CALGARY, Alberta, Nov. 08, 2018 (GLOBE NEWSWIRE) — Petrus Resources Ltd. (“Petrus” or the “Company”) is pleased to report financial and operating results for the third 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 September 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 set out in 2018 to improve its financial position and to increase its light oil weighting in order to increase funds flow per share. In the first half of 2018 the Company directed excess funds flow to debt repayment, targeting debt reduction of $10 to $15 million. In the first nine months of 2018, Petrus has reduced its net debt(1) by $16.5 million or 11%. The second element of the Company’s 2018 plan targeted to drill Cardium light oil wells in Ferrier with budgeted capital of $25 to $30 million. The Company’s development program recommenced during the third quarter as planned and Petrus drilled 5 (2.9 net) wells during the second half of 2018. The Company expects the remaining capital program will be funded by funds flow and working capital and is targeting to end 2018 with net debt(1) no greater than $135 million(2).
HIGHLIGHTS
- Petrus generated funds flow of $7.7 million in the third quarter of 2018 which is consistent with the $7.7 million generated in the third quarter of 2017. The quarterly average light oil price (Edm CAD$) increased 40% from the prior year which offset the impact of 34% reduced natural gas prices (AECO 7A monthly index) from the prior year. Approximately 70% of the Company’s third quarter light oil production was Canadian Condensate. The Canadian Condensate price differential to WTI (C$) was $4.76/bbl whereas the Edmonton Light differential to WTI (C$) was $15.15/bbl for the third quarter of 2018. During the quarter the Company optimized its natural gas production which resulted in an 18% increase from the prior year in its total liquids weighting which helped to further offset the impact of reduced natural gas pricing.
- The Company has strategically focused on debt repayment in 2018 and has reduced net debt(1) by $16.5 million or 11% since December 31, 2017. As a result of the current commodity price environment, Petrus continues to focus on Cardium light oil development in Ferrier. Capital investment resumed in August and the Company drilled 5 (2.9 net) wells during the second half of 2018. The completion operations for these wells commenced in early November and the wells are expected to be on stream by year end(2).
- Third quarter average production was 8,338 boe/d in 2018 compared to 10,567 boe/d for the same period in 2017. The 21% decrease is due to certain dry gas production in the Foothills area which was shut-in due to uneconomic gas prices. The production decrease is also attributable to natural production declines. Petrus strategically deferred its capital development until the second half of 2018 in order to permit debt repayment early in the year.
- Total operating expenses for the third quarter were 9% lower at $4.95 per boe in 2018 compared to $5.42 per boe in 2017 (3). The Company continues to focus on optimizing its cost structure, particularly in the Ferrier area, through facility ownership and control.
- The 2018 semi-annual review of the Company’s Revolving Credit Facility (“RCF”) has been completed and the RCF syndicate of lenders maintained the Company’s borrowing base at $110 million. The Company’s $35 million second lien term loan (“Term Loan”) also remains unchanged following the semi-annual RCF review. The Term Loan is due October 8, 2020 and bears interest at the Canadian Dealer Offered Rate (CDOR) plus 700 basis points.
- 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. During the third quarter, the Company recognized a $2.4 million ($3.18 per boe) realized gain related to natural gas, offset by a $4.5 million ($5.87 per boe) realized loss related to light oil. As a percentage of third quarter 2018 production, Petrus has derivative contracts in place for 71% at an average price of $2.49/mcf and 62% at an average price of $66.80/bbl of its natural gas and oil and natural gas liquids production, respectively, for the remainder of 2018.
(1) Refer to “Non-GAAP Financial Measures” .
(2) Refer to “Advisories – Forward-Looking Statements”.
(3) Refer to “Advisories – BOE Presentation”.
SELECTED FINANCIAL INFORMATION
OPERATIONS |
Three months ended |
Three months ended |
Three months ended |
Three months ended |
Three months ended |
|||||
Average Production |
33,461 |
45,550 |
39,126 |
45,543 |
46,625 |
|||||
Natural gas (mcf/d) | ||||||||||
Oil (bbl/d) | 1,243 | 1,877 | 1,484 | 1,530 | 1,854 | |||||
NGLs (bbl/d) | 1,519 | 1,098 | 1,241 | 1,475 | 1,086 | |||||
Total (boe/d) | 8,338 | 10,567 | 9,246 | 10,596 | 10,711 | |||||
Total (boe) | 767,095 | 972,140 | 841,316 | 953,598 | 985,388 | |||||
Natural gas sales weighting | 67 | % | 72 | % | 71 | % | 72 | % | 73 | % |
Realized Prices |
1.50 |
1.66 |
1.24 |
2.18 |
1.90 |
|||||
Natural gas ($/mcf) | ||||||||||
Oil ($/bbl) | 77.24 | 51.23 | 75.29 | 73.91 | 66.10 | |||||
NGLs ($/bbl) | 45.27 | 24.79 | 41.53 | 46.50 | 38.00 | |||||
Total realized price ($/boe) | 25.79 | 18.82 | 22.92 | 26.50 | 23.56 | |||||
Royalty income | 0.32 | 0.01 | 0.05 | 0.03 | 0.03 | |||||
Royalty expense | (3.12 | ) | (2.73 | ) | (2.54 | ) | (4.90 | ) | (3.04 | ) |
Net oil and natural gas revenue ($/boe) | 22.99 | 16.10 | 20.43 | 21.63 | 20.55 | |||||
Operating expense | (4.95 | ) | (5.42 | ) | (4.57 | ) | (4.36 | ) | (4.81 | ) |
Transportation expense | (0.98 | ) | (1.29 | ) | (1.17 | ) | (1.26 | ) | (1.25 | ) |
Operating netback (1) ($/boe) | 17.06 | 9.39 | 14.69 | 16.01 | 14.49 | |||||
Realized gain (loss) on derivatives | (2.69 | ) | 1.88 | (0.74 | ) | 0.31 | 1.23 | |||
Other income | 0.08 | — | 0.12 | — | — | |||||
General & administrative expense | (1.72 | ) | (1.09 | ) | (1.63 | ) | (1.50 | ) | (0.27 | ) |
Cash finance expense | (2.53 | ) | (1.99 | ) | (2.49 | ) | (1.96 | ) | (1.54 | ) |
Decommissioning expenditures | (0.20 | ) | (0.23 | ) | — | (0.23 | ) | (0.62 | ) | |
Corporate netback (1) ($/boe) | 10.00 | 7.96 | 9.95 | 12.63 | 13.29 | |||||
FINANCIAL ($000s except per share) | Three months ended Sept. 30, 2018 |
Three months ended Sept. 30, 2017 |
Three months ended Jun. 30, 2018 |
Three months ended Mar. 31, 2018 |
Three months ended Dec. 31, 2017 |
Oil and natural gas revenue Net loss Net loss per share Basic Basic |
20,030 (8,048)
(0.16)
0.16
49,492 |
18,299 (50,696)
(1.03)
0.16
49,428 |
19,321 (10,615)
(0.21)
0.17
49,492 |
25,301 (5,684)
(0.11)
0.24
49,492 |
23,243 (67,095)
(1.36)
0.26
49,456 |
As at period end Common shares outstanding (000s) Basic Total assets |
49,492 |
49,428 |
49,492 |
49,492 |
49,492 |
(1) Refer to “Non-GAAP Financial Measures”.
OPERATIONS UPDATE
Production |
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Third quarter average production by area was as follows: | ||||||||
For the three months ended September 30, 2018 |
Ferrier |
Foothills |
Central Alberta |
Total |
||||
Natural gas (mcf/d) | 24,458 | 2,462 | 6,542 | 33,462 | ||||
Oil (bbl/d) | 674 | 164 | 405 | 1,243 | ||||
NGLs (bbl/d) | 1,322 | 8 | 189 | 1,518 | ||||
Total (boe/d) | 6,072 | 582 | 1,684 | 8,338 | ||||
Natural gas sales weighting | 67 | % | 71 | % | 65 | % | 67 | % |
Third quarter average production was 8,338 boe/d (67% natural gas) in 2018 compared to 10,567 boe/d (72% natural gas) in the third quarter of 2017. The 21% decrease is due to certain dry gas production in the Foothills area which was shut-in due to uneconomic gas prices. The production decrease is also attributable to natural production declines. Petrus strategically deferred its capital development until the second half of 2018 in order to permit debt repayment early in the year.
Capital Development(1)
In response to the commodity price outlook for natural gas, the Company set out in 2018 to improve its financial position and direct excess funds flow to debt repayment, targeting debt reduction of $10 to $15 million. In the first nine months of 2018, Petrus reduced its net debt by $16.5 million or 11%. The second element of the Company’s 2018 plan targeted to drill Cardium light oil wells in Ferrier with budgeted capital of $25 to $30 million. The Company’s development program recommenced during the third quarter as planned and total capital invested in the first nine months of 2018 has been $11.5 million. Petrus drilled 5 (2.9 net) wells during the second half of 2018 for a total of 7 (3.6 net) drilled or participated in to date in 2018. The completion operations for the 5 recent wells commenced in early November and the wells are expected to be on stream by year end(2). The Company expects that the remaining capital program will be funded by funds flow and working capital.
Production Optimization
During the third quarter, Petrus initiated additional deep cut processing of certain natural gas production in order to increase its natural gas liquids yield. In the current commodity price environment, the increased NGL yield optimizes the netback. Petrus’ total liquids production increased from 29% in the second quarter of 2018 to 33% in the third quarter of 2018 despite no new oil production brought on stream.
CREDIT FACILITY UPDATE
The 2018 semi-annual review of the Company’s Revolving Credit Facility (“RCF”) has been completed and the RCF syndicate of lenders maintained the Company’s borrowing base at $110 million. The Company’s $35 million second lien term loan (“Term Loan”) also remains unchanged following the semi-annual RCF review. The Term Loan is due October 8, 2020 and bears interest at the Canadian Dealer Offered Rate (CDOR) plus 700 basis points. The average Term Loan interest rate for the third quarter of 2018 was 8.8%.
BOARD OF DIRECTORS
Mr. Brian Minnehan and Mr. Jeffrey Zlotky, both nominees of Wingren B.V., have resigned as directors of Petrus. The Board of Directors, management and staff of Petrus would like to thank Messrs. Minnehan and Zlotky for their leadership, hard work, commitment, and service to Petrus and its Board of Directors.
An updated corporate presentation can be found on the Company’s website at www.petrusresources.com.