CALGARY, AB, March 7, 2024 /CNW/ – Headwater Exploration Inc. (the “Company” or “Headwater”) (TSX:HWX) announces its operating and financial results for the three months and year ended December 31, 2023. Selected financial and operational information is outlined below and should be read in conjunction with the audited financial statements and the related management’s discussion and analysis (“MD&A”). These filings will be available at www.sedarplus.ca and the Company’s website at www.headwaterexp.com. In addition, readers are also directed to the Company’s Annual Information Form for the year ended December 31, 2023, dated March 7, 2024, filed on SEDAR+ at www.sedarplus.ca.
Three months ended
December 31,
Percent
Change
Year ended
December 31,
Percent
Change
2023
2022
2023
2022
Financial (thousands of dollars except per share and production
data)
Sales, net of blending (1) (4)
131,690
102,974
28
482,823
430,047
12
Adjusted funds flow from operations (2)
81,983
71,828
14
288,262
279,727
3
Per share – basic (3)
0.35
0.31
13
1.22
1.23
(1)
– diluted (3)
0.34
0.31
10
1.21
1.21
–
Cash flows provided by operating activities
90,690
66,448
36
303,316
283,925
7
Per share – basic
0.38
0.29
31
1.29
1.25
3
– diluted
0.38
0.28
36
1.28
1.23
4
Net income
45,469
39,789
14
156,072
162,109
(4)
Per share – basic
0.19
0.17
12
0.66
0.71
(7)
– diluted
0.19
0.17
12
0.66
0.70
(6)
Capital expenditures (1)
30,050
60,677
(50)
233,846
244,495
(4)
Adjusted working capital (2)
63,526
104,918
(39)
Shareholders’ equity
610,498
543,335
12
Dividends declared
23,658
23,392
1
94,421
23,392
304
Per share
0.10
0.10
–
0.40
0.10
300
Weighted average shares (thousands)
Basic
236,408
231,766
2
235,583
227,299
4
Diluted
238,872
235,305
2
237,705
230,755
3
Shares outstanding, end of period (thousands)
Basic
236,580
233,920
1
Diluted (5)
241,138
241,029
–
Operating (6:1 boe conversion)
Average daily production
Heavy crude oil (bbls/d)
18,514
13,536
37
16,466
11,411
44
Natural gas (mmcf/d)
8.0
11.5
(30)
8.8
8.2
7
Natural gas liquids (bbls/d)
93
99
(6)
98
57
72
Barrels of oil equivalent (9) (boe/d)
19,939
15,546
28
18,038
12,841
40
Average daily sales (6) (boe/d)
20,134
15,568
29
18,038
12,843
40
Netbacks ($/boe) (3) (7)
Operating
Sales, net of blending (4)
71.09
71.90
(1)
73.34
91.74
(20)
Royalties
(12.91)
(13.51)
(4)
(13.01)
(18.17)
(28)
Transportation
(5.12)
(4.21)
22
(5.35)
(4.28)
25
Production expenses
(7.34)
(6.25)
17
(7.17)
(5.93)
21
Operating netback (3)
45.72
47.93
(5)
47.81
63.36
(25)
Realized gains on financial derivatives
3.35
2.96
13
2.14
0.01
na
Operating netback, including financial derivatives (3)
49.07
50.89
(4)
49.95
63.37
(21)
General and administrative expense
(1.51)
(1.14)
32
(1.47)
(1.38)
7
Interest income and other expense (8)
0.84
1.15
(27)
0.92
0.76
21
Current tax expense
(4.14)
(0.75)
452
(5.62)
(3.07)
83
Adjusted funds flow netback (3)
44.26
50.15
(12)
43.78
59.68
(27)
(1)
Non-GAAP financial measure. Refer to “Non-GAAP and Other Financial Measures” within this press release.
(2)
Capital management measure. Refer to “Non-GAAP and Other Financial Measures” within this press release.
(3)
Non-GAAP ratio. Refer to “Non-GAAP and Other Financial Measures” within this press release.
(4)
Heavy oil sales are netted with blending expense to compare the realized price to benchmark pricing while transportation expense is shown separately. In the audited annual financial statements blending expense is recorded within blending and transportation expense.
(5)
In-the-money dilutive instruments as at December 31, 2023 includes 2.5 million stock options with a weighted average exercise price of $3.88 and 2.0 million performance share units (“PSUs”). The number of outstanding PSUs has been adjusted for dividends. Restricted share units have been excluded as the Company intends to cash settle these awards.
(6)
Includes sales of unblended heavy crude oil, natural gas and natural gas liquids. The Company’s heavy crude oil sales volumes and production volumes differ due to changes in inventory. For the three months ended December 31, 2023, sales volumes comprised of 18,709 bbs/d of heavy oil, 8.0 mmcf/d of natural gas and 93 bbls/d of natural gas liquids (2022- heavy oil of 13,558 bbls/d, natural gas of 11.5 mmcf/d and natural gas liquids of 99 bbls/d). For the year ended December 31, 2023, sales volumes comprised of 16,465 bbls/d of heavy oil, 8.8 mmcf/d of natural gas and 98 bbls/d of natural gas liquids (2022- heavy oil of 11,413 bbls/d, natural gas of 8.2 mmcf/d and natural gas liquids of 57 bbls/d).
(7)
Netbacks are calculated using average sales volumes.
(8)
Excludes unrealized foreign exchange gains/losses, accretion on decommissioning liabilities, interest on lease liability and interest on repayable contribution.
(9)
See ‘”Barrels of Oil Equivalent.”
Achieved record production of 19,939 boe/d (93% heavy oil), an increase of 28% over 2022 fourth quarter production of 15,546 boe/d (87% heavy oil).
Realized record adjusted funds flow from operations (1) of $82.0 million ($0.35 per basic share), cash flows from operating activities of $90.7 million ($0.38 per basic share) and free cash flow (3) of $51.9 million.
Achieved an operating netback, including financial derivatives, (2) of $49.07/boe and an adjusted funds flow netback (2) of $44.26/boe.
Generated net income of $45.5 million ($0.19 per basic share) equating to $24.55/boe.
Executed a $30.1 million capital expenditure (3) program including 13 net crude oil wells in Marten Hills West, at a 100% success rate.
Returned $0.10 per common share to shareholders.
As at December 31, 2023, Headwater had working capital of $78.6 million, adjusted working capital (1) of $63.5 million and no outstanding bank debt.
Achieved average production of 18,038 boe/d (91% heavy oil), an increase of 40% over 2022 annual production of 12,841 boe/d (89% heavy oil).
Realized adjusted funds flow from operations (1) of $288.3 million ($1.22 per basic share) and cash flows from operating activities of $303.3 million ($1.29 per basic share).
Achieved an operating netback, including financial derivatives, (2) of $49.95/boe and an adjusted funds flow netback (2) of $43.78/boe.
Generated net income of $156.1 million ($0.66 per basic share) equating to $23.71/boe.
Returned a total of $0.40 per common share or $94.4 million to shareholders.
Proved developed producing reserves increased by 33% to 22.1 mmboe from 16.6 mmboe.
Total proved reserves increased by 54% to 32.5 mmboe from 21.1 mmboe.
Total proved plus probable reserves increased by 51% to 51.9 mmboe from 34.3 mmboe.
Achieved finding and development (“F&D”) costs (2), including changes in future development costs of $19.17 per boe on a proved developed producing basis, $18.61 per boe on a total proved basis and $14.97 per boe on a total proved plus probable basis.
Based on a 2023 adjusted funds flow netback (2) of $43.78/boe, achieved recycle ratios (2) of 2.3 on a proved developed producing basis, 2.4 on a total proved basis and 2.9 on a total proved plus probable basis.
(1)
Capital management measure. Refer to “Non-GAAP and Other Financial Measures” within this press release.
(2)
Non-GAAP ratio that does not have any standardized meaning under IFRS and therefore may not be comparable with the calculation of similar measures of other entities. Refer to “Non-GAAP and Other Financial Measures” within this press release.
(3)
Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable with the calculation of similar measures of other entities. Refer to “Non-GAAP and Other Financial Measures” within this press release.
Marten Hills West
Production from Marten Hills West grew more than 250% from 3,000 bbls/d in the first quarter of 2023 to greater than 10,500 bbls/d in the fourth quarter of 2023. The year was also characterized by a significant pool expansion in addition to the validation of the stacked pay potential of the area. Economic production has now been proven from four different Clearwater sands in Marten Hills West.
In the Clearwater A, successful tests at 00/03-15-075-01W5 and 02/05-18-075-01W5 have expanded the eastern Clearwater A pool boundary by 4 miles de-risking an additional ten sections of land. The 00/3-15-076-01W5 well achieved a 60-day initial production rate of 157 bbls/d while the 02/05-18-075-01W5 well achieved a 60-day initial production rate of 147 bbls/d. Success from these wells expands the potential of the Clearwater A in Marten Hills West to greater than 45 sections.
The positive results of the two active waterflood pilots in the Clearwater A suggest that a large portion of the Clearwater A pool will be amenable to secondary recovery. The two active pilots continue to exceed our expectations with decreasing gas oil ratios and greater than 200 bbls/d of stabilized oil production. Continued implementation of the Clearwater A waterflood will occur with a full section waterflood employed by the end of the first quarter of 2024.
The successful discovery well drilled at 02/13-15-076-02W5 in the Clearwater …
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