Exhibit
99.2
MANAGEMENT’S
DISCUSSION AND ANALYSIS
MARCH
31, 2024
| Kolibri Global Energy Inc. | 1 | First Quarter 2024 |
MANAGEMENT’S
DISCUSSION AND ANALYSIS
The
following is management’s discussion and analysis (“MD&A”) of Kolibri Global Energy Inc.’s (“KEI”
or the “Company”) operating and financial results for the three months ended March 31, 2024, compared to the corresponding
period in the prior year, as well as information and expectations concerning the Company’s outlook based on currently available
information. The MD&A should be read in conjunction with the unaudited condensed consolidated interim financial statements for the
three months ended March 31, 2024 and the audited consolidated financial statements and MD&A for the year ended December 31, 2023.
The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 “Interim
Financial Reporting”. The reporting and measurement currency is the United States dollar. Additional information relating to KEI
including its Annual Information Form is filed on SEDAR at www.sedarplus.ca and on the Company’s website at www.kolibrienergy.com.
Netback
from operations, netback including commodity contracts, net operating income and adjusted EBITDA (collectively, the “Company’s
Non-GAAP Measures”) are not measures or ratios recognized under IFRS and do not have any standardized meanings prescribed by IFRS.
Management of the Company believes that such measures and ratios are relevant for evaluating returns on each of the Company’s projects
as well as the performance of the enterprise as a whole. The Company’s Non-GAAP Measures may differ from similar computations as
reported by other similar organizations and, accordingly, may not be comparable to similar non-GAAP measures and ratios as reported by
such organizations. The Company’s Non-GAAP Measures should not be construed as alternatives to net income, cash flows from operating
activities, working capital or other financial measures and ratios determined in accordance with IFRS, as an indicator of the Company’s
performance.
Please
read carefully the important cautionary notes regarding technical information, forward-looking statements and other matters set out in
this report.
Description
of Business
KEI
is a North American energy company focused on finding and exploiting energy projects in oil and gas. Through various subsidiaries, the
Company owns and operates energy properties in the United States. The Company continues to utilize its technical and operational expertise
to identify and acquire additional projects in oil, gas and clean and sustainable energy. The common shares of the Company trade on the
Toronto Stock Exchange (“TSX”) under the symbol “KEI” and on the NASDAQ under the symbol “KGEI”.
Operating
Summary
The
Company’s results of operations are dependent on production volumes of natural gas, crude oil and natural gas liquids and the prices
received for the production. Prices for these commodities have shown significant volatility during recent years and are determined by
supply and demand factors, including weather and general economic conditions.
| Kolibri Global Energy Inc. | 2 | First Quarter 2024 |
OVERVIEW
Results
at a Glance
| | |
Three
Months ended March 31, | |
| | |
2024 | | |
2023 | |
| Financial (US $000 except per share) | |
| | |
| |
| Oil and gas gross revenues | |
| 18,244 | | |
| 18,074 | |
| Oil and gas revenues, net of royalties | |
| 14,226 | | |
| 14,293 | |
| Net operating income(1) | |
| 11,980 | | |
| 12,740 | |
| Net income | |
| 3,345 | | |
| 7,896 | |
| Basic net income per share | |
| 0.09 | | |
| 0.22 | |
| Cash flows from operating activities | |
| 9,695 | | |
| 13,029 | |
| Adjusted EBITDA(2) | |
| 10,374 | | |
| 11,396 | |
| Additions to property, plant and equipment | |
| 5,320 | | |
| 4,188 | |
| | |
| | | |
| | |
| Operating | |
| | | |
| | |
| Average production (BOEPD) | |
| 3,305 | | |
| 3,194 | |
| Average price ($/BOE) | |
| 60.66 | | |
| 62.87 | |
| Netback from operations ($/BOE)(3) | |
| 38.94 | | |
| 43.67 | |
| Netback including commodity contracts ($/BOE)(3) | |
| 37.81 | | |
| 42.23 | |
| | |
March 31, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Balance Sheet | |
| | | |
| | |
| Cash and cash equivalents | |
| 1,801 | | |
| 598 | |
| Total assets | |
| 229,191 | | |
| 224,357 | |
| Working capital (deficiency) | |
| (6,564 | ) | |
| (11,916 | ) |
| Available borrowing capacity | |
| 8,042 | | |
| 10,042 | |
| Total non-current liabilities | |
| 38,556 | | |
| 35,099 | |
(1)
Net operating income is considered a non-GAAP measure. Refer to the section entitled “Non-GAAP Measures” at the end of this
MD&A.
(2)
Adjusted EBITDA is considered a non-GAAP measure. Refer to the section entitled “Non-GAAP Measures” at the end of this MD&A.
(3)
Netback from operations and netback including commodity contracts are considered non-GAAP ratios. Refer to the section entitled “Non-GAAP
Measures” at the end of this MD&A.
Highlights
The
average production for the first quarter of 2024 was 3,305 BOEPD, an increase of 3% compared to first quarter 2023 production of 3,194
BOEPD. The increase is due to production from the wells that were drilled and completed in 2023.
Gross
revenues for the first quarter of 2024 increased by 1% compared to the first quarter of 2023. The increase was due to the increase in
production of 3% partially offset by a 4% decrease in average prices.
| Kolibri Global Energy Inc. | 3 | First Quarter 2024 |
Production
and operating expense per barrel averaged $8.36 per BOE in the first quarter of 2024 compared to $6.04 per BOE in the first quarter of
2023. The increase was due to natural gas and NGL processing costs of $0.6 million, or $1.93 per BOE, related to prior years as the purchaser
reassessed prior year gathering and processing costs in 2024. Without these fees, operating expense per barrel would be $6.43 per BOE
for the first quarter of 2024, an increase of 6%.
Adjusted
EBITDA(1) was $10.4 million for the first quarter of 2024 compared to $11.4 million for 2023, a decrease of 9%. The decrease
was due to a decrease in average prices and higher production and operating expenses due to the prior period gathering and processing
fees, partially offset by an increase in production.
Net
income in the first quarter of 2024 was $3.3 million, compared to net income of $7.9 million in the same period of 2023. The decrease
was due to lower average prices, higher income tax expense and higher operating expenses due to the prior period gathering and processing
fees, partially offset by higher production. In addition, the Company had a $0.9 million unrealized loss on commodity contracts in the
first quarter of 2024 compared to a $1.4 million unrealized gain in the first quarter of 2023.
Netback
from operations(2) decreased to $38.94 per BOE in the first quarter of 2024 compared to $43.67 per BOE in the same period
of 2023, a decrease of 11%. Netback including commodity contracts(2) for the first quarter of 2024 was $37.81 per BOE compared
to $42.23 in 2023, a decrease of 10% from the prior year period. The decreases were due to lower average prices and increased operating
expenses due to the prior period gathering and processing fees as noted above. Netback from operations for the first quarter of 2024
without the prior period gathering and processing fees would have been $40.87 per BOE.
At
March 31, 2024, the Company had $8.0 million of available borrowing capacity on the credit facility and was in compliance with both of
its debt covenants.
(1)
Adjusted EBITDA is considered a non-GAAP measure. Refer to the section entitled “Non-GAAP Measures” at the end of this MD&A.
(2)
Netback from operations and netback including commodity contracts are considered non-GAAP ratios. Refer to the section entitled “Non-GAAP
Measures” at the end of this MD&A.
OPERATIONS
UPDATE
Tishomingo
Field, Ardmore Basin, Oklahoma
The
average production for the first quarter of 2024 was 3,305 BOEPD, an increase of 3% compared to first quarter 2023 production of 3,194
BOEPD. The increase is due to production from the wells that were drilled and completed in 2023. During the first quarter of 2024, the
Company reworked three wells that were impacted by offset fracture stimulations. Wells that were impacted by the offset fracture stimulations
reduced production by about 275 BOEPD in the first quarter of 2024 and the wells had not fully recovered by the end of the quarter. Even
with this reduction, production is above the year end forecast from our third-party reservoir engineering firm
In
April 2024, the Company finished drilling the Nickel Hill 35-1H and Nickel Hill 35-2H wells (both 62.9% working interest). The Company
is currently performing fracture stimulation operations on these wells and expects production to begin in June of 2024.
Production
and Revenue
| | |
Three months ended March 31 | |
| | |
2024 | | |
2023 | | |
% | |
| Average oil production (BOPD) | |
| 2,423 | | |
| 2,431 | | |
| - | |
| Average natural gas production (mcf/d) | |
| 2,371 | | |
| 2,138 | | |
| 11 | |
| Average NGL production (BOEPD) | |
| 487 | | |
| 407 | | |
| 20 | |
| Average production (BOEPD) | |
| 3,305 | | |
| 3,194 | | |
| 3 | |
| Average oil price ($/bbl) | |
| 75.03 | | |
| 74.40 | | |
| 1 | |
| Average natural gas price ($/mcf) | |
| 2.06 | | |
| 4.24 | | |
| (51 | ) |
| Average NGL price ($/bbl) | |
| 28.25 | | |
| 26.77 | | |
| 6 | |
| Average price ($/BOE) | |
| 60.66 | | |
| 62.87 | | |
| (4 | ) |
| Oil revenue ($000) | |
| 16,548 | | |
| 16,278 | | |
| 2 | |
| Natural gas revenue ($000) | |
| 445 | | |
| 815 | | |
| (45 | ) |
| NGL revenue ($000) | |
| 1,251 | | |
| 981 | | |
| 28 | |
| Kolibri Global Energy Inc. | 4 | First Quarter 2024 |
DISCUSSION
OF OPERATING RESULTS
Oil
production for the first quarter of 2024 was flat with 2,423 BOPD compared to 2,431 BOPD for the same period of 2023. Oil revenue increased
by 2% in the first quarter of 2024 versus the same period of 2023 due to an increase in oil prices of 1%.
For
the first quarter of 2024, average natural gas production was 2,371 MCFPD compared to 2,138 MCFPD for the same period of 2023, an increase
of 11%. The increase in the first quarter of 2024 is due to the additional production from the wells drilled in 2023. Natural gas revenue
decreased by 45% in the first quarter of 2024 versus the same period in 2023 due to a decrease in natural gas prices of 51%, partially
offset by the increase in production.
Natural
gas liquids (NGL) production in the first quarter of 2024 increased to 487 BOEPD from 407 BOEPD in the comparable period of 2023, an
increase of 20%. NGL revenue increased by 28% in the first quarter of 2024 compared to the same period in 2023 due to the production
increase and an increase in NGL prices of 6%.
Average
production on a per BOE basis was 3,305 BOEPD in the first quarter of 2024 compared to 3,194 BOEPD in the same period of 2023, an increase
of 3%. The increase is due to the factors discussed above. Gross revenue for the first quarter of 2024 increased by 1% compared to the
first quarter of 2023 due to an increase in production partially offset by a decrease in average prices.
Royalties,
Operating Expenses and Netback
| | |
Three months ended March 31, | |
| ($/BOE) | |
2024 | | |
2023 | | |
% | |
| Average price | |
| 60.66 | | |
| 62.87 | | |
| (4 | ) |
| Less: Royalties | |
| 13.36 | | |
| 13.16 | | |
| 2 | |
| Less: Operating expenses(3) | |
| 8.36 | (4) | |
| 6.04 | | |
| 38 | |
| Netback from operations(1) | |
| 38.94 | | |
| 43.67 | | |
| (11 | ) |
| Price adjustment from commodity contracts(2) | |
| (1.13 | ) | |
| (1.44 | ) | |
| (22 | ) |
| Netback including commodity contracts(1) | |
| 37.81 | | |
| 42.23 | | |
| (10 | ) |
(1)
Netback from operations and netback including commodity contracts are considered non-GAAP ratios. Refer to the section entitled “Non-GAAP
Measures” at the end of this MD&A.
(2)
Price adjustment from commodity contracts includes the positive or negative adjustment to the average price per barrel that the Company
realized from its commodity contracts. See the listing of commodity contracts below.
(3)
Operating expenses include compressor costs of $271,000 in the first quarter of 2024 and $183,000 in the first quarter of 2023 that are
accounted for as a lease under IFRS 16.
(4)
Includes natural gas and NGL processing costs of $0.6 million, or $1.93 per BOE, related to prior years as the purchaser reassessed prior
year gathering and processing costs in 2024.
| Kolibri Global Energy Inc. | 5 | First Quarter 2024 |
Average
prices decreased by 4% in the first quarter of 2024, compared to the same period in the prior year, due to a 51% price decrease in natural
gas partially offset by small price increases in oil and NGLs discussed above. Oil made up 73% of the production mix in the first quarter
of 2024 compared to 76% for the same period in 2023.
Royalties
on Tishomingo production averaged approximately 22.0% for the first quarter of 2024 versus 20.9% in the first quarter of 2023. The percentages
differences are due to different royalty burdens on the wells produced by the Company.
Major
production and operating expenses are related to the gathering and processing of natural gas and NGLs as well as periodic well repairs
and maintenance. Operating expenses averaged $8.36 per BOE for the first quarter of 2024 compared to $6.04 per BOE for the same period
in 2023. The increase was due to natural gas and NGL processing costs of $0.6 million, or $1.93 per BOE, related to prior years as the
purchaser reassessed prior year gathering and processing costs in 2024. Without these fees, operating expense per barrel would be $6.43
per BOE for the first quarter of 2024, an increase of 6%.
Realized
and Unrealized Gains and Losses from Risk Management Contracts
The
Company has entered into financial commodity contracts which are summarized in the table below. Total Volume Hedged in the table is the
annual volumes and Price is the fixed price specified in the financial commodity contracts.
At
March 31, 2024 the following financial commodity contracts were outstanding and recorded at estimated fair value:
| Commodity | |
Period | |
Total
Volume Hedged (BBLS) | | |
Price
($/BBL) | |
| Oil – WTI Swap | |
April 1, 2024 to May 31, 2024 | |
| 8,000 | | |
$62.77 | |
| Oil – WTI Costless Collars | |
April 1, 2024 to June 30, 2024 | |
| 3,000 | | |
$65.00
- $79.50 | |
| Oil – WTI Costless Collars | |
April 1, 2024 to June 30, 2024 | |
| 12,000 | | |
$65.00
- $86.00 | |
| Oil – WTI Costless Collars | |
April 1, 2024 to December 31, 2024 | |
| 60,000 | | |
$65.00
- $89.50 | |
| Oil – WTI Put | |
April 1, 2024 to June 30, 2024 | |
| 1,650 | | |
$60.00 | |
| Oil – WTI Costless Collars | |
April 1, 2024 to June 30, 2024 | |
| 1,950 | | |
$65.00
- $94.55 | |
| Oil – WTI Costless Collars | |
June 1, 2024 to June 30, 2024 | |
| 8,000 | | |
$60.00
- $78.15 | |
| Oil – WTI Costless Collars | |
July 1, 2024 to September 30, 2024 | |
| 21,000 | | |
$60.00
- $86.65 | |
| Oil – WTI Costless Collars | |
July 1, 2024 to September 30, 2024 | |
| 18,000 | | |
$60.00
- $78.00 | |
| Oil – WTI Costless Collars | |
July 1, 2024 to September 30, 2024 | |
| 3,600 | | |
$65.00
- $90.65 | |
| Oil – WTI Costless Collars | |
October 1, 2024 to December 31, 2024 | |
| 39,000 | | |
$60.00
- $82.50 | |
| Oil – WTI Costless Collars | |
January 1, 2025 to March 31, 2025 | |
| 36,000 | | |
$60.00
- $77.00 | |
| Oil – WTI Costless Collars | |
April 1, 2025 to June 30, 2025 | |
| 20,400 | | |
$60.00
- $75.40 | |
| Oil – WTI Costless Collars | |
April 1, 2025 to June 30, 2025 | |
| 1,350 | | |
$65.00
- $82.54 | |
| Oil – WTI Costless Collars | |
July 1, 2025 to September 30, 2025 | |
| 21,000 | | |
$65.00
- $82.00 | |
| Oil – WTI Costless Collars | |
July 1, 2025 to September 30, 2025 | |
| 750 | | |
$65.00
- $80.50 | |
| Oil – WTI Costless Collars | |
April 1, 2024 to June 30, 2024 | |
| 15,000 | | |
$65.45
- $86.00 | |
| Oil – WTI Swap | |
May 1, 2024 to June 30, 2024 | |
| 9,600 | | |
$85.67 | |
| Oil – WTI Costless Collars | |
July 1, 2024 to September 30, 2024 | |
| 15,000 | | |
$63.80
- $84.50 | |
| Oil – WTI Costless Collars | |
July 1, 2024 to September 30, 2024 | |
| 13,800 | | |
$67.75
- $89.85 | |
| Oil – WTI Costless Collars | |
October 1, 2024 to December 31, 2024 | |
| 15,000 | | |
$62.35
- $82.70 | |
| Oil – WTI Costless Collars | |
October 1, 2024 to December 31, 2024 | |
| 13,800 | | |
$65.75
- $87.10 | |
| Oil – WTI Costless Collars | |
October 1, 2024 to December 31, 2024 | |
| 1,200 | | |
$61.00
- $81.46 | |
| Oil – WTI Costless Collars | |
October 1, 2024 to December 31, 2024 | |
| 2,400 | | |
$60.00
- $78.23 | |
| Oil – WTI Costless Collars | |
January 1, 2025 to March 31, 2025 | |
| 15,000 | | |
$64.25
- $84.60 | |
| Oil – WTI Costless Collars | |
January 1, 2025 to March 31, 2025 | |
| 14,400 | | |
$66.25
- $87.75 | |
| Oil – WTI Costless Collars | |
April 1, 2025 to June 30, 2025 | |
| 3,000 | | |
$59.50
- $79.00 | |
| Oil – WTI Costless Collars | |
April 1, 2025 to June 30, 2025 | |
| 5,700 | | |
$60.80
- $74.07 | |
| Oil – WTI Costless Collars | |
April 1, 2025 to June 30, 2025 | |
| 13,200 | | |
$64.50
- $85.70 | |
| Oil – WTI Costless Collars | |
July 1, 2025 to September 30, 2025 | |
| 21,900 | | |
$63.25
- $83.65 | |
| Kolibri Global Energy Inc. | 6 | First Quarter 2024 |
The
estimated fair value results in a $1.0 million liability as of March 31, 2024 (December 31, 2023: $0.1 million liability) for the financial
oil and gas contracts which has been determined based on the prospective amounts that the Company would receive or pay to terminate the
contracts, consisting of a current liability of $0.9 million and a long term liability of $0.1 million (December 31, 2023: current liability
of $0.2 million and a long term asset of $0.1 million).
For
the first quarter of 2024, approximately 14% of oil production was hedged at $62.77/bbl and 32% of oil production was hedged with costless
collars with a price range of $65/bbl to $89.50/bbl.
Subsequent
to quarter-end, the Company entered into the following additional financial commodity contracts:
| Commodity | |
Period | |
Total Volume Hedged (BBLS) | | |
Price ($/BBL) | |
| Oil – WTI Swap | |
May 1, 2024 to June 30, 2024 | |
| 9,600 | | |
$85.67 | |
| Oil – WTI Costless Collars | |
May 1, 2024 to June 30, 2024 | |
| 15,600 | | |
$71.50 - $96.25 | |
| Oil – WTI Costless Collars | |
July 1, 2024 to September 30, 2024 | |
| 13,800 | | |
$67.75
- $89.85 | |
| Oil – WTI Costless Collars | |
July 1, 2024 to September 30, 2024 | |
| 24,000 | | |
$69.50 - $93.25 | |
| Oil – WTI Costless Collars | |
October 1, 2024 to December 31, 2024 | |
| 13,800 | | |
$65.75 - $87.10 | |
| Oil – WTI Costless Collars | |
October 1, 2024 to December 31, 2024 | |
| 24,000 | | |
$67.50 - $89.50 | |
| Oil – WTI Costless Collars | |
January 1, 2025 to March 31, 2025 | |
| 15,000 | | |
$64.25 - $84.60 | |
| Oil – WTI Costless Collars | |
January 1, 2025 to March 31, 2025 | |
| 14,400 | | |
$66.25 - $87.75 | |
| Oil – WTI Costless Collars | |
January 1, 2025 to March 31, 2025 | |
| 16,200 | | |
$65.50 - $86.25 | |
| Oil – WTI Costless Collars | |
April 1, 2025 to June 30, 2025 | |
| 13,200 | | |
$64.50 - $85.70 | |
| Oil – WTI Costless Collars | |
April 1, 2025 to June 30, 2025 | |
| 10,800 | | |
$64.00 - $84.00 | |
| Oil – WTI Costless Collars | |
July 1, 2025 to September 30, 2025 | |
| 21,900 | | |
$63.25 - $83.65 | |
| Oil – WTI Costless Collars | |
July 1, 2025 to September 30, 2025 | |
| 10,800 | | |
$62.75 - $82.00 | |
The
realized and unrealized gains/losses from the financial commodity contracts are as follows:
| ($000s) | |
Three
months ended March 31, | |
| | |
2024 | | |
2023 | |
| Realized
loss on financial commodity contracts | |
$ | (341 | ) | |
| (414 | ) |
| | |
| | | |
| | |
| Unrealized gain (loss)
on financial commodity contracts | |
$ | (915 | ) | |
| 1,390 | |
| Kolibri Global Energy Inc. | 7 | First Quarter 2024 |
Production
and Operating Expenses
Production
and operating expenses for the first quarter of 2024 was $2.2 million compared to $1.6 million for the same period of 2023, an increase
of 38%. The increase was due to natural gas and NGL processing costs of $0.6 million related to prior years as the purchaser reassessed
prior year gathering and processing costs in 2024.
General
and Administrative Expenses
G&A
expense for the first quarter of 2024 was $1.3 million compared to $0.9 million for the same period of 2023, an increase of 36%. The
increase was due to higher accounting fees and public company costs, higher payroll and director fees and higher investor relations costs.
Depletion
and Depreciation
Depletion
and depreciation expense for the first quarter of 2024 was $3.9 million compared to $4.3 million in the same period of 2023. Depletion
and depreciation expense on a per barrel basis was $12.94 for the first quarter of 2024 compared to $15.09 for the first quarter of 2023.
Interest
on loans and borrowings
Interest
on loans and borrowings increased from $0.5 million in the first quarter of 2023 to $0.9 million for the same period of 2024. The increase
is due to an increase in interest rates and an increase in the outstanding loan balance in the first quarter of 2024 compared to the
first quarter of 2023.
Net
income for the period
The
Company had net income of $3.3 million ($0.09 per basic share) in the first quarter of 2024 compared to net income of $7.9 million ($0.22
per share) for the same period of 2023. The change in net income in 2024 compared to the same period in 2023 is due to realized and unrealized
losses in financial commodity contracts in the first quarter of 2024 totaling $1.3 million versus a gain of $1.0 million in the same
period of 2023, an increase in income tax expense of $1.2 million, an increase in operating expenses of $0.7 million, an increase in
interest on long term debt of $0.4 million an increase in G&A expense of $0.3 million and an increase in stock based compensation
of $0.1 million, partially offset by a decrease in depletion, depreciation and accretion of $0.4 million.
Cash
from operating activities
Cash
flows from operating activities for the first quarter of 2024 was $9.7 million compared to cash flows from continuing operating activities
of $13.1 million in the same period of 2023.
CAPITAL
EXPENDITURES
Capital
expenditures were for the wells drilled and completed in the Tishomingo field located in Oklahoma.
| ($000) | |
| |
| | |
2024 | | |
2023 | |
| | |
| | | |
| | |
| Additions to oil and
gas properties | |
$ | 5,320 | | |
$ | 4,188 | |
| | |
$ | 5,320 | | |
$ | 4,188 | |
| Kolibri Global Energy Inc. | 8 | First Quarter 2024 |
LIQUIDITY
AND CAPITAL RESOURCES
| (000s;
other than number of shares and per share amounts) | |
At March 31, 2024 | | |
At December 31, 2023 | |
| | |
| | |
| |
| Working Capital (Deficiency) (US$)(1) | |
$ | (6,564 | ) | |
$ | (11,916 | ) |
| | |
| | | |
| | |
| Loans and Borrowings (US$) | |
$ | 31,958 | | |
$ | 29,958 | |
| | |
| | | |
| | |
| Shares Outstanding, end of period | |
| 35,625,587 | | |
| 35,625,587 | |
| | |
| | | |
| | |
| Market Price per share (in Canadian $) | |
$ | 4.22 | | |
$ | 5.09 | |
| Market Value of Shares (in Canadian $) | |
$ | 150,340 | | |
$ | 181,334 | |
In
May 2022, the Company’s US subsidiary amended the credit facility from BOK Financial, which is secured by the US subsidiary’s
interests in the Tishomingo Field. The credit facility expires in June 2026 and is intended to fund the drilling of the Caney wells in
the Tishomingo Field.
The
credit facility has a borrowing base of $40.0 million and the Company has an available borrowing capacity of $8.0 million at March 31,
2024. The credit facility is subject to a semi-annual review and redetermination of the borrowing base. The next redetermination will
be later in the second quarter of 2024. Future commitment amounts will be subject to new reserve evaluations and there is no guarantee
that the size and terms of the credit facility will remain the same after the borrowing base redetermination. Any redetermination of
the borrowing base is effective immediately and if the borrowing base is reduced, the Company has six months to repay any shortfall.
The
credit facility has two primary debt covenants. One covenant requires the US subsidiary to maintain a positive working capital balance
which includes any unused excess borrowing capacity and excludes the fair value of commodity contracts and the current portion of long-term
debt (the “Current Ratio”). The second covenant ensures the ratio of outstanding debt and long-term liabilities to a trailing
twelve month adjusted EBITDA amount (the “Maximum Leverage Ratio”) be no greater than 3 to 1 at any quarter end. Adjusted
EBITDA is defined as net income excluding interest expense, depreciation, depletion and amortization expense, and other non-cash and
non-recurring charges including severance, share based compensation expense and unrealized gains or losses on commodity contracts.
The
Company was in compliance with both covenants for the quarter ended March 31, 2024. At March 31, 2024, the Current Ratio of the US Subsidiary
was 1.16 to 1.0 and the Maximum Leverage Ratio was 0.90 to 1.0 for the three months ended March 31, 2024. Based on the Company’s
2024 forecast, it expects to be in compliance with this covenant for the next twelve months.
At
March 31, 2024, loans and borrowings of $32.0 million (December 31, 2023: $30.0 million) are presented net of loan acquisition costs
of $0.3 million (December 31, 2023: $0.3 million).
At
March 31, 2024, the Company had working capital deficit of $6.6 million compared to a working capital deficit of $11.9 million at December
31, 2023. The Company had available borrowing capacity of $8.0 million at March 31, 2024. The Company closely monitors its working capital
and borrowing capacity to ensure adequate funds are available to finance its administrative and operating requirements. Planned drilling
activity can be adjusted if adequate funds are not available and the Company has available borrowing capacity to manage its working capital
requirements.
| Kolibri Global Energy Inc. | 9 | First Quarter 2024 |
The
Company has entered into financial commodity contracts as part of its risk management strategy to manage its cash flows for future activity
and to offset commodity price fluctuations. Other potential sources of cash flows include proceeds from additional debt or equity offerings
but there is no guarantee that additional financing will be available when needed.
CONTRACTUAL
OBLIGATIONS
The
following are the contractual maturities of financial liabilities, excluding estimated interest payments at March 31, 2024:
| | |
Carrying amount | | |
2024 | | |
2025 | | |
2026 | |
| | |
| | |
| | |
| | |
| |
| Fair value of commodity contracts | |
$ | 990 | | |
$ | 733 | | |
$ | 265 | | |
| - | |
| Lease payable | |
$ | 1,145 | | |
$ | 835 | | |
$ | 280 | | |
$ | 30 | |
| Loans and borrowings* | |
$ | 31,667 | | |
| - | | |
| - | | |
$ | 31,667 | |
| Accounts payable and other payables | |
$ | 14,881 | | |
$ | 14,881 | | |
| - | | |
| - | |
| | |
$ | 48,683 | | |
$ | 16,449 | | |
$ | 545 | | |
$ | 31,697 | |
*
The Credit Facility provides for interest only payments until the September 2026 maturity date. The Company is required to repay amounts
owing under the Credit Facility in full on the September 2026 maturity date. See “Liquidity and Capital Resources” and “Principal
Business Risks” for discussion of events that would require early repayment of the Credit Facility.
| Kolibri Global Energy Inc. | 10 | First Quarter 2024 |
QUARTERLY
SUMMARY
Below
is a summary of the Company’s performance over the last eight quarters:
| | |
2024 | | |
2023 | | |
2022 | |
| ($000,
except as noted) | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Daily Production | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Oil (BOPD) | |
| 2,423 | | |
| 2,245 | | |
| 2,083 | | |
| 1,821 | | |
| 2,431 | | |
| 1,551 | | |
| 1,252 | | |
| 1,439 | |
| Natural gas (MCFPD) | |
| 2,371 | | |
| 1,428 | | |
| 1,565 | | |
| 1,397 | | |
| 2,138 | | |
| 969 | | |
| 1,083 | | |
| 1,271 | |
| NGLs (BOEPD) | |
| 487 | | |
| 359 | | |
| 393 | | |
| 361 | | |
| 407 | | |
| 155 | | |
| 269 | | |
| 277 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Average production (BOEPD) | |
| 3,305 | | |
| 2,842 | | |
| 2,737 | | |
| 2,415 | | |
| 3,194 | | |
| 1,868 | | |
| 1,702 | | |
| 1,928 | |
| | |
2024 | | |
2023 | | |
2022 | |
| ($000, except as noted) | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Average Price | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Oil ($/bbl) | |
| 75.03 | | |
| 78.51 | | |
| 79.70 | | |
| 72.33 | | |
| 74.40 | | |
| 80.42 | | |
| 93.52 | | |
| 109.74 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Natural gas ($/mcf) | |
| 2.06 | | |
| 2.32 | | |
| 2.71 | | |
| 1.83 | | |
| 4.24 | | |
| 6.71 | | |
| 10.24 | | |
| 6.48 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| NGL ($/bbl) | |
| 28.25 | | |
| 20.41 | | |
| 19.84 | | |
| 15.97 | | |
| 26.77 | | |
| 26.66 | | |
| 35.33 | | |
| 40.82 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Average price ($/bbl) | |
| 60.66 | | |
| 65.76 | | |
| 65.04 | | |
| 58.00 | | |
| 62.87 | | |
| 72.47 | | |
| 80.89 | | |
| 92.02 | |
| | |
2024 | | |
2023 | | |
2022 | |
| ($000, except as noted) | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Netback(1) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Average price ($/BOE) | |
| 60.66 | | |
| 65.76 | | |
| 65.04 | | |
| 58.00 | | |
| 62.87 | | |
| 72.47 | | |
| 80.89 | | |
| 92.02 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Royalties | |
| 13.36 | | |
| 14.34 | | |
| 14.42 | | |
| 11.98 | | |
| 13.16 | | |
| 15.83 | | |
| 17.96 | | |
| 21.19 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating expenses (4,5) | |
| 8.36 | | |
| 7.02 | | |
| 7.34 | | |
| 6.05 | | |
| 6.04 | | |
| 8.25 | | |
| 7.77 | | |
| 7.77 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Netback from operations(1) | |
| 38.94 | | |
| 44.40 | | |
| 43.28 | | |
| 39.97 | | |
| 43.67 | | |
| 48.39 | | |
| 55.16 | | |
| 63.06 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Price adjustment from commodity contracts | |
| (1.13 | ) | |
| (1.63 | ) | |
| (1.37 | ) | |
| (1.44 | ) | |
| (2.34 | ) | |
| (5.47 | ) | |
| (9.40 | ) | |
| (12.03 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Netback including commodity contracts(1) | |
| 37.81 | | |
| 41.65 | | |
| 38.60 | | |
| 42.23 | | |
| 46.05 | | |
| 49.69 | | |
| 53.66 | | |
| 36.88 | |
| Kolibri Global Energy Inc. | 11 | First Quarter 2024 |
| | |
2024 | | |
2023 | | |
2022 | |
| ($000, except as noted) | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Net operating income(2) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Oil and gas revenue | |
| 18,244 | | |
| 17,192 | | |
| 16,378 | | |
| 12,746 | | |
| 18,074 | | |
| 12,455 | | |
| 12,666 | | |
| 16,114 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Royalties | |
| 4,018 | | |
| 3,748 | | |
| 3,632 | | |
| 2,632 | | |
| 3,781 | | |
| 2,721 | | |
| 2,813 | | |
| 3,717 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating expenses | |
| 2,246 | | |
| 1,567 | | |
| 1,628 | | |
| 1,147 | | |
| 1,553 | | |
| 1,417 | | |
| 1,216 | | |
| 1,364 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| 11,980 | | |
| 11,877 | | |
| 11,118 | | |
| 8,967 | | |
| 12,740 | | |
| 8,317 | | |
| 8,637 | | |
| 11,033 | |
| | |
2024 | | |
2023 | | |
2022 | |
| ($000, except as noted) | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | | |
Q1 | | |
Q4 | | |
Q3 | | |
Q2 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Net income (loss) | |
| 3,345 | | |
| 2,319 | | |
| 4,268 | | |
| 7,896 | | |
| 2,793 | | |
| 9,299 | | |
| 7,007 | | |
| (2,456 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic income (loss) ($/share) | |
| 0.09 | | |
| 0.14 | | |
| 0.07 | | |
| 0.12 | | |
| 0.22 | | |
| 0.08 | | |
| 0.26 | | |
| 0.20 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Adjusted EBITDA(3) | |
| 10,374 | | |
| 10,502 | | |
| 9,536 | | |
| 7,646 | | |
| 11,396 | | |
| 6,854 | | |
| 6,874 | | |
| 8,572 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash flows from operating activities | |
| 9,695 | | |
| 9,974 | | |
| 9,631 | | |
| 6,013 | | |
| 13,030 | | |
| 6,098 | | |
| 6,387 | | |
| 8,314 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Bank debt | |
| 31,667 | | |
| 29,612 | | |
| 23,809 | | |
| 17,819 | | |
| 17,819 | | |
| 17,799 | | |
| 15,855 | | |
| 15,907 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total assets | |
| 229,191 | | |
| 224,439 | | |
| 211,745 | | |
| 196,655 | | |
| 188,023 | | |
| 184,082 | | |
| 172,634 | | |
| 169,193 | |
(1)
Netback from operations and netback including commodity contracts are considered non-GAAP ratios. Refer to the section entitled “Non-GAAP
Measures” at the end of this MD&A.
(2)
Net operating income is considered a non-GAAP measure. Refer to the section entitled “Non-GAAP Measures” at the end of this
MD&A.
(3)
Adjusted EBITDA is considered a non-GAAP measure. Refer to the section entitled “Non-GAAP Measures” at the end of this MD&A.
(4)
Operating expenses include compressor costs of $271,000 in the first quarter of 2024 and $183,000 in the first quarter of 2023 that are
accounted for as a lease under IFRS 16.
(5)
Operating expenses for the first quarter of 2024 includes natural gas and NGL processing costs of $0.6 million, or $1.93 per BOE, related
to prior years as the purchaser reassessed prior year gathering and processing costs in 2024.
| Kolibri Global Energy Inc. | 12 | First Quarter 2024 |
Quarterly
Variability
Fluctuations
in quarterly results are due to a number of factors, some of which are not within the Company’s control such as:
| ● | Oil,
gas and NGL price changes due to volatile market conditions related to the current conflict
between Russia and Ukraine |
| ● | Changes
in production resulting from fluctuations in drilling and completions and shut-in of wells |
| ● | Production
increases from new wells that begin producing |
CRITICAL
ACCOUNTING ESTIMATES
The
preparation of the consolidated financial statements requires management to make estimates and use judgment regarding the reported amounts
of assets and liabilities, the disclosures of contingencies at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the period. By their nature, estimates are subject to measurement uncertainty and changes in such estimates
in future years could require a material change in the financial statements. Accordingly, actual results may differ from the estimated
amounts. Significant estimates and judgments made by management in the preparation of the consolidated financial statements are as follows:
Oil
and gas assets
Development
and production assets are assessed for recoverability at cash generating unit (“CGU”) level. The determination of CGUs is
subject to management judgments. Recoverability is assessed by comparing the carrying value of the asset to its estimated recoverable
amount, which is based on the higher of fair value of the assets less the cost to sell (“FVLCS”) or value in use (“VIU”).
The significant estimates used in the determination of the estimated recoverable amount include the following:
| ● | Proved
and probable oil and gas reserves – Significant assumptions that are valid at the time
of oil and gas reserve estimation may change significantly when additional information becomes
available. Estimates of economically recoverable proved and probable oil and gas reserves
are based upon a number of significant assumptions, such as forecasted production, forecasted
oil and gas commodity prices, forecasted operating costs, forecasted royalty costs, and forecasted
future development costs. Changes in forecasted oil and gas commodity price assumptions,
costs or recovery rates may change the economic status of proved and probable oil and gas
reserves and may ultimately result in a restatement of proved and probable oil and gas reserves.
Independent third-party reserve evaluators are engaged at least annually to estimate proved
and probable oil and gas reserves |
| ● | Discount
rate – The discount rate used to calculate the net present value of cash flows is based
on estimates of an industry peer group weighted average cost of capital. Changes in the economic
environment could result in significant changes to this estimate. |
Depletion
of oil and gas assets
Depletion
of development and production assets is determined based on proved and probable oil and gas reserves and includes forecasted future development
costs as estimated by the Company’s independent third-party reserve evaluators. By their nature, the estimates of proved and probable
oil and gas reserves are subject to measurement uncertainty. Accordingly, the impact to the consolidated financial statements in future
periods could be material.
| Kolibri Global Energy Inc. | 13 | First Quarter 2024 |
Asset
retirement obligations
The
provisions for site restoration and abandonment is based on current legal requirements, technology, price levels and expected plans and
are based on significant assumptions such as inflation rate and discount rate. Actual costs and cash outflows can differ from estimates
because of changes in laws or regulations, market conditions and changes in technology.
Derivative
instruments
The
estimated fair value of derivative financial instruments resulting in financial assets and liabilities, by their very nature is subject
to estimation, due to the use of future oil and natural gas prices and the volatility in these prices.
Compensation
costs
Compensation
costs recognized for share based compensation plans are subject to the estimation of what the ultimate payout will be using pricing models
such as Black-Scholes model which is based on assumptions such as volatility, forfeiture rate, interest rate and expected term.
Income
taxes
Tax
interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. As such
income taxes are subject to measurement uncertainty. Deferred income tax assets are assessed by management at the end of the reporting
period to determine the likelihood that they will be realized from future taxable earnings.
Liquidity
The
Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s
reputation.
Typically
the Company ensures that it has sufficient cash on demand and cash flows from operating activities to meet expected operational expenses
for a one-year period, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances
that cannot reasonably be predicted, such as natural disasters. To achieve this objective, the Company prepares annual capital expenditure
budgets, which are regularly monitored and updated as considered necessary. Further, the Company utilizes authorizations for expenditures
on both operated and non-operated projects to further manage capital expenditure. The Company also attempts to match its payment cycle
with collection of oil revenue on the 20th of each month.
The
Company monitors its expected cash inflows from trade and other receivables and its expected cash outflows on trade and other payables
and principal debt payments. The current volatile economic climate may lead to adverse changes in cash flows and working capital levels
which may also have a direct impact on the Company’s results and financial position and which may adversely affect the Company’s
liquidity.
| Kolibri Global Energy Inc. | 14 | First Quarter 2024 |
OUTSTANDING
SHARE DATA
There
were 35,625,587, 35,625,587 and 35,625,587 common shares outstanding as of May 13, 2024, March 31, 2024 and December 31, 2023, respectively.
The Company had 875,784, 875,784 and 939,634 stock options outstanding as of May 13, 2024, March 31, 2024 and December 31, 2023, respectively.
The Company had 118,570, 118,570, and 119,140 restricted share units (RSUs) granted as of May 13, 2024, March 31, 2024 and December 31,
2023 respectively.
PRINCIPAL
BUSINESS RISKS
KEI’s
business and results of operations are subject to a number of risks and uncertainties, including but not limited to the following:
| ● | the
uncertainty of finding oil and gas in commercial quantities |
| ● | securing
markets for existing and future production |
| ● | commodity
price fluctuations due to market forces |
| ● | volatile
market conditions related to the current conflict between Russia and Ukraine |
| ● | financial
risk due to foreign exchange rates and interest rate exposure |
| ● | changes
to government regulations in the United States, including regulations relating to prices,
taxes, royalties and environmental protection |
| ● | changing
government policies and regulations, social instability and other political, economic or
diplomatic developments in the countries in which the Company operates |
| ● | the
ability to fund wells drilled in non-operated sections of the Tishomingo field |
| ● | the
uncertainty of pipeline repairs leading to temporary shutting-in of wells |
| ● | availability
of equity or debt financing is affected by many factors many of which are beyond the control
of the Company |
| ● | uncertainties
inherent in estimating quantities of oil and natural gas reserves and cash flows to be derived
therefrom |
| ● | the
oil and gas industry is intensely competitive and the Company competes with a large number
of companies with greater resources |
| ● | risks
related to evolving emissions, carbon and other regulations impacting climate change and
the advancement of alternative sources of renewable energy |
| ● | risks
related to the Credit Facility, including the risk that the Company could be required under
the terms of the Credit Facility to prepay the outstanding principal amount and other amounts
owing under the Credit Facility in certain circumstances, some of which are out of the Company’s
control, including failure to comply with financial ratio tests, borrowing base redeterminations,
Mr. Wolf Regener ceasing to be the President of Kolibri Global Energy Inc., certain changes
to the board of directors of the Company and the acquisition by any person or persons acting
jointly or in concert of 25% or more of the Company’s shares. There can be no assurance
that the Company will be able to obtain sufficient capital to repay the Credit Facility.
A failure by the Company to perform its obligations under the Credit Facility could result
in, among other adverse effects, the loss of the Company’s Tishomingo Field assets.
A copy of the Amended and Restated Credit Agreement was filed on SEDAR on May 26, 2023. See
“Liquidity and Capital Resources” and “Contractual Obligations” above
and the “Risk Factors” section in the Company’s most recent Annual Information
Form. |
| ● | the
other risks identified in the Company’s most recent Annual Information Form under the
“Risk Factors” section and the Company’s other public disclosure, available
under the Company’s profile on SEDAR at www.sedarplus.ca. |
The
Company seeks to mitigate these risks by:
| ● | maintaining
product mix to manage exposure to commodity price risk |
| ● | monitoring
production trends to maximize the potential of its capital spending program |
| ● | from
time to time, entering into financial commodity contracts to hedge against commodity price
risk |
| ● | ensuring
strong third-party operators for non-operated properties |
| ● | transacting
with creditworthy counterparties |
| ● | monitoring
commodity prices and capital programs to manage cash flows |
| ● | reviewing
proposed changes in applicable government regulations and laws to assess the impact on the
Company’s operations |
| Kolibri Global Energy Inc. | 15 | First Quarter 2024 |
DISCLOSURE
CONTROLS AND PROCEDURES
The
Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) have designed, or caused to be designed
under their supervision, disclosure controls and procedures (“DC&P”) and internal controls over financial reporting (“ICOFR”)
as defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings in order to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with
IFRS.
The
DC&P have been designed to provide reasonable assurance that material information relating to KEI is made known to the CEO and CFO
by others and that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed
or submitted by KEI under securities legislation is recorded, processed, summarized and reported within the time periods specified in
securities legislation. The Company’s CEO and CFO have concluded, based on their evaluation that the Company’s DC&P and
ICOFR are effective at March 31, 2024 to provide reasonable assurance that material information related to the Company is made known
to them by others within the Company.
The
CEO and CFO are required to cause the Company to disclose any change in the Company’s ICOFR and DC&P that occurred during the
most recent interim period that has materially affected, or is reasonably likely to materially affect, the Company’s ICOFR. No
changes in ICOFR and DC&P were identified during such period that have materially affected, or are reasonably likely to materially
affect, the Company’s ICOFR during the quarter ended March 31, 2024.
It
should be noted that a control system, including the Company’s DC&P and ICOFR, no matter how well conceived or operated, can
provide only reasonable, not absolute, assurance that the objective of the control system will be met and it should not be expected that
DC&P and ICOFR will prevent all errors or fraud.
OUTLOOK
In
the United States, the Company intends to drill and complete additional wells in the Caney/Sycamore formations on its Oklahoma lands
as financing becomes available and the economic environment changes. In addition, the Company continues to utilize its technical and
operational expertise to identify and acquire additional oil, gas and clean energy projects. The Company expects to continue drilling
additional wells utilizing cash flows from operating activities and potentially its available borrowing capacity under its credit facility.
NON-GAAP
MEASURES
The
Company’s Non-GAAP Measures are not measures or ratios recognized under IFRS and do not have any standardized meanings prescribed
by IFRS. Management of the Company believes that such measures and ratios are relevant for evaluating returns on each of the Company’s
projects as well as the performance of the enterprise as a whole. The Company’s Non-GAAP Measures may differ from similar computations
as reported by other similar organizations and, accordingly, may not be comparable to similar non-GAAP measures and ratios as reported
by such organizations. The Company’s Non-GAAP Measures should not be construed as alternatives to net income, cash flows from operating
activities, working capital or other financial measures and ratios determined in accordance with IFRS, as an indicator of the Company’s
performance.
| Kolibri Global Energy Inc. | 16 | First Quarter 2024 |
Netback
from operations per barrel and its components are calculated by dividing revenue, less royalties and operating expenses by the Company’s
sales volume during the period. Netback including commodity contracts is calculated by adjusting netback from operations by the realized
gains or losses received from commodity contracts during the period. Netback is a non-GAAP ratio but it is commonly used by oil and gas
companies to illustrate the unit contribution of each barrel produced. The Company believes that the netback is a useful supplemental
measure of the cash flows generated on each barrel of oil equivalent that is produced in its operations. However, non-GAAP measures and
non-GAAP ratios do not have any standardized meaning prescribed by IFRS and therefore, may not be comparable to similar measures or ratios
used by other companies and should not be used to make comparisons.
The
following is the reconciliation of the non-GAAP ratio netback from operations to net income from continuing operations:
| (US $000) | |
For the three months ended March 31, | |
| |
2024 | | |
2023 | |
| Net income | |
| 3,345 | | |
| 7,896 | |
| | |
| | | |
| | |
| Adjustments: | |
| | | |
| | |
| Income tax expense | |
| 1,191 | | |
| - | |
| Finance income | |
| - | | |
| (1,390 | ) |
| Finance expense | |
| 2,216 | | |
| 949 | |
| Share based compensation | |
| 128 | | |
| 18 | |
| General and administrative expenses | |
| 1,265 | | |
| 930 | |
| Depletion and depreciation | |
| 3,894 | | |
| 4,338 | |
| Other income | |
| (59 | ) | |
| (1 | ) |
| Operating netback | |
| 11,980 | | |
| 12,740 | |
| | |
| | | |
| | |
| Netback from operations | |
$ | 38.94 | | |
$ | 43.67 | |
Net
operating income is similarly a non-GAAP measure that represents revenue net of royalties and operating expenses. The Company believes
that net operating income is a useful supplemental measure to analyze operating performance and provides an indication of the results
generated by the Company’s principal business activities prior to the consideration of other income and expenses.
The
following is the reconciliation of the non-GAAP measure net operating income:
| (US $000) | |
For the three months ended March 31, | |
| |
2024 | | |
2023 | |
| Oil and gas revenue, net of royalties | |
| 14,226 | | |
| 14,293 | |
| Less: production and operating expenses | |
| 2,246 | | |
| 1,553 | |
| Net operating income | |
| 11,980 | | |
| 12,740 | |
| Kolibri Global Energy Inc. | 17 | First Quarter 2024 |
Adjusted
EBITDA is calculated as net income before interest, taxes, depletion and depreciation and other non-cash and non-operating gains and
losses. The Company considers this a key measure as it demonstrates its ability to generate cash from operations necessary for future
growth excluding non-cash items, gains and losses that are not part of the normal operations of the Company and financing costs. The
following is the reconciliation of the non-GAAP measure adjusted EBITDA:
| (US $000) | |
Three months ended March 31, | |
| | |
2024 | | |
2023 | |
| Net income | |
| 3,345 | | |
| 7,896 | |
| Depletion and depreciation | |
| 3,894 | | |
| 4,338 | |
| Accretion | |
| 45 | | |
| 45 | |
| Interest expense | |
| 915 | | |
| 485 | |
| Unrealized (gain) loss on commodity contracts | |
| 915 | | |
| (1,390 | ) |
| Share based compensation | |
| 128 | | |
| 18 | |
| Other income | |
| (59 | ) | |
| (1 | ) |
| Income tax expense | |
| 1,191 | | |
| - | |
| Foreign currency loss | |
| - | | |
| 5 | |
| | |
| | | |
| | |
| Adjusted EBITDA | |
| 10,374 | | |
| 11,396 | |
Cautionary
Statements
| (a) | The
Company’s natural gas production is reported in thousands of cubic feet (“Mcfs”).
The Company also uses references to barrels (“Bbls”) and barrels of oil equivalent
(“BOEs”) to reflect natural gas liquids and oil production and sales. BOEs may
be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 Bbl 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 crude oil as compared to natural gas is significantly different from
the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as
an indication of value. |
| (b) | Discounted
and undiscounted net present value of future net revenues attributable to reserves do not
represent fair market value. |
| (c) | Possible
reserves are those additional reserves that are less certain to be recovered than probable
reserves. There is a 10% probability that the quantities actually recovered will equal or
exceed the sum of proved plus probable plus possible reserves. |
| (d) | This
MD&A and the Company’s other public disclosure contains peak and 30-day initial
production rates and other short-term production rates. Readers are cautioned that initial
production rates are preliminary in nature and are not necessarily indicative of long-term
performance or of ultimate recovery. |
CAUTION
REGARDING FORWARD-LOOKING INFORMATION
This
MD&A contains forward-looking information including expectations regarding proposed timing and expected results of development work
in the Company’s Tishomingo Field, expected productivity from current and future wells, planned capital expenditure programs and
cost estimates, the effect of design and performance improvements on future productivity, planned use and sufficiency of proceeds from
the Company’s debt and equity financings, compliance with debt covenants under the Company’s credit facility, cash on hand
and cash flows from operating activities and the Company’s strategy and objectives. The use of any of the words “target”,
“plans”, “anticipate”, “continue”, “estimate”, “expect”, “may”,
“will”, “project”, “should”, “believe”, “intend” and similar expressions
are intended to identify forward-looking statements.
| Kolibri Global Energy Inc. | 18 | First Quarter 2024 |
Such
forward-looking information is based on management’s expectations and assumptions, including that the Company’s geologic
and reservoir models and analysis will be validated, that indications of early results are reasonably accurate predictors of the prospectiveness
of the shale intervals, that previous exploration results are indicative of future results and success, that expected production from
future wells can be achieved as modeled, declines will match the modeling, future well production rates will be improved over existing
wells, that rates of return as modeled can be achieved, that recoveries are consistent with management’s expectations, that additional
wells are actually drilled and completed, that design and performance improvements will reduce development time and expense and improve
productivity, that discoveries will prove to be economic, that well shut-ins will not materially reduce production or adversely affect
future productivity, that anticipated results and estimated costs will be consistent with managements’ expectations, that all required
permits and approvals and the necessary labor and equipment will be obtained, provided or available, as applicable, on terms that are
acceptable to the Company, when required, that no unforeseen delays, unexpected geological or other effects, equipment failures, permitting
delays or labor or contract disputes are encountered, that the development plans of the Company and its co-venturers will not change,
that the demand for oil and gas will be sustained, that the combination of cash on hand and cash flows from operating activities will
be sufficient to finance the Company’s cash requirements through 2024, that the Company will continue to be able to access sufficient
capital through financings, credit facilities, farm-ins or other participation arrangements to maintain its projects, that the Company
will continue in compliance with the covenants under its reserve-based loan facility and that the borrowing base will not be reduced,
that the Company will not be adversely affected by changing government policies and regulations, social instability or other political,
economic or diplomatic developments in the countries in which it operates and that global economic conditions will not deteriorate in
a manner that has an adverse impact on the Company’s business and its ability to advance its business strategy.
Forward
looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially
from those anticipated. These risks include, but are not limited to: any of the assumptions on which such forward looking information
is based vary or prove to be invalid, including that the Company’s geologic and reservoir models or analysis are not validated,
anticipated results and estimated costs will not be consistent with managements’ expectations, that the Company will not achieve
a comparable level of hedging going forward in respect of its existing production, that the Company will not achieve the results anticipated
by management from the Company’s cost reduction measures, the risks associated with the oil and gas industry (e.g. operational
risks in development, exploration and production; delays or changes in plans with respect to exploration and development projects or
capital expenditures; the uncertainty of reserve and resource estimates and projections relating to production, costs and expenses, and
health, safety and environmental risks, including flooding and extended interruptions due to inclement or hazardous weather conditions),
well shut-ins and the potential for damage to the affected wells, the risk of commodity price and foreign exchange rate fluctuations,
risks and uncertainties associated with securing the necessary regulatory approvals and financing to proceed with continued development
of the Tishomingo Field, the Company or its subsidiaries is not able for any reason to obtain and provide the information necessary to
secure required approvals or that required regulatory approvals are otherwise not available when required, that unexpected geological
results are encountered, that completion techniques require further optimization, that production rates do not match the Company’s
assumptions, that very low or no production rates are achieved, that the Company will cease to be in compliance with the covenants under
its reserve-based loan facility and be required to repay outstanding amounts or that the borrowing base will be reduced pursuant to a
borrowing base redetermination and the Company will be required to repay the resulting shortfall, that the Company is unable to access
required capital, that occurrences such as those that are assumed will not occur, do in fact occur, and those conditions that are assumed
will continue or improve, do not continue or improve and the other risks identified in the Company’s most recent Annual Information
Form under the “Risk Factors” section and the Company’s other public disclosure, available under the Company’s
profile on SEDAR at www.sedarplus.ca.
Although
the Company has attempted to take into account important factors that could cause actual costs or results to differ materially, there
may be other factors that cause actual results not to be as anticipated, estimated or intended. There can be no assurance that such statements
will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. The
forward-looking information included in this MD&A is expressly qualified in its entirety by this cautionary statement. Accordingly,
readers should not place undue reliance on forward-looking information. The Company undertakes no obligation to update these forward-looking
statements, other than as required by applicable law.
| Kolibri Global Energy Inc. | 19 | First Quarter 2024 |
CORPORATE
INFORMATION
| DIRECTORS
AND OFFICERS |
|
| |
|
| David
Neuhauser 1,3 |
|
| Director,
Chairman of the Board |
|
| |
|
| Eric
Brown 1,4,5 |
|
| Director |
|
| |
|
| Leslie
O’Connor 2,3,4,5 |
|
| Director |
AUDITORS |
| |
Marcum
LLP |
| Evan
Templeton2,3,5 |
Houston,
TX, USA |
| Director |
|
| |
|
| Douglas
Urch 1,2 |
BANKERS |
| Director |
BOK
Financial |
| |
Denver,
CO, USA |
| Wolf
Regener 4 |
|
| Director,
President and Chief Executive Officer |
HSBC
Bank Canada |
| |
Calgary,
AB |
| Gary
Johnson |
|
| Chief
Financial Officer and Vice President |
CONSULTING
ENGINEERS |
| |
Netherland,
Sewell & Associates, Inc. |
| 1
Member of the Audit Committee |
Houston,
TX, USA |
| 2
Member of the Corporate Governance Committee |
|
| 3
Member of the Compensation Committee |
TRANSFER
AGENT AND REGISTRAR |
| 4
Member of the HS&E Committee |
Computershare
Trust Company |
| 5
Member of the Reserves Committee |
Calgary,
AB |
| |
|
| STOCK
EXCHANGE LISTING |
HEAD
OFFICE |
| The
Toronto Stock Exchange |
Suite
220, 925 Broadbeck Drive |
| Trading
Symbol: KEI |
Thousand
Oaks, CA, USA 91320 |
| NASDAQ
|
Telephone:
(805) 484-3613 |
| Trading
Symbol: KGEI |
Fax:
(805) 484-9649 |
| |
|
| LEGAL
COUNSEL |
CANADIAN
OFFICE |
| DuMoulin
Black LLP |
15th
Floor, 1111 West Hastings St. |
| Vancouver,
BC |
Vancouver,
BC, Canada V6E 2J3 |
| |
Telephone
(604) 687-1224 |
| Haynes
Boone, LLP |
Fax:
(604) 687-3635 |
| New
York, NY, USA |
|
| Kolibri Global Energy Inc. | 20 | First Quarter 2024 |
