CALGARY, Alberta, Aug. 09, 2017 (GLOBE NEWSWIRE) — GRANITE OIL CORP. (“Granite” or the “Company”) (TSX:GXO) (OTCQX:GXOCF) is pleased to release its financial and operational results and operational update for the six months ended June 30, 2017.
Financial and Operating Highlights
|Three Months Ended June 30,||Six Months Ended June 30,|
|(000s, except per share amounts)||($)||($)||($)||($)|
|Oil and natural gas revenues||13,788||11,837||28,239||19,854|
|Funds from operations (1)||6,743||6,014||13,303||11,972|
|Per share – basic||0.20||0.19||0.39||0.38|
|Per share – diluted (2)||0.20||0.19||0.39||0.38|
|Net income (loss)||(116)||(5,010)||2,384||(7,268)|
|Per share – basic||(0.00)||(0.16)||0.07||(0.23)|
|Per share – diluted (2)||(0.00)||(0.16)||0.07||(0.23)|
|Capital expenditures (3)||5,846||5,731||10,637||10,053|
|Net debt (4)||35,985||25,697||35,985||25,697|
|Dividends declared (per share)||0.1050||0.1050||0.1050||0.1050|
|Weighted average – basic||33,804||31,846||33,749||31,095|
|Weighted average – diluted||34,046||32,120||34,019||31,376|
|Natural gas (mcf/d) (6)||448||–||588||146|
|Crude oil (bbls/d)||2,784||2,858||2,835||2,843|
|Average wellhead prices|
|Natural gas ($/mcf)||3.24||–||2.75||1.08|
|Crude oil and NGLs ($/bbl)||53.91||45.58||54.46||38.14|
|Combined average ($/boe)||53.01||45.58||53.19||37.87|
|Operating netback ($/boe) (8)||30.37||27.80||29.05||27.27|
|Gross (net) wells drilled|
|Oil (#)||3 (3.0)||3 (3.0)||6 (6.0)||4 (4.0)|
|Total (#)||3 (3.0)||3 (3.0)||6 (6.0)||4 (4.0)|
|Average working interest (%)||100||100||100||100|
(1) Funds from operations and funds from operations per share are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary in the Management’s Discussion and Analysis under “Non-GAAP Measurements” for further discussion.
(2) The Company uses the weighted average common shares (basic) when there is a net loss for the period and the weighted average common shares (diluted) when there is net income in the period to calculate net income (loss) per share diluted. The Company uses the weighted average common shares (diluted) to calculate the funds from operations diluted.
(3) Total capital expenditures, excluding acquisitions and excluding non-cash transactions. Refer to commentary in the Management’s Discussion and Analysis under “Capital Expenditures and Acquisitions” for further information.
(4) Net debt, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary under “Non-GAAP Measurements” for further discussion.
(5) For a description of the boe conversion ratio, refer to the commentary in the Management’s Discussion and Analysis under “Other Measurements”.
(6) Commencing in March 2016, the Company began injecting the majority of its natural gas production into the Alberta Bakken property pursuant to the EOR scheme.
(7) Combined average realized prices includes all oil, gas and NGL sales revenue, excluding other income.
(8) Operating netback, which is calculated by deducting royalties, operating expenses and transportation expenses from oil and gas revenue and adjusting for any realized hedging on financial instruments, is not a recognized measure under IFRS. Please refer to the commentary under “Non-GAAP Measurements” for further discussion.
Second Quarter Highlights
- Generated funds flow of $6.8 million ($0.20 per share), compared to $6.0 million ($0.19 per share) in Q2, 2016.
- Reduced General and Administrative costs by 21% in the second quarter of 2017 as compared to the same period of 2016.
- Maintained production on a per boe basis year over year.
- Maintained monthly dividend distributions at $0.035/share.
- Completed Granite’s annual borrowing base review in April 2017, which resulted in a renewal of its credit facility at $60 million with no material change to terms or conditions.
During the second quarter, Granite drilled, completed and tied in three (3.0 net) horizontal development wells and tested a new hydraulic fracturing technology as the Company continues its focus on cost reductions and capital-efficient development. As well, the Company completed significant upgrades to the gas injection enhanced oil recovery (“EOR”) facilities that are integral to the Company’s long-term development model and which will reduce future facility requirements and long-term operating costs.
Operating costs for the quarter were higher than anticipated due to third party fees for processing the Company’s oil as repairs were being made to Granite’s processing equipment. These repairs were completed in the second quarter. Operating costs have returned to normalized levels going forward.
All-in capital costs for the three wells totaled approximately $4.1 million, with production for the quarter being slightly lower than the first quarter of 2017, totaling 2,859 BOE/d (97% liquids). Production was impacted by delayed completions due to service company availability, the conversion of two producing oil wells into gas injection wells decreasing quarterly production by approximately 100 bbls/d and production interruptions associated with facility commissioning expansion projects.
Among second quarter capital expenditures, approximately $1.8 million was on facility upgrades and gas injection EOR infrastructure expansions. This capital included a new 1680 horsepower gas compressor commissioned in the third week of April, 2017 as well as 4.1 kilometers of additional high-pressure pipelines to accommodate an increasing number of restricted flowing wells and to support the continued expansion of the EOR program and future growth in production and reserves. The added gas compression facilities provide capacity for approximately two years of additional drilling and associated injection at current development rates. Lastly, as mentioned above, two formerly producing oil wells were converted into gas injection wells.
Funds flow throughout the quarter was $6.8 million, a 3% increase over the first quarter of 2017, which includes some prior period amendments complimenting the Company’s quarterly funds flow.
At present, Granite has concluded the majority of its third quarter capital program. Two 100% percent working interest oil wells have been drilled and completed this quarter and one existing producing oil well was converted to a gas injection well. The two wells drilled this quarter are currently under test and expected to be on-stream by the end of the current week. All-in costs for the wells are expected to total approximately $1.25 million per well returning to benchmark lows of 2016 despite increased service costs and longer lateral lengths – demonstrating the Company’s continued commitment to cost-efficient development. Total capital expenditures for the quarter are expected to drop significantly to approximately $3.2 million as the Company shifts the majority of its capital to drilling for the remainder of the year and continuing into 2018.
Granite is revising its guidance for the second half of 2017 due to commodity price trends and added price pressure associated with the CAD/USD foreign exchange rate relative to the guidance released January 24, 2017. As well, due to increased well costs in the first half and shifting development capital to expanding its EOR, the Company reduced its development well count from 10 to 8 wells in 2017 protecting its balance sheet and resulting in a minor reduction in production. The following tables outline the revised guidance and associated assumptions:
2017 Second Half Pricing Assumptions
|WTI oil price (US$)||$55.00||$50.00|
|Exchange rate (US/Cdn)||1.35||1.25|
|WCS Differential (US$)||($14.00)||($11.00)|
2017 Annual Guidance
|Production (boe/d)||3,050||2,900 – 3,000|
|Funds from operations (‘000’s)||$30.0||$26.0 – $27.0|
|Capital Expenditures – Development (‘000’s)||$13.5||$14.2|
|Capital Expenditures – Exploration (‘000’s)||$3.0||$3.0|
|Development Wells (#)||10||8|
|Year End net debt||$31.0||$37.0|
|Net debt to annualized funds from operations||0.97||1.40|
|All in payout ratio||100%||119%|
|All in payout ratio (excluding exploration)||93%||108%|
Granite remains committed to the protection of its strong balance sheet and dividend while staying focused on maximizing long term value of its resource for the shareholders. For the remainder of the year Granite’s capital program will focus almost entirely on drilling, including two potentially high impact exploration wells, and demonstrating improved sustainability. Granite remains in a strong position to adapt to continued volatility in commodity pricing and will continue to adjust as needed.
Board of Directors Update
Granite is pleased to announce and welcomes Mrs. Kathy Turgeon to the Board of Directors. Mrs. Turgeon brings a wealth of experience as the current CFO of Peyto Exploration & Development Corp. Granite is following a similar, proven organic growth model as Petyo and Mrs. Turgeon’s experience will be invaluable. Mrs. Turgeon is a Chartered Accountant.
For further information, please contact Michael Kabanuk, President & CEO by telephone at (587)349-9123 or Tyler Klatt, V.P. Exploration by telephone at (587) 349-9125