CALGARY, Aug. 8, 2018 /CNW/ – Yangarra Resources Ltd. (“Yangarra” or the “Company“) (TSX:YGR) announces its financial and operating results for the three and six months ended June 30, 2018.
Second Quarter Highlights
- Reached 10,000 boe/d of production at the end of the quarter.
- Average production of 7,570 boe/d (60% liquids) during the quarter an increase of 1% from the first quarter of 2018 and 33% increase from the same period in 2017.
- Oil and gas sales were $29.9 million, an increase of 53% from the same period in 2017.
- Funds flow from operations of $17.0 million ($0.20 per share – basic), an increase of 41% from the same period in 2017.
- Adjusted EBITDA (which excludes changes in derivative financial instruments) was $16.6 million ($0.20 per share – basic).
- Net income of $1.6 million ($0.02 per share – basic) or $2.6 million net income before tax.
- Operating costs were $7.72/boe (including $1.31/boe of transportation costs).
- Field netbacks were $31.82 per boe.
- Operating netbacks, which include the impact of commodity contracts, were $26.64 per boe.
- Operating margins were 61% and cash flow margins were 57%.
- G&A costs of $0.56/boe.
- Royalties were 9% of oil and gas revenue.
- Total capital expenditures were $26 million.
- Commissioned the 20 mmcf/d Ferrier West facility together with the Company’s third oil treating facility.
- Net debt (which excludes current derivative financial instruments) was $115.1 million.
- Net Debt to annualized second quarter funds flow from operations was 1.69:1.
- Corporate LMR is 8.78, with decommissioning liabilities of $11.4 million (discounted).
Operations Update
Yangarra has now drilled a total of 42 bioturbated Cardium wells. IP 30 results for wells 21-30 had a 10% improvement from wells 11-20 and a 25% improvement from wells 1-10 (all wells adjusted for lateral length).
The Company resumed drilling operations in late May and drilled 5 gross/net wells in the second quarter consisting of 3 two-mile and 2 one-mile horizontal wells. The Q2 drilling program included various inter-frack spacings on pads ranging from 60-96 stages per mile which will be compared to the current standard 80 stages per mile to assist with determining optimal frack spacing.
As a result of continuously improving drilling and production results, Yangarra continues to update future drilling inventory. The Company’s Cardium type curve is the weighted average of all future inventory in all areas of the Cardium portfolio. Current inventory is estimated at 913 gross (716 net) locations (1-mile wells). Based on current inventory, drilling with 2 rigs year-round other than breakup, Yangarra estimates it has 16 years (net) of future inventory. In 2018, the Company added 17 sections of Cardium land.
Budget Update
The Board of Directors approved an increase in the capital budget from $90 million to $120 million for 2018. This budget will allow the Company to continue to utilize 2 drilling rigs which optimizes drilling operations and provides economies of scale.
As the additional spending will occur in the fourth quarter, the existing guidance of 9,000 – 10,000 boe/d average production for 2018 remains unchanged.
Yangarra estimates that 22 gross (19 net) wells will be put on production during the second half of 2018, including wells drilled in the first half of 2018 but expected to be completed in the second half of 2018.
Management Changes
Yangarra has appointed Gurdeep Gill as Vice President, Business Development with responsibilities for business development and capital markets. Mr. Gill has 18 years of experience in investment banking and capital markets, most recently as the head of investment banking at AltaCorp Capital Inc. prior to that, he worked at National Bank Financial and Tristone Capital Inc.
Financial Summary
2018 |
2017 |
Six months ended |
||||||||||
Q2 |
Q1 |
Q2 |
2018 |
2017 |
||||||||
Statements of Comprehensive Income |
||||||||||||
Petroleum & natural gas sales |
$ |
29,922,471 |
$ |
29,749,716 |
$ |
19,527,395 |
$ |
59,672,187 |
$ |
35,076,783 |
||
Net income (before tax) |
$ |
2,604,506 |
$ |
8,046,711 |
$ |
7,893,731 |
$ |
10,651,217 |
$ |
15,235,464 |
||
Net income |
$ |
1,646,498 |
$ |
5,658,059 |
$ |
5,611,218 |
$ |
7,304,557 |
$ |
10,827,763 |
||
Net income per share – basic |
$ |
0.02 |
$ |
0.07 |
$ |
0.07 |
$ |
0.09 |
$ |
0.13 |
||
Net income per share – diluted |
$ |
0.02 |
$ |
0.07 |
$ |
0.07 |
$ |
0.08 |
$ |
0.13 |
||
Statements of Cash Flow |
||||||||||||
Funds flow from operations |
$ |
17,004,713 |
$ |
18,637,949 |
$ |
12,047,670 |
$ |
35,642,663 |
$ |
22,390,874 |
||
Funds flow from operations per share – basic |
$ |
0.20 |
$ |
0.22 |
$ |
0.15 |
$ |
0.42 |
$ |
0.28 |
||
Funds flow from operations per share – diluted |
$ |
0.19 |
$ |
0.22 |
$ |
0.14 |
$ |
0.41 |
$ |
0.27 |
||
Cash from operating activities |
$ |
16,288,319 |
$ |
14,988,928 |
$ |
9,241,194 |
$ |
31,277,247 |
$ |
17,851,606 |
||
Statements of Financial Position |
||||||||||||
Property and equipment |
$ |
387,733,694 |
$ |
367,513,370 |
$ |
299,963,241 |
$ |
387,733,694 |
$ |
299,963,241 |
||
Total assets |
$ |
430,520,160 |
$ |
411,579,250 |
$ |
326,865,302 |
$ |
430,520,160 |
$ |
326,865,302 |
||
Working capital deficit |
$ |
18,600,280 |
$ |
18,844,775 |
$ |
69,864,913 |
$ |
18,600,280 |
$ |
69,864,913 |
||
Net Debt (which excludes current derivative financial instruments) |
$ |
115,118,849 |
$ |
108,019,791 |
$ |
72,674,034 |
$ |
115,118,849 |
$ |
72,674,034 |
||
Non-Current Liabilities, excluding bank debt |
$ |
51,546,663 |
$ |
47,626,159 |
$ |
39,580,252 |
$ |
51,546,663 |
$ |
39,580,252 |
||
Shareholders equity |
$ |
224,991,440 |
$ |
218,030,997 |
$ |
197,280,541 |
$ |
224,991,440 |
$ |
197,280,541 |
||
Weighted average number of shares – basic |
85,019,808 |
82,885,794 |
80,555,880 |
83,958,696 |
80,264,589 |
|||||||
Weighted average number of shares – diluted |
87,782,665 |
86,336,165 |
84,065,109 |
86,406,125 |
83,388,671 |
|||||||
Company Netbacks ($/boe)
2018 |
2017 |
Six months ended |
||||||||||
Q2 |
Q1 |
Q2 |
2018 |
2017 |
||||||||
Sales price |
$ |
43.43 |
$ |
44.03 |
$ |
37.61 |
$ |
43.73 |
$ |
38.02 |
||
Royalty expense |
(3.90) |
(4.15) |
(2.86) |
(4.02) |
(2.95) |
|||||||
Production costs |
(6.40) |
(6.40) |
(8.26) |
(6.40) |
(7.70) |
|||||||
Transportation costs |
(1.31) |
(1.65) |
(0.73) |
(1.48) |
(0.82) |
|||||||
Field operating netback |
31.82 |
31.84 |
25.76 |
31.83 |
26.55 |
|||||||
Realized gain (loss) on commodity contract settlement |
(5.18) |
(2.25) |
0.92 |
(3.73) |
0.61 |
|||||||
Operating netback |
26.64 |
29.59 |
26.68 |
28.10 |
27.16 |
|||||||
G&A |
(0.56) |
(0.57) |
(0.92) |
(0.56) |
(0.74) |
|||||||
Finance expenses |
(1.39) |
(1.29) |
(1.95) |
(1.34) |
(1.79) |
|||||||
Funds flow netback |
24.69 |
27.73 |
23.81 |
26.19 |
24.63 |
|||||||
Depletion and depreciation |
(10.00) |
(10.07) |
(10.68) |
(10.04) |
(10.75) |
|||||||
Accretion |
(0.08) |
(0.07) |
(0.09) |
(0.07) |
(0.10) |
|||||||
Stock-based compensation |
(1.95) |
(1.21) |
(0.71) |
(1.59) |
(0.76) |
|||||||
Unrealized gain (loss) on financial instruments |
(8.87) |
(4.47) |
2.88 |
(6.69) |
3.50 |
|||||||
Deferred income tax |
(1.39) |
(3.54) |
(4.40) |
(2.45) |
(4.78) |
|||||||
Net Income netback |
$ |
2.39 |
$ |
8.37 |
$ |
10.81 |
$ |
5.35 |
$ |
11.74 |
Business Environment
2018 |
2017 |
Six months ended |
||||||||||
Q2 |
Q1 |
Q2 |
2018 |
2017 |
||||||||
Realized Pricing (Including realized commodity contracts) |
||||||||||||
Oil ($/bbl) |
$ |
71.34 |
$ |
68.51 |
$ |
63.69 |
$ |
69.89 |
$ |
63.97 |
||
NGL ($/bbl) |
$ |
31.71 |
$ |
40.50 |
$ |
29.14 |
$ |
35.56 |
$ |
29.51 |
||
Gas ($/mcf) |
$ |
1.16 |
$ |
2.21 |
$ |
3.00 |
$ |
1.69 |
$ |
3.08 |
||
Realized Pricing (Excluding commodity contracts) |
||||||||||||
Oil ($/bbl) |
$ |
80.03 |
$ |
72.04 |
$ |
62.63 |
$ |
75.95 |
$ |
63.39 |
||
NGL ($/bbl) |
$ |
40.38 |
$ |
45.24 |
$ |
27.85 |
$ |
42.51 |
$ |
28.89 |
||
Gas ($/mcf) |
$ |
1.16 |
$ |
2.21 |
$ |
2.89 |
$ |
1.69 |
$ |
2.97 |
||
Oil Price Benchmarks |
||||||||||||
West Texas Intermediate (“WTI”) (US$/bbl) |
$ |
67.88 |
$ |
62.87 |
$ |
48.29 |
$ |
65.37 |
$ |
50.10 |
||
Edmonton Par (C$/bbl) |
$ |
80.54 |
$ |
72.06 |
$ |
61.92 |
$ |
76.25 |
$ |
62.95 |
||
Edmonton Par to WTI differential (US$/bbl) |
$ |
(5.46) |
$ |
(5.87) |
$ |
(2.20) |
$ |
(5.67) |
$ |
(2.89) |
||
Natural Gas Price Benchmarks |
||||||||||||
AECO gas (Cdn$/mcf) |
$ |
1.03 |
$ |
1.85 |
$ |
2.78 |
$ |
1.44 |
$ |
2.79 |
||
Foreign Exchange |
||||||||||||
U.S./Canadian Dollar Exchange |
$ |
0.78 |
$ |
0.79 |
$ |
0.74 |
$ |
0.78 |
$ |
0.75 |
Operations Summary
Net petroleum and natural gas production, pricing and revenue are summarized below:
2018 |
2017 |
Six months ended |
||||||||||
Q2 |
Q1 |
Q2 |
2018 |
2017 |
||||||||
Daily production volumes |
||||||||||||
Natural gas (mcf/d) |
18,336 |
18,538 |
15,586 |
18,436 |
13,315 |
|||||||
Oil (bbl/d) |
3,162 |
3,352 |
2,281 |
3,252 |
2,060 |
|||||||
NGL’s (bbl/d) |
1,353 |
1,066 |
826 |
1,214 |
818 |
|||||||
Combined (boe/d 6:1) |
7,570 |
7,507 |
5,705 |
7,539 |
5,097 |
|||||||
Revenue |
||||||||||||
Petroleum & natural gas sales – Gross |
$ |
29,922,471 |
$ |
29,749,716 |
$ |
19,527,395 |
$ |
59,672,187 |
$ |
35,076,783 |
||
Realized gain (loss) on commodity contract settlement |
(3,569,273) |
(1,522,025) |
477,734 |
(5,091,298) |
563,652 |
|||||||
Total sales |
26,353,198 |
28,227,691 |
20,005,129 |
54,580,889 |
35,640,435 |
|||||||
Royalty expense |
(2,684,294) |
(2,801,221) |
(1,487,371) |
(5,485,515) |
(2,718,546) |
|||||||
Total Revenue – Net of royalties |
$ |
23,668,904 |
$ |
25,426,470 |
$ |
18,517,758 |
$ |
49,095,374 |
$ |
32,921,889 |
Working Capital Summary
The following table summarizes the change in working capital during the six months ended June 30, 2018 and the year ended December 31, 2017:
2018 |
2017 |
||||
Net Debt – beginning of period |
$ |
(93,533,252) |
$ |
(65,005,805) |
|
Funds flow from operations |
35,642,662 |
52,902,650 |
|||
Additions to property and equipment |
(57,322,323) |
(83,472,094) |
|||
Decommissioning costs incurred |
– |
(95,433) |
|||
Additions to E&E Assets |
(6,520,031) |
– |
|||
Issuance of shares |
6,758,792 |
2,179,593 |
|||
Other |
(144,697) |
(42,163) |
|||
Net Debt – end of period |
$ |
(115,118,849) |
$ |
(93,533,252) |
|
Credit facility limit |
$ |
150,000,000 |
$ |
120,000,000 |
Capital Spending
Capital spending is summarized as follows:
2018 |
2017 |
Six months ended |
|||||||||
Cash additions |
Q2 |
Q1 |
Q2 |
2018 |
2017 |
||||||
Land, acquisitions and lease rentals |
$ |
92,348 |
$ |
57,142 |
$ |
1,726,569 |
$ |
149,490 |
$ |
2,497,484 |
|
Drilling and completion |
19,519,585 |
26,771,512 |
4,299,243 |
46,291,097 |
23,963,628 |
||||||
Geological and geophysical |
199,680 |
139,091 |
284,010 |
338,771 |
427,802 |
||||||
Equipment |
6,112,877 |
4,340,961 |
1,382,772 |
10,453,838 |
4,293,044 |
||||||
Other asset additions |
85,687 |
3,439 |
208,438 |
89,126 |
215,336 |
||||||
$ |
26,010,177 |
$ |
31,312,145 |
$ |
7,901,032 |
$ |
57,322,322 |
$ |
31,397,294 |
||
Exploration & evaluation assets |
$ |
1,471,820 |
$ |
5,048,211 |
$ |
– |
$ |
6,520,031 |
$ |
– |
Capital spending is summarized as follows:
Total wells drilled in the half were 15 gross (13.2 net) consisting of 8 gross (7.7 net) two-mile wells and 7 gross (5.5 net) one-mile wells. The two wells drilling over year-end 2017 were completed in January 2018. The Ferrier West plant was constructed in the second quarter.
Quarter End Disclosure
The Company’s financial statements, notes to the financial statements and management’s discussion and analysis for the year ended December 31, 2017 and three and six months ended June 30, 2018 have been filed on SEDAR (www.sedar.com) and are available on the Company’s website (www.yangarra.ca).