Clearview Resources Ltd. ("Clearview" or the "Company") is pleased to announce its financial and operational results for the three and nine months ended September 30, 2022.
"Clearview's expectation of being free of bank debt by the end of the year remains intact. With bank debt eliminated, we expect to allocate 2023 adjusted funds flow between returns to shareholders and capital spending to grow the Company's asset base," commented Rod Hume, Clearview's CEO. "The Company is currently contemplating strategies for returns to shareholders, including a potential share buy-back or special dividend as well as considering the resumption of development drilling", Mr. Hume added.
Q3 2022 HIGHLIGHTS
- Generated an operating netback(1) of $20.59 per barrel of oil equivalent ("boe") in the three months ended September 30, 2022, an increase of 9% over the comparative period of 2021 and $27.23 per boe in the first nine months of 2022, an increase of 75% over the comparative period of 2021;
- Generated adjusted funds flow(2) of $1.9 million in the three months ended September 30, 2022 and cash provided by operating activities of $2.2 million as compared to $1.4 million and $2.1 million, respectively, in the comparative period of 2021;
- Reduced the Company's net debt(2) to $3.9 million at September 30, 2022, from $10.2 million at December 31, 2021, inclusive of the Company's convertible debentures of $1.2 million;
- Increased the realized sales price per boe(3) by 28%, in the three months ended September 30, 2022 over the comparative period, to $52.15 per boe resulting in an increase in oil and natural gas sales of $1.8 million over the comparative period of 2021;
- Reduced its cash finance costs per boe(1) by 44%, in the nine months ended September 30, 2022, at a time when interest rates are rising, as a result of its continued efforts to reduce outstanding bank debt; and
- Closed the disposition of its working interest in the non-core, non-operated Carstairs Elkton Unit in November for net proceeds of $1.5 million, after customary adjustments. The net proceeds were immediately applied against the Company's bank debt.
FINANCIAL and OPERATIONAL RESULTS
Production for the three months ended September 30, 2022 was 2,006 boe per day ("boe/d"), a decrease of 3% compared to the prior year period, as declines were largely offset by the reactivation and optimization programs undertaken in the first and second quarters of 2022. Increased natural gas liquids production due to switching to a different natural gas processing facility late in 2021 also reduced the overall decrease for the quarter as compared to the third quarter of 2021. During the nine months ended September 30, 2022, the Company also experienced reduced volumes for periods of time from several processing facilities being taken offline in the second and third quarters to complete repair and maintenance operations on the facilities.
Adjusted funds flow(1) for the three months ended September 30, 2022 was $1.9 million ($0.17 per basic share), an increase of 36% (42%), over the comparative period of 2021, primarily due to a 24% increase in oil and natural gas revenue as a result of higher realized sales prices for the Company's production. This increase in revenue was offset by higher royalties and higher operating costs due to inflationary pressures increasing the cost of field services. In addition, processing income was higher and realized loss on financial instruments was lower than the comparative period of 2021. For the nine months ended September 30, 2022, the Company generated adjusted funds flow of $7.6 million ($0.65 per basic share), up 102% (103%), as compared to the nine months of the prior year.
Capital expenditures for the three months ended September 30, 2022 were $0.7 million, primarily focused on facility work and optimizations undertaken late in the third quarter in the Windfall area. Net capital expenditures(2) for the nine months ended September 30, 2022 were approximately $1.0 million due to the proceeds of $1.35 million received on the disposition of undeveloped lands in the second quarter of 2022.
Clearview reduced its outstanding bank debt by $7.0 million and increased its working capital deficit by $0.7 million for a net debt(1) reduction of $6.3 million in the first nine months of 2022. At September 30, 2022, the Company had net debt of $3.9 million, consisting of bank debt with ATB Financial of $1.8 million, convertible debentures of $1.2 million and a working capital deficit of $0.9 million.
Subsequent to the end of the quarter, the Company closed the disposition of its working interest in the non-core, non-operated Carstairs Elkton Unit for net proceeds of $1.5 million, after customary adjustments. The proceeds were immediately applied to reduce the Company's outstanding bank debt.
Clearview's 2022 reactivation and optimization programs continued to mitigate corporate declines in the third quarter of 2022. Field activity in the third quarter of 2022 was focused on workovers on wells requiring pump changes/upgrades. This program, combined with the reactivation and optimization programs in the first and second quarters, has achieved a production rate in the third quarter of 2022 of 2,006 boe/d compared to the second quarter of 2022 of 2,016 boe/d, the first quarter of 2022 of 2,088 boe/d and the fourth quarter of 2021 of 2,045 boe/d. With minimal capital spending, the Company has been able to offset declines and maintain production of approximately 2,000 to 2,100 boe/d in the past several years. Optimization and reactivation work has continued in the fourth quarter.
The Company's asset retirement spending included the completion of suspended pipeline abandonments in the third quarter. Clearview's well abandonment program commenced in the fourth quarter and is nearing completion for the year, satisfying the Alberta Energy Regulator's requirements for abandonment and reclamation spending.
In addition to internally funded abandonment and reclamation activities, Clearview continues to utilize the government funded Site Rehabilitation Program to reclaim wellsites and perform environmental assessments with the goal of achieving reclamation certificates.
Inflationary pressures, supply chain issues and high industry activity levels relative to the tight oilfield labour force have impacted Clearview consistent with the rest of industry. Operating costs have increased year-over-year due to these factors. Multiple increases in power costs have also impacted operating costs.
Clearview continues to rationalize its operations towards a more focused and efficient, higher working interest, operated asset base. The disposition of the non-core, non-operated working interest in the Carstairs Elkton Unit, subsequent to the end of the quarter, is another step in this strategy. The Company expects to close the disposition of a second minor, non-core, non-operated asset before year end, providing further bank debt reduction and reducing decommissioning obligations.
Consistent with Clearview's strategy to seek liquidity for its shareholders, management and the Board continue to improve the corporation's financial position by prioritizing bank debt repayment to enhance shareholder value.
The Company is continuing with an optimization and reactivation program, leveraging on the successful results of the 2021 and 2022 programs. Maintaining a strong producing asset base and minimizing production declines, as the Company retires its bank debt, is expected to support Clearview's objective to provide liquidity to its shareholders.
The Company anticipates initiating returns to Shareholders in the second quarter of 2023. While plans for these returns are not yet finalized, nor approved by the Board of Directors, Clearview is evaluating a Substantial Issuer Bid to purchase, for cancellation, a portion of the shares of the Company by way of a modified Dutch auction. In addition, Clearview is evaluating returns to shareholders via special dividends. The amount and allocation of Shareholder returns are dependent on many factors, including but not limited to commodity prices, credit agreements, production results/success of reactivation and optimization programs, continued inflationary pressures on corporate costs, and capital spending to maintain the asset base. While these factors bring variability and uncertainty to financial results, Clearview remains confident and committed to Shareholder returns in 2023.
The Board of Directors has appointed Mr. Rod Hume as President and Chief Executive Officer, effective immediately. Mr. Hume joined the Company in September 2021 as Vice President, Engineering and Chief Operating Officer and recently filled the role of Interim President & CEO.