LOGAN ENERGY CORP. ANNOUNCES THIRD QUARTER 2023 RESULTS, OPERATIONS UPDATE AND 2024 GUIDANCE

2023-11-22

TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Potash · Canada

Canada NewsWire

CALGARY, AB , Nov. 22, 2023 /CNW/ - Logan Energy Corp. (" Logan " or the " Company ") is pleased to report its unaudited financial and operating results for the third quarter of 2023, and to provide an operations update, increased guidance for the second half of 2023 and preliminary guidance for 2024.

[](https://mma.prnewswire.com/media/2283921/Logan_Energy_CorpLOGAN_ENERGY_CORPANNOUNCES_THIRD_QUARTER_20.html)

Selected financial and operational information is set out below and should be read in conjunction with the Company's unaudited interim financial statements and related management's discussion and analysis (" MD&A ") for the three and nine months ended September 30, 2023 and 2022 filed on SEDAR+ at www.sedarplus.ca and are available on the Company's website at www.loganenergycorp.com . The highlights reported in this press release include certain non-GAAP measures and ratios which have been identified using capital letters and are defined herein. The reader is cautioned that these measures may not be directly comparable to other issuers; refer to additional information under the heading "Reader Advisories – Non-GAAP Measures and Ratios".

THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

The third quarter of 2023 reflects Logan's first full quarter of operations following the spin-out of the early stage Montney assets from Spartan Delta Corp. (" Spartan ") on June 20, 2023 (the " Spin-Out "). Logan raised net equity proceeds of $102.2 million in the third quarter through completion of the previously announced private placement and exercise of the transaction warrants issued in connection with the Spin-Out. Production averaged 5,394 BOE per day (24% liquids) during the third quarter, up from 5,015 BOE per day (22% liquids) in the second quarter of 2023. The first two wells drilled at Simonette were brought on stream in September and did not contribute meaningful volumes to the average reported for the third quarter. The increase in production compared to the previous quarter is primarily due to the installation of additional field compression at Pouce Coupe . The Company generated $5.2 million of Adjusted Funds Flow for the three months ended September 30, 2023 , an increase of 64% compared to $3.1 million in the previous quarter, primarily driven by the increase in oil and gas sales, net of royalties. Capital Expenditures before A&D were $33.5 million for the three months ended September 30, 2023 , of which Logan spent $3.5 million on seismic and land, $27.3 million on drilling and completions, $1.7 million on equipping and facilities and $0.9 million on production optimization projects. Additionally, Logan incurred $5.1 million of acquisition costs during the quarter to expand its undeveloped acreage position at Simonette and to acquire certain equipment inventory to be used in its 2023 and 2024 capital program. Logan exited the third quarter with $90.0 million of cash on hand and access to a $15.0 million revolving demand credit facility which is currently undrawn. The Company is well positioned to execute on its 2023 and 2024 capital expenditure programs. Since commencing operations, Logan has added 62.25 net sections of land around our core area of Simonette, consisting of 32.75 net sections of Montney acreage and 29.5 net sections of land in non- Montney plays on and surrounding our existing asset base. Within the Montney acreage added, Logan has acquired a 14 net section contiguous block of land in the Lator area west of Simonette which Logan plans to drill this winter.

The table below summarizes the Company's financial and operating results for the three months ended September 30, 2023 :

| (CA$ thousands, except as otherwise noted) | Three months ended September 30, 2023 | | FINANCIAL HIGHLIGHTS | | | Oil and gas sales | 17,488 | | Net loss and comprehensive loss | (10,708) | | $ per common share, basic and diluted | (0.03) | | Cash provided by operating activities | 5,158 | | Adjusted Funds Flow (1) | 5,159 | | Cash used in investing activities | 17,307 | | Capital Expenditures before A&D (1) | 33,536 | | Acquisitions | 5,144 | | Total assets | 218,390 | | Working capital surplus | 67,374 | | Shareholders' equity | 162,165 | | Common shares outstanding (000s), end of period (2) | 465,537 | | OPERATING HIGHLIGHTS AND NETBACKS (5) | | | Average daily production | | | Crude oil (bbls/d) | 782 | | Condensate (bbls/d) (3) | 243 | | Natural gas liquids (bbls/d) (3) | 273 | | Natural gas (mcf/d) | 24,573 | | BOE/d | 5,394 | | % Liquids (4) | 24 % | | Average realized prices | | | Crude oil ($/bbl) | 108.60 | | Condensate ($/bbl) (3) | 105.22 | | Natural gas liquids ($/bbl) (3) | 50.65 | | Natural gas ($/mcf) | 2.67 | | Combined average ($/BOE) | 35.24 | | Netbacks ($/BOE) (5) | | | Oil and gas sales | 35.24 | | Processing and other revenue | 1.76 | | Royalties | (5.85) | | Operating expenses | (15.80) | | Transportation expenses | (4.41) | | Operating Netback ($/BOE) (5) | 10.94 | | General and administrative expenses | (2.52) | | Financing income (6) | 1.98 | | Settlement of decommissioning obligations | (0.01) | | Adjusted Funds Flow Netback ($/BOE) (5) | 10.39 |

| (1) | "Adjusted Funds Flow" and "Capital Expenditures before A&D" do not have standardized meanings under IFRS, refer to "Non-GAAP Measures and Ratios" section of this press release. | | (2) | Refer to "Share Capital" section of this press release. | | (3) | Condensate is a natural gas liquid (" NGL ") as defined by NI 51-101. See "Other Measurements". | | (4) | "Liquids" includes crude oil, condensate and NGLs. | | (5) | "Netbacks" are non-GAAP financial ratios calculated per unit of production. "Operating Netback", and "Adjusted Funds Flow Netback" do not have standardized meanings under IFRS, refer to "Non-GAAP Measures and Ratios" section of this press release. | | (6) | Excludes non-cash accretion of decommissioning obligations. |

OPERATIONS AND WELL PERFORMANCE UPDATE

Logan began drilling operations in July at Simonette with a well in the North Simonette oil play segment (the " 5-11 well ") which was completed in August and began flowback in September. From there, the rig moved to South Simonette in August to drill a single well within the gas-condensate play segment (the " 14-33 well ") which was completed and began flowback in September. The rig then moved to Pouce Coupe to drill a three well pad which spud on September 7, 2023 . The Pouce Coupe pad has now been completed and has just begun flowback.

North Simonette 5-11 Performance

The Logan 5-11 well is offsetting a 2012 vintage well (the " 16-12 legacy well ") that was completed with a 12 stage oil frac and 885 tonnes of proppant across 1,942 meters of horizontal. The 16-12 legacy well achieved peak monthly production of 120 bbls/d of oil and is expected to have ultimate recovery of 210 mbbl of oil, 4.7 mbbl of NGLs and 0.62 bcf of sales gas (318 mBOE with 68% liquids) 1.

The Logan 5-11 well was completed with a high intensity frac consisting of 207 stages and 8,275 tonnes of proppant across 2,914 meters of horizontal. For the month of October, 5-11 averaged 494 bbls/d of oil, 8 bbls/d of NGLs and 1.4 mmcf/d of sales gas (732 BOE/d with 69% liquids) 2 . As of October 31, 2023 , the well had been on production for 65 days. The water cut continues to decline as the well continues to clean up. Importantly, the drawdown for October was only ~25% (or 5MPa of drawdown) due to downhole pump capacity limits demonstrating that the well has significantly more inflow potential. The Company's experience is that wells in the under-pressured Montney oil play, like North Simonette, can take up to three to four months to reach peak production.

Initial production results from the 5-11 well exceeded our Previous H2 2023 Guidance (defined herein) assumptions by 35%. While the production results are early, Logan is encouraged by the results to date and believes that North Simonette will be a highly economic and material play segment for the Company going forward.

South Simonette 14-33 Performance

The Logan 14-33 well is offsetting the top performing legacy well in South Simonette (the " 16-33 legacy well ") that was completed in 2017 with a 70 stage frac and 3,150 tonnes of proppant across 2,937 meters of horizontal. The 16-33 legacy well achieved peak monthly production of 318 bbls/d of condensate, 45 bbls/d of NGLs and 5.9 mmcf/d of sales gas (1,352 BOE/d with 27% liquids) and is expected to have an ultimate recovery of 253 mbbl of condensate, 54 mbbl of NGLs and 7.1 bcf of sales gas (1,493 mBOE with 21% liquids) 3 .

The Logan 14-33 well was completedwith 125 stages and 7,378 tonnes of proppant across 2,974 meters of horizontal. Importantly, the 14-33 well was landed 35 meters deeper in the Montney section than a typical legacy well in South Simonette, as Logan believes this will lead to materially better liquids capture.

For the month of October, 14-33 averaged 528 bbls/d of condensate, 47 bbls/d of NGLs and 6.1 mmcf/d of sales gas (1,598 BOE/d with 36% liquids) 4 . As of October 31, 2023 , the well had been on production for 38 days.

For context, the initial gas rate of 14-33 is equivalent to that of the best legacy well in the field, but 14-33's liquids ratio of 87 bbl/mmcf is ~60% higher than the offsetting legacy well's initial liquids ratio and substantially higher than the average legacy well.

Initial production results from the 14-33 well exceeded our Previous H2 2023 Guidance assumptions by 81%, with the condensate rate exceeding our guidance assumptions by over 145%. Logan is also very encouraged by these early results in South Simonette. To date, the new deeper landing depth and more intense completion is yielding increased condensate production consistent with our hypothesis.

On the back of these well results, Logan took advantage of a rig coming available in the area and has commenced drilling again with a three well pad spud at South Simonette on October 28, 2023 (" 4-10 Pad "). The Company's total budget for Capital Expenditures before A&D of $75 million for 2023 remains unchanged. The land holding well initially planned for Flatrock in the fourth quarter of 2023 has been deferred to 2024 and replaced by this accelerated drilling at Simonette.

| | | | 1 | 100/16-12-064-26W5/00 well; P+PDP EUR as per the McDaniel Report. See "Reserves Disclosure". | | 2 | Producing day rate, well produced for 646 hours in October. | | 3 | 100/16-33-061-27W5/00 well; P+PDP EUR as per the McDaniel Report. See "Reserves Disclosure". | | 4 | Producing day rate, well produced for 721 hours in October. |

UPDATED H2 2023 GUIDANCE AND 2024 BUDGET

Logan is pleased to provide increased guidance for the second half of 2023 (" Updated H2 2023 Guidance ") as well as the Company's preliminary budget for 2024 (" 2024 Guidance ").

On the strength of its initial well results in Simonette, the Company has raised its H2 2023 guidance to 6,000 BOE/d (previously 5,000 BOE/d). For 2024, the Company's Board of Directors has approved an initial capital budget of $120 million . The budget is designed to deliver growth in Simonette, maintain production in Pouce Coupe and advance long term growth projects like Flatrock . The 2024 capital budget is allocated as follows: $64 million for drilling, completion, equipment and tie-in projects at Simonette and Pouce Coupe , $13 million for drilling and completion at Flatrock , $28 million for infrastructure and $15 million for land and contingency.

At Simonette, Logan plans to drill, complete and bring onstream four 100% working interest Montney wells. The 4-10 three well pad currently drilling is budgeted to come onstream in August 2024 , allowing for contingency of an extended spring breakup. In addition, Logan plans to drill and test one well on the recently acquired lands in the Lator area.

At Pouce Coupe , Logan plans to drill and bring onstream a two well pad which will fill Logan's available third-party processing capacity. During the third quarter, Logan advanced its long-term infrastructure plans for Pouce Coupe . Logan was successful in procuring strategic long-term egress for its Pouce Coupe development project by adding 40 mmcf/d of firm transport commencing in 2027. This is a critical part of the development plan for Pouce Coupe and ensures that Logan will be able to execute on its long-term growth plans for the asset. Logan is also advancing a company built and operated processing solution that is optimized for Logan's development plan. Additionally, Logan is advancing procurement of secondary market gas egress that, together with the processing solution, will target a production growth ramp between 2025 to 2027.

At Flatrock , Logan plans to drill its first two wells in 2024 and complete and test one of the two wells.

The following table summarizes Logan's 2024 Guidance, along with Updated H2 2023 Guidance as compared to previous guidance provided as part of the Company's press release dated July 13, 2023 (" Previous H2 2023 Guidance "), which is reproduced below:

| | Previous H2 2023 Guidance | Updated

H2 2023 Guidance | % Change | 2024 Guidance | | Average production (BOE/d) (1) | 5,000 | 6,000 | 20 | 8,700 | | % Liquids | 26 % | 28 % | 8 | 31 % | | Forecast Average Commodity Prices (2) | | | | | | WTI crude oil price (US$/bbl) | 70.00 | 78.63 | 12 | 75.00 | | AECO natural gas price ($/GJ) | 2.50 | 2.40 | (4) | 2.75 | | Average exchange rate (US$/CA$) | 1.32 | 1.36 | 3 | 1.375 | | Operating Netback ($/BOE) (1)(3) | 10.75 | 15.55 | 45 | 22.52 | | Adjusted Funds Flow ($MM) (3) | 8 | 15 | 88 | 64 | | Capital Expenditures before A&D ($MM) | 75 | 75 | - | 120 | | Acquisitions, net of dispositions (4) | - | 5 | nm | - | | Working capital surplus (deficit), end of year ($MM) (5)(6) | 42 | 36 | (14) | (20) | | Common shares outstanding, end of year (MM) (6) | 484.9 | 465.5 | (4) | 465.5 |

| (1) | Additional information regarding the assumptions used in the forecasted average production, Operating Netbacks and Adjusted Funds Flow are provided under "Reader Advisories" below. | | (2) | Changes in forecast commodity prices, exchange rates, differences in the amount and timing of capital expenditures, and variances in average production estimates can have a significant impact on the key performance measures included in Logan's guidance. The Company's actual results may differ materially from these estimates. Holding all other assumptions constant, a US$10/bbl increase (decrease) in the forecasted WTI crude oil price for the second half of 2023 and the 2024 calendar year would increase (decrease) Adjusted Funds Flow by approximately $2 million ($2 million) and $8 million ($10 million), respectively. An increase (decrease) of CA$1.00/GJ in the forecasted AECO natural gas price for the second half of 2023 and 2024 calendar year, holding the NYMEX-AECO basis differential and all other assumptions constant, would increase (decrease) Adjusted Funds Flow by approximately $3 million ($3 million) and $10 million ($13 million), respectively. Holding U.S. dollar benchmark commodity prices and all other assumptions constant, an increase (decrease) of $0.10 in the US$/CA$ exchange rate would increase (decrease) Adjusted Funds Flow by approximately $1 million ($1 million) for the second half of 2023 and $4 million ($4 million) for 2024. Assuming capital expenditures are unchanged, an increase (decrease) in Adjusted Funds Flow will result in an equivalent increase (decrease) in the forecasted working capital surplus. | | (3) | "Operating Netback", "Adjusted Funds Flow", and "Capital Expenditures before A&D" do not have standardized meanings under IFRS, see "Reader Advisories". | | (4) | Acquisitions and/or dispositions are included in the Company's guidance upon reaching a definitive agreement. | | (5) | The forecasted working capital deficit of $20 million at the end of 2024 exceeds the current borrowing base of $15 million under Logan's credit facility. Although Logan anticipates that the lenders will increase the borrowing base upon completion of the 2023 year-end reserves evaluation, there is no guarantee that additional credit capacity will be available. | | (6) | The forecasted working capital surplus and forecast number of common shares outstanding at the end of 2023 per the Company's Previous H2 2023 Guidance assumed that 100% of the transaction warrants issued in connection with the Spin-Out would be exercised prior to expiry on August 14, 2023, resulting in the issuance of 173.2 million common shares for gross cash proceeds of $60.6 million. However, only 153.8 million transaction warrants were exercised for gross proceeds of $53.8 million and the remaining 19.4 million transaction warrants expired on August 14, 2023. Logan's Updated H2 2023 Guidance and 2024 Guidance is based on the current number of common shares outstanding as of the date hereof. Refer to additional information regarding outstanding dilutive securities under the heading of "Share Capital". |

The increase in average production forecast for H2 2023 to 6,000 BOE per day is reflective of new wells drilled both exceeding initial production type curves, as well as these wells coming on production earlier than originally estimated. The forecasted working capital surplus for year-end 2023 decreased as a result of 19.4 million transaction warrants that expired unexercised (which resulted in less dilution to the share count than originally anticipated), as well as unbudgeted land acquisitions completed by the Company, offset by the forecasted increase in Adjusted Funds Flow. The 2024 budget of 8,700 BOE per day assumes all new pads come onstream in mid 2024; Logan expects to exit 2024 above 10,000 BOE per day (Q4 average production 5 ).

| | | 5 10,000 boe/d Q4 2024 estimated production comprised of 70% Gas, 4% NGLs, 12% Condensate and 14% Oil. |

GRANT OF STOCK OPTIONS

On November 22, 2023 , the Company's Board of Directors approved the grant of 22.7 million stock options with an exercise price of $0.89 per common share and a five year term. The options vest as to one-third on each of the first, second and third anniversary of the grant date. Of the total number of options granted, an aggregate of 9.7 million options were granted to officers and directors of the Company.

ABOUT LOGAN ENERGY CORP.

Logan is a growth-oriented exploration, development and production company formed through the spin-out of Spartan's early stage Montney assets. Logan is founded with a strong initial capitalization and three high quality and opportunity rich Montney assets located in the Simonette and Pouce Coupe areas of northwest Alberta and the Flatrock area of northeastern British Columbia . The management team brings proven leadership and a track record of generating excess returns in various business cycles.

READER ADVISORIES

Non-GAAP Measures and Ratios

This press release contains certain financial measures and ratios which do not have standardized meanings prescribed by International Financial Reporting Standards (" IFRS ") or Generally Accepted Accounting Principles (" GAAP "). As these non-GAAP financial measures and ratios are commonly used in the oil and gas industry, Logan believes that their inclusion is useful to investors. The reader is cautioned that these amounts may not be directly comparable to measures for other companies where similar terminology is used.

The non-GAAP measures and ratios used in this press release, represented by the capitalized and defined terms outlined below, are used by Logan as key measures of financial performance and are not intended to represent operating profits nor should they be viewed as an alternative to cash provided by operating activities, net income or other measures of financial performance calculated in accordance with IFRS.

The definitions below should be read in conjunction with the "Non-GAAP and Other Financial Measures" section of the Company's MD&A dated November 22, 2023 , which includes discussion of the purpose and composition of the specified financial measures and detailed reconciliations to the most directly comparable GAAP financial measures.