Advantage Energy : Consolidated Management’s Discussion & Analysis (Q4 2024 MDA FINAL)
AAV.TO
CONSOLIDATED MANAGEMENT'S DISCUSSION & ANALYSIS
For the three months and years ended December 31, 2024 and 2023
CONSOLIDATED MANAGEMENT'S DISCUSSION & ANALYSIS
The following Management's Discussion and Analysis ("MD&A"), dated as of March 4, 2025, provides a detailed explanation of the consolidated financial and operating results of Advantage Energy Ltd. ("Advantage", the "Corporation", "us", "we" or "our") for the three months and year ended December 31, 2024, and should be read in conjunction with the December 31, 2024, audited consolidated financial statements. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards" or "IFRS"), representing generally accepted accounting principles ("GAAP") for publicly accountable enterprises in Canada. All references in the MD&A and consolidated financial statements are to Canadian dollars unless otherwise indicated. All dollar per boe figures herein forth only include the results of Advantage's natural gas and liquids operations and exclude the results of Entropy Inc. ("Entropy").
This MD&A contains specified financial measures such as non‐GAAP financial measures, non‐GAAP ratios, capital management measures and supplementary financial measures and forward‐looking information. Readers are advised to read this MD&A in conjunction with both the "Specified Financial Measures" and "Forward‐Looking Information and Other Advisories" sections found at the end of this MD&A.
Financial Highlights
Three months ended
Year ended
December 31
December 31
($000, except as otherwise indicated)
2024
2023
2024
2023
Financial Statement Highlights
163,477
543,295
Natural gas and liquids sales
147,137
541,100
Net income and comprehensive income(3)
17,130
41,026
21,719
101,597
per basic share (2)
0.10
0.25
0.13
0.61
per diluted share (2)
0.10
0.24
0.13
0.59
Basic weighted average shares (000)
166,974
163,939
163,955
166,553
Diluted weighted average shares (000)
169,785
168,441
166,821
171,833
Cash provided by operating activities
56,350
89,048
217,533
323,345
Cash provided by (used in) financing activities
22,789
(52,120)
481,077
(70,263)
Cash used in investing activities
(71,202)
(58,846)
(697,725)
(282,761)
Other Financial Highlights
81,389
241,396
Adjusted funds flow (1)
82,494
313,570
per basic share (1)(2)
0.49
0.50
1.47
1.88
per diluted share (1)(2)
0.48
0.49
1.45
1.82
Net capital expenditures (1)
99,162
39,938
736,911
282,796
Free cash flow ‐ surplus (deficit) (1)
(29,194)
42,680
(61,662)
40,933
Bank indebtedness
470,424
212,854
470,424
212,854
Net debt (1)(4)
718,449
235,010
718,449
235,010
Advantage Energy Ltd. ‐ 1
Operating Highlights(1)
Three months ended
Year ended
December 31
December 31
2024
2023
2024
2023
Operating
Production
7,527
3,254
5,347
2,710
Crude oil (bbls/d)
Condensate (bbls/d)
979
1,264
1,116
1,166
NGLs (bbls/d)
3,379
3,345
3,127
3,021
Total liquids production (bbls/d)
11,885
7,863
9,590
6,897
Natural gas (Mcf/d)
389,331
363,124
367,965
322,687
Total production (boe/d)
76,774
68,384
70,918
60,678
Average realized prices (including realized derivatives)
2.46
2.20
Natural gas ($/Mcf)
2.84
3.24
Liquids ($/bbl)
87.84
81.55
85.02
78.35
Operating Netback ($/boe)
23.14
20.93
Natural gas and liquids sales
23.39
24.43
Realized gains on derivatives
2.91
0.98
1.97
1.59
Processing and other income
0.11
0.39
0.21
0.34
Net sales of purchased natural gas
‐
‐
‐
(0.01)
Royalty expense
(2.40)
(1.64)
(2.02)
(1.92)
Operating expense
(5.19)
(3.55)
(4.75)
(3.78)
Transportation expense
(3.77)
(4.08)
(3.90)
(4.09)
Operating netback (2)
14.80
15.49
12.44
16.56
Advantage Energy Ltd. ‐ 2
Corporate Update
On June 24, 2024, the Corporation closed the acquisition of certain Charlie Lake and Montney assets (the "Acquisition" or the "Acquired Assets") for cash consideration of $445.3 million, including closing adjustments. The Acquisition capitalized on an opportunity to consolidate a high‐quality, liquids‐weighted asset that is contiguous with our existing core areas and complementary to our infrastructure platform.
The Acquisition was partially funded by the issuance of 5,910,000 common shares at a price of $11.00 per share (see "Shareholders' Equity") and $143.8 million aggregate principal amount of 5.0% convertible unsecured subordinated debentures at a price of $1,000 per debenture (see "Convertible Debentures") for aggregate gross proceeds of $208.8 million. The remainder was funded from the Corporation's credit facility which was increased to $650 million (see "Bank Indebtedness, Credit Facilities and Working Capital").
In the fourth quarter of 2024, the Corporation disposed of certain non‐core assets for proceeds of $11.4 million (see "Cash Used in Investing Activities and Net Capital Expenditures").
Advantage 2025 Guidance
On December 10, 2024, the Corporation announced its 2025 budget (see News Release dated December 10, 2024).
Advantage's 2025 capital program continues our focus on growing adjusted funds flow per share via high rate‐of‐ return development drilling. To maximize shareholder value, all free cash flow from operations will be allocated to debt reduction though a portion of the proceeds from non‐core asset divestitures may be used to buy back shares, while achieving a net debt target of $450 million towards the end of 2025. On March 4, 2025, the United States implemented a 25% across‐the‐board tariff, with a lower 10% tariff implemented on Canadian energy. The full impact of the implemented tariffs to supply chains is not determinable at this time.
The below table summarizes Advantage's 2025 guidance:
Forward Looking Information(1)
Guidance(3)
Cash Used in Investing Activities ($ millions) (2)
270 to
300
Production
Total Production (boe/d)
80,000 to
83,000
Natural Gas (%)
84 to
85
Crude Oil and Condensate (%)
11 to
12
NGLs (%)
~4
Expenses
Royalty Rate (%)
8 to 10
Operating Expense ($/boe)(4)
5.20 to
5.90
Transportation Expense ($/boe) (4)
3.95 to
4.25
G&A Expense ($/boe) (4)
0.75 to
0.85
Finance Expense ($/boe) (4)
1.50 to
1.95
Advantage Energy Ltd. ‐ 3
Corporate Update (continued)
Advantage 2024 Guidance Comparison
The below table summarizes Advantage's 2024 guidance compared to actual 2024 financial and operational results:
Original 2024
2024
Guidance(1)(3)
Revised 2024 Guidance(2)(3)
Actual(3)
Net capital expenditures ($ millions)
260 to 290
245 to 275
266.7(4)
Total Production (boe/day)
65,000 to 68,000
70,000 to 73,000
70,918
Liquids Production (%)
~10%
~13%
14%
Royalty Rate (%)
7 to 9
9 to 10
9.7
Operating Expense ($/boe)(5)
3.85
5.00
4.75
Transportation Expense ($/boe) (5)
3.95
3.50
3.90
G&A/Finance Expense ($/boe) (5)
1.90
2.50
2.54
Advantage revised its guidance on successful closing of the Acquisition and actual results for 2024 were substantially within the revised guidance other than as follows:
Operating Expense
The Corporation achieved actual operating cost of $4.75/boe and 5% below the revised guidance as a result of higher than anticipated operational synergies from the Acquisition, driving down operating costs on a per boe basis.
Transportation Expense
The Corporation's actual transportation expense was above its revised guidance at $3.90/boe due to the classification of certain physical transportation agreements acquired from the Acquisition as an expense rather than a deduction from revenue.
Advantage Energy Ltd. ‐ 4
Production
Three months ended
Year ended
December 31
%
December 31
%
Average Daily Production
2024
2023
Change
2024
2023
Change
Crude oil (bbls/d)
7,527
3,254
131
5,347
2,710
97
Condensate (bbls/d)
979
1,264
(23)
1,116
1,166
(4)
NGLs (bbls/d)
3,379
3,345
1
3,127
3,021
4
Total liquids production (bbls/d)
11,885
7,863
51
9,590
6,897
39
Natural gas (Mcf/d)
389,331
363,124
7
367,965
322,687
14
Total production (boe/d)
76,774
68,384
12
70,918
60,678
17
Liquids (% of total production)
15
11
14
11
Natural gas (% of total production)
85
89
86
89
Average Daily Production
400
14,000
350
12,000
300
10,000
bbls/d
340
250
MMcf/d
6,000
314
11,885
150
8,000
363
357
356
12,820
369
389
200
4,000
273
7,863
100
5,765
6,355
7,577
6,452
7,141
2,000
50
‐
0
Q1 23
Q2 23
Q3 23
Q4 23
Q1 24
Q2 24
Q3 24
Q4 24
Liquids (bbls/d)
Natural gas (MMcf/d)
For the three months and year ended December 31, 2024, Advantage delivered record total production averaging 76,774 boe/d and 70,918 boe/d, respectively, increases of 12% and 17% compared to the same periods of the prior year. All growth during the second half of 2024 has been directly attributable to the Acquired Assets.
Natural gas production for the three months and year ended December 31, 2024 averaged 389 MMcf/d and 368 MMcf/d, respectively, increases of 7% and 14% compared to the same periods of the prior year. The increase in natural gas production was due to continued development at Glacier, with 13.8 net wells brought on production (see "Cash Used in Investing Activities and Net Capital Expenditures"), accompanied with natural gas production from the Acquired Assets. Advantage has been responsibly managing our natural gas production during periods of unusually low Alberta natural gas prices during the second half of 2024. Production curtailment levels were determined on a continuous day‐to‐day basis to eliminate variable cash costs and defer development capital. The curtailments were primarily dry gas at Glacier, which is amongst the lowest‐cost natural gas assets in North America and did not materially impact cash flow. The impact of curtailments on natural gas production for the year ended December 31, 2024 was approximately 11.2 MMcf/d.
Liquids production for the three months and year ended December 31, 2024 averaged 11,885 bbls/d and 9,590 bbls/d, respectively, increases of 51% and 39% compared to the same periods of the prior year, entirely due to liquids production from the Acquired Assets (see "Cash Used in Investing Activities and Net Capital Expenditures"). The increase in high‐quality liquids production has had a dramatic impact on sales during the quarter (see "Natural Gas and Liquids Sales").
Advantage expects total annual production to increase to between 80,000 and 83,000 boe/d in 2025 based on the Corporation's planned 2025 capital program (see "Corporate Update").
Advantage Energy Ltd. ‐ 5
Commodity Prices and Marketing
Three months ended
Year ended
Average Realized Prices(2)
December 31
%
December 31
%
2024
2023
Change
2024
2023
Change
Natural gas
Excluding derivatives ($/Mcf)
2.03
2.64
(23)
1.87
2.92
(36)
Including derivatives ($/Mcf)
2.46
2.84
(13)
2.20
3.24
(32)
Liquids
93.92
97.89
(4)
95.50
94.35
1
Crude oil ($/bbl)
Condensate ($/bbl)
95.02
97.88
(3)
97.25
98.80
(2)
NGLs ($/bbl)
55.11
59.49
(7)
57.05
56.10
2
Total liquids excluding derivatives ($/bbl)
82.98
81.55
2
83.17
78.35
6
Total liquids including derivatives ($/bbl)
87.84
81.55
8
85.02
78.35
9
Average Benchmark Prices
Natural gas (1)
AECO daily ($/Mcf)
1.48
2.30
(36)
1.46
2.64
(45)
AECO monthly ($/Mcf)
1.46
2.66
(45)
1.44
2.93
(51)
Empress daily ($/Mcf)
1.59
2.32
(31)
1.51
2.65
(43)
Henry Hub ($US/MMbtu)
2.42
2.74
(12)
2.25
2.53
(11)
Emerson daily ($US/MMbtu)
1.55
1.99
(22)
1.39
2.20
(37)
Dawn daily ($US/MMbtu)
2.23
2.28
(2)
1.96
2.33
(16)
Chicago Citygate ($US/MMbtu)
2.33
2.29
2
2.13
2.30
(7)
Liquids
WTI ($US/bbl)
70.26
78.26
(10)
75.71
77.57
(2)
MSW Edmonton ($/bbl)
94.88
99.56
(5)
97.64
100.60
(3)
Average Exchange rate ($US/$CAD)
0.7149
0.7346
(3)
0.7301
0.7409
(1)
Natural gas
Advantage's realized natural gas price excluding derivatives for the three months and year ended December 31, 2024 was $2.03/Mcf and $1.87/Mcf, respectively, decreases of 23% and 36% compared to the same periods of the prior year. This decrease was attributed to lower natural gas benchmark prices in markets where Advantage physically delivers natural gas and has market diversification exposure. North American natural gas benchmark prices have decreased substantially in 2024 largely due to strong North American natural gas production accompanied by a mild 2023/2024 winter resulting in elevated gas inventories. In particular, natural gas prices at AECO and Empress fell below Glacier's variable costs of production at various points in September through early November whereby Advantage proactively curtailed production determined on a continuous day‐to‐day basis (see "Production").
Advantage's natural gas exposure consists of the AECO, Empress, Emerson, Dawn, and Chicago markets. Additionally, the Corporation delivers 25,000 MMbtu/d under a long‐term natural gas supply agreement whereby Advantage receives a PJM electricity‐based spark‐spread price, less Alliance tolls. Advantage incurs additional transportation expense to deliver production beyond AECO to the Empress, Emerson, Dawn and Chicago markets (see "Transportation Expense").
Advantage Energy Ltd. ‐ 6
Commodity Prices and Marketing (continued)
The following table outlines the Corporation's 2025 forward‐looking natural gas market exposure, and 2024 actual natural gas market exposure, excluding hedging.
Forward‐looking 2025(2)
2024
Effective
Percentage of Natural
Actual
Percentage of Natural
production
Gas Production
production
Gas Production
Sales Markets
(MMcf/d)(1)
(%)
(MMcf/d) (1)
(%)
AECO
170.8
41%
90.7
25%
AECO Other(4)
28.4
7%
36.8
10%
Empress
88.4
21%
80.1
22%
Emerson
30.9
7%
43.1
12%
Dawn
52.7
13%
52.7
14%
Chicago
17.1
4%
27.1
7%
Ventura
‐
‐
12.5
3%
PJM electricity price(5)
25.0
6%
25.0
7%
Total
413.2(3)
100%
368.0
100%
Liquids
Advantage's realized liquids price excluding derivatives for the three months and year ended December 31, 2024 was $82.98/bbl and $83.17/bbl, respectively, increases of 2% and 6% compared to the same periods of the prior year. Realized liquids price excluding derivatives increased slightly in 2024 when compared to 2023 due to a higher proportion of Advantage's liquids production being comprised of crude oil, condensate, and pentanes compared to the prior year due to the impact from the Acquired Assets. The price that Advantage receives for crude oil and condensate production is largely driven by global supply and demand and the Edmonton light sweet oil and condensate price differentials. Approximately 80% of our liquids production is comprised of crude oil, condensate and pentanes, which generally attracts higher market prices than other liquids. The quality of our liquids production has increased significantly from the prior year due to the Acquired Assets.
Advantage Energy Ltd. ‐ 7
Natural gas and liquids sales
Three months ended
Year ended
December 31
%
December 31
%
($000, except as otherwise indicated)
2024
2023
Change
2024
2023
Change
Crude oil
65,036
29,304
122
186,896
93,330
100
Condensate
8,558
11,382
(25)
39,723
42,047
(6)
NGLs
17,133
18,306
(6)
65,289
61,856
6
Liquids
90,727
58,992
54
291,908
197,233
48
Natural gas
72,750
88,145
(17)
251,387
343,867
(27)
Natural gas and liquids sales
163,477
147,137
11
543,295
541,100
‐
per boe
23.14
23.39
(1)
20.93
24.43
(14)
Natural Gas and Liquids Sales
($ millions)
$146.0
$147.1
$163.5
$140.7
$135.9
$139.8
28%
$107.2
40%
35%
$104.1
55%
39%
41%
53%
71%
72%
61%
60%
65%
45%
59%
47%
29%
Q1 23
Q2 23
Q3 23
Q4 23
Q1 24
Q2 24
Q3 24
Q4 24
Natural gas sales (% of Total)
Liquids sales (% of Total)
Total ($ millions)
Natural gas and liquids sales for the three months and year ended December 31, 2024, increased by $16.3 million, or 11%, and $2.2 million, or 0%, respectively, compared to the same corresponding periods of 2023.
For the year ended December 31, 2024, natural gas sales decreased by $92.5 million or 27%, compared to 2023, due to a 36% decrease in realized gas prices (see "Commodity Prices and Marketing"), partially offset by a 14% increase in natural gas production volumes (see "Production"). Liquids sales increased by $94.7 million, or 48%, due to a 39% increase in liquids production volumes (see "Production") and a 6% increase in realized liquids prices (see "Commodity Prices and Marketing"). The Acquired Assets contributed $113.5 million of natural gas and liquids sales since closing the Acquisition on June 24, 2024, the majority of which attributed to liquids production (see "Corporate Update").
For the three months ended December 31, 2024, natural gas sales decreased by $15.4 million or 17%, compared to the corresponding period in 2023, due to a 23% decrease in realized gas prices (see "Commodity Prices and Marketing"), partially offset by a 7% increase in natural gas production volumes (see "Production"). Fourth quarter liquids sales increased by $31.7 million, or 54%, due to a 51% increase in liquids production volumes (see "Production") and a 2% increase in realized liquids prices (see "Commodity Prices and Marketing").
Advantage Energy Ltd. ‐ 8
Financial Risk Management
The Corporation's financial results and condition are impacted primarily by the prices received for natural gas, crude oil, condensate and NGLs production. Natural gas, crude oil, condensate and NGLs prices can fluctuate widely and are determined by supply and demand factors, including available access to transportation, weather, general economic conditions in consuming and producing regions and political factors. Additionally, certain commodity prices are transacted and denominated in US dollars. Advantage has been proactive in commodity risk management to reduce the volatility of cash provided by operating activities supporting our organic development by diversifying sales to different physical markets and entering into financial commodity and foreign exchange derivative contracts. Advantage's Credit Facilities (as defined herein) allow us to enter derivative contracts on up to 75% of total estimated production over the first three years and up to 50% over the fourth and fifth years. In addition, the Credit Facilities allow us to enter basis swap arrangements to any natural gas price point in North America for up to 100,000 MMbtu/d with a maximum term of seven years. Basis swap arrangements are excluded from hedged production limits.
The Corporation enters into financial risk management derivative contracts to manage the Corporation's exposure to commodity price risk, foreign exchange risk and interest rate risk. A summary of realized and unrealized derivative gains and losses for the three months and year ended December 31, 2024, and 2023 are as follows:
Three months ended
Year ended
($000)
December 31
December 31
2024
2023
2024
2023
Realized gains (losses) on derivatives
Natural gas
16,169
6,636
47,642
38,184
Crude oil
5,318
‐
6,493
‐
Foreign exchange
(179)
(27)
(101)
(2,033)
Natural gas embedded derivative
(728)
(469)
(2,907)
(908)
Total
20,580
6,140
51,127
35,243
Unrealized gains (losses) on derivatives
(14,278)
17,264
4,496
6,233
Natural gas
Crude oil
(10,505)
‐
7,052
‐
Foreign exchange
(1,461)
682
(1,634)
3,090
Natural gas embedded derivative
25,793
12,777
(4,733)
(13,192)
Unsecured debenture derivative
(68)
365
(866)
(5,606)
Total
(519)
31,088
4,315
(9,475)
Gains (losses) on derivatives
Natural gas
1,891
23,900
52,138
44,417
Crude oil
(5,187)
‐
13,545
‐
Foreign exchange
(1,640)
655
(1,735)
1,057
Natural gas embedded derivative
25,065
12,308
(7,640)
(14,100)
Unsecured debenture derivative
(68)
365
(866)
(5,606)
Total
20,061
37,228
55,442
25,768
Advantage Energy Ltd. ‐ 9
Disclaimer
Advantage Energy Ltd. published this content on March 04, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 04, 2025 at 22:52:13.234.