Bonterra Energy announces 2024 budget focused on maximizing free funds flow with modest production growth and provides preliminary Montney well test results – Canadian Energy News, Top Headlines, Commentaries, Features & Events – EnergyNow

• Approved capital expenditure range of $90 million to $100 million, fully funded by internally generated funds flow (the “Budget”);
• Annual average production expected between 13,800 and 14,200 BOE per day², weighted approximately 60 percent to oil and liquids;
• Free funds flow³ of $20 million to $25 million in 2024, defined as funds flow³ net of development capital and decommissioning expenditures settled (“Free Funds Flow³), generated from $125 million to $130 million in corporate funds flow³;
• Net debt³ of $125 million to $130 million at year-end 2024, driving a year-end net debt to trailing twelve months’ EBITDA ratio³ of 0.8 to 0.9 times; and
• $6 million to $7 million allocated to abandonment and reclamation obligations (“ARO”) in 2024, related to inactive wells with no further potential, along with pipelines and facilities.

“Building on Bonterra’s disciplined and successful execution through 2023, we have established a strong foundation on which to drive forward in 2024 and beyond, demonstrated by the approval of our $90 million to $100 million capital expenditure budget designed to maximize Free Funds Flow, modestly grow production, and reduce net debt,” said Patrick Oliver, President and CEO of the Company. “While continuing to prudently develop our high-quality, oil-weighted asset base in the Cardium and pursuing development in the Montney, we intend to secure financial flexibility by maintaining a strong balance sheet that will support our ultimate goal of implementing a return of capital model.”

The Company’s 2024 budget is structured to generate meaningful Free Funds Flow³, which can be allocated to further strengthening the balance sheet and modest production growth. While the Company remains committed to establishing a sustainable return of capital model, timing for implementation is largely dependent on a favourable commodity price environment. Given recent market volatility and softening in both crude oil and natural gas prices, Bonterra intends to prudently focus on optimizing Free Funds Flow and strengthening the balance sheet.

The allocation of the Company’s 2024 Budget is expected to be approximately 66 percent to drilling and completion activities and ongoing recompletions of existing wells in the Company’s high rate-of-return, lower-risk light oil core Pembina Cardium and Willesden Green areas; approximately 24 percent to non-operated activities, infrastructure and facilities; and the balance to land and ARO.

In order to mitigate risk, diversify the Company’s commodity price exposure and add stability during periods of market volatility, hedges have been layered on approximately 30 percent of Bonterra’s expected crude oil and 20 percent of Bonterra’s natural gas production through Q3 2024. Bonterra expects to layer on additional hedges representing approximately 10 percent of natural gas production through Q3 2024 by the end of 2023.Through the next nine months, Bonterra has secured WTI prices between $50.00 USD to $93.75 USD per bbl on approximately 2,133 bbls per day; and natural gas prices between $2.15 to $3.56 per GJ on approximately 6,974 GJ per day.

Bonterra’s Budget is designed to enable the Company to responsibly manage the pace of the capital program, maintain flexibility, maximize capital efficiencies and optimize marketing and hedging opportunities. Bonterra plans to regularly review the Budget and may elect to adjust the amount and timing of capital spending to ensure alignment with the broader commodity price environment and in keeping with the target of a return of capital model.

2024 Guidance Summary and Sensitivities

The following table shows Bonterra’s sensitivity to key commodity price variables. The sensitivity calculations are performed independently and show the effect of changing one variable while holding all other variables constant.

Annualized sensitivity analysis on funds flow, as estimated for 2024¹

As previously communicated, Bonterra intends to prioritize sustainability and responsible Free Funds Flow¹ allocation, with the ultimate goal of implementing a sustainable dividend once specific metrics are achieved and commodity prices are conducive. These required metrics include a targeted net debt range of $135 to $145 million and a debt to EBITDA ratio[4] of under one times. Should low commodity prices persist, the Company intends to prioritize the continued management of the balance sheet and maintaining ongoing financial flexibility.

Bonterra is pleased to announce a significant Montney discovery at Valhalla. The Company’s first Montney test well was drilled in Q3 2023 at 04-03-074-6W6 (the “04-03 Well”) on Bonterra’s block of 100 percent owned lands covering 45 sections.

• The 04-03 Well was drilled to a total measured depth of approximately 5,500 meters, including a horizontal leg of 3,200 meters for $3.5 million, and was completed early in Q4 2023 with 134 individual stages for $4.2 million.
• Bonterra performed a flow test over 17.8 days at restricted rates which averaged 523 BOE per day (340 Bbls per day of 40 degree API crude oil and 1,100 Mcf per day of natural gas). Production rates were restricted to ensure compliance with applicable regulatory requirements.
• The well achieved a peak daily rate of 753 BOE per day (469 BBL per day and 1,707 MCF per day) during the flow test.
• Currently, the Company is exploring various options to tie-in the 04-03 Well to third party gas processing facilities.
• Should an egress solution be secured in the area, a second delineation well will be considered later in the year.

Bonterra is very encouraged with the test results from the 04-03 Well and the potential for Valhalla to emerge as an exciting new core area. This first well supports continued testing and delineation of the Company’s strategic Valhalla asset, which is expected to provide greater optionality for shareholders and an expanded development runway for Bonterra in the future.  The Company will exercise discipline to align the pace of future development in the area with available egress solutions.

Bonterra Energy Corp. is a conventional oil and gas corporation forging a grounded path forward for Canadian energy. Operations include a large, concentrated land position in Alberta’s Pembina Cardium, one of Canada’s largest oil plays. Bonterra’s liquids-weighted Cardium production provides a foundation for implementing a return of capital strategy over time, which is focused on generating long-term, sustainable growth and value creation for shareholders. An emerging Montney exploration opportunity is expected to provide enhanced optionality and an expanded potential development runway for the future. Our shares are listed on the Toronto Stock Exchange under the symbol “BNE” and we invite stakeholders to follow us on LinkedIn and X (formerly Twitter) for ongoing updates and developments.