Western Star Resources Inc. press release

Athabasca Oil Announces 2024 Third Quarter Results Highlighted by Strong Free Cash Flow and Continued Execution on Share Buybacks

2024-10-31

CSE - Canadian National Stock Exchange · Lead · Silver · Zinc · Gold · Copper · Tungsten · Cobalt · Canada

CALGARY, Alberta, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Athabasca Oil Corporation (TSX: ATH) (“Athabasca” or the “Company”) is pleased to report its third quarter results highlighting strong free cash flow underpinned by operational momentum at all assets and continued execution on its return of capital commitment through share buybacks.

Corporate Consolidated Third Quarter Highlights

Production: Average production of 38,909 boe/d (98% Liquids), representing 8% growth year over year (16% on a per share basis). Annual production remains on track with previously increased 2024 guidance of 36,000 – 37,000 boe/d. Cash Flow Growth: Adjusted Funds Flow of $164 million (cash flow from operating activities of $187 million) or $0.30 per share, representing 25% growth on a per share basis year over year. In 2024, the Company forecasts Adjusted Funds Flow of ~$555 million 1 , supported by increased operating scale and constructive Canadian heavy oil pricing. Athabasca forecasts ~100% growth in 2024 forecasted funds flow per share relative to 2022 when growth to 28,000 bbl/d at Leismer was sanctioned. Differentiated Balance Sheet: Proactively refinanced the Company’s senior secured second lien Notes with $200 million of senior unsecured notes at a 6.75% coupon with a 2029 maturity. Consolidated Net Cash position of $135 million with Liquidity of $456 million, including $335 million in cash. Resilient Producer: Competitively positioned with Thermal Oil sustaining capital to hold production flat funded within cash flow at ~US$50/bbl WTI 1 and growth initiatives fully funded within cash flow at ~US$60/bbl WTI 1 . Robust Free Cash Flow: Capital flexibility and balance sheet strength supports durable asset growth and return of capital initiatives for shareholders, resulting in continued top tier cash flow per share growth into the future. Athabasca expects to generate in excess of $1 billion of Free Cash Flow at US$70/bbl WTI 1 after fully funding its growth program during the timeframe of 2024-27. The Company intends to release its 2025 capital budget in December.

Return of Capital

Cumulative Return of Capital of ~$800 million. Commencing in the Fall of 2021 a deliberate strategy prioritized $385 million of debt reduction. Share buybacks commenced in 2023 and have totaled $415 million to date. 2024 Return of Capital Commitment: Athabasca (Thermal Oil) is allocating 100% of Free Cash Flow to share buybacks in 2024. Year to date the Company has completed $257 million in share buybacks and forecasts 2024 Free Cash Flow of ~$315 million 1 . Focus on Per Share Metrics: A steadfast commitment to return of capital has driven an ~104 million share reduction (~16%) in the Company’s fully diluted share count since March 31, 2023.

Athabasca (Thermal Oil) Third Quarter Highlights

Production: ~34,900 bbl/d supported by growth at Leismer (record quarter at ~27,500 bbl/d) and stability at Hangingstone (~7,400 bbl/d). Cash Flow: Adjusted Funds Flow of $150 million with an Operating Netback of $49.68/bbl. Capital Program: $44 million of capital focused on sustaining operations at Leismer and Hangingstone. 2024 capital program forecast of ~$195 million including the commencement of progressive growth to 40,000 bbl/d at Leismer. The Company is currently drilling four new well pairs and six redrill opportunities at Leismer with production expected in early 2025. Two new well pairs at Hangingstone (1,400 meter laterals) will begin steaming in late November with production expected in early 2025. Free Cash Flow: $106 million of Free Cash Flow supporting return of capital commitments.

Duvernay Energy Corporation (“DEC”) Third Quarter Highlights

Production: ~4,100 boe/d (77% Liquids) supported by production from two new pads placed on production in the spring. Results continue to support management’s type curve expectations with restricted IP180s/well averaging ~840 boe/d (82% Liquids) on the 2-well 100% working interest (“WI”) pad and IP120s/well averaging ~835 boe/d (85% Liquids) on the 3-well 30% WI pad. Cash Flow: Adjusted Funds Flow of $14 million with an Operating Netback of $44.20/boe. Capital Program: $6 million focused on commencing a 3-well 100% WI pad at 04-18-64-16W5 which spud in early September. The first two wells have been cased with lateral lengths averaging ~4,000 meters per well. The pad is expected to be completed in 2025. The 2024 capital program forecast is ~$75 million, fully funded within cash flow and cash on hand in DEC.

Corporate Consolidated Strategy

Value Creation: The Company’s Thermal Oil division provides a differentiated liquids weighted growth platform supported by financial resiliency to execute on return of capital initiatives. Athabasca’s subsidiary company, Duvernay Energy Corporation, is designed to enhance value for Athabasca’s shareholders by providing a clear path for self-funded production and cash flow growth in the Kaybob Duvernay resource play. Athabasca (Thermal Oil) and Duvernay Energy have independent strategies and capital allocation frameworks. Consolidated Free Cash Flow Growth: Athabasca’s capital allocation framework is designed to unlock shareholder value by prioritizing multi‐year cash flow per share growth. In 2024, Athabasca forecasts Corporate Consolidated Adjusted Funds Flow of ~$555 million or ~$1 per share, representing ~100% per share growth over 2022 when the Company sanctioned growth to 28,000 bbl/d at Leismer. The Company’s outlook targets ~20% net Adjusted Funds Flow per share compound annual growth rate during the three-year time to 2027 2 .

Athabasca (Thermal Oil) Strategy

Large Resource Base: Athabasca’s top-tier assets underpin a strong Free Cash Flow outlook with low sustaining capital requirements. The long life, low decline asset base includes ~1.2 billion barrels of Proved plus Probable reserves and ~1 billion barrels of Contingent Resource. Strong Financial Position: Prudent balance sheet management is a core tenet of Athabasca’s strategy. During the quarter, Athabasca issued $200 million 6.75% senior unsecured notes due in 2029 and redeemed US$157 million 9.75% senior secured second lien notes due in 2026. The Company proactively refinanced its debt on attractive terms and maintains strategic flexibility with a Net Cash position. Capital Efficient Leismer Expansions: As previously announced, the Company has sanctioned expansion plans at Leismer for growth to 40,000 bbl/d. This will be completed utilizing a progressive build strategy that adds incremental production in the coming years with the full capacity to be achieved in 2028. The capital for this project is estimated at $300 million for a capital efficiency of ~$25,000/bbl/d. The Company can maintain 40,000 bbl/d for approximately fifty years (Proved plus Probable Reserves). Sustaining Hangingstone : Steaming on two new sustaining well pairs will occur later this year with first production expected in early 2025. These wells will support base production with the objective of ensuring Hangingstone continues to deliver meaningful cash flow contributions to the Company and maintaining competitive netbacks ($48.39/bbl Q3 2024 Operating Netback). Corner – Future Optionality: The Company’s Corner asset is a large de-risked oil sands asset adjacent to Leismer with 351 million barrels of Proved plus Probable reserves and 520 million barrels Contingent Resource (Best Estimate Unrisked). There are over 300 delineation wells and ~80% seismic coverage, with reservoir qualities similar or better than Leismer. The asset has a 40,000 bbl/d regulatory approval for development with the existing pipeline corridor passing through the Corner lease. The Company has updated its development plans and is finalizing facility cost estimates. Athabasca intends to explore external funding options and does not plan to fund an expansion utilizing existing cash flow or balance sheet resources. Exposure to Improving Heavy Oil Pricing: With the start-up of the Trans Mountain pipeline expansion (590,000 bbl/d) in early May, spare pipeline capacity is driving tighter and less volatile WCS heavy differentials. Regional liquids pricing benchmarks have also been supported by a depreciating Canadian currency relative to the United States. Every US$5/bbl WCS change impacts Athabasca (Thermal Oil) Adjusted Funds Flow by ~$85 million annually. Significant Multi-Year Free Cash Flow: Inclusive of the progressive growth at Leismer, Athabasca (Thermal Oil) expects to generate in excess of $1 billion of Free Cash Flow at US$70 WTI 1 during the timeframe of 2024-27. Free Cash Flow will continue to support the Company’s return of capital initiatives. Thermal Oil Royalty Advantage: Athabasca has significant unrecovered capital balances on its Thermal Oil Assets that ensure a low Crown royalty framework (~6% 1 ). Leismer is forecasted to remain pre-payout until late 2027 1 and Hangingstone is forecasted to remain pre-payout beyond 2030 1 . Tax Free Horizon Advantage: Athabasca (Thermal Oil) has $2.4 billion of valuable tax pools and does not forecast paying cash taxes this decade.

Duvernay Energy Strategy

Accelerating Value: DEC is an operated, private subsidiary of Athabasca (owned 70% by Athabasca and 30% by Cenovus Energy). DEC accelerates value realization for Athabasca’s shareholders by providing a clear path for self-funded production and cash flow growth without compromising Athabasca’s capacity to fund its Thermal Oil assets or its return of capital strategy. Kaybob Duvernay Focused: Exposure to ~200,000 gross acres in the liquids rich and oil windows with ~500 gross future well locations, including ~46,000 gross acres with 100% working interest. Self-Funded Growth: Current activity is being funded within cash flow and cash on hand. The 2024 program includes drilling and completions of a two-well 100% WI pad and a three-well 30% WI pad along with the spudding an additional multi-well pad in September 2024. The Company has self-funded growth potential to in excess of ~20,000 boe/d (75% Liquids) by the late 2020s 1 .

Footnote: Refer to the “Reader Advisory” section within this news release for additional information on Non‐GAAP Financial Measures (e.g. Adjusted Funds Flow, Free Cash Flow, Sustaining Capital, Net Cash, Liquidity) and production disclosure.

1 Pricing Assumptions: realized prices January – October and flat pricing of US$70 WTI, US$12.50 WCS heavy differential, C$2 AECO, and 0.73 C$/US$ FX for the balance of 2024 . 2025-2 7 US$70 WTI, US$12.50 WCS heavy differential, C$3.00 AECO, and 0.75 C$/US$ FX. 2 The Company’s illustrative multi-year outlook assumes a 10% annual share buyback program at an implied share price of 4.5x EV/Debt Adjusted Cash flow in 2025 and beyond.

Financial and Operational Highlights

| | Three months ended September 30, | | Nine months ended September 30, | | | | | | | | | | | | | | | ($ Thousands, unless otherwise noted) | 2024 | | | 2023 | | | 2024 | | | 2023 | | | | | | | | CORPORATE CONSOLIDATED ( 1) | | | | | | | | | | | | | | | | | | Petroleum and natural gas production (boe/d) ( 2) | | 38,909 | | | | 36,176 | | | | 36,675 | | | | 34,950 | | | | Petroleum, natural gas and midstream sales | $ | 376,781 | | | $ | 379,241 | | | $ | 1,089,635 | | | $ | 952,596 | | | | Operating Income ( 2) | $ | 180,184 | | | $ | 168,410 | | | $ | 465,070 | | | $ | 320,063 | | | | Operating Income Net of Realized Hedging ( 2)(3) | $ | 175,755 | | | $ | 164,643 | | | $ | 460,511 | | | $ | 289,645 | | | | Operating Netback ($/boe) ( 2) | $ | 49.12 | | | $ | 50.84 | | | $ | 46.36 | | | $ | 33.27 | | | | Operating Netback Net of Realized Hedging ($/boe) ( 2)(3) | $ | 47.91 | | | $ | 49.70 | | | $ | 45.91 | | | $ | 30.11 | | | | Capital expenditures | $ | 50,634 | | | $ | 33,286 | | | $ | 175,098 | | | $ | 101,080 | | | | Cash flow from operating activities | $ | 187,143 | | | $ | 134,879 | | | $ | 398,864 | | | $ | 202,330 | | | | per share - basic | $ | 0.35 | | | $ | 0.23 | | | $ | 0.72 | | | $ | 0.34 | | | | Adjusted Funds Flow ( 2) | $ | 163,680 | | | $ | 141,138 | | | $ | 417,198 | | | $ | 213,406 | | | | per share - basic | $ | 0.30 | | | $ | 0.24 | | | $ | 0.75 | | | $ | 0.36 | | | | ATHABASCA (THERMAL OIL) | | | | | | | | | | | | | | | | | | Bitumen production (bbl/d) ( 2) | | 34,853 | | | | 31,691 | | | | 33,390 | | | | 29,972 | | | | Petroleum, natural gas and midstream sales | $ | 372,634 | | | $ | 360,761 | | | $ | 1,072,954 | | | $ | 895,167 | | | | Operating Income ( 2) | $ | 163,694 | | | $ | 155,415 | | | $ | 425,837 | | | $ | 278,533 | | | | Operating Netback ($/bbl) ( 2) | $ | 49.68 | | | $ | 53.59 | | | $ | 46.64 | | | $ | 33.72 | | | | Capital expenditures | $ | 44,431 | | | $ | 34,439 | | | $ | 120,634 | | | $ | 89,604 | | | | Adjusted Funds Flow ( 2) | $ | 150,088 | | | | | $ | 383,214 | | | | | | | | | | Free Cash Flow ( 2) | $ | 105,657 | | | | | $ | 262,580 | | | | | | | | | | DUVERNAY ENERGY ( 1) | | | | | | | | | | | | | | | | | | Petroleum and natural gas production (boe/d) ( 2) | | 4,056 | | | | 4,485 | | | | 3,285 | | | | 4,978 | | | | Percentage Liquids (%) ( 2) | 77 | % | | 55 | % | | 77 | % | | 56 | % | | | | | | | Petroleum, natural gas and midstream sales | $ | 24,728 | | | $ | 24,508 | | | $ | 63,015 | | | $ | 78,403 | | | | Operating Income ( 2) | $ | 16,490 | | | $ | 12,995 | | | $ | 39,233 | | | $ | 41,530 | | | | Operating Netback ($/boe) ( 2) | $ | 44.20 | | | $ | 31.50 | | | $ | 43.59 | | | $ | 30.56 | | | | Capital expenditures | $ | 6,203 | | | $ | (1,153 | ) | | $ | 54,464 | | | $ | 11,476 | | | | Adjusted Funds Flow ( 2) | $ | 13,592 | | | | | $ | 33,984 | | | | | | | | | | Free Cash Flow ( 2) | $ | 7,389 | | | | | $ | (20,480 | ) | | | | | | | | | NET INCOME AND COMPREHENSIVE INCOME | | | | | | | | | | | | | | | | | | Net income and comprehensive income ( 4) | $ | 68,722 | | | $ | (79,212 | ) | | $ | 203,407 | | | $ | (78,726 | ) | | | per share - basic ( 4) | $ | 0.13 | | | $ | (0.14 | ) | | $ | 0.37 | | | $ | (0.13 | ) | | | per share - diluted ( 4) | $ | 0.12 | | | $ | (0.14 | ) | | $ | 0.36 | | | $ | (0.13 | ) | | | COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | | | Weighted average shares outstanding - basic | | 540,884,257 | | | | 581,917,255 | | | | 555,035,218 | | | | 586,906,810 | | | | Weighted average shares outstanding - diluted | | 550,712,443 | | | | 581,917,255 | | | | 559,203,568 | | | | 586,906,810 | | |

| | | | September 30 | | December 31 | | | | | As at ($ Thousands) | | | 2024 | | 2023 | | | | | LIQUIDITY AND BALANCE SHEET | | | | | | | | | | Cash and cash equivalents | | | $ | 334,851 | | $ | 343,309 | | | Available credit facilities ( 5) | | | $ | 121,316 | | $ | 85,488 | | | Face value of term debt ( 6) | | | $ | 200,000 | | $ | 207,648 | |

(1) Corporate Consolidated and Duvernay Energy reflect gross production and financial metrics before taking into consideration Athabasca's 70% equity interest in Duvernay Energy. (2) Refer to the “Reader Advisory” section within this News Release for additional information on Non-GAAP Financial Measures and production disclosure. (3) Includes realized commodity risk management loss of $4.4 million and $4.6 million for the three and nine months ended September 30, 2024 (three and nine months ended September 30, 2023 – loss of $3.8 million and $30.4 million). (4) Net income (loss) and comprehensive income (loss) per share amounts are based on net income (loss) and comprehensive income (loss) attributable to shareholders of the Parent Company. In the calculation of diluted net income (loss) per share for the three months ended September 30, 2024 net income (loss) was reduced by $2.6 million to account for the impact to net income (loss) had the outstanding warrants been converted to equity. (5) Includes available credit under Athabasca's and Duvernay Energy's Credit Facilities and Athabasca's Unsecured Letter of Credit Facility. (6) The face value of the term debt at December 31, 2023 was US$157.0 million translated into Canadian dollars at the December 31, 2023 exchange rate of US$1.00 = C$1.3226.

Operations Update

Athabasca (Thermal Oil)

Production for the third quarter of 2024 averaged 34,853 bbl/d. The Thermal Oil division generated Operating Income of $164 million (Operating Netbacks - $50.05/bbl at the Leismer and $48.39/bbl at Hangingstone) during the period with capital expenditures of $44 million, primarily related to drilling and completions, and progressing future growth initiatives at Leismer.

Leismer

Leismer produced a record 27,485 bbl/d during the quarter following the completion of the facility expansion. The Company is continuing with progressive growth to increase Leismer production to 40,000 bbl/d (regulatory approved capacity) over the next three years. These capital projects are flexible and highly economic (~$25,000/bbl/d capital efficiency) and will maximize value creation when executed alongside the Company’s return of capital initiatives. Activity over the next three years will include drilling ~20 well pairs (sustaining and growth wells), expanding steam capacity to ~130,000 bbl/d and adding oil processing capacity at the central processing facility. The project will benefit from installing opportunistically pre-purchased steam generators which reduce the timelines and costs for the project.

Activity in H2 2024 includes drilling four sustaining well pairs at Pad L10 and six extended redrills on Pad L1, with production expected in early 2025.

Hangingstone

Production during the quarter averaged 7,368 bbl/d. Non-condensable gas co-injection continues to assist in pressure support, reduced energy usage and an improved SOR averaging ~3.4x year to date. During the quarter the Company rig released two ~1,400 meter well pairs with first steam planned for later this year and production in early 2025. Well design with extended reach laterals is expected to drive project capital efficiencies of ~$15,000/bbl/d and will leverage off available plant and infrastructure capacity. These sustaining well pairs will support base production with the objective of ensuring Hangingstone continues to deliver meaningful cash flow contributions to the Company and maintaining competitive netbacks.

Duvernay Energy

Production for the third quarter of 2024 averaged 4,056 boe/d (77% Liquids). Duvernay Energy generated Operating Income of $16 million (Operating Netback - $44.20/boe) during the period.

Duvernay Energy brought its two-well 100% working interest pad at 03-18-64-17W5 on production in late April. The pad generated an average restricted 180-day rate of ~840 boe/d per well (82% liquids). A three well pad (30% working interest) at 02-03-65-20W5 was brought on production in late May, with an approximate 120-day rate of ~835 boe/d per well (85% liquids). Both pads are performing in-line with management’s expectations and are exhibiting strong extended results with high liquids content. The Company spud a three-well 100% working interest pad at 4-18-64-16W5 in September. Two wells have been cased on this pad with average laterals of ~4,000 meters per well. The operated pad of wells is expected to be completed in 2025.

About Athabasca Oil Corporation

Athabasca Oil Corporation is a Canadian energy company with a focused strategy on the development of thermal and light oil assets. Situated in Alberta’s Western Canadian Sedimentary Basin, the Company has amassed a significant land base of extensive, high quality resources. Athabasca’s light oil assets are held in a private subsidiary (Duvernay Energy Corporation) in which Athabasca owns a 70% equity interest. Athabasca’s common shares trade on the TSX under the symbol “ATH”. For more information, visit www.atha.com .

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Reader Advisory:

This News Release contains forward-looking information that involves various risks, uncertainties and other factors. All information other than statements of historical fact is forward-looking information. The use of any of the words “anticipate”, “plan”, “project”, “continue”, “maintain”, “may”, “estimate”, “expect”, “will”, “target”, “forecast”, “could”, “intend”, “potential”, “guidance”, “outlook” and similar expressions suggesting future outcome are intended to identify forward-looking information. The forward-looking information is not historical fact, but rather is based on the Company’s current plans, objectives, goals, strategies, estimates, assumptions and projections about the Company’s industry, business and future operating and financial results. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. No assurance can be given that these expectations will prove to be correct and such forward-looking information included in this News Release should not be unduly relied upon. This information speaks only as of the date of this News Release. In particular, this News Release contains forward-looking information pertaining to, but not limited to, the following: our strategic plans; the allocation of future capital; timing and quantum for shareholder returns including share buybacks; the terms of our NCIB program; our drilling plans and capital efficiencies; production growth to expected production rates and estimated sustaining capital amounts; timing of Leismer’s and Hangingstone’s pre-payout royalty status; applicability of tax pools and the timing of tax payments; expected operating results at Hangingstone; Adjusted Funds Flow and Free Cash Flow in 2024 and 2025 to 2027; type well economic metrics; number of drilling locations; forecasted daily production and the composition of production; our outlook in respect of the Company’s business environment, including in respect of the Trans Mountain pipeline expansion and heavy oil pricing; and other matters.