CALGARY, AB,
Jan. 11,
2023 Paramount Resources Ltd. (ʺParamountʺ or the
ʺCompanyʺ) (TSX: POU) is pleased to announce the closing of the
disposition of its Kaybob Smoky and Kaybob South Duvernay
properties and a special dividend of $1.00 per class A common share (ʺCommon Shareʺ).
The Company is also pleased to provide preliminary estimates of its
fourth quarter production and annual 2022 capital expenditures and
updates to its 2023 guidance, preliminary 2024 guidance and
five-year outlook.
CLOSING OF DISPOSITION
Paramount has closed the previously announced disposition of its
Kaybob Smoky and Kaybob South Duvernay properties and certain other
minor interests in the Kaybob Region (the "Disposition") for cash
proceeds of approximately $370
million after adjustments. The Company has applied a portion
of this amount to repay all remaining drawings under its revolving
credit facility.
SPECIAL DIVIDEND
Paramount's Board of Directors has declared a special cash
dividend of $1.00 per Common Share
that will be payable on January 25,
2023 to shareholders of record on January 18, 2023. This dividend will be
designated as an "eligible dividend" for Canadian income tax
purposes.
FOURTH QUARTER PRODUCTION AND 2022
ANNUAL CAPITAL EXPENDITURES
Despite production challenges in December due to extremely cold
weather, the Company's fourth quarter 2022 sales volumes are
expected to have averaged approximately 97,500 Boe/d (45% liquids)
based on preliminary field estimates.(1) The Company
expects annual capital expenditures for 2022 to be around the high
end of previous guidance of between $600
million and $640 million,
reflecting both minor acceleration activities and the pre-ordering
of additional materials that will benefit 2023.
_________________________
|
(1)
|
The stated estimate of
sales volumes is preliminary and subject to change. See "Advisories
– Forward-Looking Information".
|
UPDATED GUIDANCE
Paramount is updating its 2023 guidance, preliminary 2024
guidance and five-year outlook as set out below to account for the
Disposition. In addition, the Company is increasing planned
abandonment and reclamation expenditures in 2023 by $10 million to accelerate activities at the
Hawkeye field, further reducing inactive and suspended wells.
2023
|
Prior
|
Revised
|
Annual average sales
volumes (Boe/d)
|
105,000 to
110,000
(46%
liquids)
|
100,000 to
105,000
(45%
liquids)
|
First half
average sales volumes (Boe/d)
|
101,000 to
106,000
(45%
liquids)
|
96,000 to
101,000
(45%
liquids)
|
Second
half average sales volumes (Boe/d)
|
109,000 to
114,000
(46%
liquids)
|
104,000 to
109,000
(46%
liquids)
|
Capital
expenditures
|
$720 to $760
million
|
$650 to $700
million
|
Abandonment and
reclamation expenditures
|
$45 million
|
$55 million
|
Free cash flow
(1)
|
$650 million
|
$630 million
|
The Company's 2023 capital program and regular monthly dividend
would remain fully funded down to an average WTI price of about
US$56/Bbl in 2023.(2)
Preliminary 2024
(3)
|
Prior
|
Revised
|
Annual average sales
volumes (Boe/d)
|
115,000 to
125,000
(48%
liquids)
|
110,000 to
120,000
(47%
liquids)
|
Capital
expenditures
|
$750 to $850
million
|
$700 to $800
million
|
Free cash flow
(4)
|
$650 million
|
$620 million
|
The Company's 2024 capital program and regular monthly dividend
would remain fully funded down to an average WTI price of about
US$55/Bbl in 2024.(5)
___________________________
|
(1)
|
Free cash flow is a
capital management measure used by Paramount. Refer to "Advisories
- Specified Financial Measures" for more information on this
measure. The revised free cash flow forecast is based on the
following assumptions for 2023: (i) the midpoint of stated capital
spending and production, (ii) $55 million in abandonment and
reclamation costs, (iii) $7 million in geological and geophysical
expenses, (iv) realized pricing of $63.00/Boe (US$80.00/Bbl WTI,
US$5.00/MMBtu NYMEX, $4.74/GJ AECO), (v) a $US/$CAD exchange rate
of $0.730, (vi) royalties of $10.30/Boe, (vii) operating costs of
$11.40/Boe and (vii) transportation and processing costs of
$3.65/Boe.
|
(2)
|
Assuming no changes to
the other stated free cash flow forecast assumptions for
2023.
|
(3)
|
All 2024 guidance is
based on preliminary planning and current market conditions and is
subject to change.
|
(4)
|
The revised free cash
flow estimate is based on the following assumptions for 2024: (i)
the midpoint of stated capital spending and production, (ii) $40
million in abandonment and reclamation costs, (iii) $7 million in
geological and geophysical expenses, (iv) realized pricing of
$58.45/Boe (US$75.00/Bbl WTI, US$4.50/MMBtu NYMEX, $4.27/GJ AECO),
(v) a $US/$CAD exchange rate of $0.735, (vi) royalties of
$9.85/Boe, (vii) operating costs of $10.45/Boe and (vii)
transportation and processing costs of $3.50/Boe.
|
(5)
|
Assuming no changes to
the other stated free cash flow estimate assumptions for
2024.
|
Five-Year Outlook
(1)
|
Prior
|
Revised
|
2027 annual average
sales volumes (Boe/d)
|
140,000 to
150,000
|
135,000 to
145,000
|
Annual capital
expenditures
|
$750 to $850
million
|
$700 to $800
million
|
Midpoint cumulative
free cash flow (2)
|
$4.2 billion
|
$3.9 billion
|
ABOUT PARAMOUNT
Paramount is an independent, publicly traded, liquids-focused
Canadian energy company that explores for and develops both
conventional and unconventional petroleum and natural gas,
including longer-term strategic exploration and pre-development
plays, and holds a portfolio of investments in other entities. The
Company's principal properties are located in Alberta and British
Columbia. Paramount's class A common shares are listed on
the Toronto Stock Exchange under the symbol "POU".
_____________________________
|
(1)
|
The five-year outlook
is based on preliminary planning and current market conditions and
is subject to change. The five-year outlook is for the period from
2023 through to the end of 2027.
|
(2)
|
The revised anticipated
cumulative free cash flow is based on the following assumptions:
(i) the stated annual capital expenditures and management
assumptions as to annual production growth; (ii) approximately $55
million in abandonment and reclamation costs in 2023 and
approximately $40 million annually thereafter, (iii) approximately
$7 million in annual geological and geophysical expenses, (iv) 2023
realized pricing of $63.00/Boe (US$80.00/Bbl WTI, US$5.00/MMBtu
NYMEX, $4.74/GJ AECO) and thereafter commodity prices of
US$75.00/Bbl WTI, US$4.50/MMBtu NYMEX and $4.27/GJ AECO, (v) a 2023
$US/$CAD exchange rate of $0.730 and thereafter a $US/$CAD exchange
rate of $0.735 and (vi) internal management estimates of future
royalties, operating costs, transportation and processing costs
and, beginning in 2026, cash taxes.
|
ADVISORIES
Forward-Looking Information
Certain statements in this press release constitute
forward-looking information under applicable securities
legislation. Forward-looking information typically contains
statements with words such as "anticipate", "believe", "estimate",
"will", "expect", "plan", "schedule", "intend", "propose", or
similar words suggesting future outcomes or an outlook.
Forward-looking information in this press release includes, but is
not limited to:
- expected fourth quarter 2022 average sales volumes;
- expected 2022 annual capital expenditures;
- forecast average sales volumes for 2023 and certain periods
therein;
- planned capital expenditures in 2023;
- planned abandonment and reclamation expenditures in 2023;
- forecast free cash flow in 2023;
- preliminary anticipated capital expenditures in 2024 and the
resulting expected 2024 average sales volumes and free cash flow;
and
- the Company's five-year outlook for average sales volumes,
capital expenditures and cumulative free cash flow.
Such forward-looking information is based on a number of
assumptions which may prove to be incorrect. Assumptions have been
made with respect to the following matters, in addition to any
other assumptions identified in this press release:
- future commodity prices;
- the impact of the COVID-19 pandemic;
- the impact of the Russian invasion of the Ukraine;
- royalty rates, taxes and capital, operating, general &
administrative and other costs;
- foreign currency exchange rates, interest rates and the rate
and impacts of inflation;
- general business, economic and market conditions;
- the performance of wells and facilities;
- the availability to Paramount of the required capital to fund
its exploration, development and other operations and meet its
commitments and financial obligations;
- the ability of Paramount to obtain equipment, materials,
services and personnel in a timely manner and at expected and
acceptable costs to carry out its activities;
- the ability of Paramount to secure adequate product processing,
transportation, fractionation and storage capacity on acceptable
terms and the capacity and reliability of facilities;
- the ability of Paramount to market its natural gas and liquids
successfully to current and new customers;
- the ability of Paramount and its industry partners to obtain
drilling success (including in respect of anticipated production
volumes, reserves additions, liquids yields and resource
recoveries) and operational improvements, efficiencies and results
consistent with expectations;
- the timely receipt of required governmental and regulatory
approvals;
- the receipt of benefits under government programs;
- the application of regulatory requirements respecting
abandonment and reclamation; and
- anticipated timelines and budgets being met in respect of
drilling programs and other operations (including well completions
and tie-ins, the construction, commissioning and start-up of new
and expanded facilities, including third-party facilities, and
facility turnarounds and maintenance).
Although Paramount believes that the expectations reflected in
such forward-looking information are reasonable based on the
information available at the time of this press release, undue
reliance should not be placed on the forward-looking information as
Paramount can give no assurance that such expectations will prove
to be correct. Forward-looking information is based on
expectations, estimates and projections that involve a number of
risks and uncertainties which could cause actual results to differ
materially from those anticipated by Paramount and described in the
forward-looking information. The material risks and uncertainties
include, but are not limited to:
- the risks set out in the Company's Management's Discussion and
Analysis for the three and nine months ended September 30, 2022;
- fluctuations in commodity prices;
- changes in capital spending plans and planned exploration and
development activities;
- the potential for changes to expected fourth quarter 2022
average sales volumes and 2022 annual capital expenditures upon
finalization;
- the potential for changes to preliminary anticipated 2024
capital expenditures prior to finalization and changes to the
resulting expected 2024 average sales volumes and free cash
flow;
- the potential for changes to the Company's five-year outlook
for average sales volumes, capital expenditures and cumulative free
cash flow;
- changes in foreign currency exchange rates, interest rates and
the rate of inflation;
- the uncertainty of estimates and projections relating to
production, future revenue, free cash flow, reserve additions,
product yields (including condensate to natural gas ratios),
resource recoveries, royalty rates, taxes and costs and
expenses;
- the ability to secure adequate product processing,
transportation, fractionation, and storage capacity on acceptable
terms;
- operational risks in exploring for, developing, producing and
transporting natural gas and liquids, including the risk of spills,
leaks or blowouts;
- the ability to obtain equipment, materials, services and
personnel in a timely manner and at expected and acceptable costs,
including the potential effects of inflation and supply chain
disruptions;
- potential disruptions, delays or unexpected technical or other
difficulties in designing, developing, expanding or operating new,
expanded or existing facilities (including third-party
facilities);
- processing, pipeline and fractionation infrastructure outages,
disruptions and constraints;
- risks and uncertainties involving the geology of oil and gas
deposits;
- the uncertainty of reserves estimates;
- general business, economic and market conditions;
- the ability to generate sufficient cash from operating
activities to fund, or to otherwise finance, planned exploration,
development and operational activities and meet current and future
commitments and obligations (including product processing,
transportation, fractionation and similar commitments and
obligations);
- changes in, or in the interpretation of, laws, regulations or
policies (including environmental laws);
- the ability to obtain required governmental or regulatory
approvals in a timely manner, and to obtain and maintain leases and
licenses;
- the effects of weather and other factors including wildlife and
environmental restrictions which affect field operations and
access;
- uncertainties as to the timing and cost of future abandonment
and reclamation obligations and potential liabilities for
environmental damage and contamination;
- uncertainties regarding Indigenous claims and in maintaining
relationships with local populations and other stakeholders;
- the outcome of existing and potential lawsuits, insurance
claims, regulatory actions, audits and assessments; and
- other risks and uncertainties described elsewhere in this
document and in Paramount's other filings with Canadian securities
authorities.
In addition, there are no assurances as to the declaration and
payment of any future dividends by the Company or the amount or
timing of any such dividends.
The foregoing list of risks is not exhaustive. For more
information relating to risks, see the section titled "Risk
Factors" in Paramount's annual information form for the year
ended December 31, 2021, which is
available on SEDAR at www.sedar.com. The forward-looking
information contained in this press release is made as of the date
hereof and, except as required by applicable securities law,
Paramount undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise.
Certain forward-looking information in this press release,
including forecast free cash flow in 2023 and future periods, may
also constitute a "financial outlook" within the meaning of
applicable securities laws. A financial outlook involves statements
about Paramount's prospective financial performance or position and
is based on and subject to the assumptions and risk factors
described above in respect of forward-looking information generally
as well as any other specific assumptions and risk factors in
relation to such financial outlook noted in this press release.
Such assumptions are based on management's assessment of the
relevant information currently available and any financial outlook
included in this press release is provided for the purpose of
helping readers understand Paramount's current expectations and
plans for the future. Readers are cautioned that reliance on any
financial outlook may not be appropriate for other purposes or in
other circumstances and that the risk factors described above or
other factors may cause actual results to differ materially from
any financial outlook.
Oil and Gas Measures and Definitions
This press release contains disclosures expressed as "Boe/d",
which means barrels of oil equivalent ("Boe") per day. Natural gas
equivalency volumes have been derived using the ratio of six
thousand cubic feet of natural gas to one barrel of oil when
converting natural gas to Boe. Equivalency measures may be
misleading, particularly if used in isolation. A conversion ratio
of six thousand cubic feet of natural gas to one barrel of oil is
based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value
equivalency at the well head. For the nine months ended
September 30, 2022, the value ratio
between crude oil and natural gas was approximately 23:1. This
value ratio is significantly different from the energy equivalency
ratio of 6:1. Using a 6:1 ratio would be misleading as an
indication of value.
Product Type Information
This press release includes references to forecast sales volumes
of "liquids". "Liquids" refers to light and medium crude oil, tight
oil, condensate and ethane, propane and butane ("other NGLs")
combined. Below is further information respecting the composition
of sales volumes or forecast sales volumes for applicable
periods.
Fourth quarter 2022 sales volumes are expected to have averaged
approximately 97,500 Boe/d (55% shale gas and conventional natural
gas combined, 39% light and medium crude oil, tight oil and
condensate combined and 6% other NGLs) based on preliminary field
estimates.
The Company forecasts that 2023 annual sales volumes will
average between 100,000 Boe/d and 105,000 Boe/d (55% shale gas
and conventional natural gas combined, 39% light and medium crude
oil, tight oil and condensate combined and 6% other NGLs). First
half 2023 sales volumes are expected to average between 96,000
Boe/d and 101,000 Boe/d (55% shale gas and conventional natural gas
combined, 39% light and medium crude oil, tight oil and condensate
combined and 6% other NGLs). Second half 2023 sales volumes are
expected to average between 104,000 Boe/d and 109,000 Boe/d (54%
shale gas and conventional natural gas combined, 40% light and
medium crude oil, tight oil and condensate combined and 6% other
NGLs).
The Company's preliminary 2024 guidance forecasts annual sales
volumes that will average between 110,000 Boe/d and 120,000 Boe/d
(53% shale gas and conventional natural gas combined, 41% light and
medium crude oil, tight oil and condensate combined and 6% other
NGLs).
Specified Financial Measures
Free cash flow is a capital management measure that Paramount
utilizes in managing its capital structure. This measure is not a
standardized measure and therefore may not be comparable with the
calculation of similar measures by other entities. Refer to Note 15
– Capital Structure in the unaudited Interim Condensed Consolidated
Financial Statements of Paramount as at and for the three and nine
months ended September 30, 2022 for a
description of the composition and use of this measure.
SOURCE Paramount Resources Ltd.