CALGARY, ALBERTA–(Marketwired – Feb. 27, 2017) – PrairieSky Royalty Ltd. (“PrairieSky” or the “Company“) (TSK:PSK) is pleased to announce its fourth quarter and year end operating and financial results for the period ended December 31, 2016. In addition, PrairieSky’s Board of Directors has approved a dividend increase of $0.03 per share per annum (4%) and allocated $44.0 million to extend PrairieSky’s normal course issuer bid (“NCIB”) from May 2, 2017 to May 1, 2018. The dividend increase to $0.75 per share per annum ($0.0625 per share per month) will be effective for the March 2017 dividend payable on April 17, 2017.
2016 Fourth Quarter and Full Year Highlights:
- Reported average fourth quarter royalty production of 23,978 BOE per day (46% liquids), with average royalty production of 23,308 BOE per day (47% liquids) for the year ended December 31, 2016.
- Recorded fourth quarter Funds from Operations of $61.8 million ($0.27 per common share) and $200.2 million for the year ended December 31, 2016 ($0.88 per common share).
- Reduced cash administrative expenses across the business to $2.22 per BOE for the fourth quarter 2016, down from $2.45 per BOE for the third quarter of 2016 and $3.94 per BOE for the fourth quarter 2015.
- Dividends declared in the fourth quarter of $41.1 million ($0.18 per share) resulting in a payout ratio of 67%.
- Completed four separate acquisition transactions in the fourth quarter, funded entirely from cash on hand, for aggregate consideration of $117.3 million and representing approximately 460 BOE per day (83% liquids) of high quality royalty production and over 100,000 acres of mineral title and royalty lands including a 3.95% gross overriding royalty interest at Onion Lake, Saskatchewan which provides exposure to a long life heavy and thermal oil project including future phases.
- Maintained a strong balance sheet with $44.2 million of positive working capital and nil debt as of December 31, 2016.
- Subsequent to year-end, completed an acquisition for a 4% gross overriding royalty on current and future phases of the Lindbergh SAGD thermal oil project as well as seismic over certain lands in British Columbia and Alberta for total cash consideration of $250 million.
PrairieSky is committed to adding value for shareholders through all commodity cycles. Throughout a very challenging year for the Canadian oil and gas industry, PrairieSky remained focused on its strategy of delivering strong, risk adjusted returns to its shareholders through the leasing of undeveloped land, managing controllable costs in our business, and pursuing acquisitions which are accretive on a per share basis and match the quality and duration of PrairieSky’s existing business.
During 2016, PrairieSky actively marketed our fee title lands and saw significant leasing interest on the acreage, earning $12.4 million in lease issuance bonus and entering into over 110 leasing arrangements with over 70 different counterparties. This leasing activity is a precursor to future drilling activity on new and existing plays. During the fourth quarter of 2016, approximately 140 wells were spud on PrairieSky lands bringing the annual total to over 500 wells as compared to over 650 wells spud in 2015. For the full year 2016, we estimate that approximately $630 million of third party capital was spent drilling and completing new wells on PrairieSky’s lands, representing a decrease of approximately 32% from estimated 2015 capital spending of approximately $923 million. Drilling and licensing activity was focused on the Viking light oil play in western Saskatchewan, as well as light oil plays in the Mannville in central Alberta, the Bakken in southern Alberta and Saskatchewan, and multiple liquids rich resource play targets in the Deep Basin including the Montney and Spirit River formations.
During the fourth quarter, PrairieSky generated funds from operations of $61.8 million, of which $41.1 million was used to pay dividends of $0.18 per common share (67% payout ratio) and $9.9 million was used to acquire 327,000 common shares under PrairieSky’s NCIB with excess cash flow added to the balance sheet. At December 31, 2016, PrairieSky maintained a strong balance sheet with $44.2 million of positive working capital, including $34.0 million of cash on hand, and no debt.
PrairieSky remains committed to paying dividends and reducing the share count using internally generated free cash flow. PrairieSky is pleased to increase the dividend by $0.03 per common share annually to $0.75 per common share. The dividend will be paid out of internally generated free cash flow, assuming current strip pricing, while using excess cash flow to repurchase common shares and add cash to the balance sheet.
Since inception, PrairieSky has remained focused on cost control, creating efficiencies and investing in technologies which benefit the business over the long term. Quarter over quarter cash G&A was down by 9% to $2.22 per BOE in the fourth quarter of 2016 from $2.45 per BOE in third quarter of 2016. Year over year, PrairieSky’s cash G&A decreased to $2.78 per BOE in 2016 from $3.72 per BOE in 2015. PrairieSky’s staff continued their focus on ensuring timely and accurate royalty payments, collecting $8.3 million in royalty compliance recoveries in 2016.
During Q4 2016, PrairieSky deployed $117.3 million in acquisition capital, representing approximately 460 BOE per day (83% liquids) of high quality royalty production and over 100,000 acres of mineral title and royalty lands. In the two largest transactions, the Company acquired a combined 3.95% royalty interest at Onion Lake, Saskatchewan representing exposure to a long life heavy and thermal oil project, including future phases. Subsequent to year-end, PrairieSky closed its $250 million acquisition of a 4% gross overriding royalty on current and future phases on the Lindbergh SAGD thermal oil project, as well as seismic over certain lands in British Columbia and Alberta. PrairieSky continues 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.
I would like to thank our shareholders for their continued support. Please contact Pam Kazeil, our Chief Financial Officer, at 587-293-4089 or myself at 587-293-4005 with any questions.
Andrew Phillips, President & CEO
DIVIDEND INCREASED TO $0.75 PER SHARE; $44.0 MILLION ALLOCATED TO NCIB
PrairieSky will increase its current dividend level to $0.75 per common share, effective for the March 31, 2017 record date payable on April 17, 2017. The Board of Directors considers a number of factors in determining the dividend level, including current and projected activity levels on PrairieSky’s royalty lands, the current commodity price environment and the working capital balance and earnings of the Company.
PrairieSky’s Board has also authorized Management to apply to the Toronto Stock Exchange to extend its NCIB for an additional one year period commencing on May 2, 2017 and has allocated $44.0 million to repurchase common shares under the NCIB from May 2, 2017 to May 1, 2018. PrairieSky’s current NCIB allows PrairieSky to purchase for cancellation up to 1,600,000 common shares until May 1, 2017. From commencement of the NCIB on May 2, 2016 to December 31, 2016, PrairieSky has purchased and cancelled 960,000 common shares at an average price of $27.04 and an aggregate cost of $26.0, funded entirely from free cash flow.
FINANCIAL AND OPERATIONAL INFORMATION
The following table summarizes selected operational and financial information of the Company for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted.
A full version of PrairieSky’s Management’s Discussion and Analysis (“MD&A“) and Audited Financial Statements and notes thereto for the fiscal period ended December 31, 2016 is available on SEDAR at www.sedar.com and PrairieSky’s website at www.prairiesky.com.
|($ Millions, unless otherwise noted)||Three
|Funds from Operations(1)||61.8||60.0||200.2||177.8|
|Per Share – basic and diluted(2)||0.27||0.36||0.88||1.14|
|Net Earnings and Comprehensive Income||16.1||8.0||20.0||63.0|
|Per Share – basic and diluted(2)||0.07||0.05||0.09||0.40|
|Acquisitions including non-cash consideration||112.2||1,463.2||144.8||1,525.1|
|Working Capital at period end||44.2||210.3||44.2||210.3|
|Shares Outstanding (millions)|
|Shares outstanding at period end||228.0||228.2||228.0||228.2|
|Weighted average – basic||228.2||168.2||228.6||155.7|
|Weighted average – diluted||228.5||168.4||228.8||156.0|
Royalty Production Volumes
|Natural Gas (MMcf/d)||78.2||62.2||74.7||60.9|
|Crude Oil (bbls/d)||8,583||5,432||8,455||5,484|
|Natural Gas ($/Mcf)||$||2.27||$||2.45||$||1.65||$||2.67|
|Crude Oil ($/bbl)||52.09||40.74||44.22||47.80|
|Operating Netback per BOE(1)||$||23.16||$||18.29||$||19.17||$||21.14|
|Funds from Operations per BOE(1)||$||28.01||$||36.95||$||23.47||$||28.28|
|Natural Gas Price Benchmarks|
|Foreign Exchange Rate (US$/CAD$)||0.7496||0.7489||0.7548||0.7820|
|Oil Price Benchmarks|
|West Texas Intermediate (WTI) (US$/bbl)||$||48.64||$||41.71||$||42.99||$||48.61|
|Edmonton Light Sweet ($/bbl)||$||59.95||$||52.16||$||52.82||$||56.97|
|(1) A non-GAAP measure which is defined under the Non-GAAP Measures section in the 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 December 15, 2016. The dividend was paid on January 16, 2017 to shareholders of record as at December 30, 2016.|
|(4) See “Conversions of Natural Gas to BOE”.|
2016 RESERVES INFORMATION
PrairieSky’s year end 2016 reserves were evaluated by independent reserves evaluators GLJ Petroleum Consultants Ltd. (“GLJ”). The evaluation of the Royalty Properties was done in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities. PrairieSky’s reserves information is included in the Company’s Annual Information Form which is available on SEDAR at www.sedar.com and PrairieSky’s website at www.prairiesky.com.