CALGARY, Aug. 8, 2018 /CNW/ – TORC Oil & Gas Ltd. (“TORC” or the “Company”) (TSX: TOG) is pleased to announce its financial and operating results for the three and six months ended June 30, 2018. The associated management’s discussion and analysis (“MD&A”) and unaudited interim financial statements as at and for the three and six months ended June 30, 2018 can be found at www.sedar.com and www.torcoil.com.
Highlights |
Three months ended |
Six months ended |
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(in thousands, except per share data) |
June 30 2018 |
March 31 2018 |
June 30 2017 |
June 30 2018 |
June 30 2017 |
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Financial |
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Adjusted funds flow, including |
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transaction related costs (1) |
$74,637 |
$64,012 |
$52,471 |
$138,649 |
$103,954 |
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Per share basic |
$0.38 |
$0.33 |
$0.28 |
$0.70 |
$0.56 |
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Per share diluted |
$0.37 |
$0.32 |
$0.28 |
$0.69 |
$0.56 |
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Adjusted funds flow, excluding |
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transaction related costs (1) |
$75,337 |
$64,012 |
$52,471 |
$139,349 |
$103,954 |
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Per share basic |
$0.38 |
$0.33 |
$0.28 |
$0.71 |
$0.56 |
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Per share diluted |
$0.38 |
$0.32 |
$0.28 |
$0.70 |
$0.56 |
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Net income |
$13,321 |
$5,224 |
$2,532 |
$18,545 |
$5,276 |
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Per share basic |
$0.07 |
$0.03 |
$0.01 |
$0.09 |
$0.03 |
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Per share diluted |
$0.07 |
$0.03 |
$0.01 |
$0.09 |
$0.03 |
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Exploration and development |
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expenditures |
$30,004 |
$41,670 |
$17,166 |
$71,674 |
$49,385 |
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Property acquisitions, net of |
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dispositions |
$227,214 |
$2,694 |
$29,105 |
$229,908 |
$28,978 |
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Net debt (2) |
$367,035 |
$269,521 |
$241,912 |
$367,035 |
$241,912 |
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Cash dividends declared (3) |
$9,071 |
$7,908 |
$7,543 |
$16,979 |
$14,526 |
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Dividends declared per common share |
$0.064 |
$0.060 |
$0.060 |
$0.124 |
$0.120 |
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Common shares |
||||||||||
Shares outstanding, end of period |
210,812 |
196,658 |
187,402 |
210,812 |
187,402 |
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Weighted average shares (basic) |
197,423 |
196,350 |
186,893 |
196,890 |
185,216 |
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Weighted average shares (diluted) |
200,787 |
198,835 |
188,456 |
200,153 |
187,045 |
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Operations |
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Production |
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Crude oil (Bbls per day) |
18,850 |
18,827 |
17,677 |
18,839 |
17,200 |
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NGL (Bbls per day) |
1,282 |
1,160 |
739 |
1,222 |
663 |
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Natural gas (Mcf per day) |
17,560 |
17,441 |
14,156 |
17,500 |
14,586 |
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Barrels of oil equivalent (Boepd, 6:1) |
23,059 |
22,894 |
20,775 |
22,978 |
20,294 |
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Average realized price |
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Crude oil ($ per Bbl) |
$75.44 |
$67.46 |
$57.32 |
$71.47 |
$58.15 |
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NGL ($ per Bbl) |
$31.13 |
$26.60 |
$18.20 |
$28.99 |
$23.20 |
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Natural gas ($ per Mcf) |
$0.84 |
$1.72 |
$2.33 |
$1.28 |
$2.36 |
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Barrels of oil equivalent |
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($ per Boe, 6:1) |
$64.04 |
$58.13 |
$51.01 |
$61.12 |
$51.74 |
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Operating netback per Boe (6:1) |
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Operating netback (1) |
$38.82 |
$33.64 |
$30.34 |
$36.26 |
$30.84 |
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Operating netback (prior to hedging) (1) |
$39.28 |
$33.69 |
$30.34 |
$36.52 |
$30.84 |
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Adjusted funds flow netback per Boe (6:1) |
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Including transaction related costs (1) |
$35.57 |
$31.07 |
$27.75 |
$33.34 |
$28.30 |
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Excluding transaction related costs (1) |
$35.90 |
$31.07 |
$27.75 |
$33.51 |
$28.30 |
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Wells drilled: |
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Gross |
8 |
26 |
3 |
34 |
25 |
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Net |
7.0 |
18.6 |
1.9 |
25.6 |
17.9 |
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Success (%) |
100 |
100 |
100 |
100 |
100 |
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(1) |
Management uses these financial measures to analyze operating performance and leverage. The definitions of these measures are found in the Company’s Management’s Discussion and Analysis (“the MD&A”) for the three and six months ended June 30, 2018. These measures do not have any standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures for other companies. |
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(2) |
Net debt is calculated as current assets (excluding financial derivative assets) less: i) current liabilities (excluding financial derivative liabilities), and ii) bank debt. |
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(3) |
Cash dividends declared are net of the share dividend program participation. |
PRESIDENT’S MESSAGE
The second quarter of 2018 represents the continued execution of TORC’s business plan. TORC maintains a focus on the Company’s long term objectives of disciplined growth while maintaining financial flexibility and providing a sustainable dividend.
TORC’s disciplined approach, focused on executing efficient capital programs, prudent financial management and maintaining a low underlying decline profile, positions the Company to take advantage of strategic opportunities as they arise. This positioning has been realized during and subsequent to the second quarter of 2018, through two strategic acquisitions of high quality southeast Saskatchewan conventional and unconventional light oil assets. TORC will continue to be disciplined and focused while being proactive to further position and complement the Company’s asset base and business model.
The Company’s key achievements in the second quarter of 2018 included the following:
- Achieved record quarterly production of 23,059 boepd, up from 22,894 boepd in the first quarter of 2018 and 20,775 boepd in the second quarter of 2017;
- Generated cash flow of $75.3 million relative to $64.0 million in the first quarter of 2018 and $52.5 million in the second quarter of 2017;
- Generated cash flow per share of $0.38 as compared to $0.33 in the first quarter of 2018 and $0.28 in the second quarter of 2017;
- Successfully drilled 8 (7.0 net) wells and completed 7 (6.25 net) wells;
- During the second quarter, TORC declared dividends of $12.9 million of which $3.8 million was paid under the share dividend program;
- Achieved a payout ratio (excluding acquisitions) of 52% in the second quarter and 61% for the first half while still growing production (exclusive of acquisitions);
- On June 27th, TORC successfully closed the strategic acquisition of approximately 3,200 boepd of light oil focused production in the Company’s southeast Saskatchewan core area for aggregate consideration comprised of the issuance of 13.5 million TORC common shares and $125.0 million in cash, prior to closing adjustments. Subsequent to the closing, the 13.5 million TORC common shares issued cleared through a successful block trade. As part of the block trade, TORC’s major shareholder, the Canada Pension Plan Investment Board, increased their ownership position from approximately 24% to 28% currently;
- Exited the quarter with net debt of approximately $367 million with $324 million drawn on the Company’s $500 million credit facility; and
- Subsequent to the end of the second quarter, TORC closed the acquisition of a private company with complementary operations which are primarily focused on the unconventional Midale light oil play in southeast Saskatchewan. The strategic acquisition includes 4.0 mmboe of P+P reserves and over 1,000 boepd of high quality, high netback, light oil producing assets for aggregate consideration comprised of the issuance of 2.1 million TORC common shares and $46.5 million in cash.
OPERATIONAL UPDATE
TORC achieved production of 23,059 boepd during the second quarter, up from 22,894 boepd in the first quarter, representing the Company’s 24th consecutive quarter of growth. The continued outperformance of the Company’s existing low decline production base combined with a successful drilling program continues to deliver consistent and predictable results.
TORC spent a total of $30 million of exploration and development capital in the second quarter. Combined with the first quarter, total first half capital spending was $72 million, representing approximately 40% of TORC’s 2018 capital budget. With approximately 60% of the capital program planned for the second half of the year, TORC remains well positioned to achieve the Company’s production guidance.
SOUTHEAST SASKATCHEWAN
TORC participated in the drilling of 4 (3.0 net) conventional wells in the second quarter following an active first quarter which included the drilling of 10 (6.9 net) conventional wells. With a total of 51 (41.6 net) wells budgeted to be drilled in 2018, 37 (31.7 net) additional conventional wells are planned to be drilled in the second half of 2018. During the second quarter, 2 (1.75 net) conventional wells were completed and have recently been brought on production.
On the Company’s unconventional asset base in southeast Saskatchewan, TORC drilled 3 (3.0 net) development wells in the Torquay/Three Forks resource play during the second quarter of 2018. During the second quarter, 4 (3.5 net) Torquay/Three Forks wells were completed and have been brought on production. In the second half of 2018, 6 (6.0 net) Torquay wells are scheduled to be drilled for a total of 15 (13.0 net) wells this year.
On the unconventional Midale light oil resource play in southeast Saskatchewan, TORC drilled 1 (1.0 net) well during the second quarter for a total of 6 (4.3 net) wells in the first half. During the second quarter, 1 (1.0 net) unconventional Midale well was completed and has been recently brought on production. The Company plans to drill 9 (6.9 net) unconventional Midale wells spread across the Company’s land position for both the development and further delineation of the play during the second half of 2018. Through the continued consolidation and delineation of this play, TORC has increased the total number of identified undrilled locations on the Company’s land base to 175.
CARDIUM
In 2018, TORC has budgeted to drill 11 (10.4 net) Cardium wells. As planned, the Company drilled 5 (4.4 net) wells in the first half of 2018, all in the first quarter. TORC’s Cardium program includes drilling an additional 6 (6.0 net) wells.
STRATEGIC ACQUISITION
TORC is pleased to announce that subsequent to the second quarter, the Company completed the acquisition of Villanova 4 Oil Corp. (“V4″or “Acquisition”), a private oil company with complementary high quality, light oil assets in southeast Saskatchewan. The strategic acquisition of V4 includes over 1,000 boepd (~80% light oil and liquids) of high netback, light oil producing assets which are primarily focused in the emerging unconventional Midale play. The assets enhance TORC’s high quality inventory in this play along with providing infrastructure synergies. Aggregate consideration for the Acquisition is comprised of the issuance of 2.1 million TORC common shares and $46.5 million in cash.
CAPITAL PROGRAM
With the closing of the latest Acquisition, TORC is increasing the Company’s 2018 capital budget to $185 million from $180 million previously. The 2018 capital program will remain concentrated on the Company’s primary core areas in southeast Saskatchewan, focused on both conventional and unconventional opportunities, and the Cardium play in central Alberta. TORC continues to focus on operational efficiencies with a goal of achieving results that exceed budget expectations.
The revised program maintains TORC’s balanced approach where the Company continues to focus on disciplined long term organic growth, maintaining a consistent production decline, and protecting the Company’s strong financial position to maintain repeatability of the business model.
Based on current commodity prices and budgeted cost structure, TORC expects to achieve significant free cash flow in 2018 while growing production and paying the current dividend.
TORC has undertaken an active commodity hedging program to further protect our core capital spending requirements and dividend policy and currently has 4,750 bopd of oil production hedged through the remainder of 2018. A current hedging schedule can be found in TORC’s corporate presentation at www.torcoil.com.
INCREASED PRODUCTION GUIDANCE
TORC is increasing the Company’s 2018 average production guidance to 25,100 boepd from 24,700 boepd previously and 2018 exit production guidance to 28,000 boepd from 27,000 boepd previously.
DIVIDEND
TORC’s dividend is reviewed regularly with the Board of Directors and is an important component of TORC’s overall strategy. During the second quarter, TORC declared dividends of $12.9 million of which $3.8 million was paid under the share dividend plan.
The Board of Directors has confirmed a dividend of $0.022 per common share will be paid on August 15, 2018 to shareholders of record on July 31, 2018.
TORC’s priorities are to act prudently to protect TORC’s financial flexibility while positioning the Company to continue to achieve per share growth over a long term basis while paying out a sustainable dividend.
OUTLOOK
TORC has built a sustainable growth platform of light oil focused assets and continues to enhance this platform. The stability of the high quality, low decline, conventional light oil assets in southeast Saskatchewan and the low risk Cardium development inventory in central Alberta, combined with exposure to growth oriented light oil resource plays in southeast Saskatchewan, positions TORC to provide value creation through a disciplined long term strategy.
TORC has the following key operational and financial attributes:
High Netback Production (1) |
2018E Average: 25,100 boepd 2018E Exit: 28,000 boepd
|
Total Proved plus Probable Reserves (2) |
Greater than 133 mmboe (~85% light oil & liquids)
|
Southeast Saskatchewan Light Oil |
Greater than 400 net undrilled conventional locations Greater than 150 net undrilled Torquay/Three Forks locations Greater than 175 net undrilled unconventional Midale locations |
Cardium Light Oil Development Inventory |
Greater than 290 net undrilled locations |
Sustainability Assumptions (3) |
Corporate decline ~23% Capital Efficiency ~$26,000 per boepd (IP 365)
|
2018 Capital Program |
$185 million |
Monthly Dividend |
$0.022 per share
|
Pro Forma Net Debt as at June 30, 2018 (4) |
$414 million; $371 million drawn |
Shares Outstanding |
212.9 (basic) |
Tax Pools |
Approximately $1.8 billion |
Notes: |
|
(1) |
~88% light oil & NGLs. |
(2) |
All reserves information in this press release are gross reserves. The reserve information for TORC in the foregoing table is derived from the independent engineering report effective December 31, 2017 prepared by Sproule & Associates Limited (“Sproule”) evaluating the oil, NGL and natural gas reserves attributable to all of our properties (the “TORC Reserve Report”). The reserves associated with the June acquisition is based on TORC’s internal evaluation prepared by a qualified reserves evaluator in accordance with NI-51-101 and COGE Handbook, and effective April 1, 2018. The reserves associated with the acquisition of the private company, subsequent to the second quarter, is based on TORC’s internal evaluation prepared by a qualified reserves evaluator in accordance with NI-51-101 and COGE Handbook, effective July 1, 2018, and is included in the total proved plus probable reserves of 133 mmboe. |
(3) |
Refers to full cycle capital efficiency which is the all-in corporate capital budget divided by the IP365 of the associated wells. Corporate decline refers to TORC’s estimated oil and gas production decline rate in the normal life cycle of a well. |
(4) |
See “Non-GAAP Measures”. |
An updated corporate presentation can be found at www.torcoil.com.