CALGARY, ALBERTA–(Marketwired – April 26, 2016) –
PrairieSky Royalty Ltd. (“PrairieSky” or the “Company“) (TSX:PSK) is pleased to announce its first quarter operating and financial results for the period ended March 31, 2016 and initiation of a normal course issuer bid.
2016 First Quarter Highlights:
- Average production of 23,081 BOE per day, 49% liquids
- Funds from Operations of $41.4 million or $0.18 per share, basic and diluted
- Revenues of $48.9 million including $43.2 million of Royalty Revenue and a Funds from Operations per BOE of $19.71
- Leased land for new and existing plays, collecting $1.8 million in lease issuance bonus consideration
- Maintained a strong balance sheet with $201.3 million of positive working capital, including $182.7 million of cash on hand and nil debt as of March 31, 2016
PrairieSky continues to execute on its strategy of delivering strong, risk adjusted returns to its shareholders through the leasing of undeveloped land while focusing on cost controls in our business. Despite the challenging commodity price environment, it was an active quarter on PrairieSky’s land base with over 100 wells spud or rig released, primarily focused on the Viking light oil play in Western Saskatchewan and the multi-zone Deep Basin fairway of Alberta and British Columbia. In addition, we continue to see leasing interest from new and existing lessees with recent leasing activity from 21 different producers on our fee lands during the quarter. Our large undeveloped land position, low cost structure and high margin royalty production continues to deliver strong funds flow and growth opportunities with no capital requirements.
PrairieSky has maintained a strong balance sheet with $201.3 million of positive working capital, and no debt, as of March 31, 2016. During the quarter, PrairieSky suspended its Dividend Reinvestment Plan (“DRIP”) and Stock Dividend Program (“SDP”) and set its annual dividend at $0.72 per share per annum, in each case effective for the March 2016 dividend payable on April 15, 2016. This adjustment reflects PrairieSky’s commitment to paying dividends out of internally generated free cash flow, without the dilution of the DRIP/SDP, while continuing to add cash on the balance sheet.
PrairieSky completed an additional $2.7 million of complementary acquisitions during Q1 2016 using cash on hand, adding additional fee title lands and gross overriding royalty interests to its portfolio. We continue to see quality acquisition opportunities including small and medium sized potential transactions, and will remain selective and disciplined in our evaluation of new royalty opportunities.
PrairieSky is pleased to announce that the board of directors has authorized management to apply for and initiate a normal course issuer bid (“NCIB”), subject to regulatory approval of the Toronto Stock Exchange (“TSX”). PrairieSky currently intends to allocate up to $40 million over the next 12 months (approximately $3.3 million per month), net of regular monthly dividend payments, to repurchase common shares. PrairieSky has an unparalleled royalty land position in Canada with over 14.7 million acres, including over 7.7 million acres of fee simple mineral title. Management believes a normal course issuer bid provides an opportunity to use excess cash resources to reduce PrairieSky’s share count over time, representing an investment in PrairieSky’s high quality asset base and enhancing value for remaining shareholders.
Andrew Phillips, President & CEO
FINANCIAL AND OPERATIONAL INFORMATION
The following table summarizes select operational and financial information of the Company for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted.
|($ Millions, except per share or as otherwise noted)||Three months ended March 31, 2016||Three months ended March 31, 2015|
|Funds from Operations(1)||41.4||37.7|
|Per Share – basic and diluted (2)||0.18||0.25|
|Net Earnings and Comprehensive Income||1.7||16.8|
|Per Share – basic and diluted(2)||0.01||0.11|
|Acquisitions including non-cash consideration||2.7||4.5|
|Weighted average – basic||228.6||149.3|
|Weighted average – diluted||228.8||149.3|
|Natural Gas (MMcf/d)||70.7||62.5|
|Crude Oil (bbls/d)||8,748||5,968|
|Natural Gas ($/Mcf)||$||1.80||$||2.96|
|Crude Oil ($/bbl)||34.16||43.34|
|Operating Netback per BOE(1)||$||15.66||$||20.85|
|Funds from Operations per BOE(1)||$||19.71||$||23.20|
|Natural Gas Price Benchmarks|
|Oil Price Benchmarks|
|West Texas Intermediate (WTI) (US$/bbl)||32.34||48.40|
|Edmonton Light Sweet ($/bbl)||42.18||51.09|
|(1)||A Non-GAAP measure which is defined under the Non-GAAP Measures section in PrairieSky’s MD&A.|
|(2)||Net Earnings and Comprehensive Income and Funds from Operations per common share are calculated using the weighted average number of common shares outstanding.|
|(3)||A dividend of $0.06 per common share was declared on March 17, 2016. The dividend was paid on April 15, 2016 to shareholders of record as at March 31, 2016.|
|(4)||See “Conversions of Natural Gas to BOE”.|
A full version of PrairieSky’s Management’s Discussion and Analysis (“MD&A“) and unaudited interim condensed financial statements and notes thereto for the fiscal period ended March 31, 2016 is available on SEDAR at www.sedar.com and PrairieSky’s website at www.prairiesky.com.
NORMAL COURSE ISSUER BID
PrairieSky intends to apply for and initiate a NCIB to repurchase up to $40 million of common shares (approximately $3.3 million per month) over the next 12 months. The NCIB has been approved by the Company’s board of directors; however, it is subject to acceptance by the TSX and, if accepted, will be made in accordance with the applicable rules and policies of the TSX and applicable securities laws. Under the NCIB, common shares may be repurchased in open market transactions on the TSX, and/or other Canadian exchanges, or by such other means as may be permitted by the TSX and applicable securities laws. The price that PrairieSky will pay for common shares in open market transactions will be the market price at the time of purchase. Common shares acquired under the NCIB will be cancelled.
PrairieSky will file a Notice to Make a NCIB to purchase up to 1,600,000 currently issued and outstanding common shares, representing approximately 1% of the public float of 151,509,248 common shares. In accordance with the rules of the TSX governing normal course issuer bids, the total number of common shares the Company is permitted to purchase is subject to a daily purchase limit of 243,509 common shares, representing 25% of the average daily trading volume of common shares on the TSX calculated for the six-month period ended March 31, 2016, provided, however, that the Company may make one block purchase per calendar week which exceeds the daily repurchase restriction. The NCIB is expected to commence shortly after regulatory approvals are obtained. Common shares may be repurchased under the program over a period of up to one year. The Company has not bought back any of its securities since inception.
PrairieSky will be entering into an automatic purchase plan with its broker in order to facilitate purchases of its common shares. The automatic purchase plan allows for purchases by the Company of its common share at any time, including, without limitation, when the Company would ordinarily not be permitted to make purchases due to regulatory restriction or self-imposed blackout periods. Purchases will be made by PrairieSky’s broker based upon the parameters prescribed by the TSX and the terms of the parties’ written agreement.
PrairieSky believes establishing the NCIB as part of its capital management strategy is in the best interests of the Company and represents an attractive opportunity to use cash resources, net of regular dividend payments, to reduce PrairieSky’s share count over time and thereby enhance the value of the shares held by remaining shareholders. The Board currently intends to evaluate the NCIB, and the level of purchases thereunder, on an annual basis in conjunction with PrairieSky’s annual dividend review. The next regularly scheduled dividend review will be in February 2017.
While PrairieSky currently intends to only use $40 million to effect NCIB purchases over the next 12 months, the Company’s board of directors may consider, from time to time, applying to the TSX to increase the amount of NCIB purchases. Decisions regarding increases to the NCIB will be based on market conditions, share price, best use of funds from operations, and other factors including other options to expand our portfolio of royalty assets.