CALGARY, ALBERTA–(Marketwired – May 4, 2016) – Cardinal Energy Ltd. (“Cardinal” or the “Company“) (TSX:CJ) is pleased to announce its operating and financial results for the three months ended March 31, 2016. The Company also announces that its unaudited financial statements and management’s discussion and analysis for the quarter ended March 31, 2016, will be available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on Cardinal’s website at www.cardinalenergy.ca.
In Q1 Cardinal focused its operations in three areas:
- Reducing operating costs;
- Increasing its hedging exposure; and
- Preserving capital.
Cardinal decreased its unit operating costs for the first quarter by 9% to $21.50/boe from $23.66/boe in the fourth quarter of 2015. We are on track to continue to see further cost reductions.
In the first quarter commodity prices fell to levels that both Cardinal and industry were not expecting. This dramatic fall in pricing further reinforced the need to protect our revenue through hedging. The Company added sufficient hedges to protect our capital program and dividend in 2016, and has begun to systematically layer in additional hedges for 2017 and 2018. The downturn and pricing levels in the first quarter have further emphasized the need to control as many of our inputs as possible to try and reduce the volatility of our business.
We undertook a very modest capital program in the first quarter. The low decline nature of our asset base allowed us to spend only $2.4 million in the quarter while maintaining production at our budgeted level of 14,245 boe/d for the quarter. This was an increase of 29% over the first quarter of 2015.
|FINANCIAL AND OPERATING HIGHLIGHTS|
|($000’s except shares, per share and per boe amounts)||Three months ended March 31,|
|Petroleum and natural gas revenue||33,424||38,409||(13)|
|Cash flow from operations||7,758||21,944||(65)|
|basic per share||$||0.12||$||0.38||(68)|
|fully diluted per share||$||0.12||$||0.38||(68)|
|basic per share||$||(0.24)||$||(0.22)||9|
|fully diluted per share||$||(0.24)||$||(0.22)||9|
|Development capital expenditures||2,077||2,711||(23)|
|Weighted average shares outstanding (000’s)|
|Average daily production|
|Crude oil and NGL (bbl/d)||12,597||10,225||23|
|Natural gas (mcf/d)||9,886||4,785||107|
|Petroleum and natural gas revenue||$||25.78||$||38.72||(33)|
|Realized gain on derivatives||8.36||15.10||(45)|
|Netback after risk management||$||9.07||$||25.75||(65)|
|(1) Includes $50 million face value convertible debentures, see non-GAAP measures.|
There has been no change to Cardinal’s base capital expenditure budget (“budget”) for 2016. The budget is anticipated to result in average and exit production for 2016 of approximately 14,600 boe/d and deploys total development capital of $25 million. We continue to expect $60 million in cash flow from operations based on an average WTI price of USD $40/barrel, an exchange rate of 0.71 $USD/CAD, a differential to WCS of $19 and the effect of our existing 2016 hedges. Given the recent improvement in crude oil prices we have not adjusted these budget inputs. The budget achieves a total payout ratio of less than 100% in this lower commodity price environment and net bank debt of $90 million at year end.
The Company is well positioned in the current low price environment to execute its base capital budget and maintain production while maintaining a total payout ratio of less than 100%. If oil prices continue to improve we will continue to add to our existing 2016 and 2017 hedge portfolio and will consider increasing our base capital budget and guidance for 2016.
Cardinal was able to successfully maintain its base production levels during the lowest quarter for oil pricing since its inception. The low decline nature of our production enabled Cardinal to hold production levels with only $2.4 million of capital expenditures in the first quarter. We were also able to successfully reduce operating costs by $2.16 per boe compared to the fourth quarter 2015. The operating cost reductions were realized throughout all of our properties.
Hedging has been an important part of Cardinal’s business strategy. During the quarter we increased our 2016 and 2017 hedge portfolio for oil to WTI, natural gas and the WCS/WTI oil differential. Approximately 70% of our oil production is priced off of WCS and the differential for WCS has had significant volatility. The widening of the differential substantially reduced our Q4 and Q1 netback. We have systematically hedged our WCS exposure for 2016 and 2017 to mitigate this exposure.
Cardinal continues to opportunistically hedge its oil and natural gas production for 2016, 2017 and 2018.
|2016 (Apr-Dec)||$63.90||6,667 bbl/d(1)||$2.12||2,560 gj/d(2)|
|2017||$62.33||4,949 bbl/d||$2.14||2,496 gj/d|
|2018||$57.50||500 bbl/d||$2.25(3)||1,000 gj/d|
- 500 bbl/d collared from April-June, 2016 at $70 X $78
- 3,000 gj/d collared from April-December 2016 at $2.00 X $2.93
- 2018 AECO hedges only run January through April.
- Does not include our WCS hedges, refer to MD&A.
With increased oil prices in April and some near term price stability, we are cautiously optimistic in our approach to the remainder of 2016. No new wells were drilled by Cardinal in the first quarter. We have recently begun a 4 well drilling program in Bantry and expect to drill an additional 4 wells in Q3 as part of our base budget. We are starting to see some additional unbudgeted cost savings in our drilling program and expect to increase the number of wells drilled as a result of these cost savings.
Our staff have done an excellent job of integrating the Mitsue property into our portfolio. We have been able to begin moving forward with growth focused operations on the property and have begun the planning and implementation of operating cost reduction initiatives. Our geological team has started to put together a drilling inventory on the property and we expect to drill our first horizontal well in Mitsue in late Q4 or early Q1, 2017.
With the positive move forward in oil prices we have initiated several workovers of under optimized and suspended wells.
We continue to evaluate acquisition opportunities and see this opportunity list slowly starting to grow and be more accessible.
About Cardinal Energy Ltd.
Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal’s operations are focused in all season access areas in Alberta.