CALGARY, Nov. 29, 2018 /CNW/ – PetroShale Inc. (“PetroShale” or the “Company”) (TSXV: PSH, OTCQX: PSHIF) is pleased to announce its financial and operating results for the three and nine month periods ending September 30, 2018. In addition, the Company announces the appointment of Mr. Caleb Morgret as Chief Financial Officer (CFO), who will assume the role from Mr. David Rain, who is retiring effective November 30, 2018.
The Company’s unaudited consolidated financial statements and corresponding Management’s Discussion and Analysis (MD&A) for the period will be available on SEDAR at www.sedar.com, on the OTCQX website at www.otcqx.com, and on PetroShale’s website at www.petroshaleinc.com. Copies of the materials can also be obtained upon request without charge by contacting the Company directly. Please note, currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.
THIRD QUARTER 2018 HIGHLIGHTS
- Production averaged 6,797 barrels of oil equivalent per day (“boepd”) (85% liquids), which is 259% higher than the third quarter of 2017 and 7% higher than the second quarter of 2018.
- Revenue totaled $40.1 million, an increase of 450% over the third quarter of 2017 and 11% over the second quarter of 2018, driven by higher production and realized prices.
- Adjusted EBITDA increased to $22.0 million, which is 645% higher than the third quarter of 2017 and 8% higher than the second quarter of 2018.
- Operating netback, prior to the impact of hedging, was $41.28 per boe, an increase of 81% over the third quarter of 2017 and 1% over the previous quarter.
- Capital expenditures totaled $167.6 million in the first nine months of 2018 with approximately $93.5 million (56%) directed towards acquisitions and $74.1 million (44%) for drilling and completions activities on 10.4 net wells.
- Closed a strategic acquisition of assets within PetroShale’s North Dakota Bakken core area for US$51.7 million, including approximately 550 boepd of low decline light oil production and approximately 1,980 net acres in three 100% operated drilling units which are largely undeveloped (the “Acquisition”).
- Funded the Acquisition with proceeds of a concurrent $46.0 million “bought deal” equity financing, a $12.5 million private placement financing, and a draw under the Company’s senior credit facility of US$10.5 million.
- Increased PetroShale’s borrowing base under our senior credit facility to US$92 million upon closing of the Acquisition and following the senior lenders’ semi-annual review of the Company’s borrowing base in November, increased it further to US$125 million.
FINANCIAL & OPERATING HIGHLIGHTS
Three months ended |
Nine months ended |
|||||||||
FINANCIAL |
September 30, |
September 30, |
September 30, |
September 30, |
||||||
Oil and natural gas revenue |
$ |
40,123 |
$ |
7,292 |
$ |
95,566 |
$ |
32,939 |
||
Net income (loss) |
10,449 |
(854) |
19,074 |
(1,611) |
||||||
Per share – diluted |
0.06 |
(0.01) |
0.11 |
(0.01) |
||||||
Adjusted EBITDA(1) |
22,018 |
2,954 |
53,253 |
15,535 |
||||||
Capital expenditures |
90,045 |
14,959 |
167,606 |
32,578 |
||||||
Net debt(1) |
150,281 |
60,417 |
||||||||
Common shares outstanding |
190,789,972 |
157,097,767 |
||||||||
Weighted average – basic |
175,322,589 |
156,990,553 |
164,068,659 |
111,872,688 |
||||||
Weighted average – diluted |
179,017,367 |
156,990,553 |
167,820,840 |
111,872,688 |
||||||
OPERATING |
||||||||||
Sales volumes |
||||||||||
Crude Oil (Bbl/d) |
4,784 |
1,411 |
4,116 |
1,988 |
||||||
Natural gas (Mcf/d) |
6,257 |
1,211 |
4,101 |
1,759 |
||||||
NGLs (Bbl/d) |
971 |
281 |
700 |
274 |
||||||
Barrels of oil equivalent (Boe/d)(2) |
6,797 |
1,894 |
5,500 |
2,555 |
||||||
Average realized prices |
||||||||||
Crude Oil ($/Bbl) |
$ |
86.77 |
$ |
53.76 |
$ |
81.86 |
$ |
57.95 |
||
Natural gas ($/Mcf) |
1.09 |
1.38 |
1.14 |
1.92 |
||||||
NGLs ($/Bbl) |
14.63 |
6.06 |
12.00 |
7.37 |
||||||
Barrels of oil equivalent ($/Boe) |
$ |
64.16 |
$ |
41.85 |
$ |
63.64 |
$ |
47.23 |
||
Operating netback ($/Boe) (1) |
||||||||||
Revenue |
$ |
64.16 |
$ |
41.85 |
$ |
63.64 |
$ |
47.23 |
||
Royalties |
(13.01) |
(8.92) |
(12.50) |
(9.95) |
||||||
Realized loss on derivatives |
(3.75) |
– |
(3.63) |
– |
||||||
Operating costs |
(3.48) |
(5.79) |
(3.71) |
(6.21) |
||||||
Production taxes |
(4.82) |
(3.16) |
(4.91) |
(3.56) |
||||||
Transportation expense |
(1.57) |
(1.20) |
(1.22) |
(1.10) |
||||||
Operating netback(1) |
$ |
37.53 |
$ |
22.78 |
$ |
37.67 |
$ |
26.41 |
||
Operating netback prior to hedging(1) |
$ |
41.28 |
$ |
22.78 |
$ |
41.30 |
$ |
26.41 |
(1) See “Non-IFRS measures”. |
|
(2) See “Oil and Gas Advisories”. |
MESSAGE FROM THE CEO
PetroShale had an active third quarter resulting in a 259% increase in quarterly production over the same period in 2017. This increase reflects our active drilling and completions program during the first nine months of this year.
During the third quarter, PetroShale drilled four (3.3 net) operated wells: two at our Horse Camp unit in the South Berthold area and two at our Primus unit in the Antelope area. The same drilling rig was then moved to our Bear Chase unit in South Berthold where we have started drilling three (1.5 net) wells. The two (1.8 net) Horse Camp wells were recently completed and will be placed on production in early December. The two (1.5 net) Primus wells are expected to be completed in the first quarter of 2019.
During the quarter, we closed a strategic acquisition of assets within our North Dakota Bakken core area which included approximately 550 boepd of low decline production (~90% light oil and liquids), as well as significant working interests in three primarily undeveloped drilling units that will be operated by PetroShale. The Acquisition increased our inventory of low-risk infill drilling locations by 24% and our undeveloped land position by 34%.
Concurrent with the Acquisition, the Company closed a bought deal public equity financing and private placement financing (the “Equity Financings”) in August 2018, raising aggregate gross proceeds of $58.5 million. Net proceeds from the Equity Financings, along with a US$10.5 million draw on the Company’s credit facility, were used to fund the Acquisition.
WTI benchmark prices continued to strengthen during the third quarter and averaged approximately $69.50 per Bbl. The improved oil price environment and increase in production volumes led to higher revenue, cash flow from operations and adjusted EBITDA relative to the same period in 2017.
During the quarter, our realized Bakken differential (relative to WTI) averaged US$3.11 per Bbl, compared to US$5.26 per Bbl in the comparative period in 2017 and US$4.40 per Bbl in the second quarter of 2018. Subsequent to the end of the quarter, a number of factors including refinery shut downs caused a widening of the Bakken differential. We do not believe this to be a structural change and anticipate that the Bakken differential will narrow in the first half of 2019 following a return of refinery capacity, anticipated delivery of new rail cars to expand crude by rail and a possible expansion of throughput capacity of the Dakota Access Pipeline (DAPL).
We increased the borrowing capacity of our senior credit facility to US$125 million. This increase provides us with substantial undrawn credit capacity of US$81 million to carry out our ongoing drilling and completion programs and to pursue strategic acquisitions.
David Rain, our CFO, will be retiring effective November 30, 2018. We wish to thank David for his years of service to the Company and his instrumental role in successfully securing debt and equity financings which have facilitated the growth of PetroShale’s asset base, both organically and through accretive acquisitions. I am also proud to announce and welcome David as a new Director who will join our Board of Directors effective December 3, 2018.
We are also pleased to announce that Mr. Caleb Morgret has been appointed as Chief Financial Officer (CFO) of PetroShale effective December 3, 2018. Caleb is the former CFO of private-equity backed White Star Petroleum, and previously served as Vice President & Treasurer for Chesapeake Energy Corporation. Caleb brings over 18 years of industry experience across international borders, including Germany and the United Kingdom, with expertise in both energy and investment banking. He holds a Bachelor of Business Administration from the University of South Carolina, an MBA from Southern Methodist University and has been a CFA Charterholder since August of 2009. Caleb’s skills, background and breadth of knowledge are welcome additions to the PetroShale team. Caleb will be based in our Denver office.
PetroShale had another great quarter with substantial growth in both production and cash flow year over year as we continue to execute our strategy in the core of the Bakken play. Going forward, we will continue to carry out our development plan with anticipation that results from these high-value opportunities will generate per share growth in production, reserves and EBITDA.
As always, we wish to thank all of PetroShale’s employees, directors and shareholders for your continued support and look forward to updating you on our progress and achievements in the future.
((signed))
Mike Wood
President & CEO
About PetroShale
PetroShale is an oil company engaged in the acquisition, development and consolidation of interests in the North Dakota Bakken / Three Forks.