CALGARY, ALBERTA–(Marketwired – March 9, 2017) – Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX:PRQ) is pleased to report operating and financial results for the three and twelve month periods ended December 31, 2016, and to provide 2016 year end reserves information as evaluated by Sproule Associates Limited (“Sproule”). Petrus continues to be committed to operating cost and debt reduction as well as improved capital efficiencies and is focused on organic growth in its core area (Ferrier, Alberta). The Company is targeting liquids rich natural gas in the Cardium formation as well as investing in infrastructure in Ferrier with the objective to maximize the Company’s return on investment. The Company’s Management’s Discussion and Analysis (“MD&A”) and audited consolidated financial statements dated as at and for the year ended December 31, 2016 are available on SEDAR (the System for Electronic Document Analysis and Retrieval) at www.sedar.com.
- At year end the Company’s net debt(1) ($124.9 million) was 45% lower than year end 2015 ($226.7 million). Fourth quarter cash finance expense was 53% lower in 2016 relative to the prior year. Subsequent to December 31, 2016, Petrus entered into an agreement with Macquarie Bank Limited to extend and pay down its second lien term loan. The loan balance of $35 million is now due in October 2019. The interest rate basis remains unchanged and is currently 7.9% per annum.
- In the fourth quarter of 2016 Petrus generated cash flows from operating activities of $18.8 million, compared to $8.8 million in the fourth quarter of 2015. For the year ended December 31, 2016, Petrus generated cash flows from operating activities of $41.9 million compared to $15.5 million in the prior year. The changes for the three and twelve month periods are explained by changes in non-cash working capital.
- Petrus generated funds from operations(1) of $10.3 million in the fourth quarter of 2016; a 54% increase relative to $6.7 million generated in the fourth quarter of 2015. The increase is due to higher production, lower operating expenses, and improved commodity prices. The increase was offset by $1.4 million of G&A expenses (net of capitalized portion) related to one-time severance costs and annual incentive compensation recognized in the fourth quarter of 2016. For the year ended December 31, 2016, Petrus generated funds from operations of $28.6 million, which is 36% lower than $44.6 million in the prior year. The decrease on a full year basis is due to lower production (attributed to the Peace River asset disposition) and lower commodity prices, in addition to higher fourth quarter G&A expenses.
- Fourth quarter production was 8,595 boe/d in 2016 compared to 8,172 boe/d in 2015; this 5% increase is a result of Ferrier development activity. During the fourth quarter, 4 gross (2.2 net) new wells were brought on production. The remaining 2016 development locations are expected to come on production in the first quarter of 2017. Full year production for 2016 was 8,236 boe/d compared to 8,762 boe/d for the year ended December 31, 2015. The decrease is attributed to the sale of Peace River assets offset by enhanced production in Ferrier. Petrus’ February 2017 average monthly production is expected to be 9,148 boe/d.
- In 2015 and 2016, Petrus’ transformed its operating cost structure through the divestiture of higher cost assets and the construction of a natural gas processing plant in Ferrier. As a result, operating expenses have decreased 67% from $11.00 per boe in the fourth quarter of 2015 to $3.63 per boe in the fourth quarter of 2016. In Ferrier, operating expenses per boe decreased approximately 83% in the fourth quarter of 2016 compared to the fourth quarter of 2015. The decrease is a result of the low cost structure of the Petrus owned and operated Ferrier gas plant, expiration of a third party processing commitment and higher production volume from developmental drilling.
- Petrus ended 2016 with $420.9 million of proved plus probable reserve value before-tax, discounted at 10%; a 5% increase from the December 31, 2015 report, despite the effect of the Peace River asset disposition in 2016 and a lower commodity price forecast used by Sproule. In 2016, the Company realized Finding and Development costs of $9.89/boe and $2.46/boe for Proved Developed Producing (“PDP”) and Total Proved (“TP”) reserves respectively.
- Petrus’ Board of Directors approved a $50 to $60 million capital budget for 2017 (excluding acquisitions and dispositions). Capital is expected to be directed primarily to the development of the Company’s Ferrier assets. The program is expected to include drilling 16 gross (11.7 net) Cardium wells at Ferrier. The program also provides for investment in facilities; the processing and compression capability of the Ferrier gas plant is expected to be doubled to reach a capacity of approximately 60 mmcf/d by the fourth quarter of 2017.
- Petrus utilizes financial derivative contracts to mitigate commodity price risk. The Company’s realized gain on financial derivatives in 2016 increased the Company’s corporate netback(1) by $4.98 per boe compared to $5.18 per boe realized in the prior year.
|(1)||Refer to “Non-GAAP Financial Measures.”|
SELECTED FINANCIAL INFORMATION
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Sept. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
|Natural gas (mcf/d)||33,964||32,088||37,327||30,009||33,071||35,456|
|Natural gas sales weighting||69||%||61||%||72||%||70||%||65||%||67||%|
|Natural gas ($/mcf)||2.39||2.93||3.29||2.53||1.64||2.01|
|Total realized price ($/boe)||21.40||29.43||26.97||21.06||19.32||18.18|
|Net oil and natural gas revenue ($/boe)||18.54||25.83||23.55||18.14||17.18||15.23|
|Realized gain on derivatives ($/boe)||4.98||5.18||0.99||4.06||6.87||7.84|
|General & administrative expense||(2.56||)||(2.35||)||(3.78||)||(1.69||)||(1.86||)||(2.72||)|
|Cash finance expense||(3.53||)||(4.16||)||(2.58||)||(3.85||)||(3.18||)||(4.53||)|
|Corporate netback(1) ($/boe)||9.47||13.96||13.05||9.13||10.06||5.68|
|FINANCIAL (000s except per share)||Twelve months
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Sept. 30, 2016
Jun. 30, 2016
Mar. 31, 2016
|Oil and natural gas revenue||64,840||94,587||21,409||13,805||14,926||14,698|
|Net loss per share|
|Funds from operations(1)||28,568||44,639||10,317||5,966||7,725||4,558|
|Funds from operations per share(1)|
|Net acquisitions (dispositions)||(29,718||)||938||–||(29,718||)||–||–|
|Common shares outstanding|
|Weighted average shares outstanding||44,429||35,148||45,349||45,349||45,349||41,762|
|As at period end|
|(1)||Refer to “Non-GAAP Financial Measures.”|
|(2)||In prior periods Petrus included realized gain on derivatives (hedging gain (loss)) in the calculation of operating netback.|
|(3)||In computing diluted per share metrics no instruments (performance warrants or stock options) were added to the calculation as their impact is anti-dilutive.|
Average fourth quarter production on an area level was as follows:
|Average production for the three months ended Dec. 31, 2016||Ferrier||Foothills||Central Alberta||Total|
|Natural gas (mcf/d)||21,599||7,939||7,789||37,327|
|Natural gas sales weighting||74||%||78||%||64||%||72||%|
Average production was 8,595 boe/d (28% oil and liquids) in the fourth quarter of 2016 compared to 8,172 boe/d (36% oil and liquids) in the fourth quarter of 2015.
During the fourth quarter, Petrus drilled 5 gross (2.6 net) wells in the Ferrier area targeting liquids rich natural gas in the Cardium formation. With the addition of these new wells, Petrus’ February 2017 monthly production is expected to be 9,148 boe/d. Based on the Company’s year-end production and 2016 capital expenditures Petrus added production at a cost of approximately $11,300 per flowing boe/d. Average drill and case costs were lower than comparable wells drilled in 2015 due to new techniques, reduced service costs and improved cycle time.
Using historic data and estimated field production, the Company estimates its corporate base decline production rate to be approximately 28%. Since the acquisition of Arriva Energy Inc. on September 9, 2014 up to this report date, Petrus has drilled 17 wells in the Ferrier area and participated as a working interest partner in 6 additional wells. For the same period, the Company has increased net production in the Ferrier area from approximately 1,000 boe/d to over 5,400 boe/d.
Petrus’ Board of Directors approved a $50 to $60 million capital budget for 2017 (excluding acquisitions and dispositions). Capital is expected to be directed primarily to the development of the Company’s Ferrier assets. The program is expected to include drilling 16 gross (11.7 net) Cardium wells at Ferrier. The program also provides for investment in facilities; the processing and compression capability of the Ferrier gas plant is expected to be doubled to reach a capacity of approximately 60 mmcf/d by the fourth quarter of 2017.
Term Loan Extension
On January 24, 2017 Petrus entered into an agreement with Macquarie Bank Limited to extend the Company’s $42 million second lien term loan by two years; now due October 2019. Concurrent with the extension, the Company reduced the amount outstanding by $7 million through working capital and available credit facilities. The interest rate on the remaining $35 million balance will remain unchanged at a per annum rate of the (three-month) Canadian Dealer offered Rate (CDOR) plus 700 basis points.
Acquisition and Private Placement
On February 28, 2017 the Company closed an acquisition of certain oil and natural gas interests in the Ferrier area (the “Acquisition”) and a non- brokered private placement of 4,078,708 common shares of the Company (“Common Shares”) at a purchase price of $2.53 per Common Share, for aggregate gross proceeds of $10.3 million (the “Private Placement”). A portion of the net proceeds of the Private Placement were used to fund the Acquisition and Petrus expects the remainder will be used to fund the Company’s 2017 capital program.
ANNUAL GENERAL MEETING
The Company’s Annual General & Special Meeting will be held at the Jamieson Place Conference Centre (3rd floor) 308, 4th Ave SW Calgary, Alberta, on Thursday May 18, 2017 at 9:00 a.m. (Calgary time). At the Annual General & Special Meeting, the Company intends to, among other things, request shareholder approval to complete a share consolidation.
Petrus’ 2016 year end reserves were evaluated by independent reserves evaluator Sproule and Associates (“Sproule”) in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) as of December 31, 2016. Additional reserve information as required under NI 51-101 will be included in our Annual Information Form which will be filed on SEDAR.
Petrus has a reserves committee, comprised of independent board members, that reviews the qualifications and appointment of the independent reserve evaluators. The committee also reviews the procedures for providing information to the evaluators. All booked reserves are based upon annual evaluations by the independent qualified reserve evaluators conducted in accordance with the COGE Handbook and NI 51-101. The evaluations are conducted using all available geological and engineering data. The reserves committee has reviewed the reserves information and approved the reserve report.
The following table provides a summary of the Company’s before tax reserves as evaluated by Sproule:
|As at December 31, 2016||Total Company Interest(1)(3)|
|Proved + Probable Producing||75,947||2,558||2,933||18,149||372,404||272,303||220,119|
|Total Proved Plus Probable||189,383||6,884||7,579||46,027||849,349||572,622||420,888|
|(1)||Tables may not add due to rounding.|
|(2)||NPV 0%, NPV 5% and NPV 10% refer to the risked net present value of the future net revenue of the Company’s reserves, discounted by Nil, 5% and 10%, respectively and is presented before tax and based on Sproule’s pricing assumptions.|
|(3)||Company interest reserves are the Company’s total working interest before the deduction of royalties (but after including any royalty interests of Petrus).|
Petrus ended 2016 with reserve value before-tax discounted at 10% of $420.9 million proved plus probable (“P+P”) and $268.0 million total proved (“TP”), respectively. This represents a 5% and 8% increase, respectively, from the December 31, 2015 report, despite a lower commodity price forecast by the independent reserve evaluators. In 2016 Petrus’ total company interest reserves decreased 6% to 46.0 mmboe on a P+P basis and 5% on a TP basis to 31.1 mmboe, due to a significant asset disposition in 2016.
FUTURE DEVELOPMENT COST
Future Development Cost (“FDC”) reflects Sproule’s best estimate of what it will cost to bring the proved and probable undeveloped reserves on production. FDC associated with our total P+P reserves at December 31, 2016 is $260.1 million (undiscounted) and includes 229 gross (126.4 net) booked P+P locations.
The following table provides a summary of the Company’s FDC as set forth in Sproule’s report:
|Future Development Cost ($000s)||Total Proved||Total Proved + Probable|
|Total FDC, Undiscounted||201,556||269,144|
|Total FDC, Discounted at 10%||174,468||231,281|
The following table highlights annual performance ratios for the Company from 2013 to 2016:
|December 31, 2016||December 31, 2015||December 31, 2014||December 31, 2013|
|Reserve Life Index (yr)(1)||4.4||5.2||4.6||4.2|
|Reserve Replacement Ratio(1)||0.4||0.7||5.9||1.4|
|Reserve Life Index (yr)(1)||9.8||10.9||7.3||6.4|
|Reserve Replacement Ratio(1)||0.5||2.9||9.1||1.8|
|Future Development Cost ($000s)||201,556||223,409||122,326||17,877|
|Total Proved + Probable|
|Reserve Life Index (yr)(1)||14.6||16.4||11.2||11.0|
|Reserve Replacement Ratio(1)||(0.1||)||3.7||12.7||3.2|
|Future Development Cost ($000s)||269,144||325,325||199,410||40,864|
|(1)||Refer to “Oil and Gas Disclosures.”|
|(2)||Certain changes in FD&A produce non-meaningful figures as discussed in the “Oil and Gas Disclosures.”|
In 2016, the Company realized F&D costs of $9.89/boe and $2.46/boe for Proved Developed Producing (“PDP”) and TP reserves, respectively. This represents a 67% and 88% reduction, respectively, from the prior year as outlined in the following table.
|Finding & Development Costs ($/boe)(1)||2016||2015|
|Proved Developed Producing||9.89||29.80|
|Proved plus probable(1)||(8.06||)||19.01|
(1) Refer to “Oil and Gas Disclosures.”
An updated corporate presentation can be found on the Company’s website at www.petrusresources.com.