- Seven Generations Energy (TSX:VII) has posted a C$1.4 billion impairment loss for the first quarter of 2020.
- The current value of proven and probable reserves at the company’s Kakwa River project is behind the huge fall
- The revised value of the Kakwa River project is $6.7 billion
- The company is shredding capital investment budget a further 28 per cent and shutting-in production
- Seven Generations Energy Ltd (VII) is up 3.9 per cent, with shares trading for $2.65 and a market cap of $900 million
Seven Generations Energy (TSX:VII) has revealed steep losses that the quarter from hell has wrought on the intermediate energy producer.
The lowlight was an approximate C$1.4 billion impairment loss, or $1.1 billion after tax, based on commodity prices used to value proved and probable reserves. At March 31, 2020, the revised carrying value of the Kakwa River project was $6.7 billion.
Seven Generations has however managed to hedge a roughly 8 per cent of condensate volumes, or 50,000 barrels per day.
The company announced sales volumes were 193,500 equivalent barrels, made up of 42 per cent natural gas, 36 per cent condensate, 22 per cent NGL’s.
First quarter total funds flow amounted to $275 million with capital investments of $266 million.
Capital investments were suspended in early March, as the company also temporarily suspended all drilling and completions activities. Seven Generations expects resumption of field activities toward the end of Q2.
has announced 2020 capital investment will restart a further 28 per cent, to $650 million for the year and annual production guidance has been reduced 4 per cent.
The company’s CEO and President Marty Proctor said the unprecedented challenges affecting the industry will take time to resolve.
“We must plan for an extended period of price weakness and make responsible decisions to best position our company for a rebalanced market.
“To ensure our financial resilience, we are further reducing our 2020 capital program by $250 million and delaying the start up of 11 new wells which will reduce our 2020 production guidance to 175,000- 185,00 barrels of oil equivalent per day.
“We are refocusing our 2020 development drilling program tower our gas-weighted assets – optionally enabled by the diverse, high quality resource in our Kakwa River project and our extensive gas processing infrastructure,” he said.
Seven Generations Energy Ltd (VII)is up 3.9 per cent, with shares trading for $2.65 at 1:54 pm EDT.