Strathcona Resources Ltd. (“Strathcona” or the “Company”) reported its third quarter 2024 financial and operational results and announced 2025 Guidance. The Board of Directors also declared a quarterly dividend of $0.25 per share to be paid on December 31, 2024 to shareholders of record on December 16, 2024.
Highlights
Production of 178,235 boe/d (72% oil and condensate, 79% liquids)(1)
Operating Earnings of $265.4 million ($1.24 / share)(2)
Free Cash Flow of $200.6 million ($0.94 / share)(2)
Quarter Review and Near-Term Priorities
Strathcona’s third quarter production decreased modestly quarter-over-quarter to 178 Mboe / d, driven by regularly scheduled turnarounds at Strathcona’s Lloydminster thermal assets, and production curtailments in the Montney in response to low gas prices and third-party gas plant turnarounds.
In Cold Lake, the focus of Strathcona’s capital program remains the drilling of the 4-well pair G4 pad in Orion, targeting the Upper Grand Rapids formation, and 8-lower drainage wells on the D-East pad in Tucker. On a combined basis, the pads are expected to add more than 5 Mbbls / d of production at a capital cost of approximately $60 million, while reducing the Cold Lake division’s steam-oil-ratio by approximately 5%. Also in the third quarter, Strathcona signed a definitive agreement to purchase the Cold Lake Transmission System (“CLTS”) from Campus Energy Partners (“Campus”) for an aggregate purchase price of $40 million and closed the transaction early in the fourth quarter. The CLTS provides the majority of fuel gas used to create steam at Lindbergh and Orion, while also transporting natural gas to several third-party customers. Strathcona’s ownership is expected to reduce Lindbergh and Orion operating costs by approximately $74 million on a proved plus probable PV-10 basis ($65 million on a proved PV-10 basis) by eliminating fees previously paid to Campus, based on Strathcona’s YE 2023 reserves.
In Lloydminster, production at Strathcona’s thermal assets was impacted by regularly scheduled quarterly turnarounds in Meota. Capital activity was concentrated on Strathcona’s Druid property, where the Company tied in 30 new wells including its first multi-lateral well targeting the Mannville Stack. Early results are encouraging, with the multilateral achieving current production of approximately 300 bbls / d (approximately 3x single lateral analogues). Strathcona plans to apply learnings from the initial Druid multilateral across its asset base.
In the Montney, third quarter production was negatively impacted by an unplanned turnaround at a third-party gas processing facility serving Grande Prairie, which began in September and continued longer than expected through October. In addition, Strathcona voluntarily shut-in its Groundbirch field production due to weak natural gas prices beginning in September and continuing through October. Production has since been restored as natural gas prices have improved.
Outlook and Investor Day
As a result of the reduction in Strathcona’s natural gas production due to the above mentioned curtailments, fourth quarter 2024 production volumes are expected to average 185 to 190 Mboe / d, with full year 2024 production averaging approximately 183 Mboe / d. Full year 2024 oil and liquids production guidance is unchanged, as is Strathcona’s $1.30 billion 2024 capital budget.
Looking forward, Strathcona’s board of directors has approved a 2025 capital budget of $1.35 billion, with production guidance of 185 to 195 Mboe / d, composed of 72% oil and 78% liquids. The 2025 budget reflects balanced capital spending across Cold Lake, Lloydminster and the Montney, delivering approximately 4% year-over-year production growth at the mid-point of guidance. The 2025 budget is expected to generate approximately $700 million of free cash flow at US$70 WTI, assuming a US$13 WCS-WTI differential, C$3 / GJ AECO and 1.38x USD-CAD, 100% of which is expected to be allocated towards shareholder returns and M&A opportunities.
Further details regarding Strathcona’s 2025 capital budget, long-range plan and returns to shareholders will be discussed in depth at Strathcona’s Investor Day on November 14, 2024, for which supporting materials have been posted on Strathcona’s website.
Quarterly Dividend
Strathcona’s board of directors has declared a quarterly dividend of $0.25 per share to be paid on December 31, 2024 to shareholders of record on December 16, 2024. Payments to shareholders who are not residents of Canada will be net of any Canadian withholding taxes that may be applicable. Dividends paid by Strathcona are considered “eligible dividends” for Canadian tax purposes.
Investors Day Call Details
Date: Thursday, November 14, 2024
Time: 11:00AM ET (9:00AM MT)
Webcast Link: https://my.400.lumiconnect.com/r/participant/live-meeting/400-345-948-539
For those unable to participate in the conference call at the scheduled time, the materials presented have been posted on Strathcona’s website.
