CALGARY, Alberta, Nov. 07, 2017 (GLOBE NEWSWIRE) — (TSX:CJ) Cardinal Energy Ltd. (“Cardinal” or the “Company”) is pleased to announce its operating and financial results for the quarter ended September 30, 2017.
The Company’s unaudited financial statements and management’s discussion and analysis for the quarter ended September 30, 2017, 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.
Financial and Operating Highlights
- Cash flow from operating activities increased by 82% to $23.7 million for the third quarter of 2017, up from $13.0 million in the second quarter of 2017.
- Adjusted funds flow increased to $23.2 million for the third quarter of 2017 an increase of 47% from $15.8 million for the second quarter of 2017.
- Average production of 21,463 boe/d for the third quarter of 2017, reflecting the first quarter that included the volumes from the light oil acquisition which closed on June 30, 2017.
- Production increased by 43% from the third quarter of 2016 and our light oil weighting increased to 40% of production from 18%.
- Netbacks increased 19% in the quarter to $16.80/boe from $14.07/boe in the third quarter of 2016.
- Operating costs per boe of $20.38 were down 1% from $20.57 per boe in the second quarter of 2017.
- Added 27 net sections of undeveloped land in our core Bantry area which is prospective for Mannville oil.
- Our planned divestiture of royalties and fee title lands is progressing, the first of the four planned sale packages has been completed subsequent to quarter end.
|Three months ended
|Nine months ended
|($ 000’s except shares, per share and operating amounts)||2017||2016||% Chg||2017||2016||% Chg|
|Petroleum and natural gas revenue||86,022||53,673||60||216,198||137,221||58|
|Cash flow from operating activities||23,719||22,092||7||52,088||51,234||2|
|Adjusted funds flow(1)||23,200||18,177||28||53,567||42,857||25|
|basic and diluted per share||0.21||0.25||(16||)||0.60||0.62||(3||)|
|basic and diluted per share||(0.11||)||(0.06||)||83||(0.04||)||(0.80||)||(95||)|
|Net bank debt (1)||243,516||35,148||n/m||243,516||35,148||n/m|
|Exploration and development capital||14,048||12,697||11||50,552||26,851||88|
|Total capital expenditures||14,284||13,530||6||380,996||28,331||n/m|
|Weighted average shares outstanding|
|Average daily production|
|Crude oil and NGL (bbl/d)||18,355||13,027||41||15,080||12,833||18|
|Natural gas (mcf/d)||18,650||11,578||61||17,228||10,660||62|
|Petroleum and natural gas revenue||43.56||39.01||12||44.12||34.28||29|
|Realized gain (loss)||(1.33||)||1.74||(176||)||(1.99||)||4.07||(149||)|
|Netback after risk management (1)||15.47||15.81||(2||)||14.70||13.52||9|
|(1) See non-GAAP measures|
Cardinal has initiated a process, as part of its recent acquisition, to divest of both gross overriding royalties (“GOR’s”) and fee title lands acquired with the acquisition and GOR’s created on some of its existing long life assets. On October 31, 2017, Cardinal closed a disposition of a 2.5% Gross Overriding Royalty (“GOR”) on certain of its Wainwright properties for proceeds of $14.5 million which was within the anticipated sale metrics. Proceeds from the first disposition along with future GOR dispositions will be used to pay down Cardinal’s credit facility. This sale is the first step in a previously announced process to reduce Cardinal’s net bank debt to one times net bank debt to adjusted funds flow or lower. Cardinal currently has a second GOR sale package in the market and is expected to market its third of four packages in November.
Q3 Capital Spending
During the third quarter of 2017, Cardinal incurred $14.2 million of capital expenditures. Spending in the quarter included the items below:
- $2.7 million Acquisition of undeveloped land;
- $1.5 million Pipelines;
- $2.0 million Facilities; and
- $3.9 million Drilling and Completion of 2 Dunvegan wells.
Excluding one-time facility expenditures, pipelines and land acquisitions totalling approximately $5 million, Cardinal’s total payout ratio would have been 89% in the quarter. Including these expenditures our total payout ratio was 110%. Cardinal’s low decline of approximately 10% enabled it to spend minimal amounts on drilling and completions in the quarter.
During the third quarter of 2017 Cardinal paid cash dividends of $0.105 per share for a total payment of $11.6 million to shareholders, resulting in a simple dividend payout ratio of 50%. Although this ratio is higher than our targeted range, the low decline nature of our asset base makes Cardinal sustainable at these levels. With increased oil pricing and a focus on increasing netbacks with light oil development, the simple dividend payout ratio is expected to decline in the upcoming quarters.
In the quarter Cardinal drilled two light oil Dunvegan wells in the Grande Prairie area that were brought on production late in the third quarter. Both wells are tracking to initial production rates well ahead of our expectations for the play. Cardinal has purchased additional lands in the area and expects to be able to continue to grow this area in the future. Cardinal has begun a four well drilling program for the Dunvegan in the Grand Prairie area with production expected in Q1 2018 on the four new drills.
Cardinal was drawn $239 million on its $325 million bank facility at the end of the third quarter. Subsequent to the end of the quarter, we repaid $14.5 million of the facility with the proceeds of the GOR disposition. Our bank line redetermination is currently underway and Cardinal does not anticipate any changes to its credit facility as a result of this review.
With the success of the ongoing GOR sales process and the increase in commodity prices, Cardinal looks forward to a strong 2018. We have undergone a tough period in the Canadian oil and gas industry. Low commodity prices have curtailed development on most of our properties. Our focus for 2018 will shift from a maintenance mode to one of more aggressively exploiting our properties while continuing to maintain the cost discipline developed through this downturn. We have managed to acquire several long life legacy assets at what we believe was the bottom of the commodity cycle. Our shareholders should see the rewards from these purchases in 2018 and beyond as it transforms Cardinal into a company that becomes sustainable without the need for further large scale acquisitions. We will continue to reduce our bank debt on a quarterly basis with the goal of getting our leverage levels back to our historical range of less than one times adjusted funds flow.
We look forward to conveying a 2018 budget later in the year and the renewed optimism in the oil markets.