Advantage Energy Ltd. is pleased to announce its 2023 budget and three-year strategic plan.
Advantage's 2023 capital program is focused on prudent cash flow per share growth via high rate-of-return development drilling into existing infrastructure. Top-line production is planned to grow by 11% year-over-year, and all free cash flow ("FCF")(a) will remain allocated to the Corporation's share buyback program.
2023 Budget Highlights
- Adjusted funds flow ("AFF") per share(b) is expected to grow by 25% year-over-year, based on strip pricing dated November 14, 2022 and planned share buybacks.
- Corporate production is expected to average between 59,000 and 62,500 boe/d, an increase of approximately 11% year-over-year. Production estimates include provisions for a major 14-day plant turnaround at Glacier in May and likely NGTL restrictions during the summer.
- Liquids production is expected to grow by more than 20% year-over-year, driven by continued drilling at Wembley.
- Corporate production decline rate is expected to be approximately 24%.
- Cash used in investing activities is planned to be between $250 million and $280 million, representing a payout ratio(b) of under 50% prior to share buybacks. Capital estimates include provisions for inflation of 15-20% from a year earlier, though Advantage is actively seeking lower cost service providers and suppliers.
- Drilling for the year is planned to include approximately 25 net wells, with approximately 55% of the program focused at Glacier and the remaining targeting oil and liquids at Wembley and Valhalla.
- The previously announced Glacier Gas Plant expansion to 425 mmcf/d capacity is planned to be completed early in the second quarter of 2023.
Net debt(a) target remains at $200 million, although net debt(a) is currently under $80 million.
- Following the completion of our current substantial issuer bid ("SIB", see press release dated November 7, 2022) of up to $100 million on December 16, 2022, Advantage will resume its normal course issuer bid ("NCIB"). Advantage will plan to renew the NCIB in April 2023 and additional SIB's may be required to achieve our net debt(a) target.
- Advantage expects it will not be subject to cash taxes until calendar 2024 due to over $1 billion in high-quality tax pools.
Highlights of the Three-Year Strategic Plan
- Annual production is expected to grow by at least 10% in each of the next three years, exceeding 75,000 boe/d by 2025.
- Cash used in investing activities is planned to remain between $250 million and $300 million per year (including provisions for inflation).
- On average, Advantage plans to drill approximately 26 net wells per year to achieve growth targets, with current tier 1 inventory estimated at 531 wells plus over 1,000 additional economic locations.
- Gas and liquids processing capacity at the Glacier/Valhalla/Progress complex is expected to climb in increments to 500 mmcf/d by the end of 2025 at a cost of approximately $40 million per year for three years.
- Planned production growth will be managed in conjunction with transportation service growth and hedging, with a focus on non-AECO markets prior to the commissioning of LNG Canada.
Marketing Update
Advantage has hedged 16% of 2023 forecast natural gas production at an average of US$4.19/mmbtu. AECO market exposure continues to be the most volatile component of our revenue portfolio due to recurring issues related to NGTL expansion delays and unpredictable maintenance related operating practices. Total exposure to AECO is now less than 25% of our production over the 2023-2024 period and 9% during summer 2023.
Sustainability Update
Advantage is pleased to provide an update to its 2021 Sustainability Report, which is available on our website at www.advantageog.com. Advantage's Board of Directors continues to be actively engaged in the oversight of sustainability and ESG matters as well as risk management. The update includes key sustainability metrics for the year ended 2021, progress on prior established sustainability targets, and ongoing initiatives to prioritize ESG aspects in our operations and work towards our target of "Net Zero" Scope 1 and 2 emissions by 2025.
