Athabasca Oil Corp T.ATH

Alternate Symbol(s): ATHOF

Energy Oil & Gas E&P

Athabasca Oil Corporation (AOC) is a Canadian energy company with a focused strategy on the development of thermal and light oil assets. AOC’s segments include Light Oil and Thermal Oil. The Thermal Oil segment includes the Company’s assets, liabilities and operating results for the exploration, development and production of bitumen from sand and carbonate rock formations located in the Athabasca region of Northern Alberta. It also consists of two operating oil sands steam assisted gravity drainage projects and a resource base of exploration areas in the Athabasca region of northeastern Alberta. The Light Oil segment includes its assets, liabilities and operating results for the exploration, development and production of light crude oil and medium crude oil, tight oil and conventional natural gas. Its Light Oil segment consists exclusively of the Duvernay in the Greater Kaybob area with about 155,000 gross acres across Kaybob West, Kaybob North, Kaybob East and Two Creeks.

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Athabasca Oil Corp

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Post by retiredcfon Jul 25, 2024 8:44am

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Post# 36147604

RBC

July 24, 2024

Athabasca Oil Corporation
2Q First Glance—Thermal Growth in Focus

TSX: ATH | CAD 5.37 | Sector Perform | Price Target CAD 6.00

Sentiment: Neutral

Athabasca Oil reported solid second-quarter results punctuated by 4% higher adjusted FFO per share of $0.29, 3% higher production volumes of 37,600 boe/d, and 3% lower capital spending vis-a-vis Street consensus (see table below). The company also updated its 2024 guidance pointing toward 3% higher (1,000 boe/d) midpoint production amid 27% ($58 million) higher capital spending related to commencing expansion plans at Leismer to 40,000 bbl/d.

Conference Call

Athabasca does not host a quarterly conference call.

Key Points

• Second-quarter production volumes of 37,600 boe/d (98% oil & liquids) were about 2% above our estimate of 36,700 boe/d.

At Leismer, Athabasca reported production of 26,400 bbl/d (vs. RBCe 26,500 bbl/d) amid bitumen realizations of $78.42/bbl (5% above RBCe $74.80/bbl). The facility expansion was commissioned in late February and successfully ramped up to approximately 28,000 bbl/d in June as planned, with a current SOR of circa 3.0x.
The company is continuing with the progressive growth to increase Leismer production to 40,000 bbl/d over the next three years at a total cost of $300 million ($25,000/bbl/d), which includes the drilling of circa 20 well pairs, expanding steam capacity to approximately 130,000 bbl/d, and adding oil processing capacity at its central processing facility.
The incremental $58 million increase of capital is allocated toward Athabasca’s thermal operations. Additional investment at Leismer will be directed toward four total wells this year, which include two extended reach redrills and two sustaining well pairs on Pad L10, in addition to commencing expansion work for growth to 40,000 bbl/d. The company’s 2024 capital spending will support Leismer’s productive capacity at circa 28,000 bbl/d until the next step-up to about 32,000 bbl/d in mid-2026. Following this, Athabasca plans to grow production to 35,000 bbl/d in 2027 and achieve 40,000 bbl/d in 2028.
Elsewhere,Athabasca’sproductionatHangingstonesatat7,300bbl/d(5%aboveRBCat7,000bbl/d)amidrealizationsof$86.98/ bbl (7% above RBCe $81.40/bbl). The company recently spud the first of two circa 1,400 metre sustaining well pairs at a capital efficiency of circa $15,000/bbl/d.
Athabasca’s capital spending in the quarter of $48 million was 3% below our outlook of $50 million.
On the shareholder returns front, Athabasca repurchased $78 million of its common shares outstanding in the second quarter.

The company is allocating 100% of free cash flow (excluding Duvernay Energy) to share buybacks in 2024. Year-to-date, the company has completed $173 million (34.7 million common shares) in share repurchases.

2024 Guidance

• Alongside its second-quarter results, Athabasca announced that it is increasing its total production guidance by 3% to a midpoint of 36,500 boe/d (previously 35,500 boe/d) amid a 27% ($58 million) higher capital program of $275 million (previously $217million) reflective of the sanctioning of growth plans at Leismer.