Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong financial performance despite operational challenges, including wildfires.
- Consolidated production in Q2 2024 averaged 18,993 barrels per day, a 5% increase from Q2 last year.
- Successful replacement of failed downhole temperature sensors, leading to increased production rates.
- Receipt of regulatory approval to restart disposal operations at the demo asset, enhancing water handling and operational flexibility.
- Meaningful debt repayment in July 2024, reducing USD61 million of the USD300 million senior secured notes due 2028.
Negative Points
- Operational challenges due to wildfires in Northern Alberta, leading to temporary evacuation and halted drilling operations.
- Production rates were reduced in preparation for potential full evacuation during the wildfires.
- Delayed regulatory approval for disposal operations at the demo asset, impacting production ramp-up.
- Failures of third-party downhole temperature sensors required replacements and redrilling, affecting production timing.
- Lower production in Q2 2024 compared to Q1 2024, reflecting operational reductions and necessary replacement work.
Q & A Highlights
Q: Can you provide more details on the production increase observed in July and recently? How much of this uplift is due to de-bottlenecking versus new drills?
A: Robert Logan, President and CEO: The majority of the recent production increase is due to new drilling activities. Most of the facility de-bottlenecking is scheduled for the turnarounds in September and October for the expansion and demo assets, respectively.
Q: Could you elaborate on the minor acquisitions mentioned in the release and your view on the M&A market?
A: Tony Kraljic, CFO: We made two small acquisitions. The first was a small gas asset over our existing oil sands acreage to ensure full control of the reservoir. The second was acquiring assets out of receivership for nominal consideration, which we will assess for future development while focusing on our current projects.
Q: How did the wildfires impact your operations and what measures were taken?
A: Robert Logan, President and CEO: The wildfires led to the temporary evacuation of nonessential personnel and halted drilling operations twice. We prioritized safety and minimized risks to staff and assets. Operations and drilling have fully resumed.
Q: What is the updated production guidance for 2024?
A: Robert Logan, President and CEO: We have adjusted our full-year guidance to anticipate consolidated average production of 20,000 to 21,000 barrels per day, reflecting a year-over-year growth of 13% to 19%.
Q: Can you discuss the financial performance and key metrics for Q2 2024?
A: Tony Kraljic, CFO: We saw stronger realized commodity pricing and favorable WCS differentials, leading to operating netbacks of $36.68 per barrel, a 49% increase over Q1. Adjusted EBITDA was $58.4 million, and adjusted funds flow was $47.2 million, despite $13.8 million in realized losses on commodity risk management contracts.
Q: What are the plans for debt reduction?
A: Tony Kraljic, CFO: In July 2024, we redeemed USD 61 million of our USD 300 million senior secured notes due 2028. We plan to continue reducing debt semiannually using excess cash flow until total indebtedness is less than USD 150 million.
Q: How is the hedging program structured to support the capital expenditure program?
A: Robert Loebach, VP of Corporate Development & Capital Markets: Our hedging program includes 11,500 barrels per day of fixed price swaps for WTI at just under USD 71 per barrel for 2024, and costless collars for 8,600 barrels per day with an average floor of almost USD 59 per barrel and an average ceiling of over USD 85 per barrel for the first half of 2025.
Q: What are the key operational updates post-Q2 2024?
A: Robert Logan, President and CEO: Post-Q2, consolidated bitumen production increased to an average of approximately 19,660 barrels per day in July and 21,050 barrels per day from August 1 to 13. This was largely due to the replacement of failed downhole temperature sensors and initial production from completed wells.
Q: What are the future plans for the demo asset?
A: Robert Logan, President and CEO: We received regulatory approval to restart the existing disposal well and drilled a second disposal well awaiting approval. These will enhance our water handling and operational flexibility, supporting higher production rates.
Q: Can you provide more details on the new executive appointments?
A: Robert Logan, President and CEO: We welcomed Jonathan Kanderka as our new Chief Operating Officer and Dean Custance as our new Vice President of Finance. Both bring extensive expertise in their respective fields, which will further enhance Greenfire's operational and financial capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
