CALGARY, Alberta, Aug. 09, 2018 (GLOBE NEWSWIRE) — Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) (TSX:PPR) is pleased to announce its operating and financial results for the three and six months ended June 30, 2018, and to provide an operational update. PPR’s consolidated financial statements (“Financial Statements”) and related Management’s Discussion and Analysis (“MD&A”) for the three and six months ended June 30, 2018 are available on its website and filed on SEDAR.
- Production averaged 5,146 boe/d in the second quarter and 4,879 boe/d for the first six months of 2018, with a 70% liquids weighting in both periods, demonstrating the success of PPR’s strategy to focus on oil and natural gas liquids (“NGL”) opportunities. Production volumes in both Q2 and the first six months of 2018 reflect the divestment of certain non-core gas-weighted properties in Q4 2017 and natural declines, as well as an average of 960 boe/d and 510 boe/d of incremental production from the successful 2018 drilling program during each respective period.
- Subsequent to the end of the second quarter, PPR began producing from its second high impact well at Princess, bringing PPR’s current production to approximately 6,000 boe/d, with a third Princess well scheduled to be brought on-stream in August 2018.
- First half 2018 exploration and development capital expenditures totaled $18.9 million, representing approximately 70% of the Company’s anticipated annual capital budget, with activity largely focused at Princess, the Wayne area in Wheatland and the waterflood at Evi. Since the start of 2018, PPR has drilled eight wells with a 100% success rate, six of which were completed, tied-in and brought on production by the end of the second quarter. As noted above, one additional well was brought on-stream in July and the other is expected to be brought on-stream in August 2018.
- PPR’s higher oil and NGL weighting has benefited the Company in Q2 and the first six months of 2018 as oil and NGL prices strengthened. The Company’s Q2 2018 realized oil price of $70.96 per bbl and realized NGL price of $53.04 per bbl were 28% and 65% higher, respectively, over Q2 2017.
- Operating netbacks before realized hedging gains totaled $23.86/boe for Q2 2018 and $22.17/boe for the first half of 2018, an increase of 49% and 43%, respectively, from Q2 2017. The increases reflect the higher realized oil and NGL prices, partially offset by higher royalties and higher operating costs associated with increased oil production.
- Adjusted EBITDAX (before pro-forma adjustments) was $6.3 million in the second quarter and $11.3 million for the first six months of 2018, a decrease of $1.0 million and $ 2.2 million, respectively, from Q2 2017, impacted by higher operating netbacks but a realized hedging loss incurred in 2018 compared to a realized hedging gain in 2017.
- During the second quarter of 2018, PPR increased its borrowing base under its Revolving Facility from US$40 million to US$45 million. The expanded borrowing base reflects PPR’s increased underlying reserves value and provides additional liquidity and financial flexibility heading into the second half of 2018.
- Net loss was $15.1 million for the second quarter of 2018 and $26.8 million for the first half of 2018. The net losses primarily resulted from non-cash items including depletion and depreciation and unrealized loss on derivative financial instruments.
FINANCIAL AND OPERATING HIGHLIGHTS
|Three Months Ended
|Six Months Ended
|($000s except per unit amounts)||2018||2017||2018||2017|
|Oil and natural gas revenue||24,187||21,682||43,470||40,890|
|Per share – basic||(0.13||)||0.01||(0.23||)||0.08|
|Per share – diluted||(0.13||)||0.01||(0.23||)||0.07|
|Adjusted EBITDAX (before pro-forma adjustments)(1)||6,319||7,361||11,341||13,474|
|Per share – basic & diluted||0.05||0.06||0.10||0.12|
|Adjusted funds from operations(2)||4,792||7,060||8,674||12,994|
|Per share – basic & diluted||0.04||0.06||0.07||0.12|
|Capital expenditures (net of proceeds from dispositions)||4,754||4,767||19,706||53,153|
|Crude oil (bbls/d)||3,513||3,458||3,302||3,147|
|Natural gas (Mcf/d)||9,175||13,136||8,776||14,099|
|Natural gas liquids (bbls/d)||104||225||114||259|
|Average Realized Prices|
|Crude oil ($/bbl)||70.96||55.42||66.60||55.63|
|Natural gas ($/Mcf)||1.20||3.00||1.62||2.98|
|Natural gas liquids ($/bbl)||53.04||32.19||52.87||34.00|
|Operating Netback ($/boe)(2)|
|Realized gains on derivative instruments||(6.28||)||2.15||(4.71||)||1.78|
|Operating netback, after realized gains on
|(1) (2)||Adjusted EBITDAX (before pro-forma adjustments), adjusted funds from operations and operating netback are non-IFRS measures. See “Other Advisories” below.|
June 30, 2018
December 31, 2017
|Working capital deficit(1)||5,247||2,201|
|Total net debt(2)||73,667||57,961|
|Debt capacity(3) (in USD)||7,000||9,000|
|Common shares outstanding (in millions)||115.8||115.9|
|(1) & (2)||Working capital deficit and Net Debt are non-IFRS measures. See “Other Advisories” below.|
|(3)||Debt capacity reflects the Revolving Facility of USD$45 million at June 30, 2018 and USD$40 million at December 31, 2017, net of amounts drawn thereunder at such dates.|
|Three months ended
|Six months ended
|Net (working interest) wells||2.0||—||7.95||4.0|
|Success rate, net wells (%)||100||N/A||100||100|
During Q2 2018, the Company finalized the completion and tie-in of the last of the three gross (3.0 net) wells drilled in the first quarter of 2018 in the Wheatland area. Below is a summary of the on-production timing and current production rates of the three wells:
- Wayne-1 came on stream in early April and is currently producing at approximately 76 boe/d (64% liquids);
- Wayne-2 came on stream in mid-April and is currently producing at approximately 45 boe/d (58% liquids); and
- Wayne-3 came on stream in early June and is currently producing at approximately 290 boe/d (30% liquids).
At Princess, the Company drilled two gross (2.0 net) wells during the second quarter, finalized the completion and tie-in of three gross (3.0 net) wells drilled in the first quarter of 2018, and completed the construction of a multi-well satellite and associated pipelines.
One of the five Princess wells came on production in mid-March, and two began producing in early May 2018. On July 30, 2018, PPR announced results from a fourth well that was completed and brought on production subsequent to the quarter end. The fifth well is expected to be placed on production in August 2018. As announced in the Company’s July 30, 2018 news release, Princess-1 and Princess-4 (as defined therein) have shown strong production rates and, based on current production rates and netbacks, could achieve payout in approximately three months, delivering the strongest economics in PPR’s portfolio of properties.
Year to date, the Company has directed $3.1 million in capital to continue the advancement of its waterflood project at Evi, which was allocated to pipeline construction and three injector conversions. Operations in the Evi area provide approximately 40% of corporate production with operating netbacks improving with the oil price increase to average approximately $39.22/boe in Q2 2018.
OUTLOOK AND GUIDANCE
Prairie Provident’s business strategy has been built on a balanced approach, utilizing predictable funds flow from our low-decline oil assets to fuel growth developments. Our priorities remain focused on maintaining a strong balance sheet while delivering accretive growth in our asset value. PPR is encouraged by the well performance from its successful 2018 drilling program, especially the recent Lithic Glauconite wells at Princess.
Current average daily production is approximately 6,000 boe/d (74% liquids), representing a 17% increase over average daily Q2 2018 production. Based on current and projected production rates, Prairie Provident anticipates full-year production to be well within its 2018 guidance range of 5,200 to 5,600 boe/d. Prairie Provident’s projected full-year 2018 capital budget remains consistent with its original guidance of $26 million. After bringing on-stream the fifth Princess well, PPR has approximately 22% of its 2018 capital budget available for further development.
As a result of accelerating a portion of its drilling program to Q1 from Q3 of 2018, PPR has increased its debt ratio in the second quarter of 2018 to 2.8 times Debt to Adjusted EBITDAX. Subsequent to June 30, 2018, PPR sold certain non-core properties for gross proceeds of $2.8 million without any impact to its borrowing capacity. The proceeds were applied first towards debt repayment and may be redeployed in the future. Together with the strong production and payout profile from the Princess Lithic Glauconite wells, the Company anticipates its debt leverage to improve through the remainder of the year.
PPR’s active risk management program provides price protection through a rolling three-year hedging program that supports its capital program and provides upside participation in new production. Prairie Provident currently has approximately 60% of 2018 estimated base production volumes (net of royalties), 45% in 2019 and 25% in 2020 hedged using a mixture of costless collars and forward swaps to provide a higher level assurance of future cash flows. The Company will continue to monitor pricing conditions for hedging opportunities that offer greater upside participation should commodity prices rise.
Prairie Provident’s full-year 2018 guidance estimates remain unchanged from those presented in the Company’s news release dated March 28, 2018. Additional details on Prairie Provident’s 2018 capital program and guidance can be found on the Company’s website at www.ppr.ca.
ABOUT PRAIRIE PROVIDENT:
Prairie Provident is a Calgary-based company engaged in the exploration and development of oil and natural gas properties in Alberta. The Company’s strategy is to grow organically in combination with accretive acquisitions of conventional oil prospects, which can be efficiently developed. Prairie Provident’s operations are primarily focused at Wheatland and Princess in Southern Alberta targeting the Ellerslie and the Lithic Glauconite formations, along with an early stage waterflood project at Evi in the Peace River Arch. Prairie Provident protects its balance sheet through an active hedging program and manages risk by allocating capital to opportunities offering maximum shareholder returns.