CALGARY, Alberta, March 21, 2019 (GLOBE NEWSWIRE) — GRANITE OIL CORP. (“Granite” or the “Company”) (TSX:GXO)(OTCQX:GXOCF) is pleased to release its financial results for the year ended December 31, 2018. Granite has filed its audited financial statements for the year ended December 31, 2018, and related Management Discussion & Analysis with the applicable Canadian securities regulatory authorities. Granite’s annual financial materials may be viewed in their entirety on www.sedar.com and on the Company’s website at www.graniteoil.ca.
Financial and Operating Highlights
|Year Ended December 31,|
|(000s, except per share amounts)||($)||($)|
|Oil and natural gas revenues||43,371||52,667|
|Funds from operations(1)||9,175||24,336|
|Per share – basic||0.27||0.72|
|Per share – diluted(2)||0.26||0.71|
|Net income (loss)||753||(5,508)|
|Per share – basic||0.02||(0.16)|
|Per share – diluted(2)||0.02||(0.16)|
|Weighted average – basic||34,290||33,968|
|Weighted average – diluted||34,943||34,437|
|Natural gas (mcf/d)||102||417|
|Crude oil (bbls/d)||1,978||2,598|
|Average wellhead prices|
|Natural gas ($/mcf)||1.85||2.78|
|Crude oil and NGLs ($/bbl)||59.95||55.09|
|Combined average ($/boe)(6)||59.55||54.09|
|Operating netback prior to realized hedging gains (losses) ($/boe)(7)||29.75||29.90|
|Operating netback ($/boe)(8)||21.79||29.72|
|Proved plus probable||19,194||19,534|
|Total net present value – proved plus probable (10% discount before taxes)||310,322||318,159|
|Gross (net) wells drilled|
|Oil (#)||3 (3.0)||9 (9.0)|
|Dry and abandoned (#)||– (-)||1 (1.0)|
|Total (#)||3 (3.0)||10 (10.0)|
|Average working interest (%)||100||100|
- Funds from operations and funds from operations per share are not recognized measures under International Financial Reporting Standards (IFRS). Please refer to the commentary in the “Reader Advisories” under “Non-GAAP Measurements” for further discussion.
- The Company uses the weighted average common shares (basic) when there is a net loss for the period to calculate net income (loss) per share diluted. The Company uses the weighted average common shares (diluted) to calculate the funds from operations diluted.
- Total capital expenditures, excluding acquisitions and excluding non-cash transactions. Refer to commentary in the Management Discussion and Analysis under “Capital Expenditures” for further information.
- Net debt, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary in the “Reader Advisories” under “Non-GAAP Measurements” for further discussion.
- For a description of the boe conversion ratio, refer to the commentary in the ”Reader Advisories” under “BOE Presentation”.
- Combined average realized prices includes all oil, gas and NGL sales revenue, excluding other income.
- Operating netback prior to adjusting for any realized hedging on financial instruments, which is calculated by deducting royalties, operating expenses and transportation expenses from oil and gas revenue, is not a recognized measure under IFRS. Please refer to the commentary in “Reader Advisories” under “Non-GAAP Measurements” for further discussion.
- Operating netback, which is calculated by deducting royalties, operating expenses and transportation expenses from oil and gas revenue and adjusting for any realized hedging on financial instruments, is not a recognized measure under IFRS. Please refer to the commentary in “Reader Advisories” under “Non-GAAP Measurements” for further discussion.
2018 Oil Reserves Highlights (1)(2)
During 2018, the Company shut-in its shallow gas production resulting in a reserves category shift from Proved Developed Producing (‘PDP’) oil reserves to proved developed non-producing (‘PDNP’) reserves in the independent report in respect of the Company’s reserves (the “Sproule Report”) prepared by Sproule Associates Limited (“Sproule”) with an effective date of December 31, 2018. Accordingly, to provide a more accurate representation of relevant reserves metrics, all finding and development costs and recycle ratios set out in this news release have been calculated for Company Gross Reserves for oil and NGL volumes using an adjusted operating netback (prior to hedging) of $30.01 per barrel, versus the Company’s all-in operating netback (prior to hedging) of $29.75 per barrel of oil equivalent.
Proved Developed Producing (PDP) reserves
- F&D costs were $13.26 per barrel, resulting in a PDP recycle ratio of 2.3 times
- Increased 0.7% to 7,013 mbbls 2018, from 6,966 mbbls in 2017
- Reserves replacement of 106%
Total Proved (TP) reserves
- F&D costs including change in future development capital (‘FDC’) were $12.39 per barrel, resulting in a TP recycle ratio of 2.4 times
- Increased 1.0% to 12,314 mbbls in 2018, from 12,188 mbbls in 2017
- Reserves replacement of 118%
Proved Plus Probable (P+P) reserves
- F&D costs including change in FDC were $20.40 per barrel, resulting in a 2P recycle ratio of 1.5 times
- Decreased 1.3% to 16,364 mbbls in 2018, from 16,571 mbbls
- Reserves replacement of 71%
- “Oil” reserves include all Light, Medium, and Heavy Crude Oil volumes and Natural Gas Liquids (‘NGL’).
- Recycle ratio is calculated as operating netback divided by F&D costs. The F&D cost includes changes in FDC, where applicable. Calculation is based on estimated 2018 operating netback for oil of $30.01 per barrel, which is calculated as revenue (prior to hedging) less royalties and production costs. See “Readers Advisories” for the method of calculating operating netback.
The fourth quarter of 2018 was exceptionally challenging for the Canadian energy sector as producers faced unprecedented discounts for Canadian oil products. This had a significant impact on the earnings of the Company through the latter half of 2018. However, following the Alberta Government’s decision to mandate province-wide oil production curtailments, the Canadian oil price outlook for 2019 has significantly improved.
Granite has been diligent in its efforts to capitalize on this improved outlook and protect its earnings potential through 2019 by aggressively adding to its hedging portfolio. With the Company’s cost structure, the current portfolio provides Granite competitive pricing and correspondingly strong netbacks on hedged volumes through the year. Currently, the Company has 600 barrels per day of West Texas Intermediate (‘WTI’) hedges matched with Western Canada Select (‘WCS’) differential hedges for the second and third quarters of 2019, along with 600 barrels per day of WTI hedges matched with 400 barrels per day of WCS differential hedges for the fourth quarter, all at favourable all-in prices.
Granite is also managing price volatility and market uncertainty in the Canadian energy sector through conservative capital spending and by actively optimizing its EOR scheme and field operations. The Company has not drilled a well since early May 2018 and incurred limited capital expenditures of approximately $1.0 million in the second half of 2018 as it navigated extraordinarily high price discounts for its oil.
In 2019, Granite will prioritize debt repayment with its significant free cash flow to rapidly deleverage and remains flexible in its capital spending plans for the year. The Company has a significant advantage in its ability to create value with its highly efficient, effective and flexible EOR scheme with minimal capital. This is highlighted by the capital efficiency at which Granite replaced its production and developed producing reserves in the past number of years, including in 2018. See the Company’s March 12, 2019 news release for additional information regarding its reserves as at December 31, 2018.
As the success of its 2018 wells has demonstrated, the Company has the ability to add significant production volumes quickly through drilling. Granite is drill-ready and will continue to be prudent in its capital spending to manage prevailing market conditions.