CALGARY, Alberta, Nov. 08, 2024 (GLOBE NEWSWIRE) — NuVista Energy Ltd. (“NuVista” or the “Company“) (TSX: NVA) is pleased to announce strong financial and operating results for the three and nine months ended September 30, 2024, and to provide an update on our operational performance. The quality and composition of our asset base consistently enables us to generate strong returns across commodity price cycles. Subsequent to the third quarter, our daily production has reached new record levels, as we continue to invest in new high-return wells and infrastructure projects to support our development plans. We also added LNG market access to our diversified natural gas portfolio and made significant progress on our return of capital to shareholders program through our normal course issuer bid (the “2024 NCIB”), while maintaining a financial position with low debt.
Financial Highlights
During the third quarter of 2024, NuVista:
Delivered adjusted funds flow(1) of $139.5 million ($0.68/share, basic(3)), and free adjusted funds flow(2) of $19.4 million. Adjusted funds flow and free adjusted funds flow remained strong relative to the second quarter, supported by condensate rich production and lower cash costs, despite softer commodity prices;Generated net earnings of $59.8 million ($0.29/share, basic), resulting in year-to-date net earnings of $206.6 million ($1.00/share, basic);Completed a well-executed capital expenditures(2) program, investing $118.4 million in well and facility activities including the drilling of 14 wells and completion of 12 wells in our condensate rich Wapiti Montney asset base. Year-to-date, the capital expenditures program has totaled $427.8 million, with 34 wells drilled and 38 wells completed, in addition to completing several infrastructure projects;Added LNG sales to our natural gas diversification portfolio by gaining exposure to the Japan/Korea marker (“JKM”) through a netback agreement with Trafigura based on 21,000 MMbtu/d of LNG for a period of up to thirteen years commencing January 1, 2027;Exited the quarter with $37.5 million drawn on our $450 million credit facility and net debt(1) of $261.9 million, maintaining a favorable net debt to annualized third quarter adjusted funds flow(1) ratio of 0.5x;Repurchased and subsequently cancelled 816,800 common shares under its 2024 NCIB program at a weighted average price of $13.81 per share for a total cost of $11.3 million. Since the inception of our NCIB programs in 2022, NuVista has repurchased and subsequently cancelled 33.2 million common shares for an aggregate cost of $394.6 million or $11.89 per share; andRecognized as part of the TSX30 for the third consecutive year. The TSX30 recognizes the thirty top-performing companies on the Toronto Stock Exchange (“TSX”) over the prior three-year period (see www.tsx.com/tsx30). NuVista ranked a notable sixth place overall.
Notes:
(1) Each of “adjusted funds flow”, “net debt”, “net debt to annualized third quarter adjusted funds flow” are capital management measures. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release.
(2) “Free adjusted funds flow” and “capital expenditures” are non-GAAP financial measures that do not have standardized meanings under IFRS Accounting Standards and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release.
(3) “Adjusted funds flow per share” is a supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release.
Operational Excellence
During the third quarter of 2024, NuVista:
Produced an average of 83,475 Boe/d, within the third quarter guidance range of 83,000 – 86,000 Boe/d, and consistent with the second quarter production despite unplanned downtime at third-party facilities, which negatively impacted the quarter by approximately 5,000 Boe/d. All impacted production has since been brought back online, with daily production levels in late October reaching record levels above 90,000 Boe/d. It is expected that production will stabilize around this new level throughout much of the fourth quarter;Production for the third quarter comprised 31% condensate, 9% NGLs and 60% natural gas, a favorable outcome despite the fact that the production outage occurred in our richest condensate area. This was mainly due to outperformance of the most recent pad brought online at Pipestone;Realized strong production milestones for both pads brought online during the second quarter in the Pipestone area. A 4-well pad at Pipestone South has reached its IP90 at average rates per well of 1,300 Boe/d including 40% condensate, in line with historic averages for the area despite flowing at restricted rates since coming on production due to infrastructure capacity. In addition, the most southerly pad drilled at Pipestone North to-date has reached its IP60 milestone, producing 1,650 Boe/d including 50% condensate over the period. This pad included co-development of the Lower Montney and is important as it illustrates the continued repeatability in condensate yields as we progress development to the south. Completion operations in Pipestone will resume in the new year where we will begin on the 14-well pad that is scheduled to come on production at the end of the first quarter;Commenced the production ramp-up of two new pads in the Wapiti area, as planned during the third quarter, following the completion of our infrastructure expansion projects in the first half of the year. With firm transportation capacity in place, area production has reached record levels. Both the 6-well pad in Elmworth and a 4-well pad in Gold Creek have reached IP90 milestones and with facilities very recently expanded, they have now been able to produce consistently. The pad on the southern end of Elmworth co-developed the entire stack including one well in the Lower Montney which averaged 1,675 Boe/d including 15% condensate over the period and reflects over 25% more production than the other 5 wells on the pad which averaged 1,300 Boe/d per well including 26% condensate. The 4-well pad on the western side of Gold Creek also has reached IP90 averaging 1,500 Boe/d per well including 35% condensate over the period. This pad was also co-developed in the Lower and Middle Montney and exhibited exceptional consistency in deliverability across the zones which reinforces our view on inventory expansion in Gold Creek area; andBrought on production a 6-well pad between Gold Creek and Elmworth. Notably, this pad was co-developed across the entire stack of 4 zones, and included one Lower Montney pilot. The pad has reached its IP30 milestone producing on average 1,725 Boe/d per well including 40% condensate. Importantly, the Lower Montney well exhibited robust productivity compared to the other benches, producing 1,850 Boe/d including 38% condensate.
Balance Sheet Strength and Return of Capital to Shareholders
At the end of the third quarter, our net debt was $261.9 million, resulting in a net debt to annualized third quarter adjusted funds flow ratio of 0.5x, which supports our strong financial position. The net debt level is also well below the $350 million limit set by management, to ensure that our net debt to adjusted funds flow ratio remains comfortably below 1.0x in a stress test price environment of US$45/Bbl WTI oil and US$2.00/MMBtu NYMEX natural gas.
We remain focused on our disciplined value-adding growth strategy, balanced with providing significant shareholder returns. We continue to believe the best way to return capital to shareholders is through the repurchase of shares, although we will continue to consider other options in tandem with our longer term, high return growth plans. This evaluation will consider commodity prices, the economic and tax environment, and will include all options including share repurchases and dividend payments.
Presently, our Board has set a target of returning approximately 75% of free adjusted funds flow to shareholders through the repurchase of the NuVista’s common shares pursuant to our NCIB programs.
2024 Guidance Reaffirmed
We are extremely well-positioned with top-tier assets and highly favorable economics. Our disciplined execution has enabled us to achieve growth in production and adjusted funds flow, while also generating positive free adjusted funds flow. This has allowed us to continue to return capital to our shareholders through the repurchase of shares. Our high condensate weighting, for which pricing has remained supportive, continues to drive superior economics despite the weakness in natural gas prices experienced for much of 2024. We continue to execute according to our plans, with well and facility outperformance in several areas. As such, we reaffirm our 2024 capital expenditure guidance target of approximately $500 million, allowing us to maintain the efficiencies of a steady 2-drill-rig execution.
Recent average weekly production has reached a record level above 90,000 Boe/d and our guidance for the fourth quarter of 2024 is 89,000 – 91,000 Boe/d. This includes the minor impact associated with our decision to temporarily shut in the very small amount of our production which was exposed to AECO when those prices reached historically low levels at the start of the fourth quarter. We are pleased that despite the unplanned impacts of third-party downtime in the third quarter, we are able to reaffirm our previously announced full-year 2024 guidance range of 83,500 – 86,000 Boe/d.
2025 Budget Further Enhances Priority of Return of Capital to Shareholders
With well outperformance continuing to drive strong capital efficiencies, and with commodity prices retreating from the highs of 2022, we have taken this as a market signal to moderate capital spending and production growth in order to increase the priority of at least triple-digit return of cash to shareholders via share buybacks. We are fortunate that our business has the flexibility and superior asset quality to afford this. We have set our 2025 capital expenditure guidance at approximately $450 million to grow production volumes by 7% to a 2025 annual average of approximately 90,000 Boe/d. This includes a planned six-week turnaround for maintenance and expansion of major third party facilities in Wapiti which will impact the second and third quarters. Production volumes are expected to approach 100,000 Boe/d in the second half of the year. Our budget is based on commodity price assumptions of $65/Bbl WTI oil and $3/MMBtu Nymex natural gas. In this base scenario we would expect to generate approximately $175 million of free adjusted funds flow, of which we will target at least 75% for return to shareholders. This capital budget is approximately $125 million lower than our previous outlook with only a modest tempering of our production growth from 10% to 7%. Superior ongoing execution and new well performance are the main drivers that provide us the flexibility to exercise this discipline and reduce capital substantially with only a modest growth impact.
Substantially all of our production growth in 2025 will come from the Pipestone North area, beginning with the startup of the CSV Midstream Albright gas plant which is anticipated to be commissioned during the first quarter. 14 wells will be completed in Pipestone to ramp into this additional capacity of 8,000 to 10,000 Boe/d by the second quarter. Looking further ahead, Gold Creek area production growth will be a high focus for 2026 and 2027.
We will monitor the economic environment, and if commodity prices are averaging higher than our base assumptions, we have the ability and intention to increase returns to shareholders and 2025 capital expenditures for future growth concurrently to maximize long term value per share. If in an environment where commodity prices soften, we have the flexibility to further moderate production growth and reduce 2025 capital expenditures to act counter-cyclically and ensure our return of capital to shareholders remains intact. Underlying our commitment to shareholder returns is a pristine balance sheet. We expect to enter 2025 with approximately $250 million of net debt.
We intend to continue our track record of carefully directing free adjusted funds flow towards a prudent balance of capital return to shareholders and debt reduction, while investing in high return growth projects. NuVista’s top quality asset base, deep inventory, and management’s relentless focus on value maximization supports our medium-term plans for value-adding growth to the plateau level of 125,000 Boe/d. We will continue to closely monitor and adjust to the environment in order to maximize the value of our asset base and ensure the long-term sustainability of our business. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our Board of Directors and our shareholders for their continued guidance and support.
Please note that our corporate presentation will be available at www.nuvistaenergy.com on November 8, 2024. NuVista’s management’s discussion and analysis, condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and notes thereto, will be filed on SEDAR+ (www.sedarplus.ca) on November 8, 2024 and can also be obtained at www.nuvistaenergy.com.
FINANCIAL AND OPERATING HIGHLIGHTS Three months ended September 30Nine months ended September 30($ thousands, except otherwise stated) 2024 2023 % Change 2024 2023 % ChangeFINANCIAL Petroleum and natural gas revenues 301,406 360,373 (16) 933,780 1,032,600 (10)Cash provided by operating activities 150,249 160,194 (6) 464,422 509,581 (9)Adjusted funds flow(3) 139,478 202,010 (31) 415,137 554,956 (25)Per share, basic(6) 0.68 0.94 (28) 2.01 2.55 (21)Per share, diluted(6) 0.67 0.91 (26) 1.98 2.47 (20)Net earnings 59,823 110,323 (46) 206,566 278,165 (26)Per share, basic 0.29 0.51 (43) 1.00 1.28 (22)Per share, diluted 0.29 0.50 (42) 0.99 1.24 (20)Total assets 3,339,971 3,009,291 11 Net capital expenditures(1) 118,433 110,036 8 427,786 405,036 6 Net debt(3) 261,898 150,158 74 OPERATING Daily Production Natural gas (MMcf/d) 297.2 283.1 5 296.6 264.4 12 Condensate (Bbls/d) 26,204 26,704 (2) 25,398 23,873 6 NGLs (Bbls/d) 7,735 6,491 19 7,395 6,295 17 Total (Boe/d) 83,475 80,382 4 82,228 74,240 11 Condensate & NGLs weighting 41% 41% 40% 41% Condensate weighting 31% 33% 31% 32% Average realized selling prices(5) Natural gas ($/Mcf) 1.92 3.36 (43) 2.41 4.49 (46)Condensate ($/Bbl) 95.51 103.92 (8) 98.20 100.33 (2)NGLs ($/Bbl)(4) 26.09 29.19 (11) 26.90 31.54 (15)Netbacks ($/Boe) Petroleum and natural gas revenues 39.25 48.73 (19) 41.45 50.95 (19)Realized gain (loss) on financial derivatives 1.53 1.30 18 0.55 0.39 41 Other income 0.34 — — 0.14 — — Royalties (4.64) (3.64) 27 (4.71) (4.92) (4)Transportation expense (5.13) (4.91) 4 (4.85) (4.86) — Net operating expense(2) (11.43) (11.49) (1) (11.47) (11.69) (2)Operating netback(2) 19.92 29.99 (34) 21.11 29.87 (29)Corporate netback(2) 18.17 27.30 (33) 18.44 27.37 (33)SHARE TRADING STATISTICS High ($/share) 14.86 13.55 10 14.86 13.55 10 Low ($/share) 10.70 10.34 3 9.59 9.93 (3)Close ($/share) 11.12 13.00 (14) 11.12 13.00 (14)Common shares outstanding (thousands of shares) 205,381 213,209 (4)
(1) Non-GAAP financial measure that does not have any standardized meaning under IFRS Accounting Standards and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and other financial measures”.
(2) Non-GAAP ratio that does not have any standardized meaning under IFRS Accounting Standards and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and other financial measures”.
(3) Capital management measure. Reference should be made to the section entitled “Non-GAAP and other financial measures”.
(4) Natural gas liquids (“NGLs”) include butane, propane and ethane revenue and sales volumes, and sulphur revenue.
(5) Product prices exclude realized gains/losses on financial derivatives.
(6) Supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and other financial measures”.
Advisories Regarding Oil and Gas Information
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. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Any references in this press release to initial production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter and are not indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for NuVista.
This press release contains certain oil and gas metrics, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies and should not be used to make comparisons. Such metrics have been included herein to provide readers with additional measures to evaluate NuVista’s performance; however, such measures are not reliable indicators of NuVista’s future performance and future performance may not compare to NuVista’s performance in previous periods and therefore such metrics should not be unduly relied upon. Management uses these oil and gas metrics for its own performance measurements and to provide security holders with measures to compare the NuVista’s operations over time. Readers are cautioned that the information provided by these metrics, or that can be derived from the metrics presented in this presentation, should not be relied upon for investment or other purposes.
NuVista has presented certain well economics based on type curves for the Pipestone development block. The type curves are based on historical production in respect of NuVista’s Pipestone assets as well as drilling results from analogous development located in close proximity to such area. Such type curves and well economics are useful in understanding management’s assumptions of well performance in making investment decisions in relation to development drilling in the Montney area and for determining the success of the performance of development wells; however, such type curves and well economics are not necessarily determinative of the production rates and performance of existing and future wells and such type curves do not reflect the type curves used by our independent qualified reserves evaluator in estimating our reserves volumes.
Basis of presentation
Unless otherwise noted, the financial data presented in this news release has been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) also known as International Financial Reporting Standards (“IFRS”).
Natural gas liquids are defined by National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities” to include ethane, butane, propane, pentanes plus and condensate. Unless explicitly stated in this press release, references to “NGL” refers only to ethane, butane and propane and references to “condensate” refers to only to condensate and pentanes plus. NuVista has disclosed condensate and pentanes plus values separately from ethane, butane and propane values as NuVista believes it provides a more accurate description of NuVista’s operations and results therefrom.
Production split for Boe/d amounts referenced in the news release are as follows:
ReferenceTotal Boe/dNatural Gas
%Condensate
%NGLs
% Q3 2024 production – actual83,47560%31%9%Q3 2024 production guidance83,000 – 86,00061%30%9%Q4 2024 production guidance89,000 – 91,00061%30%9%2024 annual production guidance83,500 – 86,00061%30%9%2025 annual production guidance~90,00061%30%9%
Advisory regarding forward-looking information and statements
This press release contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable securities laws. The use of any of the words “will”, “expects”, “believe”, “plans”, “potential” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements, including but not limited to:
our expectations that production will stabilize around 90,000 Boe/d for much of the fourth quarter;our assumption that completion operations in Pipestone will resume in 2025 beginning with a 14-well pad scheduled to come on production at the end of the first quarter;the expectation that recent lower Montney results at Pipestone will be an important indicator for future development plans;our expectations regarding the consistency in deliverability of inventory in the Gold Creek area;that our soft ceiling net debt will allow our current production levels to be sustainable and maintain an adjusted funds flow ratio below 1.0x in a stress test price environment of US$45/Bbl WTI oil and US$2.00/MMBtu NYMEX natural gas;NuVista’s ability to continue directing free adjusted funds flow towards a prudent balance of return of capital to shareholders and debt reduction, while investing in high return growth projects;the anticipated allocation of free adjusted funds flow;that 75% of NuVista’s free adjusted funds flow will be put towards the repurchase of the Company’s common shares pursuant to the 2024 NCIB;our 2024 full year production and capital expenditures guidance ranges;our plan to continue to maintain an efficient drilling program by employing 2-drill-rig execution;guidance with respect to our updated 2024 full year production mix;guidance with respect to fourth quarter 2024 production and production mix;future commodity prices;our expectation with respect to our 2025 capital expenditures, free adjusted funds flow and average annual production guidance;expectations that the Company will exit 2024 with net debt significantly below $300 million;our expectation that growth in 2025 will be largely supported by Pipestone North;the expected timing of start-up of a third-party gas plant in the Pipestone area and the anticipated benefits thereof;that production volumes in the second half of 2025 will approach approximately 100,000 Boe/d;that production during the second and third quarters of 2025 will be impacted due to planned turnaround activity at third-party facilities which is expected to be at least six weeks in duration;the exception that more detailed quarterly production guidance will be released throughout 2025, once more detailed information in known;our expectation that the Gold Creek area will be an important area of development focus in 2026 and 2027;our expectation that our value-adding growth plateau level will be approximately 125,000 Boe/d;our future focus, strategy, plans, opportunities and operations; andother such similar statements.
The future acquisition of our common shares pursuant to a share buyback (including through our normal course issuer bid), if any, and the level thereof is uncertain. Any decision to acquire common shares pursuant to a share buyback will be subject to the discretion of the Board of Directors and may depend on a variety of factors, including, without limitation, the Company’s business performance, financial condition, financial requirements, growth plans, expected capital requirements and other conditions existing at such future time including, without limitation, contractual restrictions and satisfaction of the solvency tests imposed on the Company under applicable corporate law. There can be no assurance of the number of common shares that the Company will acquire pursuant to a share buyback, if any, in the future.
By their nature, forward-looking statements are based upon certain assumptions and are subject to numerous risks and uncertainties, some of which are beyond NuVista’s control, including the impact of general economic conditions, industry conditions, current and future commodity prices and inflation rates; the impact of ongoing global events, including Middle East and European tensions, with respect to commodity prices, currency and interest rates, anticipated production rates, borrowing, operating and other costs and adjusted funds flow; the timing, allocation and amount of capital expenditures and the results therefrom; anticipated reserves and the imprecision of reserve estimates; the performance of existing wells; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; access to infrastructure and markets; competition from other industry participants; availability of qualified personnel or services and drilling and related equipment; stock market volatility; effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties; the ability to access sufficient capital from internal sources and bank and equity markets; that we will be able to execute our 2024 drilling plans as expected; our ability to carry out our 2024 production and capital guidance as expected and including, without limitation, those risks considered under “Risk Factors” in our Annual Information Form.
Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. NuVista’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the forward-looking statements in this press release in order to provide readers with a more complete perspective on NuVista’s future operations and such information may not be appropriate for other purposes. NuVista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
This press release also contains financial outlook and future oriented financial information (together, “FOFI”) relating to NuVista including, without limitation, capital expenditures in 2024, capital expenditures in 2025, net debt, free adjusted funds flow and production which are based on, among other things, the various assumptions disclosed in this press release including under “Advisory regarding forward-looking information and statements” and including assumptions regarding benchmark pricing as it relates to free adjusted funds flow and the 2024 and 2025 capital allocation framework. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on FOFI. NuVista’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the FOFI in order to provide readers with a more complete perspective on NuVista’s future operations and such information may not be appropriate for other purposes.
These forward-looking statements and FOFI are made as of the date of this press release and NuVista disclaims any intent or obligation to update any forward-looking statements and FOFI, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities law.
Non-GAAP and other financial measures
This press release uses various specified financial measures (as such terms are defined in National Instrument 52-112 – Non-GAAP Disclosure and Other Financial Measures Disclosure (“NI 52-112“)) including “non-GAAP financial measures”, “non-GAAP ratios”, “capital management measures” and “supplementary financial measures” (as such terms are defined in NI 52-112), which are described in further detail below. Management believes that the presentation of these non-GAAP measures provides useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis.
(1) Non-GAAP financial measures
NI 52-112 defines a non-GAAP financial measure as a financial measure that: (i) depicts the historical or expected future financial performance, financial position or cash flow of an entity; (ii) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the entity; (iii) is not disclosed in the financial statements of the entity; and (iv) is not a ratio, fraction, percentage or similar representation.
These non-GAAP financial measures are not standardized financial measures under IFRS Accounting Standards and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these measures should not be construed as alternatives to or more meaningful than the most directly comparable GAAP measures as indicators of NuVista’s performance. Set forth below are descriptions of the non-GAAP financial measures used in this press release.
Free adjusted funds flow
Free adjusted funds flow is adjusted funds flow less net capital expenditures, power generation expenditures, and asset retirement expenditures. Each of the components of free adjusted funds flow are non-GAAP financial measures. Management uses free adjusted funds flow as a measure of the efficiency and liquidity of its business, measuring its funds available for additional capital allocation to manage debt levels and return capital to shareholders through its NCIB program and/or dividend payments. By removing the impact of current period net capital and asset retirement expenditures, management believes this measure provides an indication of the funds NuVista has available for future capital allocation decisions.
The following table sets out our free adjusted funds flow compared to the most directly comparable GAAP measure of cash provided by operating activities less cash used in investing activities for the applicable periods:
Three months ended September 30 Nine months ended September 30 ($ thousands)2024 2023 2024 2023 Cash provided by operating activities150,249 160,194 464,422 509,581 Cash used in investing activities(124,352)(120,713)(428,489)(398,940)Excess (deficit) cash provided by operating activities over cash used in investing activities25,897 39,481 35,933 110,641 Adjusted funds flow139,478 202,010 415,137 554,956 Net capital expenditures(118,433)(110,036)(427,786)(405,036)Power generation expenditures— — (1,680)— Asset retirement expenditures(1,636)(773)(8,478)(9,987)Free adjusted funds flow19,409 91,201 (22,807)139,933 Capital expenditures
Capital expenditures are equal to cash used in investing activities, excluding changes in non-cash working capital, other asset expenditures, power generation expenditures, proceeds on property dispositions and costs of acquisitions. NuVista considers capital expenditures to represent its organic capital program and a useful measure of cash flow used for capital reinvestment.
The following table provides a reconciliation between the non-GAAP measure of capital expenditures to the most directly comparable GAAP measure of cash used in investing activities for the applicable periods:
Three months ended September 30Nine months ended September 30($ thousands) 2024 2023 2024 2023 Cash used in investing activities (124,352) (120,713) (428,489) (398,940)Changes in non-cash working capital 5,919 10,677 (977) (15,596)Other asset expenditures — — — 9,500 Power generation expenditures — — 1,680 — Proceeds on property disposition — — — (26,000)Capital expenditures (118,433) (110,036) (427,786) (431,036) Net capital expenditures
Net capital expenditures are equal to cash used in investing activities, excluding changes in non-cash working capital, other asset expenditures, and power generation expenditures. The Company includes funds used for property acquisitions or proceeds from property dispositions within net capital expenditures as these transactions are part of its development plans. NuVista considers net capital expenditures to represent its organic capital program inclusive of capital spending for acquisition and disposition proposes and a useful measure of cash flow used for capital reinvestment.
The following table provides a reconciliation between the non-GAAP measure of net capital expenditures to the most directly comparable GAAP measure of cash used in investing activities for the applicable periods:
Three months ended September 30 Nine months ended September 30 ($ thousands) 2024 2023 2024 2023 Cash used in investing activities (124,352) (120,713) (428,489) (398,940)Changes in non-cash working capital 5,919 10,677 (977) (15,596)Other asset expenditures — — — 9,500 Power generation expenditures — — 1,680 — Net capital expenditures (118,433) (110,036) (427,786) (405,036) Net operating expense
NuVista considers that any incremental gross costs incurred to process third party volumes at its facilities are offset by the applicable fees charged to such third parties. However, under IFRS Accounting Standards, NuVista is required to reflect operating costs and processing fee income separately on its statements of earnings. Management believes that net operating expense, calculated as gross operating expense less processing income and other recoveries, is a meaningful measure for investors to understand the net impact of the NuVista’s operating activities.
The following table sets out net operating expense compared to the most directly comparable GAAP measure of operating expenses for the applicable periods:
Three months ended September 30 Nine months ended September 30 ($ thousands) 2024 2023 2024 2023 Operating expense 90,091 85,952 265,899 238,989 Other income(1) (2,293) (1,003) (7,496) (2,020)Net operating expense 87,798 84,949 258,403 236,969
(1) Processing income and other recoveries, included within Other Income as presented in the table below:
Three months ended September 30 Nine months ended September 30 ($ thousands) 2024 2023 2024 2023 Other income 2,642 — 3,178 — Processing income and other recoveries 2,293 1,003 7,496 2,020 Other Income 4,935 1,003 10,674 2,020
Non-GAAP ratios
NI 52-112 defines a non-GAAP ratio as a financial measure that: (i) is in the form of a ratio, fraction, percentage or similar representation; (ii) has a non-GAAP financial measure as one or more of its components; and (iii) is not disclosed in the financial statements of the entity. Set forth below is a description of the non-GAAP ratios used in this press release.
These non-GAAP ratios are not standardized financial measures under IFRS Accounting Standards and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these ratios should not be construed as alternatives to or more meaningful than the most directly comparable GAAP measures as indicators of NuVista’s performance.
Per Boe disclosures for petroleum and natural gas revenues, realized gains/losses on financial derivatives, royalties, transportation expense, G&A expense, financing costs, and DD&A expense are non-GAAP ratios that are calculated by dividing each of these respective GAAP measures by NuVista’s total production volumes for the period.
Non-GAAP ratios presented on a “per Boe” basis may also be considered to be supplementary financial measures (as such term is defined in NI 52-112).
Operating netback and corporate netback (“netbacks”), per Boe
NuVista calculated netbacks per Boe by dividing the netbacks by total production volumes sold in the period. Each of operating netback and corporate netback are non-GAAP financial measures. Operating netback is calculated as petroleum and natural gas revenues including realized financial derivative gains/losses, less royalties, transportation expense and net operating expense. Corporate netback is operating netback less general and administrative expense, cash share-based compensation expense, financing costs excluding accretion expense, and current income tax expense (recovery).
Management believes both operating and corporate netbacks are key industry benchmarks and measures of operating performance for NuVista that assists management and investors in assessing NuVista’s profitability, and are commonly used by other petroleum and natural gas producers. The measurement on a Boe basis assists management and investors with evaluating NuVista’s operating performance on a comparable basis.
Net operating expense, per Boe
NuVista has calculated net operating expense per Boe by dividing net operating expense by NuVista’s production volumes for the period.
Management believes that net operating expense, calculated as gross operating expense less processing income and other recoveries, which are included in other income on the statement of income and comprehensive income, is a meaningful measure for investors to understand the net impact of the Company’s operating activities. The measurement on a Boe basis assists management and investors with evaluating NuVista’s operating performance on a comparable basis.
(2) Capital management measures
NI 52-112 defines a capital management measure as a financial measure that: (i) is intended to enable an individual to evaluate an entity’s objectives, policies and processes for managing the entity’s capital; (ii) is not a component of a line item disclosed in the primary financial statements of the entity; (iii) is disclosed in the notes to the financial statements of the entity; and (iv) is not disclosed in the primary financial statements of the entity.
NuVista has defined net debt, adjusted funds flow, and net debt to annualized third quarter adjusted funds flow ratio as capital management measures used by the Company in this press release.
Adjusted funds flow
NuVista considers adjusted funds flow to be a key measure that provides a more complete understanding of the Company’s ability to generate cash flow necessary to finance capital expenditures, expenditures on asset retirement obligations, and meet its financial obligations. NuVista has calculated adjusted funds flow based on cash flow provided by operating activities, excluding changes in non-cash working capital and asset retirement expenditures, as management believes the timing of collection, payment, and occurrence is variable and by excluding them from the calculation, management is able to provide a more meaningful performance measure of NuVista’s operations on a continuing basis. More specifically, expenditures on asset retirement obligations may vary from period to period depending on the Company’s capital programs and the maturity of its operating areas, while environmental remediation recovery relates to an incident that management doesn’t expect to occur on a regular basis. The settlement of asset retirement obligations is managed through NuVista’s capital budgeting process which considers its available adjusted funds flow.
A reconciliation of adjusted funds flow is presented in the following table:
Three months ended September 30
Nine months ended September 30
2024 2023 2024 2023 Cash provided by operating activities$150,249 $160,194 $464,422 $509,581 Asset retirement expenditures 1,636 773 8,478 9,987 Change in non-cash working capital (12,407) 41,043 (57,763) 35,388 Adjusted funds flow$139,478 $202,010 $415,137 $554,956 Net debt and Net debt to annualized current quarter adjusted funds flow
Net debt is used by management to provide a more complete understanding of NuVista’s capital structure and provides a key measure to assess the Company’s liquidity. NuVista has calculated net debt based on accounts receivable and prepaid expenses, other receivable, accounts payable and accrued liabilities, long-term debt (credit facility) and senior unsecured notes and other liabilities. NuVista calculated annualized current quarter adjusted funds flow ratio by dividing net debt by the annualized adjusted funds flow for the current quarter.
The following is a summary of total market capitalization, net debt, annualized current quarter adjusted funds flow, and net debt to annualized current quarter adjusted funds flow:
September 30, 2024
December 31, 2023 Basic common shares outstanding (thousands of shares) 205,381 207,584 Share price(1)$11.12 $11.04 Total market capitalization$2,283,837 $2,291,727 Accounts receivable and prepaid expenses (133,904) (163,987)Inventory (12,080) (20,705)Accounts payable and accrued liabilities 176,123 157,711 Current portion of other liabilities 14,805 14,082 Long-term debt (credit facility) 37,529 16,897 Senior unsecured notes 163,080 162,195 Other liabilities 16,345 17,358 Net debt$261,898 $183,551 Annualized current quarter adjusted funds flow$557,912 $807,948 Net debt to annualized current quarter adjusted funds flow 0.5 0.2
(3) Supplementary financial measures
This press release may contain certain supplementary financial measures. NI 52-112 defines a supplementary financial measure as a financial measure that: (i) is intended to be disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of an entity; (ii) is not disclosed in the financial statements of the entity; (iii) is not a non-GAAP financial measure; and (iv) is not a non-GAAP ratio.
NuVista calculates “adjusted funds flow per share” by dividing adjusted funds flow for a period by the number of weighted average common shares of NuVista for the specified period.
FOR FURTHER INFORMATION CONTACT: Jonathan A. WrightMike J. LawfordIvan J. CondicCEOPresident and COOVP, Finance and CFO(403) 538-8501(403) 538-1936(403) 538-1945