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KIWETINOHK ENERGY ANNOUNCES 2025 BUDGET



--------------------------------------------------------------------------------


NEWS PROVIDED BY

Kiwetinohk Energy

Dec 16, 2024, 07:00 ET


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CALGARY, AB, Dec. 16, 2024 /CNW/ - Kiwetinohk Energy Corp. ("Kiwetinohk" or the
"Company") (TSX: KEC) today provided its 2025 budget, 2026 outlook and a fourth
quarter operational update.

Message to shareholders

"In 2024 Kiwetinohk is expected to deliver almost 20% production growth while
maintaining one of the strongest operating netbacks in our peer group. Looking
ahead to 2025, we're encouraged by delineation and testing of our emerging
Simonette Montney play. Our 2025 budget and plan aims for continued growth,
enhanced operational flexibility in response to market conditions, and the
generation and return of free funds flow with an initial focus on debt
repayment," said Pat Carlson, Chief Executive Officer.

2025 Budget objectives:

 1. Optimize Multi-Year Growth
    Continue to develop our high-pressure liquids rich Duvernay while retaining
    and demonstrating the productivity of the underdeveloped Simonette Montney
    resource.
    
    
 2. Unlock Free Funds Flow Potential
    Demonstrate the free funds flow1 generation capability of the assets,
    supported by an owned and operated infrastructure advantage and access to
    natural gas markets in Chicago. Establish a capital allocation framework
    that prioritizes free funds flow use for debt reduction followed by
    returning capital to shareholders.
    
    
 3. Enhance Operational Flexibility
    Maintain adaptability to market conditions while driving shareholder value.
    The 2025 Budget incorporates technology initiatives aimed at reducing per
    well capital costs and optimizing well design for improved productivity.

"In our Power Division, we remain focused on the sale and financing efforts for
the most advanced projects within our development portfolio. Given the continued
regulatory uncertainty, aside from expenditures directly supporting these
processes, we have not committed additional funds to development projects at
this time. We will share updates as they become available," said Fareen
Sunderji, President of Power.

_____________________________

1 Non-GAAP measure that does not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by other entities.
Please refer to the section "Non-GAAP and other financial measures" herein for
further information.

2025 corporate budget and guidance overview

Annual average production 

 * Forecast 2025 average production of 31.0 - 34.0 Mboe/d, delivering an
   expected 21% growth over the midpoint of 2024 guidance through the capital
   program outlined below. Production in 2025 is expected to maintain a
   consistent liquids content, comprising  45% - 49% condensate and NGLs.
 * The expected 21% production growth includes a scheduled shut-down of
   third-party infrastructure in Placid. This shutdown is expected to result in
   approximately 15% of the company's total production volumes curtailed for a
   40-day period during the second quarter. In addition, the Company is
   forecasting an approximately 80% runtime within Simonette during the month of
   June to facilitate expanding processing capacity by an additional 15 MMcf/d.
   Together, this planned downtime is projected to reduce annualized production
   by approximately 1,000 boe/d. 

Planned capital expenditures2

 * Drill, complete, equip and tie-in (DCET) expenditure of $270 - $290 million.
   Approximately 5% of DCET relates to technology initiatives aimed at reducing
   per well capital costs and optimizing well design for improved productivity.
 * Other spending of $20 - $25 million is required to manage growth and base
   production, including completing the remaining work required to expand the
   5-31 gas processing plant and complete the electrification of the processing
   facilities in Simonette.
   
   Kiwetinohk's guidance contained in this news release is based on the
   following capital development plan, which may be revised to optimize
   development throughout the year: 

Pad

Spud

Expected on-stream

# wells

14-29 (Simonette)

Q4/24

Q1/25

2 Duvernay, 1 Montney

01-27 (Simonette)

Q4/24 / Q1/25

Q3/25

2 Duvernay, 1 Montney

09-33 (Tony Creek)

Q1/25

Q3/25

3 Duvernay

16-19 (Placid)

Q2/25

Q3/25

2 Montney

08-23 (Simonette)

Q3/25

Q4/25

2 Duvernay, 1 Montney

06-22 (Simonette)

Q4/25

Q1/26

3 Duvernay

11-22 (Simonette)

Q4/25

Q2/26

1 Montney

09-11 (Simonette)

Q4/25

Q3/26

3 Duvernay

Free funds flow from operations2

 * Adjusted funds flow from operations2 is expected to exceed capital
   expenditures for the year based on the midpoint of guidance and commodity
   price and exchange rate sensitives outlined below, generating between
   $15 million and $80 million of free funds flow.

Capital expenditures secured through a robust hedging program

 * Approximately 40% of forecasted oil and condensate production is hedged for
   2025 at an average floor price of US$70/boe with structures that allow for
   upside price participation up to US$76/boe for some of the production.
 * Approximately 40% of our forecasted natural gas production is hedged for 2025
   with an average floor price of US$3.15/MMbtu with structures that allow for
   upside price participation to US$4.40/MMbtu for some of the production.

_____________________________

2 Non-GAAP measure that does not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by other entities.
Please refer to the section "Non-GAAP and other financial measures" herein for
further information.

2025 detailed guidance

Kiwetinohk's annual guidance ranges provide information relevant to expectations
for financial and operational results. This corporate guidance is based on
various commodity price scenarios, regulatory assumptions and economic
conditions and readers are cautioned that certain guidance estimates may
fluctuate. Kiwetinohk will update guidance if and as required throughout the
year.

Financial & Operational Guidance


2025

Production (annual average) 

Mboe/d 

31.0 - 34.0

Oil & liquids 

%

45% - 49%

Natural gas 1

%

51% - 55%

Financial 



Royalty rate

%

6% - 8%

Operating costs 

$/boe 

$7.25 - $7.75

Transportation

$/boe 

$6.00 - $6.25

Corporate G&A expense 2

$/boe

$1.95 - $2.15

Cash taxes 3

$MM 

$—

Upstream Capital 5

$MM 

$290 - $315

DCET 4

$MM

$270 - $290

Plant expansion, production maintenance and other

$MM

$20 - $25

Annual Adjusted Funds Flow from Operations commodity pricing sensitivities 5


US$60/bbl WTI & US$3.00/MMBtu HH & $0.72 USD/CAD

CAD$MM

$300 - $335

US$70/bbl WTI & US$3.50/MMBtu HH & $0.72 USD/CAD

CAD$MM

$360 - $400

US$ WTI +/- $1.00/bbl 6

CAD$MM

+/- $4.3

US$ Chicago +/- $0.10/MMBtu 6

CAD$MM

+/- $4.7

CAD$ AECO 5A +/- $0.10/GJ 6

CAD$MM

+/- $0.1

Exchange Rate (USD/CAD) +/- $0.01 6

CAD$MM

+/- $3.6

Annual Net debt to Adjusted Funds Flow from Operations sensitivities 5


US$60/bbl WTI & US$3.00/MMBtu HH & $0.72 USD/CAD

X

0.8x - 1.0x

US$70/bbl WTI & US$3.50/MMBtu HH & $0.72 USD/CAD

X

0.5x - 0.6x

1 – Chicago sales of ~90% expected for 2025

2 - Includes G&A expenses for all divisions of the Company - corporate,
upstream, power and business development.

3 - The Company expects to pay immaterial cash taxes on its US subsidiary
annually. No Canadian taxes are anticipated in 2025.

4 - Approximately 5% of DCET relates to technology initiatives aimed at reducing
per well capital costs and optimizing well design for improved productivity.

5 - Non-GAAP measure that does not have any standardized meaning under IFRS and
therefore may not be comparable to similar measures presented by other entities.
Please refer to the section "Non-GAAP Measures" herein. Other key assumptions
are set forth in the table.

6 - Assumes US$65/bbl WTI, US$3.25/mmbtu HH, US$0.80/mmbtu HH - AECO basis diff,
$0.72 USD/CAD.

2026 outlook and capital allocation guidance

With consistently top-performing wells in the Duvernay, owned infrastructure,
key egress access, and robust operating netbacks in a moderating commodity price
environment, Kiwetinohk is well positioned for the future. The operating plans
underlying the 2026 outlook allows Kiwetinohk to remain nimble and flexible to
adapt to market conditions, optimize operations and generate free funds flow as
the Company moves towards our 40,000 boe/d production target.

Key elements of the 2026 outlook:

 * Production growth
   Projected production growth of approximately 15% over the midpoint of 2025
   guidance, reaching an expected annual range of 35.0 - 39.0 Mboe/d.
 * Capital requirements
   Under current development plans, the upstream division will require an
   estimated $300 - $350 million of capital in 2026.
 * Sustaining capital
   Kiwetinohk expects to be able to sustain mid-point 2025 production levels of
   32.5 Mboe/d for approximately $200 - $220 million of capital with sufficient
   inventory to sustain this production level for an extended period.

Return of capital framework:

As noted above, under a range of commodity price outlooks, the Company is
expected to generate free funds flow in 2025 and 2026 to allow for a return of
capital to shareholders.

 * Kiwetinohk will take a measured approach to its capital allocation strategy
   that will prioritize a balance of production growth and debt repayment to
   strengthen the balance sheet.
 * Once debt levels have been reduced, a return of capital framework is expected
   to be introduced to weigh share buybacks and other forms of shareholder
   returns against other opportunities to create value for shareholders.

Kiwetinohk's 2026 plans are subject to board approval and may change with the
result that 2026 outlooks would change accordingly. Capital investment decisions
and the highest value return of capital strategy will be re-evaluated annually
or as market conditions dictate.

Fourth quarter operations and corporate update

Production is expected to achieve near the midpoint of 2024 annual guidance.

In late November, the 8-23 pad in Simonette was brought on-stream, including two
Duvernay wells and one Simonette Montney well. Although still in the early days,
a second result from the Simonette Montney in 2024 has strengthened our
confidence to advance additional delineation drilling. In September the 1-27 pad
was brought on-stream as reported in the third quarter results. These wells (1
Duvernay / 1 Montney) continue to flow at steady rates now more than two months
into production. This pad also includes the first Simonette Montney well drilled
by the Company.

Current production wellhead rates from new wells is summarized below:

Pad

On-stream

# wells

Natural gas +
associated
liquids 

(MMcf/d)

Condensate

(bbl/d)

Average
production
per well

(boe/d)

% Condensate

8-23 (Simonette)

November

2 Duvernay

10.0

1,300

2,960

44 %

8-23 (Simonette)

November

1 Montney

1.0

450

620

73 %

1-27 (Simonette)

September

1 Duvernay

11.5

550

2,460

22 %

1-27 (Simonette)

September

1 Montney

7.5

550

1,800

31 %

Kiwetinohk will continue to develop the Simonette Montney, with a third Montney
well currently underway, and three additional wells included in the 2025
drilling program. These delineation wells are crucial for de-risking the
significant production potential of this underdeveloped resource play, which
overlays and complements Kiwetinohk's leading Duvernay asset base.

About Kiwetinohk

Kiwetinohk produces natural gas, natural gas liquids, oil and condensate and is
a developer of renewable and natural gas power projects, and early stage carbon
capture and storage opportunities, in Alberta.

Kiwetinohk's common shares trade on the Toronto Stock Exchange under the symbol
KEC. Additional details are available within the documents available on
Kiwetinohk's website at kiwetinohk.com and SEDAR+ at www.sedarplus.ca. 

Oil and gas advisories

For the purpose of calculating unit costs, natural gas is converted to a barrel
of oil equivalent using six thousand cubic feet of natural gas equal to one
barrel of oil unless otherwise stated. The term barrel of oil equivalent (boe)
may be misleading, particularly if used in isolation. A boe conversion ratio for
gas of 6 Mcf:1 boe is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of crude oil as
compared to natural gas is significantly different from an energy equivalency of
6:1, utilizing a conversion ratio of 6:1 may be misleading as an indication of
value. 

This news release includes references to sales volumes of "crude oil" "oil and
condensate", "NGLs" and "natural gas" and revenues therefrom. National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities, includes
condensate within the NGLs product type. The Company has disclosed condensate as
combined with crude oil and separately from other NGLs since the price of
condensate as compared to other NGLs is currently significantly higher, and the
Company believes that this crude oil and condensate presentation provides a more
accurate description of its operations and results therefrom. Crude oil
therefore refers to light oil, medium oil, tight oil, and condensate. NGLs
refers to ethane, propane, butane, and pentane combined. Natural gas refers to
conventional natural gas and shale gas combined.

References to short-term production rates are useful in confirming the presence
of hydrocarbons, however such rates are not determinative of the rates at which
such wells will commence production and decline thereafter, and are therefore
not indicative of long term performance or recovery. Investors are encouraged
not to place reliance on such rates when assessing the Company's aggregate
production.

Forward looking information

Certain information set forth in this news release contains forward-looking
information and statements including, without limitation, management's business
strategy, management's assessment of future plans and operations. Such
forward-looking statements or information are provided for the purpose of
providing information about management's current expectations and plans relating
to the future. Forward-looking statements or information typically contain
statements with words such as "anticipate", "believe", "expect", "plan",
"intend", "estimate", "project", "potential", "may" or similar words suggesting
future outcomes or statements regarding future performance and outlook. Readers
are cautioned that assumptions used in the preparation of such information may
prove to be incorrect. Events or circumstances may cause actual results to
differ materially from those predicted as a result of numerous known and unknown
risks, uncertainties and other factors, many of which are beyond the control of
the Company.

In particular, this news release contains forward-looking statements pertaining
to the following:

 * the Company's expectations regarding 2024 annual results;
 * the Company's expectations regarding free funds flow generation in 2025 and
   the allocation of free funds flows;
 * the Company's ability to demonstrate the productivity of the  underdeveloped
   Simonette Montney resource;
 * the Company's capital allocation framework and priorities;
 * the expectation that third-party shutdowns will be completed within expected
   timelines and the impact to production therein;
 * the investment required in 2025 and 2026 to achieve production targets;
 * the Company's ability to achieve its 40,000 boe/d production target;
 * the Company's expectations regarding sustaining capital at 2025 production
   levels;
 * timelines to complete an expansion of 15 MMcf/d of infrastructure and the
   related impact to annual production;
 * DCET of certain wells and expected costs there of;
 * drilling and completion activities on certain wells and pads, including cost
   efficiencies going forward, and the expected timing for certain pads to be
   brought on-stream;
 * the ability of the asset base to provide a high rate of return;
 * the anticipated production of certain wells under development, the timing
   thereof, and the resulting growth profile of production;
 * the Company's 2025 capital expenditures budget and allocations thereof;
 * the anticipated use of additional hedges to protect cashflows;
 * the Company's expectations regarding power expenditures in 2025;
 * the Company's detailed 2025 guidance targets;
 * the Company's summarized 2026 outlook;
 * the Company's expectation of achieving near the mid-point of 2024 production
   guidance range;
 * the Company's expectations regarding cash taxes and when they are expected to
   be paid by the Company;
 * the Company's expectations regarding a return of capital framework and
   allocation of capital;
 * the Company's business strategies, objectives, focuses and goals and expected
   or targeted performance and results;

Statements relating to reserves are also deemed to be forward looking
information, 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.

In addition to other factors and assumptions that may be identified in this news
release, assumptions have been made regarding, among other things:

 * the ability to finance the 2025 capital program;
 * the ability to utilize technology to reduce per well capital costs and
   improve productivity;
 * the ability to maximize shareholder value in the short and longer term;
 * the ability to demonstrate the full economic potential of the Company's
   resource;
 * the ability to achieve recognition of the value of the Company's Montney
   lands;
 * the ability to negotiate deal structures and terms on the Company's power
   projects;
 * the expected future cost of the power portfolio;
 * the Company's expectation of reduced risk and the ability to increase
   successfully completed lateral length and the resulting increase in
   productivity and recovery per unit of completed lateral length;
 * the timing and costs of the Company's capital projects, including drilling
   and completion of certain wells;
 * the impact of increasing competition;
 * the impact of potential future tariffs;
 * the general stability of the economic and political environment in which the
   Company operates;
 * the Company's expectations regarding well performance, operational timelines
   and performance;
 * general business, economic and market conditions;
 * royalty rates, costs, exchange rates and interest rates;
 * the Company's expectations on value generation related to its power
   portfolio;
 * the Company's ability to deliver additional value to shareholders;
 * the ability of the Company to obtain qualified staff, equipment and services
   in a timely and cost efficient manner;
 * future commodity and power prices;
 * the regulatory framework regarding royalties, taxes, power, renewable and
   environmental matters in the jurisdictions in which the Company operates;
 * the ability of the Company to obtain the required capital to finance its
   exploration, development and other operations and meet its commitments and
   financial obligations;
 * the ability of the Company to secure adequate product processing,
   transportation, fractionation and storage capacity on acceptable terms and
   the capacity and reliability of facilities;
 * the impact of war, hostilities, civil insurrection, pandemics (including
   Covid-19), instability and political and economic conditions (including the
   ongoing Russian-Ukrainian conflict and conflict in the Middle East) on the
   Company;
 * the ability of the Company to successfully market its products;
 * expectations regarding access of oil and gas leases in light of caribou range
   planning; and
 * the Company's operational success and results being consistent with current
   expectations.

Readers are cautioned that the foregoing list is not exhaustive of all factors
and assumptions that have been used. Although the Company believes that the
expectations reflected in such forward- looking statements or information are
reasonable, undue reliance should not be placed on forward-looking statements as
the Company can give no assurance that such expectations will prove to be
correct.

Forward-looking statements or information involve a number of risks and
uncertainties that could cause actual results to differ materially from those
anticipated by the Company and described in the forward-looking statements or
information. These risks and uncertainties include, among other things:

 * those risks set out in the Annual Information Form (AIF) under "Risk
   Factors";
 * the ability of management to execute its business plan;
 * general economic and business conditions;
 * risks of war, hostilities, civil insurrection, pandemics (including
   Covid-19), instability and political and economic conditions (including the
   ongoing Russian-Ukrainian conflict and conflict in the Middle East) in or
   affecting jurisdictions in which the Company operates;
 * the risks of the power and renewable industries;
 * operational and construction risks associated with certain projects;
 * the possibility that government policies or laws may change or governmental
   approvals may be delayed or withheld;
 * risks relating to regulatory approvals and financing;
 * the ability to market in Alberta for power projects;
 * uncertainty involving the forces that power certain renewable projects;
 * uncertainty regarding provincial and federal electricity regulations and
   policies;
 * the Company's ability to enter into or renew leases;
 * potential delays or changes in plans with respect to power and solar projects
   or capital expenditures;
 * risks associated with rising capital costs and timing of project completion;
 * fluctuations in commodity and power prices, foreign currency exchange rates
   and interest rates;
 * risks inherent in the Company's marketing operations, including credit risk;
 * health, safety, environmental and construction risks;
 * risks associated with existing and potential future lawsuits and regulatory
   actions against the Company;
 * uncertainties as to the availability and cost of financing;
 * the ability to secure adequate processing, transportation, fractionation and
   storage capacity on acceptable terms;
 * processing, pipeline and fractionation infrastructure outages, disruptions
   and constraints;
 * financial risks affecting the value of the Company's investments; and
 * other risks and uncertainties described elsewhere in this document and
   in Kiwetinohk's other filings with Canadian securities authorities.

Readers are cautioned that the foregoing list is not exhaustive of all possible
risks and uncertainties.

The forward-looking statements and information contained in this news release
speak only as of the date of this news release and the Company undertakes no
obligation to publicly update or revise any forward-looking statements or
information, except as expressly required by applicable securities laws.

Non-GAAP and other financial measures

This news release uses various specified financial measures including "non-GAAP
financial measures", "non-GAAP financial ratios" and "capital management
measures", as defined in National Instrument 52-112 Non-GAAP and Other Financial
Measures Disclosure and explained in further detail below. These non-GAAP and
other financial measures presented in this news release should not be considered
in isolation or as a substitute for performance measures prepared in accordance
with IFRS and should be read in conjunction with the  Financial Statements and
MD&A. Readers are cautioned that these non-GAAP measures do not have any
standardized meanings and should not be used to make comparisons between
Kiwetinohk and other companies without also taking into account any differences
in the method by which the calculations are prepared.

Please refer to the Company's MD&A as at and for the three and nine months ended
September 30, 2024, under the section "Non-GAAP and other financial measures"
for a description of these measures, the reason for their use and a
reconciliation to their closest GAAP measure where applicable. The Company's
MD&A is available on Kiwetinohk's website at kiwetinohk.com or its SEDAR+
profile at www.sedarplus.ca.

Non-GAAP Financial Measures

Capital expenditures, capital expenditures and net acquisitions (dispositions),
operating netback and adjusted operating netback are measures that are not
standardized measures under IFRS and might not be comparable to similar
financial measures presented by other companies.

The most directly comparable GAAP measure to capital expenditures and capital
expenditures and net acquisitions (dispositions) is cash flow used in investing
activities. The most directly comparable GAAP measure to operating netback and
adjusted operating netback is commodity sales from production.

Capital Management Measures

Adjusted funds flow from operations, free funds flow (deficiency) from
operations, adjusted working capital surplus (deficit), net debt to annualized
adjusted funds flow from operations and net debt to adjusted funds flow from
operations are capital management measures that may not be comparable to similar
financial measures presented by other companies. These measures may include
calculations that utilize non-GAAP financial measures and should not be
considered in isolation or construed as alternatives to their most directly
comparable measure disclosed in the Company's primary financial statements or
other measures of financial performance calculated in accordance with IFRS.

Supplementary Financial Measures

This news release contains supplementary financial measures expressed as: (i)
adjusted funds flow (ii) petroleum and natural gas sales, revenue, operating
costs, and transportation, and (iii) royalty rate.

Metrics presented on a $/boe basis are calculated by dividing the respective
measure, as applicable, over the referenced period by the aggregate applicable
units of production (boe) during such period.

Royalty rate is calculated by dividing royalties by petroleum and natural gas
sales less royalty and other revenue.

Future oriented financial information

Financial outlook and future-oriented financial information referenced in this
news release about prospective financial performance, financial position or cash
flows is based on assumptions about future events, including economic conditions
and proposed courses of action, based on management's assessment of the relevant
information currently available. These projections contain forward-looking
statements and are based on a number of material assumptions and factors set out
above and are provided to give the reader a better understanding of the
potential future performance of the Company in certain areas. Actual results may
differ significantly from the projections presented herein. These projections
may also be considered to contain future oriented financial information or a
financial outlook. The actual results of the Company's operations for any period
will likely vary from the amounts set forth in these projections, and such
variations may be material. See "Risk Factors" in the Company's AIF published on
the Company's profile on SEDAR+ at www.sedarplus.ca for a further discussion of
the risks that could cause actual results to vary. The future oriented financial
information and financial outlooks contained in this news release have been
approved by management as of the date of this news release. Readers are
cautioned that any such financial outlook and future-oriented financial
information contained herein should not be used for purposes other than those
for which it is disclosed herein.

Market and Industry Data

This news release includes historical, current and forecast market and industry
data that has been obtained from third party or public sources. Although
management of Kiwetinohk believes such information to be reliable, none of such
information has been independently verified by Kiwetinohk.

Abbreviations

$/boe

dollars per barrel equivalent

AIF

Annual Information Form

boe

barrel of oil equivalent, including crude oil, condensate, natural gas liquids,
and natural gas (converted on the basis of one boe per six Mcf of natural gas)

boe/d

barrel of oil equivalent per day

Mcf

thousand cubic feet

Mcf/d

thousand cubic standard feet per day

MD&A

Management Discussion & Analysis

MMcf/d

million cubic feet per day

NGLs

natural gas liquids, which includes butane, propane, and ethane

For more information on Kiwetinohk, please contact:

Investor Relations
IR email: IR@kiwetinohk.com
IR phone: (587) 392-4395

Pat Carlson, CEO
Jakub Brogowski, CFO

SOURCE Kiwetinohk Energy


×


MODAL TITLE


ORGANIZATION PROFILE


KIWETINOHK ENERGY

   Also from this source

 * Kiwetinohk renews Normal Course Issuer Bid

 * Kiwetinohk reports third quarter 2024 results and provides Duvernay and
   Montney operations update

 * Kiwetinohk reports second quarter 2024 results, increases annual production
   guidance


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