All dollar amounts in this news release are stated in Canadian dollars unless otherwise noted.
Highlights | Three months ended | Year ended | ||||
(in thousands, except per share data) | 2023 | 2023 | 2022 | 2023 | 2022 | |
Financial | ||||||
Funds flow1 | ||||||
Per share basic | ||||||
Per share diluted | ||||||
Adjusted funds flow1 | ||||||
Per share basic | ||||||
Per share diluted | ||||||
Adjusted EBITDA1 | ||||||
Per share basic | ||||||
Per share diluted | ||||||
Cash provided by operating activities | ||||||
Net income | ||||||
Per share basic | ||||||
Per share diluted | ||||||
Exploration and development expenditures1 | ||||||
Property acquisitions | - | - | - | |||
Property dispositions | - | - | - | |||
Working capital (net debt)1 | ( | ( | ||||
Common shares | ||||||
Shares outstanding, end of period | 648,671 | 651,091 | 662,411 | 648,671 | 662,411 | |
Weighted average shares (basic) | 649,984 | 658,521 | 662,411 | 658,298 | 648,842 | |
Weighted average shares (diluted) | 674,271 | 681,140 | 672,207 | 672,763 | 672,010 | |
Operations | ||||||
Production | ||||||
Tight oil (Bbls per day) | 5,630 | 5,527 | 6,326 | 6,172 | 6,564 | |
Shale gas (Mcf per day) | 11,980 | 11,841 | 13,218 | 12,180 | 12,207 | |
Natural gas liquids (Bbls per day) | 2,382 | 2,406 | 2,480 | 2,466 | 2,275 | |
Barrels of oil equivalent (Boepd, 6:1) | 10,009 | 9,907 | 11,009 | 10,668 | 10,874 | |
Average realized price | ||||||
Tight oil ($ per Bbl) | ||||||
Shale gas ($ per Mcf) | ||||||
Natural gas liquids ($ per Bbl) | ( | |||||
Barrels of oil equivalent ($ per Boe, 6:1) | ||||||
Operating netback per Boe (6:1) | ||||||
Operating netback1 | ||||||
Operating netback (prior to hedging)1 | ||||||
Funds flow netback per Boe (6:1) | ||||||
Funds flow1 | ||||||
Adjusted funds flow1 |
1 | Management uses these non-GAAP financial measures to analyze operating performance, leverage and investing activity. These measures do not have a standardized meaning under GAAP and therefore may not be comparable with the calculation of similar measures for other companies. See Non-GAAP Measures within this document for additional information. |
MESSAGE TO SHAREHOLDERS
The progress and results achieved by Lucero throughout 2023 reflect the Company's disciplined capital allocation strategy, responsible operations and commitment to maintaining financial flexibility to pursue opportunities for shareholder value enhancement. Lucero successfully executed the Company's 2023 capital program safely and on budget, investing
The majority of Lucero's 2023 capital program was executed within the first nine months of the year, leading to a modest
Lucero continued to focus on portfolio optimization over the past year, resulting in the strategic disposition of non-core and non-operated assets in June of 2023 which commanded premium market metrics (the "Disposition" and "Disposed Assets"), and provided the Company with cash consideration of
In light of the strong balance sheet and positive net earnings, Lucero returned 24% of the Company's free funds flow in 2023 to shareholders through a Normal Course Issuer Bid (the "NCIB"). By year end 2023,
2023 HIGHLIGHTS
Lucero's achievements during the fourth quarter and year-ended
Fourth quarter:
- 10,009 Boepd average production, compared to 9,907 Boepd in the third quarter of 2023 and 11,009 Boepd in the fourth quarter of 2022;
$34.0 million of funds flow, compared to$32.9 million in the previous quarter and$37.0 million in the fourth quarter of 2022;$0.05 per share of funds flow, consistent with the third quarter of 2023 and$0.06 per share in the fourth quarter of 2022;$38.30 per Boe average operating netback, compared to$37.75 per Boe in the previous quarter and$40.07 per Boe in the fourth quarter of 2022;$30.2 million free funds flow, after spending$3.7 million in exploration and development expenditures; and$82.6 million of working capital atDecember 31, 2023 , compared to working capital of$52.6 million at the end of the third quarter of 2023 and net debt of$77.4 million atDecember 31, 2022 .
Full year:
- 10,668 Boepd of average production, 2% lower than 10,874 Boepd in 2022, despite selling approx. 20 percent of the Company's production;
$138.0 million of funds flow, a 6% decrease compared to$147.1 million in 2022;$38.54 per Boe average operating netback, a 7% decrease compared to$41.23 per Boe in 2022;$80.9 million of exploration and development expenditures, allocated to the successful drilling of five (4.3 net) wells and the completion of six (5.5 net) wells4, exiting 2023 with two (1.7 net) wells that were drilled but uncompleted ("DUCs");- PDP, TP and P+P reserves growth of 10%, 4% and 3%, respectively (normalizing for the Disposition);
- PDP, TP and P+P production replacement ratios5 of 143%, 125% and 119%, respectively (normalizing for acquisitions and the Disposition);
$59.3 million of net income ($0.09 per share basic and diluted); and- Returning
$13.5 million to shareholders through the purchase and cancellation of 21.6 million Common Shares.
_________________________ |
1 See "Non-GAAP Measures" within this press release. |
RESERVES
In this press release, all references to reserves are to gross Company reserves, meaning Lucero's working interest reserves before deductions of royalties and before consideration of Lucero's royalty interests. The reserves were evaluated by
The following tables are a summary of Lucero's petroleum and natural gas reserves, as evaluated by NSAI, effective
Reserves Summary
Tight Oil (Mbbl) |
| NGLs (Mbbl) | Total Oil Equivalent (Mboe) | ||||||
Proved | |||||||||
Developed Producing | 12,808 | 32,168 | 6,359 | 24,529 | |||||
Developed Non-Producing | 729 | 1,457 | 287 | 1,259 | |||||
Undeveloped | 11,865 | 11,454 | 1,879 | 15,653 | |||||
Total Proved | 25,402 | 45,079 | 8,525 | 41,441 | |||||
Probable | 8,659 | 15,558 | 3,174 | 14,426 | |||||
Total Proved plus Probable | 34,061 | 60,636 | 11,699 | 55,867 | |||||
Net Present Value of Future Net Revenue (in Canadian dollars)
Before Future Income Tax Expenses and Discounted at | |||||
0 % | 5 % | 10 % | 15 % | 20 % | |
(C$MM) | (C$MM) | (C$MM) | (C$MM) | (C$MM) | |
Proved | |||||
Developed Producing | 915 | 619 | 469 | 382 | 325 |
Developed Non-Producing | 52 | 37 | 30 | 25 | 22 |
Undeveloped | 671 | 430 | 306 | 231 | 183 |
Total Proved | 1,638 | 1,086 | 805 | 639 | 530 |
Probable | 651 | 385 | 264 | 197 | 156 |
Total Proved plus Probable | 2,289 | 1,471 | 1,068 | 836 | 686 |
Values have been converted to Canadian dollars using the year-end 2023 exchange rate of |
Net Present Value of Future Net Revenue (in US dollars)
Before Future Income Tax Expenses and Discounted at | |||||
0 % | 5 % | 10 % | 15 % | 20 % | |
(US$MM) | (US$MM) | (US$MM) | (US$MM) | (US$MM) | |
Proved | |||||
Developed Producing | 692 | 468 | 355 | 289 | 246 |
Developed Non-Producing | 39 | 28 | 23 | 19 | 17 |
Undeveloped | 507 | 325 | 231 | 175 | 138 |
Total Proved | 1,238 | 821 | 608 | 483 | 401 |
Probable | 492 | 291 | 199 | 149 | 118 |
Total Proved plus Probable | 1,731 | 1,112 | 808 | 632 | 519 |
Finding, Development, and Acquisition Costs
Finding, Development & Acquisition ("FD&A")1 | Finding & Development ("F&D")1 | |||||||||
PDP | Total Proved | Total Proved | PDP | Total Proved | Total Proved | |||||
Capital Costs (C$000s) | ||||||||||
Exploration and development expenditures | ||||||||||
Acquisitions | 6,339 | 6,339 | 6,339 | - | - | - | ||||
Dispositions | (130,453) | (130,453) | (130,453) | - | - | - | ||||
Change in future development capital ("FDC") | (2,176) | (41,374) | (66,465) | (2,176) | 2,186 | 1,996 | ||||
Total FD&A / F&D costs | ( | ( | ( | |||||||
Reserves Additions (Mboe) | ||||||||||
Net change in reserve volumes | 1,550 | 929 | 698 | 1,550 | 929 | 698 | ||||
Add back production | 3,894 | 3,894 | 3,894 | 3,852 | 3,852 | 3,852 | ||||
Reserves associated with acquisitions | 639 | 639 | 825 | - | - | - | ||||
Reserves associated with dispositions | (8,570) | (13,995) | (19,170) | - | - | - | ||||
Total additions | (2,487) | (8,533) | (13,753) | 5,402 | 4,781 | 4,550 | ||||
F&D (C$/Boe) | ||||||||||
Three year F&D (C$/Boe)2 | ||||||||||
Recycle ratio3 | 2.1 | 3.9 | 4.8 | 2.6 | 2.2 | 2.1 | ||||
1 | The calculation of F&D and FD&A costs incorporates the change in FDC required to bring proved undeveloped and probable reserves into production. The FDC was converted to Canadian dollars using the average 2023 exchange rate of |
2 | Calculation of the three year FD&A and F&D costs per Boe reflect the sum of capital costs and net reserve additions for the years 2021 through 2023. |
3 | Recycle ratio is defined as 2023's operating netback prior to hedging, divided by F&D or FD&A costs, as applicable, on a per Boe basis. Operating netback prior to hedging is calculated as revenue (excluding realized gain or loss on financial derivatives) minus royalties, operating expenses, production taxes and transportation expenses. Lucero's operating netback prior to hedging in 2023 averaged |
Net Asset Value per Share as at
(C$ millions except share and per share amounts) | |
Proved Plus Probable reserve value (NPV10 before tax) | |
Working capital | 83 |
Total net assets | |
Basic Common Shares outstanding (millions) | 649 |
Estimated NAV per basic Common Share |
OUTLOOK AND SUSTAINABILITY
Lucero's 2024 capital program is budgeted at
Lucero is in a unique position among Canadian-listed, growth-oriented exploration and production companies. The Company offers 100% exposure to
With a focus on realizing success in 2024 and beyond, the Company is proud to highlight the following key operational and financial attributes:
Production Guidance | 2024E Average: 10,100 Boepd1 2024E Exit: 10,300 Boepd1 |
Total Proved plus Probable Reserves2 | Approx. 56 MMboe (82% light oil and liquids) |
Development Inventory | >30 net undrilled locations at |
Corporate Production Decline | Approx. 30% |
2024 Exploration and Development Expenditures | |
Working capital | |
Common Shares outstanding (basic) | 649 million at |
_______________________________ |
1 Approximately 60% light oil, 20% NGL and 20% conventional natural gas. |
2 All reserves information in this press release are gross Company reserves, meaning Lucero's working interest reserves before deductions of royalties and before consideration of Lucero's royalty interests. The reserve information for Lucero in the foregoing table is derived from the independent engineering report effective |
3 Assumes a foreign exchange rate of |
READER ADVISORIES
Forward Looking Statements
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, strategy, business model, focus, objectives and other aspects of Lucero's anticipated future operations and financial, operating and drilling and development plans and results, including, expected future production, production mix, reserves, drilling inventory, working capital, net debt, funds flow, free funds flow, operating netbacks, decline rate and decline profile, capital expenditure program and commodity prices. In addition, and without limiting the generality of the foregoing, this press release contains forward‐looking information regarding: that the Company's robust financial position affords the Company flexibility to drive continued growth while pursuing initiatives aimed at further enhancing shareholder value; that wells will be brought on-stream at a measured pace, which is intended to deliver a sustainable quarterly production profile; Lucero's expectation of corporate decline rates; Lucero's expectation on its long-term growth prospects; the Company's expectation that it is well positioned to continue generating measured growth and robust operating netbacks while targeting high expected recoveries, all of which contributes to the Company's ability to support and generate meaningful rates of return that can directly contribute to shareholder value creation; Lucero's 2024 capital program budgeted at
Although the Company 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 Lucero 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 Company's 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 the Company will derive there from. 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 Lucero's 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 Lucero'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.sedarplus.ca). These forward‐looking statements are made as of the date of this press release and Lucero 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.
Non‐GAAP Measures
This document includes non-GAAP measures and ratios commonly used in the oil and natural gas industry. These non-GAAP measures and ratios do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS", or alternatively, "GAAP") and therefore may not be comparable with the calculation of similar measures by other companies. For additional details, descriptions and reconciliations of these and other non-GAAP measures, see the Company's Management's Discussion and Analysis ("MD&A") for the three months and year ended
"Funds flow" represents cash from operating activities prior to changes in non-cash operating working capital and settlement of decommissioning obligations, including cash finance expenses, and is a measure of the Company's ability to generate funds to service any debt and other obligations and to fund its operations, without the impact of changes in non-cash working capital, which can vary based solely on timing of settlement of accounts receivable and accounts payable. "Adjusted funds flow" represents funds flow prior to transaction related costs, as transaction costs are associated with acquisition or disposition activity that are not representative of normal course business operations. "Funds flow netback per Boe" and "Adjusted funds flow netback per Boe" represents funds flow and adjusted funds flow, respectively, divided by production volumes for the corresponding period. "Funds flow per share basic and diluted" and "Adjusted funds flow per share basic and diluted" represents funds flow and adjusted funds flow, respectively, divided by the weighted average basic and diluted shares outstanding, respectively, for the corresponding period. The reconciliation between cash provided by operating activities, as defined by IFRS, and funds flow as well as adjusted funds flow, is as follows:
Three months ended | Year ended | ||||||
($ thousands) | 2023 | 2022 | 2023 | 2022 | |||
Cash provided by operating activities | |||||||
Finance expenses - cash | 424 | (1,710) | (2,259) | (7,154) | |||
Settlement of decommissioning obligations | - | - | 304 | - | |||
Changes in non-cash operating working capital | 1,317 | (3,195) | 3,231 | (18,358) | |||
Funds flow | |||||||
Transaction related costs | - | - | 2,454 | 2,100 | |||
Adjusted funds flow |
"Adjusted EBITDA" represents cash provided by operating activities prior to changes in non-cash working capital, to measure the Company's ability to generate funds to service debt and other obligations and to fund the Company's operations, without the impact of changes in non-cash working capital which can vary based solely on timing of settlement of accounts receivable and accounts payable. "Adjusted EBITDA per share basic and diluted" is a non-GAAP ratio that includes adjusted EBITDA, a non-GAAP measure. The Company calculates adjusted EBITDA per share basic and diluted as adjusted EBITDA divided by weighted average basic and diluted shares outstanding, respectively. Lucero believes that adjusted EBITDA and adjusted EBITDA per share basic and diluted are key industry performance measures of the Company's ability to generate liquidity and are common measures within the oil and gas industry. The reconciliation between cash flow from operating activities, as defined by IFRS, and adjusted EBITDA, as defined herein, is as follows:
Three months ended | Year ended | ||||||
($ thousands) | 2023 | 2022 | 2023 | 2022 | |||
Cash provided by operating activities | |||||||
Changes in non-cash operating working capital | 1,317 | (3,195) | 3,231 | (18,358) | |||
Adjusted EBITDA |
"Working capital" (or, if a negative number, referred to as "net debt") represents total current assets (excluding financial derivative assets), less: total liabilities (excluding decommissioning obligation, deferred tax liability, lease liability and financial derivative liability). Lucero believes Working capital or net debt is a key measure to assess the Company's liquidity position at a point in time. Working capital or net debt is not a standardized measure and may not be comparable with similar measures for other entities. Net debt is also expressed as a ratio to funds flow, referred to as "net debt to funds flow ratio", and is calculated as the net debt at the end of a period divided by the funds flow in the same period. The reconciliation between total current assets, as defined by IFRS, and working capital or net debt, as defined herein, is as follows:
($ thousands) | As at | As at | |||||
Total current assets | |||||||
Total liabilities | (89,689) | (149,123) | |||||
Decommissioning obligation | 4,623 | 5,993 | |||||
Deferred tax liability | 52,865 | 30,553 | |||||
Financial derivative liability | - | - | |||||
Lease liability | 950 | 1,053 | |||||
Working capital (net debt) | ( |
"Operating netback" represents petroleum and natural gas revenue, plus or minus any realized gain or loss on financial derivatives, less royalties, operating expenses, production taxes, and transportation expenses. "Operating netback prior to hedging" represents operating netback prior to any realized gain or loss on financial derivatives. "Operating netback" and "Operating netback prior to hedging" is also presented on a per Boe basis by dividing by production volumes for the corresponding period. Lucero believes that in addition to net income (loss) and cash provided by operating activities, operating netback and operating netback prior to hedging are useful supplemental measures as they assist in the determination of the Company's operating performance, leverage, and liquidity. Operating netback is commonly used by investors to assess performance of oil and gas properties and the possible impact of future commodity price changes on energy producers. "Operating netback per Boe" is a non-GAAP ratio that represents operating netback, a Non-GAAP measure, divided by production volumes for the corresponding period, and is presented including and excluding any realized gain or loss on financial derivatives. The table below discloses Lucero's operating netback and operating netback prior to hedging, including the reconciliation to the Company's most closely comparable GAAP measure, petroleum and natural gas revenues:
Three months ended | Year ended | ||||||
($ thousands) | 2023 | 2022 | 2023 | 2022 | |||
Petroleum and natural gas revenues | |||||||
Royalties | (9,439) | (13,281) | (42,658) | (63,358) | |||
Operating expenses | (8,163) | (9,438) | (35,594) | (34,695) | |||
Production taxes | (4,390) | (7,003) | (19,463) | (27,715) | |||
Transportation expenses | (1,426) | (1,797) | (6,382) | (7,282) | |||
Operating netback prior to hedging | |||||||
Realized loss on financial derivatives | - | (4,055) | - | (45,966) | |||
Operating netback |
"Exploration and development expenditures" represents additions to property, plant and equipment in the cash flow used in investing activities, less capitalized general and administrative expenses. Exploration and development expenditures is a measure of the Company's investments in property, plant and equipment. The most directly comparable GAAP measure to exploration and development expenditures is additions to property, plant and equipment in the cash flow used in investing activities. The reconciliation between additions to property, plant and equipment, as defined by IFRS, and exploration and development expenditures, as defined herein, is as follows:
Three months ended | Year ended | ||||||
($ thousands) | 2023 | 2022 | 2023 | 2022 | |||
Additions to property, plant and equipment | |||||||
Capitalized general and administrative expenses | (848) | (746) | (3,166) | (3,057) | |||
Exploration and development expenditures |
"Free funds flow" represents funds flow, less exploration and development expenditures. Management considers this measure to be useful in determining its available discretionary cash to fund capital expenditures, acquisitions or returns of capital to shareholders.
"Payout ratio" is a non-GAAP ratio that represents exploration and development expenditures (a non-GAAP measure), plus the cost of any dividends or share buybacks, as a percentage of funds flow. Management uses this measure to, among other things, assess the Company's allocation of free funds flow for corporate initiatives.
This press release contains metrics commonly used in the oil and natural gas industry which have been prepared by management, such as "F&D costs", "FD&A costs" and "recycle ratio". These terms do not have a standardized meaning and may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons.
"F&D costs" are calculated as exploration and development expenditures, plus changes in future development capital. F&D costs are also presented on a per Boe basis, dividing F&D costs by the change in reserve volumes plus production volumes in the applicable period. Management uses F&D costs as a measure of capital efficiency for organic reserves development.
"FD&A costs" are calculated as exploration and development expenditures, plus acquisition costs, disposition proceeds, and changes in future development capital. FD&A costs are also presented on a per Boe basis, dividing FD&A costs by the change in reserve volumes (including reserve volumes associated with acquisitions and dispositions) plus applicable production volumes. Management uses FD&A costs as a measure of capital efficiency for organic and acquired/disposed reserves development.
"Recycle ratio" is a non-GAAP ratio calculated by dividing operating netback per Boe (prior to hedging) by F&D costs or FD&A costs for the year. Management uses recycle ratio to evaluate the profitability, compared to the finding, developing and acquisition costs.
Oil and Gas Disclosures and Metrics
The term "Boe" or barrels of oil equivalent may be misleading, particularly if used in isolation. A Boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Additionally, given that the value ratio based on the current price of crude oil, as compared to natural gas, is significantly different from the energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may be misleading as an indication of value.
Production replacement ratio is calculated as total reserve additions divided by annual production, where both are adjusted for any impact of acquisitions and/or dispositions.
This press release discloses drilling locations in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations are derived from the reserves evaluation prepared by NSAI as of
SOURCE
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