Highwood Asset Management Ltd. (“Highwood” or the “Company“) is pleased to announce financial and operating results for the three and nine months ended September 30, 2024. The Company also announces that its unaudited financial statements and associated Management’s Discussion and Analysis (“MD&A“) for the period ended September 30, 2024, are available on Highwood’s website at www.highwoodmgmt.com and on SEDAR+ at www.sedarplus.ca.
Highlights
Achieved average corporate production of 5,673 boe/d in Q3 2024, representing an increase of approximately 134% from the comparative period last year (average of 2,425 boe/d) as a result of successful drilling programs in both the first and third quarter of 2024. Corporate production is currently exceeding 6,300 boe/d.
For the third quarter of 2024, Highwood delivered Adjusted EBITDA of $20.3 million ($1.34 per share) and adjusted funds flow of $17.93 million ($1.18 per share), representing increases of $12.7 million (168%) and $11.9 million (199%), respectively, over the comparative three month period in 2023. Highwood is pleased to report Run Rate Net Debt / annualized Adjusted EBITDA of approximately 1.0x.(1)
As a result of a successful third quarter drilling program that delivered significant PDP reserves growth, the Company’s borrowing base has been increased from $110 million to $120 million.
The Company incurred capital expenditures of approximately $20.7 million in the third quarter of 2024, with the majority of costs related to five gross (4.98 net) wells drilled — three wells in Brazeau (one booked and two unbooked) and two wells in Wilson Creek (one booked and one unbooked).
In the first quarter of 2025, Highwood plans to begin development on its potential new core area targeting the Mannville stack, by drilling two unbooked multi-lateral open hole (“MLOH“) wells. The Company acquired these Eastern Alberta lands primarily through Crown land sales in 2024.
On October 1, 2024, Highwood made its first scheduled payment of $3.5 million plus accrued interest with respect to the promissory note that was issued in connection with the acquisition of Boulder Energy Ltd.
Highwood reiterates its guidance of a 2024 capital plan of $60–65 million, 2024 average & exit production guidance of 5,500–5,700 boe/d (+8% increase at midpoint) and 6,400–6,500 boe/d (+19% increase at midpoint), respectively, and depending on timing of capital in late December a target 2024 Net Debt / 2024 Exit EBITDA ratio of 0.8-0.9x. Over the 12-month period ending December 31, 2024, Highwood expects to grow production per share by over +50% (from prior forecasted growth of 25%).(1)(2)
Operational Update
With continued strong commodity prices in the nine months ended September 30, 2024, the Company focused primarily on the execution of its capital program. During this period, the Company executed a successful $46 million development capital program which included ten additional wells, of which five were brought online in the first quarter and the remainder in the third quarter and early fourth quarter of 2024. These ten wells consisted of five fracture stimulated wells at Wilson Creek (four booked and one unbooked), two fracture stimulated wells at Brazeau (one booked and one unbooked) and three MLOH wells, two wells in Brazeau (one booked and one unbooked) and one booked well in Viking Kinsella.
In the fourth quarter of 2024, Highwood anticipates drilling one unbooked gross (0.5 net) well and targeting four recompletions.
Outlook
The primary focus over the near-term is the completion of the Company’s 2024 capital program and growth strategy while reducing the Company’s leverage. At September 30, 2024, Highwood had over $300 million in tax pools, including more than $100 million in non-capital losses. Highwood does not anticipate being cash taxable for approximately three years.
Highwood is continuing to evaluate its undeveloped lands for drilling opportunities and is planning to continue its active capital program while commodity prices remain strong.
Corporately, the Company is dedicated to growing Free Cash Flow, on a per share basis, while using prudent leverage to provide maximum flexibility for organic growth and/or other strategic M&A opportunities, with a longer-term goal to provide significant return of capital to shareholders. The Company will also continue to assess land offerings in strategic areas where the Company sees significant growth opportunities.
2025 Guidance
Highwood is pleased to announce 2025 guidance which is focused on debt reduction of approximately 15–20% to enable financial flexibility for acquisitions, shareholder returns and acceleration of capital. The 2025 guidance also reflects year-over-year production growth of approximately 12.5% at midpoint and a free cash flow yield of approximately 15–20% based on Highwood’s current share price. Highwood’s top priority remains share price appreciation and the Company appreciates all of the support from its shareholders.
