Market Overview

Seven Generations Energy Delivers $355 Million of Adjusted Funds Flow, $1.00 Per Share, and $44 Million of Free Cash Flow in the Second Quarter Of 2019

Share:

Positive lower Montney results point to a third layer of development within the Nest

SECOND QUARTER 2019 HIGHLIGHTS

  • 7G's cash provided by operating activities totaled $422 million. At current strip prices 7G anticipates free cash flow of $100-150 million for full-year 2019, demonstrating meaningful potential for shareholder returns in the current commodity price environment.
  • Total capital investments were $311 million, with 57 percent of the 2019 capital budget invested year to date. Nest 3 Super Pad and gathering system connections were completed on time and budget such that the company is positioned for a lower proportion of infrastructure spending in the balance of the year. The company remains committed to its full-year capital guidance of $1.25 billion.
  • Sales volumes averaged 201,800 boe/d, ahead of the company's guidance and up 8 percent year over year. Condensate sales of 75,900 bbl/d represent an increase of 10 percent compared to condensate sales during the same period in 2018.
  • The company successfully tied-in production from its first full triple-stack pad. Initial 60-day lower Montney rates averaged 1,467 boe/d (67 percent condensate). Production from upper and middle Montney wells on this pad averaged 1,753 boe/d (60 percent condensate). The company is highly encouraged by these results and continues to evaluate future development potential of the lower Montney for its 2020 development program and beyond.
  • 7G has purchased the maximum number of shares initially permitted under its normal course issuer bid (NCIB) by retiring a total of 18.1 million class A common shares (common shares) as of July 31, 2019, or 5 percent of its common shares outstanding as at October 30, 2018. The company has received approval from the Toronto Stock Exchange (TSX) for an expansion of the NCIB to a total of 30.4 million common shares, or 10 percent of its public float as at October 30, 2018, by November 4, 2019.
  • Operating costs averaged $5.00 per boe in the quarter. With significant planned maintenance events now largely completed, 7G is modifying its original annual 2019 operating cost guidance to a range of $5.00 - $5.25 per boe, from $5.00 - $5.50 per boe, to reflect an improving cost structure.
  • The company's trailing 12-month return on capital employed was 10.4 percent. Cash return on invested capital was 16.2 percent.

Free cash flow growth accelerating, with capital discipline and inventory replenishment

7G continues to rapidly evolve from one of Canada's highest growth E&Ps into a sustainable free cash flow generating entity. Meaningful progress has been made on this strategic initiative on several fronts. In 2019, the company invested a portion of its discretionary capital to de-risking future development plans in Nest 1 and evaluating the potential of its liquids-rich lower Montney resource. Results to date are very encouraging. In addition, the company's successful efforts to manage operating costs and capital costs, and complete strategically important infrastructure improves the company's resilience to commodity price volatility, accelerates free cash flow growth and enhances the long-term sustainability of returns.

Consistent with this strategic evolution, 7G has received approval to expand its normal course issuer bid that efficiently drives per-share earnings and volume growth. The company anticipates free cash flow in the second half of the year and into 2020 in the current commodity price environment.

OPERATIONAL AND FINANCIAL HIGHLIGHTS

($ millions, except boe

and per share amounts)

Three months ended

June 30,

Three months ended

March 31,

Six months ended

June 30,

2019

 

2018

% Change

2019

% Change

2019

2018

% Change

Sales volumes

 

 

 

 

 

 

 

 

 

Condensate (mbbl/d)

75.9

 

69.0

10

72.7

4

74.3

68.1

9

NGLs (mbbl/d)

44.3

 

41.2

8

44.1

44.2

41.4

7

Liquids (mbbl/d)

120.2

 

110.2

9

116.8

3

118.5

109.5

8

Natural gas (MMcf/d)

489.6

 

461.3

6

483.6

1

486.6

467.3

4

Total sales volumes (mboe/d)(1)

201.8

 

187.1

8

197.4

2

199.6

187.4

7

Liquids %

60%

 

59%

2

59%

2

59%

58%

2

Realized prices

 

 

 

 

 

 

 

 

 

Condensate ($/bbl)

71.91

 

81.67

(12)

63.00

14

67.58

77.67

(13)

Natural gas ($/Mcf)

3.29

 

3.79

(13)

4.32

(24)

3.80

3.73

2

NGLs ($/bbl)

4.19

 

13.39

(69)

7.46

(44)

5.81

13.35

(56)

Total ($/boe)(1)

35.95

 

42.42

(15)

35.44

1

35.70

40.46

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