ("Tenaz", "We", "Our", "Us" or the "Company") (TSX: TNZ) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2024 and senior unsecured notes issue.
The unaudited interim condensed consolidated financial statements and related management's discussion and analysis ("MD&A") are available on SEDAR+ at www.sedarplus.ca and on Tenaz's website at www.tenazenergy.com. Select financial and operating information for the three and nine months ended September 30, 2024 appear below and should be read in conjunction with the related financial statements and MD&A.
HIGHLIGHTS
Corporate Update
We are pleased to announce a $140 million private placement offering (the "Offering") of Senior Unsecured Notes due 2029 (the "Notes"). The Offering has been placed with institutional investors and is expected to close on November 14, 2024. The Notes are non-callable for the first two-and-one-half years, bear interest at 12% per annum, and are priced at par. The Notes will replace the previously- announced $90 million delayed-draw term loan provided by National Bank of Canada ("NBC") to facilitate the acquisition of NAM Offshore B.V. ("NOBV"). This long-term debt financing provides significant liquidity to pursue our international M&A strategy, as well as funding the closing of the NOBV acquisition.
On July 18, 2024, we announced the execution of a definitive agreement to purchase NOBV. On August 5, the Netherlands Authority for Consumers and Markets ("ACM") completed its review of the transaction and cleared it to proceed as planned. We are now conducting transition activities with a target of a mid-2025 closing and assumption of operations. Free cash flow occurring between the effective date of January 1, 2024 and the closing date will be reflected as a reduction of the purchase price.
Third Quarter Operating and Financial Results
Production volumes averaged 2,535 boe/d(1) in Q3 2024, up approximately 1% from Q2 2024. Higher Netherlands production after completing annual offshore maintenance was largely offset by lower Canadian production. Production increased 7% over Q3 2023, driven by an increase in Canadian production from Leduc-Woodbend wells brought on late in 2023.
During Q3, we drilled an unstimulated multi-lateral well in the Ellerslie formation on recently-acquired land near the Watelet gas plant. During its initial 45 days of production, this well has averaged approximately 355 boe/d gross (310 boe/d net to Tenaz), with oil constituting 93% of this production. Based on these strong results, we are drilling a follow-up multi-lateral well to further develop this Ellerslie pool.
Our 2024 capital plan in Canada has been revised to include the two (1.75 net) horizontal multi-lateral wells targeting the Ellerslie formation. These two Ellerslie wells replace the four gross (3.5 net) Rex program in our original plan. The revised capital program is even more capital efficient than the original Rex-oriented plan.
Funds flow from operations ("FFO")(2) for the third quarter was $3.4 million, down 42% from Q2 2024 and 30% from Q3 2023. Lower FFO resulted in part from higher G&A and transaction costs for M&A activity, including the NOBV acquisition. In the quarter-over-quarter comparison, FFO was further impacted by a prior-period income tax recovery recorded in Q2 2024.
We recorded a net loss of $2.5 million in Q3 2024, as compared to net income of $1.3 million in Q2 2024 and $20.9 million in Q3 2023. The shift to a net loss was driven in part by transaction expenses in Q3 2024, the positive impact of a prior-period income tax recovery in Q2 2024, and a gain on acquisition of non-operated Netherlands assets which was recorded in Q3 2023.
We ended Q3 2024 with positive adjusted working capital (2) of $9.0 million, down from $44.3 million at Q2 2024 and $49.4 million at Q4 2023. The decrease in positive adjusted working capital reflects the payment of the deposit for the NOBV acquisition, transaction costs associated with the NOBV acquisition and continuing M&A efforts, and the payment for the acquisition of the Watelet gas plant. Tenaz paid a €23 million ($34 million) deposit for the acquisition of NOBV and has incurred $2.8 million of transaction costs for the first three quarters of 2024.
Budget and Outlook
Annual guidance for drilling and development ("D&D") capital expenditures ("CAPEX") is being reduced to a new range of $16 to $18 million from the previous range of $23 to $25 million. Lower D&D CAPEX reflects a change to Canadian drilling plans from a four gross (3.5 net) well Rex program to a two gross (1.75 net) well Ellerslie program.
Despite lower CAPEX, annual production is expected to be within our present guidance range of 2,700 to 2,900 boe/d. Because the Ellerslie wells were drilled late in 2024 on recently-acquired lands, annual production is expected to be near the lower end of the guidance range. The redirection of the Canadian drilling program was effected to further improve capital efficiencies while still achieving greater than 10% annual corporate production growth. The undrilled Rex wells remain in our project inventory with robust economics at current oil prices.
(1)
The term barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. Per boe amounts have been calculated by using the conversion ratio of six thousand cubic feet (6 Mcf) of natural gas to one barrel (1 bbl) of crude oil. Refer to "Barrels of Oil Equivalent" section included in the "Advisories" section of this press release.
(2)
This is a non-GAAP and other financial measure. Refer to "Non-GAAP and Other Financial Measures" included in the "Advisories" section of this press release.
FINANCIAL AND OPERATIONAL SUMMARY
Three months ended
Nine months ended
Sep 30
Jun 30
Sep 30
Sep 30
Sep 30
($000 CAD, except per share and per boe amounts)
2024
2024
2023
2024
2023
FINANCIAL
Petroleum and natural gas sales
14,822
14,007
15,051
46,715
43,591
Cash flow from operating activities
11,923
(11,920)
175
6,221
6,249
Funds flow from operations(1)
3,360
5,822
4,826
16,225
15,461
Per share, basic(1)
0.12
0.22
0.18
0.60
0.56
Per share, diluted(1)
0.11
0.19
0.16
0.54
0.54
Net income (loss)
(2,454)
1,335
20,907
(1,676)
23,032
Per share, basic
(0.09)
0.05
0.77
(0.06)
0.84
Per share, diluted
(0.09)
0.04
0.71
(0.06)
0.80
Capital expenditures(1)
6,946
2,501
15,238
13,263
21,888
Adjusted working capital (net debt)(1)
8,999
44,343
44,937
8,999
44,937
Common shares outstanding (000)
End of period, basic
27,426
27,345
27,145
27,426
27,145
Weighted average for the period, basic
27,360
26,734
27,292
26,959
27,586
Weighted average for the period, diluted
31,368
29,992
29,555
30,293
28,822
