Highwood Asset Management Ltd. Announces Second Quarter 2021 Results and Management Change
/NOT FOR DISSEMINATION IN THE U.S. OR THROUGH U.S. NEWSWIRES/
CALGARY, Aug. 27, 2021 - Highwood Asset Management Ltd., ("Highwood" or the "Company") (TSXV: HAM) is pleased to announce financial and operating results for the quarter ended June 30, 2021. The Company also announces that its unaudited financial statements and associated Management's Discussion and Analysis ("MD&A") for the quarter ended June 30, 2021, can be found at www.sedar.com and www.highwoodmgmt.com.
Highlights
- As first announced on March 25, 2021, on July 20, 2021, the Company changed its name from Highwood Oil Company Ltd. to Highwood Asset Management Ltd. to better reflect its renewed focus on driving shareholder return through a multitude of energy focused segments or divisions. The asset management structure will oversee various operations including ESG and other clean energy transition subsectors, which include industrial metals and minerals (Lithium, Iron, Rare Earth Elements including Scandium & Gadolinium, Vanadium, Silica, Alumina, etc), clean energy technologies, upstream and midstream oil & gas production & processing.
- Within the industrial metals and minerals business unit, the Company has amassed industrial metallic and mineral permits of over 3,700,000 acres in Alberta and British Columbia and issued its first National Instrument 43-101 Technical Report on Lithium from Brine on July 16, 2021. The Company has also engaged the third-party resource evaluator to compile a 43-101 Technical Report over the Ironstone prospective permits held by the Company in addition to a 43-101 Lithium from Brine Resource Assessment specific to Drumheller, Alberta.
- Within the upstream and midstream oil & gas production & processing business unit, the Company delivered average production of 94 bbl/d of oil in the second quarter of 2021. Current net production from Highwood is approximately 115 bbl/d of oil.
- Corporately, net debt at June 30, 2021 was $1.67 million.
Summary of Financial & Operating Results
| Three months ended June 30, | Six months ended June 30, | ||||||||
| 2021 | 2020 | % | 2021 | 2020 | % | ||||
| Financial (in thousands) | |||||||||
| Oil and natural gas sales | $ 544 | $ 1,737 | (69) | $ 5,702 | $ 8,282 | (31) | |||
| Transportation pipeline revenues | 931 | 769 | 21 | 1,900 | 1,929 | (2) | |||
| Total revenues, net of royalties(1) | 742 | 1,052 | (29) | 4,917 | 17,317 | (72) | |||
| Loss | (930) | (3,837) | (76) | (1,708) | (7,561) | (77) | |||
| Funds flow from operations(5) | (61) | 2,167 | (103) | (1,393) | 5,954 | (123) | |||
| Capital expenditures | 74 | 223 | (67) | 191 | 4,415 | (96) | |||
| Net debt (2) | (1,672) | (46,089) | (96) | ||||||
| Shareholder's equity (end of period) | 8,570 | 10,860 | (21) | ||||||
| Shares outstanding (end of period) | 6,014 | 6,014 | - | ||||||
| Weighted-average basic shares | 6,014 | 6,014 | - | 6,014 | 6,014 | - | |||
| outstanding | |||||||||
| Operations (3) | |||||||||
| Production | |||||||||
| Crude oil (bbls/d) | 94 | 870 | (89) | 549 | 1,371 | (60) | |||
| Total (boe/d) | 94 | 870 | (89) | 549 | 1,371 | (60) | |||
| Average realized prices (4) | |||||||||
| Crude Oil (per bbl) | 63.30 | 21.94 | 189 | 57.42 | 33.19 | 73 | |||
| Upstream Operating netback (per BOE) (5) | (3.72) | (14.06) | (74) | 16.72 | (1.32) | (1,364) | |||
| Wells drilled: | |||||||||
| Gross | - | - | - | - | 4.0 | (100) | |||
| Net | - | - | - | - | 2.0 | (100) | |||
| Success (%) | - | - | - | - | 100 | - | |||
| (1) | Includes realized and unrealized gains and losses on commodity contracts |
| (2) | Net debt consists of bank debt and working capital surplus (deficit) excluding commodity contract assets and/or liabilities. |
| (3) | For a description of the boe conversion ratio, see "Basis of Barrel of Oil Equivalent". |
| (4) | Before hedging. |
| (5) | See "Non-GAAP measures". |
2021 Second Quarter Operations
Highwood's focus in the second quarter of 2021 was to continue to amass a sizeable position of industrial mines and minerals permits throughout Western Canada to evaluate for purposes of creating a 43-101 technical report. On July 16, 2021, the Company released its first 43-101 Technical Report on Lithium from Brine evidencing the likely presence of Lithium from Brine within the Company's permitted acreage.
The Company focused time and resources in Q2 2021 on extracting and submitting brine and ironstone samples for purposes of determining the potential Lithium from Brine and Iron, Vanadium, Alumina, Rare Earth Elements and other potential metals and minerals within the Ironstone rock.
Outlook and Update to Metallic and Industrial Mineral Permits
Within the industrial metals and minerals business unit, the Company has engaged a third-party resource evaluator to prepare a 43-101 Technical Report covering the ironstone content within the 3,700,000 permitted acres or 236 blocks in Alberta and British Columbia. This 43-101 report is anticipated to be completed in late Q3 2021.
The Company has also engaged the third-party resource evaluator to prepare a 43-101 Technical Report covering the Lithium from Brine within the region of Drumheller, Alberta. This 43-101 Technical Report is anticipated to show an inferred Lithium from Brine resource within the area and will be completed in early Q4 2021.
Given its clean balance sheet which provides considerable financial and operational flexibility, the Company remains open to completing accretive acquisitions through the balance of 2021. The Company is currently engaged in several encouraging dialogues regarding various acquisitions and partnership opportunities. Global optimism around mitigating COVID-19 and restoring previous economic and industrial activities has created positive market and investment sentiment both within and outside oil & gas space.
While Highwood sold the majority of its producing oil assets in the first quarter of 2021, the Company has, and will continue to evaluate opportunities in the M&A market but will remain disciplined to pursue only those opportunities that are accretive with low to moderate liability profiles.
Corporately, the Company intends to build a growing profile of recurring free funds flow that will provide maximum flexibility for growth and / or other strategic M&A opportunities in a non-dilutive fashion.
Management Change
The Company is announcing the resignation of Mr. Graydon Glans from the Company's management team effective September 24, 2021. Highwood wishes to thank Mr. Glans for his many years of service to the Company and to wish him the very best in his future endeavors.
The Company is pleased to announce that Mr. Chris Allchorne will step into the role of Interim CFO of Highwood. Mr. Allchorne was appointed Controller of Highwood in January 2017 and brings with him an extensive accounting and public entity background. Mr. Allchorne is a Chartered Professional Accountant.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Cautionary Note Regarding Forward-Looking Information
This news release contains "forward-looking information" or "FLI" within the meaning of the Canadian securities laws. Forward-looking information is generally identifiable by use of the words "believes," "may," "plans," "will," "anticipates," "intends," "budgets", "could", "estimates", "expects", "forecasts", "projects" and similar expressions, and the negative of such expressions. Forward-looking information in this news release include statements about the Company's next steps which include resource assessment, continued exploration and development work, including in respect of the potential extraction technology, continued sampling and developing a reservoir model, the completion and timing for the Cretaceous ironstone NI 43-101 Technical Report, and the evaluation and potential spinout of a pure play lithium company, as well as the specific assumptions used to develop such FLI and the specific risk factors.
In connection with the forward-looking information contained in this news release, Highwood has made numerous assumptions, regarding, among other things: the geological, metallurgical, engineering, financial and economic advice that Highwood has received is reliable and is based upon practices and methodologies which are consistent with industry standards. While Highwood considers these assumptions to be reasonable, these assumptions are inherently subject to significant uncertainties and contingencies.
Additionally, there are known and unknown risk factors which could cause Highwood's actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained herein. Known risk factors include, among others: the Li-brine resource assessment may not be completed as planned or at all, the exploration and continued sampling may exceed the budget; continued sampling and the reservoir model may not achieve the results expected; investor support for a pure play lithium public spinout; the need to obtain additional financing; uncertainty as to the availability and terms of future financing; the possibility of delay in exploration or development programs and uncertainty of meeting anticipated program milestones; uncertainty as to timely availability of permits and other governmental approvals.
A more complete discussion of the risks and uncertainties facing Highwood is disclosed in Highwood's continuous disclosure filings with Canadian securities regulatory authorities at www.sedar.com. All forward-looking information herein is qualified in its entirety by this cautionary statement, and Highwood disclaims any obligation to revise or update any such forward-looking information or to publicly announce the result of any revisions to any of the forward-looking information contained herein to reflect future results, events, or developments, except as required by law.
Oil and Gas Measures
Readers should see the "Selected Technical Terms" in the Annual Information Form filed on April 29, 2021 for the definition of certain oil and gas terms.
Basis of Barrels of Oil Equivalent - This news release discloses certain production information on a barrels of oil equivalent ("boe") basis with natural gas converted to barrels of oil equivalent using a conversion factor of six thousand cubic feet of gas (Mcf) to one barrel (bbl) of oil (6 Mcf:1 bbl). Condensate and other NGLs are converted to boe at a ratio of 1 bbl:1 bbl. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based roughly on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at sales point. Although the 6:1 conversion ratio is an industry-accepted norm, it is not reflective of price or market value differentials between product types. Based on current commodity prices, the value ratio between crude oil, NGLs and natural gas is significantly different from the 6:1 energy equivalency ratio. Accordingly, using a conversion ratio of 6 Mcf:1 bbl may be misleading as an indication of value.
Mcfe Conversions: Thousands of cubic feet of gas equivalent ("Mcfe") amounts have been calculated by using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas. Mcfe amounts may be misleading, particularly if used in isolation. A conversion ratio of 1 bbl to 6 Mcf 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 natural gas as compared to oil is significantly different from the energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may be misleading as an indication of value.
Non-GAAP Measures
"Funds flow from operations" is a non-GAAP financial measure and is calculated as cash flow from operating activities adjusted for changes in non-cash working capital.
"Netback" is a non-GAAP financial measure and is calculated as revenues net of royalties, less transportation and processing charges and operating expenses and then divided by BOE or Mcf sold.
Contact
For further information about the Company please contact: Greg Macdonald, President and Chief Executive Officer, 587.393.0862, investorrelations@highwoodoil.com