HIGHWOOD ASSET MANAGEMENT LTD. ANNOUNCES 2022 SECOND QUARTER FINANCIAL AND OPERATING

/NOT FOR DISSEMINATION IN THE U.S. OR THROUGH U.S. NEWSWIRES/

CALGARY, AB, Aug. 29, 2022 /CNW/ – Highwood Asset Management Ltd., (“Highwood” or the “Company“) (TSXV: HAM) is pleased to announce financial and operating results for the three and six months ended June 30, 2022. The Company also announces that its unaudited financial statements and associated Management’s Discussion and Analysis (“MD&A“) for the period ended June 30, 2022, can be found at www.sedar.com and www.highwoodmgmt.com.

Highlights

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Corporately, net debt at June 30, 2022 was $nil and the Company is in a working capital surplus position of $1.4 million. The Company has reduced net debt, from $3.3 million at December 31, 2021, including a bank draw of $1.1 million, to $nil at June 30, 2022 and undrawn on its operating facility.
Within the upstream oil & gas production & processing business unit, the Company delivered average production of 97 bbl/d of oil in the second quarter of 2022. Current net production from Highwood is approximately 110 bbl/d of oil, with one well in Deer Mountain currently having access issues with the condition of the road. Highwood is working to bring this well back on production as soon as possible.
During the second quarter of 2022, the Company disposed of 50% of its 100% working interest in the Company’s 14-05 terminal to an arm’s length private Canadian midstream company (the “Purchaser”) for gross proceeds of $2.25 million. The Company and the Purchaser will each own 50% of the terminal with the Company remaining as operator. The funds will be used to reactivate the terminal which the Company anticipates bringing back on line in the third quarter of 2022.
Subsequent to June 30, 2022, the Company purchased office space for gross consideration of $1.15 million which was paid with cash on hand and drawing on the Company’s operating facility. In addition the Company’s available draw on it’s operating facility was increased to $2.92 million. The Company will realize significant general and administrative expense savings in conjunction with the purchase of the new office space, anticipated to be $10-15 thousand per month.

Summary of Financial & Operating Results

	Three months ended June 30,			Six months ended June 30,
	2022	2021	%	2022	2021	%
Financial (in thousands)
Oil and natural gas sales	$ 1,125	$ 544	107	$ 2,276	$ 5,702	(60)
Transportation pipeline revenues	847	931	(9)	1,644	1,900	(13)
Total revenues, net of royalties⁽¹⁾	1,453	742	96	3,071	4,917	(38)
Income (Loss)	1,487	(930)	257	1,943	(1,708)	212
Funds flow from operations⁽⁵⁾	127	(61)	110	602	(1,393)	141
Capital expenditures	19	74	(74)	157	191	(18)
Net debt ⁽²⁾				–	(1,672)	100
Shareholder’s equity (end of period)				10,128	8,570	18
Shares outstanding (end of period)				6,014	6,014	–
Weighted-average basic shares				6,014	6,014	–
outstanding

Operations ⁽³⁾
Production
Crude oil (bbls/d)	97	94	3	108	549	(80)
Total (boe/d)	97	94	3	108	549	(80)
Average realized prices⁽⁴⁾
Crude Oil (per bbl)	127.37	63.30	189	116.13	57.42	102
Upstream Operating netback (per BOE) ⁽⁵⁾	50.38	(3.72)	1,453	49.85	16.72	198

⁽¹⁾	Includes realized and unrealized gains and losses on commodity contracts
⁽²⁾	Net debt consists of bank debt and working capital surplus (deficit) excluding commodity contract assets and/or liabilities.
⁽³⁾	For a description of the boe conversion ratio, see “Basis of Barrel of Oil Equivalent”.
⁽⁴⁾	Before hedging.
⁽⁵⁾	See “Non-GAAP measures”.

2022 Second Quarter Operations

With the continued strong commodity prices and increased interest in Canadian energy, the Company’s focus in the second quarter was reviewing and assessing several potential acquisitions for its upstream operations. The Company will continue to review and assess opportunities which are accretive to the Company as Highwood seeks to grow this segment of its operations. The Company will also assess land offerings in strategic areas where the Company sees significant growth opportunities.

The Company also focused time and resources in Q2 2022 on extraction technologies for Lithium from Brine.

Outlook

As of today, the Company is undrawn on its credit facility and has a working capital surplus, which provides considerable financial and operational flexibility, the Company remains open to completing accretive acquisitions through the balance of 2022 and beyond. The Company is currently engaged in several encouraging dialogues regarding various acquisitions and partnership opportunities. Global optimism around mitigating COVID-19 and restoring previous economic and industrial activities has created positive market and investment sentiment both within and outside oil & gas space.

While Highwood sold the majority of its producing oil assets in the first quarter of 2021, the Company has, and will continue to evaluate opportunities in the M&A market but will remain disciplined to pursue only those opportunities that are accretive with low to moderate liability profiles.

Corporately, the Company intends to build a growing profile of recurring free funds flow that will provide maximum flexibility for growth and / or other strategic M&A opportunities in a non-dilutive fashion.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Note Regarding Forward-Looking Information

This news release contains “forward-looking information” or “FLI” within the meaning of the Canadian securities laws. Forward-looking information is generally identifiable by use of the words “believes,” “may,” “plans,” “will,” “anticipates,” “intends,” “budgets”, “could”, “estimates”, “expects”, “forecasts”, “projects” and similar expressions, and the negative of such expressions. Forward-looking information in this news release include statements about the Company’s next steps which include resource assessment, continued exploration and development work, including in respect of the potential extraction technology, continued sampling and developing a reservoir model, the completion and timing for the Cretaceous ironstone NI 43-101 Technical Report, and the evaluation and potential spinout of a pure play lithium company, as well as the specific assumptions used to develop such FLI and the specific risk factors.

In connection with the forward-looking information contained in this news release, Highwood has made numerous assumptions, regarding, among other things: the geological, metallurgical, engineering, financial and economic advice that Highwood has received is reliable and is based upon practices and methodologies which are consistent with industry standards. While Highwood considers these assumptions to be reasonable, these assumptions are inherently subject to significant uncertainties and contingencies.

Additionally, there are known and unknown risk factors which could cause Highwood’s actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained herein. Known risk factors include, among others: the Li-brine resource assessment may not be completed as planned or at all, the exploration and continued sampling may exceed the budget; continued sampling and the reservoir model may not achieve the results expected; investor support for a pure play lithium public spinout; the need to obtain additional financing; uncertainty as to the availability and terms of future financing; the possibility of delay in exploration or development programs and uncertainty of meeting anticipated program milestones; uncertainty as to timely availability of permits and other governmental approvals.

A more complete discussion of the risks and uncertainties facing Highwood is disclosed in Highwood’s continuous disclosure filings with Canadian securities regulatory authorities at www.sedar.com. All forward-looking information herein is qualified in its entirety by this cautionary statement, and Highwood disclaims any obligation to revise or update any such forward-looking information or to publicly announce the result of any revisions to any of the forward-looking information contained herein to reflect future results, events, or developments, except as required by law.

Oil and Gas Measures

Readers should see the “Selected Technical Terms” in the Annual Information Form filed on April 29, 2021 for the definition of certain oil and gas terms.

Basis of Barrels of Oil Equivalent – This news release discloses certain production information on a barrels of oil equivalent (“boe”) basis with natural gas converted to barrels of oil equivalent using a conversion factor of six thousand cubic feet of gas (Mcf) to one barrel (bbl) of oil (6 Mcf:1 bbl). Condensate and other NGLs are converted to boe at a ratio of 1 bbl:1 bbl. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf:1 bbl is based roughly on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at sales point. Although the 6:1 conversion ratio is an industry-accepted norm, it is not reflective of price or market value differentials between product types. Based on current commodity prices, the value ratio between crude oil, NGLs and natural gas is significantly different from the 6:1 energy equivalency ratio. Accordingly, using a conversion ratio of 6 Mcf:1 bbl may be misleading as an indication of value.

Mcfe Conversions: Thousands of cubic feet of gas equivalent (“Mcfe”) amounts have been calculated by using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas. Mcfe amounts may be misleading, particularly if used in isolation. A conversion ratio of 1 bbl to 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of natural gas as compared to oil is significantly different from the energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may be misleading as an indication of value.

Non-GAAP Measures

“Funds flow from operations” is a non-GAAP financial measure and is calculated as cash flow from operating activities adjusted for changes in non-cash working capital and changes in long term accounts payable and accrued liabilites.

“Netback” is a non-GAAP financial measure and is calculated as revenues net of royalties, less transportation and processing charges and operating expenses and then divided by BOE or Mcf sold.

SOURCE Highwood Oil Company Ltd.

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