Highlights for 2022 are as follows:
- Generated net income of
$97.8 million in the fourth quarter of 2022 and$155.2 million for the entire year. On a basic, weighted average per share basis this amounted to$1.73 for the fourth quarter and$2.95 for the entire year. - Realized Adjusted Funds Flow of
$24.9 million in the fourth quarter bringing the total for 2022 to$101.4 million . On a basic, weighted average per share basis this amounted to$0.44 for the fourth quarter and$1.93 for the entire year. - Achieved record sales volumes of 11,496 boe/d in the fourth quarter of 2022 and 9,778 boe/d for the entire year. Volumes increased by 34% in the fourth quarter of 2022 compared to the same quarter in 2021. Liquids volumes (crude oil and natural gas liquids) accounted for 6,172 boe/d or 54% of total volumes during the quarter and 4,814 boe/d or 49% for the entire year.
- Achieved a 138% increase in proved, developed, producing ("PDP") net asset value per share while adding sufficient PDP reserves to replace 544% of production.
- Increased production per basic share and liquids weighting while simultaneously increasing PDP reserve life index and reducing corporate decline rate.
- On
March 18, 2022 Journey closed a bought-deal flow-through share financing to issue 2.85 million flow-through shares at a price of$4.25 /share. - Closed a 4,000 boe/d (71% crude oil and NGL's) acquisition on
October 31, 2022 for$112.5 million . Closed the acquisition of a private company in theCarrot Creek area effectiveApril 1, 2022 , adding approximately 610 boe/d of low decline production (54% crude oil and NGL's). Consolidated infrastructure and gathering facilities in the Gilby area onMay 9, 2022 for$4.8 million . - Continued to advance the emerging power generation business:
- Generated 31,167 MWH of electricity in 2022 at an average price of
$183.88 /MWH - Procured 17 MW of power generation equipment and are beginning construction of a 15.5 MW power generation facility in Gilby,
Alberta which is currently forecast to be on stream by Q1 2024. - Entered into a purchase agreement for a 16.5 MW power generation facility, which is anticipated to close in the second quarter of 2023 for an acquisition price below its replacement value.
- Continued work on decommissioning non-producing sites. Journey spent
$2.5 million in the fourth quarter and$5.0 million for the entire year including Site Rehabilitation Program ("SRP") funds. To date Journey has been allocated$4.6 million under the SRP and has expended$4.0 million of this allocation.
2023 Highlight:
- On
March 1, 2023 announced a$15 million issuance of flow-through common shares at a price of$6.62 per share. This initial announcement was subsequently upsized to$17.5 million later that day. This latter amount excludes the potential 15% over allotment granted to the Underwriters.
Three Months ended December 31, | Twelve months ended December 31, | |||||
Financial ( |
2022 |
2021 | % change |
2022 |
2021 | % change |
Production revenue | 67,531 | 39,664 | 70 | 235,583 | 123,843 | 90 |
Net income | 97,753 | 5,545 | 1,657 | 155,198 | 99,134 | 57 |
Per basic share | 1.73 | 0.12 | 1,342 | 2.95 | 2.18 | 35 |
Per diluted share | 1.55 | 0.10 | 1,450 | 2.64 | 1.93 | 37 |
Adjusted Funds Flow | 24,890 | 16,562 | 50 | 101,387 | 46,274 | 119 |
Per basic share | 0.44 | 0.35 | 26 | 1.93 | 1.02 | 89 |
Per diluted share | 0.40 | 0.31 | 29 | 1.73 | 0.90 | 92 |
Cash flow from operations | 25,346 | 16,007 | 58 | 106,623 | 40,930 | 161 |
Per basic share | 0.45 | 0.33 | 36 | 2.02 | 0.90 | 124 |
Per diluted share | 0.40 | 0.30 | 33 | 1.81 | 0.80 | 126 |
Capital expenditures | 121,376 | 3,398 | 3,472 | 181,026 | 10,971 | 1,550 |
Net debt | 98,768 | 57,021 | 73 | 98,768 | 57,021 | 73 |
Share Capital (000's) | ||||||
Basic, weighted average | 56,638 | 47,868 | 18 | 52,658 | 45,397 | 16 |
Basic, end of period | 62,912 | 54,108 | 16 | 58,773 | 51,301 | 15 |
Fully diluted | 64,810 | 56,420 | 15 | 64,810 | 56,420 | 15 |
Daily Sales Volumes | ||||||
Natural gas (Mcf/d) | ||||||
Conventional | 27,929 | 22,552 | 24 | 25,492 | 20,641 | 24 |
Coal bed methane | 4,011 | 4,592 | (13) | 4,293 | 4,877 | (12) |
Total natural gas volumes | 31,940 | 27,144 | 18 | 29,785 | 25,518 | 17 |
Crude oil (Bbl/d) | ||||||
Light/medium | 3,378 | 2,609 | 29 | 2,922 | 2,395 | 22 |
Heavy | 1,616 | 658 | 146 | 904 | 684 | 32 |
Total crude oil volumes | 4,994 | 3,267 | 53 | 3,826 | 3,079 | 24 |
Natural gas liquids (Bbl/d) | 1,179 | 763 | 55 | 988 | 672 | 47 |
Barrels of oil equivalent (boe/d) | 11,496 | 8,554 | 34 | 9,778 | 8,004 | 22 |
Average Realized Prices | ||||||
Natural gas ($/mcf)1 | 6.49 | 4.64 | 40 | 5.97 | 3.59 | 66 |
Crude Oil ($/bbl)1 | 91.09 | 80.84 | 13 | 105.50 | 70.57 | 49 |
Natural gas liquids ($/bbl) | 60.90 | 53.67 | 13 | 64.69 | 45.20 | 43 |
Barrels of oil equivalent ($/boe) | 63.85 | 50.40 | 27 | 66.01 | 42.39 | 56 |
Netbacks ($/boe) | ||||||
Realized prices | 63.85 | 50.40 | 27 | 66.01 | 42.39 | 56 |
Royalties | (12.77) | (9.47) | 35 | (13.16) | (6.58) | 100 |
Operating expenses | (23.64) | (16.92) | 40 | (20.27) | (16.45) | 23 |
Transportation expenses | (0.86) | (0.37) | 132 | (0.70) | (0.47) | 49 |
Operating netback | 26.58 | 23.65 | 12 | 31.88 | 18.89 | 69 |
Note: |
1. Natural gas and crude oil prices include physical hedging gains and losses. |
OPERATIONS
Journey was busy during the fourth quarter of 2022 with the closing and integration of its 4,000 boe/d (71% crude oil and NGL's) acquisition from
Excluding acquisition and divestiture activity, Journey increased its exploration and development ("E&D") capital spending from
Since the commissioning of the 4 MW Countess power facility in the fourth quarter of 2020, Journey has been assembling expertise in procuring power equipment; cost effectively building the facilities; and ultimately connecting the assets to the power grid. After conducting a high level power distribution study in the Gilby area, Journey consolidated additional working interests in its processing facility and gathering system in Gilby in May of 2022 for
In November of 2022 Journey was the successful bidder in a request-for-proposal process to acquire a 16.5 MW power plant in
FINANCIAL
The fourth quarter was highlighted with the significant 4,000 boe/d acquisition that closed on
Realized crude oil prices during the fourth quarter of 2022 averaged
All field operating costs (royalties, operating and transportation expenses) experienced increases during the fourth quarter and throughout 2022 as compared to 2021. The increase in operating costs was due to a combination of the large acquisition in the fourth quarter; fuel and power costs for field operations which accounted for 25% of all operating costs; as well as inflationary pressures on all other costs. Royalty expense was higher by 35% in the fourth quarter of 2022 as compared to the same quarter in 2021 and for the entire year of 2022 the increase was 100% as compared to 2021. On a per boe basis royalty expense was
Journey's general and administrative ("G&A") costs were higher in 2022 by 112% as compared to 2021. G&A increased
Finance expenses related to borrowings, or in other words, interest costs, increased by 43% to
Journey realized net income of
Journey continued to be prudent with its capital spending during the fourth quarter. Excluding the October acquisition, Journey underspent its Adjusted Funds Flows to allow for the maximum flexibility in its cash position while integrating the acquisition. Capital expenditures in the fourth quarter were
OUTLOOK & GUIDANCE
In response to rapidly deteriorating commodity prices in January and February, Journey has adopted a prudent approach to its 2023 capital program and has delayed the start of 2023 drilling until after breakup. Given the deferral of a significant portion of its exploration and development capital program, Journey had provided updated guidance on
To assist in funding its 2023 drilling program, on
Journey remains poised to significantly ramp up capital expenditures in the second half of 2023 should commodity prices recover to previously forecast levels.
Journey's goals for improving corporate sustainability in 2023 include:
- Reducing leverage created by the transformational acquisition in 2022;
- Adding inventory in repeatable plays;
- Advancing the power generation business;
- Managing its ARO; and
- Continuing to search for creative ways to expand the Company's business
Journey's low corporate decline, high working interest project inventory, operated infrastructure, and favorable expiry profile allow the Company to weather periods of lower than forecast commodity prices by proactively deferring portions of the capital program on a temporary basis. Journey is focused on adjusting its capital program to meet its near term obligations without sacrificing the longer term priorities of sustainability and enhancing shareholder value.
Journey continues to pursue a careful and prudent expansion of its business plan. Journey has achieved or exceeded all of its internal targets and created significant value for all stakeholders since the bottom of the market in 2020. This expansion has been buoyed by commodity price tailwinds but would not be possible without the talented team at Journey, both in the office and the field. Journey also recognizes the steady guidance supplied by its Board of Directors and the unyielding support of AIMCo, the Company's term debt provider and largest shareholder. Together, with the support of this combined team, Journey is extremely well positioned to continue its journey of value creation and maintain its growth trajectory for years to come. The Company looks forward to updating the shareholders on Journey's progress as it continues on this exciting development path.
About the Company
Journey is a Canadian exploration and production company focused on oil-weighted operations in western Canada. Journey's strategy is to grow its production base by drilling on its existing core lands, implementing waterflood projects, and by executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.
ADVISORIES
This press release contains forward-looking statements and forward-looking information (collectively "forward looking information") within the meaning of applicable securities laws relating to the Company's plans and other aspects of its anticipated future operations, management focus, strategies, financial, operating and production results, industry conditions, commodity prices and business opportunities. In addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding decline rates, anticipated netbacks, drilling inventory, estimated average drill, complete and equip and tie-in costs, anticipated potential of the Assets including, but not limited to, EOR performance and opportunities, capacity of infrastructure, potential reduction in operating costs, production guidance, total payout ratio, capital program and allocation thereof, future production, decline rates, funds flow, net debt, net debt to funds flow, exchange rates, reserve life, development and drilling plans, well economics, future cost reductions, potential growth, and the source of funding its capital spending. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future.
The forward-looking information is based on certain key expectations and assumptions made by management, including expectations and assumptions concerning prevailing commodity prices and differentials, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; the ability to efficiently integrate assets and employees acquired through acquisitions, including the Acquisition, the ability to market oil and natural gas successfully and the ability to access capital. Although Management believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Journey can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. The actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that will be derived therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide security holders with a more complete perspective on its future operations and such information may not be appropriate for other purposes.
Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect the Company's operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).These forward looking statements are made as of the date of this press release and Journey disclaims any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Journeys prospective results of operations, funds flow, netbacks, debt, payout ratio well economics and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was made as of the date of this press release and was provided for providing further information about Journey's anticipated future business operations. Journey disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein. Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the Annual Information Form filed on www.SEDAR.com on
Non-IFRS Measures
The Company uses the following non-IFRS measures in evaluating corporate performance. These terms do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures by other companies.
(1) | "Adjusted Funds Flow" is calculated by taking "cash flow provided by operating activities" from the financial statements and adding or deducting: changes in non-cash working capital; non-recurring "other" income; transaction costs; and decommissioning costs. Adjusted Funds Flow per share is calculated as Adjusted Funds Flow divided by the weighted-average number of shares outstanding in the period. Because Adjusted Funds Flow and Adjusted Funds Flow per share are not impacted by fluctuations in non-cash working capital balances, Management believes these measures are more indicative of performance than the GAAP measured "cash flow generated from operating activities". In addition, Journey excludes transaction costs from the definition of Adjusted Funds Flow, as these expenses are generally in respect of capital acquisition transactions. The Company considers Adjusted Funds Flow a key performance measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Journey's determination of Adjusted Funds Flow may not be comparable to that reported by other companies. Journey also presents "Adjusted Funds Flow per basic share" where per share amounts are calculated using the weighted average shares outstanding consistent with the calculation of net income (loss) per share, which per share amount is calculated under IFRS and is more fully described in the notes to the audited, year-end consolidated financial statements. |
Three months ended | Twelve months ended | |||||
2022 |
2021 | % Change |
2022 |
2021 | % Change | |
Cash flow provided by operating activities | 29,346 | 16,007 | 58 | 106,623 | 40,930 | 161 |
Add (deduct): | ||||||
Changes in non-cash working capital | (3,427) | 51 | 14,602 | (10,521) | 6,498 | (162) |
Capitalized interest | - | (46) | (100) | - | (2,916) | (100) |
Non-recurring other income1 | - | - | - | - | (902) | (100) |
Transaction costs | 1,266 | (128) | (1,089) | 1,489 | 231 | 545 |
Decommissioning costs | 1,705 | 678 | 151 | 3,796 | 2,433 | 56 |
Adjusted Funds Flow | 24,890 | 16,562 | 50 | 101,387 | 46,274 | 119 |
(2) | "Netback(s)". The Company uses netbacks to help evaluate its performance, leverage, and liquidity; comparisons with peers; as well as to assess potential acquisitions. Management considers netbacks as a key performance measure as it demonstrates the Company's profitability relative to current commodity prices. Management also uses them in operational and capital allocation decisions. Journey uses netbacks to assess its own performance and performance in relation to its peers. These netbacks are operating, Funds Flow and net income (loss). "Operating netback" is calculated as the average sales price of the commodities sold (excluding financial hedging gains and losses), less royalties, transportation costs and operating expenses. There is no GAAP measure that is reasonably comparable to netbacks. |
(3) | "Net debt" is calculated by taking current assets and then subtracting accounts payable and accrued liabilities; the principal amount of term debt; and the carrying value of the other liability. Net debt is used to assess the capital efficiency, liquidity and general financial strength of the Company. In addition, it is used as a comparison tool to assess financial strength in relation to Journey's peers. |
NET DEBT RECONCILIATION ( |
|
|
Principal amount of term debt | 67,580 | 67,580 |
Principal amount of vendor-take-back debt | 43,000 | - |
Accounts payable and accrued liabilities | 45,496 | 20,441 |
Principal amount of contingent bank debt | 5,000 | 5,750 |
Other loans | 419 | 156 |
Deduct: | ||
Cash in bank | (31,400) | (15,677) |
Accounts receivable | (29,677) | (20,180) |
Prepaid expenses | (1,650) | (1,049) |
Net debt | 98,768 | 57,021 |
(4) | Journey uses "Capital Expenditures (excluding A&D)" and "Capital Expenditures (including A&D)" to measure its capital investment level compared to the Company's annual budgeted capital expenditures for its organic capital program, excluding acquisitions or dispositions. The directly comparable GAAP measure to capital expenditures is cash used in investing activities. Journey then adjusts its capital expenditures for A&D activity to give a more complete analysis for its capital spending used for FD&A purposes. The capital spending for A&D proposes has been adjusted to reflect the non-cash component of the consideration paid (i.e. shares issued). The following table details the composition of capital expenditures and its reconciliation to cash flow used in investing activities: |
(000's) | Year ended | |||
2022 | 2021 | |||
Land and lease rentals | 919 | 616 | ||
Geological and geophysical | 63 | - | ||
Drilling, completions, recompletions | 31,260 | 456 | ||
Well equipment and facilities | 9,334 | 1,918 | ||
Power generation | 2,996 | 189 | ||
Other | - | 70 | ||
Exploration and development expenditures | 44,573 | 3,249 | ||
Corporate acquisition | 19,146 | 6,174 | ||
Asset acquisitions | 120,307 | 1,595 | ||
Asset dispositions | (3,000) | (47) | ||
Capital Expenditures (including A&D ) | 181,026 | 10,971 | ||
Decommissioning costs | 5,035 | 5,312 | ||
Total capital expenditures | 186,061 | 16,283 |
Measurements
All dollar figures included herein are presented in Canadian dollars, unless otherwise noted.
Where amounts are expressed in a barrel of oil equivalent ("boe"), or barrel of oil equivalent per day ("boe/d"), natural gas volumes have been converted to barrels of oil equivalent at nine (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term boe may be misleading particularly if used in isolation. The boe conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
Abbreviations
The following abbreviations are used throughout these MD&A and have the ascribed meanings:
A&D | acquisition and divestiture of petroleum and natural gas assets |
bbl | barrel |
bbls | barrels |
boe | barrels of oil equivalent (see conversion statement below) |
boe/d | barrels of oil equivalent per day |
gj | gigajoules |
GAAP | Generally Accepted Accounting Principles |
IFRS | International Financial Reporting Standards |
Mbbls | thousand barrels |
MMBtu | million British thermal units |
Mboe | thousand boe |
Mcf | thousand cubic feet |
Mmcf | million cubic feet |
Mmcf/d | million cubic feet per day |
MSW | Mixed sweet |
NGL's | natural gas liquids (ethane, propane, butane and condensate) |
WCS | Western Canada Select benchmark oil price |
WTI | West Texas Intermediate benchmark Oil price |
All volumes in this press release refer to the sales volumes of crude oil, natural gas and associated by-products measured at the point of sale to third-party purchasers. For natural gas, this occurs after the removal of natural gas liquids.
No securities regulatory authority has either approved or disapproved of the contents of this press release.
SOURCE
© Canada Newswire, source