Nuvista Energy Ltd T.NVA

RBC

[retiredcf]

Their upside scenario target is $19.00. GLTA

November 8, 2024

Sector Perform

TSX: NVA; CAD 11.70

Price Target CAD 14.00

NuVista Energy Ltd.
Q3/24 Model Update - Lower Montney Weighs In

Our view: NuVista reported Q3/24 production of 83,475 boe/d (RBC/ Street: 83,099/82,025 boe/d) driving AFFO (f.d.) of $0.67/sh (RBC/ Street: $0.49/$0.56). 2024 production guidance with the company unveiling a 2025 capital budget of $450mm driving volumes of 90,000 mboe/d (39% liquids). Notably, the company also added an LNG netback agreement with Trafigura (21,000 mmbtu/d; 13 years) commencing in January 2027.

Key points:

• Q3/24 Results. NuVista reported Q3/24 production of 83,475 boe/ d (RBC/Street: 83,099/83,025 boe/d) driving AFFO (f.d.) of $0.67/sh (RBC/ Street: $0.49/$0.56); volumes and realizations were the key driver. Capital expenditures were $118mm (RBC/Street: $135mm/$129mm) in the quarter. Exit net debt for the quarter was $261mm (D/CF: 0.5x) which is well below NVA's net debt target of $350mm. NVA bought and cancelled 817k shares for ~$11.3mm during the quarter. The company reaffirmed its RoC commitment of 75%.

• Unveiled 2025 Budget/Reaffirmed 2024 Guidance. The company reiterated its existing 2024 guidance of 83,500-86,000 boe/d and left its capital guidance unchanged at $500mm, with Q4/24 volumes positioned to be 89,000-91,000 boe/d which includes the minor impact associated with temporary shut-ins. The company unveiled its 2025 capital budget of $450mm driving volumes of 90,000 mboe/d; the plan includes a six- week turnaround for maintenance and expansion of major third-party facilities in Wapiti which will occur in Q2/Q3. The majority of production growth will occur from its Pipestone North asset (coinciding with startup of CSV Albright) in 2025; Gold Creek the focus of growth in 2026/27.

• Adding 2027 LNG Exposure. The company added LNG exposure to its natural gas diversification strategy, through a JKM netback agreement with Trafigura based on 21,000 mmbtu/d of LNG for 13 years commencing in January 2027.

• Operational highlights - Lower Montney. (1) During the quarter, NVA drilled 14 wells, completed 12; (2) NVA completed a 4-well pad in Pipestone South in H1/24, achieved average IP90 rates per well of 1.3 mboe/d (40% liquids) despite restricted rates due to infrastructure capacity; (3) NVA's southern pad in Pipestone North (a co-development of Lower Montney) reached an IP60 of 1.7 mboe/d (50% liquids); (4) NVA intends to complete a 14-well pad in Pipestone North in Q1/25 to coincide with the startup of CSV Albright gas plant; (5) a southern Elmworth pad co-developed the entire Montney stack (including Lower Montney) averaged 1.7 mboe/d (15% liquids); (6) NVA brought on a 6- well pad between Gold Creek and Elmworth where it reached an IP30 of 1.7 mboe/d (40% condensate), and the Lower Montney well reached 1.9 mboe/d (38% liquids).

• Updates to Estimates. We update our estimates to reflect Q4/24 production guidance and the newly unveiled 2025 capital budget with tweaks to our liquids mix driving our 2024/25/26 CFPS estimates to increase by +10%/+1%/+9%.