Harvest Operations Corp. Reports Q3 2019 Results

Source Press Release
Company Harvest Operations Corp. 
Tags Strategy - Corporate, Financial & Operating Data
Date November 06, 2019

Harvest Operations Corp. (“Harvest” or the “Company”) announced its financial and operating results for the third quarter ended September 30, 2019.

This press release is an overview of the third quarter results for 2019 and should be read with the unaudited condensed interim financial statements and Management’s Discussion and Analysis (MD&A) for the third quarter ended September 30, 2019 available on the System for Electronic Document Analysis and Retrieval (SEDAR) at .

All financial data has been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board except where otherwise noted. All figures reported herein are in Canadian dollars unless otherwise stated.

Q3 2019 HIGHLIGHTS:

Conventional

  • Total sales volumes for the quarter was 26,300 barrels of oil equivalent (“boe/d”), including Harvest's share of Deep Basin Partnership ("DBP") of 3,811 boe/d (4,566 boe/d gross).  Sales volumes for the three and nine months ended September 30, 2019 decreased by 2,060 boe/d and 2,062 boe/d, respectively, as compared to the same periods in 2018. The decreases are primarily due to natural declines, third party turnarounds, forest fires in Northern Alberta during May and June 2019 resulting in shut-ins and non-core asset sales during the second quarter of 2019, which were partially offset by production resulting from new wells drilled in the fourth quarter of 2018 and Harvest’s participation in four gross non-operated wells in 2019.
  • Operating netback per bbl prior to hedging for the three and nine months ended September 30, 2019 were $9.73/bbl (2018: $17.82) and $11.70/bbl (2018: $16.02), respectively.
  • Operating loss for the three months ended September 30, 2019 was $29.8 million (Q3 2018: $97.4 million operating loss). Operating loss was lower than the prior comparative period in 2018 due to lower impairment expense, lower losses from joint ventures and lower expenses partially offset by lower revenue.
  • Capital expenditures totaled $1.5 million and $14.0 million for the three and nine months ended September 30, 2019. Capital expenditures during the nine months ended September 30, 2019 were mainly related to drilling and completions for wells drilled during the fourth quarter of 2018, the four gross partner operated wells drilled in 2019 and asset optimization and revitalization projects. During the three and nine months ended September 30, 2019, 2.0 gross wells (0.5 net) and 4.0 gross (1.1 net) wells were rig-released, respectively.
  • Cash contributions from Harvest’s Conventional operations for the three and nine months ended September 30, 2019 were $10.6 million and $42.4 million, respectively (2018: $31.3 million and $80.2 million). The decrease in cash contributions for the three and nine months ended September 30, 2019 was mainly due to a decrease in revenues, partially offset by lower royalties, operating, transportation and general and administrative expenses.

Oil Sands  

  • Sales volumes of blended bitumen for the three and nine months ended September 30, 2019 were 7,615 bbl/d and 8,119 bbl/d, respectively (2018: nil), with 13 well pairs converted to SAGD operations by September 30, 2019. BlackGold’s first turnaround occurred during the third quarter of 2019, which resulted in lower production when compared to the second quarter of 2019. During the month of October 2019 BlackGold produced in excess of 10,000 bbl/d, surpassing its original design capacity for that period.
  • Operating netback per bbl prior to hedging for the three and nine months ended September 30, 2019 were $9.81/bbl (2018: nil) and $16.98/bbl (2018: nil), respectively.
  • Cash contributions from the Oil Sands segment for the three and nine months ended September 30, 2019 were $1.6 million and $18.6 million, respectively (2018 - $2.5 million and $5.8 million cash deficiency). Up until the fourth quarter of 2018, oil sands operations were capitalized. With the project now operating as intended by management, 2019 results now reflect operating revenue and expenses in the current period, while in 2018 there were pre-operating losses.
  • Capital expenditures for the three and nine months ended September 30, 2019 were $2.0 million (2018: $25.7 million) and $3.5 million (2018: $85.4 million), respectively. The decrease in capital expenditures over the comparative periods is the result of completing facility construction and commissioning during the first half of 2018 and continued capitalization of operating losses until the fourth quarter of 2018.
  • Operating loss for the three and nine months ended September 30, 2019 were $6.6 million (2018: $2.5 million loss) and $6.4 million (2018: $6.0 million loss). Operating losses occurred during the third quarter of 2019 due to lower realized prices on blended bitumen, additional operating expenses incurred during the turnaround, also resulting in lower sales volumes during the month of September 2019.

Corporate

  • On July 26, 2019, Harvest closed the extension of the $500 million credit facility from the original maturity date of February 24, 2020 to July 29, 2022.
  • At September 30, 2019, Harvest had $462.2 million drawn under the credit facility (December 31, 2018: $386.8 million) excluding letters of credit totaling $10.2 million (December 31, 2018: $15.1 million).
  • The Alberta Government's mandatory oil production curtailment came into effect in January 2019. Harvest’s physical oil production was not impacted by the mandated production curtailment during the nine months ended September 30, 2019. Currently, the Company does not believe the production curtailment order will have a material impact for the remainder of 2019. Harvest is fully cooperating with the Alberta Government and will be prepared to adjust its 2019 and 2020 work plan and budget program, if and as required.
Source: EvaluateEnergy® ©2020 EvaluateEnergy Ltd