CALGARY, May 11, 2016 /CNW/ – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Corporation“) (TSX: PPY) is pleased to announce the syndicated group of lenders have reconfirmed the Corporation’s credit facility at $325 million, an update on construction by AltaGas Ltd. (“AltaGas“) at the AltaGas Townsend Facility (the “Townsend Facility“), updated hedging, and first quarter 2016 financial and operating results.
HIGHLIGHTS:
- Credit facilities have been reconfirmed at $325 million;
- The Townsend Facility is over 90% complete;
- Capital spending of $67.1 million was approximately $13 million (16%) below budget expectations in November 2015 due to efficiency gains;
- Financial hedges currently cover 63% of remaining 2016 forecast average production (89.5 MMcf/d) at an average price of $3.31/Mcf at AECO and $2.09/Mcf at Station 2;
- First quarter 2016 operating costs decreased 18% to $0.88/Mcfe from $1.07/Mcfe during the first quarter of 2015;
- Transportation costs during the first quarter of 2016 decreased 30% to $0.30/Mcfe from $0.43/Mcfe during the first quarter of 2015;
CONFIRMED CREDIT FACILITIES
Painted Pony’s syndicated credit facilities of $325 million, which includes current availability under the borrowing base of $225 million, was confirmed following a regularly scheduled, semi-annual review conducted in April 2016. As at March 31, 2016 Painted Pony had $87.6 million in bank debt, leaving the Corporation well positioned to execute on the remainder of the 2016 capital development plan.
ALTAGAS TOWNSEND FACILITY
Completion of the 198 MMcf/d AltaGas Townsend facility remains on schedule for a mid-2016 commissioning. AltaGas confirms that the Townsend Facility is over 90% complete with construction progress continuing ahead of schedule. The associated gas gathering line that connects Painted Pony’s Blair Creek area to the Townsend Facility, also being constructed by AltaGas, is substantially complete. To accommodate the potential early Townsend Facility commissioning and to mitigate any potential delays of firm transportation, Painted Pony has secured additional interim firm transportation to meet all take-or-pay and contracted natural gas volume commitments for the Townsend Facility. Painted Pony expects to begin delivering volumes to the Townsend Facility during the third quarter of 2016 and is targeting 2016 exit production volumes of approximately 240 MMcfe/d (40,000 boe/d).
FINANCIAL HEDGING UPDATE
Painted Pony has hedged approximately 63% of forecast second quarter through fourth quarter 2016 production at an average price of $3.31/Mcf on AECO swaps (74% of hedged volumes) and an average price of $2.09/Mcf on Station 2 swaps (26% of hedged volumes). Painted Pony’s average hedge prices are considerably above current spot pricing at AECO and at Station 2 natural gas sales points. As a result of these hedges, Painted Pony has mitigated exposure to near-term natural gas pricing weakness, strengthening operating netbacks and reducing overall corporate risk.
The current 2016 quarterly hedging position is summarized below. Additional information about Painted Pony’s financial hedging can be found in the current Investor Presentation located at: http://paintedpony.ca/investors/presentations/default.aspx
Term |
AECO Financial Swaps |
Station 2 Financial Swaps |
Total |
|||
Volume (MMcf/d) |
Average Price ($/Mcf) |
Volume (MMcf/d) |
Average Price ($Mcf) |
Volume (MMcf/d) |
Percentage of Forecast Production |
|
Q2 2016 |
60.9 |
$3.31 |
– |
– |
60.9 |
70% |
Q3 2016 |
60.9 |
$3.31 |
9.2 |
$2.08 |
70.1 |
55% |
Q4 2016 |
78.3 |
$3.30 |
59.4 |
$2.09 |
137.6 |
65% |
COMMODITY PRICING
Pricing differentials at British Columbia’s Station 2 sales hub narrowed 57% against AECO-based prices during the first quarter of 2016 compared to the fourth quarter of 2015. This resulted in Painted Pony’s realized commodity pricing moving up slightly to $1.83/Mcfe during the first quarter of 2016 compared to $1.81/Mcfe during the fourth quarter of 2015 despite significant weakening of AECO spot prices in the first quarter of 2016.
FIRST QUARTER 2016 FINANCIAL & OPERATING RESULTS
Production
Production averaged 99.6 MMcfe/d (16,601 boe/d) in the first quarter of 2016 and was impacted by approximately 3 MMcfe/d (500 boe/d) of low spot price-driven, shut-in production volumes. Average daily production volumes during the first quarter of 2016 represent a 2% increase over first quarter 2015 production volumes of 97.5 MMcfe/d (16,243 boe/d). Production guidance for 2016 remains unchanged, with anticipated annual average daily production of approximately 138 MMcfe/d (23,000 boe/d). Painted Pony expects production volumes to average approximately 90 – 96 MMcfe/d (15,000 – 16,000 boe/d) in the second quarter, with volumes rising in the fourth quarter to exit 2016 at 240 MMcfe/d (40,000 boe/d).
Capital Expenditures and Operations
During the first quarter of 2016 Painted Pony invested $66.7 million in capital expenditures, 13% below budget due to additional capital efficiencies and cost savings. These savings have allowed a reduction to Painted Pony’s anticipated 2016 capital program from a budget level of $215 million announced in November 2015 to $179 million, while preserving the same production profile. Painted Pony continues to execute on its capital program in preparation for the start-up of the Townsend Facility in mid-2016. The Corporation drilled 12 (12.0 net) wells and completed 9 (9.0 net) wells during the first quarter of 2016.
Operating Costs
Due to efficiencies, 2016 first quarter operating costs were reduced by $0.19/Mcfe or 18% to $0.88/Mcfe compared to the first quarter of 2015 at $1.07/Mcfe. The Corporation has reduced third party service costs associated with a recent decrease in industry activity.
Transportation
Transportation costs during the first quarter of 2016 decreased by $0.13/Mcfe (30%) to $0.30/Mcfe when compared to the first quarter of 2015. These costs decreased due to reduced trucking of NGLs and Painted pony’s success in negotiating access to alternate delivery points with lower costs for NGL trucking. Transportation costs for the remainder of the year are expected to average approximately $0.40/Mcfe as NGL production volumes increase from approximately 5% in early 2016 to over 10% of forecast production volumes by year-end 2016.
FINANCIAL AND OPERATING HIGHLIGHTS
Three months ended March 31, |
|||||
2016 |
2015 |
Change |
|||
Financial ($ millions, except per share and shares outstanding) |
|||||
Petroleum and natural gas revenue(1) |
16.6 |
23.6 |
(30%) |
||
Funds flow from operations(2) |
8.6 |
10.2 |
(16%) |
||
Per share – basic(3) and diluted(4) |
0.09 |
0.10 |
(10%) |
||
Net loss |
(2.2) |
(3.5) |
(37%) |
||
Per share – basic(3) and diluted(4) |
(0.02) |
(0.04) |
(50%) |
||
Capital expenditures |
67.1 |
48.4 |
39% |
||
Working capital (deficiency)(5) |
(26.0) |
(29.1) |
(11%) |
||
Bank debt |
87.6 |
7.7 |
N/A |
||
Total assets |
857.9 |
740.1 |
16% |
||
Shares outstanding (millions) |
100.0 |
99.7 |
N/A |
||
Basic weighted-average shares (millions) |
100.0 |
99.6 |
N/A |
||
Fully diluted weighted-average shares (millions) |
100.0 |
99.6 |
N/A |
||
Operational |
|||||
Daily production volumes |
|||||
Natural gas (MMcf/d) |
94.5 |
91.1 |
4% |
||
Natural gas liquids (bbls/d) |
852 |
1,068 |
(20%) |
||
Total (boe/d) |
16,601 |
16,243 |
2% |
||
Total (MMcfe/d) |
99.6 |
97.5 |
2% |
||
Realized prices |
|||||
Natural gas ($/Mcf) |
1.60 |
2.38 |
(33%) |
||
Natural gas liquids ($/bbl) |
36.26 |
41.35 |
(12%) |
||
Total ($/Mcfe) |
1.83 |
2.69 |
(32%) |
||
Operating netbacks before commodity risk management ($/Mcfe) (6) |
0.59 |
1.12 |
(47%) |
||
Operating netbacks ($/Mcfe) (6) |
1.21 |
1.38 |
(12%) |
||
1. |
Before royalties. |
2. |
Funds flow from operations and funds flow from operations per share (basic and diluted) are non-GAAP measures used to represent cash flow from operating activities before the effects of changes in non-cash working capital, deferred share unit expense and decommissioning expenditures. Funds flow from operations per share is calculated by dividing funds flow from operations by the weighted average number of basic or diluted shares outstanding in the period. See “Non-GAAP Measures”. |
3. |
Basic per share information is calculated on the basis of the weighted average number of shares outstanding in the period. |
4. |
Diluted per share information reflects the potential dilutive effect of stock options. |
5. |
Working capital (deficiency) is a non-GAAP measure calculated as current assets less current liabilities. See “Non-GAAP Measures”. |
6. |
Operating netbacks before commodity risk management is a non-GAAP measure calculated on a per unit basis as natural gas, crude oil and natural gas liquids revenues less royalties, operating and transportation costs. Operating netbacks is a non-GAAP measure calculated by adjusting operating netbacks before commodity risk management for realized gains or losses on commodity risk management. See “Non-GAAP Measures” and “Operating Netbacks”. |