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As we head into summer, I hope you and your families remain well. It is hard to believe that a year ago, Pine Cliff was sitting at $24.8 million in net debt and as of March 31, 2023, Pine Cliff has $58.1 million in positive cash, an increase of $82.9 million. Impressively, we accomplished this while paying our shareholders $35.0 million in dividends since our initial dividend payment in May 2022.
Read Full MessageQ1 2023 was the sixth consecutive quarter that Pine Cliff surpassed $19.0 million in adjusted funds flow1. Highlights from the first quarter of 2023 include:
Pine Cliff drilled two Pekisko oil wells (1.4 net) during the first quarter with a third (0.7 net) drilled and rig released by April 12, 2023. The three wells were drilled from the same pad location, minimizing surface disturbance while maximizing cost efficiencies. The three wells (2.1 net) are scheduled to be completed and placed in production before the end of the second quarter with the all in-capital costs per well expected to average $4.0 million ($2.8 million net).
Volatility is nothing new to natural gas markets, but Q1 saw a drop in United States natural gas prices we have not experienced in a long time. This decrease was caused by unseasonably warm weather in the eastern United States as well as the Freeport LNG export facility not returning to full capacity until the end of Q1. The summer of 2023 has the potential to provide weaker natural gas prices, which is why Pine Cliff has physical sales contracts in place for approximately 25% of our Q2 and Q3 natural gas production at an average price of $3.34 Mcf.
For many years, we have highlighted to our shareholders the expected increase in North American LNG exports that is scheduled to begin in late 2024 and carry on through the rest of the decade. The fact that this timeline is now just 18-24 months away is quite exciting. Adding to this positive outlook for natural gas is the rising use of natural gas in Western Canada for industrial use, oil sands production and power generation.
We are very proud of how we have positioned Pine Cliff with a strong balance sheet that can withstand the unpredictability of natural gas prices. Until the expected launch of new LNG export facilities, weather will continue to be the dominant factor impacting natural gas prices. We all know how unstable weather can be, so it is important that Pine Cliff remains in a fiscally responsible position to continue to pay a sustainable dividend through volatile commodity prices. Having no debt and a single digit production decline rate are critical pieces to Pine Cliff’s ability to maintain our dividend.
Our remaining dividend for 2023 is expected to approximate $34.7 million, and at the end of Q1 we had positive net cash of $58.1 million. We believe this positive net cash position protects our current dividend while at the same time allowing Pine Cliff to continue to look for additional quality assets to add to its portfolio.
The COVID pandemic forced us to cancel the in-person option for our past three annual shareholder meetings, but we are pleased to announce that our 2023 Annual Shareholder Meeting will be in person and held on Tuesday, May 16, 2023, at 11:00 A.M. (Calgary Time) at the offices of Bennett Jones LLP, 4500 Bankers Hall East, 855 2nd Street SW, Calgary, Alberta. Please attend if you can as it is always a good time for our management team to reconnect in person with you.
Take care and I hope to see you again soon.
Yours truly,
Phil Hodge,
President and Chief Executive Officer
May 2, 2023