CALGARY, Alberta, March 08, 2018 (GLOBE NEWSWIRE) — Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX:PRQ) is pleased to report financial and operating results for the three and twelve month periods ended December 31, 2017 and to provide summary 2017 year end reserves information as evaluated by Sproule Associates Limited (“Sproule”). The Company’s Management’s Discussion and Analysis (“MD&A”) and audited consolidated financial statements dated as at and for the year ended December 31, 2017 are available on SEDAR (the System for Electronic Document Analysis and Retrieval) at www.sedar.com.
- Petrus generated funds flow of $45.0 million for the year ended December 31, 2017 which is 62% higher than the $27.8 million generated in the prior year. For the fourth quarter of 2017, Petrus generated funds flow of $13.1 million ($1.04 per share annualized), a 33% increase relative to the $9.8 million generated in the fourth quarter of 2016. The increases in funds flow are attributed to production growth and stronger oil and liquids pricing realized in 2017.
- Fourth quarter average production was 10,711 boe/d in 2017 compared to 8,595 boe/d in 2016. The 24% increase is attributable to the Company’s drilling program at Ferrier, where production grew 54% during the same period. Since the third quarter of 2016, when the Company’s quarterly average production was 7,100 boe/d, Petrus has grown its production 51%. Annual average production also increased 24% from 8,236 boe/d in 2016 to 10,217 boe/d in 2017. The production growth is a result of the Company’s strategic shift to focus on developmental drilling and facility ownership and control in the Ferrier area.
- Operating expenses have decreased 22% from $6.48 per boe in the year ended December 31, 2016 to $5.08 per boe in the year ended December 31, 2017. The average annual expenses on a per boe basis have decreased due to the ownership, control and expansion of the Company’s Ferrier gas plant, 2017 production growth, as well as the 2016 disposition of higher cost assets. The Company’s operating expenses were $4.81 per boe in the fourth quarter of 2017.
- In 2017 Petrus’ development program generated Proved Developed Producing (“PDP”) reserve volume additions of 6.0 mmboe, or 43% of its December 31, 2016 PDP reserve volume of 13.8 mmboe. The Company produced 3.7 mmboe during 2017 and ended the year with 16.1 mmboe of PDP reserve volume.
- Petrus ended 2017 with $214.4 million and $485.1 million of PDP and Proved plus Probable (“P+P”), respectively, reserve value before-tax, discounted at 10%, based on the independent reserve report prepared by Sproule, dated March 7, 2018, for the year ended December 31, 2017 (“2017 Sproule Report”). The reserve values have increased 19% and 15%, respectively, from the December 31, 2016 Sproule Report. In 2017, the Company realized Finding and Development (“F&D”) costs(3) of $11.57/boe and $12.03/boe for PDP and Total Proved (“TP”) reserves, respectively, and during the year ended December 31, 2017 the Company’s undeveloped net acreage in Ferrier grew 31%.
- During the fourth quarter of 2017, Petrus participated in 3 gross (1.4 net) Cardium wells in the Ferrier area, two of which were Cardium light oil wells and the third a Cardium gas well. The Ferrier gas plant expansion, doubling the plant’s capacity from 30 mmcf/d to 60 mmcf/d, was completed in early October.
- Petrus utilizes financial derivative contracts to mitigate commodity price risk. The Company realized a gain on financial derivatives in the year ended December 31, 2017, which increased the Company’s corporate netback(2) by $1.00 per boe. Petrus has derivative contracts in place for 58% (average floor price of $2.54 per mcf), and 68% (average floor price of $65.46 per bbl), of its natural gas and total liquids production, respectively, for the 2018 fiscal year (as a percentage of fourth quarter 2017 average production).
(1) Refer to “Advisories – Forward-Looking Statements.”
(2) Refer to “Non-GAAP Financial Measures.”
(3) Refer to “Oil and Gas Disclosures.”
|SELECTED FINANCIAL INFORMATION|
|Dec. 31, 2017||Dec. 31, 2016||Dec. 31, 2017||Sept. 30, 2017||Jun. 30, 2017||Mar. 31, 2017|
|Natural gas (mcf/d)||43,747||33,964||46,625||45,550||42,392||40,332|
|Natural gas sales weighting||71||%||69||%||73||%||72||%||69||%||72||%|
|Natural gas ($/mcf)||2.39||2.39||1.90||1.66||3.29||2.85|
|Total realized price ($/boe)||24.26||21.40||23.56||18.82||28.69||26.48|
|Net oil and natural gas revenue ($/boe)||20.72||18.54||20.55||16.10||24.10||22.59|
|Operating netback (1)(2) ($/boe)||14.33||10.58||14.49||9.39||17.25||16.71|
|Realized gain on derivatives ($/boe)||1.00||4.98||1.23||1.88||0.23||0.57|
|General & administrative expense||(0.87||)||(2.56||)||(0.27||)||(1.09||)||(1.12||)||(1.05||)|
|Cash finance expense||(1.88||)||(3.53||)||(1.54||)||(1.99||)||(1.94||)||(2.07||)|
|Decommissioning expenditures (3)||(0.52||)||(0.96||)||(0.62||)||(0.23||)||(1.03||)||(0.19||)|
|Corporate netback (1)(2) ($/boe)||12.06||8.51||13.29||7.96||13.39||13.97|
|FINANCIAL (000s except per share)||Twelve months
|Dec. 31, 2017||Dec. 31, 2016||Dec. 31, 2017||Sept. 30, 2017||Jun. 30, 2017||Mar. 31, 2017|
|Oil and natural gas revenue||90,569||64,840||23,243||18,299||26,753||22,274|
|Net income (loss)||(111,261||)||(66,988||)||(67,095||)||(50,696||)||(781||)||7,311|
|Net income (loss) per share|
|Funds flow (3)||45,003||27,811||13,084||7,727||12,458||11,732|
|Funds flow per share (3)|
|Net acquisitions (dispositions)||4,741||(29,718||)||789||(4,866||)||—||8,818|
|Weighted average shares outstanding|
|As at period end|
|Common shares outstanding|
|Net debt (1)||148,066||124,915||148,066||137,531||137,069||130,624|
(1) Refer to “Non-GAAP Financial Measures.”
(2) In prior periods Petrus included realized gain on derivatives (hedging gain (loss)) in the calculation of operating netback. The amount is included in the calculation of corporate netback. The comparative information has been re-classified to conform to current presentation.
(3) In prior periods Petrus excluded decommissioning expenditures from the calculation of funds flow. The comparative information has been re-classified to conform to current presentation.
Average fourth quarter production by area was as follows:
For the three months ended December 31, 2017
|Natural gas (mcf/d)||30,857||8,515||7,253||46,625|
|Natural gas sales weighting||71||%||85||%||68||%||73||%|
Fourth quarter average production was 10,711 boe/d (73% natural gas) in 2017 compared to 8,595 boe/d (72% natural gas) in the fourth quarter of 2016. The 24% increase is attributable to the Company’s drilling program in its core operating area, Ferrier, where production has grown 54% since the fourth quarter of 2016.
Petrus’ 2017 drilling program has been focused exclusively in the Ferrier area targeting light oil and liquids rich natural gas in the Cardium formation. Throughout 2017, the Company drilled or participated in 19 gross (13.2 net) wells. This included two Extended Reach Horizontal (“ERH”) liquids rich natural gas wells related to the previously announced Ferrier farm-in agreement (“Farm-In”), each with approximately 100 stages of fracture stimulations. One of these ERH wells came on production in November 2017, while the second ERH well was fracture stimulated and brought on production in December 2017. The Company estimates the Farm-in contributed 16 gross (5.2 net) Cardium locations to its drilling inventory(1). During the fourth quarter of 2017, the Ferrier gas plant expansion was completed which doubled the plant’s capacity from 30 mmcf/d to 60 mmcf/d. Also during the fourth quarter, Petrus participated in 3 gross (1.4 net) Cardium wells in the Ferrier area, two of which were light oil wells and the third a liquids rich natural gas well. The most recent Cardium oil well was fracture stimulated with 82 stages over a one mile lateral. This well flow tested over 1,200 bbl/d of oil over its 10 day test period.
From 2015 to 2017 the Company has lowered its capital cost to add a producing barrel (which Petrus defines as the total capital investment per boe per day using the average initial production rate for the first 60 days) by 52%. This efficiency has dramatically improved as a result of increasing the frac density for the completion operations, using pad drilling to reduce capital costs, experiencing more efficient drilling times, implementing monobore wellbore design, and more efficient water management.
During the third quarter of 2017, as a result of weakness and volatility in the Alberta natural gas commodity price market, Petrus realized high volatility in the market price for its natural gas. In particular, there was high volatility in the daily average natural gas spot price (AECO 5A index) which is the index on which Petrus previously sold all of its natural gas. Beginning in November 2017, Petrus elected for approximately half of its natural gas production to be paid on the forward monthly natural gas price (AECO 7A index) in an attempt to reduce the Company’s exposure to daily natural gas price volatility.
During the fourth quarter of 2017, a lower portion of Petrus’ natural gas production was sold on the daily average natural gas spot price (AECO 5A index). Furthermore, the AECO 5A index averaged $1.60 per GJ in the fourth quarter of 2017 which was 16% higher than the $1.38 per GJ average market price for the third quarter of 2017. Petrus’ average realized natural gas price in the fourth quarter of 2017 of $1.80 per GJ was 12% higher than the AECO 5A index which averaged $1.60 per GJ in the fourth quarter of 2017.
Petrus has derivative contracts in place for 58% (average floor price of $2.54 per mcf), and 68% (average floor price of $65.46 per bbl), of its natural gas and total liquids production, respectively, for the 2018 fiscal year (as a percentage of fourth quarter 2017 average production).
In October 2017 Petrus completed the semi-annual review of its reserve based revolving credit facility (“RCF”). The RCF syndicate of lenders increased the borrowing base from $120 million to $130 million. In addition, the Company’s total debt borrowing limit was increased from $141 million to
$155 million. Petrus’ Term Loan has $35 million outstanding therefore lender consent, from both the RCF syndicate and Petrus’ Term Loan lender, is required for total borrowings against the RCF that exceed $105 million. The Company’s annual review of its RCF is scheduled to take place in May 2018.
Early in 2017 Petrus set out to grow its Ferrier production and as a result, set a 2017 capital budget of $50 to $60 million which was subsequently increased by $10 million to participate in additional capital opportunities identified. Petrus achieved year over year annual average production growth of 24% from 2016 to 2017. In response to the current commodity price outlook for natural gas, the Company has shifted its focus for 2018 to prioritize its light oil drilling opportunities and to moderate its growth in order to direct excess funds flow towards debt repayment. Petrus’ Board of Directors has approved a 2018 capital budget of $25 to $30 million, with excess funds flow to be directed toward debt repayment. Petrus estimates debt repayment between $10 and $15 million in 2018, based on a current forecast for commodity futures pricing, anticipated service costs and current activity levels. Assuming capital investment of $25 million and a current forecast for commodity futures pricing, Petrus estimates the 2018 capital program will increase production year over year by 2% to an average annual 2018 production of approximately 10,350 boe/d. The 2018 capital is expected to be directed primarily to the development of the Company’s Ferrier Cardium asset which is comprised of light oil and liquids rich natural gas opportunities. The program is expected to include the drilling of nine gross (4.4 net) Cardium wells and Petrus is focusing on the areas within the reservoir that are expected to be concentrated with light oil and condensate rich natural gas. The 2018 capital program is expected to be funded through funds flow and working capital.
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held at the Jamieson Place Conference Centre (3rd floor) 308, 4th Ave SW Calgary, Alberta, on Tuesday May 8, 2018 at 9:00 a.m. (Calgary time).
(1)Refer to “Advisories – Forward-Looking Statements”.
Petrus’ 2017 year end reserves were evaluated by independent reserves evaluator Sproule Associates Limited (“Sproule”) in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) as of December 31, 2017 (“2017 Sproule Report”). Additional reserve information as required under NI 51-101 will be included in our Annual Information Form, for the year ended December 31, 2017, which will be filed on SEDAR.
Petrus has a reserves committee, comprised of independent board members, that reviews the qualifications and appointment of the independent reserve evaluators. The committee also reviews the procedures for providing information to the evaluators. All booked reserves are based upon annual evaluations by the independent qualified reserve evaluators conducted in accordance with the COGE Handbook and NI 51-101. The evaluations are conducted using all available geological and engineering data. The reserves committee has reviewed the reserves information and approved the reserve report.
The following table provides a summary of the Company’s before tax reserves as evaluated by Sproule:
|As at December 31, 2017||Total Company Interest (1)(3)
|Proved + Probable Producing||88,692||2,181||3,667||20,630||429,640||317,865||257,025|
|TotalProved Plus Probable||199,522||6,332||8,879||48,464||898,573||637,694||485,132|
(1) Tables may not add due to rounding.
(2) NPV 0%, NPV 5% and NPV 10% refer to the risked net present value of the future net revenue of the Company’s reserves, discounted by Nil, 5% and 10%, respectively and is presented before tax and based on Sproule’s pricing assumptions.
(3) Total company interest reserve volumes presented above and in the remainder of this annual report are presented as the Company’s total working interest before the deduction of royalties (but after including any royalty interests of Petrus).
In 2017 Petrus’ development program generated Proved Developed Producing (“PDP”) reserve volume additions of 6.0 mmboe, or 43% of its December 31, 2016 PDP reserve volume of 13.8 mmboe. The Company produced 3.7 mmboe during 2017 and ended the year with 16.1 mmboe of PDP reserve volume.
Petrus ended 2017 with $214.4 million and $485.1 million of PDP and Proved plus Probable (“P+P”), respectively, reserve value before-tax, discounted at 10%, based on the 2017 Sproule Report. The reserve values have increased 19% and 15%, respectively, from the independent reserve report prepared by Sproule for the year ended December 31, 2016. In 2017, the Company realized Finding and Development (“F&D”) costs(3) of $11.57/boe and $12.03/ boe for PDP and Total Proved (“TP”) reserves, respectively, and during the year ended December 31, 2017 the Company’s undeveloped net acreage in Ferrier grew 31%.
Based on the 2017 Sproule Report, the Company’s PDP reserve value before-tax, discounted at 10% is $4.33 per share. On the same basis, the P+P reserve value is $9.80 per share.
FUTURE DEVELOPMENT COST
Future Development Cost (“FDC”) reflects Sproule’s best estimate of what it will cost to bring the P+P undeveloped reserves on production. FDC associated with Petrus’ total P+P reserves at December 31, 2017, based on the 2017 Sproule Report, is $283.0 million (undiscounted) and includes 225 gross (122.4 net) booked P+P locations.
The following table provides a summary of the Company’s FDC as set forth in the 2017 Sproule Report:
|Future Development Cost ($000s)||Total Proved||Total Proved + Probable|
|Total FDC, Undiscounted||182,086||283,030|
|Total FDC, Discounted at 10%||155,723||241,235|
The following table highlights annual performance ratios for the Company from 2014 to 2017:
|December 31, 2017||December 31, 2016||December 31, 2015||December 31, 2014|
|FD&A ($/boe) (1)(2)||13.05||(0.43||)||23.18||35.35|
|Reserve Life Index (yr) (1)||4.1||4.4||5.2||4.6|
|Reserve Replacement Ratio (1)||1.6||0.4||0.7||5.9|
|FD&A ($/boe) (1)(2)||14.33||(15.77||)||16.77||27.44|
|Reserve Life Index (yr) (1)||8.0||9.8||10.9||7.3|
|Reserve Replacement Ratio (1)||1.1||0.5||2.9||9.1|
|Future Development Cost ($000s)||182,086||201,556||223,409||122,326|
|Total Proved + Probable|
|FD&A ($/boe) (1)(2)||14.87||350.08||15.4||21.49|
|Reserve Life Index (yr) (1)||12.3||14.6||16.4||11.2|
|Reserve Replacement Ratio (1)||1.7||(0.1||)||3.7||12.7|
|Future Development Cost ($000s)||283,030||269,144||325,325||199,410|
(1) Refer to “Oil and Gas Disclosures in the Management’s Discussion & Analysis attached hereto.”
(2) Certain changes in FD&A produce non-meaningful figures as discussed in “Oil and Gas Disclosures” in the Management’s Discussion & Analysis attached hereto. While FD&A costs, reserve life index, reserve replacement ratio and finding and development costs are commonly used in the oil and nature gas industry and have been prepared by management, these terms do not have a standardized meaning and may not be comparable to similar measures presented by other companies and, therefore, should not be used to make such comparisons. FD&A costs take into account reserves revisions during the year on a per boe basis. The aggregate of the exploration and development costs incurred in the financial year and changes during that year in estimated future development costs generally will not reflect total FD&A costs related to reserves additions for that year.
In 2017, the Company realized F&D costs of $11.57/boe and $12.03/boe for PDP and TP reserves, respectively, as outlined in the following table.
|Finding & Development Costs ($/boe) (1)||2017||2016|
|Proved Developed Producing (1)||11.57||9.89|
|Total Proved (1)||12.03||2.46|
|Proved Plus Probable (1)||17.28||(8.06||)|
(1) Refer to “Oil and Gas Disclosures” in the Management’s Discussion & Analysis attached hereto.
NET ASSET VALUE
The following table shows the Company’s Net Asset Value (“NAV”), calculated using the price forecast from Sproule Associates Limited, the Company’s independent reserves evaluator:
|As at December 31, 2017 ($000s except per share)||Proved Developed
|Total Proved||Proved and Probable|
|Present Value Reserves, before tax (discounted at 10%) (1)||214,420||314,296||485,132|
|Undeveloped Land Value (2)||43,197||43,197||43,197|
|Net Debt (3)||(148,066||)||(148,066||)||(148,066||)|
|Net Asset Value||109,551||209,427||380,263|
|Fully Diluted Shares Outstanding (4)||49,492||49,492||49,492|
|Estimated Net Asset Value per Share||$2.21||$4.23||$7.68|
(1) Based on the 2017 Sproule Report, using the forecast future prices and costs.
(2) Based on the exploration and evaluation assets as per the Company’s December 31, 2017 audited consolidated financial statements.
(3) See Non-GAAP Financial Measures in the Management’s Discussion & Analysis attached hereto.
(4) There were no “in-the-money” options or warrants based on the Company’s December 31, 2017 closing share price of $1.95 therefore the calculation uses the common shares outstanding at December 31, 2017.
An updated corporate presentation can be found on the Company’s website at www.petrusresources.com.