NuVista Energy Ltd. Announces Record Financial and Operating Results and Shareholder Capital Return Framework

CALGARY, Alberta, May 10, 2022 (GLOBE NEWSWIRE) — NuVista Energy Ltd. (“NuVista” or the “Company”) (TSX:NVA) is pleased to announce record-setting financial and operating results for the three months ended March 31, 2022, and to provide a number of updates which demonstrate material advancement of our Pipestone and Wapiti Montney development. Commodity prices in 2022 remained strong. We used our significantly growing adjusted funds flow in a disciplined manner by growing production with new high-return wells to fill and optimize existing facilities while making rapid and meaningful progress in debt reduction. NuVista is continuing through 2022 with strength and increasing momentum. As part of our strategy to maximize the per share value growth of NuVista, our intention is to begin returning capital to shareholders now that our initial debt target has been achieved.

During the quarter ended March 31, 2022, NuVista:

  • Produced a record 66,600 Boe/d in the quarter, well above the guidance range of 64,000 – 65,000 Boe/d. This was 9% and 45% higher than the corresponding figures for the prior quarter and the first quarter of 2021, respectively;
  • Achieved net earnings of $70.3 million ($0.31/share, basic) compared to $15.4 million ($0.07/share, basic) in the first quarter of 2021;
  • Achieved a record $190 million of adjusted funds flow(1) in the first quarter ($0.83/share, basic(4)), including $64 million of free adjusted funds flow(2). The first quarter adjusted funds flow represented an increase of 25% and 470% as compared to the prior quarter and the first quarter of 2021, respectively. The free adjusted funds flow and production results for this quarter represent by far the highest ever achieved by NuVista;
  • Delivered a corporate netback(3) of $31.69/Boe for the quarter, an improvement of 17% and 293% compared to the prior quarter and the first quarter of 2021, respectively;
  • Reduced total cash costs(3) to $18.23/Boe for the quarter despite inflationary pressures. This is a reduction of 3% and 11% as compared to the prior quarter and the first quarter of 2021, respectively, as a result of improving facility and corporate efficiencies associated with rising production;
  • Closed the quarter with $413 million of net debt(1) and a favorable net debt to annualized first quarter adjusted funds flow(1) ratio of 0.5x. Subsequent to the quarter end, we have now passed below our interim debt target of $400 million. This is a pace much faster than previously anticipated;
  • Executed a successful first quarter capital expenditure(2) program of $120 million, including the drilling of 14 (14.0 net) wells and the completion of 13 (13.0 net) wells in our condensate rich Wapiti Montney play; and
  • Continued to significantly advance our progress in the areas of environmental, social and governance (“ESG”), including continued positive strides in reducing GHG and methane emissions.

Notes:

(1)   Each of “adjusted funds flow”, “net debt” and “net debt to annualized first quarter adjusted funds flow” are capital management measures. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release for further information.
(2)   Each of “free adjusted funds flow” and “capital expenditures” are non-GAAP financial measures that do not have any standardized meanings under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release for further information.
(3)   Each of “corporate netback” and “cash costs” are non-GAAP financial ratios that do not have any standardized meanings under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release for further information.
(4)   “Adjusted funds flow per share” is a supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release for further information.

Excellence in Operations and Update on the Supply Chain

In the first quarter of 2022 NuVista again achieved record production levels while successfully navigating through significant supply chain and inflationary challenges. The stable and predictable nature of our drilling program allowed us access to all the goods and services required to bring all wells on production ahead of schedule and on budget to start the year. We had budgeted for 2022 anticipating that the inflationary pressure offset by the continued improvement in execution would net a 5% increase to our drilling and completion costs over 2021, and this came to pass. Our view at the time was that this level of inflation was to be expected given that WTI oil and NYMEX natural gas were trading in the US$75/Bbl and US$4/MMBtu range, respectively. Given that the outlook for commodities has now strengthened further, we anticipate approximately an additional 5% increase to our expected well costs for the remainder of the year.

The combination of continued strong execution, cost management, well performance and commodity prices is generating an exceptionally high level of returns on our capital invested. Since the beginning of 2021 we have started up 7 new pads with greater than 3 months of production for a total of nearly $290 MM of capital invested. The aggregate program has achieved a payout multiple (5)(6) of approximately 1.5x to-date, with recent pads achieving greater than 2x payout in the first six months of production.

Production levels at Pipestone averaged 37,300 Boe/d, up 7% from the fourth quarter of 2021. Pad #9 at Pipestone North was brought on stream late in the quarter. DCET costs for the 7 wells on this pad were in line with expectations and averaged $5.3MM per well at an average horizontal length of nearly 2,000m. Pad #10 at Pipestone North is currently flow-testing. Estimated final costs for this pad were 5% below expectations, achieving DCET cost of $6.7MM at an average horizontal length of 3,000m.   We are currently drilling Pad #11 at Pipestone South, which is expected to come on-stream early in the third quarter.

Notes:

(5)   “Payout multiple” is a non-GAAP financial ratio that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures” in this press release for further information.
(6)   “Payout multiple” is calculated as: (i) the product of operating netbacks (excluding realized gains (losses) on financial derivatives) multiplied by production; divided by (ii) DCET capital invested.

ESG Progress Continues

During the quarter NuVista continued to progress key items in the area of ESG performance improvement. At Bilbo, we started up a vapor recovery unit to eliminate routine flaring of tank vapors. We also continued to progress our responsible abandonment and reclamation of inactive wells and facilities. NuVista abandoned 8 inactive wells and 47 pipelines in legacy areas during the quarter, and also decommissioned one major facility and executed reclamation activities at two major facility sites.

2022 Guidance Update

As discussed above, NuVista is pleased to note that operations and performance have been strong while both condensate and natural gas prices have increased significantly. This results in a material increase to projected adjusted funds flow, tremendous progress in reducing our net debt, and high velocity of capital investment return.

NuVista’s capital program for 2022 has been proceeding very favorably, and we are aware that the highest returns we can provide come from the drill bit as long as growth discipline and return of capital to shareholders is maintained. With the significant progress in debt reduction and the continued high demand for our products, we have elected to fill in the previously planned gaps in our drilling schedule to maintain steady execution with all three drilling rigs. This continuity reduces execution and labor risk and increases safety. This will have the effect of increasing capital spending, and the number of wells drilled will increase by four.

As noted earlier, NuVista has managed to avoid much of the disruption and inflationary pressure thus far through maintaining the discipline of not adding drilling rigs, making early commitments, flexible planning, and continued drilling and completion time efficiency gains. However given the continued strong commodity prices and the ongoing pressures, we believe it is prudent to add some cushion to our 2022 guidance to account for inflation. We have also added in some minor capital expenditures for efficiency projects and infrastructure optimization which now make sense and provide good value in a higher priced environment.

As a result of the foregoing, NuVista’s capital expenditure guidance for 2022 is increased from a range of $290 – $310 million to $355 – $375 million. Approximately two thirds of the increase has been assigned to the increased activity, with the remainder equally comprised of infrastructure optimization projects and inflationary pressures.

NuVista’s recent well performance has been strong, and in addition the on-stream dates for new wells have been ahead of schedule in the first quarter. The production increase from the added capital spending activity is anticipated to be realized in both 2022 and 2023 since the additional activity is planned for the third and fourth quarters of 2022. Guidance for the full year of 2022 is increased 1,500 Boe/d to 67,000 – 69,000 Boe/d. The additional annualized production expected in 2023 is approximately 2,000 Boe/d. Volumes in the second quarter will continue to ramp up as planned, as two additional pads are being brought on-stream. This will be offset by previously planned maintenance outages at six midstream and NuVista facilities. Our second quarter production guidance range is 62,500 to 65,000 Boe/d.

Commencing the Return of Capital to Shareholders

With the strengthened commodity price environment, the achievement of our initial target for net debt, and our significantly increased production and free adjusted funds flow, NuVista is now in the very favorable position of being able to continue our disciplined and value-adding growth strategy concurrently with continuing with the rapid reduction of net debt and the commencement of capital return to shareholders. Options for the return of capital to shareholders include the repurchase of shares and dividend strategies, and remaining free adjusted funds flow can also be considered for allocation towards continued growth and highly selective M&A, where value adding for shareholders.

Our Board has approved a long term sustainable target net debt to adjusted funds flow of less than 1.0 times in the stress test price environment of US$45/Bbl WTI and US$2.00/MMBtu NYMEX natural gas. In the context of our 2022 plan, this represents the target base net debt level of $200 – $250 million. We believe that the best method for return of capital to shareholders is initially to repurchase shares, however we will re-evaluate the uses of free adjusted funds flow closer to year end when the base targeted net debt level is expected to be achieved. The re-evaluation will take into account the supply and demand and pricing environment, and will include all options including continued disciplined growth beyond existing facility capacity of 90,000 Boe/d, share repurchases, prudent targeted M&A, and dividend payments.

In preparation for the return of capital to shareholders, NuVista’s board of directors has approved the filing of an application with the Toronto Stock Exchange (“TSX”) for a normal course issuer bid (“NCIB”) which, subject to review and approval by the TSX, will allow NuVista to initiate a share buyback program to buy back over the next twelve months up to 10% of the Company’s public float, as defined by the TSX. The necessary approval from our syndicate of lenders is currently being sought, and we anticipate commencement near the middle of June. Further, the commencement of the NCIB is subject to the receipt of the approval of the TSX and while it is anticipated that the TSX’s approval will be received concurrently with that of the Company’s lenders, there is no guarantee of such approval or the timing thereof.

At current strip prices, NuVista anticipates being able to direct approximately 50% of remaining 2022 free adjusted funds flow towards the return of capital to shareholders while at the same time reaching our targeted base net debt range of $200 – $250 million before or near year end. Despite the increased capital spending, this is anticipated to result in full satisfaction of the NCIB prior to year end at the current strip commodity pricing and share price. Our board of directors has approved the commencement of share repurchases, after regulatory NCIB approval, targeting a range of 25% to 50% of quarterly free adjusted funds flow, with the remainder directed towards debt reduction. The order of priority for free cash flow allocation shall be achieving debt reduction progress, followed by share repurchases. Combined with significant production and free adjusted funds flow growth, we are confident the share repurchases will bring significant additional value per share while returning capital to shareholders.

NuVista has an exceptional business plan that maximizes free adjusted funds flow and the return of capital to shareholders when our existing facilities are expected to be filled to capacity and maximum efficiency during 2023 with production levels of approximately 85,000 – 90,000 Boe/d. With facilities optimized, returns are enhanced further with corporate netbacks which are expected to grow by approximately $2-$3/Boe due to the efficiencies of scale which will reduce our unit operating, transportation, and interest expenses by this amount.

NuVista has top quality assets and a management team focused on relentless improvement. We have the necessary foundation and liquidity to continue adding significant value for our shareholders. We will continue to adjust to this environment in order to maximize the value of our asset base and ensure the long-term sustainability of our business. We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their continued guidance and support. Please note that our corporate presentation is being updated and will be available at www.nuvistaenergy.com on May 10, 2022. NuVista’s financial statements, notes to the financial statements and management’s discussion and analysis for the quarter ended March 31, 2021, will be filed on SEDAR (www.sedar.com) under NuVista Energy Ltd. on May 10, 2022 and can also be accessed on NuVista’s website.

Financial and Operating Highlights      
  Three months ended March 31  
($ thousands, except otherwise stated) 2022   2021   % Change  
FINANCIAL      
Petroleum and natural gas revenues 381,827   151,409   152  
Cash provided by operating activities 162,442   48,111   238  
Adjusted funds flow (1) (4) 189,869   33,257   471  
Per share, basic (7) 0.83   0.15   453  
Per share, diluted (7) 0.80   0.14   471  
Net earnings 70,255   15,389   357  
Per share, basic 0.31   0.07   343  
Per share, diluted 0.30   0.07   329  
Capital expenditures (2) 119,964   80,948   48  
Net proceeds on property dispositions   93,578   (100 )
Net debt (1) (4) 412,932   557,015   (26 )
OPERATING      
Daily Production      
Natural gas (MMcf/d) 229.0   168.4   36  
Condensate (Bbls/d) 21,680   12,627   72  
NGLs (Bbls/d) 6,756   5,155   31  
Total (Boe/d) 66,599   45,854   45  
Condensate & NGLs weighting 43 % 39 %  
Condensate weighting 33 % 28 %  
Average realized selling prices (6)      
Natural gas ($/Mcf) 5.79   3.79   53  
Condensate ($/Bbl) 119.21   70.87   68  
NGLs ($/Bbl) (5) 49.30   28.80   71  
Netbacks ($/Boe)      
Petroleum and natural gas revenues 63.71   36.68   74  
Realized loss on financial derivatives         (7.54 )         (5.11 ) 48  
Royalties         (5.56 )         (2.61 ) 113  
Transportation expenses         (4.58 )         (5.07 )         (10 )
Operating expenses         (10.89 )         (11.11 )         (2 )
Operating netback (3) 35.14   12.78   175  
Corporate netback (3) 31.69   8.06   293  
SHARE TRADING STATISTICS      
High ($/share) 11.92   2.73   337  
Low ($/share) 6.94   0.89   680  
Close ($/share) 10.57   2.37   346  
Average daily volume (‘000s) 1,576   1,478   7  
Common shares outstanding (‘000s) 228,472   225,844   1  
(1)   Refer to Note 14 “Capital management” in NuVista’s financial statements and to the sections entitled “Adjusted funds flow” and “Liquidity and capital resources” contained in NuVista’s MD&A for the three months ended March 31, 2022.
(2)   Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures”.
(3)   Non-GAAP ratio that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies where similar terminology is used. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures”.
(4)   Capital management measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures”.
(5)   Natural gas liquids (“NGLs”) include butane, propane, ethane and sulphur revenue.
(6)   Product prices exclude realized gains/losses on financial derivatives.
(7)   Supplementary financial measure. Reference should be made to the section entitled “Non-GAAP and Other Financial Measures”.

Advisories Regarding Oil And Gas Information

BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

This press release contains a number of oil and gas metrics prepared by management, including DCET costs, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate NuVista’s performance on a comparable basis with prior periods; however, such measures are not reliable indicators of the future performance of NuVista and future performance may not compare to the performance in previous periods. DCET includes all capital spent to drill, complete, equip and tie-in a well.

Reference to current strip prices for 2022 in this press release reflect April 29, 2022 pricing: WTI US$88/Bbl, NYMEX US$6.50/MMBtu, AECO $5.30/GJ, 1.28 CAD:USD FX .

Basis of presentation

Unless otherwise noted, the financial data presented in this press release has been prepared in accordance with Canadian generally accepted accounting principles (“GAAP”) also known as International Financial Reporting Standards (“IFRS”). The reporting and measurement currency is the Canadian dollar. National Instrument 51-101 – “Standards of Disclosure for Oil and Gas Activities” includes condensate within the product type of natural gas liquids. NuVista has disclosed condensate values separate from natural gas liquids herein as NuVista believes it provides a more accurate description of NuVista’s operations and results therefrom.

Production split for Boe/d amounts referenced in the press release are as follows:

Reference Total Boe/d   %
Natural Gas
%
Condensate
%
NGLs
           
Q1 2022 production – actual                66,599   57%   33%   10%  
Q1 2022 revised production guidance 64,000 – 65,000   60%   32%   8%  
Q1 2022 original production guidance 60,000 – 62,000   60%   32%   8%  
Q2 2022 production guidance 62,500 – 65,000   62%   30%   8%  
2022 revised annual production guidance 67,000 – 69,000   62%   30%   8%  
2022 original annual production guidance 65,000 – 68,000   62%   30%   8%  
2023+ production range 85,000 – 90,000   62%   30%   8%  

Advisory regarding forward-looking information and statements

This press release contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable securities laws. The use of any of the words “will”, “expects”, “believe”, “plans”, “potential” and similar expressions are intended to identify forward-looking statements. More particularly and without limitation, this press release contains forward looking statements, including management’s assessment of: NuVista’s future focus, strategy, plans, opportunities and operations; projected adjusted funds flows at current strip prices; our plans to continue to balance debt repayment, increasing adjusted funds flow through disciplined production and growth;  guidance with respect to 2022 capital expenditure amounts, spending timing and allocation; expectations that the plans under the capital program will reduce execution and labour risks and increase safety; guidance with respect to average daily production for 2022; expectations with respect to future net debt to adjusted funds flow ratio; expectations with respect to achieving our sustainable net debt target of less than 1.0 times adjusted funds flow in the stress test price environment of $US 45/Bbl WTI and $US 2.00/MMBtu NYMEX natural gas; plans to direct additional available adjusted funds flow towards a disciplined balance of debt reduction and production growth until our existing facilities are filled to maximum efficiency; planned facility outages and their effects; ESG plans, targets and expected results from our ESG initiatives; future commodity prices; anticipated increases in well costs; anticipated timing and completion of Pad #11 at Pipestone South and the anticipated benefits thereof; plans to maximize free adjusted funds flow and the return of capital to shareholders; the ability to re-evaluate the uses of free adjusted funds flow and anticipating outcomes thereof; the anticipated benefits of filling in planned drilling gaps; the future capacity of our facilities, that maximum efficiency will be achieved at flattened production levels of approximately 85,000 – 90,000 Boe/d and that this will be achieved as early as 2023; the anticipated benefit  that we will generate free adjusted funds flow while reducing net debt; that once existing facilities are filled, returns will be enhanced, corporate netbacks will grow by approximately $2-$3/Boe and unit operating, transportation, and interest costs will be reduced by this amount; NuVista’s future realized gas prices; the effect of our financial, commodity, and natural gas risk management strategy and market diversification; the intentions with respect to the NCIB, the timing for beginning purchases of common shares under the NCIB and the effects of repurchases of common shares thereunder; 2022 drilling and completion plans, timing and expected results; anticipated drilling and completions costs; and the ability to continue adding significant value and improvement. Statements relating to “reserves” are also deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities predicted or estimated and that the reserves can be profitably produced in the future.

By their nature, forward-looking statements are based upon certain assumptions and are subject to numerous risks and uncertainties, some of which are beyond NuVista’s control, including the impact of general economic conditions, industry conditions, current and future commodity prices and inflation rates; the impact of ongoing global events, including European tensions and COVID-19, with respect to commodity prices, currency and interest rates, anticipated production rates, borrowing, operating and other costs and adjusted funds flow, the timing, allocation and amount of capital expenditures and the results therefrom, anticipated reserves and the imprecision of reserve estimates, the performance of existing wells, the success obtained in drilling new wells, the sufficiency of budgeted capital expenditures in carrying out planned activities, access to infrastructure and markets, competition from other industry participants, availability of qualified personnel or services and drilling and related equipment, stock market volatility, effects of regulation by governmental agencies including changes in environmental regulations, tax laws and royalties, the ability to access sufficient capital from internal sources and bank and equity markets, that we will complete the announced dispositions on the terms and timing contemplated, that we will be able to execute our 2022 drilling plans as expected and including, without limitation, those risks considered under “Risk Factors” in our Annual Information Form. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. NuVista’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the forward-looking statements in this press release in order to provide readers with a more complete perspective on NuVista’s future operations and such information may not be appropriate for other purposes. NuVista disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This press release also contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about NuVista’s prospective results of operations including, without limitation, its ability to repay debt, expectations with respect to future net debt to adjusted funds flow ratios, projected adjusted funds flows at current strip prices, capital expenditures and corporate netbacks, which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth above. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on FOFI. NuVista’s actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits NuVista will derive therefrom. NuVista has included the FOFI in order to provide readers with a more complete perspective on NuVista’s future operations and such information may not be appropriate for other purposes.

These forward-looking statements and FOFI are made as of the date of this press release and NuVista disclaims any intent or obligation to update any forward-looking statements and FOFI, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities law.

Non-GAAP and other financial measures
This press release uses various specified financial measures (as such terms are defined in National Instrument 52-112 – Non-GAAP Disclosure and Other Financial Measures Disclosure (“NI 51-112“)) including “non-GAAP financial measures”, “non-GAAP ratios”, “capital management measures” and “supplementary financial measures” (as such terms are defined in NI 51-112), which are described in further detail below. Management believes that the presentation of these non-GAAP measures 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.

Non-GAAP financial measures

NI 52-112 defines a non-GAAP financial measure as a financial measure that: (i) depicts the historical or expected future financial performance, financial position or cash flow of an entity; (ii) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the entity; (iii) is not disclosed in the financial statements of the entity; and (iv) is not a ratio, fraction, percentage or similar representation.

These non-GAAP financial measures are not standardized financial measures under IFRS and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these measures should not be construed as alternatives to or more meaningful than the most directly comparable IFRS measures as indicators of NuVista’s performance. Set forth below are descriptions of the non-GAAP financial measures used in this press release.

(1)        Free adjusted funds flow

Free adjusted funds flow is adjusted funds flow less capital and asset retirement expenditures. Refer to NuVista’s MD&A disclosures under the headings “Adjusted funds flow” and “Capital expenditures” for a description of each component of free adjusted funds flow, which components are a capital management measure and a non-GAAP financial measure, respectively. Management uses free adjusted funds flow as a measure of the efficiency and liquidity of its business, measuring its funds available for capital investment to manage debt levels, pay dividends, and return capital to shareholders. By removing the impact of current period capital and asset retirement expenditures, management believes this measure provides an indication of the funds the Company has available for future capital allocation decisions.

The following tables set out our free adjusted funds flows compared to the most directly comparable GAAP measure of cash provided by operating activities less cash used in investing activities for the period:

  Three months ended March 31  
($ thousands) 2022   2021  
Cash provided by operating activities 162,442   48,111  
Cash used in investing activities (126,522 ) 15,061  
Excess cash provided by operating activities over cash used in investing activities 35,920   63,172  
     
Adjusted funds flow 189,869   33,257  
Capital expenditures (119,964 ) (80,948 )
Asset retirement expenditures (5,568 ) (3,833 )
Free adjusted funds flow 64,337   (51,524 )

(2)        Capital expenditures

Capital expenditures are equal to cash used in investing activities, excluding changes in non-cash working capital, other receivable and property dispositions. Any expenditures on the other receivable are being refunded to NuVista and are therefore included under current assets. NuVista considers capital expenditures to be a useful measure of cash flow used for capital reinvestment.

The following table provides a reconciliation between the non-GAAP measure of capital expenditures to the most directly comparable GAAP measure of cash used in investing activities for the period:

  Three months ended March 31  
($ thousands) 2022   2021  
Cash used in investing activities (126,522 ) 15,061  
Changes in non-cash working capital 6,558   (2,431 )
Property dispositions   (93,578 )
Capital expenditures (119,964 ) (80,948 )

Non-GAAP ratios

NI 52-112 defines a non-GAAP ratio as a financial measure that: (i) is in the form of a ratio, fraction, percentage or similar representation; (ii) has a non-GAAP financial measure as one or more of its components; and (iii) is not disclosed in the financial statements of the entity. Set forth below is a description of the non-GAAP ratios used in this press release.

These non-GAAP ratios are not standardized financial measures under IFRS and might not be comparable to similar measures presented by other companies where similar terminology is used. Investors are cautioned that these ratios should not be construed as alternatives to or more meaningful than the most directly comparable IFRS measures as indicators of NuVista’s performance.

Non-GAAP ratios presented on a “per Boe” basis may also be considered to be supplementary financial measures (as such term is defined in NI 51-112).

(1)        Operating netback and corporate netback (“netbacks”), per Boe

NuVista calculated netbacks per Boe by dividing the netbacks by total production volumes sold in the period. Each of operating netback and corporate netback are non-GAAP financial measures. Operating netback is calculated as petroleum and natural gas revenues including realized financial derivative gains/losses, less royalties, transportation and operating expenses. Corporate netback is operating netback less general and administrative, deferred share units, interest and lease finance expense.

Management feels both operating and corporate netbacks are key industry benchmarks and measures of operating performance for NuVista that assists management and investors in assessing NuVista’s profitability, and are commonly used by other petroleum and natural gas producers. The measurement on a Boe basis assists management and investors with evaluating NuVista’s operating performance on a comparable basis.

(2)        Cash costs (“cash costs”), per Boe

NuVista calculated cash costs per Boe by dividing the cash costs by total production volumes sold in the period. Cash costs are a non-GAAP financial measure, calculated as the sum of operating expenses, transportation expenses, general and administrative expenses and financing costs.

Management feels that cash costs are a key industry benchmark and measures of operating performance for NuVista that assists management and investors in assessing NuVista’s profitability, and are commonly used by other petroleum and natural gas producers. The measurement on a Boe basis assists management and investors with evaluating NuVista’s operating performance on a comparable basis.

(3)        Payout Multiple

NuVista calculated payout multiple as: (i) the product of operating netbacks (excluding realized gains (losses) on financial derivatives) multiplied by production; divided by (ii) DCET capital invested. Operating netbacks are a non-GAAP ratio calculated as the sum of petroleum and natural gas revenues less royalties, transportation expenses and operating expenses. See “Operating netback and corporate netback (“netbacks”), per Boe” above for further information.

Management feels that payout multiple is a useful indicator of NuVista’s operating performance and cost management and assists management and investors in assessing NuVista’s return on capital invested.

 

Capital management measures

NI 52-112 defines a capital management measure as a financial measure that: (i) is intended to enable an individual to evaluate an entity’s objectives, policies and processes for managing the entity’s capital; (ii) is not a component of a line item disclosed in the primary financial statements of the entity; (iii) is disclosed in the notes to the financial statements of the entity; and (iv) is not disclosed in the primary financial statements of the entity.

Please refer to Note 14 “Capital Management” in NuVista’s interim financial statements as at and for the 3 months ended March 31, 2022 and 2021 for additional disclosure net debt, adjusted funds flow and net debt to annualized first quarter adjusted funds flow ratio, each of which are capital management measures used by the Company in this press release.

NuVista calculates annualized first quarter adjusted funds flow ratio by dividing net debt by the annualized adjusted funds flow for the first quarter.

Supplementary financial measures

This press release may contain certain supplementary financial measures. NI 52-112 defines a supplementary financial measure as a financial measure that: (i) is intended to be disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of an entity; (ii) is not disclosed in the financial statements of the entity; (iii) is not a non-GAAP financial measure; and (iv) is not a non-GAAP ratio.

NuVista calculates: (i) “adjusted funds flow per share” by dividing adjusted funds flow for a period by the number of weighted average common shares of NuVista for the specified period; and (ii) “net debt to adjusted funds flow” by dividing the net debt at the end of a period by the adjusted funds flow for such period.

FOR FURTHER INFORMATION CONTACT:

Jonathan A. Wright     Ross L. Andreachuk    Mike J. Lawford
President and CEO      VP, Finance and CFO    Chief Operating Officer
(403) 538-8501   (403) 538-8539    (403) 538-1936


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