Kiwetinohk Energy Corp. is pleased to announce its interim unaudited financial and operating results for the three and nine-month periods ended September 30, 2021.
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.
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.
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.