Greenfire Resources Q4 2024 Earnings Report

Greenfire Resources EPS Results

• Actual EPS: $0.78
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Greenfire Resources Revenue Results

• Actual Revenue: $149.31 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Greenfire Resources Announcement Details

• Quarter: Q4 2024
• Date: 3/17/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, March 18, 2025
• Conference Call Time: 9:00AM ET

Greenfire Resources (NYSE:GFR), together with its subsidiaries, engages in the development, exploration, and operation of oil and gas properties in the Athabasca oil sands region of Alberta. The company operates the Tier-1 oil sands assets located in Western Canada. It utilizes steam-assisted gravity drainage (SAGD) extraction technology, a situ thermal oil recovery process to recover diluted and non- diluted bitumen. The company is headquartered in Calgary, Canada.

Greenfire Resources Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning, ladies and gentlemen. Welcome to the Green Fire Resources Fourth Quarter and Full Year twenty twenty four Results Conference Call. As a reminder, all participants are in listen only mode and today's conference is being recorded. After the presentation, there will be an opportunity to ask questions.

[Operator]

I will now turn the meeting over to Mr. Robert Lobach, Vice President of Capital Markets. Please go ahead, sir.

[Robert Loebach, Vice President of Capital Markets at Greenfire Resources]

Thank you, operator. Good morning, and welcome to Greenfire's conference call for our Q4 and full year twenty twenty four results. Please note that today's call includes forward looking statements and references non GAAP and other financial measures. We encourage you to review the associated risks detailed in our latest MD and A. Unless specified otherwise, all monetary figures discussed today are in Canadian dollars.

[Robert Loebach, Vice President of Capital Markets at Greenfire Resources]

Capital expenditures and production figures presented today are based on our working interest net to Greenfire unless noted otherwise. Joining us on today's call are key members of the Greenfire leadership team, including Adam Watrous, Executive Chairman Colin Germanic, President Tony Kraljic, Chief Financial Officer and Jonathan Kenderka, Chief Operating Officer. Upon the conclusion of our prepared remarks, we will open the floor to questions from participants. I will now hand the call over to our Executive Chairman, Adam Waters. Adam, please

[Robert Loebach, Vice President of Capital Markets at Greenfire Resources]

go ahead.

[Adam Waterous, Executive Chairman at Greenfire Resources]

Thank you, Robert, and thanks everyone for joining our conference call this morning. Obviously, there's been a lot of change at Green Fire over the last few months with Webb taking control of the Board and Colin Germanic being appointed President. Colin is a deeply experienced SAGD professional with a proven track record of capital efficient organic growth in thermal oil operations. And with Colin in the driver's seat, we remain excited about our investment in Greenfire.

[Adam Waterous, Executive Chairman at Greenfire Resources]

Nevertheless, as WETH has looked under the hood, so to speak, over the last two point five months, it's become clear that the previous stewards of the business were fundamentally running the business for the short run. Lexi to prioritize near term production adds at the expense of long term net asset value maximization and return on equity. Greenfire is currently formulating a new development plan for the company, which at a high level will prioritize drilling new well pairs in undeveloped reservoir expansion asset and managing the base production of the demo asset. Greenfire will not be giving specific 2025 production or capital guidance at this time. I will now hand the call over to Colin.

[Colin Germaniuk, President at Greenfire Resources]

Good morning, everyone, and thanks, Adam, for the introduction. I'm very excited to speak with you all today as we embark on a new chapter for our company. Greenfire is currently undergoing a significant transition. I'm privileged to lead this talented group as we work together to reposition our company for sustained success. The many changes we are going to discuss today reflect our commitment to addressing past challenges and seizing new opportunities.

[Colin Germaniuk, President at Greenfire Resources]

As part of this transition, we're moving away from a short term mindset to a strategy focused on long term value creation. This overhaul will span our culture, operating strategy and capital structure. The goal is clear, we're trying to maximize net value share per asset in the asset portfolio and enhance return on equity for Green Fire shareholders. This means prioritizing projects and investments that will deliver strong returns even if they don't yield immediate results. We're committed to building a sustainable future for Green Fire, not chasing quarterly results.

[Colin Germaniuk, President at Greenfire Resources]

So what does this look like in practice? First, we're overhauling our culture to prioritize safety, regulatory compliance and high performance. This includes embedding a safety first mindset throughout the business, introducing new incentive programs, flattening the organization and revamping internal processes to strengthen our regulatory compliance systems and drive productivity. Second, we're conducting a comprehensive review of our development plans, capital expenditures and operational strategies and are in the process of building updated development plans for the Hanging Stone facilities. We will release our 2025 guidance and provide further additional details on our new development plans when they are available.

[Colin Germaniuk, President at Greenfire Resources]

And finally, we are reassessing our capital structure and intend to adjust it over time to better position the company for longer term growth. With that, let's move to our 2024 operational results and 2025 operational update. Green Fire's production in Q4 twenty twenty four was 19,400 barrels a day, which is a 1% increase above Q3 twenty twenty four and a 12% increase from Q4 twenty twenty three. The full year production averaged 19,300 barrels a day, which is a 9% increase over 2023, driven by our drilling campaign launched in August of twenty twenty three. Moving over to 2025, our production to date has averaged 18,000 barrels a day, which is a 7% decrease from the prior quarter.

[Colin Germaniuk, President at Greenfire Resources]

This is a result of operating performance at the expansion asset, which is including impacts from ongoing steam generation equipment repairs, unexpected facility downtime and natural production declines. Currently, one of our four steam generation units is offline with an associated impact on production of about 1,500 barrels a day to 2,300 barrels a day. We're implementing mitigation strategies to limit production impacts and are developing a comprehensive plan to restore full steam capacity and will provide updates in due course. Meanwhile, strong performance at the demo asset has partially offset this reduction. Following a leadership change at Green Fire, a review identified potential under reporting of sulfur dioxide emissions at the expansion assets.

[Colin Germaniuk, President at Greenfire Resources]

Greenfire takes its regulatory obligations very seriously and we immediately reported the potential exceedance to the Alberta Energy Regulator and we're currently in discussions with them exploring remedies, including potentially adding a sulfur recovery unit to the expansion asset, The extent and any potential exceedance and any remedies, penalties or orders imposed by the AR are unknown at this time. Despite these challenges, I'm genuinely optimistic about what lies ahead. We own a high quality SAGD asset with substantial value generation potential for its long life and concentrated reserve space. And we have a strong dedicated team of industry experts who bring experience and a shared commitment to turn things around. These are the foundations of our future success and I'm confident they'll carry us through this transformation.

[Colin Germaniuk, President at Greenfire Resources]

I'll now turn the call over to our Chief Operating Officer, Jonathan to discuss 2024 reserves.

[Jonathan Kanderka, Chief Operating Officer at Greenfire Resources]

Thanks, Colin. Greenfire achieved significant reserve growth in 2024 driven primarily by the inclusion of full field development plans across approved land base at the expansion asset. At year end 2024, 1P reserves increased by 28% to two thirty five million barrels, while 2P reserves grew by 72% to four zero nine million barrels compared to the previous year. These initiatives have resulted in a 2P reserve life index of fifty eight years. The updated reserves reflect a before tax present value discounted at 10% of $2,500,000,000 for 1P reserves and $3,000,000,000 for 2P reserves, making growth of 2125% respectively from year end 2023.

[Jonathan Kanderka, Chief Operating Officer at Greenfire Resources]

After adjusting for debt and cash, this translates to a 2327% increase per share for 1P and 2P reserves respectively. Now I'll hand it back over to Robert to discuss our hedging program.

[Robert Loebach, Vice President of Capital Markets at Greenfire Resources]

Thank you, Jonathan. Greenfire executed an updated WTI program in the first quarter of twenty twenty five to enhance price certainty for a portion of the company's production. Greenfire replaced its previous WTI costless collar contracts, which had an average price range of approximately $57 to $83 a barrel U.

[Robert Loebach, Vice President of Capital Markets at Greenfire Resources]

S. With fixed price swaps covering 9,400 barrels a day of WTI at an average price of approximately $101 a barrel Canadian for the full year of 2025. With this updated hedging program in place, we believe the company is well positioned to make long term investments to deliver value for shareholders in the current volatile commodity environment. I will now hand the call over to Tony to discuss Greenfire's financial performance.

[Tony Kraljic, CFO at Greenfire Resources]

You, Robert, and good morning, everybody.

[Tony Kraljic, CFO at Greenfire Resources]

Greenfire's adjusted funds flow for Q4 twenty twenty four reached $53,000,000 contributing to a full year total of $172,000,000 up significantly from $10,500,000 in Q4 of last year and $73,200,000

[Tony Kraljic, CFO at Greenfire Resources]

for the full year last year.

[Tony Kraljic, CFO at Greenfire Resources]

Capital expenditures were $13,200,000 in Q4 and $92,000,000 for the full year. Adjusted free cash flow hit $39,800,000 in Q4 driven by favorable WCS differentials as well as reduced operating and capital costs. Adjusted free cash flow for the full year 2024 was $80,000,000 The company maintains a robust liquidity of $117,000,000 excluding $67,000,000 in cash and cash equivalents on hand and $50,000,000 available under senior credit facility supporting our ongoing execution. In July of twenty twenty four, Greenfire redeemed approximately US61 million dollars of its twenty twenty eight notes under the excess cash flow sweep mechanism. As of the year end, no print on repayment was due with next redemption scheduled before September of twenty twenty five.

[Tony Kraljic, CFO at Greenfire Resources]

Following the change of control involving WAF, the company was required to make an offer to repurchase the 2028 notes at 101% of their core value, pursuant to the terms of the notes. This offer concluded in February of twenty twenty five and a total of USD 5,000 in aggregate principal amount of the $20.28 notes was badly tendered and redeemed by the company. In Q1 twenty twenty five, with the support of the company's bondholders, Greenfart completed an amendment to the 2028 note venture. This raised the permitted capital expenditures under the 2028 notes from CAD100 million up to USD150 million over any twelve month period. This is expected to better position the company for operational stability and long term growth.

[Tony Kraljic, CFO at Greenfire Resources]

Over time, we plan to reevaluate our capital structure to better serve Green Fire shareholders. In addition to strong liquidity, the company remains well positioned with $1,600,000,000 in federal tax pools, lower prepay of royalty rates and expansion assets due to substantial unrecovered royalty balances and no gross overriding royalty obligations at the Hanging Stone facilities. With that, I'd like to turn it over to the operator to open the line for questions.

[Operator]

Thank you. We will now begin the question and answer session. And today's first question comes from Michael Bowen at Sona. Please go ahead.

[Analyst]

Hi. I just like to ask, in terms of what you found and now you are in the operations, shall we say. Are the assets worse than you expected? Or how would you describe the state of them? And why is it taking so long to put together a formal business plan given the previous management's guidance essentially?

[Adam Waterous, Executive Chairman at Greenfire Resources]

Sure. It's Adam Wontrass, sweetie. I'll take that question. We tried to give some sense. The previous business plan was designed to optimize short term performance, try to optimize production while minimizing capital.

[Adam Waterous, Executive Chairman at Greenfire Resources]

And on the face of that, that sounds maybe like a reasonable objective. If you take that sort of objective to extremes, you can lead to degradation of long term net asset value. We have a very different objective as an investor. And what we're trying to do is compound per share net asset value and optimize return on equity at the same time. And that can end up being quite a dramatic difference in terms of how you allocate capital, how you develop the resource.

[Adam Waterous, Executive Chairman at Greenfire Resources]

So, I think there may be two implications for that, that you could expect. One is that, when we ultimately determine what our capital spending program is going to be, development program is, it's going to look very different than the previous management's development plan. The second thing I would also tell you is that one of the dynamics that the company had been operating under is, it was extremely capital constrained, would be I think an adequate a fair description. And sometimes when you are extremely capital constrained, you make decisions which are not in the long term interest of compounding per share value. And let me give you maybe a simplistic mental picture.

[Adam Waterous, Executive Chairman at Greenfire Resources]

If you're running a car and

[Adam Waterous, Executive Chairman at Greenfire Resources]

you

[Adam Waterous, Executive Chairman at Greenfire Resources]

don't go for your regularly scheduled oil change,

[Adam Waterous, Executive Chairman at Greenfire Resources]

you can

[Adam Waterous, Executive Chairman at Greenfire Resources]

save some money. You actually maybe take some money for a while, but ultimately it catches up on you. And so we'll be very focused now on going for regular oil changes and using prudent maintenance for two years. So that's how we think about it. Hopefully that's helpful.

[Analyst]

I mean it is, but I mean is the state of the business and the fact that we've got another step down in production in January worse than you expected?

[Adam Waterous, Executive Chairman at Greenfire Resources]

I would say

[Adam Waterous, Executive Chairman at Greenfire Resources]

I'll tell you what, the resource

[Adam Waterous, Executive Chairman at Greenfire Resources]

is positive. We're very positive on the resource. The resource is, we think has long term development potential. I would say a fair comment is that the business had been managed for the short term to an even greater degree than we would have expected.

[Adam Waterous, Executive Chairman at Greenfire Resources]

And

[Adam Waterous, Executive Chairman at Greenfire Resources]

I think that would be a fair comment. It was

[Adam Waterous, Executive Chairman at Greenfire Resources]

managed I would just sort of

[Adam Waterous, Executive Chairman at Greenfire Resources]

have a perspective. It is the opposite of how we would have

[Adam Waterous, Executive Chairman at Greenfire Resources]

managed this business, the opposite.

[Analyst]

Okay.

[Adam Waterous, Executive Chairman at Greenfire Resources]

So for expectations, that give you some sense in terms of how we thought about it.

[Analyst]

Okay. And what do you think about the old management team's plan? I mean, clearly, production was supposed to be much higher than it ended up. Was it fantasy really to aim for that type of production level over that time frame in your opinion?

[Adam Waterous, Executive Chairman at Greenfire Resources]

I'd like to answer this. To try to maybe go back to what I said a little bit earlier. The development plan that we will ultimately provide will be radically different than the previous management teams. So that brings you some perspective of what I thought of the last management team's development plan.

[Analyst]

Okay. Listen, thank you very much for your time.

[Operator]

Thank you. And our next question today comes from Nick Astarian, a Private Investor. Please go ahead.

[Analyst]

Hey, thanks guys. I appreciate all the help and the color on this stuff. Two questions I have. One is on capital allocation and one is on operations. On capital allocation, how do you guys see stabilizing prioritizing stabilizing the core business and the existing business versus future potential acquisitions?

[Analyst]

And I ask that just because you guys have Waterus, obviously a private equity fund and with Strathcona, your track record is in buying a bunch of businesses. And then on operations, is there any permanent damage or any structural issues surrounding their drilling plan that they had put in place but hadn't quite panned out on productivity? Or is there anything else that perhaps the long term net asset value is permanently impaired from? So that's my two questions.

[Adam Waterous, Executive Chairman at Greenfire Resources]

Sure. So this is Adam Wachs again. I'll take the questions on acquisition and then I'll turn it over to Colin to talk about capital spending and debt impact on value. So we like a few things that attracted us to Green Fire. One is I've mentioned previously is the resource.

[Adam Waterous, Executive Chairman at Greenfire Resources]

We think that over time it can be effectively and profitably developed. The second thing we like about Greenfire is we do like the neighborhood. From our firm's perspective, this is the first investment we've made in the Athabasca region. We like the Seguidie business in general. This is the fifth safety business that our firm has bought over the last five years.

[Adam Waterous, Executive Chairman at Greenfire Resources]

And this is right in the heart of safety country, so to speak. So we like it now. Whether or not we might be able to make any further acquisitions is indeterminate. But we do like the neighborhood. We think that's one of the positives about re:Inpire.

[Adam Waterous, Executive Chairman at Greenfire Resources]

Now, I would like to maybe yes, I'll let Colin answer that.

[Colin Germaniuk, President at Greenfire Resources]

Yes.

[Colin Germaniuk, President at Greenfire Resources]

Colin Dermak here to your question about was there reservoir damage as a result of drilling. And the answer is no. You can't damage a reservoir through drilling operations. Performance might not have been where the previous management expected it to, but there's no reservoir damage. We still like still very much like the quality of the asset.

[Colin Germaniuk, President at Greenfire Resources]

And our near term development plans will be going to kind of undeveloped reservoir.

[Analyst]

Got you. So and then to double click on that, was the problem with the drilling plan the last couple the last year or so, was it too ambitious and they had all these maintenance issues that were catching up with them? Or was the infill and the reservoir engineering and design plan totally off base based off of, say, the steam chamber size and the dimensions of the reservoir? Was it kind of not did it not make sense that they were drilling so long and they shouldn't have expected high productivity at scale?

[Colin Germaniuk, President at Greenfire Resources]

I think directionally the plan might have made sense, but they were drilling into a reservoir that had very high recovery factors already. So I think the remaining oil was the remaining productivity was kind of less than what we originally expected. And from a cost perspective, drilling into a very high pressure reservoir is it just adds more capital. So it was some cost overruns there.

[Analyst]

Got you. Thank you. That's all for me.

[Operator]

Thank you. And this concludes the question and answer session. I'd like to turn the conference back over to Robert Lobach for closing remarks.

[Robert Loebach, Vice President of Capital Markets at Greenfire Resources]

Thank you, operator. On behalf of Greenfire, we appreciate you joining us today for our fourth quarter and full year twenty twenty four results conference call. Have a great day.

[Operator]

Thank you. This concludes today's conference call. We thank you all for your participation. You may now disconnect your lines and have a wonderful day.

Participants

Executives

• Robert Loebach, Vice President of Capital Markets
• Adam Waterous, Executive Chairman
• Colin Germaniuk, President
• Jonathan Kanderka, Chief Operating Officer
• Tony Kraljic, CFO

Analysts

• Analyst