Obsidian Energy(OBE) - 2022 Q4 - Annual Report

Financial Performance - Funds flow from operations (FFO) increased by 107% to $450.7 million ($5.50 per basic share) in 2022, compared to $217.9 million ($2.90 per basic share) in 2021[9] - Net income for 2022 was $810.1 million ($9.88 per basic share), a substantial increase from $414.0 million ($5.52 per basic share) in 2021[11] - Cash flow from operating activities for Q4 2022 was $126.5 million, compared to $62.6 million in Q4 2021[48] - The netback for the year ended December 31, 2022, was $524.1 million, up from $282.1 million in 2021[50] Capital Expenditures and Production - Capital expenditures totaled $314.8 million in 2022, significantly up from $141.0 million in 2021, contributing to a 25% increase in annual production year over year[11] - The company replaced 144% of 2022 production on a proved developed producing (PDP) basis, with total proved plus probable (2P) reserves increasing by 54% to $2.8 billion[11] - The company drilled 61 wells (59.5 net) in 2022, contributing to significant reserve additions despite some delays due to extreme cold weather[13] Debt and Financial Health - Net debt decreased to $316.8 million at December 31, 2022, down from $413.5 million at the end of 2021, improving the net debt to FFO leverage to 0.7 times[11] - Total long-term debt decreased to $225.3 million as of December 31, 2022, down 42.4% from $391.0 million in 2021[53] - Net debt as of December 31, 2022, was $316.8 million, a reduction of 23.4% from $413.5 million in 2021[53] Operating Costs - General and administrative (G&A) costs were $1.64 per boe in 2022, slightly down from $1.69 per boe in 2021[11] - Net operating costs rose to $14.29 per boe in 2022, compared to $13.04 per boe in 2021, influenced by higher power costs and inflation[11] - Operating costs for Q4 2022 were $47.6 million, up 47.9% from $32.4 million in Q4 2021[51] - Net operating costs for the year ended December 31, 2022, were $160.0 million, an increase of 36.7% compared to $117.1 million in 2021[51] Future Plans and Strategies - A normal course issuer bid (NCIB) was approved in January 2023, allowing the company to buy back up to 10% of its public float, totaling a maximum of 8,073,847 common shares[12] - The company plans to spend $26 to $28 million on decommissioning expenses targeting inactive inventory in 2023[30] - The company anticipates continued evaluation of future development opportunities, particularly for the Peace River asset[58] - The company expects to maintain its capital programs and operational plans despite potential disruptions from external factors[59] - Future operating costs and general administrative costs are projected to remain stable, with a focus on optimizing production efficiency[59] - The company is pursuing additional debt capacity to support its growth initiatives and operational needs[58] - The company plans to continue its share repurchase program under the NCIB, contingent on financial resources and market conditions[61] Production Rates - The Dawson 12-33 Pad well has a peak production rate of 123 bbl/d and current production at approximately 96 bbl/d with a 15% water-cut and oil quality of 12.4o API[22] - The Crimson 8-36 Pad wells achieved an average 10-day initial production rate of 259 boe/d (65% light oil) and the Crimson 9-02 Pad well had an average rate of 166 boe/d (90% light oil)[23] - The Crimson 12-26 Pad well is showing an average 10-day initial production rate of 397 boe/d (69% oil)[24] - The South Pembina 14-6 Pad wells averaged IP 30-day rates of 292 boe/d (59% light oil)[25] Environmental and Regulatory Compliance - The company successfully abandoned a total of 796 net wells and 1,121 kilometers of pipeline with support of $30.5 million from the Alberta Government's ASRP program[29] - As of February 22, 2023, the company has hedged 72% of its natural gas production for April to October 2023 at a swap price of C$3.55/mcf[31] Market Considerations - The impact of global health events on energy demand and commodity prices remains a key consideration for future performance[61]