CALGARY, Alberta, Nov. 01, 2018 (GLOBE NEWSWIRE) — (TSX: CJ) Cardinal Energy Ltd. (“Cardinal” or the “Company”) is pleased to announce its operating and financial results for the quarter ended September 30, 2018.
The Company’s unaudited financial statements and management’s discussion and analysis for the quarter ended September 30, 2018, will be available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on Cardinal’s website at www.cardinalenergy.ca.
Highlights from the third quarter of 2018:
- During the third quarter of 2018, cash flow from operating activities and adjusted funds flow increased 18% and 15%, respectively, over the same period in 2017.
- Adjusted funds flow per share increased 14% to $0.24 per share in the third quarter of 2018 as compared to $0.21 per share in the same period in 2017.
- Revenue increased 32% in the third quarter of 2018 compared to the same period in 2017, which included 46% and 25% increases in light oil and medium/heavy oil pricing, respectively.
- Despite an increasing regulatory cost environment, during the third quarter Cardinal reduced operating costs per boe by 1% over the same period in 2017 and by 3% over the second quarter of 2018.
- Cardinal’s debt reduction strategy continued by decreasing third quarter 2018 closing net bank debt by $43 million over the same period in 2017, which resulted in a decrease of the net debt to adjusted funds flow ratio from 4.2x to 2.3x.
- Production for the first nine months of 2018 averaged 21,024 boe/d, a 17% increase over the same period in 2017.
- Cardinal expanded its prospect inventory through a large scale farm-in in our Bantry core area and land purchases to augment our emerging Clearwater area in Northern Alberta.
Financial and Operating Highlights
|($ 000’s except shares, per share and operating amounts)
|Three months ended September 30,||Nine months ended September 30,|
|2018||2017||% Change||2018||2017||% Change|
|Petroleum and natural gas revenue||113,551||86,022||32||320,177||216,198||48|
|Cash flow from operating activities||28,074||23,719||18||81,799||52,088||57|
|Adjusted funds flow(1)||27,072||23,521||15||79,708||55,251||44|
|basic and diluted per share||0.08||(0.11||)||n/m||(0.21||)||(0.04||)||n/m|
|Net bank debt (1)||200,728||243,516||(18||)||200,728||243,516||(18||)|
|Development capital expenditures||21,280||14,048||51||48,139||50,552||(5||)|
|Total capital expenditures||10,801||14,284||(24||)||32,701||380,996||(91||)|
|Weighted average shares outstanding|
|Average daily production|
|Light oil (bbl/d)||8,580||8,174||5||8,835||4,713||87|
|Medium/heavy oil (bbl/d)||8,842||9,469||(7||)||8,718||9,794||(11||)|
|Natural gas (mcf/d)||16,718||18,650||(10||)||16,619||17,228||(4||)|
|Petroleum and natural gas revenue||58.92||43.56||35||55.79||44.12||26|
|(1) See non-GAAP measures|
Third Quarter Overview
Cardinal continues to execute on its business plan. The third quarter of 2018 saw net bank debt reduced by $13 million from the second quarter of 2018 and operating costs decrease by $0.57/boe over the second quarter of 2018 to $20.24/boe.
During the quarter, we added 58 net sections of undeveloped land in our core Bantry area via farm-in with favourable farm-in terms and expanded our position in the emerging Clearwater oil play in Northern Alberta.
Cardinal sold the last of our previously announced royalty assets for $12.5 million in the quarter, which concludes our royalty disposition process.
Our low decline conventional base production continued to perform to expectation. Production for the quarter was up slightly from the second quarter of 2018 and is expected to continue to increase moving into the fourth quarter. We expect to end 2018 with full year production coming in within our guidance of 21,000 to 21,500 boe/d.
Cardinal drilled three (2.9 net) wells in the third quarter as well as two stratigraphic test wells at Bantry. The wells drilled included two (1.9 net) Dunvegan horizontal oil wells at Grande Prairie and one (1.0 net) Glauconitic channel well at Bantry. All three wells are producing at or above our expectations. Our 16-36 Ellerslie well in Bantry, which was drilled in June of 2018 as a three-leg open hole horizontal, continues to outperform our expectations. The IP 60 rate for the well is in excess of 480 boe/d and this well currently continues to flow at strong rates.
In addition to drilling, we spent an additional $5 million on facility optimization and power generation projects in the quarter. We do not expect to see the full benefits from this initial power generation project until the first quarter of 2019.
The fourth quarter of 2018 has presented continued headwinds for the Canadian Oil and Gas Industry with the effects of limited egress showing up in a drastic fashion. While the Company believes that the differentials for both Edmonton light and Western Canadian Select (“WCS”) differentials will improve in 2019, the effect of the wide differentials are expected to significantly impact fourth quarter adjusted funds flow. Current forward average fourth quarter pricing differentials have widened over the third quarter of 2018 by approximately US$15/bbl for both Edmonton light and WCS oil.
In order to deal with the pricing uncertainty in the current environment, Cardinal is taking a proactive approach on multiple fronts to maintain our strong balance sheet. The Company is reducing workovers and non-essential services in order to reduce operating costs in the quarter and we are assessing and reducing discretionary capital spending in the quarter. On the pricing side, Cardinal is proactively increasing its netback by finding alternate routes to market through trucking both to receipt points that are not as heavily penalized with differentials and to areas where we can blend our oil into more attractive pricing streams.
Our mandate for 2018/2019 will be to continue to focus on three areas: maintaining our dividend and our total payout ratio below 100%, reducing our debt levels to 1x run rate adjusted funds flow and reducing our operating costs through larger long lead time capital projects. In addition, we will proactively upgrade our infrastructure to minimize our future environmental impact and continue to accelerate our future abandonment obligation expenditures.
Cardinal is able to provide shareholders with a sustainable dividend, modest growth and a continually improving asset base all supported by funds flow.