Third Quarter Highlights
- Average production of 8,409 boe/d (46% liquids) during the quarter, a 34% decrease from the same period in 2019
- Oil and gas sales were $18.9 million, a decrease of 40% from the same period in 2019
- Funds flow from operations of $10.0 million ($0.12 per share – basic), a decrease of 47% from the same period in 2019
- Adjusted EBITDA (which excludes changes in derivative financial instruments) was $12.5 million ($0.15 per share – basic)
- Net income of $0.5 million ($0.01 per share – basic, $0.7 million before tax), a decrease of 92% from the same period in 2019
- Operating costs were $6.10/boe (including $1.28/boe of transportation costs)
- Field operating netbacks were $17.08/boe
- Operating netbacks, which include the impact of commodity contracts, were $16.67/boe
- Operating margins were 68% and funds flow from operations margins were 53%
- G&A costs of $0.28/boe
- Royalties were 5% of oil and gas revenue
- All in cash costs were $11.06/boe
- Capital expenditures were $10.0 million
- Net Debt of $193.9 million
- Net Debt to third quarter annualized funds flow from operations was 4.8 : 1
- Retained earnings of $104 million
- Corporate LMR is 9.0 with decommissioning liabilities of $16.5 million (discounted)
Operations & Capital Update
Yangarra has reduced drilling and completions costs by 20-25% as compared to pre COVID-19 wells as a result of the addition of a construction division, revised well designs, water handling improvements and a variety of other structural cost saving initiatives. This will allow the Company to achieve rates of return above internal thresholds on new wells with oil below US$40 WTI.
With capital efficiencies improving materially, the strengthening of natural gas prices and more stability in oil prices, Yangarra elected to complete four previously drilled wells and drill one additional well for the third quarter. For the next two quarters, Yangarra will match its capital budget to cash flow.
Approximately 2,500 boe/d (52% liquids) was shut-in for six weeks due to third-party infrastructure turnarounds and for completions activity. All the shut-in production together with four completed wells was brought on by the end of the quarter.
Financial Summary
2020 |
2019 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2020 |
2019 |
|||||||
Statements of Comprehensive Income |
|||||||||||
Petroleum & natural gas sales |
$ |
18,910 |
$ |
16,290 |
$ |
31,606 |
$ |
62,635 |
$ |
107,986 |
|
Net income (loss) (before tax) |
$ |
691 |
$ |
(2,933) |
$ |
8,754 |
$ |
1,635 |
$ |
38,573 |
|
Net income (loss) |
$ |
537 |
$ |
(2,801) |
$ |
6,560 |
$ |
571 |
$ |
36,293 |
|
Net income (loss) per share – basic |
$ |
0.01 |
$ |
(0.03) |
$ |
0.08 |
$ |
0.01 |
$ |
0.43 |
|
Net income (loss) per share – diluted |
$ |
0.01 |
$ |
(0.03) |
$ |
0.08 |
$ |
0.01 |
$ |
0.42 |
|
Statements of Cash Flow |
|||||||||||
Funds flow from operations |
$ |
10,038 |
$ |
7,733 |
$ |
19,055 |
$ |
33,064 |
$ |
71,231 |
|
Funds flow from operations per share – basic |
$ |
0.12 |
$ |
0.09 |
$ |
0.22 |
$ |
0.39 |
$ |
0.83 |
|
Funds flow from operations per share – diluted |
$ |
0.12 |
$ |
0.09 |
$ |
0.22 |
$ |
0.39 |
$ |
0.82 |
|
Cash from operating activities |
$ |
7,411 |
$ |
1,544 |
$ |
10,768 |
$ |
24,680 |
$ |
55,735 |
|
Statements of Financial Position |
|||||||||||
Property and equipment |
$ |
557,827 |
$ |
554,479 |
$ |
530,389 |
$ |
557,827 |
$ |
530,389 |
|
Total assets |
$ |
603,817 |
$ |
604,105 |
$ |
581,426 |
$ |
603,817 |
$ |
581,426 |
|
Working capital deficit (surplus) |
$ |
(6,622) |
$ |
(2,181) |
$ |
(2,947) |
$ |
(6,622) |
(2,947) |
||
Adjusted Net Debt |
$ |
193,878 |
$ |
192,067 |
$ |
185,752 |
$ |
193,878 |
$ |
185,752 |
|
Shareholders equity |
$ |
307,322 |
$ |
306,638 |
$ |
295,645 |
$ |
307,322 |
$ |
295,645 |
|
Weighted average number of shares – basic |
85,380 |
85,380 |
85,363 |
85,380 |
85,362 |
||||||
Weighted average number of shares – diluted |
85,677 |
85,380 |
85,936 |
85,758 |
86,518 |
||||||
Company Netbacks ($/boe)
2020 |
2019 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2020 |
2019 |
|||||||
Sales price |
$ |
24.44 |
$ |
18.13 |
$ |
27.00 |
$ |
22.57 |
$ |
31.46 |
|
Royalty expense |
(1.26) |
(0.35) |
(1.79) |
(1.06) |
(2.30) |
||||||
Production costs |
(4.83) |
(5.37) |
(5.51) |
(5.34) |
(5.62) |
||||||
Transportation costs |
(1.28) |
(0.96) |
(1.46) |
(1.06) |
(1.07) |
||||||
Field operating netback |
17.08 |
11.45 |
18.24 |
15.11 |
22.47 |
||||||
Realized gain (loss) on commodity contract settlement |
(0.41) |
(0.08) |
0.34 |
(0.12) |
0.24 |
||||||
Operating netback |
16.67 |
11.37 |
18.58 |
14.99 |
22.71 |
||||||
G&A |
(0.28) |
(0.66) |
(0.59) |
(0.58) |
(0.47) |
||||||
Cash Finance expenses |
(3.41) |
(2.11) |
(1.75) |
(4.35) |
(1.73) |
||||||
Depletion and depreciation |
(8.60) |
(8.46) |
(8.15) |
(8.46) |
(8.39) |
||||||
Non Cash – Finance expenses |
(1.98) |
(1.71) |
(0.04) |
(0.05) |
(0.05) |
||||||
Stock-based compensation |
(0.13) |
(1.68) |
(0.66) |
(0.78) |
(0.85) |
||||||
Unrealized gain (loss) on financial instruments |
(1.37) |
(0.07) |
0.08 |
(0.18) |
0.02 |
||||||
Deferred income tax |
(0.20) |
0.15 |
(1.87) |
(0.38) |
(0.66) |
||||||
Net Income netback |
$ |
0.69 |
$ |
(3.18) |
$ |
5.60 |
$ |
0.21 |
$ |
10.57 |
|
Business Environment
2020 |
2019 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2020 |
2019 |
|||||||
Realized Pricing (Including realized commodity contracts) |
|||||||||||
Oil ($/bbl) |
$ |
49.49 |
$ |
31.31 |
$ |
69.83 |
$ |
45.71 |
$ |
69.81 |
|
NGL ($/bbl) |
$ |
19.01 |
$ |
13.82 |
$ |
22.78 |
$ |
16.45 |
$ |
27.82 |
|
Gas ($/mcf) |
$ |
2.47 |
$ |
2.24 |
$ |
1.06 |
$ |
2.17 |
$ |
1.56 |
|
Realized Pricing (Excluding commodity contracts) |
|||||||||||
Oil ($/bbl) |
$ |
49.49 |
$ |
31.31 |
$ |
69.83 |
$ |
45.65 |
$ |
69.81 |
|
NGL ($/bbl) |
$ |
18.96 |
$ |
13.98 |
$ |
20.85 |
$ |
16.47 |
$ |
26.33 |
|
Gas ($/mcf) |
$ |
2.47 |
$ |
2.25 |
$ |
1.06 |
$ |
2.21 |
$ |
1.56 |
|
Oil Price Benchmarks |
|||||||||||
West Texas Intermediate (“WTI”) (US$/bbl) |
$ |
40.89 |
$ |
28.00 |
$ |
56.43 |
$ |
38.35 |
$ |
56.99 |
|
Edmonton Par ($/bbl) |
$ |
48.66 |
$ |
28.67 |
$ |
69.48 |
$ |
42.92 |
$ |
70.31 |
|
Edmonton Par to WTI differential (US$/bbl) |
$ |
(4.35) |
$ |
(7.31) |
$ |
(3.63) |
$ |
(6.50) |
$ |
(4.26) |
|
Natural Gas Price Benchmarks |
|||||||||||
AECO gas ($/mcf) |
$ |
2.28 |
$ |
1.89 |
$ |
0.90 |
$ |
2.07 |
$ |
1.55 |
|
Foreign Exchange |
|||||||||||
U.S./Canadian Dollar Exchange |
0.75 |
0.72 |
0.76 |
0.74 |
0.75 |
||||||
Operations Summary
Net petroleum and natural gas production, pricing and revenue are summarized below:
2020 |
2019 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2020 |
2019 |
|||||||
Daily production volumes |
|||||||||||
Natural gas (mcf/d) |
27,445 |
33,214 |
41,068 |
33,103 |
39,049 |
||||||
Oil (bbl/d) |
2,135 |
2,513 |
3,627 |
2,728 |
4,020 |
||||||
NGL’s (bbl/d) |
1,700 |
1,827 |
2,253 |
1,884 |
2,045 |
||||||
Combined (boe/d 6:1) |
8,409 |
9,875 |
12,724 |
10,129 |
12,574 |
||||||
Revenue |
|||||||||||
Petroleum & natural gas sales – Gross |
$ |
18,910 |
$ |
16,290 |
$ |
31,606 |
$ |
62,635 |
$ |
107,986 |
|
Realized gain (loss) on commodity contract settlement |
(319) |
(69) |
402 |
(335) |
832 |
||||||
Total sales |
18,591 |
16,221 |
32,008 |
62,300 |
108,818 |
||||||
Royalty expense |
(976) |
(314) |
(2,093) |
(2,930) |
(7,881) |
||||||
Total Revenue – Net of royalties |
$ |
17,615 |
$ |
15,907 |
$ |
29,915 |
$ |
59,370 |
$ |
100,937 |
|
Working Capital Summary
The following table summarizes the change in working capital during the nine months ended September 30, 2020 and December 31, 2019:
Nine months ended |
Year ended |
|||
September 30, 2020 |
December 31, 2019 |
|||
Adjusted Net Debt – beginning of period |
$ |
(187,711) |
$ |
(155,882) |
Funds flow from operations |
31,760 |
92,236 |
||
Additions to property and equipment |
(36,089) |
(115,276) |
||
Decommissioning costs incurred |
– |
(966) |
||
Additions to E&E Assets |
(426) |
(5,723) |
||
Issuance of shares |
– |
41 |
||
Provision for Credit Losses |
– |
(664) |
||
Other |
(1,412) |
(1,477) |
||
Adjusted Net Debt – end of period |
$ |
(193,878) |
$ |
(187,711) |
Credit facility limit |
$ |
210,000 |
$ |
225,000 |
Capital Spending
Capital spending is summarized as follows:
2020 |
2019 |
Nine Months Ended |
|||||||||
Cash additions |
Q3 |
Q2 |
Q3 |
2020 |
2019 |
||||||
Land, acquisitions and lease rentals |
$ |
258 |
$ |
36 |
$ |
170 |
$ |
398 |
$ |
306 |
|
Drilling and completion |
8,036 |
372 |
18,194 |
30,971 |
66,063 |
||||||
Geological and geophysical |
190 |
145 |
148 |
506 |
594 |
||||||
Equipment |
1,232 |
273 |
4,807 |
3,473 |
26,474 |
||||||
Other asset additions |
281 |
258 |
104 |
740 |
786 |
||||||
$ |
9,997 |
$ |
1,084 |
$ |
23,423 |
$ |
36,089 |
$ |
94,223 |
||
Exploration & evaluation assets |
$ |
– |
$ |
– |
$ |
3,180 |
$ |
426 |
$ |
5,243 |
Quarter End Disclosure
The Company’s financial statements, notes to the financial statements and management’s discussion and analysis will be filed on SEDAR (www.sedar.com) and are available on the Company’s website (www.yangarra.ca).