CALGARY, Alberta, March 20, 2018 (GLOBE NEWSWIRE) — Cardinal Energy Ltd. (“Cardinal” or the “Company“) (TSX:CJ) is pleased to announce its operating and financial results for the quarter and year ended December 31, 2017 as well as its 2017 year end reserves.
2017 Financial Highlights
- Achieved an all in total payout ratio of 98% in Q4 2017 despite accelerating planned Q1 2018 development activity into 2017.
- Fourth quarter 2017 operating costs per boe decreased 12% to average $20.34 per boe as compared to the same period in 2016.
- Netbacks improved 52% in the fourth quarter and 70% for 2017, respectively over the same periods in 2016, to average $22.64/boe and $18.36/boe.
- Achieved a 151% increase in cash flow from operating activities and a 75% increase in adjusted funds flow during the fourth quarter compared to the same period in 2016. For 2017, cash flow from operating activities and adjusted funds flow increased 26% and 39%, respectively, compared to 2016.
- Increased annual production by 28% and fourth quarter production by 43% which included a 39% increase in crude oil production compared to 2016.
|Three months ended December 31,||Year ended December 31,|
|($ 000’s except shares, per share and operating amounts)||2017||2016||% Change||2017||2016||% Change|
|Petroleum and natural gas revenue||97,646||58,721||66||313,844||195,942||60|
|Cash flow from operating activities||24,442||9,728||151||76,530||60,962||26|
|Adjusted funds flow (1)||28,421||16,247||75||81,988||59,104||39|
|basic and diluted per share||0.26||0.22||18||0.86||0.84||2|
|basic and diluted per share||(0.49||)||(0.43||)||14||(0.61||)||(1.25||)||(51||)|
|Net bank debt (1)||225,967||70,300||n/m||225,967||70,300||n/m|
|Exploration and development capital||15,901||14,510||10||66,453||41,361||61|
|Total capital expenditures||759||47,927||(98||)||381,756||76,258||n/m|
|Weighted average shares outstanding|
|basic and diluted (000s)||110,446||73,728||50||94,113||70,097||34|
|Average daily production|
|Crude oil and NGL (bbl/d)||17,943||12,586||43||15,802||12,771||24|
|Natural gas (mcf/d)||18,032||12,178||48||17,431||11,042||58|
|Petroleum and natural gas revenue||50.66||43.67||16||45.96||36.64||25|
|Realized gain (loss)||(2.82||)||0.09||N/A||(2.22||)||3.08||N/A|
|Netback after risk management (1)||19.82||14.95||33||16.14||13.88||16|
|(1) See non-GAAP measures|
Reserve Highlights (1)
- 2017 production reserve replacement
- 4.7x Proved Developed Producing (“PDP”)
- 6.3x Total Proved and Probable (“TPP”)
- Increased our PDP Reserve Life Index (“RLI”) to 9.3 years from 8.5 years.
- Increased our TPP RLI to 13.7 years.
- 89% of Cardinal’s reserves are producing (proved plus probable producing), an increase of 3% over 2016.
- Finding Development and Acquisition Costs (“FD&A”) including the change in future development costs (“FDC”) was $10.76/boe with a recycle ratio of 2.1x (Q4 2017 netback).
- Cardinal acquired 37.3 Mmboe of TPP reserves in 2017 at a cost of $10.42/boe (including FDC).
- Top Quartile in our peer group in:
- % PDP of TPP reserves; TPP Recycle Ratio; FD&A; FDC/2018 cash flow, PDP RLI
1. See Oil and Gas Metrics
Summary of Reserves
Cardinal’s year end 2017 reserves were evaluated by independent reserves evaluator GLJ Petroleum Consultants (“GLJ”) as at December 31, 2017. This evaluation of all of the Company’s oil and gas properties was done in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserve information as required under NI 51-101 will be included in Cardinal’s Annual Information Form which will be filed on SEDAR on or before March 30, 2018.
Reserves Summary (4)
|At December 31||2017 (2)
|Total proved and probable||103,778||67,476||54||%|
|Proved producing RLI, (yrs) (5)(6)||9.3||8.5||9||%|
|Proved RLI, (yrs) (5)(6)||10.3||9.3||11||%|
|Proved and probable RLI, (yrs) (5)(6)||13.7||12.7||8||%|
|Proved plus probable producing RLI, (yrs) (5)(6)||12.1||10.9||11||%|
|Proved and Probable producing reserves % of Total||89||%||86||%||3||%|
|At December 31||NPV10 Before Income Tax (2)
|NPV10 Before Income Tax (3)
|Total Proved and Probable||1,214,643||859,768|
|Gross Reserves Reconciliation(1)|
|Proved and Probable
|December 31, 2016||45,416||49,452||67,476|
|Extensions & Improved Recovery||1,396||3,718||4,573|
|Technical Revisions (7)||2,287||3,318||2,141|
|December 31, 2017||70,500||78,083||103,778|
|2017 WI Reserve Additions (9)||31,874||35,421||43,092|
|Production Replacement x||4.7||5.2||6.3|
|Reserves per share (boe per share – basic)(10)|
|Proved plus probable||0.94|
|Finding and development costs – proved plus probable(11)||$||12.67|
|Recycle ratio – proved plus probable(12)||1.8|
|Finding, development and acquisition costs – proved plus probable ($/boe)(11)||$||10.76|
|Recycle ratio – proved plus probable(12)||2.1|
- Gross reserves are the Company’s total working interest reserves before deduction of royalties and without including royalty interest reserves.
- Based on Consultant’s Average December 31, 2017 price forecast.
- Based on Sproule’s December 31, 2016 price forecast.
- Numbers may not add due to rounding.
- RLI based on Q4 2017 20,770 boed working interest production.
- RLI based on Q4 2016 14,600 boed working interest production.
- Includes any revisions for economic factors.
- In accordance with the requirements of NI 51-101, the reserve estimates for acquisitions are the reserves as of December 31, 2017 plus production from date of acquisition date. Net of dispositions.
- 90% of the total proved reserve additions are producing.
- Basic shares as at December 31, 2017.
- Includes changes in future development costs; includes royalty interests acquired and is net of dispositions.
- Recycle ratio is calculated using Cardinal’s Q4 2017 netback ($22.64/boe) divided by either the finding and development or finding, development and acquisition costs per boe. Excludes consideration of hedging in the netback.
The focus for Cardinal in 2017 was on two transformational light oil acquisitions, the Grande Prairie acquisition in late Q1, 2017 and the Midale and House Mountain light oil acquisition on July 1, 2017.
Both acquisitions have helped to transform Cardinal from a medium quality (WCS) weighted asset base to a light oil weighted asset base. Along with each of the acquisitions came a large light oil drilling inventory, stable declines and high netback production.
Cardinal has spent a total of $46 million in the Grande Prairie area in 2017 including both the original acquisition and a 7 well drill program, resulting in a TPP PV10 reserve value of $100 million at year end 2017. We have now drilled a total of 7 Dunvegan light oil wells on our Grande Prairie lands acquired in 2017, which on a group basis are outperforming both historical drilling in the Elmworth Dunvegan pool as well as exceeding our own type curve for the play.
Our focus with the House Mountain and Midale acquisition for the balance of 2017 was to integrate and increase our understanding of the assets.
In House Mountain we are seeing a positive waterflood response to initiatives undertaken in 2017. Prudent management of this asset has resulted in 3 million barrels of incremental high netback, light oil reserves being added to our yearend report due to the lower than forecasted decline rate.
The addition of Midale to our asset base in 2017 gave Cardinal a world class oil asset under a combination of CO2 and waterflood. We see enormous unbooked upside in Midale, as the pool recovery factors are only half of its analog neighbor, the Weyburn unit. The Midale unit will provide Cardinal an ultra-low decline base of production with significant opportunities to grow this light oil resource over the foreseeable future.
In our first 6 months of operating the Midale property we generated $15 million of operating income and incurred $1.5 million of capital expenditures of which $1.4 million were CO2 purchases. The production on the property was held flat at approximately 3,000 bopd.
Our 2017 reserve additions were primarily low decline, high netback light oil in some of the best oil pools in Western Canada. Cardinal acquired these assets with the lowest FD&A number of our peers at $10.76 per boe. This combined with our conservative FDC booking of $162 million (1.2x 2018 cash flow budget) gave Cardinal an impressive 2.1x recycle ratio.
|Light and Medium Crude Oil||17||14.8||9||9|
At current commodity prices, Cardinal will be able to generate significant cash flow to fund its dividend, to improve our financial flexibility by reducing our net bank debt and show modest year over year growth. Cardinal will continue to pursue initiatives to reduce our operating costs, 2017 saw a distinct and maintainable downward trend in per unit operating costs which we feel is repeatable in 2018 and 2019.
Appointment of Officer
Cardinal is pleased to announce that Mr. Ken Younger has been appointed VP South Area effective April 1, 2018. Mr. Younger joined Cardinal in April of 2016 and has progressed into leading our South Operations Area which is centered around the Bantry field.
2017 was a transformational year for Cardinal. We achieved our goal of diversifying our asset base with a focus on light oil. In the fourth quarter of 2017 light oil made up 53% of our gross revenues. Cardinal has built a high quality sustainable asset base with an approximate 10% annual decline rate.
We delivered on our operational metrics while also achieving a very strong health, safety and environmental reclamation record. Our Liability Management Ratio (“LMR”) continues to improve and Cardinal is committed to spending a percentage of its operating budget every year on well abandonments and surface reclamation.
With approximately 77% of Cardinal’s production base currently being supported by existing enhanced oil recovery (“EOR”) schemes, the Company can, with modest reinvestment, maintain production volumes and generate free cash flow for years to come.
Our focus for 2018 and beyond will be to deliver a combination of modest production growth, a reduction in net debt, an increase in netbacks, and a reduction in operating, G&A and other costs.
As we navigate a new era for Canadian oil and gas companies Cardinal’s focus will be on prudent business decisions and growth in shareholder value.
Cardinal also announces the filing of its Audited Financial Statements for the year ended December 31, 2017 and related Management’s Discussion and Analysis with the Canadian securities regulatory authorities on the System for Electronic Analysis and Retrieval (“SEDAR”). In addition, Cardinal will file its Annual Information Form for the year ended December 31, 2017 on SEDAR on or prior to March 30, 2018. Electronic copies may be obtained on Cardinal’s website at www.cardinalenergy.ca and on Cardinal’s SEDAR profile at www.sedar.com.
About Cardinal Energy Ltd.
Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal’s operations are focused in low decline light and medium quality oil in Alberta and Saskatchewan.