CALGARY, March 5, 2015 /CNW/ – (TSX:PMT) – Perpetual Energy Inc. (“Perpetual”, the “Company” or the “Corporation”) is pleased to report its fourth quarter and year end 2014 financial and operating results. Perpetual continues to report year-over-year gains in production, revenue and funds flow, reflecting operational and financial success on our key diversifying strategies in the Greater Edson area for liquids-rich natural gas and at Mannville for heavy oil. A focus on debt reduction in 2014 was successfully reflected in a 12 percent decrease in net debt at the end of 2014, as compared to the end of 2013, achieved with the monetization of future gas over bitumen (“GOB”) royalty credits, property dispositions and execution of the East Edson joint venture (“East Edson JV”). Financial flexibility was further enhanced with the issuance of senior notes and early redemption of $125 million of convertible debentures in 2014 which extends the term for the majority of Perpetual’s debt to 2018 and beyond.
A complete copy of Perpetual’s audited consolidated financial statements and related Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2014 can be obtained through the Corporation’s website at www.perpetualenergyinc.com and SEDAR at www.sedar.com.
FOURTH QUARTER 2014 HIGHLIGHTS
Capital Spending and Property Dispositions
Production Highlights
Financial Highlights
2014 ANNUAL HIGHLIGHTS
Capital Spending and Property Dispositions
Production Highlights
Financial Highlights
2015 OUTLOOK
In 2015, Perpetual is focused on five strategic priorities:
In light of current weakness and uncertainty in commodity prices, Perpetual’s Board of Directors has approved a first quarter capital expenditure budget of $45 million. Nearly $42 million will be directed to the drilling of six wells (4.5 net) in west central Alberta, with three (1.5 net) at West Edson and three (3.0 net) at East Edson, coupled with the East Edson plant construction activities. All heavy oil drilling has been deferred until oil prices recover, although $1.3 million will be expended on advancing the Mannville waterflood. Strategic spending at Panny to advance the LEAD pilot project has been reduced to include only capital required to drill two (2.0 net) observation wells associated with the pilot scheme, estimated at $1.2 million.
Capital activity for the remainder of the year will be assessed as the year progresses with the intention that spending will be largely funded from funds flow and available bank indebtedness. The reduction in drilling in first quarter 2015 will not materially impact 2015 gas production as the wells drilled to date have generally exceeded the type curves and provide the same production capability as originally budgeted. Further, variations in capital spending for the final three quarters of 2015 are not expected to materially affect average production or annual funds flow.
Perpetual has commodity price contracts in place for both crude oil and natural gas to protect a base level of cash flow. Natural gas contracts were entered into to provide downside protection on revenue, primarily through the summer months, with physical and financial contracts in place for 2015 on an average of close to 68,400 GJ/d at an average price of $2.63/GJ. Crude oil contracts for 2015 on 1,000 bbls/d include costless collars protecting a WTI floor price of Cdn$87.50/bbl with an average ceiling of Cdn$95.50/bbl, as well as financial contracts which fix the basis differential between WTI and Western Canadian Select trading hubs at an average of US$16.88/bbl.
Incorporating the assumptions and commodity price contracts outlined above, the following table shows Perpetual’s estimated 2015 funds flow using various commodity prices:
Projected 2015 funds flow(2) ($millions) |
AECO gas price ($/GJ)(1) |
||||||
WTI price (US$/bbl)(1) |
$2.50 |
$3.00 |
$3.50 |
$4.00 |
$4.50 |
||
$45.00 |
4.7 |
13.8 |
22.9 |
32.1 |
41.2 |
||
$50.00 |
6.8 |
15.9 |
25.1 |
34.2 |
43.3 |
||
$55.00 |
8.9 |
18.0 |
27.2 |
36.3 |
45.4 |
||
$60.00 |
11.0 |
20.1 |
29.3 |
38.4 |
47.5 |
||
$65.00 |
13.1 |
22.2 |
31.4 |
40.5 |
49.6 |
||
(1) |
The current settled and forward average AECO and WTI prices for 2015 as of March 4, 2015 were $2.69 per GJ and US$55.69 per bbl, respectively. |
(2) |
Funds flow is a non-GAAP measures. Please refer to “Non-GAAP Measures” below. |
Amendment to Credit Facility
The Corporation’s credit facility is with a syndicate of Canadian chartered banks. As at December 31, 2014 total availability under the facility was $105 million. The credit facility includes covenants with respect to debt and trailing funds flow ratios. The Corporation was in compliance with the lender’s covenants at December 31, 2014. On March 5, 2015, the Corporation’s lenders agreed to revise financial covenants based on prevailing low commodity prices at the end of 2014 and uncertainty surrounding forecast commodity prices into 2016. Based on internal 2015 and 2016 financial and operating forecasts, Perpetual expects to be in compliance with the lender’s new covenants. The next semi-annual redetermination of the Corporation’s borrowing base will occur on or before April 30, 2015.
Financial and Operating Highlights |
THREE MONTHS Ended December 31 |
YEAR ENDED December 31, |
|||||
($Cdn thousands except volume and per share amounts) |
2014 |
2013 |
Change |
2014 |
2013 |
Change |
|
Financial |
|||||||
Oil and natural gas revenue |
62,562 |
49,075 |
27% |
262,790 |
201,294 |
31% |
|
Funds flow (1) |
17,316 |
12,998 |
33% |
81,395 |
58,468 |
39% |
|
Per share (1) (2) |
0.12 |
0.09 |
33% |
0.55 |
0.39 |
41% |
|
Net earnings (loss) |
(18,273) |
(13,745) |
(33%) |
3,366 |
7,620 |
(56%) |
|
Per share (2) |
(0.12) |
(0.09) |
(33%) |
0.02 |
0.05 |
(60%) |
|
Total assets |
750,602 |
742,288 |
1% |
750,602 |
742,288 |
1% |
|
Net bank debt outstanding (1) |
21,867 |
67,201 |
(67%) |
21,867 |
67,201 |
(67%) |
|
Senior notes, at principal amount |
275,000 |
150,000 |
83% |
275,000 |
150,000 |
83% |
|
Convertible debentures, at principal amount |
34,878 |
159,779 |
(78%) |
34,878 |
159,779 |
(78%) |
|
Total net debt (1) |
331,745 |
376,980 |
(12%) |
331,745 |
376,980 |
(12%) |
|
Capital expenditures |
|||||||
Exploration and development (3) |
26,018 |
24,518 |
6% |
116,457 |
96,684 |
20% |
|
Dispositions, net of Acquisitions |
(20,595) |
(483) |
4164% |
(70,351) |
(70,840) |
(1%) |
|
Interest in Warwick Gas Storage |
– |
– |
– |
– |
19,129 |
(100%) |
|
Other |
84 |
2 |
4100% |
614 |
120 |
412% |
|
Net capital expenditures |
5,507 |
24,037 |
(77%) |
46,720 |
45,093 |
4% |
|
Common shares outstanding (thousands) |
|||||||
End of period |
150,077 |
148,490 |
1% |
150,077 |
148,490 |
1% |
|
Weighted average |
149,084 |
148,144 |
1% |
149,084 |
148,144 |
1% |
|
Operating |
|||||||
Average production |
|||||||
Natural gas (MMcf/d) (4) |
122.5 |
90.3 |
36% |
102.7 |
88.9 |
16% |
|
Oil and NGL (bbl/d) (4) |
3,262 |
3,509 |
(7%) |
3,443 |
3,860 |
(11%) |
|
Total (boe/d) |
23,685 |
18,559 |
28% |
20,554 |
18,696 |
10% |
|
Average prices |
|||||||
Natural gas, before derivatives ($/Mcf) |
3.96 |
3.37 |
18% |
4.50 |
3.26 |
38% |
|
Natural gas, including derivatives ($/Mcf) |
4.16 |
3.62 |
15% |
4.36 |
3.53 |
24% |
|
Oil and NGL, before derivatives ($/bbl) |
59.77 |
65.35 |
(9%) |
75.01 |
67.65 |
11% |
|
Oil and NGL, including derivatives ($/bbl) |
64.39 |
65.88 |
(2%) |
71.82 |
66.48 |
8% |
|
Barrel of oil equivalent, including derivatives ($/boe) |
30.40 |
30.09 |
1% |
33.81 |
30.56 |
11% |
|
Drilling (wells drilled gross/net) (5) |
|||||||
Gas |
11/10.0 |
4/2.0 |
29/20.9 |
6/3.0 |
|||
Oil |
– |
5/5.0 |
20/17.8 |
37/35.7 |
|||
Total |
11/10.0 |
9/7.0 |
49/38.7 |
43/38.7 |
|||
Success rate (%) |
100/100 |
100/100 |
100/100 |
100/100 |
(1) |
These are non-GAAP measure. Please refer to “Non-GAAP Measures” below. |
(2) |
Based on weighted average basic common shares outstanding for the period. |
(3) |
Exploration and development costs include geological and geophysical expenditures. |
(4) |
Production amounts are based on the Corporation’s interest before royalty expense. |
(5) |
Wells drilled includes gas wells drilled as part of the East Edson JV |
[expand title=”Advisories & Contact”]Forward-Looking Information and Statements
Certain information regarding Perpetual in this news release including management’s assessment of future plans and operations and including the information contained under the heading “2015 Outlook” may constitute forward-looking information and statements under applicable securities laws. The forward-looking information and statements includes, without limitation, statements regarding capital expenditure levels for 2015, prospective drilling activities; forecast production, production type, operations, funds flows, and timing thereof; forecast and realized commodity prices; expected funding, allocation and timing of capital expenditures; expected compliance with credit facility covenants in 2015 and 2016; projected use of funds flow and anticipated funds flow; planned drilling and development and the results thereof; expected dispositions, anticipated proceeds therefrom and the use of proceeds therefrom; and commodity prices. Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information and statements contained in this press release, which assumptions are based on management analysis of historical trends, experience, current conditions, and expected future developments pertaining to Perpetual and the industry in which it operates as well as certain assumptions regarding the matters outlined above. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Perpetual and described in the forward looking information and statements contained in this press release. Undue reliance should not be placed on forward-looking information and statements, which is not a guarantee of performance and is subject to a number of risks or uncertainties, including without limitation those described under “Risk Factors” in Perpetual’s Annual Information Form and MD&A for the year ended December 31, 2014 and those included in other reports on file with Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com) and at Perpetual’s website (www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not exhaustive. Forward-looking information is based on the estimates and opinions of Perpetual’s management at the time the information is released and Perpetual disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or otherwise, other than as expressly required by applicable securities laws.
Volume Conversions
Barrel of oil equivalent (“boe”) may be misleading, particularly if used in isolation. In accordance with National Instrument 51-101 (“NI 51-101”), a conversion ratio for natural gas of 6 Mcf:1bbl has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, utilizing a conversion on a 6 Mcf:1 bbl basis may be misleading as an indicator of value as the value ratio between natural gas and crude oil, based on the current prices of natural gas and crude oil, differ significantly from the energy equivalency of 6 Mcf:1 bbl.
Non-GAAP Measures
This news release contains financial measures that may not be calculated in accordance with generally accepted accounting principles in Canada (“GAAP”). Readers are referred to advisories and further discussion on non-GAAP measures contained in the “Significant Accounting Policies and non-GAAP Measures” section of management’s discussion and analysis.
About Perpetual
Perpetual Energy Inc. is a Canadian energy company with a spectrum of resource-style opportunities spanning heavy oil, NGL and bitumen along with a large base of shallow gas assets. Perpetual’s shares and convertible debentures are listed on the Toronto Stock Exchange under the symbol “PMT”, “PMT.DB.D” and “PMT.DB.E”, respectively. Further information with respect to Perpetual can be found at its website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.
SOURCE Perpetual Energy Inc.