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Headwater Exploration Inc T.HWX

Alternate Symbol(s):  CDDRF

Headwater Exploration Inc. is a Canada-based resource company, which is engaged in the exploration and development and production of petroleum and natural gas in Canada. The Company's core operating areas are Marten Hills and McCully Field. Marten Hills is located approximately 250 kilometers (km) north of Edmonton, Alberta, within the Clearwater play. It owns approximately 270 sections of Clearwater rights. The McCully Field is located approximately 10 km northeast of Sussex, New Brunswick, in the farming community of Penobsquis. It owns and operates a natural gas processing plant, with a processing capacity of about 35 million standard cubic feet per day (mmscfpd), and a 50 km transmission line connected to the Maritimes and Northeast pipeline. The Company has oil production, reserves, and lands in the Clearwater play in the Marten Hills area of Alberta as well as low decline natural gas production and reserves in the McCully Field near Sussex, New Brunswick.


TSX:HWX - Post by User

Post by retiredcfon Aug 05, 2022 9:10am
256 Views
Post# 34873607

RBC

RBC

August 4, 2022

Headwater Exploration Inc.
Q2/22 broadly in-line; continued momentum at Marten Hills

TSX: HWX | CAD 5.54 | Outperform | Speculative Risk | Price Target CAD 10.00

Sentiment: Neutral

Headwater’s Q2/22 results were broadly in line with expectations and underscored by several strong well results. Management continues to balance core development with delineation in West Marten Hills and recently acquired exploratory acreage in Greater Peavine; plenty of activity is slated for the second half. We expect the stock to trade in line with peers on the back of the release and we continue to highlight Headwater as a top E&P pick.

Details

Q2/22 broadly in line with expectations. Q2 volumes of 11,772 boe/d were slightly ahead of RBC/consensus estimates of 11,546/11,614 boe/d. This drove in-line CFPS of $0.34, compared to RBCe/consensus of $0.36/$0.32. Q2 capital spend totaled $31 million (RBCe/consensus: $40/$30 million), which featured five successful Clearwater A wells in West Marten Hills, and 9/4 injection/water source wells in Marten Hills in supporting EOR acceleration.

Marten Hills West delineation continues. The Marten Hills West program continues to deliver strong results with seven recent well results showing IP30s ranging from 109 to 366 bbl/d (average: 245 bbl/d). Management has drilled 13 wells in Marten Hills West YTD (100% success rate), punctuated by five Clearwater A wells coming on production in Q2/22 with July volumes reaching roughly 1,600 bbl/d. Management has planned another 19 step-out locations for the balance of 2022 and plans to drill its first Clearwater A water injection pilot prior to year-end.

Updates at Core Marten Hills, Greater Peavine, McCully. Headwater drilled 13 injection and water source wells alongside one production well in Q2/22 at Marten Hills; currently 35% of the field (3.5 sections) is under waterflood, with Headwater on track to increase this to 65% by H1/23. The company added 6.75 additional sections of land in Peavine through land sales, increasing its Greater Peavine acreage to 110 sections. Management plans to add a fourth rig to drill eight Peavine wells and test eight prospects beginning in Q4/22. Headwater also shut-in its McCully asset on May 1, 2022, and will restart the asset in winter 2023 to capitalize on premium gas pricing.

2022 guidance maintained. Management maintained its 2022 capital guidance of $230 million after lifting this in Q1/22 to support land expenditures ($30 million), 20 incremental wells ($25 million), roads and pad construction ($30 million), and incorporating inflation (10%). Headwater currently guides for 2022E average volumes of 13,000 boe/d (exit: 16,500 boe/d)


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