Veren Announces Strategic Infrastructure Transaction
KEY HIGHLIGHTS
- Directing
$400 million of proceeds toward debt reduction, resulting in total expected debt reduction of$1.3 billion in 2024. - 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
$300 million .
TRANSACTION DETAILS AND STRATEGIC PARTNERSHIP SYNERGIES
Veren and PGI have entered into a transaction for certain infrastructure assets in the Alberta Montney which includes the Company selling to PGI primarily all its working interest in four oil battery sites in the
The Company and PGI also renegotiated and consolidated multiple prior agreements for gathering and processing of Veren's products in the Alberta Montney, resulting in a new agreement with lower fees. The Company has agreed to an amended area of dedication and a 15 year take-or-pay commitment at the oil battery sites with PGI, which will result in an annual fee of
As part of this transaction, the Company will receive net cash proceeds of
PGI has also granted Veren an option to design, construct and operate certain future infrastructure development in the Company's
Including the impact from a reduction in Veren's future capital expenditures related to facility expansions funded by PGI and expected interest expense savings due to the immediate reduction in debt as a result of this transaction, the Company's expected cumulative five-year after-tax excess cash flow remains unchanged, while reducing its net debt by
This transaction is expected to close in fourth quarter 2024 and is subject to customary closing conditions.
BALANCE SHEET STRENGHTENING
The Company will direct the
OUTLOOK
As a result of higher-than-expected production from the Company's multi-well pads in the Gold Creek West area of its
The Company is committed to its strategic priorities of operational execution, strengthening its balance sheet and increasing its return of capital.
Net debt and development capital expenditures are specified financial measures. Refer to the Advisory. |
2024 GUIDANCE
|
Prior |
Revised |
Total Annual Average Production (boe/d) (1) |
191,000 - 199,000 |
192,500 - 197,500 |
|
|
|
Capital Expenditures |
|
|
Development capital expenditures ($ 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 |
10.00% - 11.00% |
10.00% - 11.00% |
1) |
The revised total annual average production (boe/d) is comprised of approximately 65% Oil, Condensate & NGLs and 35% Natural Gas |
2) |
Land expenditures and net property acquisitions and dispositions are not included. Revised development capital expenditures is allocated on an approximate basis as follows: 90% drilling & development and 10% facilities & seismic |
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) |
~60% |
1) |
Total return of capital is based on a framework that targets to return to shareholders 60% of excess cash flow on an annual basis |
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
For the three months ended
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
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
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:
Telephone: (403) 693-0020 Toll-free (US and
Address:
www.vrn.com
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