Paramount Resources Ltd. Announces 2023 Annual Results, Non-Core Asset Disposition and Revised 2024 Guidance

2024-03-06

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

Canada NewsWire

CALGARY, AB , March 6, 2024 /CNW/ - Paramount Resources Ltd. ("Paramount" or the "Company") (TSX: POU) is pleased to announce its 2023 annual financial and operating results, highlighted by record production, and a $47 million non-core asset disposition. The Company is also providing a production update and revised 2024 guidance.

2023 HIGHLIGHTS

The Company achieved record annual sales volumes of 96,393 Boe/d (46% liquids) in 2023. Sales volumes in the fourth quarter were 101,348 Boe/d (46% liquids), of which 72,860 Boe/d (51% liquids) was produced in the Grande Prairie Region. (1) Cash from operating activities was $938 million ( $6.56 per basic share) in 2023 and $287 million ( $1.99 per basic share) in the fourth quarter. (2) Adjusted funds flow was $965 million ( $6.75 per basic share) in 2023 and $284 million ( $1.97 per basic share) in the fourth quarter. (2) Capital expenditures totaled $732 million in 2023, which were largely directed to the Grande Prairie Region Montney development and the Kaybob North and Willesden Green Duvernay developments. Asset retirement obligation settlements totaled $55 million in 2023, which included the abandonment of 82 wells and reclamation of 113 sites. Free cash flow was $168 million ( $1.18 per basic share) in 2023 and $60 million ( $0.41 per basic share) in the fourth quarter. (2) Paramount returned $355 million to shareholders in 2023 comprised of $1.50 per share in regular monthly cash dividends and a special cash dividend of $1.00 per share. The Company realized total cash proceeds of approximately $45 million in the fourth quarter from the previously disclosed termination and close out of its 2024 NYMEX WTI swaps.

| | | | (1) | In this press release, "liquids" refers to NGLs (including condensate) and oil combined, "natural gas" refers to shale gas and conventional natural gas combined, "condensate and oil" refers to condensate, light and medium crude oil, tight oil and heavy crude oil combined and "Other NGLs" refers to ethane, propane and butane. See the "Product Type Information" section for a complete breakdown of sales volumes for applicable periods by the specific product types of shale gas, conventional natural gas, NGLs, light and medium crude oil, tight oil and heavy crude oil. See also "Oil and Gas Measures and Definitions" in the Advisories section. | | (2) | Adjusted funds flow and free cash flow are capital management measures used by Paramount. Cash from operating activities per basic share, adjusted funds flow per basic share and free cash flow per basic share are supplementary financial measures. Refer to the "Specified Financial Measures" section for more information on these measures. |

At December 31, 2023 , net debt was $60 million and Paramount's $1.0 billion revolving credit facility was undrawn. (1) The carrying value of the Company's investments in securities at December 31, 2023 was $541 million . Paramount received total cash dividends of $8 million in 2023 from these investments.

2023 RESERVES

At December 31, 2023 , the Company's: (2) proved developed producing ("PDP") reserves were 165 MMBoe with an NPV 10 of approximately $2.1 billion ( $14.57 per basic share); total proved ("TP") reserves were 415 MMBoe with an NPV 10 of approximately $4.5 billion ( $31.60 per basic share); and proved plus probable ("P+P") reserves were 761 MMBoe with an NPV 10 of approximately $7.9 billion ( $55.04 per basic share).

Paramount's reserves replacement ratios in 2023 were 1.4x for PDP reserves, 1.2x for TP reserves and 2.8x for P+P reserves. (3) The Company's 2023 and three-year average F&D costs and recycle ratios are as follows: (4)

| | 2023 | Three-Year Average | | | | F&D Costs ($/Boe) | Recycle Ratio | F&D Costs ($/Boe) | Recycle Ratio | | | PDP | $16.58 | 1.6x | $10.89 | 3.0x | | TP | $16.96 | 1.6x | $12.39 | 2.6x | | P+P | $12.52 | 2.2x | $10.57 | 3.1x |

Dispositions in 2023 resulted in reductions to the Company's PDP reserves of 8.4 MMBoe, TP reserves of 35.6 MMBoe and P+P reserves of 59.8 MMBoe.

NON-CORE ASSET DISPOSTION

The Company sold certain non-core assets in the Kaybob Region in February 2024 for cash proceeds of approximately $47 million and has retained a 2% no-deduction gross overriding royalty on the undeveloped Montney acreage forming part of the assets (the "2024 Kaybob Disposition"). Paramount had previously forecast these assets to generate approximately 1,000 Boe/d of average annual sales volumes for 2024.

CORPORATE UPDATE

In the fourth quarter of 2023, Paramount brought on production a total of eleven (11.0 net) wells in the Grande Prairie Region, consisting of a three well pad in Karr and an eight well pad in Wapiti. In December, the Company successfully commissioned the liquids handling expansion of its Leafland natural gas processing plant at Willesden Green. The expansion was completed on budget and ahead of the originally scheduled January 2024 startup. The plant now has raw handling capacity of approximately 6,000 Bbl/d of liquids and 22 MMcf/d of natural gas.

| | | | (1) | Net (cash) debt is a capital management measure used by Paramount. This capital management measure has been expressed as net debt in this instance for simplicity as the amount referenced is a positive number. Refer to the "Specified Financial Measures" section for more information on this measure. | | (2) | All reserves are gross reserves based on an evaluation prepared by McDaniel & Associates Consultants Ltd. ("McDaniel") dated March 5, 2024 and effective December 31, 2023 (the "McDaniel Report"). "NPV 10 " refers to the before tax net present value of future net revenue of the applicable reserves, discounted at 10 percent, as estimated in the McDaniel Report. Such value does not represent fair market value. Readers are referred to the advisories concerning "Reserves Data". | | (3) | See "Oil and Gas Measures and Definitions" in the Advisories section of this document for a description of the calculation and use of reserves replacement ratio. | | (4) | F&D costs and recycle ratio are non-GAAP ratios. Refer to the "Specified Financial Measures" section and "Oil and Gas Measures and Definitions" in the Advisories section for more information on these measures and on the related non-GAAP financial measure of F&D capital. |

Paramount completed all four (4.0 net) Willesden Green Duvernay wells from its 2023 development program in early December. These wells are all now on production and have exhibited strong results. Three of the wells averaged gross 30-day peak production per well of 1,873 Boe/d (4.1 MMcf/d of shale gas and 1,195 Bbl/d of NGLs) with an average CGR of 294 Bbl/MMcf. The fourth well has produced for 27 days and is exhibiting a similar production profile. (1) The Company recently commenced construction of its second natural gas processing facility at Willesden Green, with start-up anticipated in the fourth quarter of 2025. This first phase of the new facility will provide an estimated raw handling capacity of 10,000 Bbl/d of liquids and 50 MMcf/d of natural gas. All six (6.0 net) Kaybob North Duvernay wells that were drilled in 2023 were recently brought on production and have exhibited strong initial production rates.

PRODUCTION UPDATE AND REVISED 2024 GUIDANCE

Paramount is revising its forecast of 2024 sales volumes to a range of 100,000 Boe/d to 106,000 Boe/d (47% liquids), 9,000 Boe/d lower at the midpoint than prior guidance of 108,000 Boe/d to 116,000 Boe/d (47% liquids).

The significant factors contributing to the revision are described below.

The 2024 Kaybob Disposition completed in February has reduced forecast 2024 average sales volumes by approximately 1,000 Boe/d. Paramount has shut-in dry gas production due to the current natural gas price environment, reducing forecast 2024 average sales volumes by approximately 2,250 Boe/d. The Company continues to closely monitor market conditions and may restore or further reduce production as conditions warrant. Sales volumes were approximately 95,000 Boe/d (46% liquids) in January and 103,000 Boe/d (48% liquids) in February based on field estimates, approximately 14,000 Boe/d lower on average across the two months than expected. Cold weather in January resulted in a number of significant production upsets, particularly in the Grande Prairie Region. In addition, production was impacted by intermittent run time at key facilities, an unplanned pipeline outage in the Karr field that shut-in approximately 4,000 Boe/d of production for two weeks and the outage of a water disposal well in the Grande Prairie Region that will continue until the third quarter of 2024. 2024 production expectations from the five (5.0 net) well Karr 7-33S pad that was brought onstream in the third quarter of 2023 have been downwardly revised by approximately 3,500 Boe/d (55% liquids). Early production from the wells significantly exceeded type curve expectations and the prior guidance forecasted continued outperformance. The wells, which paid out in approximately three months of being brought onstream, are now performing in line with type curve expectations and the Company has reduced forecast sales volumes for the pad accordingly. The Company has benefited from strong new well performance in the Grande Prairie Region in growing its production base and maximizing netbacks, leading to the optimization of production from mature wells being deferred. There are currently 31 wells shut-in and 13 wells that would benefit from intervention in the Grande Prairie Region. The Company will incur incremental operating expenditures to pursue an aggressive well optimization program beginning in 2024 to increase production from these wells, the full benefit of which has not been incorporated into the revised 2024 sales volume forecast.

| _ | | | (1) | 30-day peak production is the highest daily average production rate for each well, measured at the wellhead, over a rolling 30-day period, excluding days when the well did not produce. Natural gas sales volumes were lower by approximately 8% and liquids sales volumes were lower by approximately 20% due to shrinkage. The production rates and volumes stated are over a short period of time and, therefore, are not necessarily indicative of average daily production, long-term performance or of ultimate recovery from the wells. CGR means condensate to gas ratio and is calculated by dividing raw wellhead liquids volumes by raw wellhead natural gas volumes. See "Oil and Gas Measures and Definitions" in the Advisories section. |

In total, Grande Prairie Region sales volumes are forecast to be approximately 6,000 Boe/d lower in 2024, primarily as a result of the revised Karr 7-33S pad production, earlier than anticipated tubing installations on certain wells at Karr due to higher than expected CGRs and the rescheduling of the 21-day outage at the third-party Wapiti natural gas processing plant from May to September. The Company has increased forecasted sales volumes by a total of 1,500 Boe/d in the Kaybob Region and Central Alberta and Other Region, largely due to better than expected Duvernay results.

The table below summarizes significant factors contributing to the revision in Paramount's 2024 sales volumes guidance at the midpoint:

| | Midpoint Annual Average Sales Volumes (Boe/d) | | Prior 2024 guidance | 112,000 | | 2024 Kaybob Disposition | -1,000 | | Dry gas production shut-ins | -2,250 | | January and February sales volumes lower than forecast | -1,250 | | Revisions to Grande Prairie Region forecast | -6,000 | | Revisions to Kaybob and Central Alberta and Other Region forecasts | +1,500 | | Revised 2024 guidance | 103,000 |

The Company is updating its forecast of 2024 free cash flow to approximately $235 million from $350 million to reflect revised midpoint 2024 forecast sales volumes of 103,000 Boe/d (47% liquids) and updated operating cost, royalty and other assumptions. Free cash flow does not include the $47 million cash proceeds from the 2024 Kaybob Disposition.

The Company's midpoint 2024 capital program, abandonment and reclamation expenditures and regular monthly dividend is fully funded under the above forecast. The Company's midpoint 2024 sustaining and maintenance capital program, abandonment and reclamation expenditures and regular monthly dividend would remain fully funded down to an average WTI price in 2024 of about US$61 /Bbl, assuming no changes to the other forecast assumptions. See "Advisories – Pricing Sensitivity" for additional sensitivities of 2024 free cash flow to changes in commodity price assumptions.

| | | | (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 stated free cash flow forecast is based on the following assumptions for 2024: (i) the midpoint of stated capital expenditures and sales volumes, (ii) $40 million in abandonment and reclamation costs, (iii) $10 million in geological and geophysical expenses, (iv) realized pricing of $56.90/Boe (reflecting changes to production mix); (v) a $US/$CAD exchange rate of $0.735, (vi) royalties of $8.35/Boe, (vii) operating costs of $12.90/Boe and (vii) transportation and NGLs processing costs of $3.85/Boe. For comparative purposes, the previous 2024 free cash flow forecast utilized the following differing assumptions as to the following factors: (i) $7 million in geological and geophysical expenses, (ii) realized pricing of $56.40/Boe, (iii) royalties of $8.80/Boe, (iv) operating costs of $12.05/Boe and (v) transportation and NGLs processing costs of $3.70/Boe. |

MARCH DIVIDEND

Paramount's Board of Directors has declared a cash dividend of $0.125 per class A common share that will be payable on March 28, 2024 to shareholders of record on March 15 , 2024. The dividend will be designated as an "eligible dividend" for Canadian income tax purposes.

ANNUAL GENERAL MEETING

Paramount will hold its annual general meeting of shareholders on Thursday, May 2, 2024 at 10:30 am ( Calgary time) in the Bankers Hall Auditorium located at 315 - 8th Avenue S.W., Calgary, Alberta .

COMPLETE ANNUAL RESULTS

Paramount's: (i) complete annual results, including a review of operations, the Company's audited consolidated financial statements as at and for the year ended December 31, 2023 (the "Consolidated Financial Statements") and the accompanying management's discussion and analysis (the "MD&A"); and (ii) 2023 annual information form, which contains additional important information concerning the Company's reserves, properties and operations, can be obtained on SEDAR+ at www.sedarplus.ca or on Paramount's website at www.paramountres.com/investors/financial-shareholder-reports .

A summary of historical financial and operating results is also available on Paramount's website at www.paramountres.com/investors/financial-shareholder-reports .

ABOUT PARAMOUNT

Paramount is an independent, publicly traded, liquids-rich natural gas 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 Common Shares are listed on the Toronto Stock Exchange under the symbol "POU".

| FINANCIAL AND OPERATING RESULTS (1) | | | | | | | | | | | | ($ millions, except as noted) | Three months ended December 31 | Year ended December 31 | | | | | | | | | | | 2023 | | 2022 | 2023 | 2022 | | | | | | | Net income | 111.9 | | 259.9 | | 470.2 | 680.6 | | | | | | per share – basic ($/share) | 0.78 | | 1.83 | | 3.29 | 4.83 | | | | | | per share – diluted ($/share) | 0.75 | | 1.76 | | 3.17 | 4.63 | | | | | | Cash from operating activities | 287.0 | | 306.9 | | 938.2 | 1,049.6 | | | | | | per share – basic ($/share) | 1.99 | | 2.17 | | 6.56 | 7.45 | | | | | | per share – diluted ($/share) | 1.93 | | 2.08 | | 6.32 | 7.14 | | | | | | Adjusted funds flow | 284.1 | | 340.7 | | 965.3 | 1,171.0 | | | | | | per share – basic ($/share) | 1.97 | | 2.40 | | 6.75 | 8.32 | | | | | | per share – diluted ($/share) | 1.91 | | 2.31 | | 6.51 | 7.97 | | | | | | Free cash flow | 59.7 | | 162.0 | | 168.4 | 471.1 | | | | | | per share – basic ($/share) | 0.41 | | 1.14 | | 1.18 | 3.35 | | | | | | per share – diluted ($/share) | 0.40 | | 1.10 | | 1.13 | 3.20 | | | | | | Total assets | | | | | 4,388.7 | 4,337.3 | | | | | | Investments in securities | | | | | 540.9 | 557.1 | | | | | | Long-term debt | | | | | – | 159.4 | | | | | | Net (cash) debt | | | | | 59.6 | 161.2 | | | | | | Common shares outstanding _(millions) _(2) | | | | | 144.2 | 142.0 | | | | | | Sales volumes (3) | | | | | | | | | | | | Natural gas (MMcf/d) | 326.2 | | 321.9 | 315.1 | 294.7 | | | | | | | Condensate and oil (Bbl/d) | 40,290 | | 37,580 | 37,657 | 33,908 | | | | | | | Other NGLs (Bbl/d) | 6,698 | | 6,143 | 6,226 | 5,650 | | | | | | | Total (Boe/d) | 101,348 | | 97,370 | 96,393 | 88,672 | | | | | | | % liquids | 46 % | | 45 % | 46 % | 45 % | | | | | | | Grande Prairie Region (Boe/d) | 72,860 | | 64,434 | 70,943 | 58,519 | | | | | | | Kaybob Region (Boe/d) | 20,324 | | 24,477 | 17,449 | 22,730 | | | | | | | Central Alberta & Other Region (Boe/d) | 8,164 | | 8,459 | 8,001 | 7,423 | | | | | | | Total (Boe/d) | 101,348 | | 97,370 | 96,393 | 88,672 | | | | | | | Netback | | _$/Boe _(4) | | _$/Boe _(4) | | | _$/Boe _(4) | | _$/Boe _(4) | | | Natural gas revenue | 83.7 | 2.79 | 194.2 | 6.56 | | 349.1 | 3.04 | 671.1 | 6.24 | | | Condensate and oil revenue | 363.7 | 98.12 | 375.1 | 108.50 | | 1,364.2 | 99.25 | 1,448.9 | 117.07 | | | Other NGLs revenue | 22.2 | 36.00 | 27.3 | 48.25 | | 81.9 | 36.06 | 114.2 | 55.37 | | | Royalty income and other revenue | 0.9 | – | 1.1 | – | | 3.3 | – | 18.2 | – | | | Petroleum and natural gas sales | 470.5 | 50.46 | 597.7 | 66.72 | | 1,798.5 | 51.12 | 2,252.4 | 69.60 | | | Royalties | (68.9) | (7.39) | (84.4) | (9.43) | | (254.3) | (7.23) | (335.3) | (10.36) | | | Operating expense | (126.4) | (13.56) | (119.2) | (13.31) | | (453.8) | (12.90) | (407.1) | (12.58) | | | Transportation and NGLs processing | (33.2) | (3.56) | (27.2) | (3.03) | | (134.4) | (3.82) | (123.7) | (3.82) | | | Sales of commodities purchased (5) | 50.2 | 5.38 | 102.7 | 11.47 | | 255.1 | 7.25 | 272.0 | 8.41 | | | Commodities purchased (5) | (47.4) | (5.08) | (100.4) | (11.21) | | (250.2) | (7.11) | (267.0) | (8.25) | | | Netback | 244.8 | 26.25 | 369.2 | 41.21 | | 960.9 | 27.31 | 1,391.3 | 43.00 | | | Risk management contract settlements | 43.0 | 4.61 | (23.0) | (2.57) | | 46.7 | 1.33 | (179.0) | (5.53) | | | Netback including risk management contract settlements | 287.8 | 30.86 | 346.2 | 38.64 | | 1,007.6 | 28.64 | 1,212.3 | 37.47 | | | Capital expenditures | | | | | | | | | | | | Grande Prairie Region | 75.8 | | 135.8 | 380.3 | 453.3 | | | | | | | Kaybob Region | 64.5 | | 11.4 | 190.4 | 131.2 | | | | | | | Central Alberta and Other Region | 61.7 | | 1.0 | 120.0 | 2.1 | | | | | | | Fox Drilling and Cavalier Energy | 3.9 | | 12.1 | 29.2 | 27.7 | | | | | | | Corporate | 3.0 | | 9.3 | 12.2 | 40.7 | | | | | | | Total | 208.9 | | 169.6 | 732.1 | 655.0 | | | | | | | Asset retirement obligations settled | 12.8 | | 7.0 | 54.6 | 36.1 | | | | | |

Earlier from Paramount Resources Ltd.

Paramount Resources Ltd. Announces February Dividend 2024-02-01
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