Bonterra Energy Corp. Announces 2019 Operational and Financial Budget and Operations Update for 2018

Source Press Release
Company Bonterra Energy Corp. 
Tags Financial & Operating Data, Strategy - Corporate
Date January 10, 2019

Bonterra Energy Corp. () (TSX: BNE) ("Bonterra" or the "Company") is pleased to announce the Company's Board of Directors has approved an initial 2019 capital budget range of $57 to $77 million, which will ultimately be dependent on Canadian realized pricing per BOE. This capital program represents a continuous single rig drilling program and associated facility capital. Bonterra's strategic objectives associated with the 2019 capital budget are consistent with the Company's long-term objectives of achieving disciplined per share growth in combination with maintaining financial flexibility while paying a sustainable dividend.

Bonterra's 2019 capital budget incorporates a measured approach to address the volatility in the crude oil price and oil price differential environments. Canadian crude oil price differentials have been positively impacted by the Alberta Government's recent announcement that 325,000 barrels per day of Alberta crude oil production would be curtailed effective January 1, 2019 to help reduce the excess crude in storage, as well as their intention to purchase rail cars to transport additional barrels of crude oil out of the province.  While these actions are expected to have a positive impact over the near-term, Canada still requires additional pipeline capacity such as: Keystone XL, Trans Mountain and Enbridge Line 3 Replacement to ensure a fair price is received for the country's crude oil over the longer term.

The Company remains committed to focusing on sustainability and debt reduction for the remainder of 2019 and will continue to monitor the effect of the production curtailments, progress of additional pipelines and commodity prices to determine if adjustments to its capital spending program for 2019 may be warranted. 

2019 Capital Budget
Bonterra's disciplined capital budget is designed to afford the Company greater flexibility to execute the capital program while prioritizing protection of the balance sheet, reduction of net debt and maintenance of the current dividend. The Company's capital budget anticipates that during the first quarter of 2019, nine gross (9.0 net) wells will be drilled, and six gross (6.0 net) completed and brought on production in the period.  The planned budget structure will enable the Company to increase or decrease the level of spending on a monthly basis depending on the realized Canadian ("Edmonton Par") crude oil pricing environment.

Bonterra intends to direct the 2019 budget to new wells primarily targeting the Pembina Cardium across the Company's Carnwood and Rose Creek areas along with funds directed to facilities and pipelines, non-operated drilling and completion activities and abandonments.

2019 Capital Budget Objectives:

  • Invest in higher rate-of-return, lower-risk light oil opportunities within the Company's extensive drilling inventory;
  • Maintain an all-in (capital plus dividends) payout ratio of less than 100 percent of funds flow;
  • Direct the pace of the capital program to maintain spending flexibility throughout the year and effectively respond to a changing price environment; and
  • Maintain financial flexibility to achieve longer-term growth in production, reserves and funds flow per share while generating positive returns to shareholders.

Annual average production volumes are expected to range between 12,600 and 13,200 BOE per day, with a 2019 forecast exit rate range of 13,000 and 14,000 BOE per day. In the context of ongoing volatility in commodity prices, Bonterra will review on a monthly basis and may elect to adjust the amount and timing of capital spending to ensure sustainability and a payout ratio of less than 100 percent.  

2019 Budget and Guidance Summary

  2019 Budget 
Canadian Realized Pricing per BOE (1)  $50.00 to $60.00 
Average Daily Production (BOE per day)  12,600 – 13,200 
Oil and NGL weighting  69% 
Exit Production (BOE per day)  13,000 – 14,000 
Funds Flow (millions)  $69 - $101 
Per share (fully diluted)  $2.07 - $3.02 
Capital Expenditures (millions)  $57 to $77 
Dividends (millions)  $4 
Free Funds Flow (millions)  $8 - $20 
Total Payout Ratio (capital and dividend)  92% - 80% 

(1)  Canadian realized oil price is based on WTI US $50 per barrel to WTI US $56 per barrel; Edmonton par differential of $9.00 per barrel; CAD/USD exchange rate of $0.75; Natural gas price of $1.46 per mcf; NGL price of CAD $32 per barrel; and a quality differential of CAD $3.25 per barrel. 

Operational Highlights for 2018

  • The Company has a significant economic drilling inventory of approximately 700 identified low-risk Pembina Cardium locations;
  • The Company owns and controls the majority of its infrastructure and operates approximately 89 percent of its corporate production;
  • Average production volumes for full year 2018 are expected to be approximately 13,200 BOE per day;
  • Net debt at year end 2018 is expected to approximate net debt at the end of 2017. Year over year reduction in projected net debt did not occur due to significant widening of light oil differentials that reached up to US$30 per barrel in Q4 2018 compared to US$6 to US$7 per barrel in Q3 2018; and
  • A significant erosion in Canadian realized oil pricing from Q3 to Q4 2018 led the Company to prudently reduce the monthly dividend payment from $0.10 to $0.01 per common share.
Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd