CALGARY, March 14, 2016 /CNW/ – Journey Energy Inc. (JOY – TSX) (“Journey” or the “Company“) is pleased to announce its financial results for 2015. The complete set of financial statements and management discussion and analysis for the year ended December 31, 2015 are posted on www.sedar.com and on the Company’s website www.journeyenergy.ca.
HIGHLIGHTS
Highlights for the fourth quarter and year end 2015 are as follows:
Three Months ended December 31, |
Twelve months ended December 31, |
||||||
Financial ($000’s except per share amounts) |
2015 |
2014 |
% change |
2015 |
2014 |
% change |
|
Production revenue |
25,008 |
48,264 |
(48) |
119,907 |
209,509 |
(43) |
|
Cash flow from operations |
9,527 |
24,557 |
(61) |
49,542 |
93,601 |
(47) |
|
Per basic share |
0.22 |
0.57 |
(61) |
1.13 |
2.65 |
(57) |
|
Per diluted share |
0.21 |
0.56 |
(62) |
1.10 |
2.56 |
(57) |
|
Net income (loss) |
38,586 |
(105,316) |
(137) |
(111,337) |
(90,221) |
23 |
|
Per basic share |
0.89 |
(2.44) |
(136) |
(2.55) |
(2.56) |
– |
|
Per diluted share |
0.86 |
(2.44) |
(134) |
(2.55) |
(2.56) |
– |
|
Capital expenditures, net cash |
8,554 |
17,702 |
(52) |
48,099 |
260,857 |
(82) |
|
Net debt |
106,534 |
100,575 |
6 |
106,534 |
100,575 |
6 |
|
Share Capital – Common and Restricted Voting (000’s) |
|||||||
Basic, weighted average |
43,540 |
43,213 |
1 |
43,715 |
35,261 |
24 |
|
Basic, end of period |
43,615 |
43,304 |
1 |
43,615 |
43,304 |
1 |
|
Fully diluted |
49,681 |
48,131 |
3 |
49,681 |
48,130 |
3 |
|
Daily Production |
|||||||
Natural gas volumes (mcf/d) |
25,972 |
33,846 |
(23) |
28,677 |
28,925 |
(1) |
|
Light/medium oil (bbl/d) |
4,167 |
4,880 |
(15) |
4,445 |
4,300 |
3 |
|
Heavy oil (bbl/d) |
431 |
454 |
(5) |
443 |
487 |
(9) |
|
Natural gas liquids (bbl/d) |
667 |
799 |
(17) |
642 |
738 |
(13) |
|
Barrels of oil equivalent (BOE/d) |
9,593 |
11,773 |
(19) |
10,309 |
10,346 |
– |
|
Average Prices |
|||||||
Natural gas ($/mcf) |
2.37 |
3.58 |
(34) |
2.64 |
4.40 |
(40) |
|
Light Oil ($/bbl) |
42.84 |
67.74 |
(37) |
48.60 |
83.86 |
(42) |
|
Heavy oil (bbl/d) |
36.58 |
64.88 |
(44) |
45.52 |
79.80 |
(43) |
|
Natural gas liquids ($/bbl) |
24.06 |
54.41 |
(56) |
25.73 |
64.18 |
(60) |
|
Corporate ($/BOE) |
28.33 |
44.56 |
(36) |
31.87 |
55.48 |
(43) |
|
Netbacks ($/BOE) |
|||||||
Realized prices |
28.33 |
44.56 |
(36) |
31.87 |
55.48 |
(43) |
|
Royalties |
(1.61) |
(7.40) |
(78) |
(3.72) |
(9.67) |
(62) |
|
Operating expenses |
(12.46) |
(14.39) |
(13) |
(14.00) |
(14.53) |
(4) |
|
Transportation expense |
(0.56) |
(0.86) |
(35) |
(0.83) |
(0.67) |
24 |
|
Operating netback |
13.70 |
21.91 |
(37) |
13.32 |
30.61 |
(56) |
|
Wells drilled |
|||||||
Gross |
5 |
4 |
16 |
31 |
|||
Net |
3.1 |
2.8 |
13.2 |
22.8 |
|||
Success rate (%) |
100 |
82 |
100 |
98 |
OPERATIONS
Journey achieved production of 9,593 BOE/d (55% liquids) in the fourth quarter, representing a 2% reduction from third quarter levels. The lower pricing environment resulted in a reduction in capital expenditures to $8.6 million for the quarter. Highlights from the fourth quarter included 3 (2.6 net) successful, operated, horizontal wells of which 1 (0.6 net) was drilled in Matziwin, and 2 (2 net) wells were drilled on our recent Brook’s farm-in lands. Journey intends to follow up our Brooks success with an additional well in the summer of 2016.
In October, Journey completed the purchase of a key asset in the Skiff area of Alberta for $1.0 million. The asset contains two horizontal wells currently producing approximately 30 bbls/d (100% oil) and is located in the center of our waterflood project in the area. Journey drilled a follow up well on this section in March 2016 and is in the process of expanding the current waterflood project to improve recovery within the pool.
Over the course of 2015, Journey participated in 16 (13.2 net) wells, and together with other development spending, added production at an expected IP 365 capital efficiency of approximately $25,000/BOE/d. The majority of this capital was allocated earlier in 2015 and did not receive the full benefit of lower industry costs. Journey also completed $6.6 million in tuck in acquisitions (net of dispositions) adding approximately 1.4 million barrels of Proved plus Probable reserves. Journey’s $48.1 million capital program also included $3.5 million in waterflood capital and $2.3 million in land and seismic, projects that are expected to contribute significantly to the future value of our Company.
FINANCIAL
Journey realized cash flow from operations of $9.5 million in the fourth quarter of 2015 compared to $24.6 million in the same quarter last year. Average commodity prices impacted cash flows as they were 36% lower in the fourth quarter compared to 2014 and 11% lower than the third quarter of this year. Helping to mitigate lower realized commodity prices, was a $1.9 million realized gain in respect of oil hedges. On a per share basis, cash flow was $0.22 per basic share ($0.21 per diluted share).
Journey realized net income of $38.6 million ($0.89 per basic share and $0.86 per diluted share) in the fourth quarter. The largest item contributing to the net income was a $91 million impairment reversal in the quarter. The impairment reversal was the result of strong reserve additions in the fourth quarter and was directly attributable to better waterflood performance in Cherhill, Glenevis and Matziwin; as well as new drilling locations in Skiff, Matziwin, Brooks and Countess. All of these positive results increased reserve bookings significantly in the fourth quarter and despite declining commodity prices increased the value in each of the areas mentioned. The result was a partial reversal of the impairment Journey incurred in the third quarter.
Journey’s production mix moved to a stronger liquids weighting throughout the year, but the fourth quarter showed the most dramatic change. The aggregate liquids (oil and natural gas liquids) weighting moved to 55% in the fourth quarter compared to 52% in the fourth quarter of 2014. As a percentage of revenue, 77% of the corporate revenues were derived from liquids sales.
Royalty costs were down 82% in the fourth quarter to average $1.61/BOE as compared to $7.40/BOE in the same quarter of 2014. Commensurate with the decline in commodity prices, the average royalty rate (as a percentage of revenue) was down 66% to 5.7% from 16.6% in 2014. Operating costs were down 29% in the fourth quarter to $11.0 million and on a per BOE basis the rate was down 13% to $12.46/BOE from $14.39 in the same quarter of 2014.
Journey continues to search for cost structure efficiencies. During the fourth quarter, Journey implemented additional work force reductions in both the field and its head office. As a result, the cumulative reductions in 2015 resulted in a 28% decrease in our full time equivalent count as compared to the end of 2014.
Attributable to the combination of the continued decline in commodity prices and some small, but accretive acquisition opportunities, Journey chose to defer certain of its drilling projects. Commensurate with the decrease in capital spending, production and cash flow levels were lower. However, Journey exited the year with net debt of $106.5 million, which was consistent with previous guidance. Net debt was comprised of $90.7 million of bank debt and $15.8 million of working capital deficiency. The current bank facility is $140 million and is currently undergoing its annual review. We expect this review will be completed by the end of April.
2016 GUIDANCE
Journey’s 2016 guidance remains unchanged from our February 23, 2016 press release as follows:
Annual average production |
8,700 to 9,000 BOE/d (55% liquids) |
Capital spending (excluding acquisitions) |
$9 million |
Cash flow |
$15 – $16 million |
Year end net debt |
$100 – $101 million |
Cash flow per basic, weighted average share |
$0.34 – $0.37 |
WTI oil price |
US $39/bbl |
AECO natural gas price |
CDN $2.40/mcf |
F/X |
$0.72 US$/CDN$ |
The recent strengthening of oil prices is a welcome change to the challenges and pressures facing our industry. As commodity prices improve, we will continue to re-evaluate our near term business strategies and capital spending. However, Journey remains in the fortunate position of owning and operating our own destiny where we can set the pace of development for our assets. We continue to prioritize the maintenance or reduction of current debt levels over spending development capital. We are focusing on opportunities to insulate our company from low future cash flows by reducing controllable costs and by taking advantage of opportunities to mitigate price exposure. We have recently entered into a hedging contract for 1,000 bbls/d at a WTI price of price of $60/BBL Canadian for the calendar year 2017.
As detailed in our February press release, our $9 million, 2016 capital program will be weighted towards the drill, complete, equip and tie-in of 2.5 net commitment wells and the expansion of our operated, waterflood projects. The future development capital projects in Journey’s reserve evaluation generate attractive rates of return in excess of 50% using year-end consensus price forecasts.
Journey continues to see favorable indications in our waterflood projects and plans to take advantage of low industry costs to prudently expand long lead time waterflood projects. This allows us to add significant oil weighted reserves while slowing our corporate declines and also to remain poised to ramp up capital expenditures and return production to previous levels as commodity prices improve.
With no expiry issues, legacy low decline pools, and attractive capital ready development projects, Journey remains steadfast in our desire to unlock significant value for shareholders through patient and prudent execution of our business plan over the longer term. Journey would like to thank all of our shareholders and employees for their continued faith and support.
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 grow its production base by drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.
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