CALGARY, Nov. 7, 2018 /CNW/ – Yangarra Resources Ltd. (“Yangarra” or the “Company“) (TSX:YGR) announces its financial and operating results for the three and nine months ended September 30, 2018.
Yangarra continues to delineate its core, bioturbated Cardium acreage and is currently drilling bioturbated wells #54 and #55 with 30 (26.7 net) wells drilled to date in 2018. Current production is approximately 12,500 boe/d and the Company expects to drill another 6 (5 net) wells and tie-in 4 to 5 additional wells before year-end.
Third Quarter Highlights
- Average production of 10,323 boe/d (61% liquids) during the quarter, an increase of 36% from the second quarter of 2018 and a 71% increase from the same period in 2017.
- Oil and gas sales were $45 million, an increase of 156% from the same period in 2017.
- Funds flow from operations of $29.5 million ($0.35 per share – basic), an increase of 128% from the same period in 2017.
- Adjusted EBITDA (which excludes changes in derivative financial instruments) was $29.4 million ($0.35 per share – basic).
- Net income of $12.9 million ($0.15 per share – basic) or $18.3 million net income before tax.
- Operating costs were $6.35/boe (including $1.07/boe of transportation costs).
- Field netbacks were $36.79 per boe.
- Operating netbacks, which include the impact of commodity contracts, were $33.15 per boe.
- Operating margins were 70% and cash flow margins were 66%.
- G&A costs of $0.61/boe.
- Royalties were 9% of oil and gas revenue.
- Total capital expenditures were $48 million.
- Net debt (which excludes current derivative financial instruments) was $135.7 million.
- Net Debt to annualized third quarter funds flow from operations was 1.2 : 1.
- Corporate LMR is 10.67 with decommissioning liabilities of $11.8 million (discounted).
Operations Update
Yangarra drilled and completed a five well pad during the quarter that generated cost savings of over $400k per well when compared to single well pads which provide a template for costs as the Company transitions to pad drilling.
Yangarra has undertaken an extensive infrastructure upgrade to four key gas processing facilities that includes 79 km of pipeline and installation of an additional 10,000 Horse Power (HP) of compression which will increase capacity to 90 mmcf/d. Essentially all Yangarra’s gas will be processed through Company owned infrastructure once the project is complete in Q1 2019 (75% complete now).
The Company truck division has grown to 11 units with several more on order. Increased regulatory burden in Alberta has resulted in the loss of small & mid-size trucking firms in Central Alberta which has given rise to significant increases in trucking rates. The Company internal rate for trucking is approximately 35% lower than commercial rates.
In addition, the Company has a full complement of company staffed crew trucks, pressure trucks and mechanical services which provide significant savings to operating costs.
The Company power requirements are internally generated by lease fuel fired generators or primary drivers which provide significant cost savings over grid supplied power.
Budget Update
The Board of Directors approved an increase in the capital budget from $120 million to $140 million for 2018. This revised budget includes $120 million for drilling 36 (31.7 net wells) and $20 million of infrastructure and land acquisition. The Company has run two rigs for the entire year, with a shorter than usual spring break-up period.
Financial Summary
2018 |
2017 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2018 |
2017 |
|||||||
Statements of Comprehensive Income |
|||||||||||
Petroleum & natural gas sales |
$ |
45,131,784 |
$ |
29,922,471 |
$ |
17,663,925 |
$ |
104,803,971 |
$ |
52,740,708 |
|
Net income (before tax) |
$ |
18,301,586 |
$ |
2,604,506 |
$ |
5,511,977 |
$ |
28,952,803 |
$ |
20,747,441 |
|
Net income |
$ |
12,946,733 |
$ |
1,646,498 |
$ |
3,975,606 |
$ |
20,251,290 |
$ |
14,803,369 |
|
Net income per share – basic |
$ |
0.15 |
$ |
0.02 |
$ |
0.05 |
$ |
0.24 |
$ |
0.18 |
|
Net income per share – diluted |
$ |
0.15 |
$ |
0.02 |
$ |
0.05 |
$ |
0.23 |
$ |
0.18 |
|
Statements of Cash Flow |
|||||||||||
Funds flow from operations |
$ |
29,524,289 |
$ |
17,004,713 |
$ |
12,948,149 |
$ |
65,166,952 |
$ |
35,339,023 |
|
Funds flow from operations per share – basic |
$ |
0.35 |
$ |
0.20 |
$ |
0.16 |
$ |
0.77 |
$ |
0.44 |
|
Funds flow from operations per share – diluted |
$ |
0.34 |
$ |
0.19 |
$ |
0.15 |
$ |
0.75 |
$ |
0.42 |
|
Cash from operating activities |
$ |
26,538,939 |
$ |
16,288,319 |
$ |
13,381,396 |
$ |
57,816,186 |
$ |
31,233,002 |
|
Statements of Financial Position |
|||||||||||
Property and equipment |
$ |
426,744,949 |
$ |
387,733,694 |
$ |
315,064,829 |
$ |
426,744,949 |
$ |
315,064,829 |
|
Total assets |
$ |
479,396,785 |
$ |
430,520,160 |
$ |
342,983,774 |
$ |
479,396,785 |
$ |
342,983,774 |
|
Working capital deficit |
$ |
23,528,470 |
$ |
18,600,280 |
$ |
79,069,633 |
$ |
23,528,470 |
$ |
79,069,633 |
|
Net Debt (which excludes current derivative financial instruments) |
$ |
135,712,402 |
$ |
115,118,849 |
$ |
80,449,394 |
$ |
135,712,402 |
$ |
80,449,394 |
|
Non-Current Liabilities, excluding bank debt |
$ |
58,467,174 |
$ |
51,546,663 |
$ |
40,523,942 |
$ |
58,467,174 |
$ |
40,523,942 |
|
Shareholders equity |
$ |
239,945,953 |
$ |
224,991,440 |
$ |
202,437,802 |
$ |
239,945,953 |
$ |
202,437,802 |
|
Weighted average number of shares – basic |
85,330,893 |
85,019,808 |
81,033,965 |
84,421,121 |
80,523,866 |
||||||
Weighted average number of shares – diluted |
87,613,710 |
87,782,665 |
84,772,793 |
86,783,199 |
83,692,914 |
||||||
Company Netbacks ($/boe)
2018 |
2017 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2018 |
2017 |
|||||||
Sales price |
$ |
47.52 |
$ |
43.43 |
$ |
31.87 |
$ |
45.29 |
$ |
35.71 |
|
Royalty expense |
(4.38) |
(3.90) |
(2.43) |
(4.17) |
(2.75) |
||||||
Production costs |
(5.28) |
(6.40) |
(5.41) |
(5.94) |
(6.84) |
||||||
Transportation costs |
(1.07) |
(1.31) |
(1.45) |
(1.31) |
(1.06) |
||||||
Field operating netback |
36.79 |
31.82 |
22.58 |
33.87 |
25.06 |
||||||
Realized gain (loss) on commodity contract settlement |
(3.65) |
(5.18) |
2.95 |
(3.70) |
1.49 |
||||||
Operating netback |
33.15 |
26.64 |
25.53 |
30.17 |
26.55 |
||||||
G&A |
(0.61) |
(0.56) |
(0.74) |
(0.58) |
(0.74) |
||||||
Finance expenses |
(1.30) |
(1.39) |
(0.71) |
(1.32) |
(1.39) |
||||||
Funds flow netback |
31.24 |
24.69 |
24.07 |
28.26 |
24.42 |
||||||
Depletion and depreciation |
(10.09) |
(10.00) |
(10.95) |
(10.06) |
(10.83) |
||||||
Asset Impairment |
(0.85) |
– |
– |
(0.35) |
– |
||||||
Accretion |
(0.06) |
(0.08) |
(0.08) |
(0.07) |
(0.09) |
||||||
Stock-based compensation |
(1.59) |
(1.95) |
(0.71) |
(1.59) |
(0.74) |
||||||
Unrealized gain (loss) on financial instruments |
0.62 |
(8.87) |
(2.39) |
(3.69) |
1.29 |
||||||
Deferred income tax |
(5.64) |
(1.39) |
(2.77) |
(3.76) |
(4.02) |
||||||
Net Income netback |
$ |
13.63 |
$ |
2.39 |
$ |
7.17 |
$ |
8.75 |
$ |
10.02 |
|
Business Environment
2018 |
2017 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2018 |
2017 |
|||||||
Realized Pricing (Including realized commodity contracts) |
|||||||||||
Oil ($/bbl) |
$ |
74.84 |
$ |
71.34 |
$ |
60.41 |
$ |
72.02 |
$ |
62.66 |
|
NGL ($/bbl) |
$ |
40.05 |
$ |
31.71 |
$ |
37.52 |
$ |
37.23 |
$ |
32.51 |
|
Gas ($/mcf) |
$ |
1.38 |
$ |
1.16 |
$ |
1.88 |
$ |
1.56 |
$ |
2.62 |
|
Realized Pricing (Excluding commodity contracts) |
|||||||||||
Oil ($/bbl) |
$ |
82.54 |
$ |
80.03 |
$ |
56.51 |
$ |
78.79 |
$ |
60.85 |
|
NGL ($/bbl) |
$ |
41.76 |
$ |
40.38 |
$ |
33.39 |
$ |
42.23 |
$ |
30.58 |
|
Gas ($/mcf) |
$ |
1.30 |
$ |
1.16 |
$ |
1.60 |
$ |
1.53 |
$ |
2.45 |
|
Oil Price Benchmarks |
|||||||||||
West Texas Intermediate (“WTI”) (US$/bbl) |
$ |
69.50 |
$ |
67.88 |
$ |
48.20 |
$ |
66.75 |
$ |
49.45 |
|
Edmonton Par (C$/bbl) |
$ |
81.92 |
$ |
80.54 |
$ |
57.05 |
$ |
78.19 |
$ |
61.20 |
|
Edmonton Par to WTI differential (US$/bbl) |
$ |
(6.83) |
$ |
(5.46) |
$ |
(2.56) |
$ |
(6.00) |
$ |
(2.61) |
|
Natural Gas Price Benchmarks |
|||||||||||
AECO gas (Cdn$/mcf) |
$ |
1.19 |
$ |
1.03 |
$ |
1.45 |
$ |
1.48 |
$ |
2.30 |
|
Foreign Exchange |
|||||||||||
U.S./Canadian Dollar Exchange |
0.77 |
0.78 |
0.80 |
0.78 |
0.77 |
||||||
Operations Summary
Net petroleum and natural gas production, pricing and revenue are summarized below:
2018 |
2017 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2018 |
2017 |
|||||||
Daily production volumes |
|||||||||||
Natural gas (mcf/d) |
24,378 |
18,336 |
16,142 |
20,439 |
14,260 |
||||||
Oil (bbl/d) |
4,853 |
3,162 |
2,380 |
3,789 |
2,165 |
||||||
NGL’s (bbl/d) |
1,406 |
1,353 |
955 |
1,282 |
866 |
||||||
Combined (boe/d 6:1) |
10,323 |
7,570 |
6,025 |
8,477 |
5,408 |
||||||
Revenue |
|||||||||||
Petroleum & natural gas sales – Gross |
$ |
45,131,784 |
$ |
29,922,471 |
$ |
17,663,925 |
$ |
104,803,971 |
$ |
52,740,708 |
|
Realized gain (loss) on commodity contract settlement |
(3,462,012) |
(3,569,273) |
1,632,783 |
(8,553,310) |
2,196,435 |
||||||
Total sales |
41,669,772 |
26,353,198 |
19,296,708 |
96,250,661 |
54,937,143 |
||||||
Royalty expense |
(4,156,841) |
(2,684,294) |
(1,344,746) |
(9,642,356) |
(4,063,292) |
||||||
Total Revenue – Net of royalties |
$ |
37,512,931 |
$ |
23,668,904 |
$ |
17,951,962 |
$ |
86,608,305 |
$ |
50,873,851 |
|
Working Capital Summary
The following table summarizes the change in working capital during the nine months ended September 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 |
65,166,951 |
52,902,650 |
||
Additions to property and equipment |
(105,803,666) |
(83,472,094) |
||
Decommissioning costs incurred |
– |
(95,433) |
||
Additions to E&E Assets |
(8,082,910) |
– |
||
Issuance of shares |
6,758,792 |
2,179,593 |
||
Other |
(218,317) |
(42,163) |
||
Net Debt – end of period |
$ |
(135,712,402) |
$ |
(93,533,252) |
Credit facility limit |
$ |
150,000,000 |
$ |
120,000,000 |
Subsequent to September 30, 2018 the maximum amount available under the syndicated credit facility was increased to $175 million.
Capital Spending
Capital spending is summarized as follows:
2018 |
2017 |
Nine months ended |
|||||||||
Cash additions |
Q3 |
Q2 |
Q3 |
2018 |
2017 |
||||||
Land, acquisitions and lease rentals |
$ |
79,477 |
$ |
92,348 |
$ |
3,503,852 |
$ |
228,967 |
$ |
6,001,336 |
|
Drilling and completion |
38,264,772 |
19,519,585 |
14,939,137 |
84,555,869 |
39,289,999 |
||||||
Geological and geophysical |
163,002 |
199,680 |
134,283 |
501,773 |
562,085 |
||||||
Equipment |
9,892,565 |
6,112,877 |
2,248,622 |
20,346,403 |
6,541,666 |
||||||
Other asset additions |
81,528 |
85,687 |
84,631 |
170,654 |
299,967 |
||||||
$ |
48,481,344 |
$ |
26,010,177 |
$ |
20,910,525 |
$ |
105,803,666 |
$ |
52,695,053 |
||
Exploration & evaluation assets |
$ |
1,562,879 |
$ |
1,471,820 |
$ |
– |
$ |
8,082,910 |
$ |
– |
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 nine months ended September 30, 2018 have been filed on SEDAR (www.sedar.com) and are available on the Company’s website (www.yangarra.ca).