CALGARY, Alberta, Aug. 09, 2018 (GLOBE NEWSWIRE) — Petrus Resources Ltd. (“Petrus” or the “Company”) is pleased to report financial and operating results for the second quarter of 2018. The Company’s Management’s Discussion and Analysis (“MD&A”) and interim consolidated financial statements dated as at and for the period ended June 30, 2018 are available on SEDAR (the System for Electronic Document Analysis and Retrieval) at www.sedar.com.
In response to the commodity price outlook for natural gas, the Company shifted its focus in the first half of 2018 to improving its financial position and directing excess funds flow towards debt repayment. During the first half of 2018, Petrus reduced its net debt by $13.0 million or 9%. The Company’s focus for the second half of 2018 is to prioritize light oil drilling opportunities in its core area, Ferrier, Alberta. The Company’s 2018 capital program is scheduled to recommence in August and Petrus expects to drill an additional 7 (3.7 net) Cardium light oil wells during the second half of 2018. The program is expected to be funded through funds flow and the Company is targeting to end 2018 at its current level of net debt.
HIGHLIGHTS
- Petrus generated funds flow of $8.4 million in the second quarter of 2018 which is 33% lower than the $12.5 million generated in the second quarter of 2017. The decrease is primarily due to the 63% reduction in natural gas pricing (AECO 7A monthly index) in the comparable period. The impact of the lower gas price was partially offset by the Company’s active hedging program. The quarterly average light oil price (Edm CAD$) increased 31% from the prior year which further offset the impact of the reduced natural gas prices.
- The Company has strategically focused on debt repayment in 2018 and has reduced net debt(1) by $13.0 million or 9% since December 31, 2017. As a result of the current commodity price environment, Petrus intends to direct its 2018 capital budget towards Cardium light oil development in Ferrier. Capital investment is expected to recommence in August(2).
- Second quarter average production was 9,246 boe/d in 2018 compared to 10,240 boe/d for the same period in 2017. The 10% decrease is attributable to certain dry gas production in the Foothills area which was shut-in due to uneconomic gas prices.
- Total operating expenses for the second quarter were 17% lower at $4.57 per boe in 2018 compared to $5.53 per boe in 2017(3). The Company continues to focus on lowering its operating costs, particularly in the Ferrier area, through facility ownership and control.
- Petrus utilizes financial derivative contracts to mitigate commodity price risk and provide stability and sustainability to the Company’s economic returns, funds flow and capital development plan. The Company realized a net loss on financial derivatives in the second quarter of 2018 of $0.6 million ($0.74 per boe) which is made up of a $3.2 million realized gain related to natural gas, offset by a $3.8 million net loss related to light oil. The amounts are due to the significant decrease in the price of natural gas and significant increase in the price of light oil, respectively. The Company endeavors to hedge approximately 50 to 70% of its forecast production for the following year, and approximately 30 to 50% of its forecast production for the subsequent year. As a percentage of second quarter 2018 production, Petrus has derivative contracts in place for 63% and 74% of its natural gas and oil and natural gas liquids production, respectively, for the remainder of 2018.
- During the second quarter of 2018, Petrus participated in the drilling of one (0.2 net) Cardium light oil well in the Ferrier area. The completion activities for the well were deferred to July due to spring break-up. The well was brought on production early in the third quarter.
(1) Refer to “Non-GAAP Financial Measures” .
(2) Refer to “Advisories – Forward-Looking Statements”.
(3) Refer to “Advisories – BOE Presentation”.
SELECTED FINANCIAL INFORMATION
OPERATIONS |
Three months ended |
Three monthsended |
Three monthsended |
Three monthsended |
Three monthsended |
|||||
Average Production |
39,126 |
42,392 |
45,543 |
46,625 |
45,550 |
|||||
Natural gas (mcf/d) | ||||||||||
Oil (bbl/d) | 1,484 | 2,015 | 1,530 | 1,854 | 1,877 | |||||
NGLs (bbl/d) | 1,241 | 1,160 | 1,475 | 1,086 | 1,098 | |||||
Total (boe/d) | 9,246 | 10,240 | 10,596 | 10,711 | 10,567 | |||||
Total (boe) | 841,316 | 931,821 | 953,598 | 985,388 | 972,140 | |||||
Natural gas sales weighting | 71 | % | 69 | % | 72 | % | 73 | % | 72 | % |
Realized Prices |
1.24 |
3.29 |
2.18 |
1.90 |
1.66 |
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Natural gas ($/mcf) | ||||||||||
Oil ($/bbl) | 75.29 | 59.02 | 73.91 | 66.10 | 51.23 | |||||
NGLs ($/bbl) | 41.53 | 30.32 | 46.50 | 38.00 | 24.79 | |||||
Total realized price ($/boe) | 22.92 | 28.69 | 26.50 | 23.56 | 18.82 | |||||
Royalty income | 0.05 | 0.03 | 0.03 | 0.03 | 0.01 | |||||
Royalty expense | (2.54 | ) | (4.62 | ) | (4.90 | ) | (3.04 | ) | (2.73 | ) |
Net oil and natural gas revenue ($/boe) | 20.43 | 24.10 | 21.63 | 20.55 | 16.10 | |||||
Operating expense | (4.57 | ) | (5.53 | ) | (4.36 | ) | (4.81 | ) | (5.42 | ) |
Transportation expense | (1.17 | ) | (1.32 | ) | (1.26 | ) | (1.25 | ) | (1.29 | ) |
Operating netback (1) ($/boe) | 14.69 | 17.25 | 16.01 | 14.49 | 9.39 | |||||
Realized gain (loss) on derivatives | (0.74 | ) | 0.23 | 0.31 | 1.23 | 1.88 | ||||
Other income | 0.12 | — | — | — | — | |||||
General & administrative expense | (1.63 | ) | (1.12 | ) | (1.50 | ) | (0.27 | ) | (1.09 | ) |
Cash finance expense | (2.49 | ) | (1.94 | ) | (1.96 | ) | (1.54 | ) | (1.99 | ) |
Decommissioning expenditures | — | (1.03 | ) | (0.23 | ) | (0.62 | ) | (0.23 | ) | |
Corporate netback (1) ($/boe) | 9.95 | 13.39 | 12.63 | 13.29 | 7.96 |
FINANCIAL ($000s except per share) | Threemonths ended Jun. 30, 2018 |
Threemonths ended Jun. 30, 2017 |
Three monthsended Mar. 31, 2018 |
Three monthsended Dec. 31, 2017 |
Three monthsended Sept. 30, 2017 |
Oil and natural gas revenue Net loss Net loss per share Basic Fully diluted Funds flow Funds flow per share Basic Fully diluted Capital expenditures Net acquisitions (dispositions) Weighted average shares outstanding Basic Fully diluted |
19,321 (10,615) (0.21) 0.17 49,492 |
26,753 (781) (0.02) 0.25 49,428 |
25,301 (5,684) (0.11) 0.24 49,492 |
23,243 (67,095) (1.36) 0.26 49,456 |
18,299 (50,696) (1.03) 0.16 49,428 |
As at period end Common shares outstanding (000s) Basic Fully diluted Total assets Non-current liabilities Net debt (1) |
49,492 |
49,428 |
49,492 |
49,492 |
49,428 |
(1) Refer to “Non-GAAP Financial Measures”.
OPERATIONS UPDATE
Production |
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Average second quarter production by area was as follows: | ||||||||
For the three months ended June 30, 2018 |
Ferrier |
Foothills |
Central Alberta |
Total |
||||
Natural gas (mcf/d) | 28,734 | 3,225 | 7,167 | 39,126 | ||||
Oil (bbl/d) | 845 | 203 | 435 | 1,483 | ||||
NGLs (bbl/d) | 1,039 | 15 | 188 | 1,241 | ||||
Total (boe/d) | 6,672 | 756 | 1,818 | 9,246 | ||||
Natural gas sales weighting | 72 | % | 71 | % | 66 | % | 71 | % |
Second quarter average production was 9,246 boe/d (71% natural gas) in 2018 compared to 10,240 boe/d (69% natural gas) in the second quarter of 2017. The 10% decrease is attributable to certain production volume in the Foothills area being shut-in due to uneconomic natural gas pricing.
Capital Development
The Company achieved year over year annual average production growth of 24% from 2016 to 2017 as a result of Petrus’ strategic focus on its Ferrier production growth. However, in response to the current commodity price outlook for natural gas, the Company shifted its 2018 focus to prioritize light oil drilling opportunities and to direct excess funds flow towards debt repayment. To date in 2018, Petrus has drilled or participated in 2 (0.7 net) Cardium light oil wells in Ferrier and has reduced net debt by $13.0 million or 9%. The Company’s 2018 capital program is scheduled to recommence in August and Petrus expects to drill an additional 7 (3.7 net) Cardium light oil wells during the second half of 2018.
An updated corporate presentation can be found on the Company’s website at www.petrusresources.com.
For further information, please contact:
Neil Korchinski, P.Eng.
President and Chief Executive Officer
T: (403) 930-0889
E: nkorchinski@petrusresources.com
NON-GAAP FINANCIAL MEASURES
This press release makes reference to the terms “operating netback”, “corporate netback”, and “net debt”. These indicators are not recognized measures under GAAP (IFRS) and do not have a standardized meaning prescribed by GAAP (IFRS). Accordingly, the Company’s use of these terms may not be comparable to similarly defined measures presented by other companies. Management uses these terms for the reasons set forth below.
Operating Netback
Operating netback is a common non-GAAP financial measure used in the oil and gas industry which is a useful supplemental measure to evaluate the specific operating performance by product at the oil and gas lease level. The most directly comparable GAAP measure to operating netback is funds flow. Operating netback is calculated as oil and natural gas revenue less royalties, operating and transportation expenses. It is presented on an absolute value and per unit basis.
Corporate Netback
Corporate netback is also a common non-GAAP financial measure used in the oil and gas industry which evaluates the Company’s profitability at the corporate level. Management believes corporate netback provides information to assist a reader in understanding the Company’s profitability relative to current commodity prices. It is calculated as the operating netback less general and administrative expense, finance expense, decommissioning expenditures, plus the net realized gain (loss) on financial derivatives. It is presented on an absolute value and per unit basis. The most directly comparable GAAP measure to corporate netback is funds flow.
Net Debt
Net debt is a non-GAAP financial measure and is calculated as current assets (excluding unrealized financial derivative assets) less current liabilities (excluding unrealized financial derivative liabilities) and long term debt. Petrus uses net debt as a key indicator of its leverage and strength of its balance sheet. There is no GAAP measure that is reasonably comparable to net debt.