Advantage Oil & Gas Ltd. is pleased to report first quarter 2021 results including record production, significant free cash flow(a) and a material reduction in net debt(a).
Results from Advantage's winter drilling program have continued to exceed expectations both in costs and well performance while gas prices were elevated during the quarter, strengthening our financial outlook and guidance for 2021. Drilling in the first quarter of 2021 was entirely gas-focused at Glacier where wells continued to achieve a step change in productivity with cost reductions of over 10%. All wells from the program are utilizing existing capacity at Advantage's owned and operated Glacier Gas Plant, where incremental operating expenses of new production are minimal.
Operating and Financial Highlights for the Quarter include:
- Cash provided by operating activities was $51.6 million
- Net capital expenditures(a) were $37.2 million
- Adjusted funds flow ("AFF")(a) was $54.0 million ($0.29 per share), exceeding capital by 45%
- Free cash flow(a) was $16.8 million representing 31% of AFF(a)
- Net debt(a) was reduced to $214.5 million, a reduction of $150.4 million from the first quarter of 2020 and $36.9 million from the fourth quarter of 2020
- Reduced net debt to AFF(a) ratio to 1.7x
- Record total production of 49,819 boe/d, up 7% over first quarter 2020
- Record gas production of 271 mmcf/d, up 6% from first quarter 2020
- Liquids production of 4,609 bbls/d (1,395 bbls/d crude oil, 721 bbls/d condensate, 2,493 bbls/d NGLs), up 24% from first quarter 2020
- Maintained low cash costs including operating costs of $2.45/boe
- Increased operating netbacks(a) to $14.14/boe, up 59% from first quarter 2020
- Glacier well outperformance and available Glacier Gas Plant capacity provides flexibility to continue capitalizing on higher natural gas prices
- Five additional Glacier wells are scheduled to be completed and tied-in during the third quarter of 2021
- Fourteen additional wells are scheduled to be drilled in the second half of 2021 with the primary focus remaining at Glacier
- The northwest segment of the Glacier gas gathering system has been expanded and was commissioned in early April, increasing capacity and eliminating restrictions on existing and future well pads
- Liquids production has been stable for the last four quarters but is expected to decline slightly during the remainder of the year as our capital program is primarily focused on gas development at Glacier.
Advantage has hedged approximately 41% of its natural gas production for this summer and 37% of its natural gas production for calendar 2021. These hedges are fixed price swaps denominated at AECO, Henry Hub, Dawn and Chicago, reflective of the markets in our natural gas diversification strategy. Advantage has 46% of its crude oil and condensate production hedged for the remainder of 2021 with WTI swaps at an average price of US$48.54/bbl.
- Advantage's strong first quarter 2021 results are consistent with and reinforce the Corporation's recently revised 2021 guidance with lower capital and higher production. During the second quarter of 2021, Advantage expects to generate significant free cash flow due to planned low capital spending of less than $10 million.
This is anticipated to further reduce the Corporation's net debt to AFF(a) ratio towards 1x. For 2021, free cash flow(a), debt reduction and moderate production growth remain key priorities. In addition, the Corporation is targeting to deliver approximately 10% annual production growth and $70 million free cash flow(a). Advantage will continue to fortify its balance sheet and maximize returns for our shareholders by executing on its strategy to:
- Continue to deliver moderate production growth (between 5% and 10%) utilizing existing capacity at our Glacier Gas Plant
- Enhance corporate resilience and scale through:
- balancing our high exposure to gas pricing by growing our liquids production at Progress and Wembley
- revenue-generating cleantech investments through Entropy Inc. that will leverage our carbon capture and sequestration technology and expertise
- acquisitions that create efficiencies and scale
- Potentially return capital to shareholders