Canadian Montney Player 7Gen Takes Q4 Loss
Canada’s Seven Generations Energy (7Gen), which recently announced a strategic combination with fellow Montney producer ARC Resources, reported a Q4 2020 net loss of C$961.2(US$756.7)mn on February 18.
The loss compares year-on-year to a profit of C$82.6mn in Q4 2019, and is largely related to a C$1.41bn impairment taken on a property, plant and equipment evaluation related to the C$8.1bn combination with ARC Resources. Adjusted Ebitda fell to C$307.3mn in Q4 from C$389.3mn a year earlier.
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The Q4 impairment was the second for 7Gen in 2020: in Q1, falling commodity prices led to a C$1.44bn impairment, and the combination of the two produced a net loss of C$2.15bn in 2020, against earnings in 2019 of C$473.8mn. Full-year Ebitda declined to C$976.4mn from C$1.52bn in 2019.
Total sales volumes for the year fell 9%, to 183,900 barrels of oil equivalent (boe)/day from 203,000 boe/day. Natural gas sales volumes declined 7% year-on-year, to 469.4bn ft3/day from 503bn ft3/day.
In releasing its Q4 and 2020 financial results, 7Gen commented on the duality of market conditions in 2020 stemming from a first quarter crude oil price war between Saudi Arabia and Russia and the emerging coronavirus pandemic.
“In the first half of 2020 the oil and natural gas industry experienced an unprecedented decline in commodity prices due to significant deterioration in oil demand stemming from the global Covid-19 pandemic,” it said. “Crude oil prices recovered modestly in the second half of the year in response to production cuts announced by Opec+, an increase in demand for crude oil and the commencement of global vaccine distributions.”
Despite the global challenges, however, the company noted a couple of significant ESG achievements on the year: the completion of its first fully-electric well pad and the first investment by its 7G Sustainability Fund (7GSF), which is funded by responsible natural gas supply agreements with gas distribution utilities in Quebec and Vermont.
The all-electric well pad – a first for the company – is equipped entirely with electric instrumentation, compression and pumps. It is expected to have modestly improved overall pad economics, with electrification costs more than offset by reduced natural gas input costs and lower future maintenance expenses.
The 7GSF investment, meanwhile, gives 7Gen a 20% equity interest in a modular controlled environment agriculture (CEA) farm – essentially a greenhouse complex – that will be developed by greenhouse provider Sustainitech on five acres of land immediately adjacent to 7Gen’s Gold Creek gas plant south of Grande Prairie.
“The CEA farm is the first of its kind co-located on an industrial site and will be powered by waste heat and electricity pulled off of 7G’s Gold Creek facility,” 7Gen said. “Once operational, this project is anticipated to generate approximately 4,800 metric tonnes of carbon credits to 7G on an annual basis.”