Reuters


TC Energy Corp reported a 13.4% rise in fourth-quarter comparable profit on Thursday, partly helped by lower operating costs for its U.S. natural gas pipelines.

TC Energy profit rises 13% on higher earnings from U.S. gas pipelines- oil and gas 360

Source: Reuters

The company behind the Keystone XL oil pipeline, work on which was halted after U.S. President Joe Biden revoked the permit, had said it expects to record a large non-cash charge in its first-quarter earnings, but did not provide the size of it.

TC Energy said it continues to expect its Coastal Gaslink pipeline in British Columbia to be in service by 2023.

Its construction has faced opposition from environmentalists and was disrupted due to restriction imposed by the provincial government to fight the spread of COVID-19 infections after the Christmas holiday break.

The company said due to this project costs for the pipeline will increase significantly and the schedule will be delayed further.

Earnings from the companies U.S. and Canadian natural gas pipelines rose more than 9% each in the quarter.

Comparable earnings rose to C$1.1 billion ($867.30 million), or C$1.15 per share, in the quarter ended Dec. 31, from C$970 million, or C$1.03 per share, a year earlier.

($1 = 1.2683 Canadian dollars)


Recent Company Earnings:


December 6, 2022

Oil and Gas 360


DALLAS–(BUSINESS WIRE)–Dec. 6, 2022– Matador Resources Company (NYSE: MTDR) (“Matador” or the “Company”) today announced that its Board of Directors amended the Company’s dividend policy pursuant to which the Company intends to pay cash dividends on its common stock of $0.15 per share per quarter in 2023, which is a 50% increase from its prior policy of $0.10 per share per quarter.

Matador Resources Company amends its quarterly cash dividend policy to $0.15 per share- oil and gas 360

The Company anticipates that the Board will implement such amended policy in connection with the declaration of Matador’s next quarterly dividend, which is expected during the first quarter of 2023 for a dividend to be paid during early March 2023.

Joseph Wm. Foran, Matador’s Founder, Chairman and Chief Executive Officer, stated, “We are pleased to announce an increase in the Company’s dividend policy. Today’s announcement of a quarterly cash dividend policy of $0.15 per share is an increase of 50% as compared to Matador’s prior quarterly cash dividend policy of $0.10 per share. Matador’s Board of Directors adopted its initial dividend policy in February 2021 with a quarterly cash dividend of $0.025 per share, which was doubled in October 2021 to $0.05 per share and doubled again in June 2022 to $0.10 per share. The continued increase in our quarterly cash dividend is evidence of our commitment to return value to Matador’s shareholders as well as our growing financial strength and positive operational outlook. In fact, in the last two years, we have reduced our outstanding debt by $775 million. As a result, our leverage ratio has been at an all-time low for us as a public company of only 0.2x at the end of the third quarter of 2022. We are grateful for the continued support and friendship of our shareholders and look forward to paying this anticipated dividend to our shareholders during the first quarter of 2023.”

About Matador Resources Company

Matador is an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Its current operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. Matador also operates in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana. Additionally, Matador conducts midstream operations in support of its exploration, development and production operations and provides natural gas processing, oil transportation services, natural gas, oil and produced water gathering services and produced water disposal services to third parties.

For more information, visit Matador Resources Company at www.matadorresources.com.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. “Forward-looking statements” are statements related to future, not past, events. Forward-looking statements are based on current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as “could,” “believe,” “would,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “should,” “continue,” “plan,” “predict,” “potential,” “project,” “hypothetical,” “forecasted” and similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Such forward-looking statements include, but are not limited to, statements about guidance, projected or forecasted financial and operating results, future liquidity, the payment of dividends, results in certain basins, objectives, project timing, expectations and intentions, regulatory and governmental actions and other statements that are not historical facts. Actual results and future events could differ materially from those anticipated in such statements, and such forward-looking statements may not prove to be accurate. These forward-looking statements involve certain risks and uncertainties, including, but not limited to, the following risks related to financial and operational performance: general economic conditions; the Company’s ability to execute its business plan, including whether its drilling program is successful; changes in oil, natural gas and natural gas liquids prices and the demand for oil, natural gas and natural gas liquids; its ability to replace reserves and efficiently develop current reserves; the operating results of the Company’s midstream’s oil, natural gas and water gathering and transportation systems, pipelines and facilities, the acquiring of third-party business and the drilling of any additional salt water disposal wells; costs of operations; delays and other difficulties related to producing oil, natural gas and natural gas liquids; delays and other difficulties related to regulatory and governmental approvals and restrictions; impact on the Company’s operations due to seismic events; availability of sufficient capital to execute its business plan, available borrowing capacity under its revolving credit facilities and otherwise; its ability to make acquisitions on economically acceptable terms; its ability to integrate acquisitions; the operating results of and the availability of any potential distributions from our joint ventures; weather and environmental conditions; the impact of the worldwide spread of the novel coronavirus, or COVID-19, or variants thereof, on oil and natural gas demand, oil and natural gas prices and its business; and the other factors which could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. For further discussions of risks and uncertainties, you should refer to Matador’s filings with the Securities and Exchange Commission (“SEC”), including the “Risk Factors” section of Matador’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Matador undertakes no obligation to update these forward-looking statements to reflect events or circumstances occurring after the date of this press release, except as required by law, including the securities laws of the United States and the rules and regulations of the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.

Mac Schmitz
Vice President – Investor Relations
[email protected]
(972) 371-5225

Source: Matador Resources Company

November 17, 2022

Oil Price


OPEC Secretary General Haitham al-Ghais said on Wednesday that the organization is ready to “intervene for the benefit of oil markets”, Saudi-owned Al-Arabiya TV reports, citing Ghais as saying that OPEC is aware, cautious and monitoring economic developments worldwide.

OPEC ready to intervene “For the benefit of oil markets”- oil and gas 360

Source: Oil Price

In early October, OPEC+ announced plans to reduce oil production by 2 mb/d in November 2022 from the August 2022 required production level, a move that angered President Joe Biden who lambasted the organization for colluding with Russia to keep oil prices high.

If the plan is implemented, Saudi Arabia and Russia should produce 10.5 mb/d in November 2022; the production of the OPEC 10 group members should reach 25.4 mb/d while that of non-OPEC producers should be 16.4 mb/d. This in effect would lead to the production of OPEC+ coming to an average of 41.9 mb/d. Further, OPEC and its non-OPEC allies including Russia agreed to extend their cooperation, which was set to end on 31 December 2022, by another year.

After an initial bump, oil prices have cooled since the announcement partly because the impact of the production cut is likely to be limited with many members already struggling to meet quotas and also due to economic uncertainty and China doubling down on its zero-Covid policy both of which are likely to hit demand.

OPEC has predicted that China’s oil demand will decline by 60,000 barrels per day this year, after forecasting an increase of 120,000 b/d only a month ago thanks to new lockdowns.OPEC has cut its demand growth view for 2022 by 460,000 bpd to 2.64 million bpd and for 2023 by 360,000 bpd to 2.34 million bpd, citing “the extension of China’s zero-Covid-19 restrictions in some regions, economic challenges in OECD Europe, and inflationary pressures in other key economies.”

By Alex Kimani for Oilprice.com

November 10, 2022

Oil and Gas 360


Northern Oil and Gas, Inc.-11/09/2022- (NYSE: NOG) (“NOG”) today announced the company’s third quarter results.

 

NOG announces third quarter 2022 results- oil and gas 360

 

THIRD QUARTER HIGHLIGHTS

  • Record quarterly production of 79,123 Boe per day (57% oil), an increase of 37% from the third quarter of 2021
  • Third quarter GAAP cash flow from operations of $276.8 million. Excluding changes in net working capital, cash flow from operations was $269.3 million, an increase of 7% sequentially from the second quarter of 2022
  • Capital expenditures of $154.5 million during the third quarter (excluding non-budgeted acquisitions) were higher because of accelerated activity and strong Ground Game execution
  • Free Cash Flow of $110.6 million during the third quarter, an increase of 99% from the third quarter of 2021. See “Non-GAAP Financial Measures” below
  • Announced $110.0 million core Midland Basin acquisition in August 2022, which closed in October 2022
  • Increasing 2022 well count, production and capital expenditure guidance and adjusting operating cost and pricing differential guidance

SHAREHOLDER RETURN HIGHLIGHTS

  • Declared $0.30 per share common dividend for the fourth quarter of 2022, an increase of 20% from the third quarter
  • Repurchased $38.7 million of common shares in the third quarter and October 2022, for a total of $51.5 million year-to-date at an average price of $28.42 per share (1.81 million shares)
  • Retired $10.0 million principal amount of 8.125% Senior Unsecured Notes at an average price of 94.8% of par value in the third quarter and October 2022, for a total of $23.4 million year-to-date at an average price of 96.7% of par value
  • On November 8, 2022, exercised right to cause a full conversion of the 6.5% Series A Perpetual Convertible Preferred Stock into shares of common stock, which will be effected on November 15, 2022

Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG”) today announced the company’s third quarter results.

MANAGEMENT COMMENTS

“Significant volume growth helped NOG achieve record Adjusted EBITDA and cash flow once again this quarter, more than offsetting lower oil prices,” commented Nick O’Grady, NOG’s Chief Executive Officer. “We continue to see accelerating activity on our properties and strong Ground Game reinvestment opportunities. This increasing velocity, combined with our high quality larger acquisitions, is setting the stage for substantial growth in cash flows and returns for 2023.”

THIRD QUARTER FINANCIAL RESULTS

Oil and natural gas sales for the third quarter were $534.1 million. Third quarter GAAP net income was $583.5 million or $6.77 per diluted share. Third quarter Adjusted Net Income was $154.7 million or $1.80 per diluted share, an increase of 5% from the second quarter of 2022. Adjusted EBITDA in the third quarter was $292.4 million, an increase of 7% from the second quarter of 2022. See “Non-GAAP Financial Measures” below.

PRODUCTION

Third quarter production was 79,123 Boe per day, an increase of 9% from the second quarter of 2022 and an increase of 37% from the third quarter of 2021. Oil represented 57% of total production in the third quarter. Oil production was 45,107 Bbls per day, an increase of 8% from the second quarter of 2022 and a 33% increase over the third quarter of 2021. NOG had 16.2 net wells turned in-line during the third quarter, compared to 10.1 net wells turned in-line in the second quarter of 2022. Production increased quarter over quarter, driven primarily by growth in NOG’s Permian production, which made up approximately 26% of volumes in the third quarter. Additionally, Williston volumes recovered from weather-related shut-ins experienced in the second quarter and NOG benefited from a partial quarter contribution from the Williston Basin acquisition, which closed on August 15, 2022. Marcellus production was up 2% from the second quarter, a reflection of strong results from the most recent development pad, and represented 17% of total volumes.

PRICING

During the third quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $91.38 per Bbl, and NYMEX natural gas at Henry Hub averaged $7.95 per million cubic feet (“Mcf”). NOG’s unhedged net realized oil price in the third quarter was $90.54, representing a $0.84 differential to WTI prices. NOG’s unhedged net realized gas price in the third quarter was $8.43 per Mcf, representing approximately 106% realization compared with Henry Hub pricing.

OPERATING COSTS

Lease operating costs were $68.5 million in the third quarter of 2022, or $9.41 per Boe, a ~4% decrease on a per unit basis compared to the second quarter of 2022. The decrease in unit costs was driven primarily by the reduction in firm transportation costs incurred in the previous quarter, slightly offset by some modest increases in lifting and processing costs. Third quarter general and administrative (“G&A”) costs totaled $10.3 million or $1.41 per Boe. This includes $2.9 million of legal and transaction expenses in connection with acquisitions and $1.3 million of non-cash stock-based compensation. NOG’s cash G&A costs excluding these amounts totaled $6.0 million or $0.82 per Boe in the third quarter, down 12% from the prior quarter on a unit basis.

CAPITAL EXPENDITURES AND ACQUISITIONS

Capital expenditures for the third quarter was $154.5 million (excluding non-budgeted acquisitions). This was comprised of $136.6 million of total drilling and completion (“D&C”) capital on organic and ground game assets, and $17.9 million of ground game acquisition spending and other items. The primary drivers of increased spending from the second quarter were increased development activity (wells-in-process increased by 4.5 net wells) and significant Ground Game success in August and September 2022. NOG has experienced moderate well cost inflation in 2022, but year-to-date well costs have been within NOG’s assumptions for the year. The weighted average AFE elected to in the third quarter was $8.6 million, but the related wells had longer average laterals than the second quarter, and normalized for lateral length third quarter AFEs increased a modest 5% over the second quarter.

NOG’s Williston Basin spending was 53% of the total capital expenditures for the quarter, the Permian was 46%, and other items were 1%. On the Ground Game acquisition front, NOG closed on five transactions during the third quarter totaling 2.0 net well locations and 965 net acres, a marked increase from the second quarter and a significant driver of increased capital investment.

As previously announced, during August 2022, NOG completed its Williston Basin acquisition with a $158.0 million cash settlement at closing. NOG subsequently announced additional Permian Basin acquisitions on August 17, 2022 (Midland Basin, closed on October 3, 2022), September 30, 2022 (Alpha Energy Partners, anticipated closing December 2022), October 11, 2022 (Additional Delaware Basin, anticipated closing December 2022), and October 19, 2022 (MPDC Mascot Project, anticipated closing January 2023). In total, the pending acquisitions have a combined unadjusted purchase price of $617.5 million, with earn-out provisions in the Alpha Energy Partners acquisition that could generate a maximum of an additional $22.5 million in consideration.

LIQUIDITY AND CAPITAL RESOURCES

NOG had total liquidity of $418.1 million as of September 30, 2022, consisting of cash of $9.1 million, and $409.0 million of committed borrowing availability under the revolving credit facility. Additionally, NOG had acquisition deposits of $28.5 million as of September 30, 2022, which will be used to partially fund pending acquisitions.

As of September 30, 2022, NOG had $726.6 million of 8.125% Senior Unsecured Notes due 2028 outstanding, a decrease from $750.0 million at December 31, 2021. As of September 30, 2022, NOG had $164.4 million of liquidation preference value of 6.5% Series A Perpetual Convertible Preferred Stock outstanding, a decrease from $221.9 million at December 31, 2021.

On October 11, 2022, NOG priced a total of $500.0 million of 3.625% Senior Unsecured Convertible Notes due 2029, upsized due to strong demand, and inclusive of the exercise of the $65.0 million over-allotment option. The Company purchased Capped Calls as part of the transaction, boosting the effective conversion price of the notes to $52.17 per share. These notes feature Instrument C settlement, which requires the Company to repay all principal amounts in cash.

On November 8, 2022, NOG exercised its right to cause a full mandatory conversion of its 6.5% Series A Perpetual Convertible Preferred Stock into shares of common stock, which will be effected on November 15, 2022. Holders of the Preferred Stock will receive 4.4878 shares of common stock and a cash payment of $6.3337 for each share of Preferred Stock converted. All dividends on the Preferred Stock will cease to accumulate on the conversion date. On November 15, 2022, holders of record at the close of business on November 1, 2022 will separately receive a final semi-annual cash dividend of $3.25 per share on the Preferred Stock. The conversion will have no impact on NOG’s fully diluted share count as the Preferred Stock has been included in NOG’s fully diluted share calculations on an as-converted basis. The 1,643,732 outstanding shares of Preferred Stock will convert into an aggregate of approximately 7,376,740 shares of common stock. Based on NOG’s recent $0.30 per share declared common stock dividend, the conversion of the Preferred Stock will reduce annualized dividend payments by approximately $1.8 million per year.

SHAREHOLDER RETURNS

On August 1, 2022, NOG’s Board of Directors declared a regular quarterly cash dividend for NOG’s common stock of $0.25 per share for stockholders of record as of September 29, 2022, which was paid on October 31, 2022. This represented a 32% increase from the prior quarter.

On November 2, 2022, NOG’s Board of Directors declared a regular quarterly cash dividend for NOG’s common stock of $0.30 per share for stockholders of record as of December 29, 2022, which will be paid on January 31, 2023. This represents a 20% increase from the prior quarter.

In the third quarter and October 2022, NOG repurchased $38.7 million of its common stock. In total year-to-date, NOG has repurchased and retired 1.81 million shares at an average price of $28.42 per share, for a total of $51.5 million. NOG has $98.5 million remaining available on its current common stock repurchase authorization.

In the third quarter and October 2022, NOG repurchased and retired $10.0 million of its 8.125% Senior Unsecured Notes due 2028. The average purchase price was 94.8% of par value. NOG has $26.6 million remaining available on its current repurchase authorization.

2022 FULL YEAR GUIDANCE

(all forecasts are provided on a 2-stream production basis)

NOG is increasing production, net well completion, and capital expenditure guidance, and adjusting certain other guidance items.

Significant year-to-date Ground Game success, development activity pull-forwards, and stronger organic well elections have driven an increase in capital expenditure guidance for the year by $47.5 million at the midpoint. Inflation was not a material factor to the increase in capital spending.

Additional turn-in-lines ahead of schedule, combined with notably better well performance, have driven an increase to production guidance by approximately 1,250 Boe per day at the midpoint for 2022. Notably, NOG expects second half 2022 capital spending to drive significant volume growth exiting 2022 into 2023. NOG has provided December production exit rate guidance that includes, on a full month pro forma basis, the acquisitions the Company expects to close in December 2022. The pending acquisition of the MPDC Mascot Project is not included in these figures, as it is scheduled to close in January 2023.

NOG is updating production expense guidance to account for slightly higher processing and lifting costs incurred year-to-date. This has been more than offset by higher than expected gas realizations, as well as significantly better realized oil prices in both the Williston and Permian basins, leading to improved annual guidance for oil differentials and gas realizations.

Click here for more

 

Investor Relations
952-476-9800
[email protected]

November 4, 2022

Oil and Gas 360


DENVERNov. 3, 2022 /PRNewswire/ — SM Energy Company (the “Company”) (NYSE: SM) today announced operating and financial results for the third quarter 2022 and provided certain fourth quarter and full year 2022 guidance. Highlights include:

 

SM Energy reports third quarter 2022 results; return of capital programs is initiated-oil and gas 360

 

  • Driving profitability. Net income in the third quarter and for the first nine months of 2022 was $481.2 million, or $3.87 per diluted common share, and $853.5 million, or $6.87 per diluted common share, respectively. Adjusted net income(1) in the third quarter and for the first nine months of 2022 was $1.82 and $6.00 per diluted common share, respectively. Net cash provided by operating activities in the third quarter and for the first nine months of 2022 was $513.4 million and $1.40 billion, respectively. Adjusted EBITDAX(1) in the third quarter and for the first nine months was $460.2 million and $1.54 billion, respectively.
  • Further improving the leverage ratio. Net-debt-to-adjusted EBITDAX(1) was reduced to 0.6 times at third quarter end.
  • Initiating return of capital program through share buybacks and increased fixed dividend. As announced on September 7, 2022, the Company launched a return of capital program that includes an increase in the fixed dividend to $0.60 per share annually, to be paid in quarterly increments of $0.15 per share, and authorization for share repurchases of up to $500.0 million. The Company initiated the program by repurchasing approximately 453,000 shares during the quarter and scheduling the first $0.15 quarterly dividend for payment on November 7, 2022.
  • Generating noteworthy performance from new wells. In South Texas, five new Austin Chalk wells reached peak IP 30 in the northern portion of the Company’s position. The wells averaged approximately 1,300 Boe/d at 72% oil and 89% liquids and are expected to payout in approximately 8 months. In the Midland Basin, the Company recently completed three, high performing new wells in Sweetie Peck that are expected to reach peak IP 30 in November, proving-up an area along the western flank of the position.
  • Keeping capital expenditures on track. Third quarter capital expenditures of $226.1 million, adjusted for an increase in capital accruals of $12.8 million totaled $238.9 million.(1) For the full year 2022, capital expenditures (net of the change in capital accruals) are expected to range between $870.0 and $900.0 million, unchanged from earlier guidance.
  • Applying new technology to further reduce emissions. The Company initiated its program to conduct monthly flyovers of the majority of its operated facilities in the Midland Basin for enhanced methane detection. In conjunction with this program, the Company designed an automated data integration system that concurrently pulls the data onto internal dashboards, enabling better accuracy and faster response times.

President and Chief Executive Officer Herb Vogel comments: “This is a very exciting time for our Company as we enhance our return of capital to shareholders with a solid, sustainable increase in the annual fixed dividend and a robust share buyback program. We believe that SM Energy has among the highest quality and longest life inventories in our space, and we consider ourselves to be among the top operators in terms of efficiency and organic inventory replacement. Over the past 12 months we have generated more than $1 billion in adjusted free cash flow.(1) We believe we have established the foundation for sustainable and repeatable return of capital through the cycle and provided for upside flexibility during periods of strong commodity prices.”

PRODUCTION BY OPERATING AREA

Midland Basin

South Texas

Total

Oil (MBbl / MBbl/d)

4,497 / 48.9

1,179 / 12.8

5,676 / 61.7

Natural Gas (MMcf / MMcf/d)

16,082 / 174.8

14,872 / 161.7

30,954 / 336.5

NGLs (MBbl / MBbl/d)

9 / –

1,836 / 20.0

1,845 / 20.1

Total (MBoe / MBoe/d)

7,186 / 78.1

5,493 / 59.7

12,679 / 137.8

Note: Totals may not calculate due to rounding.

As previously reported, third quarter production volumes were 12.7 MMBoe, or 137.8 MBoe/d. Volumes were approximately 57% from the Midland Basin and 43% from South Texas and were 45% oil.

REALIZED PRICES BY OPERATING AREA

Midland Basin

South Texas

Total

(Pre/Post-hedge)(1)

Oil ($/Bbl)

$93.59

$89.12

$92.66 / $71.44

Natural Gas ($/Mcf)

$7.71

$7.44

$7.58 / $5.58

NGLs ($/Bbl)

nm

$36.37

$36.36 / $34.25

Per Boe

$75.85

$51.42

$65.27 / $50.58

Note: Totals may not calculate due to rounding.

As previously reported, the third quarter average realized price before the effect of hedges was $65.27 per Boe and the average realized price after the effect of hedges (post-hedge) was $50.58 per Boe.(1)

  • Benchmark pricing for the quarter included NYMEX WTI at $91.56/Bbl, NYMEX Henry Hub natural gas at $8.20/MMBtu and Hart Composite NGLs at $42.47/Bbl.
  • The effect of commodity derivative settlements for the third quarter was a loss of $14.69 per Boe, or $186.3 million.
  • The realized price for natural gas was negatively affected by lower realizations in the Midland Basin where NGL revenue is incorporated into the realized natural gas price. The Company expects realizations to remain lower in this region into the fourth quarter due to widened differentials at the regional Waha trading hub.

For additional operating metrics and regional detail, please see the Financial Highlights section below and the accompanying slide deck.

NET INCOME (LOSS), NET INCOME (LOSS) PER SHARE AND NET CASH PROVIDED BY OPERATING ACTIVITIES

Third quarter 2022 net income was $481.2 million, or $3.87 per diluted common share, compared with net income of $85.6 million, or $0.69 per diluted common share, for the same period in 2021. The current year period included a 10% increase in total oil, gas, and NGL production revenue and other income due to a 23% increase in the average commodity price per Boe as compared to the same period in 2021. The current year period also benefited from a net derivative gain of $137.6 million, a 19% decline in DD&A per Boe and lower interest expense as compared to the same period in 2021. This was partially offset by an income tax expense of $119.4 million versus a negligible amount in the third quarter 2021. For the first nine months of 2022, net income was $853.5 million, or $6.87 per diluted common share, compared with a net loss of $388.7 million, or $3.29 per diluted common share, for the same period in 2021.

Third quarter 2022 net cash provided by operating activities of $513.4 million before net change in working capital of $(96.5) million totaled $416.9 million,(1) which was up $109.9 million, or 36%, from the same period in 2021 with net cash provided by operating activities of $328.1 million before net change in working capital of $(21.1) million totaling $307.0 million.(1) The increase in net cash provided by operating activities before net change in working capital for the third quarter 2022 compared with the same period in 2021 was primarily due to the increase in realized prices, lower realized derivative settlement losses and lower interest expense. For the first nine months of 2022, net cash provided by operating activities of $1,398.0 million before net change in working capital of $13.3 million totaled $1,411.3 million, which was up $733.3 million from the same period in 2021. The increase in net cash provided by operating activities before net change in working capital for the first nine months of 2022 compared with the same period in 2021 was primarily due to the increases in both production volumes and realized prices.

ADJUSTED EBITDAX,(1) ADJUSTED NET INCOME,(1) AND NET DEBT-TO-ADJUSTED EBITDAX(1)

Third quarter 2022 Adjusted EBITDAX(1) was $460.2 million, up $113.5 million, or 33%, from $346.7 million for the same period in 2021. For the first nine months of 2022 Adjusted EBITDAX(1) was $1.5 billion compared with $818.5 million for the same period in 2021.

Third quarter 2022 Adjusted net income(1) was $226.0 million, or $1.82 per diluted common share, which compares with Adjusted net income(1) of $91.5 million, or $0.74 per diluted common share, for the same period in 2021. For the first nine months of 2022, Adjusted net income(1) was $744.8 million, or $6.00 per diluted common share, compared with an Adjusted net income(1) of $86.7 million, or $0.73 per diluted common share, for the same period in 2021.

At September 30, 2022, Net debt-to-Adjusted EBITDAX(1) was 0.6 times.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL EXPENDITURES

On September 30, 2022, the outstanding principal amount of the Company’s long-term debt was $1.6 billion with zero drawn on the Company’s senior secured revolving credit facility, and cash and cash equivalents of $498.4 million. Net debt(1) was $1.1 billion.

Third quarter 2022 capital expenditures of $226.1 million adjusted for increased capital accruals of $12.8 million were $238.9 million(1), coming in below guidance of $250-270 million. During the third quarter 2022, the Company drilled 18 net wells, of which 8 were in South Texas and 10 were in the Midland Basin, and added 31 net flowing completions, of which 17 were in South Texas and 14 were in the Midland Basin.

COMMODITY DERIVATIVES

As entered into as of October 31, 2022, commodity derivative positions for the fourth quarter of 2022 include:

  • Oil – Approximately 52% of expected oil production is hedged to WTI at an average price of $56.01/Bbl (weighted-average of collar ceilings and swaps).
  • Oil, Midland Basin differential – Approximately 2,500 MBbls are hedged to the local price point at a positive $1.15/Bbl basis.
  • Natural gas – Approximately 48% of expected natural gas production is hedged. 7,000 BBtu is hedged to HSC at a weighted-average price of $2.47/MMBtu, and 3,100 BBtu is hedged to Waha at a weighted-average price of $2.22/MMBtu.
  • NGL hedges are by individual product and include propane swaps and collars.

The Company expects to hedge less than 30% of 2023 production.

A detailed schedule of these and other derivative positions are provided in the 3Q22 accompanying slide deck.

2022 OPERATING PLAN AND GUIDANCE

The Company is unable to provide a reconciliation of forward-looking non-GAAP capital expenditures because components of the calculation are inherently unpredictable, such as changes to, and timing of, capital accruals. The inability to project certain components of the calculation would significantly affect the accuracy of a reconciliation.

GUIDANCE FULL YEAR AND FOURTH QUARTER 2022:

  • Capital expenditures (net of the change in capital accruals): Full year $870-900 million, unchanged. Fourth quarter $228-258 million. For the full year 2022, the Company expects to complete approximately 81 net wells.
  • Production: 52.5-53.0 MMBoe or 144-145 MBoe/d, as previously reported, at ~46% oil. Fourth quarter 12.7-13.2 MMBoe, or 138-143 MBoe/d, at ~44% oil.
  • LOE: $5.10-$5.15/Boe, reflecting higher second half inflation. Fourth quarter ~$5.60/Boe.
  • Transportation: ~$3.00/Boe, unchanged. Fourth quarter ~$3.25/Boe.
  • Production and ad valorem taxes: ~$3.90/Boe, increased due to higher mid-year commodity prices and higher property tax assessments, respectively. Fourth quarter ~$3.50/Boe.
  • DD&A: ~$11.50/Boe, unchanged: Fourth quarter ~$11.50/Boe.
  • Exploration expense: ~$55 million, up slightly.
  • G&A: ~$110 million, unchanged.

UPCOMING EVENTS

EARNINGS Q&A WEBCAST AND CONFERENCE CALL

November 4, 2022 – Please join SM Energy management at 8:00 a.m. Mountain time/10:00 a.m. Eastern time for the third quarter 2022 financial and operating results Q&A session. This discussion will be accessible via webcast (available live and for replay) on the Company’s website at ir.sm-energy.com or by telephone. To join the live conference call, please register at the link below for dial-in information.

The call replay will be available approximately one hour after the call and until November 18, 2022.

CONFERENCE PARTICIPATION

  • November 29, 2022 – Bank of America Energy Credit Conference. Chief Financial Officer Wade Pursell will present at 10:50 am Eastern time. The event will be webcast, accessible from the Company’s website and available for replay for a limited period. The Company will post an investor presentation to its website the morning of the event.
  • December 6, 2022 – 17th Annual Capital One Energy Conference. President and Chief Executive Officer Herb Vogel will participate in investor meetings at the event.

DISCLOSURES

FORWARD LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of securities laws. The words “estimate,” “expect,” “goal,” “generate,” “plan,” “target,” “believes,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this release include, among other things, projections for the full year and fourth quarter 2022, including guidance for capital expenditures, production, production costs, DD&A, exploration expense and G&A; the timing of expected payout and to reach IP 30 rates for certain new wells; the quality and life of our inventory; expectations for future natural gas realized prices; the percent of future production to be hedged, and the number of wells the Company plans to complete in 2022. These statements involve known and unknown risks, which may cause SM Energy’s actual results to differ materially from results expressed or implied by the forward-looking statements. Future results may be impacted by the risks discussed in the Risk Factors section of SM Energy’s most recent Annual Report on Form 10-K, as such risk factors may be updated from time to time in the Company’s other periodic reports filed with the Securities and Exchange Commission, specifically the third quarter 2022 Form 10-Q and the 2021 Form 10-K. The forward-looking statements contained herein speak as of the date of this release. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so, except as required by securities laws.

FOOTNOTE 1

Indicates a non-GAAP measure or metric. Please refer below to the section “Definitions of non-GAAP Measures and Metrics as Calculated by the Company” in Financials Highlights for additional information.

ABOUT THE COMPANY

SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas. SM Energy routinely posts important information about the Company on its website. For more information about SM Energy, please visit its website at www.sm-energy.com.

SM ENERGY INVESTOR CONTACTS

Jennifer Martin Samuels, [email protected], 303-864-2507

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Condensed Consolidated Balance Sheets

(in thousands, except share data)

September 30,

December 31,

ASSETS

2022

2021

Current assets:

Cash and cash equivalents

$            498,435

$            332,716

Accounts receivable

258,003

247,201

Derivative assets

42,207

24,095

Prepaid expenses and other

9,133

9,175

Total current assets

807,778

613,187

Property and equipment (successful efforts method):

Proved oil and gas properties

9,914,261

9,397,407

Accumulated depletion, depreciation, and amortization

(6,054,796)

(5,634,961)

Unproved oil and gas properties

579,261

629,098

Wells in progress

276,298

148,394

Other property and equipment, net of accumulated depreciation of $62,950 and $62,359,
respectively

31,831

36,060

Total property and equipment, net

4,746,855

4,575,998

Noncurrent assets:

Derivative assets

36,048

239

Other noncurrent assets

60,832

44,553

Total noncurrent assets

96,880

44,792

Total assets

$         5,651,513

$         5,233,977

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$            631,984

$            563,306

Derivative liabilities

174,717

319,506

Other current liabilities

7,316

6,515

Total current liabilities

814,017

889,327

Noncurrent liabilities:

Revolving credit facility

Senior Notes, net

1,571,429

2,081,164

Asset retirement obligations

97,724

97,324

Deferred income taxes

212,470

9,769

Derivative liabilities

14,506

25,696

Other noncurrent liabilities

73,705

67,566

Total noncurrent liabilities

1,969,834

2,281,519

Stockholders’ equity:

Common stock, $0.01 par value – authorized: 200,000,000 shares; issued and outstanding:
122,796,046 and 121,862,248 shares, respectively

1,228

1,219

Additional paid-in capital

1,810,352

1,840,228

Retained earnings

1,068,385

234,533

Accumulated other comprehensive loss

(12,303)

(12,849)

Total stockholders’ equity

2,867,662

2,063,131

Total liabilities and stockholders’ equity

$         5,651,513

$         5,233,977

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2022

2021

2022

2021

Operating revenues and other income:

Oil, gas, and NGL production revenue

$        827,558

$        759,813

$      2,676,656

$      1,745,547

Other operating income

7,893

426

10,673

22,387

Total operating revenues and other income

835,451

760,239

2,687,329

1,767,934

Operating expenses:

Oil, gas, and NGL production expense

159,961

135,745

470,245

362,131

Depletion, depreciation, amortization, and asset retirement
obligation liability accretion

145,865

202,701

460,169

574,375

Exploration (1)

14,203

8,709

44,117

26,746

Impairment

1,077

8,750

6,466

26,250

General and administrative (1)

28,428

25,530

81,715

74,883

Net derivative (gain) loss (2)

(137,577)

209,146

385,180

924,183

Other operating expense, net

1,213

43,401

2,614

44,654

Total operating expenses

213,170

633,982

1,450,506

2,033,222

Income (loss) from operations

622,281

126,257

1,236,823

(265,288)

Interest expense

(22,825)

(40,861)

(97,708)

(120,268)

Gain (loss) on extinguishment of debt

5

(67,605)

(2,139)

Other non-operating income (expense), net

1,163

153

930

(1,071)

Income (loss) before income taxes

600,619

85,554

1,072,440

(388,766)

Income tax (expense) benefit

(119,379)

39

(218,951)

95

Net income (loss)

$        481,240

$          85,593

$         853,489

$        (388,671)

Basic weighted-average common shares outstanding

123,195

121,457

122,318

118,224

Diluted weighted-average common shares outstanding

124,279

123,851

124,233

118,224

Basic net income (loss) per common share

$               3.91

$               0.70

$                6.98

$               (3.29)

Diluted net income (loss) per common share

$               3.87

$               0.69

$                6.87

$               (3.29)

Dividends per common share

$               0.15

$               0.01

$                0.16

$                0.02

(1)  Non-cash stock-based compensation included in:

Exploration expense

$             1,000

$                908

$              2,965

$              3,004

General and administrative expense

4,105

3,590

10,893

11,187

Total non-cash stock-based compensation

$             5,105

$             4,498

$            13,858

$            14,191

(2)  The net derivative (gain) loss line item consists of the following:

Derivative settlement loss

$        186,299

$        213,555

$         595,080

$         480,262

(Gain) loss on fair value changes

(323,876)

(4,409)

(209,900)

443,921

Total net derivative (gain) loss

$       (137,577)

$        209,146

$         385,180

$         924,183

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data and dividends per share)

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Stockholders’
Equity

Common Stock

Shares

Amount

Balances, December 31, 2021

121,862,248

$           1,219

$   1,840,228

$       234,533

$             (12,849)

$      2,063,131

Net income

48,764

48,764

Other comprehensive income

182

182

Cash dividends declared, $0.01 per share

(1,218)

(1,218)

Issuance of common stock upon vesting
of RSUs, net of shares used for tax
withholdings

1,929

(24)

(24)

Stock-based compensation expense

4,274

4,274

Balances, March 31, 2022

121,864,177

$           1,219

$   1,844,478

$       282,079

$             (12,667)

$      2,115,109

Net income

323,485

323,485

Other comprehensive income

182

182

Issuance of common stock under
Employee Stock Purchase Plan

65,634

1

1,644

1,645

Stock-based compensation expense

29,471

4,479

4,479

Balances, June 30, 2022

121,959,282

$           1,220

$   1,850,601

$       605,564

$             (12,485)

$      2,444,900

Net income

481,240

481,240

Other comprehensive income

182

182

Cash dividends declared, $0.15 per share

(18,419)

(18,419)

Issuance of common stock upon vesting
of RSUs and settlement of PSUs, net of
shares used for tax withholdings

1,289,498

13

(25,118)

(25,105)

Stock-based compensation expense

5,105

5,105

Purchase of shares under Stock
Repurchase Program

(452,734)

(5)

(20,236)

(20,241)

Balances, September 30, 2022

122,796,046

$           1,228

$   1,810,352

$   1,068,385

$             (12,303)

$      2,867,662

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Condensed Consolidated Statements of Stockholders’ Equity (Continued)

(in thousands, except share data and dividends per share)

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Loss

Total
Stockholders’
Equity

Common Stock

Retained
Earnings
(Deficit)

Shares

Amount

Balances, December 31, 2020

114,742,304

$           1,147

$   1,827,914

$       200,697

$             (13,598)

$      2,016,160

Net loss

(251,269)

(251,269)

Other comprehensive income

191

191

Cash dividends declared, $0.01 per share

(1,147)

(1,147)

Stock-based compensation expense

5,737

5,737

Balances, March 31, 2021

114,742,304

$           1,147

$   1,833,651

$       (51,719)

$             (13,407)

$      1,769,672

Net loss

(222,995)

(222,995)

Other comprehensive income

592

592

Cash dividends, $0.01 per share

(31)

(31)

Issuance of common stock under
Employee Stock Purchase Plan

252,665

3

1,312

1,315

Stock-based compensation expense

57,795

1

3,955

3,956

Issuance of common stock through
cashless exercise of Warrants

5,918,089

59

(59)

Balances, June 30, 2021

120,970,853

$           1,210

$   1,838,859

$     (274,745)

$             (12,815)

$      1,552,509

Net income

85,593

85,593

Other comprehensive income

246

246

Cash dividends declared, $0.01 per share

(1,215)

(1,215)

Issuance of common stock upon vesting
of RSUs and settlement of PSUs, net of
shares used for tax withholdings

502,937

5

(4,737)

(4,732)

Stock-based compensation expense

4,498

4,498

Balances, September 30, 2021

121,473,790

$           1,215

$   1,838,620

$     (190,367)

$             (12,569)

$      1,636,899

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Condensed Consolidated Statements of Cash Flows

(in thousands)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2022

2021

2022

2021

Cash flows from operating activities:

Net income (loss)

$        481,240

$          85,593

$         853,489

$        (388,671)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depletion, depreciation, amortization, and asset retirement
obligation liability accretion

145,865

202,701

460,169

574,375

Impairment

1,077

8,750

6,466

26,250

Stock-based compensation expense

5,105

4,498

13,858

14,191

Net derivative (gain) loss

(137,577)

209,146

385,180

924,183

Derivative settlement loss

(186,299)

(213,555)

(595,080)

(480,262)

Amortization of debt discount and deferred financing costs

1,303

3,905

8,910

13,350

(Gain) loss on extinguishment of debt

(5)

67,605

2,139

Deferred income taxes

110,048

(68)

202,996

(282)

Other, net

(3,910)

6,076

7,668

(7,301)

Net change in working capital

96,518

21,078

(13,230)

52,170

Net cash provided by operating activities

513,370

328,119

1,398,031

730,142

Cash flows from investing activities:

Capital expenditures

(226,101)

(180,088)

(591,846)

(550,265)

Other, net

(596)

5,293

(596)

5,514

Net cash used in investing activities

(226,697)

(174,795)

(592,442)

(544,751)

Cash flows from financing activities:

Proceeds from revolving credit facility

705,500

1,649,500

Repayment of revolving credit facility

(758,000)

(1,742,500)

Net proceeds from Senior Notes

(812)

392,771

Cash paid to repurchase Senior Notes

(65,480)

(584,946)

(450,776)

Repurchase of common stock

(20,241)

(20,241)

Net proceeds from sale of common stock

1,645

1,315

Dividends paid

(1,218)

(1,178)

Other, net

(35,086)

(4,732)

(35,110)

(4,733)

Net cash used in financing activities

(55,327)

(123,524)

(639,870)

(155,601)

Net change in cash, cash equivalents, and restricted cash

231,346

29,800

165,719

29,790

Cash, cash equivalents, and restricted cash at beginning of period

267,089

332,716

10

Cash, cash equivalents, and restricted cash at end of period

$        498,435

$          29,800

$         498,435

$            29,800

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2022

2021

2022

2021

Supplemental schedule of additional cash flow information and
non-cash activities:

Operating activities:

Cash paid for interest, net of capitalized interest

$         (34,793)

$         (51,364)

$        (125,668)

$        (126,228)

Investing activities:

Increase (decrease) in capital expenditure accruals and other

$          12,810

$         (20,102)

$            50,590

$              8,885

Other information:

Net cash paid for income taxes

$                   (4)

$               (181)

$          (10,506)

$                (802)

DEFINITIONS OF NON-GAAP MEASURES AND METRICS AS CALCULATED BY THE COMPANY
To supplement the presentation of its financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain non-GAAP measures and metrics, which are used by management and the investment community to assess the Company’s financial condition, results of operations, and cash flows, as well as compare performance from period to period and across the Company’s peer group. The Company believes these measures and metrics are widely used by the investment community, including investors, research analysts and others, to evaluate and compare recurring financial results among upstream oil and gas companies in making investment decisions or recommendations. These measures and metrics, as presented, may have differing calculations among companies and investment professionals and may not be directly comparable to the same measures and metrics provided by others. A non-GAAP measure should not be considered in isolation or as a substitute for the most directly comparable GAAP measure or any other measure of a company’s financial or operating performance presented in accordance with GAAP. A reconciliation of the Company’s non-GAAP measures to the most directly comparable GAAP measure is presented below. These measures may not be comparable to similarly titled measures of other companies.

Adjusted EBITDAX : Adjusted EBITDAX is calculated as net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. The Company believes that Adjusted EBITDAX provides useful information for internal analysis and for investors and analysts, as a performance and liquidity measure, to evaluate the Company’s ability to internally generate funds for exploration, development, acquisitions, and to service debt. The Company is also subject to financial covenants under the Company’s Credit Agreement, a material source of liquidity for the Company, based on Adjusted EBITDAX ratios. Please reference the Company’s third quarter 2022 Form 10-Q for discussion of the Credit Agreement and its covenants.

Adjusted net income (loss) and adjusted net income (loss) per diluted common share  Adjusted net income (loss) and adjusted net income (loss) per diluted common share excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements, impairments, net (gain) loss on divestiture activity, gains and losses on extinguishment of debt, and accruals for non-recurring matters. The Company uses these measures to evaluate the comparability of the Company’s ongoing operational results and trends and believes these measures provide useful information to investors for analysis of the Company’s fundamental business on a recurring basis.

Adjusted free cash flow Adjusted free cash flow is calculated as net cash provided by operating activities before net change in working capital less capital expenditures before increase (decrease) in capital expenditure accruals and other. The Company uses this measure as representative of the cash from operations, in excess of capital expenditures that provides liquidity to fund discretionary obligations such as debt reduction, returning cash to shareholders or expanding the business.

Net debt : Net debt is calculated as the total principal amount of outstanding senior unsecured notes plus amounts drawn on the revolving credit facility less cash and cash equivalents (also referred to as total funded debt). The Company uses net debt as a measure of financial position and believes this measure provides useful additional information to investors to evaluate the Company’s capital structure and financial leverage.

Net debt-to-Adjusted EBITDAX  Net debt-to-Adjusted EBITDAX is calculated as Net Debt (defined above) divided by Adjusted EBITDAX (defined above) for the trailing twelve-month period (also referred to as leverage ratio). A variation of this calculation is a financial covenant under the Company’s Credit Agreement. The Company and the investment community may use this metric in understanding the Company’s ability to service its debt and identify trends in its leverage position. The Company reconciles the two non-GAAP measure components of this calculation.

Post-hedge:  Post-hedge is calculated as the average realized price after the effects of commodity derivative settlements. The Company believes this metric is useful to management and the investment community to understand the effects of commodity derivative settlements on average realized price.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Production Data

For the Three Months Ended

Percent Change
Between

For the Nine Months Ended

Percent
Change
Between
Periods

September 30,

June 30,

September 30,

3Q22 &
2Q22

3Q22 &
3Q21

September 30,

September 30,

2022

2022

2021

2022

2021

Realized sales price (before the effect of derivative settlements):

Oil (per Bbl)

$             92.66

$   108.64

$             69.30

(15) %

34 %

$             98.52

$             64.50

53 %

Gas (per Mcf)

$               7.58

$       7.66

$               5.12

(1) %

48 %

$               6.88

$               4.24

62 %

NGLs (per Bbl)

$             36.36

$     42.08

$             36.87

(14) %

(1) %

$             39.04

$             31.19

25 %

Equivalent (per Boe)

$             65.27

$     74.23

$             53.02

(12) %

23 %

$             67.23

$             47.43

42 %

Realized sales price (including the effect of derivative settlements):

Oil (per Bbl)

$             71.44

$     79.45

$             50.17

(10) %

42 %

$             75.05

$             47.40

58 %

Gas (per Mcf)

$               5.58

$       5.96

$               3.89

(6) %

43 %

$               5.37

$               3.09

74 %

NGLs (per Bbl)

$             34.25

$     37.96

$             20.22

(10) %

69 %

$             34.99

$             18.75

87 %

Equivalent (per Boe)

$             50.58

$     56.20

$             38.12

(10) %

33 %

$             52.28

$             34.38

52 %

Net production volumes: (1)

Oil (MMBbl)

5.7

6.1

8.1

(8) %

(30) %

18.3

20.2

(9) %

Gas (Bcf)

31.0

31.5

29.1

(2) %

6 %

93.8

77.1

22 %

NGLs (MMBbl)

1.8

1.9

1.4

(5) %

30 %

5.9

3.8

56 %

Equivalent (MMBoe)

12.7

13.3

14.3

(5) %

(12) %

39.8

36.8

8 %

Average net daily production: (1)

Oil (MBbls per day)

61.7

67.5

87.6

(9) %

(30) %

66.9

73.9

(9) %

Gas (MMcf per day)

336.5

346.3

316.3

(3) %

6 %

343.7

282.5

22 %

NGLs (MBbls per day)

20.1

21.4

15.5

(6) %

30 %

21.6

13.9

56 %

Equivalent (MBoe per day)

137.8

146.6

155.8

(6) %

(12) %

145.8

134.8

8 %

Per Boe data:

Lease operating expense

$               5.64

$       5.11

$               4.20

10 %

34 %

$               4.98

$               4.46

12 %

Transportation costs

$               2.87

$       2.87

$               2.41

— %

19 %

$               2.82

$               2.75

3 %

Production taxes

$               3.17

$       3.75

$               2.49

(15) %

27 %

$               3.28

$               2.18

50 %

Ad valorem tax expense

$               0.93

$       0.69

$               0.38

35 %

145 %

$               0.73

$               0.44

66 %

General and administrative (2)

$               2.24

$       2.12

$               1.78

6 %

26 %

$               2.05

$               2.03

1 %

Derivative settlement loss

$            (14.69)

$    (18.03)

$            (14.90)

19 %

1 %

$            (14.95)

$            (13.05)

(15) %

Depletion, depreciation,
amortization, and asset
retirement obligation liability
accretion

$             11.50

$     11.60

$             14.14

(1) %

(19) %

$             11.56

$             15.61

(26) %

(1) Amounts and percentage changes may not calculate due to rounding.

(2) Includes non-cash stock-based compensation expense per Boe of $0.32, $0.26, and $0.25 for the three months ended September 30, 2022, June 30,
2022, and September 30, 2021, respectively, and $0.27 and $0.30 for the nine months ended September 30, 2022, and 2021, respectively.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Adjusted EBITDAX Reconciliation  (1)

(in thousands)

Reconciliation of net income (loss) (GAAP) and net
cash provided by operating activities (GAAP) to
Adjusted EBITDAX (non-GAAP):

For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,

Trailing Twelve
Months at
September 30,

2022

2021

2022

2021

2022

Net income (loss) (GAAP)

$      481,240

$        85,593

$      853,489

$    (388,671)

$             1,278,389

Interest expense

22,825

40,861

97,708

120,268

137,793

Income tax expense (benefit)

119,379

(39)

218,951

(95)

228,984

Depletion, depreciation, amortization, and asset
retirement obligation liability accretion

145,865

202,701

460,169

574,375

660,180

Exploration (2)

13,203

7,801

41,152

23,742

52,756

Impairment

1,077

8,750

6,466

26,250

15,216

Stock-based compensation expense

5,105

4,498

13,858

14,191

18,486

Net derivative (gain) loss

(137,577)

209,146

385,180

924,183

362,656

Derivative settlement loss

(186,299)

(213,555)

(595,080)

(480,262)

(863,776)

(Gain) loss on extinguishment of debt

(5)

67,605

2,139

67,605

Other, net

(4,663)

905

(5,064)

2,407

(6,964)

Adjusted EBITDAX (non-GAAP)

$      460,155

$      346,656

$   1,544,434

$      818,527

$             1,951,325

Interest expense

(22,825)

(40,861)

(97,708)

(120,268)

(137,793)

Income tax (expense) benefit

(119,379)

39

(218,951)

95

(228,984)

Exploration (2)(3)

(11,993)

(7,801)

(27,959)

(23,742)

(39,563)

Amortization of debt discount and deferred financing
costs

1,303

3,905

8,910

13,350

12,835

Deferred income taxes

110,048

(68)

202,996

(282)

212,843

Other, net

(457)

5,171

(461)

(9,708)

4,987

Net change in working capital

96,518

21,078

(13,230)

52,170

52,011

Net cash provided by operating activities (GAAP)

$      513,370

$      328,119

$   1,398,031

$      730,142

$             1,827,661

(1) See “Definitions of non-GAAP Measures and Metrics as Calculated by the Company” above.

(2)  Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the accompanying unaudited
condensed consolidated statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the
accompanying unaudited condensed consolidated statements of operations for the component of stock-based compensation expense recorded to exploration expense.

(3)  For the three and nine months ended September 30, 2022, amounts are net of certain capital expenditures related to unsuccessful exploration efforts outside of our core
areas of operations.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Adjusted Net Income Reconciliation (1)

(in thousands, except per share data)

Reconciliation of net income (loss) (GAAP) to adjusted net income
(non-GAAP):

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2022

2021

2022

2021

Net income (loss) (GAAP)

$        481,240

$           85,593

$       853,489

$     (388,671)

Net derivative (gain) loss

(137,577)

209,146

385,180

924,183

Derivative settlement loss

(186,299)

(213,555)

(595,080)

(480,262)

Impairment

1,077

8,750

6,466

26,250

(Gain) loss on extinguishment of debt

(5)

67,605

2,139

Other, net

(3,117)

1,525

(2,984)

3,108

Tax effect of adjustments (2)

70,724

(1,272)

30,122

(103,166)

Valuation allowance on deferred tax assets

1,272

103,166

Adjusted net income (non-GAAP)

$        226,048

$           91,454

$       744,798

$         86,747

Diluted net income (loss) per common share (GAAP)

$               3.87

$               0.69

$              6.87

$            (3.29)

Net derivative (gain) loss

(1.11)

1.69

3.10

7.82

Derivative settlement loss

(1.50)

(1.72)

(4.79)

(4.06)

Impairment

0.01

0.07

0.05

0.22

(Gain) loss on extinguishment of debt

0.54

0.02

Other, net

(0.02)

0.01

(0.01)

0.02

Tax effect of adjustments (2)

0.57

(0.01)

0.24

(0.87)

Valuation allowance on deferred tax assets

0.01

0.87

Adjusted net income per diluted common share (non-GAAP)

$               1.82

$               0.74

$              6.00

$              0.73

Basic weighted-average common shares outstanding

123,195

121,457

122,318

118,224

Diluted weighted-average common shares outstanding

124,279

123,851

124,233

118,224

Note: Amounts may not calculate due to rounding.

(1) See “Definitions of non-GAAP Measures and Metrics as Calculated by the Company” above.

(2) The tax effect of adjustments for each of the three and nine months ended September 30, 2022, and 2021, was calculated using a tax rate of 21.7%. This rate
approximates the Company’s statutory tax rate for the respective periods, as adjusted for ordinary permanent differences.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

September 30, 2022

Reconciliation of Total Principal Amount of Debt to Net Debt  (1)

(in thousands)

As of September 30, 2022

Principal amount of Senior Unsecured Notes (2)

$                               1,585,144

Revolving credit facility (2)

Total principal amount of debt (GAAP)

1,585,144

Less: Cash and cash equivalents

498,435

Net Debt (non-GAAP)

$                               1,086,709

(1) See “Definitions of non-GAAP Measures and Metrics as Calculated by the Company” above.

(2) Amounts are from Note 5 – Long-term Debt in Part I, Item I of the Company’s Form 10-Q as of September 30, 2022.

 

Adjusted Free Cash Flow (1)

(in thousands)

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

Trailing Twelve
Months at
September 30,

2022

2021

2022

2021

2022

Net cash provided by operating activities
(GAAP)

$        513,370

$        328,119

$     1,398,031

$        730,142

$          1,827,661

Net change in working capital

(96,518)

(21,078)

13,230

(52,170)

(52,011)

Cash flow from operations before net change in
working capital

416,852

307,041

1,411,261

677,972

1,775,650

Capital expenditures (GAAP)

226,101

180,088

591,846

550,265

716,422

Increase (decrease) in capital expenditure
accruals and other

12,810

(20,102)

50,590

8,885

30,879

Capital expenditures before accruals and other

238,911

159,986

642,436

559,150

747,301

Adjusted free cash flow (non-GAAP)

$        177,941

$        147,055

$        768,825

$        118,822

$          1,028,349

(1) See “Definitions of non-GAAP Measures and Metrics as Calculated by the Company” above.

 

SOURCE SM Energy Company

November 2, 2022

Oil and Gas 360


November 2, 2022 at 4:15 PM EDT-  DENVER, Nov. 02, 2022 (GLOBE NEWSWIRE) — PDC Energy, Inc. (“PDC” the “Company”, “we”, “us”, “our”) (Nasdaq:PDCE) today announced its 2022 third quarter financial and operating results.
PDC Energy, Inc. announces 2022 third quarter financial and operating results- oil and gas 360

2022 Third Quarter Highlights:

  • Net cash from operating activities of approximately $850 million, adjusted cash flows from operations, a non-U.S. GAAP metric defined below, of approximately $700 million and oil and gas capital investments of approximately $260 million.
  • Approximately $440 million of adjusted free cash flow (“FCF”), a non-U.S. GAAP metric defined below.
  • Returned approximately $295 million of capital to shareholders through the repurchase of approximately 4.2 million shares, or approximately 4.5 percent of common stock outstanding, and a $0.35 base dividend.
  • Reduced debt by approximately $300 million, exiting the quarter with approximately $1.4 billion in long-term debt and a leverage ratio of 0.5x.
  • Total production of 23.0 million barrels of oil equivalent (“MMBoe”) or approximately 250,000 Boe per day and oil production of 7.4 million barrels (“MMBbls”) or approximately 81,000 Bbls per day.
  • Published the Company’s 2022 environmental, social and governance (“ESG”) materials providing a roadmap on progress of our key metrics, material initiatives and successes in 2021. We remain committed and on track to achieve our long-term goals of reducing greenhouse gas and methane emission intensity by 60% and 50%, respectively, by 2025.

CEO Commentary

President and Chief Executive Officer, Bart Brookman, commented, “The third quarter generated solid results for PDC. This marks the first full quarter reflecting the benefits of the Great Western acquisition. I am proud of our team who worked diligently to fully integrate this transaction on schedule and under budget. Results for the quarter are highlighted by $440 million of free cash flow, shareholder returns of approximately $295 million through our accelerated share buyback program, and a $0.35 per share base dividend. Quarterly production averaged 250,000 Boe per day, the midpoint of our guidance, as we began to see the synergies of the consolidated asset base. Our low cost and efficient operations are reflected in our strong free cash flow, as lease operating, and G&A expenses came in at a combined $4.75 per Boe.

“Additionally, our regulatory team has worked tirelessly and thoughtfully to move our Guanella CAP permitting application forward. This CAP, along with our prior OGDPs, represent our planned Wattenberg Field turn-in-line activity through 2028. We are scheduled for the COGCC public hearing on December 7, 2022. The locations included under the CAP application represent approximately 450 wells in our Summit and Plains areas in the core Wattenberg Field.”

Operations Update

In the third quarter of 2022, PDC invested approximately $260 million while delivering total production of 23.0 million Boe, or approximately 250,000 Boe per day, and oil production of 7.4 million barrels, or approximately 81,000 barrels per day. Total production and oil production represent a sequential increase of 7 percent and 8 percent, respectively, compared to the second quarter of 2022, primarily driven by the production volumes from the Great Western acquisition and turn-in-line activities in the third quarter of 2022.

In the Wattenberg Field, the Company invested approximately $230 million to operate an average of three drilling rigs and approximately one completion crew in the third quarter, resulting in 47 spuds and 41 TILs. As a result of the longer laterals and improved efficiencies, we completed approximately 15 percent more stages in the third quarter compared to the previous quarter. Total production was 20.2 million Boe, or approximately 219,000 Boe per day, while oil production was approximately 6.3 million Bbls, or approximately 69,000 Bbls per day. PDC exited the third quarter with approximately 200 drilled, uncompleted wells (“DUCs”) and approximately 400 approved permits in-hand.

In the Delaware Basin, PDC invested approximately $30 million to operate one drilling rig, resulting in 3 spuds and 1 TIL. Total production was 2.8 million Boe, or approximately 31,000 Boe per day, while oil production was approximately 1.1 million Boe, or approximately 12,000 Boe per day.

Q3 2022 Shareholder Returns and Financial Position

The Company returned approximately $295 million of capital to shareholders in the third quarter through the repurchase of approximately 4.2 million shares of common stock and a $0.35 per share base quarterly dividend. The Company has a $1.25 billion share repurchase program authorized, which is expected to be utilized by year end 2023. PDC remains committed to returning a minimum of 60 percent of its annual post-dividend FCF to shareholders through the Company’s share repurchase program and a year-end special dividend, if needed.

The Company reduced its debt by approximately $300 million during the quarter. At quarter end, the company had approximately $45 million cash on hand and approximately $450 million drawn on its credit facility. The leverage ratio was 0.5x at September 30, 2022.

In October 2022, as part of our credit facility semi-annual redetermination, our borrowing base increased to $3.5 billion from $3.0 billion as a result of the reserves acquired from the Great Western acquisition. The Company maintained the elected commitment amount of $1.5 billion.

Guanella Comprehensive Area Plan (“CAP”)

On August 2, 2022, the Company passed a major milestone in the permitting process by receiving the Completeness Determination on its Guanella CAP from the Colorado Oil & Gas Conservation Commission (“COGCC”). The Guanella CAP covers approximately 35,000 consolidated net acres in rural Weld County with approximately 450 well locations accessed by only 22 surface locations.

On October 2, 2022, the Company completed the 60-day public comment period. We are scheduled for the COGCC public hearing on December 7, 2022 which could potentially continue on December 8, 2022 given the size and scale of the Guanella CAP. The CAP, along with our prior OGDPs, represent our planned Wattenberg Field turn-in-line activity through 2028.

Fourth Quarter and Full Year 2022 Outlook

For the fourth quarter, the Company expects total production to be in a range of 245,000-255,000 Boe per day and 80,000-84,000 Bbls per day of oil production.

For the full-year 2022, we reaffirm our production guidance range of 230,000 Boe to 240,000 Boe per day, of which approximately 73,000 Bbls to 77,000 Bbls is expected to be crude oil. Our planned 2022 capital investments in crude oil and natural gas properties are expected to be approximately $1.075 billion, which is at the high end of our previously reported full-year guidance range. This is a result of bringing on the second completion crew at the end of September, as planned, paired with continued operational efficiency that ultimately increases the number of stages completed and incremental spuds as well as continued cost pressures.

Environmental, Social and Governance (“ESG”)

Through the first nine months of 2022, the Company is on schedule with its planned projects to meet its 15% and 30% GHG and methane reduction targets for the full year 2022, respectively.

During the third quarter, the Company published its 2022 ESG materials. The 2022 ESG reports are aligned with the Sustainability Accounting Standards Board (“SASB”), the Taskforce on Climate-related Financial Disclosures (“TCFD”), and the American Exploration and Production Council (“AXPC”) ESG metrics frameworks.

For more information about PDC’s sustainability efforts and to download the 2022 ESG reports, please visit www.pdce.com.

Third Quarter Oil and Gas Production, Sales and Operating Cost Data

Crude oil, natural gas and NGLs sales, excluding net settlements on derivatives, were $1,201 million, a 3 percent decrease compared to second quarter of 2022 of $1,238 million. The decrease in sales between periods was due to a 10 percent decrease in the weighted average realized sales price per Boe to $52.25 from $57.81 partially offset by a 7 percent increase in production from 21.4 MMBoe to 23.0 MMBoe. The decrease in sales price was primarily driven by a 15 percent decrease in weighted average realized crude oil and NGLs prices partially offset by an 8 percent increase in weighted average realized natural gas prices. The combined revenue from crude oil, natural gas and NGLs sales and net settlements on commodity derivative instruments was $948 million in the third quarter of 2022 compared to $939 million in the prior quarter.

The following table provides weighted average sales price, by area, excluding net settlements on derivatives and transportation, gathering and processing expense (“TGP”), for the periods presented:

Three Months Ended Nine Months EndedSeptember 30,
September 30, 2022 June 30, 2022 Percent Change 2022 2021 Percent Change
Crude oil (MBbls)
Wattenberg Field 6,299 5,545 14 % 16,676 13,595 23 %
Delaware Basin 1,110 1,299 (15 )% 3,430 2,762 24 %
Total 7,409 6,844 8 % 20,106 16,357 23 %
Weighted average price $ 91.88 $ 108.24 (15 )% $ 98.05 $ 64.00 53 %
Natural gas (MMcf)
Wattenberg Field 46,631 43,244 8 % 127,538 113,280 13 %
Delaware Basin 6,316 6,573 (4 )% 18,345 15,434 19 %
Total 52,947 49,817 6 % 145,883 128,714 13 %
Weighted average price $ 6.03 $ 5.57 8 % $ 5.21 $ 2.54 105 %
NGLs (MBbls)
Wattenberg Field 6,083 5,575 9 % 15,949 12,685 26 %
Delaware Basin 664 688 (3 )% 1,946 1,434 36 %
Total 6,747 6,263 8 % 17,895 14,119 27 %
Weighted average price $ 29.75 $ 34.99 (15 )% $ 32.93 $ 23.41 41 %
Crude oil equivalent (MBoe)
Wattenberg Field 20,153 18,328 10 % 53,881 45,160 19 %
Delaware Basin 2,827 3,082 (8 )% 8,434 6,768 25 %
Total 22,980 21,410 7 % 62,315 51,928 20 %
Weighted average price $ 52.25 $ 57.81 (10 )% $ 53.29 $ 32.82 62 %

Production costs for the third quarter of 2022, which include LOE, production taxes and TGP, were $200 million, or $8.69 per Boe, compared to $190 million, or $8.85 per Boe, in the second quarter of 2022. The decrease in production costs per Boe was primarily due to a 7 percent increase in production volumes partially offset by a 10 percent increase in production taxes as a result of increased ad valorem rates associated with the acquisition of Great Western.

The following table provides the components of production costs for the periods presented:

Three Months Ended Nine Months Ended September 30,
September 30, 2022 June 30, 2022 2022 2021
Lease operating expenses $ 69.2 $ 70.6 $ 193.9 $ 129.8
Production taxes 98.1 89.3 250.3 101.1
Transportation, gathering and processing expenses 32.3 29.6 89.9 74.5
Total $ 199.6 $ 189.5 $ 534.1 $ 305.4
Three Months Ended Nine Months Ended September 30,
September 30, 2022 June 30, 2022 2022 2021
Lease operating expenses per Boe $ 3.01 $ 3.30 $ 3.11 $ 2.50
Production taxes per Boe 4.27 4.17 4.02 1.95
Transportation, gathering and processing expenses per Boe 1.41 1.38 1.44 1.43
Total per Boe $ 8.69 $ 8.85 $ 8.57 $ 5.88

Financial Results

Net income for the third quarter of 2022 was $798 million, or $8.30 per diluted share, compared to $662 million, or $6.74 per diluted share in the second quarter of 2022. The quarter-over-quarter change was primarily due to a $306.7 million commodity risk management gain in the third quarter of 2022 compared to a $102.0 million commodity risk management loss in the second quarter of 2022 partially offset by (i) a gain on bargain purchase from the Great Western acquisition of $100.3 million recognized in the second quarter, (ii) an increase in income tax expense of $101.3 million, and (iii) a decrease in crude oil, natural gas and NGLs sales of $37.1 million between periods. Adjusted net income, a non-U.S. GAAP financial measure defined below, was $363 million in the third quarter of 2022 compared to $502 million in the second quarter of 2022. The movement between periods is primarily attributable to the bargain purchase gain and, to a lesser extent, the change in sales and settled derivatives.

Net cash from operating activities for the third quarter of 2022 was approximately $848 million compared to $747 million in the second quarter of 2022. Adjusted cash flows from operations, a non-U.S. GAAP metric defined below, was approximately $701 million and $695 million in the third and second quarter of 2022, respectively. The quarter-over-quarter increase in adjusted cash flows from operations was primarily due to a $45.8 million decrease in derivative settlement losses and a $5.5 million decrease in general and administrative expense partially offset by a decrease in sales and an increase in production taxes and TGP between periods. Adjusted free cash flows, a non-U.S. GAAP metric defined below, increased to $440 million from $404 million in the second quarter of 2022.

G&A, which includes cash and non-cash expense and $4.9 million in Great Western transaction and transition related expense, was $40 million, or $1.75 per Boe in the third quarter of 2022 compared to $46 million, which includes $13.0 million in Great Western transaction and transition related expense, or $2.13 per Boe, in the second quarter of 2022. Excluding the transaction and transition costs associated with the Great Western acquisition, G&A was $1.53 and $1.52 per Boe in the third and second quarter, respectively.

Reconciliation of Non-U.S. GAAP Financial Measures

We use “adjusted cash flows from operations,” “adjusted free cash flow (deficit),” “adjusted net income (loss)” and “adjusted EBITDAX,” non-U.S. GAAP financial measures, for internal management reporting, when evaluating period-to-period changes and, in some cases, in providing public guidance on possible future results. In addition, we believe these are measures of our fundamental business and can be useful to us, investors, lenders and other parties in the evaluation of our performance relative to our peers and in assessing acquisition opportunities and capital expenditure projects. These supplemental measures are not measures of financial performance under U.S. GAAP and should be considered in addition to, not as a substitute for, net income (loss) or cash flows from operations, investing or financing activities and should not be viewed as liquidity measures or indicators of cash flows reported in accordance with U.S. GAAP. The non-U.S. GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. In the future, we may disclose different non-U.S. GAAP financial measures in order to help us and our investors more meaningfully evaluate and compare our future results of operations to our previously reported results of operations. We strongly encourage investors to review our financial statements and publicly filed reports in their entirety and to not rely on any single financial measure.

Adjusted cash flows from operations and adjusted free cash flow (deficit). We believe adjusted cash flows from operations can provide additional transparency into the drivers of trends in our operating cash flows, such as production, realized sales prices and operating costs, as it disregards the timing of settlement of operating assets and liabilities. We believe adjusted free cash flow (deficit) provides additional information that may be useful in an investor analysis of our ability to generate cash from operating activities from our existing oil and gas asset base to fund exploration and development activities and to return capital to stockholders in the period in which the related transactions occurred. We exclude from this measure cash receipts and expenditures related to acquisitions and divestitures of oil and gas properties and capital expenditures for other properties and equipment, which are not reflective of the cash generated or used by ongoing activities on our existing producing properties and, in the case of acquisitions and divestitures, may be evaluated separately in terms of their impact on our performance and liquidity. Adjusted free cash flow is a supplemental measure of liquidity and should not be viewed as a substitute for cash flows from operations because it excludes certain required cash expenditures. For example, we may have mandatory debt service requirements or other non-discretionary expenditures which are not deducted from the adjusted free cash flow measure.

We are unable to present a reconciliation of forward-looking adjusted cash flow because components of the calculation, including fluctuations in working capital accounts, are inherently unpredictable. Moreover, estimating the most directly comparable GAAP measure with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. We believe that forward-looking estimates of adjusted cash flow are important to investors because they assist in the analysis of our ability to generate cash from our operations.

Adjusted net income (loss). We believe that adjusted net income (loss) provides additional transparency into operating trends, such as production, realized sales prices, operating costs and net settlements on commodity derivative contracts, because it disregards changes in our net income (loss) from mark-to-market adjustments resulting from net changes in the fair value of our unsettled commodity derivative contracts, and these changes are not directly reflective of our operating performance.

Adjusted EBITDAX. We believe that adjusted EBITDAX provides additional transparency into operating trends because it reflects the financial performance of our assets without regard to financing methods, capital structure, accounting methods or historical cost basis. In addition, because adjusted EBITDAX excludes certain non-cash expenses, we believe it is not a measure of income, but rather a measure of our liquidity and ability to generate sufficient cash for exploration, development, and acquisitions and to service our debt obligations.

Cash Flows from Operations to Adjusted Cash Flows from Operations and Adjusted Free Cash Flow
Three Months Ended Nine Months Ended September 30,
September 30, 2022 June 30, 2022 2022 2021
Cash flows from operations to adjusted cash flows from operations and adjusted free cash flow:
Net cash from operating activities $ 848.4 $ 747.4 $ 2,084.8 $ 1,027.8
Changes in assets and liabilities (147.1 ) (52.7 ) (150.1 ) 31.7
Adjusted cash flows from operations 701.3 694.7 1,934.7 1,059.5
Capital expenditures for midstream assets (5.7 ) (3.0 ) (8.7 )
Capital expenditures for development of crude oil and natural gas properties (240.2 ) (346.7 ) (773.7 ) (428.8 )
Change in accounts payable related to capital expenditures for oil and gas development activities (15.0 ) 58.8 10.7 (21.2 )
Adjusted free cash flow $ 440.4 $ 403.8 $ 1,163.0 $ 609.5
Net Loss to Adjusted Net Income (Loss) and Adjusted Earnings Per Share, Diluted
Three Months Ended Nine Months Ended September 30,
September 30, 2022 June 30, 2022 2022 2021
Net income (loss) to adjusted net income (loss):
Net income (loss) $ 798.0 $ 662.4 $ 1,428.4 $ 49.2
Loss (gain) on commodity derivative instruments (306.7 ) 102.0 363.3 707.2
Net settlements on commodity derivative instruments (252.8 ) (298.7 ) (713.1 ) (215.4 )
Tax effect of above adjustments (1) 124.2 36.4 74.1
Adjusted net income (loss) $ 362.7 $ 502.1 $ 1,152.7 $ 541.0
Earnings per share, diluted 8.40 $ 6.83 14.66 0.49
Loss (gain) on commodity derivative instruments (3.19 ) 1.04 3.74 7.04
Net settlements on commodity derivative instruments (2.63 ) (3.04 ) (7.32 ) (2.14 )
Tax effect of above adjustments (1) 1.29 0.37 0.76
Adjusted earnings (loss) per share, diluted $ 3.77 $ 5.11 $ 11.82 $ 5.38
Weighted average diluted shares outstanding 96.1 98.2 97.5 100.5

_____________

(1)   Due to the full valuation allowance recorded against our net deferred tax assets, there is no tax effect for the nine months ended September 30, 2021.

Adjusted EBITDAX
Three Months Ended Nine Months Ended September 30,
September 30, 2022 June 30, 2022 2022 2021
Net income (loss) to adjusted EBITDAX:
Net income (loss) $ 798.0 $ 662.4 $ 1,428.4 $ 49.2
Loss (gain) on commodity derivative instruments (306.7 ) 102.0 363.3 707.2
Net settlements on commodity derivative instruments (252.8 ) (298.7 ) (713.1 ) (215.4 )
Non-cash stock-based compensation 7.2 7.2 20.0 17.3
Interest expense, net 18.6 17.6 49.1 59.2
Income tax expense (benefit) 229.3 128.0 358.5 0.1
Impairment of properties and equipment 0.2 0.5 1.6 0.3
Exploration, geologic and geophysical expense 11.8 0.3 12.4 0.9
Depreciation, depletion and amortization 205.6 191.1 547.7 478.6
Accretion of asset retirement obligations 3.5 3.4 9.8 9.2
Loss (gain) on sale of properties and equipment (0.1 ) 0.5 0.3 (0.6 )
Adjusted EBITDAX $ 714.6 $ 814.3 $ 2,078.0 $ 1,106.0
Cash from operating activities to adjusted EBITDAX:
Net cash from operating activities $ 848.4 $ 747.4 $ 2,084.8 $ 1,027.8
Gain on bargain purchase (4.6 ) 100.3 95.7
Interest expense, net 18.6 17.6 49.1 59.2
Amortization and write-off of debt discount, premium and issuance costs (1.4 ) (1.3 ) (4.1 ) (11.2 )
Exploration, geologic and geophysical expense 0.3 0.3 0.9 0.9
Other 0.4 2.7 1.7 (2.4 )
Changes in assets and liabilities (147.1 ) (52.7 ) (150.1 ) 31.7
Adjusted EBITDAX $ 714.6 $ 814.3 $ 2,078.0 $ 1,106.0

PDC ENERGY, INC. 
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Revenues
Crude oil, natural gas and NGLs sales $ 1,200,619 $ 703,136 $ 3,320,678 $ 1,704,396
Commodity price risk management gain (loss), net 306,749 (217,678 ) (363,283 ) (707,187 )
Other income 3,921 904 8,833 4,058
Total revenues 1,511,289 486,362 2,966,228 1,001,267
Costs, expenses and other
Lease operating expense 69,155 45,649 193,922 129,848
Production taxes 98,142 44,654 250,309 101,114
Transportation, gathering and processing expense 32,327 26,732 89,882 74,453
Exploration, geologic and geophysical expense 11,843 222 12,416 862
General and administrative expense 40,103 30,847 119,859 96,367
Depreciation, depletion and amortization 205,604 169,644 547,720 478,617
Accretion of asset retirement obligations 3,484 2,825 9,823 9,185
Impairment of properties and equipment 184 77 1,637 329
Loss (gain) on sale of properties and equipment (86 ) (220 ) 287 (561 )
Other expense 303 2,496
Total costs, expenses and other 460,756 320,733 1,225,855 892,710
Income (loss) from operations 1,050,533 165,629 1,740,373 108,557
Interest expense, net (18,629 ) (20,098 ) (49,139 ) (59,199 )
(Adjustment to) Gain on bargain purchase (4,621 ) 95,652
Income (loss) before income taxes 1,027,283 145,531 1,786,886 49,358
Income tax benefit (expense) (229,318 ) (210 ) (358,500 ) (110 )
Net income (loss) $ 797,965 $ 145,321 $ 1,428,386 $ 49,248
Earnings (Loss) per share:
Basic $ 8.40 $ 1.48 $ 14.87 $ 0.50
Diluted $ 8.30 $ 1.45 $ 14.66 $ 0.49
Weighted average common shares outstanding:
Basic 94,950 98,183 96,065 99,018
Diluted 96,122 99,966 97,467 100,534
Dividends declared per share $ 0.35 $ 0.12 $ 0.95 $ 0.24

PDC ENERGY, INC. 
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except share and per share data)

September 30, 2022 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 45,649 $ 33,829
Accounts receivable, net 609,440 398,605
Fair value of derivatives 62,246 17,909
Prepaid expenses and other current assets 10,630 8,230
Total current assets 727,965 458,573
Properties and equipment, net 7,127,291 4,814,865
Fair value of derivatives 91,075 15,177
Other assets 81,759 48,051
Total Assets $ 8,028,090 $ 5,336,666
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities:
Accounts payable $ 213,473 $ 127,891
Production tax liability 247,946 99,583
Fair value of derivatives 389,234 304,870
Funds held for distribution 538,865 285,861
Accrued interest payable 19,511 10,482
Other accrued expenses 102,024 91,409
Total current liabilities 1,511,053 920,096
Long-term debt 1,393,528 942,084
Asset retirement obligations 152,709 127,526
Fair value of derivatives 100,860 95,561
Deferred income taxes 413,983 26,383
Other liabilities 474,610 314,769
Total liabilities 4,046,743 2,426,419
Commitments and contingent liabilities
Stockholders’ equity
Common shares – par value $0.01 per share, 150,000,000 authorized, 92,857,134 and 96,468,071 issued as of September 30, 2022 and December 31, 2021, respectively 929 965
Additional paid-in capital 2,950,625 3,161,941
Retained earnings (accumulated deficit) 1,037,229 (249,954 )
Treasury shares – at cost, 130,091 and 54,960 as of September 30, 2022 and December 31, 2021, respectively (7,436 ) (2,705 )
Total stockholders’ equity 3,981,347 2,910,247
  Total Liabilities and Stockholders’ Equity $ 8,028,090 $ 5,336,666

PDC ENERGY, INC. 
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

Nine Months Ended September 30,
2022 2021
Cash flows from operating activities:
Net income (loss) $ 1,428,386 $ 49,248
Adjustments to net loss to reconcile to net cash from operating activities:
Net change in fair value of unsettled commodity derivatives (349,798 ) 491,830
Depreciation, depletion and amortization 547,720 478,617
Impairment of properties and equipment 1,637 329
Exploratory dry hole costs 11,536
Accretion of asset retirement obligations 9,823 9,185
Non-cash stock-based compensation 19,952 17,294
Loss (gain) on sale of properties and equipment 287 (561 )
Amortization of debt discount, premium and issuance costs 4,075 11,195
Deferred income taxes 357,500
Gain on bargain purchase (95,652 )
Other (742 ) 2,353
Changes in assets and liabilities 150,067 (31,670 )
     Net cash from operating activities 2,084,791 1,027,820
Cash flows from investing activities:
Capital expenditures for development of crude oil and natural gas properties (773,748 ) (428,831 )
Capital expenditures for midstream assets (8,747 )
Capital expenditures for other properties and equipment (8,619 ) (363 )
Cash paid for acquisition of an exploration and production business (1,068,241 )
Proceeds from sale of properties and equipment 640 4,720
Proceeds from divestitures 10,452
     Net cash from investing activities (1,848,263 ) (424,474 )
Cash flows from financing activities:
Proceeds from revolving credit facility and other borrowings 2,049,200 502,800
Repayment of revolving credit facility and other borrowings (1,599,200 ) (670,800 )
Repayment of convertible notes (200,000 )
Payment of debt issuance costs (101 )
Purchase of treasury shares for employee stock-based compensation tax withholding obligations (16,979 ) (5,836 )
Purchase of treasury shares (556,035 ) (107,318 )
Dividends paid (91,972 ) (23,600 )
Principal payments under financing lease obligations (1,491 ) (1,293 )
     Net cash from financing activities (216,578 ) (506,047 )
Net change in cash, cash equivalents and restricted cash 19,950 97,299
Cash, cash equivalents and restricted cash, beginning of period 33,829 2,623
Cash, cash equivalents and restricted cash, end of period $ 53,779 $ 99,922


2022 Third Quarter Teleconference and Webcast

The Company invites you to join Bart Brookman, President and Chief Executive Officer; Scott Meyers, Chief Financial Officer; Lance Lauck, Executive Vice President Corporate Development and Strategy; and David Lillo, Senior Vice President Operations for a conference call at 11:00 a.m. ET on Thursday, November 3, 2022, to discuss the 2022 third quarter results. The related slide presentation will be available on PDC’s website at www.pdce.com.

To attend the conference call or webcast, participants should register online at http://www.pdce.com/investors-overview/events-calendar-webcasts-presentations/. Once registered, participants will receive the dial in details and a unique PIN number. Participants are requested to register a minimum 15 minutes before the start of the call.

A replay of the webcast will be available two hours after the call and archived on the same web page for six months.

About PDC Energy, Inc.

PDC Energy, Inc. is a domestic independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas and NGLs, with operations in the Wattenberg Field in Colorado and Delaware Basin in west Texas. Its operations in the Wattenberg Field are focused in the horizontal Niobrara and Codell plays and our Delaware Basin operations are primarily focused in the horizontal Wolfcamp zones.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”) and the United States (“U.S.”) Private Securities Litigation Reform Act of 1995 regarding our business, financial condition, results of operations and prospects. All statements other than statements of historical fact included in and incorporated by reference into this report are “forward-looking statements”. Words such as expect, anticipate, intend, plan, believe, seek, estimate, schedule and similar expressions or variations of such words are intended to identify forward-looking statements herein. Forward-looking statements include, among other things, statements regarding permitting matters; future production, costs and cash flows; drilling locations, zones and growth opportunities; capital expenditures and projects; the return of capital to shareholders through buybacks of shares and/or payments of dividends; and ESG matters.

The above statements are not the exclusive means of identifying forward-looking statements herein. Although forward-looking statements contained in this press release reflect our good faith judgment, such statements can only be based on facts and factors currently known to us. Forward-looking statements are always subject to risks and uncertainties, and become subject to greater levels of risk and uncertainty as they address matters further into the future. Throughout this press release or accompanying materials, we may use the term “projection” or similar terms or expressions, or indicate that we have “modeled” certain future scenarios. We typically use these terms to indicate our current thoughts on possible outcomes relating to our business or our industry in periods beyond the current fiscal year. Because such statements relate to events or conditions further in the future,
they are subject to increased levels of uncertainty.

Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:

  • market and commodity price volatility, widening price differentials, and related impacts to the Company, including decreased revenue, income and cash flow, write-downs and impairments and decreased availability of capital;
  • difficulties in integrating our operations as a result of any significant acquisitions, including the Great Western acquisition, or acreage exchanges;
  • adverse changes to our future cash flows, liquidity and financial condition;
  • changes in, and interpretations and enforcement of, environmental and other laws and other political and regulatory developments, including in particular additional permit scrutiny in Colorado;
  • the coronavirus 2019 (“COVID-19”) pandemic, including its effects on commodity prices, downstream capacity, employee health and safety, business continuity and regulatory matters;
  • declines in the value of our crude oil, natural gas and NGLs properties resulting in impairments;
  • changes in, and inaccuracy of, reserve estimates and expected production and decline rates;
  • timing and extent of our success in discovering, acquiring, developing and producing reserves;
  • reductions in the borrowing base under our revolving credit facility;
  • availability and cost of capital;
  • risks inherent in the drilling and operation of crude oil and natural gas wells;
  • timing and costs of wells and facilities;
  • availability, cost, and timing of sufficient pipeline, gathering and transportation facilities and related infrastructure;
  • limitations in the availability of supplies, materials, contractors and services that may delay the drilling or completion of our wells;
  • potential losses of acreage or other impacts due to lease expirations, other title defects, or otherwise;
  • risks inherent in marketing crude oil, natural gas and NGLs;
  • effect of crude oil and natural gas derivative activities;
  • impact of environmental events, governmental and other third-party responses to such events and our ability to insure adequately against such events;
  • cost of pending or future litigation;
  • impact to our operations, personnel retention, strategy, stock price and expenses caused by the actions of activist shareholders;
  • uncertainties associated with future dividends to our shareholders or share buybacks;
  • timing and amounts of federal and state income taxes;
  • our ability to retain or attract senior management and key technical employees;
  • an unanticipated assumption of liabilities or other problems with the Great Western acquisition or other acquisitions we may pursue;
  • civil unrest, terrorist attacks and cyber threats;
  • changes in general economic, business or industry conditions, including changes in interest rates and inflation rates and concerns regarding a global economic recession; and
  • success of strategic plans, expectations and objectives for our future operations.

Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those under the “Item 1A. Risk Factors” made in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission for further information on risks and uncertainties that could affect our business, financial condition, results of operations and prospects, which are incorporated by this reference as though fully set forth herein. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this release. We undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this release or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

Contacts: Aaron Vandeford
Director Investor Relations
303-381-9493
[email protected]

Oil and Gas 360


CALGARY, ABNov. 2, 2022 /CNW/ – Surge Energy Inc. (“Surge” or the “Company”) (TSX: SGY) is pleased to announce the Company’s financial and operating results for the quarter ended September 30, 2022, and an update on Surge’s latest drilling results.

 

Surge Energy Inc. announces third quarter financial & operating results; and an operations update on strong drilling results in SE Saskatchewan/Sparky core areas- oil and gas 360

 

Q3 2022 FINANCIAL & OPERATING HIGHLIGHTS

Surge’s Board and Management continue to be optimistic on the outlook for crude oil prices, based on a historically tight physical market, ongoing geopolitical issues, and the significant underinvestment in the energy industry over the past several years.

During the third quarter of 2022, Surge delivered cash flow from operating activities of $69.2 million, an increase of 163 percent as compared to Q3/21 cash flow from operating activities of $26.3 million. Additionally, the Company delivered adjusted funds flow1(“AFF”) of $80.3 million in Q3/22, an increase of 189 percent compared to Q3/21 AFF of $27.8 million.

Despite WTI crude oil prices dropping by nearly C$20 per barrel from Q2/22 to Q3/22, Surge’s Q3/22 AFF was $1.7 million higher as compared to Q2/22, increasing from $78.6 million in Q2/22 to $80.3 million. This quarter over quarter increase is due to the Company’s better than anticipated drilling results and the expiry of most of Surge’s previously mandated fixed price crude oil hedges.

In Q3/22, Surge also returned $8.8 million to its shareholders in the form of cash dividends pursuant to the Company’s base cash dividend of $0.42 per share per annum (paid monthly). Annualized, the Company’s base cash dividend represents less than 13 percent of Q3/22 cash flow from operating activities.

During the quarter, Surge reduced net debt by 6 percent, from $280.1 million at June 30, 2022 to $264.3 million at September 30, 2022.

Additional highlights from the Company’s Q3 2022 financial and operating results include:

  • Achieved average daily production of 21,380 boepd (86 percent liquids) during Q3/22, an increase of over 21 percent as compared to Q3/21 production of 17,642 boepd (84 percent liquids);
  • Successfully drilled 26 gross (20.7 net) wells with activity focused in the Company’s Sparky and SE Saskatchewan conventional light and medium gravity crude oil core areas; and
  • Reduced net debt1 by $15.9 million as compared to June 30, 2022 while concurrently completing Surge’s successful Q3/22 capital program for $42.4 million.

FINANCIAL AND OPERATING HIGHLIGHTS

Three Months Ended September 30,

Nine Months Ended September 30,

($000s except per share amounts)

2022

2021

% Change

2022

2021

% Change

Financial highlights

Oil sales

166,487

97,272

71 %

520,397

243,639

114 %

NGL sales

3,920

2,663

47 %

12,912

6,437

101 %

Natural gas sales

8,890

5,170

72 %

28,111

16,606

69 %

Total oil, natural gas, and NGL revenue

179,297

105,104

71 %

561,420

266,682

111 %

Cash flow from operating activities

69,170

26,263

163 %

197,150

50,067

294 %

Per share – basic ($)

0.83

0.46

81 %

2.36

1.07

120 %

Per share diluted ($)

0.80

0.45

79 %

2.29

1.05

119 %

Adjusted funds flowi

80,294

27,804

189 %

221,748

57,118

288 %

Per share – basic ($)i

0.96

0.48

98 %

2.66

1.22

117 %

Per share diluted ($)

0.93

0.47

97 %

2.58

1.20

116 %

Net income (loss)iii

78,057

67,612

15 %

128,216

364,740

(65) %

Per share basic ($)

0.93

1.18

(21) %

1.54

7.82

(80) %

Per share diluted ($)

0.91

1.15

(21) %

1.49

7.63

(80) %

Expenditures on property, plant and equipment

42,358

33,932

25 %

122,216

81,330

50 %

Net acquisitions and dispositions

90,000

nmii

(32)

(12,591)

nm

Net capital expenditures

42,358

123,932

(66) %

122,184

68,739

78 %

Net debti, end of period

264,261

319,790

(17) %

264,261

319,790

(17) %

Operating highlights

Production:

Oil (bbls per day)

17,639

14,264

24 %

17,173

13,299

29 %

NGLs (bbls per day)

647

575

12 %

712

560

27 %

Natural gas (mcf per day)

18,561

16,815

10 %

18,573

15,582

19 %

Total (boe per day) (6:1)

21,380

17,642

21 %

20,981

16,456

27 %

Average realized price (excluding hedges):

Oil ($ per bbl)

102.59

74.12

38 %

111.00

67.11

65 %

NGL ($ per bbl)

65.91

50.31

31 %

66.44

42.13

58 %

Natural gas ($ per mcf)

5.21

3.34

56 %

5.54

3.90

42 %

Netback ($ per boe)

Petroleum and natural gas revenue

91.16

64.76

41 %

98.02

59.36

65 %

Realized gain (loss) on commodity and FX contracts

(7.01)

(14.30)

(51) %

(15.46)

(13.57)

14 %

Royalties

(17.27)

(9.55)

81 %

(17.48)

(7.80)

124 %

Net operating expensesi

(19.31)

(16.83)

15 %

(19.25)

(17.57)

10 %

Transportation expenses

(1.30)

(1.11)

17 %

(1.47)

(1.03)

43 %

Operating netbacki

46.27

22.97

101 %

44.36

19.39

129 %

G&A expense

(2.14)

(2.06)

4 %

(2.17)

(2.08)

4 %

Interest expense

(3.30)

(3.78)

(13) %

(3.47)

(4.60)

(25) %

Adjusted funds flowi

40.83

17.13

138 %

38.72

12.71

205 %

Common shares outstanding, end of period

83,977

72,177

16 %

83,977

72,177

16 %

Weighted average basic shares outstanding

83,626

57,380

46 %

83,448

46,662

79 %

Stock based compensation dilution

2,414

1,243

94 %

2,559

1,127

127 %

Weighted average diluted shares outstanding

86,040

58,623

47 %

86,007

47,789

80 %

This is a non-GAAP and other financial measure which is defined in the Non-GAAP and Other Financial Measures section of this document.

ii The Company views this change calculation as not meaningful, or “nm”.

iii The nine months ended September 30, 2021 includes a non-cash impairment reversal of $323.6 million

 

OPERATIONS UPDATE: STRONG DRILLING SUCCESS IN SE SASKATCHEWAN AND SPARKY CORE AREAS

During Q3/22, Surge continued its SE Saskatchewan and Sparky drilling programs, drilling 26 gross (20.7 net) wells, with 17 gross (11.7 net) horizontal wells in SE Saskatchewan targeting the Frobisher and Midale Formations, and 9.0 gross (net) horizontal wells in the Sparky core area.

As previously released, in Q2/22 Surge was successful at a highly competitive Saskatchewan Crown Land Sale in the Steelman area, which added more than 40.0 (net) internally estimated, highly economic2, light oil Frobisher drilling locations2 to its inventory. As part of the Company’s SE Saskatchewan Q3/22 drilling program, 3 gross (3.0 net) Frobisher horizontal wells were drilled on the newly acquired lands. All three of these wells are currently on production and are exceeding internal type curve expectations.

The average 30 day initial production rates from Surge’s latest three Steelman Frobisher wells is over 550 boepd (90% light oil) per well, versus an internal type curve expectation of 250 boepd2. Each of these three Steelman wells paid out in less than five weeks2 (at US$85 WTI3), demonstrating the top-tier economics associated with Surge’s large eight year SE Saskatchewan drilling inventory3.

Surge’s exciting new drilling results, along with other nearby industry activity, have substantially de-risked the Company’s internal drilling inventory of up to 110 gross (80 net) locations in the Steelman area. Surge continues to be active at Steelman, with 6 gross (5.1 net) wells anticipated to be drilled during Q4/22.

In the Sparky core area, Surge drilled 7.0 (net) horizonal wells at the Company’s operated Provost and Betty Lake properties. All of these Sparky wells are now on production, with a four well pad in Provost producing at a combined 30 day initial production rate of over 750 boepd.

In Q3/22, Surge’s Sparky core area production exceeded 9,500 boepd (>95% liquids; 26° API average crude oil gravity) for the first time in the Company’s history, up over 675% from 1,200 boepd seven years ago. Surge has a deep, 12 year Sparky drilling inventory3 of more than 425 internally estimated locations.

OUTLOOK: PREMIUM ASSET QUALITY DRIVES SUPERIOR RETURNS

Surge is an intermediate, publicly traded oil company, focused on enhancing shareholder returns through free cash flow generation. The Company’s defined operating strategy is based on acquiring and developing high quality, conventional, light and medium gravity crude oil reservoirs, using proven technology to enhance ultimate oil recoveries.

Surge’s Board and Management continue to be optimistic on the outlook for crude oil prices, based on a historically tight physical market, ongoing geopolitical issues, and the significant underinvestment in the global energy sector over the past several years.

Despite WTI crude oil prices dropping by nearly CAD$20 per barrel from Q2/22 to Q3/22, Surge’s Q3/22 AFF was $1.7 million higher than in Q2/22, increasing from $78.6 million in Q2/22 to $80.3 million in Q3/22. This quarter over quarter increase is due to the Company’s better than anticipated drilling results, along with the expiry of most of the Company’s previously mandated fixed-price crude oil hedges.

During the third quarter of 2022, Surge returned to its shareholders cash dividends totaling over $8.8 million, pursuant to the Company’s base cash dividend of $0.42 per share per annum (paid monthly). Annualized, the Company’s base cash dividend represents less than 13 percent of Q3/22 cash flow from operating activities.

With cash flow strategically allocated between high rate of return capital projects and the achievement of the Company’s previously announced net debt targets, Management currently forecasts that the Company will achieve its previously announced Phase 2 return of capital net debt target in late Q2/23, based on US$80 WTI crude oil flat pricing.

FORWARD LOOKING STATEMENTS

This press release contains forward-looking statements. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.

More particularly, this press release contains statements concerning: Surge’s expectations regarding crude oil prices; its defined operating strategy; and its forecast for achievement of its Phase 2 return to capital net debt target.

The forward-looking statements are based on certain key expectations and assumptions made by Surge, including expectations and assumptions around the performance of existing wells and success obtained in drilling new wells; anticipated expenses, cash flow and capital expenditures; the application of regulatory and royalty regimes; prevailing commodity prices and economic conditions; development and completion activities; the performance of new wells; the successful implementation of waterflood programs; the availability of and performance of facilities and pipelines; the geological characteristics of Surge’s properties; the successful application of drilling, completion and seismic technology; the determination of decommissioning liabilities; prevailing weather conditions; exchange rates; licensing requirements; the impact of completed facilities on operating costs; the availability and costs of capital, labour and services; and the creditworthiness of industry partners.

Although Surge believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Surge can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the condition of the global economy, including trade, public health (including the impact of COVID-19) and other geopolitical risks; risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks); commodity price and exchange rate fluctuations and constraint in the availability of services, adverse weather or break-up conditions; uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures; and failure to obtain the continued support of the lenders under Surge’s bank line. Certain of these risks are set out in more detail in Surge’s AIF dated March 9, 2022 and in Surge’s MD&A for the period ended December 31, 2021, both of which have been filed on SEDAR and can be accessed at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Surge undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Oil and Gas Advisories

The term “boe” means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. “Boe/d” and “boepd” mean barrel of oil equivalent per day. Bbl means barrel of oil and “bopd” means barrels of oil per day. NGLs means natural gas liquids.

This press release contains certain oil and gas metrics and defined terms which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar metrics/terms presented by other issuers and may differ by definition and application.

Drilling Inventory

This press release discloses drilling locations in two categories: (i) booked locations; and (ii) unbooked locations. Booked locations are proved locations and probable locations derived from an internal evaluation using standard practices as prescribed in COGEH and account for drilling locations that have associated proved and/or probable reserves, as applicable.

Unbooked locations are internal estimates based on prospective acreage and assumptions as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Unbooked locations have been identified by Surge’s internal certified Engineers and Geologists (who are also Qualified Reserve Evaluators) as an estimation of our multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that the Company will drill any or all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and gas reserves, resources or production. The drilling locations on which the Company actually drills wells will ultimately depend upon the availability of capital, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors. While certain of the unbooked drilling locations have been de-risked by drilling existing wells in relative close proximity to such unbooked drilling locations, the majority of other unbooked drilling locations are farther away from existing wells where management has less information about the characteristics of the reservoir and therefore there is more uncertainty whether wells will be drilled in such locations and if drilled there is more uncertainty that such wells will result in additional oil and gas reserves, resources or production.

Assuming a Jan 1, 2022 reference date, the Company will have over >1,050 gross (>975 net) drilling locations identified herein; of these >550 gross (>500 net) are unbooked locations. Of the 456 net booked locations identified herein, 362 net are Proved locations and 95 net are Probable locations based on Sproule’s 2021YE reserves. Assuming an average number of wells drilled per year of 75, Surge’s >1,050 locations provide 13 years of drilling.

Assuming a Jan 1, 2022 reference date, the Company will have over >425 gross (>425 net) Sparky Core drilling locations identified herein; of these >280 gross (>280 net) are unbooked locations. Of the 147 net booked locations identified herein, 107 net are Proved locations and 40 net are Probable locations based on Sproule’s 2021YE reserves. Assuming an average number of wells drilled per year of 35, Surge’s >400 locations provide >12 years of drilling.

Surge’s internally used type curves were constructed using a representative, factual and balanced analog data set, as of January 1, 2022. All locations were risked appropriately, and EURs were measured against OOIP estimates to ensure a reasonable recovery factor was being achieved based on the respective spacing assumption. Other assumptions, such as capital, operating expenses, wellhead offsets, land encumbrances, working interests and NGL yields were all reviewed, updated and accounted for on a well by well basis by Surge’s Qualified Reserve Evaluators. All type curves fully comply with Part 5.8 of the Companion Policy 51 – 101CP.

Assuming an Oct 15, 2022 reference date, the Company will have over >300 gross (>250 net) SE Sask drilling locations identified herein; of these 149 gross (129 net) are unbooked locations. Of the 131 net booked locations as of Jan 1, 2022, 103 net are Proved locations and 28 net are Probable locations based on Sproule’s 2021YE reserves. Assuming an average number of wells drilled per year of 30.0 net, Surge’s >250 net locations provide >8 years of drilling.

Surge’s average internal Frobisher type curve (Steelman land sale) economics have a payout of < 3 months @ US$85/bbl WTI (C$104 LSB) and are supported by >125 internally evaluated Frobisher locations by Surge’s Qualified Reserve Evaluators, with average metrics of: ~$1.4 MM per well capital, ~260 boe/d IP30 per well and ~82 mboe (73 mbbl Oil + NGL’s) Estimated Ultimate Recoverable reserves per well).

Non-GAAP and Other Financial Measures

This press release includes references to non-GAAP and other financial measures used by the Company to evaluate its financial performance, financial position or cash flow. These specified financial measures include non-GAAP financial measures and non-GAAP ratios, are not defined by IFRS and therefore are referred to as non-GAAP and other financial measures. Certain secondary financial measures in this press release – namely “adjusted funds flow”, “adjusted funds flow per share”, “free cash flow”, “net debt”, “net operating expenses”, “operating netback”, and “adjusted funds flow per boe” are not prescribed by GAAP. These non-GAAP and other financial measures are included because management uses the information to analyze business performance, cash flow generated from the business, leverage and liquidity, resulting from the Company’s principal business activities and it may be useful to investors on the same basis. None of these measures are used to enhance the Company’s reported financial performance or position. The non-GAAP and other financial measures do not have a standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers. They are common in the reports of other companies but may differ by definition and application. All non-GAAP and other financial measures used in this document are defined below.

Adjusted Funds Flow & Adjusted Funds Flow Per Share

Adjusted funds flow is a non-GAAP financial measure. The Company adjusts cash flow from operating activities in calculating adjusted funds flow for changes in non-cash working capital, decommissioning expenditures, and cash settled transaction and other costs. Management believes the timing of collection, payment or incurrence of these items involves a high degree of discretion and as such may not be useful for evaluating Surge’s cash flows.

Changes in non-cash working capital are a result of the timing of cash flows related to accounts receivable and accounts payable, which management believes reduces comparability between periods. Management views decommissioning expenditures predominately as a discretionary allocation of capital, with flexibility to determine the size and timing of decommissioning programs to achieve greater capital efficiencies and as such, costs may vary between periods. Transaction and other costs represent expenditures associated with property acquisitions and dispositions, debt restructuring and employee severance costs, which management believes do not reflect the ongoing cash flows of the business, and as such reduces comparability. Each of these expenditures, due to their nature, are not considered principal business activities and vary between periods, which management believes reduces comparability.

Adjusted funds flow per share is a non-GAAP ratio calculated using the same weighted average basic and diluted shares used in calculating income per share.

The following table reconciles cash flow from operating activities to adjusted funds flow and adjusted funds flow per share:

Three Months Ended September 30,

Nine Months Ended September 30,

($000s except per share amounts)

2022

2021

2022

2021

Cash flow from operating activities

69,170

26,263

197,150

50,067

Change in non-cash working capital

7,164

(2,866)

18,423

(2,485)

Decommissioning expenditures

3,532

2,105

5,528

4,649

Cash settled transaction and other costs

428

2,303

647

4,888

Adjusted funds flow

$                         80,294

$                         27,804

$                       221,748

$                         57,118

Per share – basic

$                             0.96

$                             0.48

$                             2.66

$                             1.22


Free Cash Flow

Free cash flow is a non-GAAP financial measure, calculated as cash flow from operating activities less expenditures on property, plant, equipment and dividends paid. Management uses free cash flow to determine the amount of funds available to the Company for future capital allocation decisions.

Net Debt

Net debt is a non-GAAP financial measure, calculated as bank debt, term debt, plus the liability component of the convertible debentures plus current assets, less current liabilities, however, excluding the fair value of financial contracts, decommissioning obligations, and lease and other obligations. There is no comparable measure in accordance with IFRS for net debt. This metric is used by management to analyze the level of debt in the Company including the impact of working capital, which varies with the timing of settlement of these balances.

($000s)

As at Sep 30, 2022

As at Jun 31, 2022

As at Sep 30, 2021

Accounts receivable

62,984

80,589

58,968

Prepaid expenses and deposits

3,055

4,227

4,044

Accounts payable and accrued liabilities

(82,298)

(102,172)

(73,009)

Dividends payable

(2,939)

(2,918)

Bank debt

(9,758)

(22,254)

(189,371)

Term debt

(159,108)

(162,180)

(47,203)

Convertible debentures

(76,197)

(75,423)

(73,219)

Net Debt

(264,261)

(280,131)

(319,790)


Net Operating Expenses

Net operating expenses is a non-GAAP financial measure, determined by deducting processing income, primarily generated by processing third party volumes at processing facilities where the Company has an ownership interest. It is common in the industry to earn third party processing revenue on facilities where the entity has a working interest in the infrastructure asset. Under IFRS this source of funds is required to be reported as revenue. However, the Company’s principal business is not that of a midstream entity whose activities are dedicated to earning processing and other infrastructure payments. Where the Company has excess capacity at one of its facilities, it will look to process third party volumes as a means to reduce the cost of operating/owning the facility. As such, third party processing revenue is netted against operating costs when analyzed by management.

Operating Netback & Adjusted Funds Flow per boe

Operating netback is a non-GAAP financial measure, calculated as petroleum and natural gas revenue and processing and other income, less royalties, realized gain (loss) on commodity and FX contracts, operating expenses, and transportation expenses. Operating netback per boe is calculated as operating netback divided by total barrels of oil equivalent produced during a specific period of time. There is no comparable measure in accordance with IFRS. This metric is used by management to evaluate the Company’s ability to generate cash margin on a unit of production basis.

Operating netback & adjusted funds flow are calculated on a per unit basis as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

($000s)

2022

2021

2022

2021

Petroleum and natural gas revenue

179,297

105,104

561,420

266,682

Processing and other income

1,941

978

5,316

3,239

Royalties

(33,964)

(15,501)

(100,099)

(35,051)

Realized gain (loss) on commodity and FX contracts

(13,790)

(23,209)

(88,565)

(60,942)

Operating expenses

(39,920)

(28,288)

(115,563)

(82,156)

Transportation expenses

(2,554)

(1,798)

(8,426)

(4,630)

Operating netback

91,010

37,286

254,083

87,142

G&A expense

(4,218)

(3,346)

(12,436)

(9,344)

Interest expense

(6,498)

(6,135)

(19,899)

(20,679)

Adjusted funds flow

80,294

27,804

221,748

57,118

Barrels of oil equivalent (boe)

1,966,876

1,623,036

5,727,563

4,492,511

Operating netback ($ per boe)

$                           46.27

$                           22.97

$                           44.36

$                           19.39

Adjusted funds flow ($ per boe)

$                           40.83

$                           17.13

$                           38.72

$                           12.71


For more information about Surge, please visit our website at www.surgeenergy.ca 

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility of the accuracy of this release.

_________________________

1 This is a non-GAAP and other financial measure which is defined in the Non-GAAP and Other Financial Measures section of this document.

2 See the Drilling Inventory section of this document.

3 Average WTI from Sept 9 to Oct 21 (when these wells produced for their first 30 days) was US$85/bbl (C$108/bbl LSB).  

 

Surge Energy Inc. Logo (CNW Group/Surge Energy Inc.)

SOURCE Surge Energy Inc.

For further information: Paul Colborne, President & CEO, Surge Energy Inc., Phone: (403) 930-1507, Fax: (403) 930-1011, Email: [email protected]; Jared Ducs, Chief Financial Officer, Surge Energy Inc., Phone: (403) 930-1046, Fax: (403) 930-1011, Email: [email protected]

November 1, 2022

Oil Price


BP (NYSE: BP) announced a further $2.5 billion share buyback after more than doubling its Q3 profit from a year earlier, thanks to what it described as an “exceptional” gas marketing and trading result and higher gas realizations.

BP boosts buybacks as Q3 profit doubles to $8.2 billion- oil and gas 360

Source: Reuters

BP joined other international oil and gas majors in reporting very strong earnings after it reported on Tuesday an underlying replacement cost profit – its metric for net profit – of $8.2 billion for the third quarter. This was slightly lower than the $8.5 billion for the previous quarter, which saw the highest quarterly profit for BP in over a decade, but more than double the $3.3 billion in earnings for the third quarter of 2021.

“Compared to the second quarter, the result was impacted by weaker refining margins, an average oil trading result and lower liquids realizations, partly offset by an exceptional gas marketing and trading result and higher gas realizations,” the UK supermajor said in a statement. BP said its oil trading performance in Q3 was “average” after an “exceptional” result in Q2.

“Net debt fell for the tenth successive quarter; we are investing with discipline; and we are delivering on our commitment to shareholder distributions – announcing a further $2.5 billion share buyback,” chief financial officer Murray Auchincloss said.

Chief executive officer Bernard Looney said, “This quarter’s results reflect us continuing to perform while transforming. We remain focused on helping to solve the energy trilemma – secure, affordable and lower carbon energy. We are providing the oil and gas the world needs today – while at the same time – investing to accelerate the energy transition.”

Based on BP’s current forecasts, at around $60 per barrel Brent and subject to the board’s discretion each quarter, BP continues to expect to be able to deliver share buybacks of around $4.0 billion annually and have the capacity for an annual increase in the dividend of around 4% through 2025.

BP, the last of Big Oil to report earnings for Q3, joined the other majors in posting strong earnings amid growing calls for windfall taxes on the industry’s profits. U.S. President Joe Biden said on Monday that the record profits of the likes of Exxon and Shell were “a windfall of war” and if oil companies don’t increase output, “they’re going to pay a higher tax on their excess profits and face other restrictions.”

Reuters


Marathon Petroleum (MPC.N) and Phillips 66 (PSX.N) posted quarterly profits which cruised past Wall Street estimates on Tuesday, becoming the latest U.S. refiners to benefit from robust fuel demand and margins amid tight supplies.

Marathon Petroleum and Phillips 66 cruise past estimates on fuel demand surge- oil and gas 360

Source: Reuters

U.S. refiners are posting strong profits with refineries running at record levels this year, strong export demand amid a squeezed supply due to Russia’s invasion of Ukraine and plant closings.

The sector has, however, drawn criticism from President Joe Biden, who said refiners were putting profits ahead of consumers and urged them to expand capacity.

Shares of Marathon rose 1.3% pre-market to $115.10, while Phillips 66 was up 1% at $105.25.

Top bosses of both refiners said market environment continues to be favorable and product demand remains strong.

Marathon, the largest U.S. refiner by capacity, said crude capacity utilization in the third quarter was about 98%, resulting in total throughput of 3 million barrels per day (bpd), which was 7% higher than a year earlier.

For the current quarter, the company expects refinery throughput to be 2.9 million bpd.

Amid the bumper results, Marathon also increased its dividend by 30% to 75 cents per share on Tuesday.

Its refining and marketing margin doubled to $30.21 per barrel for the reported quarter compared with a year earlier.

Mirroring similar gains, rival Phillips 66’s realized refining margins tripled in the July-September quarter to $26.58 per barrel.

Phillips said it returned $1.2 billion through share repurchases and dividends during the quarter.

On an adjusted basis, Marathon reported a profit of $7.81 per share, beating average analysts’ estimate of $7.07 per share, according to Refinitiv data.

Phillips 66’s adjusted profit of $6.46 per share smashed estimates of $5.04.

Rival Valero Energy (VLO.N), which also beat profit estimates on strong margins last week, said it continues to maximize refining utilization.

October 28, 2022

Oil Price


Pioneer Natural Resources became the latest oil major to report bumper profits for the third quarter, exceeding analyst expectations.

 

Pioneer joins strong Q3 oil lineup with forecast-beating profits- oil and gas 360

Source: CNBC

The result was made possible by stronger oil prices, with Pioneer enjoying an average price per barrel of $94.23 during the reporting period, the company said in a news release. The average price for gas was $7.57 per thousand cubic feet.

The results will help Pioneer implement its plan to return a total of $7.5 billion to shareholders in the form of dividends and stock repurchases.

Earlier this week, supermajors Shell and TotalEnergies also reported strong third-quarter results, with the French supermajor’s result at the highest ever, thanks to oil prices.

This strong financial performance by the oil industry earlier this year prompted governments in Europe and the Biden administration to call for—and nearly everywhere approve—windfall taxes.

The basis for the levies was the argument that oil and gas companies were benefiting from a crisis that was hurting everyone else and they had to be forced to contribute to aid measures.

“It’s definitely awkward,” Abhi Rajendran, a research scholar at Columbia University’s Center on Global Energy Policy, told Bloomberg earlier this week in comments on the expected third-quarter performance of Big Oil.

“These companies won’t want to be beating their chest over strong business results that are coming at the expense of consumers and a difficult economic environment.”

Instead of beating their chest, companies seem to be making plans for more cash returns to shareholders.

“To further enhance our top-tier free cash flow generation and return of capital, we have increased the return thresholds for wells to be included in our future development programs, which is expected to improve our program well productivity in 2023 and subsequent years, surpassing 2021 productivity levels,” Pioneer chief executive Scott Sheffield said in the news release on the company’s third-quarter results.

By Charles Kennedy for Oilprice.com

October 27, 2022

Oil Price


Despite weaker oil prices during the third quarter, the oil industry is still booking strong financial results. According to some, this is “awkward” because it is happening during a time of economic hardship. Besides being awkward, however, Big Oil’s profits will likely draw more political pressure from desperate governments.

Oil major earnings will reignite the windfall taxes debate- oil and gas 360

Source: Oil Price

Bloomberg reported this week that, based on data it had compiled, the collective profits of Exxon, Chevron, Shell, BP, and TotalEnergies for the last quarter would come in at $50.7 billion.

This is palpably lower than the record $62 billion the five supermajors reported for the second quarter—drawing the ire of politicians—but it is still a large number and will, in all likelihood, draw more ire and calls for sharing the money.

“It’s definitely awkward,” Abhi Rajendran, a research scholar at Columbia University’s Center on Global Energy Policy, told Bloomberg. “These companies won’t want to be beating their chest over strong business results that are coming at the expense of consumers and a difficult economic environment.”

This is an interesting take, given that in 2020, when Big Tech raked the cash in thanks to the lockdowns—also at the expense of consumers forced to stay at home, nobody really blamed Amazon or Apple, or Microsoft for it.

Yet the oil industry has a special place in the heart of almost every Western politician, with the energy transition still high on the official agenda even as the cost of renewables soars and Europe returns to coal to survive the winter.

Related: Why Russian LNG Exports To Europe Exploded This Summer

The oil industry made a great culprit for the energy crisis when it began unfolding, and record profits helped strengthen the factually flimsy argument. Now, this argument will probably be made again, and we might hear more talk about windfall profit taxes.

It’s not just the five Big Oil majors, either. Based on the first reports coming in this profit season, the industry had another excellent three months. Halliburton, for instance, saw its profits double between July and September to $544 million. Valero booked earnings of $2.8 billion for the period, noting stronger demand for fuels than in 2019.

Indeed, the Biden administration, for one, has been quick to call on oil companies to “to pass through lower energy costs to consumers right away.” Claiming that input costs for refiners are falling while their margins are rising, the White House said in a recent fact sheet that the industry must immediately share its higher profits with consumers by lowering end prices for their products.

Meanwhile, Energy Secretary Jennifer Granholm talked to industry executives this week to try and get them to boost the production of fuels. This sounds incongruous with the allegations made in the fact sheet but reflects a reality where demand for fuels is on the rise while the capacity to produce fuels has declined.

Unfortunately, oil executives appear to have shattered the administration’s hopes for the return of shuttered refining capacity. Understandably, there are also no plans to build new refining capacity in the context of federal energy policies seeking to reduce the economy’s reliance on fossil fuels.

Meanwhile, the attempts of governments on both sides of the Atlantic to force the oil industry to part with some of its “excess” profits may be about to backfire. Ever since the EU and the UK announced plans for windfall taxes on the oil sector, both the industry and analysts have been warning this would lead to lower investment appetite. Instead, companies will continue to prioritize the return of cash to shareholders, which would further undermine the security of future supply.

“If you’re planning your capital budget, you have to think twice now that you have a new risk,” Christyan Malek, JP Morgan’s global head of energy strategy, told Bloomberg earlier this year. “It encourages majors to return cash to shareholders as they use that free cashflow that could have been used in investment.”

In the UK, the windfall tax was approved in July, and the country’s industry lobby group warned it would threaten investment plans. The head of the body, Deirdre Michie, noted that “Exploring for oil and gas and then bringing it to shore is inherently a risky and expensive business, so our members need the UK’s fiscal rules and other regulations to be stable and predictable before they consider investing the hundreds of millions of pounds needed for such projects.”

It could well be argued that if it were any other industry, governments would celebrate its resilience and the taxes this resilient industry would be paying into the state’s coffers. Yet Big Oil, and the oil industry as a whole, has been picked as the villain of the age, and nothing they do seems right.

Oil companies are damned if they do it—produce more oil and invest in new exploration, which brings prices down—and they are just as damned if they don’t do it, shunning more exploration and focusing on the return of cash to shareholders, while demand exceeds the supply of oil. If they can’t win, why even try?

By Irina Slav for Oilprice.com

CNBC


British oil major Shell on Thursday reported that quarterly profits more than doubled from the same period last year, but lower refining and trading revenues brought an end to its run of record earnings.

Oil giant Shell reveals plans to hike dividend as quarterly profits more than double- oil and gas 360

Source: CNBC

Shell posted adjusted earnings of $9.45 billion for the three months through to the end of September, meeting analyst expectations of $9.5 billion according to Refinitiv. The company posted adjusted earnings of $4.1 billion over the same period a year earlier and notched a whopping $11.5 billion for the second quarter of 2022.

The oil giant said it planned to increase its dividend per share by around 15% for the fourth quarter 2022, to be paid out in March 2023. It also announced a new share buyback program, which is set to result in an additional $4 billion of distributions and is expected to be completed by its next earnings release.

Shares of Shell closed the European trading session up more than 5%.

The London-headquartered oil major reported consecutive quarters of record profits through the first six months of the year, benefitting from surging commodity prices following Russia’s invasion of Ukraine.

It has coincided with calls for higher taxes on the bumper profits of Britain’s biggest oil and gas companies, particularly at a time when the country faces a deepening cost-of-living crisis.

Shell warned in an update earlier this month that lower refining and chemicals margins and weaker gas trading were likely to negatively impact third-quarter earnings.

On Thursday, the company said a recovery in global product supply had contributed to lower refining margins in the third quarter, and gas trading earnings had also fallen.

“The trading and optimisation contributions were mainly impacted by a combination of seasonality and supply constraints, coupled with substantial differences between paper and physical realisations in a volatile and dislocated market,” Shell said in its earnings release.

What about renewable investments?

Shell CEO Ben van Beurden said in a statement that the firm’s “robust” results come at a time of ongoing energy market volatility.

“We continue to strengthen Shell’s portfolio through disciplined investment and transform the company for a low-carbon future. At the same time we are working closely with governments and customers to address their short and long-term energy needs,” he added.

In the first nine months of the year, Shell’s investments in its “Renewables & Energy Solutions” sector came to around $2.4 million, roughly 14% of its total cash capital expenditures of $17.5 million.

Notably, Follow This founder Mark van Baal said Shell’s renewables and energy solutions investments include natural gas, a fossil fuel.

“You can’t claim to be in transition if less than 14% of your investments is going to new, renewable energy businesses and at least 86% of your investments remain tied to old, fossil fuel businesses,” van Baal said.

“Without presenting a clear breakdown, it remains unclear how much Shell actually invests in renewable energy.”

Van Baal added, “We still don’t see Shell using this once in a lifetime opportunity to invest in diversification to ensure the long-term future of the company.”

Change in leadership

The group’s results come soon after it was announced CEO Ben van Beurden will step down at the end of the year after nearly a decade at the helm.

Wael Sawan, currently Shell’s director of integrated gas, renewables and energy solutions, will become its next chief executive on Jan. 1.

A dual Lebanese-Canadian national, Sawan has held roles in downstream retail and various commercial projects during his 25-year career at Shell.

“I’m looking forward to channelling the pioneering spirit and passion of our incredible people to rise to the immense challenges, and grasp the opportunities presented by the energy transition,” Sawan said in a statement on Sept. 15, adding that it was an honor to follow van Beurden’s leadership.

“We will be disciplined and value focused, as we work with our customers and partners to deliver the reliable, affordable and cleaner energy the world needs.”

Oil Price


TotalEnergies (NYSE: TTE) posted a record profit for the third quarter, driven by high energy prices and soaring prices of LNG as Europe scrambles to procure gas ahead of the winter.

 

TotalEnergies books record quarterly profit as LNG business booms- oil and gas 360

Source: Reuters

TotalEnergies reported on Thursday an adjusted net income of $9.9 billion for the third quarter—more than double the adjusted earnings for Q3 2021 and a record for the company.

Net income stood at $6.6 billion after taking into account a new impairment of $3.1 billion related to Russia. Despite the impairment, the net income in Q3 was still 43% higher than in the same period of 2021.

Cash flow from operations more than tripled to $17.8 billion compared to the third quarter of last year.

TotalEnergies’ Integrated Gas, Renewables & Power segment reported a record-setting adjusted net operating income of $3.6 billion for the third quarter, up by $1.1 billion from the second quarter, and cash flow of $2.7 billion, “driven by an average LNG selling price up more than 50% compared to the previous quarter and by the strong performance of its trading activities.”

The downstream business was also very strong, TotalEnergies said.

“Downstream benefited from strong distillate margins, generating an outstanding adjusted net operating income of $2.4 billion and a cash flow of $2.9 billion,” the supermajor noted.

Also on Thursday, Shell reported strong quarterly earnings despite weaker trading in gas compared to the records of the second quarter. Shell intends to lift its dividend and is launching a new share buyback program after reporting its second-highest quarterly earnings for Q3, second only to the record profit for the previous quarter.

Shell is the world’s top LNG trader while TotalEnergies is the second-largest, yet Shell did not benefit from the LNG import boom in Europe due to its weaker trading results.

Regardless, yet another very profitable and record-breaking quarter for Big Oil could convince EU policymakers that windfall taxes on the largest energy firms could help pay for government support to consumers’ soaring energy bills.

By Michael Kern for Oilprice.com

October 26, 2022

Yahoo Finance


Hess Corporation HES has reported third-quarter 2022 earnings per share of $1.89, beating the Zacks Consensus Estimate by a penny. The bottom line improved from the year-ago quarter’s 28 cents per share.

 

Oil producer Hess tops profit estimates on stronger energy prices- oil and gas 360

Source: Reuters

 

Total quarterly revenues increased to $3,157 million from $1,811 million a year ago. The top line also beat the Zacks Consensus Estimate of $2,939 million.

The strong quarterly results have been driven by higher realizations of commodity prices and increased hydrocarbon production.

Hess Corporation Price, Consensus and EPS Surprise

 

Hess Corporation Price, Consensus and EPS Surprise
                                                                                                                                                       Hess Corporation Price, Consensus and EPS Surprise
                                                                                                                                 Hess Corporation price-consensus-eps-surprise-chart | Hess Corporation Quote
Operational Update

Exploration and Production:

For the quarter under review, the Exploration and Production business reported adjusted earnings of $626 million, improving from $149 million a year ago. The business was favored by higher realized commodity prices.

Quarterly hydrocarbon production was 368 thousand barrels of oil equivalent per day (MBoe/d), up from 284 MBoe/d in the year-ago period, primarily due to higher production in Guyana.

Crude oil production increased from 153 thousand barrels per day (MBbls/d) in third-quarter 2021 to 217 MBbls/d. Natural gas liquid production totaled 60 MBbls/d, up from 47 MBbls/d in the prior-year quarter. Natural gas output was 547 thousand cubic feet per day (Mcf/d), up from 503 Mcf/d a year ago.

Worldwide crude oil realization per barrel of $93.95 (excluding the impacts of hedging) significantly improved from $67.88 in the year-ago period. Also, worldwide natural gas prices rose to $5.85 per Mcf from the year-ago figure of $4.71. The average worldwide natural gas liquids’ selling price increased to $35.44 per barrel from $32.88 a year ago.

Total costs and expenses increased to $2,269 million for the quarter from $1,483 million a year ago.

Financials

Net cash provided by operating activities was $1,339 million for the third quarter. Hess’ capital expenditure for exploration and production activities totaled $701 million.

As of Sept 30, 2022, the company had $2,384 million in cash and cash equivalents. Its long-term debt was $8,303 million at the third-quarter end.

Guidance

For 2022, Hess has revised its net production guidance (excluding Libya) upward to 325,000 barrels of oil equivalent per day (Boe/d) from the prior stated 320,000 Boe/d. For the fourth quarter, net production (excluding Libya) is projected to be 370,000 Boe/d.

The company has reiterated its capital and exploratory expenditure guidance of $2.7 billion.

Midstream:

From the midstream business, the company generated adjusted net earnings of $68 million, up from $61 million a year ago.

Operating Expenses

Operating expenses for the third quarter totaled $398 million versus the year-ago level of $333 million. Marketing costs increased to $982 million from $522 million a year ago. Also, exploration expenses increased to $58 million from $36 million in the year-ago period.

October 25, 2022

Oil Price


Halliburton Company (NYSE: HAL), the world’s largest provider of fracking services, reported on Tuesday that adjusted net income for the third quarter more than doubled from the same period last year and expects drilling activity to continue rising in all markets.

 

Haliburton sees net income more than double year-over-year- oil and gas 360

Source: Reuters

Halliburton booked a net income of $544 million, or $0.60 per diluted share, for the third quarter of 2022. This compares to the net income for the second quarter of 2022 of $109 million, or $0.12 per diluted share, and $0.26 per-share net income for the third quarter of 2021.

Revenues rose to $5.4 billion for Q3 2022, up from $5.1 billion in the second quarter of 2022, and much higher than the $3.86 billion revenue for the third quarter of 2021.

“Total company revenue grew 6% sequentially, as activity and pricing increased simultaneously in North America and International markets,” said Jeff Miller, Halliburton’s chairman, president, and CEO.

“I believe structural demand for more oil and gas supply will provide strong tailwinds for our business, and Halliburton is well-positioned to deliver improved profitability and increased returns for shareholders,” Miller added.

“Looking forward, we see activity increasing around the world — from the smallest to the largest countries and producers.”

Halliburton’s upbeat message to the market is similar to that of the world’s top oilfield services provider, Schlumberger, known as SLB as of yesterday.

Last week, Schlumberger reported third-quarter earnings, beating analyst estimates thanks to accelerating international drilling activity on top of already robust activity in North America.

Looking forward, Schlumberger remains upbeat on the drilling activity globally and expects “multiple years of growth,” CEO Olivier Le Peuch said on Friday.

The remaining of the top three oilfield services providers, Baker Hughes, signaled in its Q3 earnings release last week that the worst supply chain issues “should be behind us,” and that indicates that U.S. crude production could meaningfully increase in 2023.

By Tsvetana Paraskova for Oilprice.com


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