CALGARY, Dec. 14, 2015 /CNW/ – Journey Energy Inc. (JOY – TSX) (“Journey” or the “Company“) announces its capital plan and guidance for 2016 as well as the suspension of its quarterly dividend.
FOURTH QUARTER OPERATIONAL UPDATE
Journey has completed its fourth quarter drilling program with 4 (3.1 net) wells drilled. 3 (2.5 net) wells were drilled in Countess-Brooks and 1 (0.6 net) well was drilled in Matziwin. The results of these wells have exceeded our expectations. All wells are anticipated to be on production prior to the end of the year, at which time Journey forecasts production climbing to over 10,000 BOE/D (55% liquids).
2016 GUIDANCE
Given the extended downturn in both oil and natural gas prices, Journey has chosen to minimize its capital spending for 2016. This budget is designed to reduce our net debt below our currently projected 2015 exit level.
Journey’s guidance for 2016 is as follows:
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Annual average production
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9,000 to 9,500 BOE/d (56% liquids)
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Capital program (excluding acquisitions)
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$25 million
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Cash flow
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$29 – $31 million
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Year end net debt
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$101 to $103 million
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Cash flow per basic, weighted average share
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$0.67 – $0.71
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Journey’s 2016 capital program is currently forecast to yield annual production volumes in the 9,000 to 9,500 BOE/d range and includes an increase in liquids content from the 54% realized to date in 2015 to approximately 56% in 2016. The currently projected $25 million in capital will be allocated to drilling, completing, equipping and tieing-in 10 (9 net) wells in Brooks, Poplar Creek, Skiff, Cherhill and Matziwin, as well as waterflood expansion projects in Matziwin, Skiff and Herronton. Journey is increasing its emphasis on waterflood expansion due to recent favourable response indications from its current projects. These projects require longer lead times for production response, which in turn provide time for commodity prices to stabilize. In addition, the projects will contribute to the reduction in our corporate decline rate from the current 22% to approximately 18% by 2017.
With the planned capital program, Journey is forecasting cash flow from operations of $29-$31 million with net debt exiting the year between $101 and $103 million. These projections are based on the following average 2016 prices: WTI of US$47.50/bbl; AECO gas of C$2.45/mcf; and a foreign exchange rate of $0.75 US$/CDN$.
Journey will operate substantially all of its 2016 capital program with an average working interest of over 90%. Because of this, Journey can remain flexible with this budget, increasing or decreasing its spending should prices materially change. Management feels it prudent to not allow the debt to increase beyond current levels.
Journey has made great strides in 2015 to reduce its costs and will continue to do so in 2016. Operating expenses are anticipated to decrease by approximately $2.5 million in 2016 from 2015. In the head office, the Company incurred $19 million gross ($13 million net, after recoveries and capitalization) general and administrative costs (“G&A”) in 2014. Throughout 2015 the Company pursued staff count, as well as salary and consulting rate reductions. In 2016, Journey is projecting gross G&A of $14 million ($10 million net). Even with these G&A reductions Journey will be operating four times the number of wells and twice the production in 2016 than it did in 2012.
FOURTH QUARTER DIVIDEND
In response to an unprecedented decline in commodity prices, Journey’s Board of Directors has approved the suspension of the quarterly dividend. The suspension of the dividend will contribute to the preservation of Journey’s balance sheet and provide maximum flexibility. In addition, 2016 may present unique opportunities to deploy capital, which may not be available in future years and this may be more beneficial over the longer term than the distribution of capital to shareholders during this period of extremely low commodity prices. Journey will review a return to the dividend model as commodity prices improve.
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ABOUT THE COMPANY
Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey’s strategy is to provide investors with growth plus a sustainable yield by focusing on drilling its existing core lands, implementing water flood projects, executing on accretive acquisitions and growing its production base. Journey seeks to optimize its legacy oil pools through the application of best practices in horizontal drilling and, where feasible, with water floods.
ADVISORIES
Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under “Risk Factors” and “Forward Looking Statements” in the Annual Information Form filed on www.SEDAR.com on March 31, 2015. Forward-looking information may relate to our future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey’s drilling and other operational plans, production rates, dividend policy, long-term objectives and the declaration and payment of dividends. Journey cautions investors in Journey’s securities about important factors that could cause Journey’s actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey’s prospective cash flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management’s assessment of the relevant information currently available. Readers are cautioned that information regarding Journey’s financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date. No assurance can be given that the expectations set out in the Prospectus or herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.
No securities regulatory authority has either approved or disapproved of the contents of this press release.
Readers are cautioned that the above list of risks and factors are not intended to be exhaustive. Additional information on these and other factors that could affect our operating and financial results are, or will be, included in reports filed with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
Non-GAAP Measures
The company uses the following non-GAAP measures in evaluating corporate performance. These terms are not recognized under Generally Accepted Accounting Principles (“GAAP”).
(1) The Company considers cash flow from operations (also referred to as “cash flow”) a key performance measure as it demonstrates the Company’s ability to generate funds necessary to repay debt and to fund future growth through capital investment. Cash flow from operations is calculated as cash from operating activities before changes in non-cash working capital, transaction costs and decommissioning costs incurred. Cash flow from operations per share is calculated as cash flow from operations divided by the weighted-average number of shares outstanding in the period. Journey’s determination of cash flow from operations may not be comparable to that reported by other companies. Journey also presents cash flow from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net earnings per share, which per share amount is calculated under IFRS and is more fully described in the notes to the financial statements.
(2) Net debt is a non-GAAP measure and represents current assets less current liabilities and bank debt (but excludes the potential future liability (or assets) related to the mark-to-market measurement of derivative contracts and decommissioning liabilities). It does not have a standardized meaning prescribed by International Financial Reporting Standards and it is therefore unlikely to be comparable to similar measures presented by other companies.
(3) Operating netback is a non-GAAP measure and equals total revenue less royalties, transportation and operating costs calculated on a per BOE basis. Cash flow netback equals the operating netback less cash finance costs, general and administrative costs, realized gains and losses on derivative contracts, plus any interest income. Operating netback and funds flow from operations netback do not have a standardized measure prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculations of similar measures for other companies.
Barrel of Oil Equivalents
Where amounts are expressed in a barrel of oil equivalent (“BOE”), or barrel of oil equivalent per day (“BOE/d”), natural gas volumes have been converted to barrels of oil equivalent at six (6) thousand cubic feet (“Mcf”) to one (1) barrel. Use of the term BOE may be misleading particularly if used in isolation. The BOE conversion ratio of 6 Mcf to 1 barrel (“Bbl”) of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators’ National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.
No securities regulatory authority has either approved or disapproved of the contents of this press release.
SOURCE Journey Energy Inc.
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