Highlights
- Achieved record corporate production of 4,035 boe/d in the fourth quarter of 2023. As a result of an effective capital program in the fourth quarter of 2023 and early 2024, first quarter 2024 production is expected to average approximately 4,900 boe/d and current production is greater than 6,500 boe/d.
- During the first quarter of 2024, the Company executed a successful capital program of approximately $24 million, which included five additional wells, all of which were brought onstream in the first quarter. These five wells consisted of three fracture stimulated wells at Wilson Creek and two additional multi-lateral open hole wells, one in Brazeau and one in the Mannville horizon in eastern Alberta.
- The Company is encouraged by the initial results on the capital program executed to date in 2024, particularly with respect to the Wilson Creek wells, 100/12-05-043-05 (the “12-05 well“), 100/13-05-043-05 (the “13-05 well“), and the Brazeau well 02/08-33-047-14W5 (the “08-33 well“). Trailing and current production for the five wells drilled in the first quarter of 2024 are summarized below:
|
Average Rate Since Online |
Current Rate |
|||||||||||
|
Well |
Spud |
Rig Release |
BOPD |
BNGLD |
MCFD |
BOED |
BOPD |
BNGLD |
MCFD |
BOED |
Days |
|
|
Brazeau 08-33 well |
2024-02-18 |
2024-03-03 |
310 |
6 |
127 |
337 |
393 |
8 |
180 |
431 |
30 |
|
|
Wilson 13-05 well |
2024-01-24 |
2024-02-02 |
262 |
15 |
172 |
306 |
611 |
41 |
470 |
731 |
13 |
|
|
Wilson 12-05 well |
2024-02-03 |
2024-02-15 |
241 |
14 |
159 |
282 |
518 |
41 |
467 |
637 |
12 |
|
|
Wilson 16-33 well |
2024-01-06 |
2024-01-13 |
187 |
37 |
314 |
276 |
242 |
55 |
472 |
376 |
54 |
|
|
Viking 14-29 well |
2024-02-06 |
2024-02-20 |
28 |
0 |
0 |
28 |
37 |
0 |
0 |
36 |
24 |
|
|
(1) |
The test results are not necessarily indicative of long-term performance or of ultimate recovery. |
- The five wells had associated average cycles times of 45 days and delivered capital efficiencies of less than $20,000 boe/d, an improvement of more than 20% versus the previous forecast.
- Significant intrinsic value recognized in Year-End 2023 Reserves. Realized before-tax net present value, after debt, of booked reserves(1):
- PDP BTNPV10 of $218.9 million representing NAV $8.06/share and $7.93/share fully diluted.
- Associated RLI of 10.8 years and delivered a recycle ratio of 2.34
- 1P BTNPV10 of $463.6 million representing NAV $24.25/share and $21.07/share fully diluted.
- Associated RLI of 15.2 years and recycle ratio of 2.9
- 2P BTNPV10 of $746.9 million representing NAV $43.00/share and $36.28/share fully diluted.
- Associated RLI of 21.8 years and recycle ratio of 3.6
- PDP BTNPV10 of $218.9 million representing NAV $8.06/share and $7.93/share fully diluted.
- At December 31, 2023, Highwood had over $300 million in tax pools, including more than $100 million in non-capital losses. Highwood does not anticipate being cash taxable for approximately three years.
- Highwood reiterates its 2024 production guidance of approximately 5,200 boe/d. Representing year-over-year growth of approximately 25%. Forecast capital expenditures are estimated to be approximately $40–45 million. Further, the Company expects to reduce Net Debt by approximately 25%, reducing Net Debt / 2024E EBITDA to under 0.8x by the end of 2024.(1)(2). The Company will continue to evaluate our capital program, market conditions and associated guidance over the next 30 days.
|
Notes to Highlights: |
|
|
(1) |
See ”Caution Respecting Reserves Information” and ”Non-GAAP and other Specified Financial Measures”. |
|
(2) |
Based on Management’s projections (not Independent Qualified Reserves Evaluators’ forecasts) and applying the following pricing assumptions: WTI: US$78.00/bbl; WCS Diff: US$14.00/bbl; MSW Diff: US$4.00/bbl; AECO: C$1.90/GJ; 0.74 CAD/USD. Management projections are used in place of Independent Qualified Reserves Evaluators’ forecasts as Management believes it provides investors with valuable information concerning the liquidity of the Company. |
Summary of Financial & Operating Results
|
Three months ended December 31, |
Year ended December 31, |
||||||||
|
2023 |
2022 |
% |
2023 |
2022 |
% |
||||
|
Financial (in thousands) |
|||||||||
|
Petroleum and natural gas sales |
$ 23,633 |
$ |
$ 1,027 |
2,201 |
$ 41,212 |
$ 4,438 |
829 |
||
|
Transportation pipeline revenues |
757 |
769 |
(2) |
2,867 |
3,255 |
(12) |
|||
|
Total revenues, net of royalties(1) |
28,918 |
1,827 |
1,483 |
41,038 |
6,618 |
520 |
|||
|
Income |
47,785 |
62 |
76,973 |
46,144 |
2,246 |
1,954 |
|||
|
Funds flow from operations(5) |
7,813 |
433 |
1,704 |
13,873 |
1,519 |
813 |
|||
|
Adjusted EBITDA(6) |
10,261 |
322 |
3,087 |
17,667 |
1,608 |
999 |
|||
|
Capital expenditures |
14,737 |
362 |
3,971 |
18,767 |
2,045 |
818 |
|||
|
Net debt (2) |
97,051 |
(236) |
– |
||||||
|
Shareholder’s equity (end of period) |
104,199 |
10,697 |
874 |
||||||
|
Shares outstanding (end of period) |
15,114 |
6,037 |
150 |
||||||
|
Weighted-average basic shares |
9,723 |
6,088 |
60 |
||||||
|
outstanding |
|||||||||
|
Operations (3) |
|||||||||
|
Production |
|||||||||
|
Crude oil (bbls/d) |
2,306 |
119 |
1,830 |
978 |
113 |
765 |
|||
|
NGLs (boe/d) |
526 |
– |
100 |
210 |
– |
100 |
|||
|
Natural gas (mcf/d) |
7,215 |
– |
100 |
2,696 |
– |
100 |
|||
|
Total (boe/d) |
4,035 |
119 |
3,278 |
1,682 |
113 |
1,388 |
|||
|
Average realized prices (4) |
|||||||||
|
Crude oil (Cdn$/bbl) |
95.07 |
93.44 |
2 |
99.44 |
107.54 |
(8) |
|||
|
NGL (Cdn$/boe) |
36.22 |
– |
100 |
37.52 |
– |
100 |
|||
|
Natural gas (Cdn$/mcf) |
2.57 |
– |
100 |
2.63 |
– |
100 |
|||
|
Operating netback (per BOE) |
32.42 |
40.40 |
(20) |
35.54 |
46.28 |
(23) |
|||
|
(1) |
Includes unrealized gain and losses on commodity contracts. |
|
(2) |
Net debt consists of bank debt, promissory note, long-term accounts payable and accrued liabilities and working capital surplus (deficit) excluding commodity contract assets and/or liabilities, current portion of decommissioning liabilities and lease liabilities. |
|
(3) |
For a description of the boe conversion ratio, see “Basis of Barrel of Oil Equivalent“. |
|
(4) |
Before hedging. |
|
(5) |
See “Non-GAAP and Other Specified Financial Measures“. |
The operating results of the three month and year ended December 31, 2023 include the impact of the Acquisitions from the closing date of August 3, 2023.
2023 Reserves Summary
Highwood completed three acquisitions during 2023. The combined assets were evaluated by GLJ effective December 31, 2023 using the 3 Consultants’ Average price forecast (the “Reserves Report“). GLJ is the Company’s independent qualified reserves evaluator.
Significant intrinsic value recognized in Year-End 2023 Reserves. Realized before-tax net present value of booked reserves as follows:
- PDP BTNPV10 of $218.9 million representing NAV $8.06/share and $7.93/share fully diluted.
- 1P BTNPV10 of $463.6 million representing NAV $24.25/share and $21.07/share fully diluted.
- 2P BTNPV10 of $746.9 million representing NAV $43.00/share and $36.28/share fully diluted.
Key highlights of the Company’s proved developed producing (PDP), total proved (1P) and total proved plus probable (2P) reserves from the Reserves Report are highlighted below:
- PDP reserves increased by 3,939 Mboe to 15,988 Mboe, representing a 24% (30% net of production) increase to volume along with a $32.8 million increase in value when compared to YE2022 (inclusive of acquisitions) yielding a RLI of 10.8 years
- 1P reserves increased by 8,861 Mboe to 31,847 Mboe, representing a 34% increase to volume along with a $168.8 million increase in value when compared to YE2022 (inclusive of acquisitions) yielding a RLI of 15.2 years
- 2P reserves increased by 11,805 Mboe to 52,699 Mboe, representing a 27% increase to volume along with a $221.7 million increase in value when compared to YE2022 (inclusive of acquisitions) yielding a RLI of 21.8 years
Strong Recycle Ratios — Highwood expects strong netbacks as a result of its highly economic oil plays, which result in the recycle ratios listed below:
- PDP reserves: converted reserves in 2023 at F&D of $13.40 with associated recycle ratio of 2.34 based on fourth quarter of 2023 netback
- 1P reserves: F&D of $14.10/boe with associated recycle ratio of 2.9.
- 2P reserves: F&D of $9.49/boe with associated recycle ratio of 3.6.
Further recycle ratios are listed below:
|
F&D |
FD&A |
F&D |
FD&A |
|
|
Recycle Ratio |
(Excluding FDC) |
(Including FDC) |
||
|
1P Reserves |
9.4 |
7.0 |
0.7 |
2.9 |
|
2P Reserves |
17.1 |
11.4 |
0.8 |
3.6 |
The Company has achieved early success in implementing multi-lateral open hole wells as well as higher frac intensity within the Belly River Horizon. The Company expects to apply these strategies to other areas of the asset base in 2024.
2023 Reserves by Category
The following table provides a summary of specific details from the Reserves Report, which was created in accordance with the procedures and standards contained in the Canadian Oil and Gas Evaluation Handbook and the requirements of National Instruments 51-101 — Standards of Disclosure for Oil and Gas Activities.
|
Mboe |
BTNPV10 |
|
|
Proved Developed Producing |
15,988 |
218,888 |
|
Total Proved |
31,847 |
463,636 |
|
Proved Plus Probable |
52,699 |
746,943 |
Company Reserves
|
Light & Medium Oil |
Conventional |
Shale Gas |
Natural Gas Liquids |
Oil Equivalent |
||||||||||||||||
|
Reserves Category |
Company |
Company Mbbl |
Company |
Company MMcf |
Company |
Company |
Company Mboe |
Company |
Company |
Company Mboe |
||||||||||
|
Proved |
||||||||||||||||||||
|
Producing |
5,554 |
4,445 |
47,274 |
39,183 |
0 |
0 |
2,555 |
1,960 |
15,988 |
12,936 |
||||||||||
|
Developed Non- |
498 |
366 |
4,147 |
3,282 |
0 |
0 |
247 |
168 |
1,436 |
1,081 |
||||||||||
|
Undeveloped |
9,168 |
7,467 |
19,026 |
17,302 |
2,087 |
1,870 |
1,737 |
1,391 |
14,423 |
12,053 |
||||||||||
|
Total Proved |
15,219 |
12,278 |
70,447 |
59,767 |
2,087 |
1,870 |
4,539 |
3,519 |
31,847 |
26,069 |
||||||||||
|
Total Probable |
8,994 |
7,038 |
44,148 |
38,463 |
2,574 |
2,252 |
4,071 |
3,134 |
20,852 |
16,958 |
||||||||||
|
Total Proved Plus |
24,213 |
19,316 |
114,595 |
98,230 |
4,661 |
4,122 |
8,610 |
6,653 |
52,699 |
43,028 |
||||||||||
Net Present Values for Future Net Revenues before Income Taxes Discounted at (% per year)
|
Net Present Values of Future Net Revenue |
Net Present Values of Future Net Revenue |
Unit Value Before |
||||||||||
|
Reserves Category |
0% |
5% |
10% |
15% |
20% |
0% |
5% |
10% |
15% |
20% |
$/boe |
$/Mcfe |
|
Proved |
||||||||||||
|
Producing |
377,105 |
275,266 |
218,888 |
183,743 |
159,731 |
362,229 |
269,152 |
216,089 |
182,360 |
159,006 |
16.92 |
2.82 |
|
Developed Non-Producing |
34,717 |
22,970 |
16,695 |
12,956 |
10,506 |
26,711 |
18,609 |
14,186 |
11,446 |
9,564 |
15.44 |
2.57 |
|
Undeveloped |
485,472 |
318,642 |
228,053 |
171,210 |
132,672 |
373,417 |
243,485 |
173,086 |
129,058 |
99,312 |
18.92 |
3.15 |
|
Total Proved |
897,293 |
616,878 |
463,636 |
367,909 |
302,909 |
762,357 |
531,247 |
403,362 |
322,864 |
267,883 |
17.78 |
2.96 |
|
Total Probable |
700,972 |
417,843 |
283,307 |
207,273 |
159,319 |
539,009 |
319,231 |
214,830 |
156,002 |
119,078 |
16.71 |
2.78 |
|
Total Proved Plus Probable |
1,598,266 |
1,034,720 |
746,943 |
575,182 |
462,228 |
1,301,366 |
850,478 |
618,193 |
478,866 |
386,961 |
17.36 |
2.89 |
|
Note: Unit values are based on Company Net Reserves. |
Operational Update
With the continued strong commodity prices in the fourth quarter and into 2024, the Company focused primarily on the execution of its capital program. Highwood achieved record corporate production in the fourth quarter of 2023 of 4,035 boe/d. Highwood is also pleased to announce that first quarter 2024 production is expected to average approximately 4,900 boe/d and current production is greater than 6,500 boe/d. During the first quarter of 2024, the Company executed a successful $24 million capital program which included five additional wells all of which were brought onstream in the first quarter. These five wells consisted of three fracture stimulated wells at Wilson Creek and two additional multi-lateral open hole wells, one in Brazeau and one in the Mannville horizon in eastern Alberta.
In the first quarter of 2024, the Company spud five additional new wells. Three of these wells will infill the western side of the Wilson Creek asset, the 103/16-33-042-05W5 (the “16-33 well“), the 12-05 well and the 13-05 well. Further, the Company drilled two additional multi-lateral open hole wells, one in Brazeau, the 8-33 well and one in the Mannville horizon in eastern Alberta, 100/14-29-048-08W4 (the “14-29 well“). The Company is pleased with the early results of the program. The 14-29 well has been online for approximately three weeks and is currently producing slightly below the projected type curve.
The Company will continue to review and assess opportunities which are accretive to the Company as Highwood seeks to grow this segment of its operations. The Company will also assess land offerings in strategic areas where the Company sees significant growth opportunities.
Outlook
Highwood anticipates allocating its organic Free Cash Flow after sustaining capital on a 50:50 basis to support organic production growth of approximately 25% while also expecting to reduce Net Debt by approximately 25%, achieving Net Debt / 2024E EBITDA of under 0.8x by the end of 2024. The Company will continue to evaluate our capital program, market conditions and associated guidance over the next 30 days.
The primary focus over the near-term is the execution of the Company’s capital program and growth strategy while reducing the Company’s Net Debt. At December 31, 2023, Highwood had over $300 million in tax pools, including more than $100 million in non-capital losses. Highwood does not anticipate being cash taxable for approximately three years.
Corporately, the Company is dedicated to building a growing profile of Free Cash Flow, on a per share basis, while using prudent leverage to provide it maximum flexibility for organic growth and / or other strategic M&A opportunities, with a longer-term goal to provide significant return of capital to shareholders.
Highwood is continuing to evaluate its undeveloped lands for drilling opportunities and is planning to continue its active capital program while commodity prices remain strong.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
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