Advantage Energy Ltd. is pleased to announce its 2022 budget.
Advantage's 2022 capital program will be focused on growing adjusted funds flow per share by continuing to drill high rate-of-return targets in areas with existing infrastructure capacity. An escalating emphasis will be placed on increasing liquids revenue and making infrastructure investments that either expand third-party processing revenue or advance our net-zero 2025 target. With gas prices currently elevated and robust oil prices, we expect bank indebtedness to fall to zero in the second half of 2022 with significant free cash flow available to fortify the foundations of our business.
Highlights of the 2022 Budget:
- Corporate production is expected to grow by approximately 8%, with total liquids production expected to grow by more than 25%.
- At NYMEX US$4/mmbtu and WTI US$70/bbl, adjusted funds flow ("AFF")(a) is expected to be $370 million.
- Cash used in investing activities is planned to be between $170 million and $200 million representing a payout ratio(b) of approximately 50% (including provisions for inflation).
- Revenue growth will be optimized by focusing on the highest rate-of-return development drilling in areas with existing facilities capacity (Glacier and Wembley).
- Sustaining capital for 2022 is approximately $75 million and includes drilling 9 Glacier wells to replace corporate decline of 24%.
- Half of the drilling program will focus on gas-weighted assets, and half will focus on oil-weighted assets. At current strip pricing, production periods required to payout new wells are approximately 7 months for Glacier gas wells and 8 months for Wembley oil wells.
- The Wembley oil battery will be connected to the Keyera Pipestone Processing Facility during the first quarter, increasing total third-party processing capacity to 40 mmcf/d. Advantage's total take-or-pay volumes at Wembley, including existing Tidewater service, will average 13.5 mmcf/d for 2022 before rising to 23 mmcf/d in 2023.
- The Progress compressor station (partially constructed in 2020 prior to the pandemic) is planned to be completed by early second quarter, at a cost of $12 million. Up to three new Progress wells are planned for 2022, and a third-party has committed to tie-in approximately 10 mmcf/d for transportation and processing through our Glacier Gas Plant. Third-party processing revenue is expected to pay out the remaining cost of the project within three years.
- Phase 1 of the Glacier carbon capture and storage ("CCS") project is expected to come onstream by early second quarter, with 2022 capital expected to be $7 million.
Marketing Update
Advantage has hedged approximately 39% of its natural gas production for the fourth quarter of 2021. The Corporation continues to increase its hedging position in 2022 and currently has 11% of forecast natural gas production hedged at an average of US$3.52/mmbtu assuming $US/$CDN foreign exchange of $0.79. Advantage has hedged 2,000 bbls/d of liquids for the fourth quarter of 2021 at an average price of US$49.14/bbl and no liquids hedging for 2022.
Credit Facility Renewal
On November 30, 2021, Advantage's Credit Facilities were renewed with no changes to the borrowing base of $350 million.
Executive Update
As previously announced, Andy Mah will retire from his role of Chief Executive Officer on December 31, and Michael Belenkie (currently President and Chief Operating Office) will assume the role of President and CEO. The Advantage team wishes Andy all the best in his retirement and looks forward to his continued contributions as a board member.
Advantage is also pleased to announce two executive appointments as a reflection of our expanded strategy.
Darren Tisdale will assume the role of Vice President, Geosciences. Mr. Tisdale has been with Advantage for approximately two years as Chief Geoscientist and has led Advantage's subsurface technology evolution, as well as bringing deep skillsets to business development and strategic planning.
Geoff Keyser will assume the role of Vice President, Corporate Development. Mr. Keyser joined Advantage a year ago as Director of Corporate Development, having previously served as Vice President of Engineering at a private oil and gas producer.
Looking Forward
Advantage is on the pathway to net-zero emissions by 2025[1], primarily through Entropy Inc.'s revenue-generating carbon capture and storage projects, including the Glacier CCS project.
Capital guidance for 2021 remains at $140 million to $150 million and annual production guidance has been lowered marginally to 49,250 boe/d as a result of unplanned "firm service" restrictions on TC Energy's NGTL system during the fourth quarter of 2021. With drilling results having exceeded expectations throughout 2021, production has grown by approximately 10%.
With commodity prices remaining robust, Advantage is in a strong position to grow total shareholder returns by delivering moderate production growth into existing infrastructure, enhancing corporate resilience and scale. By growing our liquids assets more rapidly than gas-weighted assets, revenue will be derived more evenly from multiple commodities, reducing exposure to gas price volatility. Cash-generating investments in infrastructure will continue, and our energy transition subsidiary, Entropy Inc., will pursue rapid growth in carbon capture and sequestration projects. Lastly, Advantage will continue to pursue strategic acquisitions of low-emissions assets that create efficiencies, resilience and scale.
Advantage looks forward to progressing the Corporation's strategy through the dynamic markets ahead.
