Greenfire Resources Announces Q4 2023 Results, Year-end 2023 Reserves and Continued Success of the Company's Multi-year Drilling Program in Q1 2024, Including the Inaugural Extended Reach Refill Well at the Demo Asset
- Positive production results and financial performance in Q4 2023, with consolidated bitumen production of 17,335 bbls/d and adjusted EBITDA of $23.4 million.
- Successful drilling programs and facility optimizations driving productivity potential at Greenfire's Tier-1 SAGD assets.
- Reserves evaluations for 2023 show significant reserves growth, with NPV10 of $2.4 billion for 2P reserves, reflecting the company's value potential.
- Operational updates for Q1 2024 include increased bitumen production, debt repayment focus, and plans for shareholder returns.
- Greenfire's growth-oriented strategy leverages its Tier-1 SAGD assets for production growth, free cash flow generation, and potential acquisitions.
- The company's commitment to debt repayment, shareholder returns, and value generation underpins its long-term sustainability and growth prospects.
- None.
Insights
The report from Greenfire Resources Ltd. details several key financial and operational metrics that are vital for understanding the company's performance and future outlook. The company's bitumen production levels are noteworthy, as they reflect the effectiveness of its Refill drilling program and facility optimizations. This production data is essential for gauging Greenfire's operational efficiency and its ability to capitalize on its assets in the Athabasca region.
Furthermore, the Adjusted EBITDA and funds flow provide insight into the company's profitability and cash generation capabilities. A significant decline in these figures year-over-year could signal operational challenges or market pressures affecting the company's financial health. The capital expenditures and liquidity information also offer a view of the company's investment in growth and its financial resilience, respectively.
Lastly, the discussion of the Trans Mountain Expansion Project (TMX) and its potential impact on the Canadian heavy oil barrel provides a strategic angle, as successful completion could enhance market access and improve pricing for Greenfire's production. This aspect is particularly relevant given the company's production is tied to WCS differentials, which could see a positive shift with the TMX's operation.
The disclosed financial results, including a decrease in Adjusted EBITDA and funds flow from the previous year, raise questions about the company's revenue and cost management strategies. The net loss reported for the year could be indicative of broader industry trends or company-specific operational issues. Investors will be interested in understanding the drivers behind these numbers, such as commodity price fluctuations or operational inefficiencies.
Greenfire's debt repayment strategy, which commits 75% of excess cash flow to redeeming the 2028 Notes, is a prudent approach to strengthening the balance sheet. The focus on debt reduction is a positive sign for investor confidence, as it suggests a commitment to financial stability and future solvency.
Analyzing the reserves evaluations and their net present value provides a long-term perspective on the company's assets and potential future revenue streams. The large 2P reserves life index suggests a robust reserve base that could support extended production and revenue generation, which is a significant factor for long-term investors.
Greenfire's operational update and forward-looking statements regarding its Refill drilling program and production growth strategies are key indicators of the company's ambition to scale operations. The industry's response to these initiatives, particularly in the context of the oil sands market, will influence the company's market positioning and competitive edge.
The potential re-rating of the Canadian heavy oil barrel, in light of the TMX, could have a considerable impact on the company's revenue streams. Market dynamics such as the WCS differential play a important role in the profitability of companies like Greenfire, which rely on heavy oil production. As such, any shift in this differential is likely to affect the company's financial performance.
Moreover, the company's commitment to capital return policies and evaluation of additional growth opportunities, including acquisitions, signals a proactive approach to shareholder value creation. This strategic direction will be closely monitored by the market, as it could significantly influence the company's stock performance and attractiveness to investors.
Calgary, Alberta--(Newsfile Corp. - March 20, 2024) - Greenfire Resources Ltd. (NYSE: GFR) (TSX: GFR) ("Greenfire" or the "Company"), a Calgary-based energy company focused on the sustainable production and development of thermal energy resources from the Athabasca region of Alberta, Canada, is pleased to announce its operating and financial results for the quarter and year ended December 31, 2023; a summary of the Company's 2023 year-end reserves; and an operational update for the first quarter of 2024. The audited consolidated Financial Statements and Notes and Management's Discussion and Analysis ("MD&A") will be filed on SEDAR+ at www.sedarplus.ca, on EDGAR at www.sec.gov/edgar.shtml and are available on Greenfire's website at www.greenfireres.com.
A conference call to discuss the results has been scheduled for Thursday, March 21, 2024 at 6:00 a.m. Mountain Time (8:00 a.m. Eastern Time). Access details for the conference call are provided below. Following the conference call, Greenfire will ring the opening bell at the Toronto Stock Exchange ("TSX"), commemorating its recent listing under the symbol "GFR". A live webcast of the celebration is expected to be available beginning shortly before 9:30 am ET on BNN Bloomberg and on YouTube at https://www.youtube.com/watch?v=1RLYrYzEtIw.
"Positive production results and impactful initial contributions from the Company's redevelopment infill ("Refill") drilling program and facility optimization initiatives in the fourth quarter of 2023 provided another clear indication of the productivity potential of Greenfire's Tier-1 SAGD assets," said Robert Logan, President and Chief Executive Officer of Greenfire.
"The Company's successful drilling momentum continued in the first quarter of 2024 with the initiation of a seven well extended reach Refill drilling program at the Demo Asset, targeting an industry leading horizontal length averaging approximately 2,000 meters per well."
"Supported by our recent listing on the TSX and amidst a potential re-rating of the Canadian heavy oil barrel with the Trans Mountain Expansion Project ("TMX") anticipated to commence operations in 2024, Greenfire will drive continued production growth, accelerate debt repayment and pursue additional potential step-change value generation opportunities," concluded Mr. Logan.
All dollar amounts reported in this press release are in Canadian dollars unless otherwise noted.
The Company holds a
Q4 and Year-end 2023 Highlights
Delivered consolidated bitumen production of 17,335 barrels per day ("bbls/d") in Q4 2023 and 17,639 bbls/d for the year-end 2023, reflecting strong production performance from the Refill drilling program, which began in August 2023, as well as surface facility optimizations at the Expansion Asset.
Adjusted EBITDA(1) was
$23.4 million in Q4 2023 ($32.5 million - Q4 2022) and$117.3 million for year-end 2023 ($218.0 million - 2022), while adjusted funds flow(1) was$10.5 million in Q4 2023 ($16.9 million - Q4 2022) and$73.2 million for year-end 2023 ($163.9 million - 2022).Capital expenditures totaled
$33.4 million in 2023, which included$19.4 million deployed in the fourth quarter, consisting of$14.9 million allocated to the Refill drilling program at the Expansion Asset, and$4.5 million directed to various facility projects.Available liquidity of
$159.5 million at December 31, 2023, consisting of:$109.5 million of cash and cash equivalents; and$50.0 million of available credit under a reserve-based credit facility ("Senior Credit Facility").
Greenfire's independent reserves evaluator, McDaniel & Associates Consultants Ltd. ("McDaniel"), prepared independent reserves evaluations for Greenfire for the year-ended 2023 in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), which reflected the following:
Proved reserves at December 31, 2023 totaled 183.3 MMbbl (183.4 MMbbl - year-end 2022), representing a net present value (discounted at
10% ) ("NPV10") of$2.0 billion based on forecast pricing in accordance with NI 51-101(2) or approximately$24.10 per diluted share, net of outstanding debt plus cash and cash equivalents.Proved plus probable ("2P") reserves at December 31, 2023 totaled 237.7 MMbbl (239.4 MMbbl - year-end 2022), representing an NPV10 of
$2.4 billion based on forecast pricing in accordance with NI 51-101(2) or approximately$29.70 per diluted share, net of outstanding debt plus cash and cash equivalents.Greenfire has a large, long-life and relatively low decline oil sands resource base, with a 2P reserves life index of 37 years(3). The Company has approximately
$1.8 billion of tax pools as at December 31, 2023 and does not anticipate paying cash (income) taxes until approximately 2030.
(1) Non-GAAP measures do not have any standardized meaning prescribed by International Financial Reporting Standards (IFRS") and may not be comparable with the calculation of similar measures presented by other entities. Refer to the discussion under the heading "Non-GAAP and Other Financial Measures" in this press release for further information.
(2) NI 51-101 pricing refers to an average of McDaniel, Sproule and GLJ forecast pricing as at January 1, 2024.
(3) 2P reserves life index is calculated by dividing Greenfire's 2P reserves as at December 31, 2023 by the Company's 2023 annual production.
Financial & Operational Highlights
| Three months ended December 31, | Year ended December 31, | |||||||||||
| ($ thousands, unless otherwise noted) | 2023 | 2022 | 2023 | 2022 | ||||||||
| Bitumen Production - Expansion Asset (bbls/d) | 14,079 | 15,710 | 13,829 | 16,802 | ||||||||
| Bitumen Production - Demo Asset (bbls/d) | 3,256 | 3,869 | 3,810 | 3,701 | ||||||||
| Total Bitumen Production (bbls/d) | 17,335 | 19,579 | 17,639 | 20,503 | ||||||||
| WTI (US$/bbl) | 78.32 | 82.65 | 77.62 | 94.23 | ||||||||
| WCS differential to WTI (US$/bbl) | (21.89 | ) | (25.89 | ) | (18.71 | ) | (18.27 | ) | ||||
| WCS (US$/bbl) | 56.43 | 56.76 | 58.91 | 75.96 | ||||||||
| AECO 5A ($/GJ) | 2.18 | 4.85 | 2.50 | 5.04 | ||||||||
| Oil sales | 161,730 | 180,741 | 675,970 | 998,849 | ||||||||
| Oil sales ($/bbl) | 71.04 | 72.18 | 73.91 | 96.82 | ||||||||
| Operating netback(1) | 27,353 | 34,567 | 132,704 | 229,694 | ||||||||
| Operating netback ($/bbl)(1) | 17.19 | 19.27 | 20.56 | 30.58 | ||||||||
| Operating expenses | 35,084 | 42,429 | 148,965 | 160,826 | ||||||||
| Operating expenses ($/bbl) | 22.05 | 23.65 | 23.08 | 21.41 | ||||||||
| Cash provided (used) by operating activities | 25,530 | 17,322 | 86,548 | 164,727 | ||||||||
| Adjusted EBITDA(1) | 23,434 | 32,528 | 117,316 | 218,033 | ||||||||
| Adjusted funds flow(1) | 10,517 | 16,902 | 73,206 | 163,926 | ||||||||
| Cash provided (used) by investing activities | 18,782 | (17,316 | ) | (12,103 | ) | (63,746 | ) | |||||
| Capital expenditures | 19,413 | 12,361 | 33,428 | 39,592 | ||||||||
| Adjusted free cash flow(1) | (8,896 | ) | 4,541 | 39,778 | 124,334 | |||||||
| Net income (loss) and comprehensive income (loss) | (4,659 | ) | 87,995 | (135,671 | ) | 131,698 | ||||||
| Per share - basic(2) | (0.07 | ) | 1.80 | (2.49 | ) | 2.69 | ||||||
| Per share - diluted(2) | (0.07 | ) | 1.25 | (2.49 | ) | 1.88 | ||||||
| Total assets, end of period | 1,173,483 | 1,174,258 | 1,173,483 | 1,174,258 | ||||||||
| Total non-current financial liabilities, end of period | 332,029 | 191,158 | 332,029 | 191,158 | ||||||||
| Common shares outstanding, end of period | 68,642,515 | 48,911,009 | 68,642,515 | 48,911,009 | ||||||||
| Weighted average shares outstanding - diluted | 68,642,515 | 70,427,594 | 54,425,083 | 69,930,167 | ||||||||
| (1) Non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures presented by other entities. Refer to the discussion under the heading "Non-GAAP and Other Financial Measures" in this press release for further information. (2) For the year ended December 31, 2022, the Company's basic and diluted earnings per share is the net income per common share of Greenfire Resources Inc. ("GRI") and the weighted average common shares outstanding has been adjusted by the applicable exchange ratio following the completion of the business combination (the "De-SPAC Transaction") involving, among other entities, Greenfire, GRI and M3-Brigade Acquisition III Corp., which closed on September 20, 2023. | ||||||||||||
Liquidity and Balance Sheet
| As at ($ thousands) | December 31, 2023 | December 31, 2022 | ||||
| Cash and cash equivalents | 109,525 | 35,363 | ||||
| Restricted cash | - | 35,313 | ||||
| Available credit facilities(1) | 50,000 | 7,000 | ||||
| Face value of Long-term debt(2) | 396,780 | 295,173 | ||||
| (1) Includes (2) As at December 31, 2023, the 2028 Notes (as defined below) have a face value of US | ||||||
Outlook and Q1 2024 Operational Update
Greenfire successfully completed the ten well extended reach Refill drilling program at the Expansion Asset in February of 2024 and subsequently initiated the seven well extended reach Refill drilling program at the Demo Asset.
In the first two months of 2024, consolidated bitumen production increased to average approximately 20,000 bbls/d, reflecting initial production contributions from new extended reach Refill wells and continued increases in reservoir pressure following heightened rates of non-condensable gas ("NCG") co-injection at the Expansion Asset.
Greenfire's previously announced 2024 Outlook allocates capital expenditures to the Hangingstone Facilities, which at the mid-point, includes
$55 million directed to drilling for the development of the Company's capital efficient and productive inventory of Refill well targets, along with$25 million for facilities and field infrastructure investments.Greenfire remains committed to prioritizing debt repayment and intends to reduce debt in the near-term using
75% of excess cash flow (as defined in the indenture for the Company's Senior Secured Notes due 2028, the "2028 Notes") to semi-annually redeem the 2028 Notes until total indebtedness is less than US$150 million .The outstanding principal amount of the 2028 Notes is US
$300 million or$397 million assuming the year-end 2023 U.S. to Canadian dollar exchange rate of 1.32.
The Company is positioned to benefit from completion of TMX, given
100% of its production is weighted to crude oil benchmarks that are linked to Western Canadian Select ("WCS") differentials, which could improve as an incremental 590,000 bbls/d of pipeline egress to tidewater is expected to become operational for Western Canada in 2024.At the mid-point of Greenfire's 2024 Outlook production range and assuming a US
$15 /bbl differential, the Company estimates that each US$1 /bbl change in the WCS differential would impact 2024 adjusted EBITDA by approximately$15 million .
Expansion Asset (
Initial Ten Refill Well Drilling Program Successfully Completed: Eight extended reach Refill wells were drilled at the Expansion Asset during 2023, with an additional two extended reach Refill wells drilled during the first quarter of 2024.
Heightened NCG Co-injection Continues to Support Higher Reservoir Pressure: Greenfire successfully executed multiple NCG debottlenecking initiatives at the Expansion Asset in the second half of 2023, which have enabled the Company to deliver NCG at higher and more consistent rates for reservoir co-injection. With heightened rates sustained, the Company expects that higher reservoir pressure will be restored at the Expansion Asset around mid-2024, which management anticipates will support increased production rates.
Greenfire's working interest bitumen production at the Expansion Asset averaged approximately 17,650 bbls/d during the first two months of 2024. The Company has recently encountered third-party downhole temperature sensor failures in five of the recently drilled Refill wells at the Expansion Asset. Greenfire has completed the first sensor replacement in March 2024 and plans to replace the remaining sensors in the second quarter of 2024. The Company estimates that working interest bitumen production has been impacted by approximately 2,000 bbls/d.
Demo Asset (
Refill Drilling Program Launched: Seven extended reach Refill wells with lateral lengths averaging approximately 2,000 meters are in the process of being drilled.
To accommodate the Refill well drilling activities, producing wells across multiple adjacent pads are expected to temporarily operate at reduced productivity. Greenfire expects to complete the seven Refill well program by the second quarter of 2024.
One extended reach Refill well has been successfully drilled to date, representing the first Refill (or infill) well drilled at the site since the Demo Asset was commissioned for SAGD in 1999.
Disposal Well Expected to Recommence Operations: The disposal well at the Demo Asset has been temporarily shut-in since the beginning of October 2023. Remediation work for this well is now complete, with disposal operations anticipated to recommence upon regulatory approval, which is projected to increase bitumen production by an incremental approximately 1,000 bbls/d once fully operational.
Greenfire's working interest bitumen production at the Demo Asset averaged approximately 2,300 bbls/d during the first two months of 2024, mainly due to production impacts from ongoing Refill well drilling operations as well as the temporarily shut-in of the disposal well.
Greenfire's Growth-oriented Strategy Underpinned by Concentrated Tier-1 SAGD Assets
Greenfire has a large, long-life and relatively low decline Tier-1 oil sands resource base, with two producing and adjacent SAGD assets at the Hangingstone Facilities and expandable pipeline infrastructure in place for diluted bitumen and diluent at the Expansion Asset. The Company's structural cost advantages from its Tier-1 SAGD reservoir at the Hangingstone Facilities, combined with its relatively lower forecasted capital expenditure profile due to its projected multi-year inventory of Refill well targets, is anticipated to result in continued near-term production growth and potential meaningful free cash flow generation. The Company believes that the Hangingstone Facilities offer ample opportunities for additional value generation.
In addition to Greenfire's existing commitment to repay debt, the Company intends to formalize and initiate a policy to return capital to its shareholders over time. Greenfire also plans to evaluate and consider additional potential prospects for further production growth, including external acquisitions that compete with the expected returns from its existing Tier-1 SAGD assets, if the Company believes they are accretive to Greenfire's shareholders.
Year-end 2023 Independent Reserves Reinforce Value Potential at the Hangingstone Facilities
Greenfire's independent reserves evaluator, McDaniel & Associates Consultants Ltd. ("McDaniel"), prepared independent reserves evaluations for Greenfire in accordance with NI 51-101 standards, effective December 31, 2023.
In accordance with NI 51-101 standards using an average of McDaniel, Sproule and GLJ forecast pricing as at January 1, 2024, Greenfire holds approximately 238 million barrels of bitumen 2P reserves with an NPV10 of
December 31, 2023 NI 51-101 Reserves at Forecast Pricing:
| Reserves (mbbls)(1) | NPV10 Before Tax ($ Million)(1)(2) | |||||
| Proved Developed Producing | 30,886 | $ | 746 | |||
| Total Proved | 183,282 | $ | 2,023 | |||
| Total Proved and Probable | 237,679 | $ | 2,423 | |||
| (1) Reserves and the associated values have been reported on a "gross" basis under NI 51-101, which reflects Greenfire's working interest reserves before deduction of royalties. (2) As Greenfire does not expect to be taxable before 2030, the before and after-tax estimates of the NPV10 of Greenfire's reserves are the same. | ||||||
Conference Call Details
Greenfire plans to host a conference call on Thursday, March 21, 2024 at 6:00 a.m. Mountain Time (8:00 a.m. Eastern Time), during which members of the Company's executive team will discuss its Q4 2023 results as well as host a question-and-answer session with investors.
- Date: Thursday, March 21, 2024
- Time: 6:00 a.m. Mountain Time (8:00 a.m. Eastern Time)
- Dial In:
- North America: 1-800-319-4610
- International: 1-604-638-5340
About Greenfire
Greenfire is an intermediate, lower-cost and growth-oriented Athabasca oil sands producer with concentrated Tier-1 assets that use steam assisted gravity drainage extraction methods. The Company is focused on responsible and sustainable energy development in Canada, with its registered office located in Calgary, Alberta. Greenfire is an operationally focused company with an emphasis on an entrepreneurial environment and employee ownership. Greenfire common shares are listed on the New York Stock Exchange and Toronto Stock Exchange under the symbol "GFR". For more information, visit greenfireres.com or find Greenfire on LinkedIn.
Non-GAAP and Other Financial Measures
Certain financial measures in this news release including Adjusted EBITDA (in total, and per bbl), Operating Netback (in total, and per bbl), Adjusted Funds Flow, Adjusted Free Cash Flow), are non-GAAP financial measures or ratios, supplementary financial measures or ratios and capital management measures. These measures are not defined by IFRS and, therefore, may not be comparable to similar measures provided by other companies. These non-GAAP and other financial measures should not be considered in isolation or as an alternative for measures of performance prepared in accordance with IFRS.
For further details of these non-GAAP financial measures or ratios, please refer to the Corporation's MD&A for the quarter ended December 31, 2023 which is available on the Corporation's website at www.greenfireres.com and is also available on the EDGAR and SEDAR+ websites.
Non-GAAP Financial Measures
Adjusted EBITDA
Net income (loss) and comprehensive income (loss) is the most directly comparable GAAP measure for adjusted EBITDA, which is a non-GAAP measure. Adjusted EBITDA is calculated as net income (loss) before interest and financing, income taxes, depletion, depreciation and amortization, the transaction and financing cost impacts of the De-SPAC Transaction and bond refinancing and is adjusted for certain non-cash items, or other items that are not considered part of normal business operations. Adjusted EBITDA is used to measure Greenfire's profitability from its underlying asset base on a continuing basis. This measure is not intended to represent net income (loss) and comprehensive income (loss) in accordance with IFRS.
The following table is a reconciliation of net income (loss) net income (loss) and comprehensive income (loss) to adjusted EBITDA(1).
Adjusted EBITDA(1)
| Three months ended December 31, | Year ended December 31, | ||||||||||||||
| ($ thousands) | 2023 | 2022 | 2023 | 2022 | 2021(2) | ||||||||||
| Net income (loss) | (4,659 | ) | 87,995 | (135,671 | ) | 131,698 | 661,444 | ||||||||
| Add (deduct): | |||||||||||||||
| Income tax recovery | 25,881 | (87,681 | ) | 19,386 | (87,681 | ) | - | ||||||||
| Unrealized (gain) loss risk management contracts | (18,035 | ) | 4,019 | (26,587 | ) | (930 | ) | 35,677 | |||||||
| Stock-based compensation | - | 1,183 | 9,808 | 1,183 | - | ||||||||||
| Financing and interest | 16,370 | 10,794 | 110,214 | 77,074 | 25,050 | ||||||||||
| Depletion and depreciation | 16,273 | 17,702 | 68,054 | 68,027 | 27,071 | ||||||||||
FAQ
What were Greenfire Resources 's Q4 2023 consolidated bitumen production and adjusted EBITDA?
What highlights were mentioned in Greenfire's Q4 and Year-end 2023 results?
What are the key financial and operational highlights for Greenfire Resources ?
What is Greenfire's strategy for debt repayment and shareholder returns?
What operational updates were provided for Q1 2024 by Greenfire Resources ?
What is the significance of Greenfire's Tier-1 SAGD assets and growth-oriented strategy?
