CALGARY, Alberta, Feb. 26, 2018 (GLOBE NEWSWIRE) — PrairieSky Royalty Ltd. (“PrairieSky” or the “Company”) (TSX:PSK) is pleased to announce its fourth quarter and year-end operating and financial results for the period ended December 31, 2017. In addition, PrairieSky’s Board of Directors has approved a dividend increase of $0.03 per share per annum (4%) and allocated $50.0 million to extend PrairieSky’s normal course issuer bid (“NCIB”) from May 4, 2018 to May 3, 2019. The dividend increase to $0.78 per share per annum ($0.065 per share per month) will be effective for the March 2018 dividend payable on or about April 16, 2018.
2017 Fourth Quarter and Full Year Highlights:
- Recorded fourth quarter Funds from Operations of $81.1 million ($0.34 per common share) and $290.2 million ($1.23 per common share) for the year ended December 31, 2017.
- Reported average royalty production of 24,406 BOE per day (49% liquids) for the fourth quarter and 25,259 BOE per day (48% liquids) for the year ended December 31, 2017.
- Recorded lease bonus consideration of $19.0 million for the fourth quarter and $67.0 million for the year ended December 31, 2017.
- Dividends declared in the fourth quarter of $44.2 million ($0.1875 per share) resulting in a payout ratio of 55%.
- Completed acquisitions of producing and non-producing gross overriding royalties in the quarter, funded entirely from cash on hand, for aggregate consideration of approximately $79 million. The producing assets represent over 300 BOE per day of high quality royalty production and 180,000 acres of royalty lands. The non-producing royalties provide exposure to two distinct emerging capital efficient oil resource plays and bring PrairieSky’s land holdings to over 600,000 acres across these plays.
- Maintained a strong balance sheet with $45.7 million of positive working capital and nil debt as of December 31, 2017.
PrairieSky is focused on its strategy of delivering strong, risk adjusted returns to its shareholders through all commodity price cycles and industry conditions. We executed our strategy throughout 2017 by leasing undeveloped land across multiple existing and new plays, managing controllable costs in our business, and selectively pursuing acquisitions which are accretive on a per share basis, and match the quality and duration of PrairieSky’s existing business. Acquisitions completed in 2017 provide shareholders with exposure to growing oil resource plays in Canada.
During 2017, PrairieSky generated $290.2 million in funds from operations which was bolstered by PrairieSky’s active marketing of our fee title lands. PrairieSky earned a record $67.0 million in lease bonus consideration during 2017, entering into approximately 140 leasing arrangements with over 80 different counterparties. Leasing activity was active on the East Shale Duvernay which represented approximately $40.0 million of lease bonus consideration. Leasing activity is a precursor to future drilling activity on new and existing plays. During the fourth quarter of 2017, there were approximately 200 wells spud on PrairieSky lands. This brings the total to approximately 735 wells spud in the year as compared to over 500 wells spud in 2016. We estimate that approximately $1.1 billion in third party capital was spent drilling and completing wells on PrairieSky lands which includes capital spent on our two thermal oil projects during the year. Net capital is estimated to be $74 million or 6.7%. Net capital as a percentage of gross decreased in 2017 as compared to 2016 due to significant capital investments on lower percentage gross overriding royalty lands, including our two thermal oil projects, and units during the year, as well as operators drilling longer horizontal wells across PrairieSky’s land base. During 2017, licensing and drilling activity was focused on the Viking light oil play in western Saskatchewan and eastern Alberta, light oil plays in central Alberta and liquids rich resource plays, including the Montney and Spirit River, in the Deep Basin and northeast British Columbia.
Funds from operations were $81.1 million in the fourth quarter. Funds from operations were used to pay dividends of $44.2 million and $11.0 million was used to purchase 336,700 common shares under PrairieSky’s normal course issuer bid, with excess cash flow added to the balance sheet. 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 $0.78 per common share effective for the March 29, 2018 record date. At December 31, 2017, PrairieSky had positive working capital of $45.7 million, including $45.1 million of cash on hand and no debt.
During the quarter, PrairieSky invested approximately $33 million of its annual lease bonus consideration to acquire royalty interests in emerging plays, including in the Clearwater oil play which represents an unparalleled position in a long duration, capital efficient oil play with significant scale. These acquisitions bring PrairieSky’s land holdings in these emerging resource plays to over 600,000 acres. PrairieSky also deployed approximately $46 million on producing gross overriding royalty assets acquiring over 300 BOE per day of production (approximately 46% liquids) and approximately 180,000 acres, primarily in the Alberta Viking formation. PrairieSky will remain selective and disciplined in our evaluation of royalty acquisition opportunities.
PrairieSky’s Q4 2017 cash administrative expense was $2.58 per BOE and $3.00 per BOE for the year. PrairieSky continued to focus on cost control and investing in technology to benefit our business over the long term. PrairieSky’s staff maintained their focus on ensuring timely and accurate royalty payments, collecting $5.1 million in royalty compliance recoveries in Q4 2017 and $10.6 million for the year.
I would like to thank our shareholders for their continued support and our dedicated staff for their efforts. 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 $0.78 PER SHARE; $50.0 MILLION ALLOCATED TO NCIB
PrairieSky will increase its current dividend level to $0.78 per common share, effective for the March 29, 2018 record date payable on or about April 16, 2018. 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 or about May 4, 2018 and has allocated $50.0 million to repurchase common shares under the NCIB from May 4, 2018 to May 3, 2019. PrairieSky’s current NCIB expires on May 3, 2018. During 2017, PrairieSky purchased and cancelled 1,402,300 common shares at an average price of $30.09 and an aggregate cost of $42.2 million, funded entirely from funds from operations.
FINANCIAL AND OPERATIONAL INFORMATION
The following table summarizes selected operational and financial information of the Company for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted.
A full version of PrairieSky’s Management’s Discussion and Analysis (“MD&A”) and Audited Financial Statements and notes thereto for the fiscal period ended December 31, 2017 is available on SEDAR at www.sedar.com and PrairieSky’s website at www.prairiesky.com.
|($ Millions, unless otherwise noted)||Three months
December 31, 2017
December 31, 2016
December 31, 2017
December 31, 2016
|Funds from Operations||81.1||61.8||290.2||200.2|
|Per Share – basic and diluted(1)(2)||0.34||0.27||1.23||0.88|
|Net Earnings and Comprehensive Income||39.9||16.1||120.6||20.0|
|Per Share – basic and diluted(2)||0.17||0.07||0.51||0.09|
|Acquisitions including non-cash consideration||80.8||112.2||380.5||144.8|
|Working Capital at period end||45.7||44.2||45.7||44.2|
|Shares Outstanding (millions)|
|Shares outstanding at period end||236.0||228.0||236.0||228.0|
|Weighted average – basic||236.2||228.2||236.5||228.6|
|Weighted average – diluted||236.5||228.5||236.7||228.8|
Royalty Production Volumes
|Natural Gas (MMcf/d)||75.2||78.2||78.1||74.7|
|Crude Oil (bbls/d)||9,419||8,583||9,565||8,455|
|Natural Gas ($/Mcf)||$||1.56||$||2.27||$||1.81||$||1.65|
|Crude Oil ($/bbl)||58.35||52.09||52.99||44.22|
|Operating Netback per BOE(1)||$||27.22||$||23.16||$||24.92||$||19.17|
|Funds from Operations per BOE||$||36.12||$||28.01||$||31.48||$||23.47|
|Natural Gas Price Benchmarks|
|Foreign Exchange Rate (US$/CAD$)||0.7865||0.7496||0.7703||0.7548|
|Oil Price Benchmarks|
|West Texas Intermediate (WTI) (US$/bbl)||$||54.83||$||48.64||$||51.26||$||42.99|
|Edmonton Light Sweet ($/bbl)||$||66.70||$||59.95||$||63.32||$||52.82|
|(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 $0.0625 per Common Share was declared on December 14, 2017. The dividend was paid on January 15, 2018 to shareholders of record as at December 29, 2017.|
|(4)||See “Conversions of Natural Gas to BOE”.|
2017 RESERVES INFORMATION
PrairieSky’s year end 2017 reserves were evaluated by independent reserves evaluators GLJ Petroleum Consultants Ltd. (“GLJ”). The evaluation of PrairieSky’s 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.
CONFERENCE CALL DETAILS
A conference call to discuss the results will be held for the investment community on Tuesday, February 27, 2018 beginning at 6:30 a.m. MT (8:30 a.m. ET). To participate in the conference call, approximately 10 minutes prior to the conference call, please dial:
(844) 657-2668 (toll free in North America)
(612) 979-9882 (International)