Veren Announces Strategic Infrastructure Transaction
Veren Inc. (TSX/NYSE: VRN) has announced a strategic partnership with Pembina Gas Infrastructure (PGI) involving infrastructure assets in the Alberta Montney. Key highlights include:
1. $400 million in net cash proceeds directed towards debt reduction
2. Gaining operatorship of additional oil battery sites
3. Renegotiated agreements resulting in reduced fees
4. Priority access and firm processing at Patterson Creek Gas Plant
5. Option for future infrastructure development with PGI funding up to $300 million
The transaction is expected to close in Q4 2024. Veren has narrowed its 2024 production guidance to 192,500-197,500 boe/d and maintains its development capital expenditures budget of $1.4-1.5 billion. The company aims to reduce its year-end 2024 net debt to $2.4 billion, resulting in a total reduction of $1.3 billion in 2024.
Veren Inc. (TSX/NYSE: VRN) ha annunciato una partnership strategica con Pembina Gas Infrastructure (PGI) che coinvolge beni infrastrutturali nella regione dell'Alberta Montney. Punti salienti includono:
1. 400 milioni di dollari in proventi netti destinati alla riduzione del debito
2. Acquisizione della gestione di ulteriori siti di produzione petrolifera
3. Accordi rinegoziati che portano a riduzioni delle commissioni
4. Accesso prioritario e lavorazione garantita presso il Patterson Creek Gas Plant
5. Opzione per lo sviluppo infrastrutturale futuro con finanziamenti PGI fino a 300 milioni di dollari
La transazione dovrebbe chiudersi nel quarto trimestre del 2024. Veren ha ridotto le proprie previsioni di produzione per il 2024 a 192.500-197.500 boe/giorno e mantiene il suo budget per le spese in conto capitale di sviluppo tra 1,4 e 1,5 miliardi di dollari. L'azienda mira a ridurre il proprio debito netto a fine anno 2024 a 2,4 miliardi di dollari, con una riduzione totale di 1,3 miliardi di dollari nel 2024.
Veren Inc. (TSX/NYSE: VRN) ha anunciado una asociación estratégica con Pembina Gas Infrastructure (PGI) que involucra activos de infraestructura en la región de Alberta Montney. Aspectos destacados incluyen:
1. $400 millones en ingresos netos dirigidos a la reducción de deuda
2. Obtención de la gestión de sitios adicionales de batería de petróleo
3. Acuerdos renegociados que resultan en tarifas reducidas
4. Acceso prioritario y procesamiento firme en la Planta de Gas Patterson Creek
5. Opción para el desarrollo de infraestructura futura con financiación de PGI de hasta $300 millones
Se espera que la transacción se cierre en el cuarto trimestre de 2024. Veren ha ajustado su guía de producción para 2024 a 192,500-197,500 boe/d y mantiene su presupuesto de gastos de capital de desarrollo de $1.4-1.5 mil millones. La empresa tiene como objetivo reducir su deuda neta a fin de 2024 a $2.4 mil millones, resultando en una reducción total de $1.3 mil millones en 2024.
Veren Inc. (TSX/NYSE: VRN)은 앨버타 몬트니 지역의 인프라 자산을 포함한 Pembina Gas Infrastructure (PGI)와 전략적 파트너십을 발표했습니다. 주요 하이라이트는 다음과 같습니다:
1. 부채 감축을 위한 4억 달러의 순현금 수익
2. 추가 석유 배터리 사이트의 운영권 확보
3. 수수료 인하로 이어진 재계약
4. Patterson Creek 가스 플랜트에서의 우선 접근 및 고정 처리
5. PGI의 최대 3억 달러 자금 지원으로 향후 인프라 개발 옵션
이번 거래는 2024년 4분기에 종료될 것으로 예상됩니다. Veren은 2024년 생산 전망을 192,500-197,500 boe/일로 조정했으며, 14억~15억 달러의 개발 자본 지출 예산을 유지합니다. 이 회사는 2024년 말까지 순부채를 24억 달러로 줄여 2024년에 총 13억 달러를 감축하는 것을 목표로 하고 있습니다.
Veren Inc. (TSX/NYSE: VRN) a annoncé un partenariat stratégique avec Pembina Gas Infrastructure (PGI) concernant des actifs d'infrastructure dans la région de l'Alberta Montney. Les points clés comprennent :
1. 400 millions de dollars de produits nets destinés à la réduction de la dette
2. Prise en charge de l'exploitation de sites de batteries à huile supplémentaires
3. Accords renégociés entraînant des frais réduits
4. Accès prioritaire et traitement ferme à l'usine de gaz Patterson Creek
5. Option pour le développement d'infrastructure future avec un financement de PGI allant jusqu'à 300 millions de dollars
La transaction devrait être finalisée au quatrième trimestre 2024. Veren a réduit ses prévisions de production pour 2024 à 192 500-197 500 boe/jour et maintient son budget de dépenses en capital de développement à 1,4 - 1,5 milliard de dollars. L'entreprise vise à réduire sa dette nette à fin 2024 à 2,4 milliards de dollars, résultant en une réduction totale de 1,3 milliard de dollars en 2024.
Veren Inc. (TSX/NYSE: VRN) hat eine strategische Partnerschaft mit Pembina Gas Infrastructure (PGI) angekündigt, die Infrastrukturvermögenswerte in der Alberta Montney-Region umfasst. Wichtige Highlights sind:
1. 400 Millionen US-Dollar an Nettobarverkäufen, die zur Schuldensenkung verwendet werden
2. Übernahme der Betriebsführung zusätzlicher Öl-Batteriestandorte
3. Neu verhandelte Vereinbarungen, die zu reduzierten Gebühren führen
4. Vorrangiger Zugang und feste Verarbeitung im Patterson Creek Gaswerk
5. Option für die zukünftige Infrastrukturentwicklung mit PGI-Finanzierung von bis zu 300 Millionen US-Dollar
Die Transaktion wird für das vierte Quartal 2024 erwartet. Veren hat seine Produktionsprognose für 2024 auf 192.500-197.500 boe/Tag gesenkt und hält sein Budget für die Entwicklungskapitalausgaben von 1,4 bis 1,5 Milliarden US-Dollar aufrecht. Das Unternehmen hat das Ziel, seine Nettoverschuldung bis Ende 2024 auf 2,4 Milliarden US-Dollar zu reduzieren, was einer Gesamtreduktion von 1,3 Milliarden US-Dollar im Jahr 2024 entspricht.
- Receiving $400 million in net cash proceeds for debt reduction
- Gaining operatorship of additional oil battery sites, enhancing efficiencies and reducing operating costs
- Renegotiated agreements resulting in lower fees
- Securing priority access and firm processing capacity at Patterson Creek Gas Plant
- Option for future infrastructure development with PGI funding up to $300 million
- Expected total debt reduction of $1.3 billion in 2024
- Temporary production impact due to facility capacity expansion in Gold Creek West area
- Production temporarily impacted in Q3 2024 by unplanned turnaround activity and third-party facilities downtime
- Narrowing of full-year 2024 production guidance range
Insights
This strategic infrastructure transaction is a significant positive development for Veren. The
The renegotiated agreements and consolidated contracts with PGI are likely to result in cost savings and operational efficiencies. The priority access and firm processing commitments secure Veren's long-term production capabilities in the Alberta Montney region.
The option for future infrastructure development with up to
This transaction demonstrates Veren's strategic approach to optimizing its midstream assets while maintaining operational control. By selling non-core infrastructure assets but retaining operatorship, Veren can focus on its core competencies in upstream operations while benefiting from PGI's midstream expertise.
The reduced fees and priority access to processing capacity are important in the competitive Montney play, potentially giving Veren a cost advantage over peers. The 15-year take-or-pay commitment, while a long-term obligation, provides stability and predictability for both parties.
The narrowing of production guidance to 192,500 to 197,500 boe/d suggests some short-term operational challenges, but the unchanged capital expenditure budget indicates confidence in achieving targets. The accelerated facility expansion in Gold Creek West area signals strong well performance and could lead to production upside in the future.
Veren's transaction with PGI is a smart strategic move that aligns with industry trends of upstream companies divesting midstream assets to focus on core operations. This deal achieves multiple objectives: debt reduction, operational efficiency and future growth potential.
The debt reduction of
The option for PGI-funded future infrastructure development is a flexible growth mechanism that allows Veren to expand without straining its balance sheet. The company's commitment to returning
KEY HIGHLIGHTS
- Directing
$400 million $1.3 billion - Gaining operatorship of additional oil battery sites, further enhancing efficiencies and reducing operating costs.
- Renegotiated and consolidated multiple prior agreements resulting in reduced fees.
- Receiving priority access for all products and firm processing for 100 percent of capacity at Patterson Creek Gas Plant.
- Option to design, construct and operate certain future infrastructure assets with PGI funding up to
$300 million
TRANSACTION DETAILS AND STRATEGIC PARTNERSHIP SYNERGIES
Veren and PGI have entered into a transaction for certain infrastructure assets in the Alberta Montney which includes the Company selling to PGI primarily all its working interest in four oil battery sites in the Gold Creek and Karr areas, while maintaining full operatorship of these sites. In addition, Veren will acquire full operatorship of four oil battery sites which are currently operated by PGI. The Company will also acquire firm processing commitment for 100 percent of capacity at the Patterson Creek Gas Plant and will receive priority access for all its products at the oil battery sites, further enhancing Veren's long-term execution in the area. PGI, a joint venture between Pembina Pipeline Corporation and KKR, is an established industry midstream partner with extensive infrastructure and midstream assets within Veren's Alberta Montney and Kaybob Duvernay plays and has a track record of safe and reliable operations.
The Company and PGI also renegotiated and consolidated multiple prior agreements for gathering and processing of Veren's products in the Alberta Montney, resulting in a new agreement with lower fees. The Company has agreed to an amended area of dedication and a 15 year take-or-pay commitment at the oil battery sites with PGI, which will result in an annual fee of
As part of this transaction, the Company will receive net cash proceeds of
PGI has also granted Veren an option to design, construct and operate certain future infrastructure development in the Company's Alberta Montney area and agreed to fund up to
Including the impact from a reduction in Veren's future capital expenditures related to facility expansions funded by PGI and expected interest expense savings due to the immediate reduction in debt as a result of this transaction, the Company's expected cumulative five-year after-tax excess cash flow remains unchanged, while reducing its net debt by
This transaction is expected to close in fourth quarter 2024 and is subject to customary closing conditions. CIBC Capital Markets is acting as financial advisor and BMO Capital Markets is acting as strategic advisor to Veren in relation to this transaction.
BALANCE SHEET STRENGHTENING
The Company will direct the
OUTLOOK
As a result of higher-than-expected production from the Company's multi-well pads in the Gold Creek West area of its Alberta Montney in 2024, Veren plans to accelerate facility capacity expansion on its retained oil battery site in the area that is fully owned and operated by the Company from 2025 to fourth quarter 2024. Production from this area is expected to be temporarily impacted as the expansion takes place. Veren's production was also temporarily impacted in third quarter 2024 by unplanned turnaround activity and third-party facilities downtime. As a result, the Company is narrowing its full year 2024 production guidance range to 192,500 to 197,500 boe/d (from 191,000 to 199,000 boe/d), with the mid-point of the production guidance range remaining unchanged. Veren's 2024 development capital expenditures budget of
The Company is committed to its strategic priorities of operational execution, strengthening its balance sheet and increasing its return of capital.
Net debt and development capital expenditures are specified financial measures. Refer to the Advisory. |
2024 GUIDANCE
Prior | Revised | |
Total Annual Average Production (boe/d) (1) | 191,000 - 199,000 | 192,500 - 197,500 |
Capital Expenditures | ||
Development capital expenditures ($ millions) | ||
Capitalized administration ($ millions) | ||
Total ($ millions) (2) | ||
Other Information for 2024 Guidance | ||
Reclamation activities ($ millions) (3) | ||
Capital lease payments ($ millions) | ||
Annual operating expenses ($/boe) | ||
Royalties |
1) | The revised total annual average production (boe/d) is comprised of approximately |
2) | Land expenditures and net property acquisitions and dispositions are not included. Revised development capital expenditures is allocated on an approximate basis as follows: |
3) | Reflects Veren's portion of its expected total budget |
RETURN OF CAPITAL OUTLOOK | |
Base Dividend | |
Current quarterly base dividend per share
|
|
Total Return of Capital | |
% of excess cash flow (1) | ~ |
1) | Total return of capital is based on a framework that targets to return to shareholders |
Advisory
Specified Financial Measures
Throughout this press release the Company uses the terms "net debt" and "development capital expenditures", which are specified financial measures under National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure. These terms do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS") and, therefore, may not be comparable with the calculation of similar measures presented by other issuers. For information on the composition of these measures and how the Company uses these measures, refer to the Specified Financial Measures section of the Company's MD&A for the period ended June 30, 2024, which section is incorporated herein by reference, and available on SEDAR+ at www.sedarplus.com, or EDGAR at www.sec.gov/edgar and on our website at www.vrn.com. There are no significant differences in the calculations between historical and forward-looking specified financial measures.
For the three months ended June 30, 2024, development capital expenditures was
Management believes the presentation of the specified financial measures above provide useful information to investors and shareholders as the measures provide increased transparency and the ability to better analyze performance against prior periods on a comparable basis. This information should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
Forward-Looking Statements
Certain statements contained in this press release constitute "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934 and "forward-looking information" for the purposes of Canadian securities regulations (collectively, "forward-looking statements"). Forward-looking statements are usually accompanied by words such as "anticipate", "expect", "believe", "will", "may", "intend", or other similar expressions, but these expressions are not the exclusive means of identifying such statements.
In particular, this press release contains forward-looking statements pertaining to, among other things, the following: use of the infrastructure disposition proceeds; total 2024 debt reduction; expected synergies and benefits from the infrastructure transactions and related agreements; net debt reduction; unchanged cumulative five-year after-tax excess cash flow; timing for closing of the transaction; accelerated facility capacity expansion on its retained oil battery site and production impact; benefits of the option to design, construct and operate certain future infrastructure development in the Company's Alberta Montney area; 2024 production and capital guidance; strategic priorities; Veren's 2024 production and development capital expenditures guidance; and other information for Veren's 2024 guidance, including capitalized administration, reclamation activities, capital lease payments, annual operating expenses and royalties; and return of capital outlook, including base dividend, and the additional return of capital targeted as a percentage of excess cash flow.
All forward-looking statements are based on Veren's beliefs and assumptions based on information available at the time the assumption was made. Veren believes that the expectations reflected in these forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon. By their nature, such forward-looking statements are subject to a number of risks, uncertainties and assumptions, which could cause actual results or other expectations to differ materially from those anticipated, expressed or implied by such statements, including those material risks discussed in the Company's Annual Information Form for the year ended December 31, 2023 under "Risk Factors" and our Management's Discussion and Analysis for the year ended December 31, 2023, under the headings "Risk Factors" and "Forward-Looking Information" and for the three and six months ended June 30, 2024, under the headings "Risk Factors" and "Forward-Looking Information". The material assumptions are disclosed in the Management's Discussion and Analysis for the year ended December 31, 2023, under the headings "Capital Expenditures", "Liquidity and Capital Resources", "Critical Accounting Estimates", "Risk Factors" and "Changes in Accounting Policies" and in the Management's Discussion and Analysis for the three and six months ended June 30, 2024, under the headings "Overview", "Commodity Derivatives", "Liquidity and Capital Resources", "Guidance", "Royalties" and "Operating Expenses". In addition, risk factors include: financial risk of marketing reserves at an acceptable price given market conditions; volatility in market prices for oil and natural gas, decisions or actions of OPEC and non-OPEC countries in respect of supplies of oil and gas; delays in business operations or delivery of services due to pipeline restrictions, rail blockades, outbreaks, pandemics, and blowouts; the risk of carrying out operations with minimal environmental impact; industry conditions including changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; uncertainties associated with estimating oil and natural gas reserves; risks and uncertainties related to oil and gas interests and operations on Indigenous lands; economic risk of finding and producing reserves at a reasonable cost; uncertainties associated with partner plans and approvals; operational matters related to non-operated properties; increased competition for, among other things, capital, acquisitions of reserves and undeveloped lands; competition for and availability of qualified personnel or management; incorrect assessments of the value and likelihood of acquisitions and dispositions, and exploration and development programs; unexpected geological, technical, drilling, construction, processing and transportation problems; the impacts of drought, wildfires and severe weather events; availability of insurance; fluctuations in foreign exchange and interest rates; stock market volatility; general economic, market and business conditions, including uncertainty in the demand for oil and gas and economic activity in general; changes in interest rates and inflation; uncertainties associated with regulatory approvals; geopolitical conflicts, including the Russian invasion of
Included in this press release are Veren's 2024 guidance in respect of capital expenditures and average annual production which is based on various assumptions as to production levels, commodity prices and other assumptions and are provided for illustration only and are based on budgets and forecasts that have not been finalized and are subject to a variety of contingencies including prior years' results. The Company's return of capital framework is based on certain facts, expectations and assumptions that may change and, therefore, this framework may be amended as circumstances necessitate or require. To the extent such estimates constitute a "financial outlook" or "future oriented financial information" in this press release, as defined by applicable securities legislation, such information has been approved by management of Veren. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.
Additional information on these and other factors that could affect Veren's operations or financial results are included in Veren's reports on file with Canadian and
The forward-looking information herein is expressly qualified by the foregoing cautionary statements.
FOR MORE INFORMATION ON VEREN, PLEASE CONTACT:
Sarfraz Somani, Manager, Investor Relations
Telephone: (403) 693-0020 Toll-free (US and
Address: Veren Inc. Suite 2000, 585 - 8th Avenue S.W.
www.vrn.com
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SOURCE Veren Inc.
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