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Yangarra Resources Ltd. — Management Reports 2025
Mar 5, 2025
45732_rns_2025-03-05_4aecc3c0-cf90-4a51-812a-024df437bb75.pdf
Management Reports
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Yangarra Resources Ltd. Management's Discussion and Analysis For the year ended December 31, 2024 and 2023
YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
Management's discussion and analysis ("MD&A") of the financial condition and the results of operations should be read in conjunction with the December 31, 2024 audited consolidated financial statements, together with the accompanying notes.
Yangarra Resources Ltd. (the “Company” or “Yangarra”) is a publicly-traded company involved in the production, exploration and development of resource properties in Western Canada. The address of the registered office is 1530, 715 – 5 Avenue SW, Calgary Alberta, T2P 2X6.
Additional information about Yangarra filed with Canadian securities commissions is available on-line at www.sedar.com.
The MD&A has been prepared using information that is current to March 5, 2025.
The financial information presented herein has been prepared on the basis of International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. Throughout this discussion, percentage changes are calculated using numbers rounded to the decimal to which they appear. All references to dollar amounts are in Canadian dollars.
BOE Presentation
Production information is commonly reported in units of barrel of oil equivalent ("boe"). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet to one barrel of oil. This conversion ratio of 6:1 is based on an energy equivalent wellhead value for the individual products. Such disclosure of boe may be misleading, particularly if used in isolation. Figures that are presented on a boe basis herein are calculated as the total aggregate amount for the period divided by boe production volumes for the period. Readers should be aware that historical results are not necessarily indicative of future performance.
Non–IFRS and Additional IFRS Measures
This document contains “funds flow from operations” or “FFO”, which is an additional IFRS measure. This document also contains the terms “adjusted net debt”, “netbacks” “adjusted EBITDA” and “capital expenditures”, which are non-IFRS financial measures. The Company uses these measures to help evaluate its performance. These non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Readers are cautioned that such financial measures should not be construed as alternatives to or more meaningful than the most directly comparable IFRS measures as indicators of the Company’s performance.
Funds flow from operations (“FFO”)
Yangarra’s determination of FFO and FFO per share may not be comparable to that reported by other companies. Management uses FFO to analyze operating performance and leverage and considers FFO to be a key measure as it demonstrates the Company’s ability to generate cash flow necessary to fund future capital investments and to repay debt, if applicable. FFO is calculated using cash flow from operating activities before changes in non-cash working capital and decommissioning costs incurred. Yangarra presents FFO per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net income per share.
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
The following table reconciles FFO to cash flow from operating activities, which is the most directly comparable measure calculated in accordance with IFRS:
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2024 2023 Year Ended
Q4 Q4 2024 2023
Cash flow from operating activities $ 15,293 $ 16,798 $ 71,037 $ 99,033
Decommissioning costs incurred - 488 527 488
Changes in non-cash working capital 917 266 4,035 (497)
Funds flow from operations $ 16,210 $ 17,552 $ 75,599 $ 99,024
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Netbacks
The Company considers corporate netbacks to be a key measure that demonstrates Yangarra’s profitability relative to current commodity prices. Corporate netbacks are comprised of operating, field operating, FFO and net income (loss) netbacks. Field Operating netback is calculated as the average sales price of its commodities (including realized gains (losses) on financial instruments) less royalties, operating costs and transportation expenses. Operating netback starts with Field Operating netback and subtracts realized gains (losses) on financial instruments. FFO netback starts with the Operating netback and further deducts general and administrative costs, finance expense and adds finance income. To calculate the net income (loss) netback, Yangarra takes Operating netback and deducts share-based compensation expense as well as depletion and depreciation charges, accretion expense, unrealized gains (losses) on financial instruments, any impairment or exploration and evaluation expense and deferred income taxes. See “Company Netbacks”, below, for the Company’s calculation of netbacks.
FFO margins and operating margins
FFO margins and operating margins are calculated as the ratio of FFO netbacks to sales price and operating netback to sales price, respectively.
Adjusted net debt
Adjusted net debt is used to assess efficiency, liquidity and the general financial strength of the Company. We define adjusted net debt as the sum of our existing credit facilities, trade and other payables, and trade receivables and prepaids. The following table summarizes our calculation of adjusted net debt:
| Dec | 31, 2024 | Dec | 31, 2023 | |
| Bank Debt | $ | 115,785 |
$ | 121,057 |
| Accounts receivable | (28,878) | (30,092) | ||
| Prepaid expenses and inventory | (9,223) | (8,918) | ||
| Accountspayable and accrued liabilities | 25,463 | 36,599 | ||
| Adjusted net Debt | $ | 103,147 |
$ | 118,646 |
Adjusted earnings before interest, taxes, depletion and depreciation, amortization
Adjusted earnings before interest, taxes, depletion and depreciation, amortization (“Adjusted EBITDA”) which represents EBITDA, excluding changes in the fair value of commodity contracts, is used to assess efficiency, liquidity and the general financial strength of the Company.
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YANGARRA RESOURCES LTD.
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
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2024 2023 Year Ended
Q4 Q4 2024 2023
Net income for the Period $ 3,884 $ 12,435 $ 26,228 $ 46,664
Finance 3,693 3,293 12,657 12,898
Deferred tax expense (1,051) 3,671 6,360 16,515
Depletion and depreciation 9,243 9,385 35,512 39,438
Change in fair value of commodity contracts 2,577 (1,755) 2,122 449
Adjusted EBITDA $ 18,346 $ 20,072 $ 82,879 $ 109,007
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Working capital surplus (deficit)
Working capital surplus (deficit) is the total of current assets less current liabilities and is used to assess efficiency, liquidity and the general financial strength of the Company.
Forward-looking Statements
Certain information regarding the Company set forth in this report, including management's assessment of the Company's future plans and operations, contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These risks and uncertainties, many of which are beyond the Company's control, include the impact of general economic conditions and specific industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, the lack of available qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. The Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, and accordingly, no assurance can be given that any events anticipated by the forward-looking statements will transpire or occur, or if any of them do, what benefits the Company can derive from such events.
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
Overview
Yangarra is a junior oil and gas company engaged in the exploration, development and production of natural gas and oil with operations in Western Canada, with a main focus on the Cardium in Central Alberta, where the Company has extensive infrastructure and land holdings. Yangarra is dedicated to creating value for its shareholders through its commitment to a clear business strategy and performance objectives. The Company's strategy is to increase the value of its corporate assets through the drill bit and by assembling a large, focused land base in Central Alberta that features high-quality, long-life light oil and liquids-rich gas reserves. The Company has assembled a significant future drilling inventory and will strive to grow this inventory through drilling, geology and strategic acquisitions.
2024 Highlights
-
Average production of 10,500 boe/d (41% liquids), a decrease of 12% from 2023
-
Oil and gas sales of $133.4 million, a decrease of 20% from 2023
-
Funds flow from operations of $75.6 million ($0.73 per share – fully diluted) a decrease of 24% from 2023
-
Adjusted EBITDA of $82.9 million ($0.80 per share – fully diluted)
-
Net income of $26.2 million ($0.25 per share – fully diluted), resulting in an income margin of 20%
-
Return on capital employed of 5.4%
-
Operating costs of $8.40/boe (including $2.09/boe of transportation costs)
-
Operating netback of $23.84/boe
-
Operating margin of 69% and funds flow from operations margin of 56%
-
G&A costs of $1.37/boe
-
Royalties at 6% of oil and gas revenue
-
Capital expenditures of $59.6 million
-
Adjusted net debt of $103.1 million, a decrease of $15.5 million from 2023
-
Retained earnings of $338.0 million
-
Decommissioning liabilities of $16.7 million (discounted)
-
Expenditures on abandonments and reclamations of $0.5 million
Fourth Quarter Highlights
-
Funds flow from operations of $16.2 million ($0.15 per share – fully diluted), a decrease of 8% from the same period in 2023
-
Oil and gas sales of $31.0 million, a decrease of 8% from the same period in 2023
-
Adjusted EBITDA of $18.3 million ($0.18 per share – fully diluted), a decrease of 8% from the same period in 2023
-
Net income of $3.9 million ($0.04 per share – fully diluted), a decrease of 69% from the same period in 2023
-
Average production of 10,207 boe/d (41% liquids), an 8% decrease from the same period in 2023
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
-
Operating costs of $8.54/boe (including $3.16/boe of transportation costs)
-
Operating netback of $21.75/boe
-
Operating margin of 66% and funds flow from operations margin of 52%
-
G&A costs of $1.33/boe
-
Royalties at 8% of oil and gas revenue
-
All in cash costs of $15.74/boe
-
Capital expenditures of $19.9 million
-
Adjusted net debt to fourth quarter annualized funds flow from operations of 1.59 : 1
Operations Update
-
Yangarra drilled 19 gross (17 net) wells during 2024
-
80% of Yangarra’s production was curtailed for four weeks during the third quarter due to a third party turn-around, impacting the yearly average production by 557 boe/d and impacting revenue by approximately $6 million
-
The Company completed a highly complementary farm-in on 11 contiguous sections in the Chambers area
-
The production optimization program was deferred during the second half of 2024 as a result of weak natural gas pricing, impacting fourth quarter production
-
The Company’s Board of Directors has approved a capital budget of $55 - $60 million for 2025, which will hold production at 11,250 – 11,750 boe/d
-
At USD $68.00/bbl for WTI oil and CDN$2.00/GJ for AECO natural gas this budget will generate $85 - $90 million of cash flow ($30 million of free cash flow)
Financial Information
| Financial Information | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | Year | Ended | |||||
| Q4 | Q4 | 2024 | 2023 | |||||
| Statements of Income and Comprehensive Income | ||||||||
| Petroleum & natural gas sales | $ | 30,961 |
$ | 33,651 |
$ | 133,364 |
$ | 166,516 |
| Income before tax | $ | 2,833 |
$ | 16,106 |
$ | 32,588 |
$ | 63,179 |
| Net income | $ | 3,884 |
$ | 12,435 |
$ | 26,228 |
$ | 46,664 |
| Net income per share - basic | $ | 0.04 |
$ | 0.13 |
$ | 0.27 |
$ | 0.50 |
| Net income per share - diluted | $ | 0.04 |
$ | 0.12 |
$ | 0.25 |
$ | 0.47 |
| Statements of Cash Flow | ||||||||
| Funds flow from operations | $ | 16,210 |
$ | 17,552 |
$ | 75,599 |
$ | 99,024 |
| Funds flow from operations per share - basic | $ | 0.16 |
$ | 0.19 |
$ | 0.77 |
$ | 1.06 |
| Funds flow from operations per share - diluted | $ | 0.15 |
$ | 0.18 |
$ | 0.73 |
$ | 1.01 |
| Cash flow from operating activities | $ | 15,293 |
$ | 16,798 |
$ | 71,037 |
$ | 99,033 |
| Weighted average number of shares - basic | 98,734 | 94,801 | 98,096 | 93,189 | ||||
| Weighted average number of shares - diluted | 104,796 | 99,534 | 104,225 | 98,445 | ||||
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
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December 31, 2024 December 31, 2023
Statements of Financial Position
Property and equipment $ 786,521 $ 759,967
Total assets $ 860,383 $ 835,217
Working capital surplus (deficit) $ 8,897 $ (735)
Adjusted net debt $ 103,147 $ 118,646
Shareholders equity $ 569,628 $ 536,598
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Business Environment
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2024 2023 Year Ended
Q4 Q4 2024 2023
Realized Pricing (Including realized commodity contracts)
Light Crude Oil ($/bbl) $ 98.10 $ 101.92 $ 97.55 $ 98.42
NGL ($/bbl) $ 36.55 $ 32.97 $ 43.85 $ 45.72
Natural Gas ($/mcf) $ 1.65 $ 2.36 $ 1.58 $ 2.79
Realized Pricing (Excluding commodity contracts)
Light Crude Oil ($/bbl) $ 99.70 $ 103.51 $ 99.25 $ 99.11
NGL ($/bbl) $ 36.55 $ 32.96 $ 43.85 $ 44.58
Natural Gas ($/mcf) $ 1.59 $ 2.41 $ 1.54 $ 2.81
Oil Price Benchmarks
West Texas Intermediate ("WTI") (US$/bbl) $ 70.69 $ 78.48 $ 76.55 $ 77.65
Edmonton Par ($/bbl) $ 94.10 $ 94.77 $ 97.11 $ 99.21
Edmonton Par to WTI differential (US$/bbl) $ (3.43) $ (8.35) $ (5.67) $ (4.24)
Natural Gas Price Benchmarks
AECO gas ($/mcf) $ 1.40 $ 2.18 $ 1.38 $ 2.72
Foreign Exchange
Canadian Dollar/U.S. Exchange 0.71 0.74 0.73 0.74
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Crude oil prices decreased by 1% for the year ended December 31, 2024, with the West Texas Intermediate (“ WTI ”) reference price averaging US$76.55/bbl compared with US$77.65/bbl in the same period in 2023. Demand for crude oil is generally tied to global economic growth, but is also influenced by factors such as infrastructure, political instability, market uncertainty, weather conditions and government regulations.
Edmonton par differentials to WTI widened in the year ended December 31, 2024 when compared to the same period in 2023, moving from a US$4.24/bbl differential in 2023 to US$5.67/bbl in 2024. In the year ended December 31, 2024 the CDN/US foreign exchange rate was 0.73 compared to 0.74 in 2023. The Edmonton par reference price is denominated in Canadian dollars so the change in the foreign exchange rate has decreased the Edmonton par price relative to WTI. Edmonton par is the closest reference price point for Yangarra’s oil and therefore is the closest proxy to realized pricing.
When compared to 2023, realized pricing on oil was flat, excluding commodity contracts, and decreased by 1% when the effects of commodity contracts are included.
When compared to 2023, liquids pricing decreased by 2%, excluding commodity contracts, and decreased by 4% when the effects of commodity contracts are included due to decreased propane and butane pricing in 2024.
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
When compared to 2023, realized pricing on natural gas decreased by 45%, excluding commodity contracts, and decreased by 43% when the effects of commodity contracts are included, primarily due to the 49% decrease in AECO natural gas prices from 2023.
Results of Operations
Net petroleum and natural gas production, pricing and revenue
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2024 2023 Year Ended
Q4 Q4 2024 2023
Daily production volumes
Natural Gas (mcf/d) 35,733 41,283 37,308 43,426
Light Crude Oil (bbl/d) 2,070 1,913 2,150 2,288
NGL's (bbl/d) 2,182 2,339 2,131 2,411
Combined (BOE/d 6:1) 10,207 11,133 10,500 11,936
Revenue
Petroleum & natural gas sales $ 30,961 $ 33,651 $ 133,364 $ 166,516
Realized gain (loss) on commodity contract settlement (121) (460) (809) 88
Total sales 30,840 33,191 132,555 166,604
Royalty expense (2,389) (2,529) (8,664) (14,258)
Total Revenue - Net of royalties $ 28,451 $ 30,662 $ 123,891 $ 152,346
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Total sales decreased 20% in 2024 to $132,555 from $166,604 in 2023. The decrease is attributable to:
-
a 9% decrease in average product prices
-
an 12% decrease in production (on a boe basis)
Company Netbacks ($/boe)
| 2023 Q4 Q4 Sales price 32.97 $ 32.85 $ Royalty expense (2.54) (2.47) Production costs (5.38) (6.70) Transportation costs (3.16) (1.70) Field operating netback 21.88 21.99 Realized gain (loss) on commodity contract settlement (0.13) (0.45) Operating netback 21.75 21.54 G&A (1.33) (1.55) Cash finance expenses (3.19) (2.90) Depletion and depreciation (9.84) (9.16) Non Cash - finance expenses (0.74) (0.31) Abandonment Expenses - - Gain on settlement of lawsuit - 6.79 Stock-based compensation (0.89) (0.39) Unrealized gain (loss) on financial instruments (2.74) 1.71 Deferred income tax 1.12 (3.58) Net income netback 4.14 $ 12.14 $ 2024 |
|
|---|---|
| 2024 2023 Year Ended |
|
| 34.71 $ 38.22 $ (2.25) (3.27) (6.30) (6.69) (2.09) (1.54) |
|
| 24.06 26.71 (0.21) 0.02 |
|
| 23.84 26.73 (1.37) (1.32) (2.94) (2.84) (9.24) (9.05) (0.35) (0.12) (0.02) - - 1.60 (0.88) (0.39) (0.55) (0.10) (1.66) (3.79) |
|
| 6.83 $ 10.72 $ |
|
The overall average price earned by the Company during 2024 was lower when compared to 2023 as natural gas prices decreased by 43%, oil prices decreased by 1% and liquids prices decreased by 4%. The average sales price decreased by 9% during 2024 when compared to 2023.
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
Operating netbacks decreased by 11% during 2024 when compared to 2023 with lower realized pricing.
Field netbacks decreased by 10% during 2024 with lower realized pricing in 2023 and the impact of realized losses on commodity contracts.
Royalty
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2024 2023 Year Ended
Q4 Q4 2024 2023
Royalty expense $ 2,389 $ 2,529 $ 8,664 $ 14,258
Per BOE $ 2.54 $ 2.47 $ 2.25 $ 3.27
As a % of sales (including commodity contracts) 8% 8% 7% 9%
As a % of sales (excluding commodity contracts) 8% 8% 6% 9%
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For 2024 royalties decreased to $8,664 or 6% as a percentage of sales. The decrease is a result of lower royalty rates due to a lower natural gas price.
Production and Transportation Costs
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2024 2023 Year Ended
Q4 Q4 2024 2023
Production costs $ 5,052 $ 6,859 $ 24,226 $ 29,158
Per BOE $ 5.38 $ 6.70 $ 6.30 $ 6.69
Transportation costs $ 2,972 $ 1,739 $ 8,039 $ 6,722
Per BOE $ 3.16 $ 1.70 $ 2.09 $ 1.54
Combined ($/BOE) $ 8.54 $ 8.39 $ 8.40 $ 8.24
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Production and transportation costs increased by 2% on a per boe basis when compared to 2023 due to the increased impact of inflation in 2024. On a dollar basis, operating costs increased by 2% due to decreased production.
Depletion and depreciation
| 2023 Q4 Q4 Depletion and depreciation 9,243 $ 9,385 $ Per BOE 9.84 $ 9.16 $ 2024 |
2024 2023 35,512 $ 39,438 $ 9.24 $ 9.05 $ Year Ended |
|---|---|
Depletion and depreciation decreased in the year ended December 31, 2024 due to an decrease in production. On a per BOE basis, depletion increased when compared to 2023 due to reductions in reserves.
General and administrative expenses (“G&A”)
| 2023 Q4 Q4 Gross G&A expenses 1,581 $ 1,721 $ G&A recoveries (334) (130) Net G&A expenses 1,247 $ 1,591 $ Per BOE 1.33 $ 1.55 $ 2024 |
|
|---|---|
| 2024 2023 Year Ended |
|
| 6,201 $ 6,641 $ (927) (884) |
|
| 5,274 $ 5,757 $ 1.37 $ 1.32 $ |
|
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
G&A decreased by 8% on a net basis and decreased by 7% on a gross basis when compared to 2023 due to lower staff counts. On a per BOE basis G&A increased by 4% due to a decrease in production.
Other expenses
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2024 2023 Year Ended
Q4 Q4 2024 2023
Cash Finance
Cash interest and finance expense $ 2,969 $ 2,921 $ 10,662 $ 11,685
Lease interest paid 28 53 138 229
Non-Cash Finance
Accretion of decommissioning liability 132 154 551 518
Accretion of debt issue costs 219 186 812 556
Accretion on lease obligations 345 (21) 494 (90)
$ 3,693 $ 3,293 $ 12,657 $ 12,898
Share-based compensation $ 834 $ 401 $ 3,382 $ 1,702
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Interest and financing fees include interest on the Company’s bank debt (the average amount drawn in 2024 was $118.4 million), bank debt servicing charges and the change in fair value of the interest rate contracts.
For the year ended December 31, 2024, if interest rates had been 1% lower with all other variables held constant, net income would have been $1,215 (2023 - $1,302) higher, due to lower interest expense. An equal and opposite impact would have occurred had interest rates been higher by the same amount.
In the year ended December 31, 2024, the Company issued 4,893 (2023 – 1,590) RSUs that vest equally over 3 years. The RSUs are exercisable in either cash or shares at the option of the Company. As it is the Company’s intention to settle in shares, the RSUs are treated as share-based compensation with a fair value on the date of issue of $1.11 (2023 – $2.67) per RSU. With the commencement of the RSU program, the Company will no longer issue new options under the Stock Option plan. All previously issued stock options will continue to vest and expire as per the agreements in place when they were originally issued.
During the year ended December 31, 2024, the Company recognized $3,382 (2023 – $1,702) of share-based compensation in the consolidated statement of income and comprehensive income. During the year ended December 31, 2024, the Company capitalized $1,327 (2023 - $1,637) related to P&E.
Commodity price risk contracts
| 2024 | 2023 | Year | Ended | ||||
| Q4 | Q4 | 2024 | 2023 | ||||
| Realized gain (loss) on commodity contract settlement $ |
(121) |
$ | (460) |
$ | (809) |
$ | 88 |
| Change in fair value of commodity contracts | (2,577) | 1,755 | (2,122) | (449) | |||
| $ | (2,698) |
$ | 1,295 |
$ | (2,931) |
$ | (361) |
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS
For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
As at December 31, 2024 the Company was committed to the following commodity price risk contracts:
| As at December 31, 2024 the Company was committed to the following commodity price risk contracts: | |
|---|---|
| Year Volume Term Reference Type Strike Price |
|
| Natural Gas | |
| 2025 10,000 GJ/d Jan 25 AECO - 7A Collar CAD $1.25 - $6.014 |
|
| 2025 10,000 GJ/d Feb 25 AECO - 7A Collar CAD $1.50 - $5.575 |
|
| 2025 14,000 GJ/d Mar 25 AECO - 7A Put CAD $1.00 |
|
| 2025 4,000 GJ/d Apr 25 AECO - 7A Collar CAD $1.50 - $2.23 |
|
| 2025 10,000 GJ/d Apr 25 - Oct 25 AECO - 7A Swap CAD $1.815 |
|
| 2025 4,000 GJ/d May 25 – Nov 25 AECO - 7A Swap CAD $1.76 |
|
| 2025 1,000 GJ/d Apr 25 – Nov 25 AECO - 7A Swap CAD $1.75 |
|
| 2025 10,000 GJ/d Nov 25 AECO - 7A Swap CAD $2.435 |
|
| 2025/2026 10,000 GJ/d Nov 25- Mar 26 AECO - 7A Call CAD $3.50 |
|
| 2026 1,000 GJ/d Apr 26 - Oct 26 AECO - 7A Swap CAD $2.505 |
|
| Oil | |
| 2025 1,650 bbl/d Jan 25 WTI - USD Collar USD $50.00 - 98.50 |
|
| 2025 1,650 bbl/d Feb 25 WTI - USD Collar USD $50.00 - 93.00 |
|
| 2025 900 bbl/d Mar 25 WTI - USD Put USD $50.00 |
|
| 2025 800 bbl/d Jan 25 - Mar 25 WTI - USD Swap USD $67.45 |
|
| 2025 900 bbl/d Apr 25 WTI - CAD Collar USD $55.00 - $86.60 |
|
| NGLs | |
| 2025 550 bbl/d Jan 25 - Mar 25 USD Conway C3 Swap 0.744/g |
|
| 2025 300 bbl/d Jan 25 - Mar 25 USD Conway C4 Swap 1.0035/g |
|
| 2025 550 bbl/d Apr 25 - Nov 25 USD Conway C3 Swap 0.70/g |
|
| 2025 300 bbl/d Apr 25 - Nov 25 USD Conway C4 Swap 0.8325/g |
As the Company had a limited number of derivatives in place as at December 31, 2024, the sensitivity of the fair value of a 10% volatility in commodity prices would have an immaterial impact on unrealized gains (losses) reported in the consolidated statements of income and comprehensive income.
Deferred Taxes
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2024 2023 Year Ended
Q4 Q4 2024 2023
Deferred tax expense $ (1,051) $ 3,671 $ 6,360 $ 16,515
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Yangarra did not pay income taxes in 2024 and does not expect to pay income taxes in 2025 or into the near future as it has sufficient tax pools to cover taxable income. Deferred tax expense is lower in the 2024 periods than in the 2023 periods due to lower taxable income in the 2023 periods requiring lower tax pool deductions.
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
The Company has the following tax pools available to reduce future taxable income:
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Year Ended
Rate % 2024
Canadian oil and gas property expenses 10 $ 23,468
Canadian development expenses 30 179,446
Canadian exploration expenses 100 140
Undepreciated capital costs 10-30 36,178
Non-capital losses (various expiry dates) 100 11,511
Share issue costs 1,015
$ 251,758
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Liquidity and Capital Resources
The following table summarizes the change in adjusted net debt during the year ended December 31, 2024 and 2023:
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|||||
|---|---|---|---|
|Year ended|Year ended|
|December 31, 2024|December 31, 2023|
|Adjusted net debt - beginning of period|$ (118,646)|$ (134,364)|
|Funds flow from operations|$ 75,599|99,024|
|Additions to property and equipment|$ (59,626)|(93,950)|
|Decommissioning costs incurred|$ (527)|(488)|
|Additions to E&E Assets|$ -|(353)|
|Issuance of shares|$ 2,093|15,988|
|Lease obligation repayment|$ (1,106)|(1,525)|
|Other|$|(934)|(2,978)|
|Adjusted net debt - end of period|$ (103,147)|$ (118,646)|
|Credit facility limit|$ 130,000|$ 135,000|
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Credit facility limit
As at December 31, 2024, the maximum amount available under the syndicated credit facility was $130,000 (2023 – $135,000) comprised of a $105,000 (2023 – $110,000) extendable revolving term credit facility and a $25,000 (2023 – $25,000) operating facility. The amount available under these facilities is redetermined at least twice a year and is primarily based on the Company’s oil and gas reserves, the syndicate of lending institutions’ forecast commodity prices, the current economic environment and other factors as determined by the syndicate (the “Borrowing Base”). If the total advances made under the credit facilities are greater than the re-determined Borrowing Base, the Company has 60 days to repay any shortfall. The facilities last for a 364-day period and will be subject to the next 364-day extension by May 30, 2025. If not extended by May 30, 2025, the facilities will cease to revolve, and all outstanding balances will become repayable on May 30, 2026.
As at December 31, 2024, the $115,785 (2023 – $121,057) reported amount of bank debt was comprised of $11,395 (2023 – $12,908) drawn on the operating facility and $105,000 (2023 – $109,139) drawn on the revolving facility and net of unamortized transaction costs of $610 (2023 – $990).
The Company is subject to a financial covenant requiring an adjusted working capital ratio above 1:1 (current assets plus the undrawn availability under the revolving facility, divided by the current liabilities less the drawn portion of the revolving facility and excluding unrealized commodity contracts). The Company was in compliance with this covenant as at December 31, 2024 and December 31, 2023. The facilities are secured by a general security agreement over all assets of the Company. Beginning December
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
20, 2024, the Company was required to ensure that not less than 30% of the forecasted daily production for the next twelve-month period is hedged and subject to commodity swaps with a minimum of 15% of such forecasted production being subject to commodity swaps that are swaps only (as opposed to a combination of swaps, collars and/or puts/calls).
The total standby fees on the revolving facility range, depending on the debt to EBITDA ratio, between 200 bps to 400 bps on bank prime borrowings and between 300 bps and 500 bps on bankers’ acceptances. The undrawn portion of the revolving facility is subject to a standby fee in the range of 75 bps to 125 bps.
During the year ended December 31, 2024, the weighted average effective interest rate for the bank debt was approximately 8.6% (2023 – 8.9%). The interest rate for the first quarter of 2025 dropped to below 7%.
Capital Spending
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2024 2023 Year Ended
Cash additions Q4 Q4 2024 2023
Land, acquisitions and lease rentals $ 110 $ 72 $ 323 $ 564
Drilling and completion 17,034 14,670 49,773 76,477
Geological and geophysical - 2 323 242
Equipment 2,494 947 8,051 14,975
Other asset additions 252 246 1,156 1,692
$ 19,890 $ 15,937 $ 59,626 $ 93,950
Exploration & evaluation assets $ - $ 89 $ - $ 353
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During 2024, Yangarra drilled 19 gross (17 net) wells and continued the optimization program on existing wells.
Outlook
The Company constrained the 2024 quarter capital program due to ongoing depressed natural gas prices, resulting in capital spending of less than $60 million. Yangarra’s primary goal in 2025 is to hit a debt target of $80 million and subsequently focus on shareholder returns.
Decommissioning Liabilities
As at December 31, 2024, the undiscounted decommissioning obligation associated with the Company’s existing properties was estimated to be $22,010 for which $16,731 has been recorded using a discount rate of 2.73% - 4.17% an inflation rate of 2% and an estimated weighted average timing of cash flows of 5.2 years.
Off Balance Sheet Arrangements
There were no off-balance sheet arrangements.
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
Share Capital
Details of changes in the number of outstanding equity instruments are detailed in the following table:
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Common Stock Restricted
Shares Options Share Units
Balance - December 31, 2023 94,801 7,604 1,590
Granted - - 4,893
Exercised 3,473 (3,473) -
Vested 460 - (460)
Forfeited - (1,566) (588)
Balance - December 31, 2024 & Date of MD&A 98,734 2,565 5,435
Exercised - - -
Vested 1,950 - (1,950)
Cancelled - - -
Balance - Date of MD&A 100,684 2,565 3,485
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Contingency
In the normal conduct of operations, there are other pending claims by and against the Company. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. In the opinion of management, based on the advice and information provided by its legal counsel, the final determination of these other litigations will not materially affect the Company’s financial position or results of operations.
Contractual Obligations and Commitments
As at December 31, 2024 the contractual maturities of the Company’s obligations are as follows
| Carrying Amount Contractual Cash Flows Less than 1 year 1-2 Years 2-5 Years |
|
|---|---|
| Accounts payable and accrued liabilities |
$ 25,463 $ 25,463 $ 25,463 $ – $ – |
| Bank debt | 115,785 116,395 – 116,395 – |
| Lease obligations | 2,160 1,688 957 399 332 |
| Other liabilities | 969 969 – – 969 |
| Commodity contracts | 2,639 2,639 2,332 307 – |
| $ 147,016 $ 147,154 $ 28,752 $ 117,101 $ 1,301 |
Credit Risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. A substantial portion of the Company’s accounts receivable are with natural gas and liquids marketers and partners on joint operations in the oil and gas industry and are subject to normal industry credit risks.
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
Purchasers of the Company’s natural gas and liquids are subject to credit review to minimize the risk of non-payment. As at December 31, 2024, the maximum credit exposure is the carrying amount of the accounts receivable of $28,878 (December 31, 2023 – $30,092).
The maximum exposure to credit risk for accounts receivable by type of customer was:
| December 31, 2024 December 31, 2023 |
|
|---|---|
| Natural gas and liquids marketers Partners on joint operations Other |
$ 11,315 $ 11,906 9,920 14,458 7,643 3,728 |
| $ 28,878 $ 30,092 |
The Company historically has not experienced any significant collection issues with its natural gas and liquids marketers. The majority of the revenue accruals and receivables from natural gas and liquids marketers were received in January 2025.
The Company’s receivables are aged as follows:
| December 31, 2024 December 31, 2023 |
|
|---|---|
| Under 30 days 30 to 60 days 60 to 90 days Over 90 days |
$ 15,757 $ 21,751 575 263 461 1,971 12,085 6,107 |
| $ 28,878 $ 30,092 |
Capital Resources
The Company’s objective when managing capital is to maintain a flexible capital structure which will allow it to execute its capital expenditure program, which includes expenditures in oil and gas activities which may or may not be successful. Therefore, the Company monitors the level of risk incurred in its capital expenditures to balance the proportion of debt and equity in its capital structure.
The Company considers its capital structure to include shareholders’ equity and debt:
| December | 31, 2024 | December 31, 2023 | ||
|---|---|---|---|---|
| Shareholders’ equity | $ | 569,628 | $ | 536,598 |
| Bank debt | $ | 115,785 | $ | 121,057 |
The Company monitors capital based on annual cash from operations before changes in non-cash working capital and capital expenditure budgets, which are updated as necessary and are reviewed and periodically approved by the Board of Directors.
The Company manages its capital structure and makes adjustments by continually monitoring its business conditions including the current economic conditions, the risk characteristics of the Company’s petroleum and natural gas assets, the depth of its investment opportunities, current and forecasted net debt levels, current and forecasted commodity prices and other facts that influence commodity prices and funds from operations such as quality and basis differentials, royalties, operating costs and transportation costs. In order to maintain or adjust the capital structure, the Company considers its forecasted cash from operations before changes in non-cash working capital while attempting to finance an acceptable capital expenditure program including acquisition opportunities, the current level of bank debt available from the Company’s
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
lender, the level of bank debt that may be attainable from its lender as a result of petroleum and natural gas reserve growth, the availability of other sources of debt with different characteristics than existing debt, the sale of assets, limiting the size of the capital expenditure program and the issue of new equity if available on favorable terms. At December 31, 2024 and December 31, 2023, the Company’s capital structure was subject to banking covenants. No changes were made to the capital policy in 2024.
Selected Quarterly Financial Information
| 2024 | 2024 | 2024 | 2024 | |
|---|---|---|---|---|
| Q4($) | Q3($) | Q2($) | Q1($) | |
| Petroleum & natural gas sales | 30,961 | 26,260 | 35,718 | 40,425 |
| Net income | 3,884 | 3,964 | 9,350 | 9,030 |
| Net income per share – basic(1) | 0.04 | 0.04 | 0.09 | 0.09 |
| Net income per share – diluted(1) | 0.04 | 0.04 | 0.09 | 0.09 |
| Funds flow from operations | 16,210 | 13,718 | 21,411 | 24,260 |
| Funds flow from operations per share – basic(1) | 0.16 | 0.14 | 0.22 | 0.25 |
| Funds flow from operations per share –diluted(1) | 0.15 | 0.13 | 0.20 | 0.24 |
| Capital expenditures(includingE&E) | 19,894 | 15,667 | 8,058 | 16,011 |
| 2023 | 2023 | 2023 | 2023 | |
| Petroleum & natural gas sales | Q4($) | Q3($) | Q2($) | Q1($) |
| Net income | 33,651 | 45,414 | 38,396 | 49,055 |
| Net income per share – basic(1) | 12,435 | 11,487 | 7,833 | 14,909 |
| Net income per share – diluted(1) | 0.13 | 0.12 | 0.08 | 0.17 |
| Funds flow from operations | 0.12 | 0.11 | 0.08 | 0.16 |
| Funds flow from operations per share – basic(1) | 17,552 | 28,994 | 22,410 | 30,068 |
| Funds flow from operations per share –diluted(1) | 0.19 | 0.31 | 0.24 | 0.34 |
| Capital expenditures(includingE&E) | 0.18 | 0.29 | 0.22 | 0.32 |
(1) Sum of quarterly per share figures may not add to annual per share figures due to rounding.
Quarterly activities
Fluctuations in quarterly revenues, net income and FFO over the last eight quarters are due primarily to the volatility in commodity prices and changes in sales volumes due to production growth and declines tied to the timing of drilling activity. The Company reduced capital expenditures on drilling and completions in 2024 due to weak natural gas prices and a corresponding decrease in petroleum and natural gas sales occurred. A major turn-around at a third party facility in the third quarter also contributed to the reduced production for the year.
Business Risks and Uncertainties
The Company is exposed to several operational risks inherent in exploring, developing, producing and marketing light crude oil and natural gas. These inherent risks include: economic risk of finding and producing reserves at a reasonable cost; financial risk of marketing reserves at an acceptable price given current market conditions; cost of capital risk associated with securing the needed capital to carry out the Company’s operations; risk of environment impact; and credit risk of non-payment for sales contracts and
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
joint venture partners. Other than the risks described herein (including the risks and uncertainties listed in the Forward-Looking Statements section in this MD&A) the Company is also subject to the risk factors set forth in the most recently filed AIF of the Company available on SEDAR+ which can be accessed at www.sedarplus.ca
The Company attempts to control operating risks by maintaining a disciplined approach to implementation of its exploration and development programs. Exploration risks are managed by hiring experienced technical professionals and by concentrating the exploration activity on reservoirs where the Company has experience and expertise. The Company also generates internal prospects and participates in projects where ownership interest is considered sufficient to minimize risk. Operational control allows the Company to manage costs, timing and sales of production and to ensure new production is brought on-stream in a timely manner. The Company maintains a comprehensive insurance program to reduce risk to an acceptable level and to protect it against significant losses.
Environmental Risks
All phases of the oil and natural gas business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, provincial and local laws and regulations. Compliance with such legislation can require significant expenditures and a breach could result in the imposition of fines and penalties, some of which could be material. Senior management continually assesses new and existing regulatory requirements and environmental risks and determines the impact these risks might have on the Company, as well as the appropriate actions necessary to manage those risks. These assessments and the resulting policy decisions are discussed quarterly with the Board of Directors which evaluates the performance and effectiveness of the Company’s environmental policies and programs.
The Company’s environmental responsibilities includes removing property, plant and equipment as well as reclaiming land and property to its original state, subsequent to the completion of oil and natural gas extraction activities. This requirement results in an asset retirement obligation that provides current recognition of estimated expenditures that will be incurred in the future. The Company’s decommissioning liabilities are discussed in further detail under “Critical Accounting Estimates” below, as well as in note 7 of the Company's December 31, 2024 audited consolidated financial statements.
Disclosure Controls and Procedures and Internal Controls over Financial Reporting
As at December 31, 2024, an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined under the rules adopted by the Canadian securities regulatory authorities, was carried out under the supervision and with the participation of Management, including the Chief Executive Officer (“CEO”), and the Chief Financial Officer (“CFO”). Based on this evaluation, the CEO and CFO concluded that, as at December 31, 2024, the design and operation of the Company’s disclosure controls and procedures were effective in meeting all regulatory filing requirements.
Internal control over financial reporting (“ICFR”) means a process designed by, or under the supervision of, an issuer's certifying officers, and effected by the issuer's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's Generally Accepted Accounting Procedures (“GAAP”) and includes those policies and procedures that:
(a) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;
(b) are designed to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the issuer's GAAP, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the
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YANGARRA RESOURCES LTD. MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended December 31, 2024 and 2023 (in 000’s of CDN dollars, except per share and per unit)
issuer; and
(c) are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the annual financial statements or interim financial reports;
Management is responsible for establishing and maintaining adequate internal controls over financial reporting.
Management has conducted an evaluation of its internal controls over financial reporting and determined that as at December 31, 2024 the controls were effective to provide reasonable assurance regarding the reliability of financial reporting, and the preparation of financial statements for external reporting purposes. In May 2013, the Committee of Sponsoring Organizations of the Treadway Commission issued an updated Internal Control-Integrated Framework (“2013 Framework”) replacing the Internal Control - Integrated Framework (1992). The control framework Yangarra’s officers used to design the Company’s ICFR is the 2013 Framework.
During the period beginning on October 1, 2024 and ending on December 31, 2024, there were no material changes to the Company’s ICFR and the CEO and CFO have filed certifications with the Canadian securities regulators regarding the Company’s 2024 public filing documents.
Critical Accounting Judgments and Estimates
The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect reported amounts and presentation of assets, liabilities, revenues, expenses and disclosures of contingencies and commitments. Such estimates primarily relate to unsettled transactions and events at the statement of financial position date which are based on information available to management at each financial statement date. Actual results could differ from those estimated. Judgments, estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There have been no changes to the Company's critical accounting judgments and estimates during the year ended December 31, 2024. Refer to Note 2 of the Company's December 31, 2024 audited consolidated financial statements.
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