CALGARY, Alberta, May 06, 2019 (GLOBE NEWSWIRE) — Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is pleased to report financial and operating results for the first quarter of 2019. Petrus is focused on organic growth and infrastructure control in its core area, Ferrier, Alberta. The Company is targeting light oil and liquids rich natural gas in the Cardium formation as well as investing in infrastructure in Ferrier to control operations in order to maximize the Company’s return on investment. The Company’s Management’s Discussion and Analysis (“MD&A”) and interim consolidated financial statements dated as at and for the period ended March 31, 2019 are available on SEDAR (the System for Electronic Document Analysis and Retrieval) at www.sedar.com.
The Company’s development plan is strategically balanced between increasing its Cardium light oil weighting in the Ferrier area and continuing to improve its balance sheet. Petrus drilled 3 gross (1.6 net) Cardium light oil wells, increased its light oil weighting 18% from the fourth quarter of 2018 and reduced net debt(1) $2.8 million or 2% since December 31, 2018. On a per share basis, the Company’s funds flow for the first quarter of 2019 was $0.23, or $0.92 on an annualized basis. The Company’s corporate netback(1) for the first quarter of 2019 was $15.11 per boe(3); its highest since the first quarter of 2015. Petrus plans to continue a balanced, disciplined approach for the remainder of 2019.
- Light oil development – In the first quarter of 2019, Petrus continued to focus on the development of its Cardium light oil inventory in Ferrier. Petrus drilled or participated in 3 gross (1.6 net) Cardium light oil wells during the first quarter of 2019 and these wells were brought on production in late March. Consistent with the 2018 drilling program, these wells utilized a significantly increased number of fracture stimulations in their completion operations. The wells drilled in the second half of 2018 were all on production by December 31, 2018 and contributed to a 25% increase in light oil production during the first quarter of 2019 compared to the fourth quarter of 2018. Petrus’ Board of Directors has approved a second quarter 2019 capital budget of $7 to $8 million, which is expected to include completion activities for two previously drilled, non-operated wells, in addition to the drilling and completion of 1 to 2 net new wells.
- Increased light oil weighting – The Company’s March 2019 light oil weighting has increased by 45% from January 2018. First quarter average production was 8,505 boe/d in 2019 compared to 7,934 boe/d in the fourth quarter of 2018. The 7% increase in total production is attributable to the Company’s development program shifting focus to oil weighted wells in light of the current commodity price environment. The Company’s first quarter operating netback increased 50% from $12.22 per boe in the fourth quarter of 2018 to $18.31 per boe in the first quarter of 2019 as a result of higher light oil production.
- Funds flow – Petrus generated funds flow of $11.6 million in the first quarter of 2019 which is 130% higher than the $5.0 million generated in the fourth quarter of 2018. The significant increase is due to higher liquids production, stronger Western Canadian light oil differential pricing and decreased operating expenses. On a per share basis, funds flow for the first quarter of 2019 was $0.23 comparable to the $0.10 per share generated in the fourth quarter of 2018.
- Low operating costs – First quarter operating expenses on a per boe basis decreased 29% from $5.28 per boe in the fourth quarter of 2018 to $3.76 per boe in the first quarter of 2019. The full year operating expenses of $4.75 per boe in 2018 marked the third consecutive year of operating cost reductions. The Company continues to focus on optimizing its cost structure, particularly in the Ferrier area, through facility ownership and control.
- Debt reduction – Petrus continues to focus on improving its financial strength and during the first quarter of 2019 reduced net debt(1) by $2.8 million or 2% since December 31, 2018. Since December 31, 2017, Petrus has reduced net debt(1) by $11.7 million or 8%.
- Commodity price risk mitigation – 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 first quarter of 2019, the Company recognized a $0.5 million ($0.67 per boe) realized hedging gain. As a percentage of first quarter 2019 production, Petrus has derivative contracts in place for 46%, at an average price of $2.00 per mcf and 47% at an average price of $68.80 per bbl, of its natural gas and oil and natural gas liquids production, respectively, for the balance of 2019(2).
(1) Refer to “Non-GAAP Financial Measures” .
(2) Refer to “Advisories – Forward-Looking Statements”.
(3) Refer to “Oil and Gas Disclosures”.
SELECTED FINANCIAL INFORMATION | ||||||||||
OPERATIONS |
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Average Production | ||||||||||
Natural gas (mcf/d) | 32,145 | 45,543 | 30,480 | 33,461 | 39,126 | |||||
Oil (bbl/d) | 1,704 | 1,530 | 1,358 | 1,243 | 1,484 | |||||
NGLs (bbl/d) | 1,444 | 1,475 | 1,496 | 1,519 | 1,241 | |||||
Total (boe/d) | 8,505 | 10,596 | 7,934 | 8,338 | 9,246 | |||||
Total (boe) | 765,488 | 953,598 | 730,819 | 767,095 | 841,316 | |||||
Liquids sales weighting | 37% | 28% | 36% | 33% | 29% | |||||
Realized Prices | ||||||||||
Natural gas ($/mcf) | 2.44 | 2.18 | 1.95 | 1.50 | 1.24 | |||||
Oil ($/bbl) | 55.10 | 73.91 | 52.26 | 77.24 | 75.29 | |||||
NGLs ($/bbl) | 36.02 | 46.50 | 29.01 | 45.27 | 41.53 | |||||
Total realized price ($/boe) | 26.36 | 26.50 | 21.91 | 25.79 | 22.92 | |||||
Royalty income | 0.06 | 0.03 | 0.10 | 0.32 | 0.05 | |||||
Royalty expense | (3.08 | ) | (4.90 | ) | (3.34 | ) | (3.12 | ) | (2.54 | ) |
Net oil and natural gas revenue ($/boe) | 23.34 | 21.63 | 18.67 | 22.99 | 20.43 | |||||
Operating expense | (3.76 | ) | (4.36 | ) | (5.28 | ) | (4.95 | ) | (4.57 | ) |
Transportation expense | (1.27 | ) | (1.26 | ) | (1.17 | ) | (0.98 | ) | (1.17 | ) |
Operating netback(1) ($/boe) | 18.31 | 16.01 | 12.22 | 17.06 | 14.69 | |||||
Realized gain (loss) on derivatives ($/boe) | 0.67 | 0.31 | (0.79 | ) | (2.69 | ) | (0.74 | ) | ||
Other income | — | — | 0.37 | 0.08 | 0.12 | |||||
General & administrative expense | (1.15 | ) | (1.50 | ) | (1.46 | ) | (1.72 | ) | (1.63 | ) |
Cash finance expense | (2.54 | ) | (1.96 | ) | (3.25 | ) | (2.53 | ) | (2.49 | ) |
Decommissioning expenditures | (0.18 | ) | (0.23 | ) | (0.21 | ) | (0.20 | ) | — | |
Funds flow & corporate netback(1)(2) ($/boe) | 15.11 | 12.63 | 6.88 | 10.00 | 9.95 | |||||
FINANCIAL (000s except $ per share) |
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Oil and natural gas revenue | 20,231 | 25,301 | 16,064 | 20,030 | 19,321 | |||||
Net income (loss) | (12,138 | ) | (5,684 | ) | 21,063 | (8,048 | ) | (10,615 | ) | |
Net income (loss) per share Basic |
(0.25 | ) | (0.11 | ) | 0.43 | (0.16 | ) | (0.21 | ) | |
Fully diluted | (0.25 | ) | (0.11 | ) | 0.43 | (0.16 | ) | (0.21 | ) | |
Funds flow | 11,573 | 12,105 | 5,030 | 7,685 | 8,364 | |||||
Funds flow per share Basic |
0.23 | 0.24 | 0.10 | 0.16 | 0.17 | |||||
Fully diluted | 0.23 | 0.24 | 0.10 | 0.16 | 0.17 | |||||
Capital expenditures | 8,483 | 6,056 | 12,660 | 3,637 | 1,745 | |||||
Net dispositions | — | (123 | ) | (6 | ) | (50 | ) | (269 | ) | |
Weighted average shares outstanding Basic |
49,483 | 49,492 | 49,492 | 49,492 | 49,492 | |||||
Fully diluted | 49,483 | 49,492 | 49,492 | 49,492 | 49,492 | |||||
As at period end Common shares outstanding Basic |
49,469 |
49,492 |
49,492 |
49,492 |
49,492 |
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Fully diluted | 49,469 | 49,492 | 49,492 | 49,492 | 49,492 | |||||
Total assets | 336,974 | 343,161 | 341,820 | 322,335 | 330,359 | |||||
Non-current liabilities | 176,093 | 174,634 | 171,646 | 170,908 | 172,757 | |||||
Net debt(1) | 136,382 | 142,238 | 139,214 | 131,603 | 135,111 | |||||
(1)Refer to “Non-GAAP Financial Measures”.
(2)Corporate netback is equal to funds flow which is a directly comparable GAAP measure. Petrus analyzes these measures on an absolute value and per unit basis.
OPERATIONS UPDATE
Production First quarter average production by area was as follows: |
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For the three months ended March 31, 2019 |
Ferrier |
Foothills |
Central Alberta |
Total |
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Natural gas (mcf/d) | 23,813 | 1,963 | 6,369 | 32,145 | ||||
Oil (bbl/d) | 1,127 | 165 | 412 | 1,704 | ||||
NGLs (bbl/d) | 1,260 | — | 184 | 1,444 | ||||
Total (boe/d) | 6,356 | 492 | 1,657 | 8,505 | ||||
Liquids sales weighting | 38 | % | 33 | % | 36 | % | 37 | % |
First quarter average production was 8,505 boe/d in 2019 compared to 10,596 boe/d in 2018. Part of the decrease in total production is attributable to the Company shifting its focus from gas wells to oil wells in light of the current commodity price environment. Furthermore, in the Foothills, the Company has approximately 800 boe/d of uneconomic dry gas production shut-in. Despite the 20% production decrease from the prior year, the Company’s first quarter operating netback increased 14% from $16.01 per boe in 2018 to $18.31 per boe in 2019 as a result of the increase in light oil production. The Company’s March 2019 light oil weighting increased by 45% from January 2018.
Petrus’ Board of Directors approved a first quarter 2019 capital budget of $8 to $10 million, which included the repayment of $1 to $2 million of debt. In the first quarter of 2019, the Company invested capital of $8.5 million and reduced net debt $2.8 million during the quarter.
As part of the 2019 first quarter capital budget, Petrus drilled 3 gross (1.6 net) Cardium light oil wells. The wells finished drilling and offset the recently drilled 5 gross (2.9 net) wells from the fourth quarter 2018 drilling program. The 3 new first quarter 2019 wells had completion operations finished near the end of the first quarter and the wells were brought on production at the end of March.
Petrus’ Board of Directors approved a second quarter 2019 capital budget of $7 to $8 million, based on a current forecast for commodity futures pricing, anticipated service costs and current activity levels(1). The commodity price assumptions used for the second quarter 2019 capital budget were an average price of $1.25 (CAD$) per GJ for natural gas (AECO) and $57.80 (US$) per bbl for oil (WTI). Petrus’ estimated second quarter average differential for Western Canadian light oil is estimated at $7.40 (US$) per bbl. The second quarter budget is expected to include the completion activities for two previously drilled, non-operated wells, the drilling and completion of 1 to 2 net new wells and allows for debt repayment of $1 to $2 million in the quarter(1).
Petrus estimates the 2019 capital plan will maintain production year over year, increase its light oil and liquids weighting, and reduce debt throughout the year. Approximately 85% of the capital plan will be directed to development of Cardium light oil wells in the Ferrier area of Alberta, which we estimate will have payouts of less than one year and achieve its objective to increase its light oil weighting and funds flow(1).
(1) Refer to “Advisories – Forward-Looking Statements”.
ANNUAL MEETING
The Company’s Annual Meeting will be held at the Jamieson Place Conference Centre (3rd floor) 308, 4th Ave SW Calgary, Alberta, on Tuesday May 7, 2019 at 2:00 p.m. (Calgary time). The Information Circular, Annual Information Form, 2018 Annual Report and the First Quarter 2019 Report are available on the SEDAR filing system (www.sedar.com) as well as on the Company’s website (www.petrusresources.com).
An updated corporate presentation can be found on the Company’s website at www.petrusresources.com.
For further information, please contact:
Neil Korchinski, P.Eng.
President and Chief Executive Officer T: (403) 930-0889
E: nkorchinski@petrusresources.com
NON-GAAP FINANCIAL MEASURES
This press release makes reference to the terms “operating netback”, “corporate netback”, “net debt” and “net debt to funds flow.” These indicators are not recognized measures under GAAP (IFRS) and do not have a standardized meaning prescribed by GAAP (IFRS). Accordingly, the Company’s use of these terms may not be comparable to similarly defined measures presented by other companies. Management uses these terms for the reasons set forth below. Please see the Company’s March 31, 2019 MD&A for a reconciliation of such measures to the most directly comparable GAAP (IFRS) measures.
Operating Netback
Operating netback is a common non-GAAP financial measure used in the oil and natural gas industry which is a useful supplemental measure to evaluate the specific operating performance by product at the oil and natural gas lease level. The most directly comparable GAAP measure to operating netback is funds flow. Operating netback is calculated as oil and natural gas revenue less royalties, operating and transportation expenses. It is presented on an absolute value and per unit basis.
Funds Flow and Corporate Netback
Corporate netback is a common non-GAAP financial measure used in the oil and natural gas industry which evaluates the Company’s profitability at the corporate level. Corporate netback is equal to funds flow which is a directly comparable GAAP measure. Petrus analyzes these measures on an absolute value and per unit basis. Management believes that funds flow and corporate netback provide information to assist a reader in understanding the Company’s profitability relative to current commodity prices. It is calculated as the operating netback less general and administrative expense, finance expense, decommissioning expenditures, plus other income and the net realized gain (loss) on financial derivatives.
Net Debt
Net debt is a non-GAAP financial measure and is calculated as current assets (excluding unrealized financial derivative assets) less current liabilities (excluding unrealized financial derivative liabilities and deferred share unit liabilities) and long term debt. Petrus uses net debt as a key indicator of its leverage and strength of its balance sheet. There is no GAAP measure that is reasonably comparable to net debt.
Net Debt to Funds Flow
Net debt to funds flow is calculated as the period ending net debt divided by the trailing quarter funds flow (annualized).