CALGARY, ALBERTA–(Marketwired – Nov. 8, 2016) – Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX:PRQ) is pleased to announce financial and operating results for the three and nine month periods ended September 30, 2016. The associated Management’s Discussion and Analysis (“MD&A”) and quarterly financial statements as at and for the period ended September 30, 2016 are available at www.sedar.com.
- During the quarter, Petrus closed the previously announced disposition of oil and natural gas interests in the Peace River area of Alberta for $29.2 million after post closing adjustments. The disposition benefited the Company by reducing debt, operating costs and future decommissioning obligations.
- Third quarter production was 7,100 boe/d compared to 8,668 boe/d reported for the third quarter of 2015. The disposition of approximately 1,000 boe/d in the Peace River area, combined with certain dry natural gas production temporarily shut-in in the Foothills area, led to the 18% production decrease.
- The Company’s current production is 8,500 boe/d; new volumes from the Company’s capital development program replaced the production attributed to the divested assets. Year end production is expected to exceed 9,000 boe/d once the remaining 2016 drills are on stream.
- Operating expenses decreased 24% from $7.87 per boe in the third quarter of 2015 to $6.04 per boe in the third quarter of 2016. The decrease was attributable to the divestiture of the Peace River assets and investments in operated infrastructure in the Ferrier area, which enable Petrus to generate third party processing income.
- Third quarter operating expenses in the Ferrier area, on a per boe basis, have decreased approximately 50% from the third quarter of 2015 and Petrus expects a further decrease due to the expiration (October 31st) of a gas processing commitment at a third party facility, increased production volume from new drills and the entering into of a pipeline transportation agreement for Ferrier liquids volume.
- At the end of the third quarter the Company’s total net debt ($124.3 million) was 45% lower than year end 2015 ($226.7 million). Interest cost savings attributable to the net debt reduction are in excess of 45%. Subsequent to quarter end, Petrus’ lender syndicate reviewed its revolving first lien credit facility and unanimously agreed to maintain the facility at $106 million. At September 30, 2016 the facility was 81% drawn at $85.3 million.
- The Company recently drilled three 100% working interest wells in its Ferrier core area targeting liquids rich natural gas in the Cardium formation. Average drill and case costs were 18% lower than budget and 50% lower than comparable wells drilled in 2014 due to new techniques employed, reduced service costs and improved cycle time. Petrus plans to drill 5 wells (2.6 net) in the fourth quarter. The total second half capital budget, inclusive of facility and gathering infrastructure investments, is $17.5 million.
- Petrus generated funds from operations in the third quarter of $6.0 million compared to $10.8 million in the third quarter of 2015. The 23% decrease is due to a decline in realized commodity prices and 18% lower production which is due to the Peace River asset divestiture and a portion of Foothills production which is temporarily shut-in.
- The Company’s realized hedging gain in the third quarter increased the Company’s corporate netback by $4.06 per boe compared to $4.72 per boe realized in third quarter of the prior year. In the third quarter of 2016 natural gas hedges were in place for 87% of gas production at an average natural gas floor price of $2.64 per GJ.
SELECTED FINANCIAL INFORMATION
|Three months ended||Three months ended||Three months ended||Three months ended||Three months ended|
|September 30, 2016||September 30, 2015||June 30,
|March 31, 2016||December 31, 2015|
|OPERATIONS ($000s except per boe)|
|Natural gas (mcf/d)||30,009||32,505||33,071||35,456||31,217|
|Natural gas sales weighting||70||%||62||%||65||%||67||%||64||%|
|Realized Sales Prices|
|Natural gas ($/mcf)||2.53||2.92||1.64||2.01||2.79|
|Hedging gain ($/boe)||4.06||4.72||6.87||7.84||6.68|
|Operating Netback ($/boe)|
|Operating expense (1)||(6.04||)||(7.87||)||(7.65||)||(8.52||)||(11.00||)|
|Operating netback (2) ($/boe)||14.67||20.11||15.10||12.93||17.85|
|G & A expense (3)||(1.69||)||(2.10||)||(1.86||)||(2.72||)||(3.08||)|
|Net interest expense (4)||(3.85||)||(4.41||)||(3.18||)||(4.53||)||(5.83||)|
|Corporate netback (2) ($/boe)||9.13||13.60||10.06||5.68||8.94|
|FINANCIAL ($000s except per share)|
|Oil and natural gas revenue||13,805||21,991||14,926||14,698||20,459|
|Funds from operations (2)||5,966||10,838||7,725||4,558||6,717|
|Funds from operations per share (2)||0.13||0.31||0.17||0.11||0.19|
|Net loss per share||(0.10||)||(0.54||)||(1.02||)||(0.10||)||(1.04||)|
|Common shares outstanding||45,349||35,148||45,349||45,349||35,148|
|Weighted average shares||45,349||35,148||45,349||41,762||35,148|
|As at quarter end ($000s)|
|Net debt (2)(5)||124,310||226,809||152,935||157,675||226,742|
|Bank debt outstanding||127,567||236,375||156,845||155,000||235,000|
|Bank debt available (6)||20,433||34,600||12,555||12,300||12,600|
|(1)||Operating expense is presented net of processing income and overhead recoveries.|
|(2)||Non-GAAP measures are defined in the Non-GAAP section of the September 30, 2016 MD&A.|
|(3)||G&A expense is presented net of capitalized general & administrative costs.|
|(4)||Interest expense is presented net of other income and non-cash deferred finance expense.|
|(5)||Net debt includes working capital (deficiency).|
|(6)||$106 million credit facility less: $85.3 million drawn, $0.3 million letter of credit.|
Average third quarter production from the Company’s operating areas was as follows:
|For the three months ended September 30, 2016||Ferrier||Foothills||Peace River||Central Alberta||Total|
|Natural gas (mcf/d)||15,411||5,897||139||8,562||14,598|
|Natural gas sales weighting||77||%||69||%||29||%||63||%||70||%|
Average production was 7,100 boe/d (30% oil and liquids) in the third quarter of 2016 compared to 8,668 boe/d (38% oil and liquids) reported for the third quarter of 2015. The disposition of approximately 1,000 boe/d in the Peace River area, combined with certain dry gas production temporarily shut-in in the Foothills area contributed to the 18% decrease in production. The Company’s production is currently 8,500 boe/d as new volumes attributed to to the Company’s development program have replaced the production from the divested assets. Year end production is expected to exceed 9,000 boe/d once the remaining new drills are on stream.
During the third quarter of 2016 Petrus invested $7.2 million of its $17.5 million second half capital budget, which was funded by funds from operations. The Company’s capital development plan is focused on the Ferrier area, where Petrus drilled 2 wells (2.0 net) during the third quarter, and plans to drill an additional 5 wells (2.6 net) during the fourth quarter. The second half capital budget includes further investments in facility and gathering infrastructure.
The first well drilled during the third quarter commenced production mid October at an average restricted rate of approximately 425 boe/d. The well was Petrus’ first monobore drill with a cemented liner which was a significant departure from the previous methodology of an open hole system with intermediate casing and took 10 days from spud to rig release.
Petrus has finished drilling the next two wells of its program which were drilled from the same pad. Both wells have been frac’d and are currently on flow test. Technological advances and reduced service costs have led to a decrease of approximately 20% in Petrus’ capital costs since early 2015. Petrus is focused on continuing to find efficiencies through the utilization of pad drilling, centralized frac water ponds and other efficiencies to continue to reduce capital costs.
Petrus also invested capital during the third quarter to expand its pipeline infrastructure to accommodate the drilling program and add a new main gathering line into the Ferrier gas processing facility. In addition, a new compressor has been added to the Ferrier gas plant, which is expected to improve throughput capability and operational flexibility. The current plant throughput is approximately 21 mmcf/d of a nominal 25 mmcf/d capacity. Petrus designed the plant to accommodate modular expansions and will consider an expansion in 2017 to accommodate additional growth. Petrus has drastically reduced operating costs in the Ferrier area from approximately $7.00 per boe in 2015 to approximately $3.50 per boe in the third quarter of 2016 and further cost reductions are anticipated. On October 31st, the Company’s processing commitment agreement through Strachan will expire resulting in approximately $170,000 per month of savings in un-utilized processing fees. Petrus also entered into an agreement to transport its Ferrier NGL volumes via pipeline in order to reduce future trucking costs.
In the nine months ended September 30, 2016, Petrus divested its assets in the Peace River area, and also closed the disposition of several other non- core, non-producing assets for total consideration of $29.7 million after post closing adjustments. The divestitures enabled Petrus to reduce debt and also to reduce future abandonment obligations, resulting in an improved LMR over 3.3. On September 30th Petrus closed the previously announced cashless property swap transaction whereby Petrus disposed of non-core assets in its Foothills area with production of approximately 250 boe/d, associated land and a working interest in non-operated production facilities. In exchange Petrus acquired production of approximately 400 boe/d and approximately 40% working interest in eight sections of predominantly undeveloped land in its Ferrier core area.
Petrus is a public Canadian oil and gas company focused on property exploitation, strategic acquisitions and risk-managed exploration in Alberta.