CALGARY, Alberta, Aug. 07, 2019 (GLOBE NEWSWIRE) — Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is pleased to report financial and operating results for the second quarter of 2019. Petrus is focused on organic growth and infrastructure control in its core area, Ferrier, Alberta. In order to maximize return on investment, 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. The Company’s Management’s Discussion and Analysis (“MD&A”) and interim consolidated financial statements dated as at and for the period ended June 30, 2019 are available on SEDAR (the System for Electronic Document Analysis and Retrieval) at www.sedar.com.
Over the past four years, Petrus has dramatically improved its business to enhance sustainability and mitigate commodity price risk. The Company has repaid $96.1 million or 43% of its net debt since December 31, 2015 and expects to repay another $2 to $4 million in the second half of 2019(2). The Company’s Ferrier Cardium asset provides optionality between natural gas and light oil so the Company’s development program can respond to commodity price fluctuations. Due to the natural gas price environment in Canada, the Company’s primary objectives are to reduce debt and to increase its light oil and total liquids weighting.
Since January 1, 2018 the Company has drilled 13 gross (6 net) Cardium light oil wells in Ferrier, each with a significantly higher number of multi-stage fracs than previously used. The Company’s light oil and total liquids production weighting have increased 46% and 36%, respectively since the beginning of 2018. 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 in the first half of 2019, increased its light oil weighting 13% from the fourth quarter of 2018 and reduced net debt(1) $8.6 million or 6% since December 31, 2018.
- Debt reduction – Petrus continues to focus on improving its financial strength and during the second quarter of 2019 reduced net debt by $5.8 million. Combined with the $2.8 million debt repayment in the first quarter, Petrus has reduced its net debt by $8.6 million or 6% since December 31, 2018. Petrus plans to continue a balanced, disciplined approach for the remainder of 2019, targeting debt repayment of $2 to $4 million(2).The Company intends to continue its disciplined focus on balance sheet improvement and capital deployment in 2020. The capital plan targets modest cash flow and production growth while directing in excess of $10 million toward debt reduction in 2020(2).
- Increased light oil weighting – The Company’s second quarter 2019 light oil weighting increased 46% from the beginning of 2018. Second quarter average production was 8,647 boe/d in 2019 compared to 8,505 boe/d in the first quarter of 2019. Petrus drilled or participated in 3 gross (1.6 net) Cardium light oil wells during the first half of 2019 and these wells were all brought on production during the first quarter. The Company did not drill additional wells during the second quarter of 2019 due to its focus on debt repayment and balance sheet improvement. In the second half of 2019, Petrus plans to drill or participate in approximately 1.5 net Cardium light oil wells per quarter(2).
- Funds flow – Petrus generated funds flow of $8.4 million in the second quarter of 2019, which is consistent with the $8.4 million generated in the second quarter of 2018. The Company’s increased liquids weighting and lower cash costs offset the impact of lower oil and natural gas liquids pricing relative to the prior year. Funds flow for the second quarter of 2019 was $0.17 per share or $0.68 on an annualized basis, which is consistent with the prior year despite lower light oil pricing.
- Low operating costs – Second quarter operating expenses on a per boe basis decreased 5% from $4.57 per boe in the second quarter of 2018 to $4.33 per boe in the second quarter of 2019. The Company continues to focus on optimizing its cost structure, particularly in the Ferrier area, through facility ownership and control.
- 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. As a percentage of second quarter 2019 production, Petrus has derivative contracts in place for 46%, at an average price of $1.81 per mcf and 47% at an average price of $69.86 (CAD) per bbl of its natural gas and oil and natural gas liquids production, respectively, for the balance of 2019.
(1) Refer to “Non-GAAP Financial Measures”.
(2) Refer to “Advisories – Forward-Looking Statements”.
(3) Refer to “Oil and Gas Disclosures”.
SELECTED FINANCIAL INFORMATION
OPERATIONS |
Three months ended Jun. 30, 2019 |
Three months ended Jun. 30, 2018 |
Three months ended Mar. 31, 2019 |
Three months ended Dec. 31, 2018 |
Three months ended Sept. 30, 2018 |
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Average Production | ||||||||||
Natural gas (mcf/d) | 32,350 | 39,126 | 32,145 | 30,480 | 33,461 | |||||
Oil (bbl/d) | 1,679 | 1,484 | 1,704 | 1,358 | 1,243 | |||||
NGLs (bbl/d) | 1,576 | 1,241 | 1,444 | 1,496 | 1,519 | |||||
Total (boe/d) | 8,647 | 9,246 | 8,505 | 7,934 | 8,338 | |||||
Total (boe) | 786,819 | 841,316 | 765,488 | 730,819 | 767,095 | |||||
Liquids sales weighting | 38 | % | 29 | % | 37 | % | 36 | % | 33 | % |
Realized Prices | ||||||||||
Natural gas ($/mcf) | 1.30 | 1.24 | 2.44 | 1.95 | 1.50 | |||||
Oil ($/bbl) | 70.96 | 75.29 | 55.10 | 52.26 | 77.24 | |||||
NGLs ($/bbl) | 19.91 | 41.53 | 36.02 | 29.01 | 45.27 | |||||
Total realized price ($/boe) | 22.29 | 22.92 | 26.36 | 21.91 | 25.79 | |||||
Royalty income | 0.15 | 0.05 | 0.06 | 0.10 | 0.32 | |||||
Royalty expense | (1.72 | ) | (2.54 | ) | (3.08 | ) | (3.34 | ) | (3.12 | ) |
Net oil and natural gas revenue ($/boe) | 20.72 | 20.43 | 23.34 | 18.67 | 22.99 | |||||
Operating expense | (4.33 | ) | (4.57 | ) | (3.76 | ) | (5.28 | ) | (4.95 | ) |
Transportation expense | (1.22 | ) | (1.17 | ) | (1.27 | ) | (1.17 | ) | (0.98 | ) |
Operating netback(1) ($/boe) | 15.17 | 14.69 | 18.31 | 12.22 | 17.06 | |||||
Realized gain (loss) on derivatives ($/boe) | (1.02 | ) | (0.74 | ) | 0.67 | (0.79 | ) | (2.69 | ) | |
Other income | 0.10 | 0.12 | — | 0.37 | 0.08 | |||||
General & administrative expense | (0.67 | ) | (1.63 | ) | (1.15 | ) | (1.46 | ) | (1.72 | ) |
Cash finance expense | (2.70 | ) | (2.49 | ) | (2.54 | ) | (3.25 | ) | (2.53 | ) |
Decommissioning expenditures | (0.24 | ) | — | (0.18 | ) | (0.21 | ) | (0.20 | ) | |
Funds flow & corporate netback(1)(2) ($/boe) | 10.64 | 9.95 | 15.11 | 6.88 | 10.00 |
FINANCIAL (000s except $ per share) |
Three months ended Jun. 30, 2019 |
Three months ended Jun. 30, 2018 |
Three months ended Mar. 31, 2019 |
Three months ended Dec. 31, 2018 |
Three months ended Sept. 30, 2018 |
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Oil and natural gas revenue | 17,652 | 19,321 | 20,231 | 16,064 | 20,030 | ||||
Net income (loss) | 2,863 | (10,615 | ) | (12,138 | ) | 21,063 | (8,048 | ) | |
Net income (loss) per share | |||||||||
Basic | 0.06 | (0.21 | ) | (0.25 | ) | 0.43 | (0.16 | ) | |
Fully diluted | 0.06 | (0.21 | ) | (0.25 | ) | 0.43 | (0.16 | ) | |
Funds flow | 8,366 | 8,364 | 11,573 | 5,030 | 7,685 | ||||
Funds flow per share | |||||||||
Basic | 0.17 | 0.17 | 0.23 | 0.10 | 0.16 | ||||
Fully diluted | 0.17 | 0.17 | 0.23 | 0.10 | 0.16 | ||||
Capital expenditures | 2,505 | 1,745 | 8,483 | 12,660 | 3,637 | ||||
Net dispositions | — | (269 | ) | — | (6 | ) | (50 | ) | |
Weighted average shares outstanding | |||||||||
Basic | 49,469 | 49,492 | 49,483 | 49,492 | 49,492 | ||||
Fully diluted | 49,469 | 49,492 | 49,483 | 49,492 | 49,492 | ||||
As at period end | |||||||||
Common shares outstanding | |||||||||
Basic | 49,469 | 49,492 | 49,469 | 49,492 | 49,492 | ||||
Fully diluted | 49,469 | 49,492 | 49,469 | 49,492 | 49,492 | ||||
Total assets | 328,912 | 330,359 | 336,974 | 341,820 | 322,335 | ||||
Non-current liabilities | 81,249 | 172,757 | 176,093 | 171,646 | 170,908 | ||||
Net debt(1) | 130,619 | 135,111 | 136,382 | 139,214 | 131,603 |
(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 |
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Second quarter average production by area was as follows: | ||||||||
For the three months ended June 30, 2019 |
Ferrier |
Foothills | Central Alberta |
Total |
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Natural gas (mcf/d) | 24,244 | 1,698 | 6,408 | 32,350 | ||||
Oil (bbl/d) | 1,139 | 146 | 394 | 1,679 | ||||
NGLs (bbl/d) | 1,401 | 3 | 172 | 1,576 | ||||
Total (boe/d) | 6,581 | 432 | 1,634 | 8,647 | ||||
Liquids sales weighting | 39 | % | 35 | % | 35 | % | 38 | % |
Second quarter average production was 8,647 boe/d in 2019 compared to 8,505 boe/d in the first quarter of 2019. The Company did not drill additional wells during the second quarter of 2019 due to its focus on debt repayment and balance sheet improvement. During the second quarter of 2019, the Company reduced net debt by $5.8 million(1). Combined with the $2.8 million debt repayment in the first quarter, Petrus has reduced its net debt by $8.6 million or 6% since December 31, 2018. During the second quarter, the Company’s revolving credit facility (“RCF”) was reclassified to current due to the inter-creditor relationship between the RCF and the Company’s Term Loan which is due October 8, 2020. The reclassification has no impact on its debt covenants and the Company remains in compliance with each of its covenants. Management is actively engaged with the RCF syndicate of lenders and the Term Loan lender and believes that the RCF and Term Loan will each be extended prior to the respective maturity dates.
Since January 1, 2018 the Company has drilled 13 gross (6 net) Cardium light oil wells in Ferrier, each with a significantly higher number of multi-stage fracs than previously used. The Company’s light oil and total liquids production weighting have increased 46% and 36%, respectively since the beginning of 2018. 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. During the first half of 2019, Petrus drilled 3 gross (1.6 net) Cardium light oil wells, increased its light oil weighting 13% from the fourth quarter of 2018 and reduced net debt(1) $8.6 million or 6% since December 31, 2018.
Petrus’ Board of Directors has approved a third quarter 2019 capital budget of $7 million, based on a current forecast for commodity futures pricing, anticipated service costs and current activity levels(2). The third quarter budget is expected to include the drilling and completion activities for 3 gross (1.5 net) Cardium light oil wells and excess cash flow of $1.5 to $2 million will be directed toward debt repayment(2).
Petrus estimates the 2019 capital plan will maintain production year over year, increase its light oil and liquids weighting, and reduce debt. 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 the objective to increase the Company’s light oil weighting and funds flow(2).
Petrus is unique in the junior E&P company space, as few gas-weighted companies are able to repay debt and grow production and cash flow all within cash from operations. Over the past four years, Petrus has dramatically improved its business in order to increase its sustainability as well as mitigate commodity price risk. Operating costs have been reduced by 51% since 2015 and Petrus’ total cash costs of $8.92 per boe are consistently one of the lowest amongst its peers. The Company forecasts that it will continue its disciplined focus on balance sheet improvement and capital deployment in 2020. The capital plan targets modest cash flow and production growth while directing in excess of $10 million toward debt reduction in 2020(2).
(1) Refer to “Non-GAAP Financial Measures”.
(2) Refer to “Advisories – Forward-Looking Statements”.