Headwater Exploration Inc. press release
HEADWATER EXPLORATION INC. ANNOUNCES 2024 RESERVES, YEAR END 2024 OPERATING AND FINANCIAL RESULTS, OPERATIONS UPDATE AND DECLARES QUARTERLY DIVIDEND
TSX - Toronto Stock Exchange · Oil · Natural Gas · Natural Gas Liquids · Canada
Canada NewsWire
CALGARY, AB , March 13, 2025 /CNW/ - Headwater Exploration Inc. (the " Company " or " Headwater ") (TSX: HWX) announces its operating and financial results for the three months and year ended December 31, 2024 . Selected financial and operational information is outlined below and should be read in conjunction with the audited financial statements and the related management's discussion and analysis ("MD&A"). In addition, readers are also directed to the Company's Annual Information Form for the year ended December 31, 2024 , dated March 13, 2025 . These filings will be available on SEDAR+ at www.sedarplus.ca and the Company's website at www.headwaterexp.com .
Financial and Operating Highlights
| | Three months ended
December 31, | Percent Change | Year ended
December 31, | Percent Change | | | | | | 2024 | 2023 | 2024 | 2023 | | | | | Financial ( thousands of dollars except per share and production data) | | | | | | | | | Sales, net of blending (1) (4) | 156,475 | 131,690 | 19 | 592,638 | 482,823 | 23 | | | Adjusted funds flow from operations (2) | 87,903 | 81,983 | 7 | 336,557 | 288,262 | 17 | | | Per share - basic (3) | 0.37 | 0.35 | 6 | 1.42 | 1.22 | 16 | | | - diluted (3) | 0.37 | 0.34 | 9 | 1.42 | 1.21 | 17 | | | Cash flows provided by operating activities | 76,016 | 90,690 | (16) | 316,737 | 303,316 | 4 | | | Per share - basic | 0.32 | 0.38 | (16) | 1.34 | 1.29 | 4 | | | - diluted | 0.32 | 0.38 | (16) | 1.34 | 1.28 | 5 | | | Net income | 48,907 | 45,469 | 8 | 188,028 | 156,072 | 20 | | | Per share - basic | 0.21 | 0.19 | 11 | 0.80 | 0.66 | 21 | | | - diluted | 0.21 | 0.19 | 11 | 0.80 | 0.66 | 21 | | | Capital expenditures (1) | 48,686 | 30,050 | 62 | 222,866 | 233,846 | (5) | | | Adjusted working capital (2) | | | | 67,578 | 63,526 | 6 | | | Shareholders' equity | | | | 699,459 | 610,498 | 15 | | | Dividends declared | 23,776 | 23,658 | - | 95,037 | 94,421 | 1 | | | Per share | 0.10 | 0.10 | - | 0.40 | 0.40 | - | | | Weighted average shares (thousands) | | | | | | | | | Basic | 237,512 | 236,408 | - | 236,386 | 235,583 | - | | | Diluted | 237,569 | 238,872 | (1) | 236,447 | 237,705 | (1) | | | Shares outstanding, end of period ( thousands) | | | | | | | | | Basic | | | | 237,757 | 236,580 | - | | | Diluted (5) | | | | 237,934 | 241,138 | (1) | | | Operating ( 6:1 boe conversion) | | | | | | | | | | | | | | | | | | Average daily production | | | | | | | | | Heavy crude oil (bbls/d) | 20,304 | 18,514 | 10 | 19,095 | 16,466 | 16 | | | Natural gas (mmcf/d) | 7.2 | 8.0 | (10) | 6.9 | 8.8 | (22) | | | Natural gas liquids (bbls/d) | 51 | 93 | (45) | 67 | 98 | (32) | | | Barrels of oil equivalent (9) (boe/d) | 21,559 | 19,939 | 8 | 20,310 | 18,038 | 13 | | | | | | | | | | | | Average daily sales (6) (boe/d) | 21,543 | 20,134 | 7 | 20,275 | 18,038 | 12 | | | Netbacks _($/boe) _(3) (7) | | | | | | | | | Operating | | | | | | | | | Sales, net of blending (4) | 78.95 | 71.09 | 11 | 79.86 | 73.34 | 9 | | | Royalties | (13.81) | (12.91) | 7 | (14.60) | (13.01) | 12 | | | Transportation | (5.26) | (5.12) | 3 | (5.51) | (5.35) | 3 | | | Production expenses | (7.64) | (7.34) | 4 | (7.35) | (7.17) | 3 | | | | | | | | | | | | Operating netback (3) | 52.24 | 45.72 | 14 | 52.40 | 47.81 | 10 | | | Realized gains on financial derivatives | (0.35) | 3.35 | (110) | 0.67 | 2.14 | (69) | | | Operating netback, including financial derivatives (3) | 51.89 | 49.07 | 6 | 53.07 | 49.95 | 6 | | | General and administrative expense | (1.53) | (1.51) | 1 | (1.48) | (1.47) | 1 | | | Interest income and other expense (8) | 0.60 | 0.84 | (29) | 0.77 | 0.92 | (16) | | | Current tax expense | (6.62) | (4.14) | 60 | (7.00) | (5.62) | 25 | | | Settlement of decommissioning liability | - | - | - | (0.01) | - | 100 | | | Adjusted funds flow netback (3) | 44.34 | 44.26 | - | 45.35 | 43.78 | 4 | |
| (1) | Non-GAAP financial measure. Refer to "Non-GAAP and Other Financial Measures" within this press release. | | (2) | Capital management measure. Refer to "Non-GAAP and Other Financial Measures" within this press release. | | (3) | Non-GAAP ratio. Refer to "Non-GAAP and Other Financial Measures" within this press release. | | (4) | Heavy oil sales are netted with blending expense to compare the realized price to benchmark pricing while transportation expense is shown separately. In the audited annual financial statements blending expense is recorded within blending and transportation expense. | | (5) | In-the-money dilutive instruments as at December 31, 2024 include 177 thousand stock options with a weighted average exercise price of $4.56. Restricted share units ("RSU") and performance share units ("PSU") have been excluded as the Company intends to cash settle these awards. | | (6) | Includes sales of unblended heavy crude oil, natural gas and natural gas liquids. The Company's heavy crude oil sales volumes and production volumes differ due to changes in inventory. For the three months ended December 31, 2024, sales volumes comprised of 20,288 bbs/d of heavy oil, 7.2 mmcf/d of natural gas and 51 bbls/d of natural gas liquids (2023 - heavy oil of 18,709 bbls/d, natural gas of 8.0 mmcf/d and natural gas liquids of 93 bbls/d). For the year ended December 31, 2024, sales volumes comprised of 19,060 bbls/d of heavy oil, 6.9 mmcf/d of natural gas and 67 bbls/d of natural gas liquids (2023- heavy oil of 16,465 bbls/d, natural gas of 8.8 mmcf/d and natural gas liquids of 98 bbls/d). | | (7) | Netbacks are calculated using average sales volumes. | | (8) | Excludes unrealized foreign exchange gains/losses, accretion on decommissioning liabilities, interest on lease liability and interest on repayable contribution. | | (9) | See '"Barrels of Oil Equivalent." |
FOURTH QUARTER 2024 HIGHLIGHTS
Achieved record average production of 21,559 boe/d, an increase of 8% over 2023 fourth quarter production of 19,939 boe/d. Realized adjusted funds flow from operations (1) of $87.9 million ( $0.37 per basic share (2) ), cash flows from operating activities of $76.0 million ( $0.32 per basic share) and free cash flow (3) of $39.2 million . Achieved an operating netback, including financial derivatives (2) , of $51.89 /boe and an adjusted funds flow netback (2) of $44.34 /boe. Generated net income of $48.9 million ( $0.21 per basic share) equating to $24.68 /boe. Executed a $48.7 million capital expenditure (3) program including 8 net crude oil wells in Marten Hills West at a 100% success rate, 13 injection wells and 1 water source well. Returned $0.10 per common share, or $23.8 million , to shareholders. As at December 31, 2024 , Headwater had working capital of $78.7 million , adjusted working capital (1) of $67.6 million and no outstanding bank debt.
YEAR ENDED DECEMBER 31, 2024 HIGHLIGHTS
Achieved average production of 20,310 boe/d, an increase of 13% over 2023 annual production of 18,038 boe/d. Realized adjusted funds flow from operations (1) of $336.6 million ( $1.42 per basic share (2) ), cash flows from operating activities of $316.7 million ( $1.34 per basic share) and free cashflow (3) of $113.7 million . Achieved an operating netback, including financial derivatives (2) , of $53.07 /boe and an adjusted funds flow netback (2) of $45.35 /boe. Generated record net income of $188.0 million ( $0.80 per basic share) equating to $25.34 /boe. Executed a $222.9 million capital expenditure (3) program: Drilled 76 net crude oil wells during the year ended December 31, 2024 , including 60 wells in Marten Hills West , 8 wells in the Greater Nipisi area, 6 wells in the Greater Peavine area, with the remainder attributed to newer exploration areas including Handel, Saskatchewan ; Pursued secondary recovery efforts with approximately 35% of Headwater's heavy oil production stabilized by December 31, 2024 ; and Continued accumulation of organic growth opportunities in and beyond the boundaries of the Clearwater . To date, Headwater now holds more than 800 net sections of land across Western Canada .
Returned a total of $0.40 per common share, or $95.0 million , to shareholders. On December 5, 2024 , the Company announced an increase to its quarterly cash dividend to $0.11 per common share ( $0.44 per common share annualized) effective for the dividend to be paid on April 15, 2025 , to shareholders of record at the close of business on March 31, 2025 . To date, Headwater has paid out a cumulative dividend of $212.9 million to shareholders ( $0.90 per common share). Proved developed producing reserves increased by 32% to 29.2 mmboe from 22.1 mmboe. Total proved reserves increased by 33% to 43.1 mmboe from 32.5 mmboe. Total proved plus probable reserves increased by 31% to 67.9 mmboe from 51.9 mmboe. Achieved finding and development ("F&D") costs (2) , including changes in future development costs of $15.32 per boe on a proved developed producing basis, $15.93 per boe on a total proved basis and $12.95 per boe on a total proved plus probable basis. Based on a 2024 adjusted funds flow netback (2) of $45.35 /boe, achieved recycle ratios (2) of 3.0 on a proved developed producing basis, 2.9 on a total proved basis and 3.5 on a total proved plus probable basis.
| (1) | Capital management measure. Refer to "Non-GAAP and Other Financial Measures" within this press release. | | (2) | Non-GAAP ratio that does not have any standardized meaning under IFRS and therefore may not be comparable with the calculation of similar measures of other entities. Refer to "Non-GAAP and Other Financial Measures" within this press release. | | (3) | Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable with the calculation of similar measures of other entities. Refer to "Non-GAAP and Other Financial Measures" within this press release. |
OPERATIONS UPDATE
Marten Hills West
In the fourth quarter of 2024, Headwater had an active Marten Hills West program drilling 8 successful multi-lateral producing wells and commissioning our second full section secondary recovery pilot.
Headwater continued to push the south and eastern pool boundaries of the Clearwater sandstone with successful step-out tests at 00/10-10-075-01W5 and 00/11-10-075-01W5. The 00/10-10-075-01W5 well has achieved a 90-day initial production rate of 117 bbls/d and the 00/11-10-075-01W5 well achieved a 90-day initial production rate of 270 bbls/d. In the first quarter of 2025, Headwater offset these expansion wells with a test at 03/06-10-075-01W5 which has achieved a 30-day initial production rate of 325 bbls/d.
Results from the Clearwater sandstone secondary recovery pilots continue to gain momentum with the commissioning of our second full section waterflood pilot in section 22-075-02W5. Injection rates in the sandstone are now exceeding 2,400 bbls/d, with stabilized oil volumes increasing from 250 bbls/d to approximately 900 bbls/d over the past 4 months. We are highly encouraged with these results and are excited to move forward with an additional 2-3 sections budgeted for secondary recovery implementation in 2025. With the expansion contemplated in 2025, we anticipate having 2,000 bbls/d of oil supported by year-end.
Clearwater E development has continued with current oil rates from this zone exceeding 700 bbls/d. Winter access roads were utilized to re-activate the 00/04-35-076-02W5 Clearwater E exploratory well drilled last winter. The well achieved a 60-day initial rate of 135 bbls/d of 24 API oil validating the northern extension. An all-weather road will be built to access the area and support further development in the third quarter of 2025. Our two active secondary recovery pilots at 02/16-07-075-01W5 and 00/13-07-075-01W5 are showing encouraging results, with early indications of subsiding gas-oil ratios and decline mitigation. The 2025 budget contemplates drilling up to 15 Clearwater E multi-laterals supported by two sections of planned secondary recovery.
Marten Hills Core
Results from secondary recovery in the core continue to perform beyond expectation with 8 of 9 sections now supported. All supported sections continue to show extremely positive results, with production rates exceeding 7,000 bbls/d having stayed flat for more than 14 months.
Greater Pelican
Headwater is excited to report achieving final Indian Oil and Gas Canada approval on the first segment of the 34.5 section land partnership with the Bigstone Cree Nation in the Greater Pelican Area. The Company is on track to spud our first well targeting the Wabiskaw formation late in the first quarter of 2025.
Headwater has captured more than 57 sections in the Greater Pelican area with multiple identified prospects. In addition to the test scheduled for the first quarter of 2025, we plan to test 2-3 additional identified concepts in 2025.
Greater Nipisi
The discovery well at Little Horse South, 16-29-076-14W5 has achieved a 120-day initial production rate of 178 bbls/d. Based on these exceptional results, Headwater is currently drilling two follow-up tests offsetting the original discovery well to continue to validate this pool that could be 15-20 sections in size.
Headwater recently rig released a Bluesky exploration test on the northern 20 section block of Little Horse. The northern test at 05-26-077-14W5 was drilled through a fault block and into a suspected gas cap. A technical review is underway to determine placement of stratigraphic tests for further prospect evaluation.
In the West Nipisi expansion area, Headwater utilized winter access roads to re-activate the 00/05-18-077-11W5 Clearwater F well and conduct a two well exploration program to further evaluate the commercial viability of an all-weather access road. The results although encouraging, do not currently provide sufficient justification for an all-weather access road.
Greater Peavine - Seal
Two large diameter multi-lateral wells were drilled via winter access roads on the western side of Seal for evaluation. Unfortunately both wells were shut-in late in February due to early break-up conditions before recovering load fluid.
The remainder of the ongoing six well Seal program will utilize a combination of large diameter and Stingwray well technology to test multiple formations on our eastern Seal acreage.
Handel
Headwater conducted a 3D seismic shoot in Handel across 31 sections of land and has identified multiple Mannville targets that will be further delineated with stratigraphic tests in the second half of 2025.
The 3D seismic has identified multiple Waseca channels that will be tested to determine the possibility of steam-assisted gravity drainage development. In addition, the 3D seismic has provided strong indications of multiple structural traps that could provide conventional heavy oil development.
McCully
McCully was placed back on production December 1 st to align with our aggressive hedging profile. Approximately 87% of our December 2024 to April 2025 volumes are hedged at Cdn$10.40 /mcf which is expected to provide approximately $15 million of free cash flow (1) over the winter producing season (2) . Headwater's structured hedging program for the McCully assets has provided consistent cash flow against highly volatile gas pricing experienced during the winter season.
| (1) | Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable with the calculation of similar measures of other entities. Refer to "Non-GAAP and Other Financial Measures" within this press release. | | (2) | McCully's winter season is estimated to be December 1, 2024 to April 30, 2025. |
FIRST QUARTER DIVIDEND
The Board of Directors of Headwater confirms a cash dividend to shareholders of $0.11 per common share payable on April 15, 2025 , to shareholders of record at the close of business on March 31, 2025 . This dividend is an eligible dividend for the purposes of the _Income Tax Act _( Canada ).
OUTLOOK
Since inception, we have continued to maintain a positive working capital balance. When combined with our existing credit facility, it provides us with optionality to organically expand our resource base, pursue accretive acquisitions and implement additional enhanced oil recovery schemes.
Headwater continues to focus on total shareholder returns through a combination of growth and return of capital.
2024 RESERVES INFORMATION
Headwater currently has reserves primarily located in the Marten Hills, Greater Peavine and Greater Nipisi areas of Alberta and reserves in the McCully Field near Sussex , New Brunswick. McDaniel & Associates Consultants Ltd. (" McDaniel ") assessed the Company's reserves in its report dated effective December 31, 2024 (" McDaniel Report ") which was prepared in accordance with standards of the Canadian Oil and Gas Evaluation Handbook (the " COGE Handbook ") and National Instrument 51-101 – _Standards of Disclosure for Oil and Gas Activities _and is based on the average forecast prices as at December 31, 2024 of three independent reserves evaluation firms. Additional information regarding reserves data and other oil and gas information is included in Headwater's Annual Information Form for the year ended December 31, 2024 , filed on SEDAR+ on March 13 , 2025.
The following tables are a summary of Headwater's petroleum and natural gas reserves, as evaluated by McDaniel, effective December 31, 2024 . It should not be assumed that the estimates of future net revenues presented in the tables below represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained, and variances could be material. The recovery and reserves estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. It is important to note that the recovery and reserves estimates provided herein are estimates only. Actual reserves may be greater or less than the estimates provided herein. Reserves information may not add due to rounding.
Reserves Summary
| | Heavy | Shale | Conventional | | Oil | | | Oil | Gas | Gas | NGL | Equivalent | | | Mbbls | MMcf | MMcf | Mbbls | MBOE | | | | | | | | | Proved developed producing | 24,919 | 734 | 23,650 | 200 | 29,183 | | Proved developed non-producing | 315 | 1,498 | 348 | 8 | 630 | | Proved undeveloped | 12,429 | - | 4,525 | 79 | 13,262 | | Total proved | 37,663 | 2,232 | 28,523 | 286 | 43,075 | | Total probable | 22,307 | 702 | 13,080 | 175 | 24,778 | | Total proved plus probable | 59,969 | 2,934 | 41,603 | 461 | 67,853 |
| (1) | Reserves have been presented on a gross basis which are the Company's total working interest share before the deduction of any royalties and without including any royalty interests of the Company. | | (2) | Based on the average of GLJ Ltd., McDaniel and Sproule Associates Limited price forecasts effective as at January 1, 2025. | | (3) | Pursuant to the COGE Handbook, reported reserves should target at least a 90 percent probability that the quantities actually recovered will be equal to or exceed the estimated proved reserves and that at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves. |
Net Present Value of Future Net Revenue
| | Before Income Tax and Discounted at | After Income Tax and Discounted at | | | | | | | | | | | 0 % | 5 % | 10 % | 15 % | 20 % | 0 % | 5 % | 10 % | 15 % | 20 % | | | $M | $M | $M | $M | $M | $M | $M | $M | $M | $M | | | | | | | | | | | | | | Proved developed producing | 1,111,598 | 978,756 | 870,159 | 784,139 | 715,582 | 934,476 | 825,701 | 734,998 | 662,717 | 605,000 | | Proved developed non-producing | 26,189 | 21,881 | 18,623 | 16,163 | 14,265 | 19,836 | 16,629 | 14,163 | 12,294 | 10,850 | | Proved undeveloped | 348,349 | 298,311 | 254,960 | 218,309 | 187,523 | 262,543 | 220,954 | 184,786 | 154,214 | 128,587 | | Total proved | 1,486,136 | 1,298,947 | 1,143,742 | 1,018,610 | 917,370 | 1,216,855 | 1,063,284 | 933,947 | 829,225 | 744,437 | | Total probable | 1,006,114 | 752,793 | 586,983 | 473,831 | 393,273 | 779,772 | 579,932 | 449,358 | 360,571 | 297,573 | | Total proved plus probable | 2,492,250 | 2,051,741 | 1,730,726 | 1,492,442 | 1,310,642 | 1,996,627 | 1,643,216 | 1,383,306 | 1,189,796 | 1,042,010 |
Earlier from Headwater Exploration Inc.
- HEADWATER EXPLORATION INC. PROVIDES FOURTH QUARTER PRODUCTION RESULTS AND ENTRANCE INTO A NEW OPERATING AREA
- HEADWATER EXPLORATION INC. ANNOUNCES DIVIDEND INCREASE, 2025 BUDGET AND OPERATIONS UPDATE
- HEADWATER EXPLORATION INC. ANNOUNCES THIRD QUARTER OPERATING AND FINANCIAL RESULTS, DECLARATION OF QUARTERLY DIVIDEND AND UPDATE TO 2024 GUIDANCE