Kolibri Global Energy Inc. (ticker not provided) has reported its first quarter financial results for 2024, revealing a mixed performance with strong production and a slight dip in adjusted EBITDA. The company's average production increased by 3% to 3,305 barrels of oil equivalent (BOE) per day, up from 3,194 BOE per day in the previous year's quarter. Despite a 9% decrease in adjusted EBITDA due to lower prices and higher operating expenses, the company has demonstrated growth in production and continued development in its operations. Additionally, Kolibri announced an increase in their line of credit from Bank of Oklahoma, which reflects the value of the company's field and provides more financial flexibility.
Key Takeaways
- Kolibri Global Energy reported an increase in average production to 3,305 BOE per day, a 3% rise from the previous year.
- Adjusted EBITDA for Q1 2024 was $10.4 million, a 9% decrease due to lower prices and higher OpEx.
- Net revenue remained stable at $14.2 million, while net income saw a drop to $3.3 million.
- Operating expenses increased to $8.36 per BOE, up from $6.04 per BOE in the prior year's quarter.
- The company's borrowing base was increased from $40 million to $50 million by Bank of Oklahoma.
Company Outlook
- Production is tracking above year-end forecasts by third-party reservoir engineering firms.
- New production from the Nickel Hill's wells is expected by the end of the month.
- The oil mix is anticipated to trend in the mid- to high 70s percentage-wise for the remainder of the year.
Bearish Highlights
- Lower prices and higher operating expenses contributed to a 9% decrease in adjusted EBITDA.
- Net income decreased significantly due to noncash unrealized mark-to-market adjustments on hedges and deferred income tax expenses.
Bullish Highlights
- Production increased due to new wells added in 2023.
- The borrowing base increase to $50 million indicates strong asset value and provides greater capital flexibility.
- Efficiency improvements have led to reduced well costs, from a budgeted $7.2 million to around $5.6 million.
Misses
- Adjusted EBITDA and net income were lower compared to the same quarter in the previous year.
Q&A Highlights
- The company expects the oil cut to return to the mid- to high 70s percentage range in subsequent quarters.
- Operating expenses came in lower than analyst estimates, which was attributed to efficient operations and reduced water haul costs.
- Kolibri is considering drilling longer lateral wells to improve capital efficiency, although this is challenged by the field's steep dips.
Kolibri Global Energy's first quarter of 2024 has shown resilience with increased production and strategic financial management. The company's forward-looking statements indicate an optimistic view of future operations, supported by recent credit facility expansions and operational efficiencies. As the company continues to navigate the complexities of the oil field, it remains focused on constant improvement and value growth.
InvestingPro Insights
Kolibri Global Energy Inc. has demonstrated a notable performance in the first quarter of 2024, with a focus on production growth and strategic financial management. InvestingPro data and tips provide additional context to the company's financial health and future outlook.
InvestingPro Data highlights:
- The company has a market capitalization of $109.91 million.
- Kolibri's P/E ratio stands at 7.64, indicating a potentially undervalued stock compared to industry averages.
- A strong gross profit margin of 86.98% in the last twelve months as of Q1 2024 shows the company's ability to manage its cost of goods sold effectively.
InvestingPro Tips for Kolibri Global Energy:
- Analysts predict that the company will be profitable this year, which aligns with the company's optimistic outlook and recent operational efficiencies.
- The company's impressive gross profit margins suggest a strong capability to generate earnings relative to its revenue, which is crucial for long-term sustainability.
Kolibri's financial flexibility, as evidenced by the increase in their line of credit, is further supported by the InvestingPro Tip indicating that the company is profitable over the last twelve months. However, potential investors should be aware of the company's cash burn and short-term obligations that exceed its liquid assets, as highlighted by another InvestingPro Tip.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available for Kolibri Global Energy Inc., which can be accessed at https://www.investing.com/pro/KGEI. These tips can provide further insights into the company's valuation, cash flow yield, and dividend policy. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full spectrum of expert financial analysis and metrics that InvestingPro has to offer.
Full transcript - Bnk Pete Inc (KGEI) Q1 2024:
Operator: Good day, and welcome to the Kolibri Global Energy First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. Also, this call may contain forward-looking information regarding Kolibri's strategic plans, anticipated production, capital expenditures, exit rates and cash flows, reserves and other estimates and forecasts. Forward-looking information is subject to risks and uncertainties, and actual results will vary from the forward-looking statements. This call may include future-oriented financial information and financial outlook information, which Kolibri discloses in order to provide readers with a more complete perspective on Kolibri's potential, future operations, and such information may not be appropriate for other purposes. For a description of the assumptions on which such forward-looking information is based on and the applicable risks and uncertainties and Kolibri's policy for updating such statements, we direct you to Kolibri's most recent annual information form and management discussion and analysis for the period under discussion as well as Kolibri's most recent corporate presentation, all of which are available on Kolibri's website. I would now like to turn the conference over to Mr. Wolf Regener. Please go ahead, sir.
Wolf Regener: Thank you. And thank you, everyone, for joining us today. With me on today's call is also Gary Johnson, our Chief Financial Officer. We released our [2023] first quarter report last night, and I assume you've all had a chance to look over the report. And hopefully, you also saw our announcement this morning regarding a line of credit increase from Bank of Oklahoma. So we're very pleased with the accomplishments we achieved this quarter and last year. We've had strong financial results, continued to make progress on our development program, nice production increases for the field, which you can actually see on Slide 11 of our presentation, kind of gives you my vision on it. And I want to take the opportunity to thank everyone in the company who has worked hard to grow the company quarter after quarter. And with that, I would like to turn the call over to Gary to discuss our financial results. So Gary, take it away.
Gary Johnson: All right. Thanks, Will, and thanks, everyone, for joining the call. I'm going to go over a few highlights of the first quarter results, and then we can take questions at the end of the call. All amounts are in U.S. dollars unless otherwise stated. As you can see from the earnings release yesterday, we had another good quarter with strong production and adjusted EBITDA. Average production was up 3% to 3,305 BOE per day compared to 3,194 BOE per day in the prior year quarter. The increase was due to the wells added in 2023 partially offset by lower production from wells that were impacted by the offset of fracture stimulations last year. Production is tracking above our third-party reservoir engineering firms year-end forecast, and we look forward to adding new production from the Nickel Hill's wells by the end of this month. The production mix for the first quarter was 70% oil due to some [ true-up ] and adjustments in the quarter, but we expect the oil mix to trend in the mid- to high 70s for the rest of the year. Adjusted EBITDA was $10.4 million compared to $11.4 million in the prior year quarter, which was a decrease of 9% due to lower prices and higher OpEx, partially offset by higher production. Net revenue was flat at $14.2 million as the higher production and lower prices offset each other. Operating expense was $8.36 per BOE for the quarter, compared to $6.04 per BOE in the prior year first quarter. The operating expense included prior period cost adjustments of about $600,000, although the net impact of those adjustments was only about $200,000 due to offsetting prior period revenue adjustments. If we subtract out the prior period cost adjustments, our operating expense would have been $6.43 per BOE. Net income was $3.3 million and basic earnings per share was $0.09 a share, compared to $7.9 million or $0.22 per basic share in the prior year first quarter. The decrease was due to a $2.3 million swing in the noncash unrealized mark-to-market adjustments on our hedges between first quarter of this year and last year. We had a $900,000 unrealized loss on hedges in this quarter versus a $1.4 million unrealized gain on hedges in the prior year first quarter. In addition, we had $1.2 million of deferred income tax expense in the first quarter of 2024 as the difference between the tax basis and book basis of our PPE has increased over the last 2 years. Since our U.S. subsidiary still has existing NOLs, no cash taxes are expected to be paid this year, but we do expect to continue recognizing deferred income tax expense for the rest of the year. Our netback from operations decreased to $38.94 per BOE compared to $43.67 per BOE in the prior year quarter. This was due to lower average prices of 4% and higher OpEx. Netbacks, including the impact of hedges, were $37.81 per BOE compared to $42.23, which was a 10% decrease. And then I just wanted to point out, as Wolf mentioned as well, our credit facility was just redetermined, which increased our borrowing base from $40 million to $50 million, which was a 25% increase. This will give us more flexibility in managing our working capital and also demonstrates the value of the field. And with that, I'll hand it back to Wolf.
Wolf Regener: Thanks, Gary. As you can tell, we've had some excellent growth over the last few years. Revenue and cash flow growing, keeping our leverage low and we've been executing well in the field. I can't emphasize enough about our great team, where last year, we went in expecting our well cost to be about $7.2 million. And now we're budgeting our wells to cost around $5.6 million. So a huge decrease, and we're actually hoping we can beat that to keep dropping that a little bit further this year, but we'll see how the year goes. We always strive for constant improvement, and this is a shining example of that. We have and are taking steps to have more people recognize the value of the company. That includes last year of our uplisting to the NASDAQ, where we now qualify for the Russell Index this year, and we'll have marketing plans in place to be able to tell more people about our -- what we feel is our undervalued story. Since we had our 2023 financials out, and we didn't have a call, I just thought I'd point out a few things. Our production last year from difference between 2022 and 2023 increased by 70%. And that also increased our adjusted EBITDA by 56%. So we're building and we're growing. We're growing company value, and we look forward to continuing to do so. With that, that concludes the formal part of our presentation, and we'd be happy to answer any questions that anyone may have.
Operator: [Operator Instructions] And our first question will come from John White with ROTH Capital.
John White: Congratulations on a nice quarter. Yes. Gary, did you say in the subsequent quarters, the oil cut is going to go back to 79%?
Gary Johnson: Yes. Maybe not that high, but we're expecting it to go 76%, 77%, kind of, what it's been trending at. It kind of dip down this quarter, but we expect it to go like I said, mid- to high 70s.
John White: Okay. I was a bit distracted when you were talking about that. And LOE came in at $2.2 million, and I had estimated $2.7 million, what do you think I -- why do you think I overestimated?
Gary Johnson: I'm not sure.
Wolf Regener: Yes. I mean we did make comments earlier that we do have more flowbacks and things like that. That's -- we'll increase our OpEx a little bit. But I think we've been able to handle that were...
Gary Johnson: Yes, I think some of the water -- and the water hall was up for a while, but that's came down as well, yes. So that's true.
John White: Okay. So it was a very nice reduction compared to my estimate. So congratulations. I saw in your updated May presentation, you've got the same 2024 guidance that you had in January?
Gary Johnson: Correct.
Wolf Regener: Yes. We haven't changed anything. We'll see how these wells come on, and hopefully, they come on as expected, and we can bring the rest of the wells that we have planned on in the year on time, and they perform as expected, and hopefully, we'll end in our guidance band. So if something changes, then we'll definitely announce that though.
Operator: [Operator Instructions] Our next question will come from Jeff Robertson with Water Tower Research.
Jeff Robertson: Wolf, I was looking at Slide 13, which addresses drilling efficiencies, and you touched on this, I think, in your remarks. Can you provide some color around what is contributing to the fewer days and as a result of lower costs for drilling your wells?
Wolf Regener: Yes, sure. We've -- not to get too technical, but we basically -- we used a different downhole assembly. We're using more rotary steerables now, and we found one that seems to be working well from one company. And we've also just over the years improved how we deal with certain things out here. What we have to do, what we have to stay away from in order to avoid having issues. You never know when you're going to have a tool failure, and that's really the only difference right now in -- when a well is coming in around the 10-day mark versus the 11- or 12-day mark, if you have less trips, but we've been fortunate enough to have some wells that we can drill from almost top to bottom without coming out of the hall for 1-mile lateral. So it's 15,500 to 16,000 feet, that we're drilling in one trip, which really saves a lot of time and money. So it's a long way from when we first started drilling these wells.
Jeff Robertson: Experience teaches you a lot of things, I suppose.
Wolf Regener: It really does. Every field is different, right? So you have to kind of -- and you can only change one thing at a time, because if you change more than once -- than one thing in a well, then you don't know what worked and what didn't work.
Jeff Robertson: Have you experimented or maybe experiment is not the right word, but have you looked at different lateral lengths as a way -- and would that add anything to your capital efficiency in this area?
Wolf Regener: Yes, we are looking at that. We're considering -- we just had a meeting with our team last week, in a couple of areas of the field, we think it may make sense to do 2-mile laterals. We do have fairly steep dips out here. And so when you start getting longer than that, you start having more challenges just from the elevation if you're drilling up dip, you're making the turn and then having a almost 1,000 feet arise, maybe 1,500 feet rise as you're drilling that and drilling down dip is a same thing. So we need an area where it can work well and we can stay on interval, we do find a difference as long as we stay in our interval, we make better and better wells and even we drill -- we drift a little bit out of our interval. The wells don't perform quite as well. So the longer the lateral, the more challenging that becomes too as far as this operation. But we are looking into it in a couple of areas, and you may see us proposing a few longer laterals here as time goes on.
Jeff Robertson: I presume in the downhole assembly, you referenced is also meant to help you stay in zone...
Wolf Regener: Absolutely. Yes, it's where all the tools are, to tell you where they are that as close to the bit as possible, and getting readings as often as possible. So because the -- in any oil field, there are complexities that as much as you know. So the second well in inception is always a lot easier than the first and the closer you're in to the previous well, the better chance you have of staying all the way in. But our guys have been really good and doing a really good job in these terms. So that's been good and balancing that off with how fast you drill. And like I said, we're getting better and better at it.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Wolf Regener for any closing remarks. Please go ahead, sir.
Wolf Regener: All right. Thank you. I just want to say thank you, everyone, for participating and joining us today. It's appreciated. [Technical Difficulty] input and to answer questions from anyone, so thank you all and hope you all have great rest of your day. Take care.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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