CALGARY, Feb. 27, 2017 /CNW/ – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Corporation“) (TSX: PPY) is pleased to announce strong finding and development (“F&D“) costs, the third consecutive year of per Mcfe cash cost reductions, a 95% increase to funds flow from operations for 2016, further decreases in per-well capital expenses, and record-high production volumes during the fourth quarter of 2016.
2016 Reserve Highlights:
- Increased Total Proved (“1P“) reserves by 31% to 2.7 Tcfe at year end 2016 from 2.0 Tcfe at year end 2015;
- Increased Proved Developed Producing (“PDP“) reserves by 102% to 484 Bcfe
(80.7 MMboe) from 240 Bcfe (40.0 MMboe); - Increased Proved Plus Probable (“2P“) reserves 7% to more than 4.9 Tcfe at year-end 2016 from 4.6 Tcfe at year-end 2015;
- Generated a finding, development and acquisition (“FD&A“) PDP recycle ratio of 2.0 times and a 1P recycle ratio of 2.6 times, inclusive of changes in future development capital (“FDC“);
- Reduced 2P FDC by approximately $300 million or 9% to $2.9 billion at year-end 2016 from $3.2 billion at year-end 2015 as a result of improved well cost structure;
- Realized reductions in 2P FDC exceeded capital spent in 2016, which resulted in negative 2P FD&A and 2P F&D costs;
- Increased PDP before tax net present values at December 31, 2016 discounted at 10% (“NPV10“) by 119% to $7.04/share in 2016 from $3.23/share in 2015;
- Replaced 579% of 2016 production volumes through PDP reserve additions of 295 Bcfe (49.2 MMboe);
- Achieved a 1P NPV10 value/share increase of 65% to $22.92/share at year-end 2016 from $13.92/share at year-end 2015;
2016 Fourth Quarter and Full Year Production Highlights
- Increased fourth quarter 2016 average daily production volumes by 144% to 220.2 MMcfe/d (36,695 boe/d) over fourth quarter 2015 average daily production volumes of 90.3 Mcfe/d (15,043 boe/d);
- Averaged annual daily production volumes of 139.2 MMcfe/d (23,204 boe/d) during 2016 and a 49% increase over 2015 annual average daily production of 93.6 MMcfe/d (15,604 boe/d);
- Natural gas liquids (“NGL“) production volumes increased 416% to 3,177 bbls/d during the fourth quarter of 2016 compared to 616 bbls/d during the fourth quarter of 2015;
2016 Fourth Quarter and Full Year Financial Highlights
- Increased funds flow from operations during the fourth quarter of 2016 by a factor of 10 times to $26.5 million ($0.26/share) compared to $2.6 million ($0.03/ share) during the fourth quarter of 2015;
- Realized commodity price discount to AECO daily spot price was reduced to 6% during 2016 compared to a 22% discount to AECO daily spot price during 2015;
- Reduced annual cash operating costs (royalties, operating expenses and transportation costs) by $0.32/Mcfe (24%) to $1.04/Mcfe in 2016 from $1.36/Mcfe in 2015, and;
- Realized pre-tax income, of $8.0 million during the fourth quarter of 2016, before unrealized non-cash hedging losses.
Mr. Patrick Ward, President and CEO of Painted Pony, in commenting on these highlights said, “Painted Pony executed a capital plan in 2016 that delivered results for shareholders entirely consistent with our 5 year plan, most notably organic production growth per share of more than 150% exit 2016 over exit 2015. The significant production milestones achieved in 2016 combined with decreasing cash expenses, continued capital cost reductions, and robust full-cycle economics highlighted by a strong PDP recycle ratio of 2.0 times, positions Painted Pony as an industry leader in low-cost, full-cycle Montney development.”
2017 Capital Budget and 2018 Development Plans
Painted Pony’s 2017 capital budget and 5-year plan are reviewed regularly by the Corporation’s executive and Board of Directors. Due to the recent decline in forward strip natural gas prices, Painted Pony is prudently reviewing its 2017 capital budget and 2018 development plans to ensure the Corporation maintains its current financial flexibility. Painted Pony has financially hedged approximately 65% of 2017 natural gas production volumes and, when combined with indexed physical contracts, is well positioned to withstand lower natural gas prices.
SUMMARY OF 2016 RESERVES AS PREPARED BY GLJ PETROLEUM CONSULTANTS
2016 Summary of Reserves
GLJ Petroleum Consultants Ltd. (“GLJ“), independent qualified reserves evaluators, prepared an evaluation of Painted Pony’s properties effective December 31, 2016, which is contained in a report dated February 27, 2017.
2P
During 2016, Painted Pony increased 2P reserves by 7% to 4.9 Tcfe (823 MMboe). As a result, 2P reserves per share increased to 49.3 Mcfe/share (8.2 boe/share) at year-end 2016 from 46.1 Mcfe/share (7.7 boe/share) at year-end 2015. The estimated NPV10 of 2P reserves at December 31, 2016 increased by 28% to $3.8 billion over year-end 2015 of $2.9 billion. The Corporation’s 2P reserve additions replaced 2016 average daily production of 139.2 MMcfe/d (23,204 boe/d) by 7.5 times.
1P
During 2016, Painted Pony increased 1P reserves by 31% to 2.7 Tcfe (442 MMboe). As a result, 1P reserves per share increased to 26.5 Mcfe/share (4.4 boe/share) at year-end 2016 from 20.2 Mcfe/share (3.4 boe/share) at year-end 2015. The estimated NPV10 of 1P reserves at December 31, 2016 increased by 65% to $2.3 billion over year-end 2015 of $1.4 billion. The Corporation’s 1P reserve additions replaced 2016 average daily production of 139.2 MMcfe/d (23,204 boe/d) by 13.4 times.
PDP
During 2016, Painted Pony increased PDP reserves by 102% to 484 Bcfe (80.7 MMboe). As a result, PDP reserves per share increased to 4.8 Mcfe/share (0.8 boe/share) at year-end 2016 from 2.4 Mcfe/share (0.4 boe/share) at year-end 2015. The estimated NPV10 of PDP reserves at December 31, 2016 increased by 119% to $705 million ($7.04/share) over year-end 2015 of $323 million, ($3.23 /share). The Corporation’s PDP reserve additions replaced 2016 average daily production of 139.2 MMcfe/d (23,204 boe/d) by 5.8 times.
Reserve Life Index
Painted Pony accelerated value in 2016 by reducing the 2P reserve life index (“RLI“), based on fourth quarter 2016 annualized production, to 61 years at the end of 2016 from 140 years at the end of 2015, and the 1P RLI to 33 years at the end of 2016 from 61 years at the end of 2015.
2016 FINDING AND DEVELOPMENT COSTS AND RECYCLE RATIOS
Painted Pony’s reduced FDC led to a negative 2P F&D cost, resulting in an incalculable recycle ratio. In 2016, the Corporation generated an FD&A 1P recycle ratio of 2.6 times and 2.0 times on an FD&A PDP basis. This is calculated by dividing Painted Pony’s average operating netback (incl. Finance Lease Expense) of $1.45/Mcfe, which is calculated using revenue plus realized hedging gains less royalties, operating expenses, transportation costs, and finance lease expense, by the FD&A costs, including changes in FDC, of $0.56/Mcfe on a 1P basis and $0.72/Mcfe on a PDP basis.
2016 |
||
Revenue |
$2.39 |
|
Realized Gain on Commodity Risk Management |
$0.38 |
|
Revenue (incl. Realized Gain on Commodity Risk Management) |
$2.77 |
|
Royalties |
($0.05) |
|
Operating Expenses |
($0.68) |
|
Transportation Costs |
($0.31) |
|
Operating Netback |
$1.73 |
|
Finance Lease Expense |
($0.28) |
|
Operating Netback (incl. Finance Lease Expense) |
$1.45 |
|
Note: See Non-GAAP disclosure in Advisory section |
The following tables outline GLJ’s estimates of Painted Pony’s reserves and associated NPV10 at December 31, 2016 and December 31, 2015:
Summary of Company Working Interest Reserves
December 31, 2016 |
December 31, 2015 |
|||||
Natural Gas |
NGLs |
Natural Gas |
Oil |
Oil Equivalent |
||
Proved Developed Producing |
443.6 |
6.8 |
484.4 |
80.7 |
40.0 |
|
Proved Developed Non-Producing |
4.4 |
0.0 |
4.5 |
0.8 |
0.7 |
|
Proved Undeveloped |
1,976.8 |
31.2 |
2,163.8 |
360.6 |
295.8 |
|
Total Proved |
2,424.8 |
38.0 |
2,652.7 |
442.1 |
336.6 |
|
Total Probable |
2,092.0 |
32.6 |
2,287.6 |
381.3 |
431.4 |
|
Total Proved Plus Probable |
4,516.7 |
70.6 |
4,940.3 |
823.4 |
768.0 |
|
See the advisories with respect to resource definitions. |
Net Present Values of Future Net Revenue (1)(2)
(Forecast Prices and Costs; Numbers in this table are subject to rounding) ($Millions) |
||||||
As at December 31, 2016 |
||||||
Annual Discount Rate |
0% |
5% |
10% |
15% |
20% |
|
BEFORE INCOME TAXES |
||||||
Proved |
||||||
Developed Producing |
1,233.1 |
890.5 |
705.3 |
591.8 |
515.5 |
|
Developed Non-Producing |
5.3 |
3.9 |
2.9 |
2.3 |
1.8 |
|
Undeveloped |
4,430.5 |
2,552.8 |
1,587.1 |
1,033.8 |
690.0 |
|
Total Proved |
5,668.9 |
3,447.1 |
2,295.3 |
1,627.9 |
1,207.2 |
|
Probable |
6,242.4 |
2,767.2 |
1,480.5 |
899.5 |
596.1 |
|
Total Proved Plus Probable |
11,911.3 |
6,214.4 |
3,775.8 |
2,527.3 |
1,803.3 |
(1) |
Estimates of future net revenue, whether discounted or not, do not represent fair market value. |
(2) |
Future net revenue is after deduction of estimated costs of abandonment and reclamation of existing and future wells that were evaluated by GLJ in the 2016 Reserves Evaluation and does not include costs of abandonment and reclamation of facilities |
Reconciliation of Company Gross Reserves
(Forecast Prices and Costs; Numbers in this table are subject to rounding) |
||||||
Natural Gas(1) |
NGLs |
Total |
Total |
|||
(Bcf) |
(MMbbl) |
(MMboe) |
(Bcfe) |
|||
Proved Developed Producing Reserves |
||||||
Opening Balance December 31, 2015 |
218.8 |
3.6 |
40.0 |
240.3 |
||
Discoveries |
– |
– |
– |
– |
||
Extensions and Improved Recovery |
246.3 |
4.4 |
45.4 |
272.6 |
||
Technical Revisions |
15.1 |
(0.7) |
1.8 |
10.9 |
||
Economic Factors |
– |
(0.0) |
(0.0) |
(0.2) |
||
Dispositions |
(6.4) |
(0.1) |
(1.1) |
(6.7) |
||
Acquisitions |
17.4 |
0.2 |
3.1 |
18.4 |
||
Production |
(47.5) |
(0.6) |
(8.5) |
(51.0) |
||
Closing Balance December 31, 2016 |
443.6 |
6.8 |
80.7 |
484.4 |
||
Proved Reserves |
||||||
Opening Balance December 31, 2015 |
1,829.6 |
31.7 |
336.6 |
2,019.8 |
||
Discoveries |
– |
– |
– |
– |
||
Extensions and Improved Recovery |
533.8 |
9.9 |
98.8 |
592.9 |
||
Technical Revisions |
110.9 |
(3.5) |
15.0 |
89.8 |
||
Economic Factors |
– |
(0.6) |
(0.6) |
(3.8) |
||
Dispositions |
(143.6) |
(1.9) |
(25.8) |
(154.8) |
||
Acquisitions |
141.6 |
3.0 |
26.6 |
159.7 |
||
Production |
(47.5) |
(0.6) |
(8.5) |
(51.0) |
||
Closing Balance December 31, 2016 |
2,424.8 |
38.0 |
442.1 |
2,652.7 |
||
Proved Plus Probable Reserves |
||||||
Opening Balance December 31, 2015 |
4,152.3 |
76.0 |
768.0 |
4,608.3 |
||
Discoveries |
– |
– |
– |
– |
||
Extensions and Improved Recovery |
305.6 |
2.0 |
52.9 |
317.7 |
||
Technical Revisions |
52.4 |
(7.7) |
1.0 |
6.0 |
||
Economic Factors |
– |
(0.3) |
(0.3) |
(1.8) |
||
Dispositions |
(270.7) |
(3.4) |
(48.5) |
(291.2) |
||
Acquisitions |
324.6 |
4.6 |
58.7 |
352.3 |
||
Production |
(47.5) |
(0.6) |
(8.5) |
(51.0) |
||
Closing Balance December 31, 2016 |
4,516.7 |
70.6 |
823.4 |
4,940.3 |
(3) Includes non-associated gas; See advisories re: product type. |
The following table highlights Painted Pony’s capital program efficiency.
Capital Efficiencies (1)
(Forecast Prices and Costs ) |
||||||
Proved Developed Producing |
2016 |
2015 |
2014 |
3-Year Weighted Avg. |
||
FD&A ($/Mcfe) |
$0.72 |
$1.38 |
$1.56 |
$1.02 |
||
Recycle Ratio |
2.0x |
0.9x |
2.0x |
1.8x |
||
F&D ($/Mcfe) |
$0.75 |
$1.38 |
$2.26 |
$1.23 |
||
Recycle Ratio |
1.9x |
0.9x |
1.4x |
1.5x |
||
Proved |
||||||
FD&A ($/Mcfe) |
$0.56 |
$0.84 |
$1.16 |
$0.81 |
||
Recycle Ratio |
2.6x |
1.5x |
2.7x |
2.2x |
||
F&D ($/Mcfe) |
$0.57 |
$0.84 |
$1.35 |
$0.85 |
||
Recycle Ratio |
2.6x |
1.5x |
2.3x |
2.1x |
||
Proved Plus Probable |
||||||
FD&A ($/Mcfe) |
n/a |
$0.16 |
$0.70 |
$0.32 |
||
Recycle Ratio |
n/a |
7.5x |
4.5x |
5.7x |
||
F&D ($/Mcfe) |
n/a |
$0.16 |
$0.76 |
$0.35 |
||
Recycle Ratio |
n/a |
7.5x |
4.1x |
5.1x |
||
(1) See advisories with respect to finding and development costs. |
Future Development Costs of Undeveloped Reserves (1)
(Forecast Prices and Costs) |
||
2P Undeveloped |
||
As at December 31 |
2016 |
2015 |
Net 2P Undeveloped Wells |
548 |
544 |
2P FDC ($Millions, undiscounted) |
2,917 |
3,205 |
Reserves (Bcfe) |
4,317 |
4,301 |
2P FDC per Mcfe |
$0.68 |
$0.75 |
(Forecast Prices and Costs) |
||
1P Undeveloped |
||
As at December 31 |
2016 |
2015 |
Net 1P Undeveloped Wells |
339 |
287 |
1P FDC ($Millions, undiscounted) |
1,825 |
1,677 |
Reserves (Bcfe) |
2,164 |
1,775 |
1P FDC per Mcfe |
$0.84 |
$0.94 |
(1) Development costs represents the total development capital less capital associated with the Capital Leases (proved: $1,864.7mm; proved plus probable: $3,023.5mm). |
2017 OPERATIONAL UPDATE
Current Operations
To date in 2017, Painted Pony has drilled 9 (9.0 net) wells and completed 4 (4.0 net) wells. Prior to spring break-up, a further 12 (12.0 net) wells are expected to be drilled and an additional 12 (12.0 net) wells are expected to be completed and production tested. The Corporation currently has five drilling rigs active in the field. The majority of current activity is to develop the production volumes necessary to supply the AltaGas Townsend Facility (the “Facility“) with an incremental 48 MMcf/d, which Painted Pony expects to begin flowing to the Facility in August 2017. Painted Pony anticipates supplying an additional 99 MMcf/d to the Facility in October 2017 upon the completion of a 99 MMcf/d Facility expansion project. Painted Pony intends to drill 61 (61.0 net) wells and complete 61 (61.0 net) wells in 2017.
Production
Painted Pony’s current productive capacity exceeds 240 MMcfe/d (40,000 boe/d) while first quarter 2017 average production volumes are expected to average approximately 213 – 225 MMcfe/d (35,500 – 37,500 boe/d). This expected level of production is approximately flat to fourth quarter 2016 average daily production volumes due to ongoing shut-ins of adjacent wells during off-set fracing and shut-ins of tested wells for tie-in throughout the first quarter of 2017.
The Corporation expects annual daily volumes will average 288 MMcfe/d (48,000 boe/d) in 2017, exiting 2017 at approximately 408 MMcfe/d (68,000 boe/d). Expected annual average daily production volumes in 2017 represent an increase of 107% over 2016 average daily production volumes of 139.2 Mcfe/d (23,204 boe/d).
TRANSPORTATION, HEDGING AND PRICING
In order to protect cash flow, capital investment and production profiles, Painted Pony sells natural gas using a combination of financial hedges and firm physical delivery transactions, supported by firm transportation contracts. Painted Pony has been successful in diversifying sales contracts to AECO, Station 2, and Sumas through a combination of these strategies.
Transportation Firm Capacity
Currently Painted Pony has 201 MMcf/d of firm transportation on the Spectra pipeline system in northeast BC and an additional 45 MMcf/d of firm transportation into AECO on the Nova Gas Transmission Ltd (“NGTL“) system at Groundbirch, BC.
Through successful bids via open seasons on the Spectra pipeline system in northeast BC in 2015 and 2016, Painted Pony has added additional firm transportation of 220 MMcf/d, (expected to be in-service December 2017) and 250 MMcf/d (expected in-service December 2018). This will bring Painted Pony’s firm transportation on the Spectra system to 357 MMcf/d by year-end 2017 and 577 MMcf/d by year-end 2018. In addition, Painted Pony has committed to an additional 130 MMcf/d of firm transportation on NGTL at Groundbirch via the TCPL Towerbirch Expansion Project (expected to be in-service November 2017). By November 2017, the Corporation will have 174 MMcf/d of firm transportation on NGTL at Groundbirch, supplied by Painted Pony’s natural gas on the Spectra system. This portfolio of contracts provides certainty of long-term firm natural gas transportation for Painted Pony’s growing British Columbia production base and provides AECO pricing on a significant portion of Painted Pony’s natural gas production.
Transportation and Hedging
Painted Pony has executed physical delivery contracts which further diversify the Corporation’s access to sales hubs. From November 2016 to August 2017, the Corporation has 194 MMcf/d of AECO and Sumas indexed contracts. These contracts have a variety of terms and fixed differentials and, when combined with financial contracts, reduce Painted Pony’s exposure to Station 2 spot pricing to less than 13% (28 MMcf/d) of forecasted natural gas production during this period.
Painted Pony hedges certain production volumes to provide balance sheet and capital spending protection. For 2017, 2018 and 2019, Painted Pony has the following financial hedges in place:
Financial AECO Natural Gas Contracts |
||||
Reference |
Volume |
Term |
Weighted Average |
Options Traded |
CDN$ AECO |
90,000 |
Q1 2017 |
2.87 |
Swaps |
CDN$ AECO |
75,000 |
Q2 2017 |
2.85 |
Swaps |
CDN$ AECO |
90,000 |
Q3 2017 |
2.86 |
Swaps |
CDN$ AECO |
145,000 |
Q4 2017 |
2.89 |
Swaps |
CDN$ AECO |
71,000 |
Q1 2018 |
2.93 |
Swaps |
CDN$ AECO |
71,000 |
Q2 2018 |
2.85 |
Swaps |
CDN$ AECO |
50,000 |
Q3 2018 |
2.81 |
Swaps |
CDN$ AECO |
24,000 |
Q4 2018 |
2.72 |
Swaps |
CDN$ AECO |
18,000 |
Q1 2019 |
2.64 |
Swaps |
CDN$ AECO |
18,000 |
Q2 2019 |
2.64 |
Swaps |
CDN$ AECO |
25,000 |
Q4 2017 – Q4 2019 |
2.88 |
Call Options |
Financial Station 2 Natural Gas Contracts |
||||
Reference |
Volume |
Term |
Weighted Average |
Options Traded |
CDN$ Station 2 |
75,000 |
Q1 2017 |
1.82 |
Swaps |
CDN$ Station 2 |
90,000 |
Q2 2017 |
1.90 |
Swaps |
CDN$ Station 2 |
100,000 |
Q3 2017 |
1.93 |
Swaps |
CDN$ Station 2 |
120,000 |
Q4 2017 |
2.07 |
Swaps |
CDN$ Station 2 |
105,000 |
Q1 2018 |
2.04 |
Swaps |
CDN$ Station 2 |
42,000 |
Q2 2018 |
2.38 |
Swaps |
CDN$ Station 2 |
37,000 |
Q3 2018 |
2.36 |
Swaps |
CDN$ Station 2 |
37,000 |
Q4 2018 |
2.36 |
Swaps |
CDN$ Station 2 |
37,000 |
Q1 2019 |
2.36 |
Swaps |
CDN$ Station 2 |
37,000 |
Q2 2019 |
2.36 |
Swaps |
CDN$ Station 2 |
25,000 |
Q3 2019 |
2.37 |
Swaps |
CDN$ Station 2 |
10,000 |
Q4 2019 |
2.45 |
Swaps |
Financial WTI Crude Oil Contracts |
||||
Reference |
Volume |
Term |
Weighted Average |
Options Traded |
CDN$ WTI |
500 |
Q1 2017 – Q4 2017 |
70.05 |
Swaps |
CDN$ WTI |
500 |
Q1 2018 – Q4 2019 |
70.20 |
Swaps |
Subsequent to December 31, 2016, Painted Pony entered into an additional commodity risk management contract as follows:
Reference |
Volume |
Term |
Weighted Average |
Options Traded |
CDN$ AECO |
10,000 |
Q1 2018 |
3.16 |
Swaps |
2016 FINANCIAL AND OPERATING RESULTS
Capital Expenditures
Exploration and development capital expenditures for 2016 of $203.5 million were approximately $9.0 million less than forecasted and included $152.9 million on drilling and completions activity. During 2016, the Corporation drilled 36 (36.0 net) wells targeting Montney natural gas. Expenditures on facilities and equipment during the year totaled $43.8 million and included wellsite facilities costs, pipeline construction costs and spending on compression and dehydration facilities. During the fourth quarter of 2016, Painted Pony’s capital expenditures were $51.3 million, approximately $9.0 million less than forecasted while still meeting forecasted production volumes targets.
Production
Annual average daily production volumes increased 49% compared to the year ended December 31, 2015 underscoring strong year-over-year organic growth. Fourth quarter 2016 average daily production volumes increased approximately 144% to 220.2 MMcfe/d (36,695 boe/d) compared to the fourth quarter of 2015 when average daily production volumes totaled 90.3 MMcfe/d (15,043 boe/d).
Funds Flow from Operations
Painted Pony generated record funds flow from operations of $26.5 million ($0.26/share) during the fourth quarter of 2016, compared to $2.6 ($0.03/share) million during the fourth quarter of 2015. The increase was primarily a result of increased production and decreased cash operating costs (royalties, operating expenses and transportation costs).
During the three months and year ended December 31, 2016, the Corporation realized natural gas prices that represented discounts of 11% and 6%, respectively, to the AECO daily spot price. This compares to discounts of 35% and 22% to the AECO daily spot price realized in the three months and year ended December 31, 2015.
For the year ended December 31, 2016, the Corporation increased funds flow from operations 95% to $55.6 million compared to $28.5 million during the year ended December 31, 2015. The increase was a result of increased production, decreased operating and transportation expenses, and a $19.9 million gain on commodity risk management in 2016.
Cash Operating Costs and Netbacks
Painted Pony improved its cash operating costs (royalties, operating expenses and transportation costs) on a per Mcfe basis in 2016 to $1.04/ Mcfe, a 24% reduction from $1.36/Mcfe in 2015.
Royalties
Royalties in 2016 were $0.05/Mcfe, or 2.2% of revenue, compared with $0.06/Mcfe in 2015, or 2.5% of revenue. For 2017, Painted Pony expects royalty rates to be approximately 3.0% of revenue because of royalty credits. This estimate considers the combined impact of incremental sales volumes from newly drilled wells that will qualify for royalty holidays, net of royalties paid on wells that have obtained the full benefit of provincial royalty incentives.
Operating Costs
Painted Pony’s operating costs decreased by 28% in 2016 to $0.68/Mcfe from $0.94/Mcfe in 2015. This marks the second consecutive year of annual operating cost reductions in excess of 25%. Higher production volumes in the fourth quarter of 2016 lowered operating costs as fixed costs were spread over a larger production base, lowering per Mcfe costs. Also, the capital fee associated with the Townsend Facility, which began operations in the third quarter of 2016, is classified separately from operating costs, with the interest portion of the capital fee included in finance expenses.
The Corporation expects that average per Mcfe operating costs in 2017 will be in the range of $0.45 to $0.55/Mcfe, assuming normal seasonal weather conditions.
Transportation
Transportation costs for the fourth quarter of 2016 increased by $0.07/Mcfe or 23%, compared to the fourth quarter of 2015 due to a 416% increase in NGL volumes, which have higher transportation costs. NGL production volumes increased 416% to 3,177 bbls/d during the fourth quarter of 2016 compared to 616 bbls/d during the fourth quarter of 2015.
Painted Pony successfully negotiated access to alternate delivery points that lowered NGL trucking costs which decreased Painted Pony’s full-year 2016 transportation costs 14% or $0.05/Mcfe, to $0.31/Mcfe in 2016 from $0.36/Mcfe in 2015.
For 2017, the Corporation expects average per unit transportation costs to be approximately $0.35 – $0.40/Mcfe.
General and Administrative Costs
Due to significantly higher volumes in the fourth quarter of 2016 and ongoing cost control, general and administrative (“G&A”) expenses in the fourth quarter of 2016 decreased 69% to $0.17/Mcfe compared to $0.55/Mcfe in the fourth quarter of 2015.
Due to forecasted higher production volumes in 2017 and a continued focus on costs, Painted Pony expects 2017 G&A expenses to be approximately $0.10 – $0.12/Mcfe.
Interim CFO Appointment
Effective immediately Mr. John Van de Pol, Senior Vice President and Chief Financial Officer (“CFO“) is taking a short-term medical leave to recover from minor eye surgery. The leave is expected to last one to two weeks. Mr. Stuart Jaggard, Vice President and Controller, has been appointed Interim CFO of the Corporation. Mr. Jaggard joined Painted Pony as Vice President and Controller in October 2014.
FINANCIAL HIGHLIGHTS
Three Months Ending |
||||
($000s, except where noted) |
Dec. 31, |
Dec. 31, |
Change |
|
Petroleum and natural gas revenue(1) |
65,155 |
15,048 |
333% |
|
Funds flow from operations (2) |
26,501 |
2,572 |
930% |
|
Per share – basic (3) and diluted (4) |
0.26 |
0.03 |
767% |
|
Net income (loss) |
(27,761) |
2,550 |
(1,189)% |
|
Per share – basic (3) and diluted (4) |
(0.28) |
0.02 |
(1,500)% |
|
Cash Capital expenditures |
51,506 |
14,567 |
254% |
|
Working capital deficiency (5) |
(73,647) |
(4,629) |
1,491% |
|
Bank debt |
200,836 |
63,626 |
216% |
|
Net debt (6) |
228,463 |
77,361 |
195% |
|
Total assets |
1,336,955 |
781,574 |
71% |
|
Decommissioning obligations |
29,857 |
21,480 |
39% |
|
Average daily production volumes (boe/d) |
36,695 |
15,043 |
144% |
|
Average daily production volumes (MMcfe/d) |
220.2 |
90.3 |
144% |
|
Realized commodity prices |
||||
Natural gas ($/Mcf) |
2.78 |
1.60 |
74% |
|
NGLs ($/bbl) |
46.62 |
40.51 |
15% |
|
Total ($/Mcfe) |
3.22 |
1.81 |
78% |
|
Operating netbacks ($/Mcfe) (7) |
2.09 |
0.96 |
118% |
1. |
Before royalties. |
2. |
Funds flow from operations and funds flow from operations per share (basic and diluted) are non-GAAP measures used to represent cash flow from operating activities before the effects of changes in non-cash working capital, DSU expense and decommissioning expenditures. Funds flow from operations per share is calculated by dividing funds flow from operations by the weighted average number of basic or diluted shares outstanding in the period. See “Non-GAAP Measures”. |
3. |
Basic per share information is calculated on the basis of the weighted average number of shares outstanding in the period. |
4. |
Diluted per share information reflects the potential dilutive effect of stock options. |
5. |
Working capital deficiency is a non-GAAP measure calculated as current assets less current liabilities. See “Non-GAAP Measures”. |
6. |
Net debt is a non-GAAP measure calculated as bank debt and working capital deficiency, adjusted for the current portion of fair value of risk management contracts. See “Non-GAAP Measures”. |
7. |
Operating netbacks is a non-GAAP measure calculated on a per unit basis as natural gas and natural gas liquids revenues, adjusted for realized gains or losses on commodity risk management, less royalties, operating expenses and transportation costs. See “Non-GAAP Measures” and “Operating Netbacks”. |
FINANCIAL HIGHLIGHTS
Year ended December 31, |
||||
2016 |
2015 |
Change |
||
Financial ($ millions, except per share and shares outstanding) |
||||
Petroleum and natural gas revenue(1) |
121.6 |
81.6 |
49% |
|
Funds flow from operations(2) |
55.6 |
28.5 |
95% |
|
Per share – basic(3) and diluted(4) |
0.56 |
0.29 |
93% |
|
Net loss |
(51.9) |
(5.2) |
898% |
|
Per share – basic(3) and diluted(4) |
(0.52) |
(0.05) |
940% |
|
Capital expenditures |
204.4 |
106.7 |
92% |
|
Working capital deficiency (5) |
(73.6) |
(4.6) |
1,500% |
|
Net debt (6) |
228.5 |
77.4 |
195% |
|
Bank debt |
200.8 |
63.6 |
216% |
|
Total assets |
1,337.0 |
781.6 |
71% |
|
Shares outstanding (millions) |
100.2 |
100.0 |
– |
|
Basic / fully diluted weighted-average shares (millions) |
100.1 |
99.8 |
– |
|
Operational |
||||
Daily production volumes |
||||
Natural gas (MMcf/d) |
129.9 |
88.7 |
46% |
|
Natural gas liquids (bbls/d) |
1,557 |
826 |
88% |
|
Total (MMcfe/d) |
139.2 |
93.6 |
49% |
|
Total (boe/d) |
23,204 |
15,604 |
49% |
|
Realized commodity prices |
||||
Natural gas ($/Mcf) |
2.04 |
2.10 |
(3%) |
|
Natural gas liquids ($/bbl) |
43.49 |
44.30 |
(2%) |
|
Total ($/Mcfe) |
2.39 |
2.39 |
– |
|
Operating netbacks ($/Mcfe) (7) |
1.73 |
1.23 |
41% |
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, DSU 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. |
Net debt is a non-GAAP measure calculated as bank debt and working capital deficiency, adjusted for the current portion of fair value of risk management contracts. See “Non-GAAP Measures”. |
7. |
Operating netbacks is a non-GAAP measure calculated on a per unit basis as natural gas and natural gas liquids revenues, adjusted for realized gains or losses on commodity risk management, less royalties, operating expenses and transportation costs. See “Non-GAAP Measures” and “Operating Netbacks”. |