CALGARY, May 11, 2016 /CNW/ – Northern Blizzard Resources Inc. (“Northern Blizzard” or the “Company”) (TSX: NBZ) announces ts operating and financial results for the three months ended March 31, 2016. Northern Blizzard’s financial statements and management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2016 are available on our website at www.northernblizzard.com and on SEDAR at www.sedar.com.
FINANCIAL AND OPERATING HIGHLIGHTS
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Three months ended |
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|
March 31, 2016 |
December 31, 2015 |
March 31, 2015 |
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|
Financial ($000s,except as otherwise noted) |
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|
Oil and natural gas sales |
56,660 |
79,846 |
106,039 |
||
|
Funds from operations(1) |
26,792 |
8,175 |
60,060 |
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|
Per share – diluted |
0.23 |
0.07 |
0.56 |
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Net income (loss) |
10,120 |
(14,105) |
(43,907) |
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|
Per share – basic |
0.09 |
(0.13) |
(0.42) |
||
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Per share – diluted |
0.09 |
(0.13) |
(0.42) |
||
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Net debt(1) |
360,621 |
400,508 |
406,382 |
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Dividends declared |
13,758 |
13,436 |
25,140 |
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Per share |
0.120 |
0.120 |
0.240 |
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|
Capital expenditures |
6,922 |
18,417 |
22,439 |
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Weighted average shares outstanding (000s) |
|||||
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Basic |
114,208 |
111,597 |
104,405 |
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Diluted |
117,995 |
115,381 |
106,468 |
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Shares outstanding at period end (000s) |
115,475 |
112,747 |
105,459 |
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Operating |
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Average daily production |
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Heavy oil (bbl/d) |
18,255 |
17,776 |
19,848 |
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|
Light oil (bbl/d) |
706 |
598 |
1,556 |
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|
Natural gas (mcf/d) |
2,562 |
4,148 |
6,388 |
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Total (boe/d) |
19,388 |
19,065 |
22,469 |
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Average realized price |
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Heavy oil ($/bbl)(2) |
21.83 |
33.15 |
39.92 |
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Light oil ($/bbl) |
35.43 |
48.55 |
47.18 |
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Oil ($/bbl) |
22.33 |
33.64 |
40.45 |
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Natural gas ($/mcf) |
1.72 |
2.27 |
2.77 |
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Combined ($/boe) |
22.07 |
32.91 |
39.32 |
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Netbacks ($/boe) |
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Average realized price |
22.07 |
32.91 |
39.32 |
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Royalties |
(1.77) |
(3.41) |
(4.29) |
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Production and operating expenses |
(14.66) |
(16.56) |
(16.21) |
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Transportation expenses |
(1.37) |
(1.94) |
(1.98) |
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Operating netback(1) |
4.27 |
11.00 |
16.84 |
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Realized gains on financial derivative contracts |
20.87 |
0.27 |
17.92 |
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General and administrative expenses |
(4.43) |
(3.03) |
(2.59) |
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Cash finance costs |
(4.40) |
(4.42) |
(4.19) |
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Other |
(0.79) |
0.82 |
1.74 |
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Funds from operations(1) |
15.52 |
4.64 |
29.72 |
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Notes:
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(1) |
Funds from operations, net debt and operating netback do not have any standardized meaning prescribed by International Financial Reporting Standards. See “Non-IFRS Financial Measures” and “Additional IFRS Measures” in the MD&A for the three months ended March 31, 2016 and 2015. |
|
(2) |
Average realized heavy oil prices are net of blending expenses and include the impact of physical delivery contracts (when applicable). |
WELL POSITIONED FOR LONG-TERM SUSTAINABILITY
Northern Blizzard has good liquidity, a well-structured balance sheet, supportive shareholders and high quality, low decline assets that position the Company for long-term sustainability.
Northern Blizzard’s strength is demonstrated by:
HIGHLIGHTS
OPERATIONS REVIEW
Capital spending during the first quarter of 2016 was $6.9 million. This included polymer powder, well workovers and conversions and the drilling of one water disposal well. We currently have no additional drilling in our 2016 budget as year-to-date oil prices do not support economic returns to justify investing capital.
We continue to focus on managing assets to lower base decline rates and reducing cost structures to the lowest sustainable levels. In this regard, we have been very successful. Operating costs for the first quarter of 2016 were below $15.00 per boe, as we continue to benefit from the rigorous cost controls initiated in late 2014. G&A costs for the first quarter of 2016 reflected salary roll backs and the difficult decision to reduce the number of personnel, which resulted in one-time severance costs.
Over 70% of our assets have a positive operating netback at a WTI price of US$30/bbl. This includes Cactus Lake, Court, Winter and Coleville Viking assets, where average operating costs are below $12.50/boe and average royalty rates are approximately 8%. These assets are the core of our asset base and continue to provide excellent economic returns even at lower oil prices. In these core areas, Northern Blizzard has over 1,000 drilling locations with anticipated rates of return greater than 30% at WTI prices of US$40–$45/bbl.
At our Plover Lake SAGD project, production has been lower than anticipated. We have completed a detailed review of our project and of analogs. Based on our review, Northern Blizzard has completed a series of facility improvements and downhole workovers. We have re-established steam injection capacity to 6,000 cold water equivalent (“CWE”) barrels per day and have been increasing the amount of steam injected into the reservoir. Currently, field steam injection is over 5,000 CWE barrels per day and should reach maximum steam injection of just under 6,000 CWE barrels per day within 60 days. Oil production is expected to follow the increased steam injection.
RISK MANAGEMENT
Northern Blizzard has a comprehensive hedging program in place to protect prices on crude oil volumes and maintain the Company’s strong financial position. A summary of Northern Blizzard’s current hedge position is provided in the table below.
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(C$)(1,2) |
2016 |
2017 |
2018 |
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WTI |
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Hedged volumes (bbl/d) |
11,500 |
10,000 |
6,000 |
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Average price ($/bbl) |
79.50 |
66.19 |
60.64 |
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WTI / WCS differential |
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Hedged volumes (bbl/d) |
11,500 |
8,000 |
– |
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Average price ($/bbl) |
(18.87) |
(18.28) |
– |
|
Notes:
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(1) |
Contracts denominated in US dollars have been converted to Canadian dollars at CAD/USD strip prices as of May 9, 2016. |
|
(2) |
The prices and volumes in this table represent averages for several contracts over the respective periods presented. The average price of a group of contracts is for indicative purposes only and does not have the same settlement profile as the individual contract. Details of the risk management contracts are disclosed in the notes to the Company’s condensed consolidated interim financial statements. |
During the first quarter of 2016, Northern Blizzard realized $35.4 million in gains on physical delivery and financial derivative contracts. The gains realized were mainly on Canadian dollar WTI contracts due to lower than hedged oil prices.
FINANCIAL LIQUIDITY
At March 31, 2016, Northern Blizzard had $5.9 million drawn on our $475 million credit facility, $358.8 million of senior unsecured notes outstanding (principal amount) and a working capital surplus of $4.0 million.
Northern Blizzard has a stock dividend program that enables shareholders to receive dividends in the form of common shares. The Company’s significant shareholders, that hold approximately 70% of the outstanding shares, have indicated that they will continue to receive stock dividends.
Northern Blizzard’s capital expenditure forecast for 2016 is $40.0 million. Northern Blizzard anticipates that funds from operations, together with the revolving credit facility, will be sufficient to finance current operations, cash dividends, planned capital expenditures and working capital requirements.
Northern Blizzard’s credit facility has two financial covenants that are calculated quarterly. The calculation for each financial covenant is based on specific definitions and cannot be calculated by referring to Northern Blizzard’s consolidated financial statements. At March 31, 2016, the Company was in compliance with the financial covenants.
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Covenant description |
Covenant |
Position at March 31, 2016 |
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Senior debt to EBITDA ratio |
Less than 3.0 |
0.1 |
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Interest coverage ratio |
Greater than 2.5 |
5.2 |
DIVIDEND
Northern Blizzard currently pays a monthly dividend of $0.04 per share. Northern Blizzard has a Stock Dividend Program (“SDP”) and shareholders holding approximately 74% of the Company’s outstanding shares currently participate in the SDP.
The SDP allows shareholders to elect to receive their dividends in the form of common shares in lieu of receiving a cash dividend on the dividend payment date. Participation in the SDP is optional; additional information can be found on Northern Blizzard’s website at www.northernblizzard.com or by contacting your financial institution or investment advisor. The availability of the SDP and its terms and conditions are subject to the discretion of Northern Blizzard’s Board of Directors.
GUIDANCE
Northern Blizzard’s guidance is based on annual estimates released on February 12, 2016. We note there are variations between the actual results for the first quarter of 2016 and the annual estimates mainly due to the nature of operations over the course of a year. Northern Blizzard expects actual 2016 results to be close to guidance at the end of the year.
Advisories
BOE Conversion and Other Advisories
In this news release, natural gas has been converted to boe based on a conversion rate of six thousand cubic feet of natural gas to one barrel (6 mcf : 1 bbl), which represents an energy equivalency conversion method applicable at the burner tip and does not represent a value equivalency at the wellhead. While it is useful for comparative measures, it may not accurately reflect individual product values and may be misleading if used in isolation.
Unless otherwise indicated, all currency is in Canadian dollars.
Forward-Looking Statements
This news release contains certain forward-looking statements and forward-looking information (collectively referred to as “forward-looking statements”) within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements contain words such as “anticipate”, “believe”, “plan”, “continuous”, “estimate”, “expect”, “may”, “will”, “project”, “should”, or similar words suggesting future outcomes.
In particular, this news release contains forward-looking statements pertaining to the following:
Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders.
With respect to forward-looking statements contained in this news release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; and the ability to market oil and natural gas successfully to current and new customers. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, substantial capital requirements, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, potential cost overruns, variations in foreign exchange rates, diluent supply shortages, competition for capital, equipment, new leases, pipeline capacity and skilled personnel, credit risks associated with counterparties, the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate decommissioning costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company’s assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. Additionally, the payment of dividends is dependent on the satisfaction of the applicable liquidity and solvency tests imposed by the Business Corporations Act (Alberta). The foregoing risks and other risks are described in more detail in the Company’s annual information form for the year ended December 31, 2015. Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, readers are cautioned that the actual results achieved may vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
SOURCE Northern Blizzard Resources Inc.
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