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Kiwetinohk Energy Corp. Announces Third Quarter 2021 Results, Operational Update and TSX Conditional Listing Approval

·13 min read

CALGARY, Alberta, Nov. 26, 2021 (GLOBE NEWSWIRE) -- Kiwetinohk Energy Corp. (“Kiwetinohk” or the “Corporation”) is pleased to announce its interim unaudited financial and operating results for the three and nine-month periods ended September 30, 2021. Selected financial and operational information is outlined below and should be read in conjunction with Kiwetinohk’s unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2021 and related Management Discussion and Analysis (“MD&A”) which are available on SEDAR at www.sedar.com.

Key achievements since the beginning of the third quarter include:

  • Kiwetinohk Resources Corp. (“KRC”) and Distinction Energy Corp. announced an agreement to combine on June 28, 2021 and form Kiwetinohk Energy Corp. Under the arrangement KRC acquired all shares of Distinction that it did not already own (approximately 48%) by way of an exchange of 20 KRC shares for each Distinction share. Shareholders of both companies voted overwhelmingly in favor of the arrangement on August 30, 2021. The transaction closed on September 22, 2021. The combined company now has core producing assets in the Fox Creek region of northwest Alberta and the Willesden Green and Ferrier areas of west central Alberta. These lands and the associated production from them are mainly in the Duvernay and Montney formations. The Corporation also has lands that it believes have potential for heavy oil development in the Clearwater formation in the Thorhild Radway central north region of Alberta.

  • The Corporation completed a ten to one share consolidation upon closing of the Distinction plan of arrangement.

  • Kiwetinohk made significant progress during the quarter advancing its portfolio of power development projects. This development work has included preparation of preliminary designs, performance estimates and preliminary cost estimates as part of a staged process that includes stages of increasing refinement and estimate quality as part of the process the Corporation uses to advance projects. Kiwetinohk currently has 1.8 gigawatts of power projects in the Alberta Energy System Operator (“AESO”) queue including two solar projects, two natural gas combined cycle projects and one Firm Renewable1 project ranging from AESO stage 1 to 2.

  • Production averaged 15,058 boe/d in the third quarter of 2021 with the legacy Distinction assets contributing approximately 6,463 boe/d.

  • Consolidated revenues from production were $66.9 million. Attribution of production volumes in the third quarter was 31% oil and condensate, 12% NGLs and 57% natural gas. Revenues have increased year over year due to higher production volumes, as a result of the acquisitions, in combination with significant improvements in realized prices over the comparative periods.

  • Net marketing income for the three months ended September 30, 2021 was $5.1 million. This reflects greater realizations through premium sales contracts for rich gas in Chicago.

  • All Kiwetinohk’s contracted Alliance pipeline capacity of 103.0 mmcf/d (after temporary assignments) was filled during the third quarter of 2021. Subsequent to the end of the quarter, a temporary assignment contract expired and Kiwetinohk now has total Alliance Pipeline capacity of approximately 120 mmcf/d.

  • Adjusted funds flow from operations in the three months ended September 30, 2021 was $28.2 million.

  • On September 22, 2021, the Corporation amended and restated its credit agreement and entered a single $225.0 million Senior Secured Extendible Revolving Facility with a syndicate of banks. The Corporation’s available combined borrowing capacity at September 30, 2021 was $170.0 million after taking into consideration current draws and reserves for outstanding letter of credit amounts.

  • Kiwetinohk invested $12.8 million in exploration and development capital expenditures, excluding acquisition expenditures, during the third quarter. These funded the commencement of drilling for two Duvernay wells in the Simonette area, three Montney wells in the Placid, one of which was a vertical evaluation well to assess the potential lower Montney zone, and one Clearwater vertical strat test well in the Thorhild area.

  • Subsequent to September 30, 2021, the Corporation applied to have its common shares (“Common Shares”) listed on the Toronto Stock Exchange (the "TSX"). The TSX has conditionally approved the listing of the Common Shares. Listing is subject to the Corporation fulfilling all of the requirements of the TSX on or before February 22, 2022. RBC Capital Markets acted as Sponsor to the Corporation in connection with the application to list its Common Shares on the TSX and BMO Capital Markets and Peters & Co. Limited acted as co-lead Financial Advisors.

  • In conjunction with the conditional listing approval from the TSX, William (Bill) Slavin will be stepping down from the Board of Directors of the Corporation.

  • Concurrent with today’s news release, Kiwetinohk has also filed its 2020 Annual Information Form (“AIF”) on SEDAR (www.sedar.com) which contains a in depth review of our energy transition strategy and plans.

Operational update

During the third quarter of 2021, the Corporation commenced drilling two Duvernay horizontal wells from an existing pad in the Simonette area. Rig release on the second well occurred in mid-November and the Corporation has commenced completion operations and expects to have the two wells onstream in early 2022.

In addition, the Corporation has recently drilled two Montney horizontal infill development wells in the Placid region. The rig was released from the second well in mid-November. These two horizontal wells are targeting production from the upper bench of the Montney which is productive in offsetting wells in each case. Completion operations and production are anticipated near the end of the first quarter of 2022. The Corporation recently cored a vertical geological evaluation well in order to evaluate the Middle Montney. Core and logs indicated low porosity relative to the proven upper bench but similar to land proven to be productive elsewhere in the Montney.

The Corporation has drilled its first multi-lateral horizontal well in the Thorhild area and put it on production in June 2021. This initial well encountered unusually heavy and high-viscosity crude oil leading to poor production rates and a decision to shut-in the well. A wide variation in crude oil properties is not uncommon in the Clearwater play. Kiwetinohk is evaluating the next steps for this specific well and has cut core in a recent vertical test well in a different part of the play to assess oil and reservoir characteristics.

Financial and operating summary:

Q3 2021

Q2 2021

Q3 2020

YTD 2021

YTD 2020

Sales volumes

Condensate (bbl/d)

4,261

3,096

18

2,493

42

Light oil (bbl/d)

308

331

435

327

448

Heavy oil (bbl/d)

39

29

15

34

5

NGLs (bbl/d)

1,814

1,220

64

1,048

72

Natural gas (mcf/d)

51,817

36,723

1,561

30,089

1,476

Total (boe/d)

15,058

10,797

793

8,918

813

Oil and condensate % of production

31%

32%

59%

32%

61%

NGL % of production

12%

11%

8%

12%

9%

Natural gas % of production

57%

57%

33%

56%

30%

Realized prices

Condensate ($/bbl)

80.70

76.60

43.02

78.97

55.45

Light oil (bbl/d)

81.61

75.61

46.59

73.92

48.01

Heavy oil (bbl/d)

61.90

57.85

31.06

56.35

31.06

NGLs ($/bbl)

49.74

42.04

11.15

46.02

5.75

Natural gas ($/mcf)

5.12

4.06

2.38

4.67

2.19

Natural gas ($/GJ)

4.78

3.79

1.95

4.36

1.81

Total ($/boe)

48.29

43.01

32.74

46.17

34.01

Royalty expense ($/boe)

(6.49)

(2.60)

(3.48)

(4.83)

(3.13)

Operating expenses ($/boe)

(6.69)

(8.10)

(9.07)

(7.32)

(9.58)

Transportation expenses ($/boe)

(3.98)

(4.36)

(0.68)

(4.05)

(0.73)

Operating netback2 ($/boe)

31.13

27.95

19.51

29.98

20.57

Risk management contract realized losses

(11.82)

(1.19)

-

(8.82)

-

Operating netback including risk management
contract realized losses2 ($/boe)

19.31

26.76

19.51

21.15

20.57

Financial results
($000s, except per share amounts)

Commodity sales

66,898

42,262

2,388

112,401

7,572

Cash flow from operating activities

29,643

(15,742)

399

10,300

(884)

Adjusted funds from operations2

28,221

17,904

(540)

44,577

(989)

Per share basic

0.82

0.06

(0.04)

1.61

(0.08)

Per share diluted

0.82

0.06

(0.04)

1.61

(0.08)

Net income (loss)

(29,680)

16,899

(3,545)

(70,400)

(14,601)

Per share basic

(0.86)

0.06

(0.03)

(2.19)

(0.11)

Per share diluted

(0.86)

0.06

(0.03)

(2.19)

(0.11)

Capital expenditures prior to acquisitions

(14,753)

(3,871)

(3,644)

(18,941)

(5,458)

Acquisitions

-

(276,298)

(3,562)

(282,414)

(4,705)


Q3 2021

Q2 2021

Q3 2020

YTD 2021

YTD 2020

Balance sheet ($000s, except share amounts)

Total assets

588,152

572,401

120,218

588,152

120,218

Long-term liabilities

138,034

142,838

4,308

138,034

4,308

Net (debt) surplus2

(36,936)

(42,105)

36,932

(36,936)

36,932

Adjusted working capital2

(4,316)

18,139

36,932

(4,316)

36,932

Weighted average shares outstanding

34,321,566

29,506,311

13,305,730

27,667,430

12,960,638

Shares outstanding end of period

43,610,140

33,436,940

14,516,961

43,610,140

14,516,961


Advisories

Barrels of oil equivalent (“BOE”) have been converted on the basis of six thousand cubic feet (“Mcf”) natural gas to 1 barrel of oil. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of oil as compared with natural gas is significantly different from the energy equivalent of six to one, utilizing a BOE conversion ratio of 6 Mcf: 1 bbl would be misleading as an indication of value.

Notes to the News Release

1 – The term "Firm Renewable" is a Kiwetinohk-originated term that describes efficient, flexible-output, fast-responding, gas-fired, internal reciprocating engine-driven power generation that addresses the need for stability that has been revealed as wind and solar renewable grows to become a significant proportion of a grid's power supply.

2 – Non-GAAP measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other entities. Please refer to the Corporation’s MD&A as at and for the three and nine months ended September 30, 2021 under the section “Non-GAAP Measures" available on Kiwetinohk’s SEDAR profile at www.sedar.com.

Forward-Looking Statements

Certain information set forth in this press release contains forward-looking information and statements including, without limitation, management’s business strategy, management’s assessment of future plans, projects and operations. Such forward-looking statements or information are provided for the purpose of providing information about management's current expectations and plans relating to the future. Forward-looking statements or information typically contain statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project", "potential" or similar words suggesting future outcomes or statements regarding future performance and outlook. Readers are cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted as a result of numerous known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Corporation.

In particular, this press release contains forward-looking statements pertaining to the following:

  • the listing of the Corporation’s Common Shares on the TSX;

  • bringing two Duvernay horizontal wells onstream in early 2022;

  • the timing of completion of two Placid wells within the Montney;

  • properties within vertical test wells in the Middle Montney;

  • the advancement of the Corporation’s green energy and power generation initiatives;

  • the Corporation’s growth strategy, including its focus on consolidation of strategic upstream assets, identification and development of natural gas-fired power generation and renewable projects and the Corporation’s plans for integration of its upstream and power portfolios;

  • sufficiency of funds to meet the Corporation's working capital requirements and anticipated drilling on the Simonette acquisition and Distinction acreage for the remainder of the 2021 / 2022 winter drilling season; and

  • the impact of current market conditions on the Corporation.

In addition to other factors and assumptions that may be identified in this press release, assumptions have been made regarding, among other things:

  • the timing and costs of the Corporation's capital projects;

  • the impact of increasing competition;

  • the general stability of the economic and political environment in which the Corporation operates;

  • the ability of the Corporation to obtain qualified staff, equipment and services in a timely and cost efficient manner;

  • the ability of the operator of the projects that the Corporation has an interest in to operate in a safe, efficient and effective manner;

  • future commodity and power prices;

  • currency, exchange and interest rates;

  • the regulatory framework regarding royalties, taxes, power, renewable and environmental matters in the jurisdictions in which the Corporation operates; and

  • the ability of the Corporation to successfully market its products.

Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions that have been used. Although the Corporation believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements as the Corporation can give no assurance that such expectations will prove to be correct.

Forward-looking statements or information involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by the Corporation and described in the forward-looking statements or information. These risks and uncertainties are described in the Corporation’s AIF and include, among other things:

  • the ability of the Corporation to satisfy the listing conditions of the TSX;

  • the ability of management to execute its business plan;

  • general economic and business conditions; and

  • the risks of the oil and gas, power and renewable industries.

Readers are cautioned that the foregoing list is not exhaustive of all possible risks and uncertainties.

The forward-looking statements and information contained in this press release speak only as of the date of this press release and the Corporation undertakes no obligation to publicly update or revise any forward-looking statements or information, except as expressly required by applicable securities laws.

Abbreviations

$/bbl

dollars per barrel

$/boe

dollars per barrel equivalent

$/GJ

dollars per gigajoule

$/mcf

dollars per thousand cubic feet

bbl(s)

barrel(s)

bbl/d

barrels per day

boe

barrel of oil equivalent, including crude oil, condensate, natural gas liquids, and natural gas (converted on the basis of one boe per six mcf of natural gas)

boe/d

barrel of oil equivalent per day

GJ

gigajoule

mcf

thousand cubic feet

mcf/d

thousand cubic standard feet per day

mmcf/d

million cubic feet per day

MMBtu

one million British Thermal Units (BTU) is a measure of the energy content in gas

MMBtu/d

one million British thermal units per day

NGLs

natural gas liquids, which includes butane, propane, and ethane

About Kiwetinohk

Kiwetinohk is engaged in the business of developing an integrated energy transition company focused on production of low carbon energy through the alignment of hydrocarbons and natural gas-fired (with carbon capture) and renewable power generation solutions.

Kiwetinohk is a reporting issuer and additional information is available on Kiwetinohk’s SEDAR profile at www.sedar.com.


FOR FURTHER INFORMATION PLEASE CONTACT:

KIWETINOHK ENERGY CORP.
Suite 1900, 250 - 2 Street S.W.
Calgary, Alberta T2P 0C1
Telephone: (587) 392-4424 Facsimile: (587) 392-4425

PATRICK CARLSON
Chief Executive Officer
(403) 819-5090

JAKUB BROGOWSKI
Chief Financial Officer
(587) 999-3905