CALGARY, Alberta – Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is pleased to report financial and operating results as at and for the three and twelve months ended December 31, 2020 and to provide 2020 year end reserves information as evaluated by Sproule Associates Limited (“Sproule”). The Company’s Management’s Discussion and Analysis (“MD&A”) and audited consolidated financial statements are available on SEDAR (the System for Electronic Document Analysis and Retrieval) at www.sedar.com.
Given the significant turmoil in global energy markets in 2020, Petrus is pleased to report annual results that achieved the objectives management laid out for the year. This includes the generation of free cash flow in excess of capital expenditures used to repay debt and continue to strengthen the Company’s balance sheet. Petrus generated $26.4 million of funds flow in 2020. This was used to fund a capital program of $14.3 million, the lowest in the Company’s history, with the remainder used to reduce the balance drawn on the company’s Revolving Credit Facility (“RCF”). In light of the volatile commodity prices during the outbreak of the COVID-19 pandemic, the Company pursued a very disciplined capital program. To conserve cash, Petrus drilled 4 gross wells (3.2 net) during the year. The Company continues to focus the majority of capital spending in its Ferrier core area where ownership of key infrastructure generates low operating costs, high netbacks and quick capital payouts.
- Debt repayment – Reduction of debt was the top priority for the Company in 2020 and Petrus was successful in reducing net debt by $9.4 million during the year. Since December 31, 2015 Petrus has repaid $112.4 million (50%) of net debt. As part of the extension agreement reached in mid-2020 in respect of Petrus’ second lien term loan (“Term Loan”), interest is now paid-in-kind and is added to the balance of the loan outstanding. Petrus focused on paying down the balance of the RCF, which was reduced by $14.8 million during the year, and is ahead of its required scheduled repayments.
- Stronger natural gas pricing – Natural gas prices showed marked improvement from the prior year and continue to strengthen. Petrus’ average realized price was $2.57/mcf in 2020, compared to $1.89/mcf in 2019, a 36% improvement. Company production was weighted 70% towards natural gas in 2020.
- Free funds flow – In 2020 Petrus generated funds flow of $26.4 million ($0.53/share), and invested $14.3 million in capital projects including the drilling of three 100% working interest wells. During the fourth quarter of 2020, Petrus generated funds flow of $6.4 million.
- Increased PDP reserves – In 2020, Petrus’ development program generated PDP reserve volume additions of 2.9 mmboe, or 1.2x production in the year. Despite decreased capital spending, the Company produced 2.4 mmboe during 2020 and ended the year with 12.2 mmboe of PDP reserves. Petrus realized Finding Development and Acquisition (“FD&A”) costs of $4.83/boe for PDP reserves, which are the best in the Company’s history.
- Low operating costs – Total annual operating costs were $4.64/boe in 2020. The Company continues to focus on optimizing its cost structure, particularly in the Ferrier area, through facility ownership and control.
- Reduced general and administrative costs – Petrus reduced gross general and administrative expenses (“G&A”) by $1.0 million in 2020, in comparison to 2019, to a total of $5.2 million. This marks the fourth consecutive year of G&A cost reductions and a 40% reduction since 2017.
2021 OUTLOOK
Petrus’ Board of Directors has approved a first quarter 2021 capital budget of $9.0 million to drill 3 gross (2.1 net) Cardium wells in its Ferrier area. With current commodity prices and the low operating cost structure utilizing company owned infrastructure, new wells operated by Petrus in the Ferrier area are expected to reach payout in under one year.
Petrus is committed to maintaining its financial flexibility and the Company will determine subsequent quarter capital spending as the year progresses. With stronger forward oil and gas prices than were experienced through most of 2020, Petrus management is forecasting stronger cash flow in 2021 than 2020 that will be used to fund a larger capital program and grow production from 2020 levels. Management anticipates that the 2020 capital plan will be funded by funds flow, with free funds flow used to continue significant debt reduction targets. With improved commodity pricing so far in 2021, Petrus has been active in adding price protection for the remainder of the year through additional forward sale contracts. The average volume of oil hedged for 2021 (825 bbl/d) represents 41% of fourth quarter 2020 average oil production. The 15,250 GJ/day average natural gas hedged for 2021 represents 61% of fourth quarter 2020 average natural gas production. Petrus’ management continues to layer in additional hedged volumes into 2022.
Refer to “Non-GAAP Financial Measures”.
Refer to “Advisories – Forward-Looking Statements”.
Refer to “Advisories – Presentation”.
SELECTED FINANCIAL INFORMATION |
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OPERATIONS | Twelve months ended
Dec. 31, 2020 |
Twelve months ended
Dec. 31, 2019 |
Three months ended
Dec. 31, 2020 |
Three months ended
Sept. 30, 2020 |
Three months ended
Jun. 30, 2020 |
Three months ended
Mar. 31, 2020 |
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Average Production | ||||||||||||
Natural gas (mcf/d) | 27,640 | 32,032 | 26,177 | 26,181 | 27,630 | 30,604 | ||||||
Oil (bbl/d) | 1,021 | 1,616 | 980 | 1,103 | 867 | 1,134 | ||||||
NGLs (bbl/d) | 980 | 1,351 | 1,014 | 997 | 819 | 1,088 | ||||||
Total (boe/d) | 6,608 | 8,306 | 6,357 | 6,463 | 6,291 | 7,323 | ||||||
Total (boe) | 2,418,259 | 3,031,659 | 584,860 | 594,599 | 572,440 | 666,361 | ||||||
Light oil weighting | 15 | % | 19 | % | 15 | % | 17 | % | 14 | % | 15 | % |
Realized Prices | ||||||||||||
Natural gas ($/mcf) | 2.57 | 1.89 | 3.07 | 2.51 | 2.35 | 2.40 | ||||||
Oil ($/bbl) | 44.14 | 64.11 | 49.64 | 46.46 | 27.18 | 50.02 | ||||||
NGLs ($/bbl) | 20.84 | 22.13 | 23.52 | 22.05 | 12.87 | 23.19 | ||||||
Total realized price ($/boe) | 20.67 | 23.35 | 24.05 | 21.48 | 15.73 | 21.23 | ||||||
Royalty income | 0.16 | 0.20 | 0.13 | 0.12 | 0.06 | 0.30 | ||||||
Royalty expense | (2.15 | ) | (2.35 | ) | (2.02 | ) | (2.09 | ) | (1.51 | ) | (2.85 | ) |
Net oil and natural gas revenue ($/boe) | 18.68 | 21.20 | 22.16 | 19.51 | 14.28 | 18.68 | ||||||
Operating expense | (4.64 | ) | (4.25 | ) | (5.53 | ) | (4.05 | ) | (4.44 | ) | (4.55 | ) |
Transportation expense | (1.43 | ) | (1.26 | ) | (1.68 | ) | (1.63 | ) | (1.40 | ) | (1.05 | ) |
Operating netback(1)($/boe) | 12.61 | 15.69 | 14.95 | 13.83 | 8.44 | 13.08 | ||||||
Realized gain (loss) on derivatives ($/boe) | 2.70 | (0.44 | ) | 0.65 | 2.20 | 6.39 | 1.76 | |||||
Other income | 0.15 | 0.03 | 0.31 | 0.04 | 0.17 | 0.07 | ||||||
General & administrative expense | (1.41 | ) | (1.20 | ) | (1.81 | ) | (1.07 | ) | (1.43 | ) | (1.35 | ) |
Cash finance expense | (2.75 | ) | (2.72 | ) | (2.49 | ) | (2.16 | ) | (3.20 | ) | (3.13 | ) |
Decommissioning expenditures | (0.37 | ) | (0.28 | ) | (0.63 | ) | (0.13 | ) | (0.15 | ) | (0.56 | ) |
Funds flow & corporate netback(1)(2)($/boe) | 10.93 | 11.08 | 10.98 | 12.71 | 10.22 | 9.87 | ||||||
FINANCIAL (000s except $ per share) | Twelve months ended
Dec. 31, 2020 |
Twelve months ended
Dec. 31, 2019 |
Three months ended
Dec. 31, 2020 |
Three months ended
Sept. 30, 2020 |
Three months ended
Jun. 30, 2020 |
Three months ended
Mar. 31, 2020 |
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Oil and natural gas revenue | 50,368 | 71,398 | 14,143 | 12,840 | 9,041 | 14,344 | ||||||
Net loss | (97,554 | ) | (42,176 | ) | (151 | ) | (3,678 | ) | (6,281 | ) | (87,444 | ) |
Net loss per share | ||||||||||||
Basic | (1.97 | ) | (0.85 | ) | — | (0.07 | ) | (0.13 | ) | (1.77 | ) | |
Fully diluted | (1.97 | ) | (0.85 | ) | — | (0.07 | ) | (0.13 | ) | (1.77 | ) | |
Funds flow | 26,397 | 33,625 | 6,423 | 7,551 | 5,855 | 6,566 | ||||||
Funds flow per share | ||||||||||||
Basic | 0.53 | 0.68 | 0.13 | 0.15 | 0.12 | 0.13 | ||||||
Fully diluted | 0.53 | 0.68 | 0.13 | 0.15 | 0.12 | 0.13 | ||||||
Capital expenditures | 14,298 | 18,073 | 2,797 | 2,543 | 305 | 8,655 | ||||||
Net dispositions | — | 651 | — | — | — | — | ||||||
Weighted average shares outstanding | ||||||||||||
Basic | 49,469 | 49,472 | 49,469 | 49,469 | 49,469 | 49,469 | ||||||
Fully diluted | 49,469 | 49,472 | 49,469 | 49,469 | 49,469 | 49,469 | ||||||
As at year end | ||||||||||||
Common shares outstanding | ||||||||||||
Basic | 49,469 | 49,469 | 49,469 | 49,469 | 49,469 | 49,469 | ||||||
Fully Diluted | 49,469 | 49,469 | 49,469 | 49,469 | 49,469 | 49,469 | ||||||
Fully diluted Total assets | 177,914 | 289,225 | 177,914 | 179,895 | 184,532 | 193,679 | ||||||
Non-current liabilities | 45,321 | 42,346 | 45,321 | 44,471 | 43,017 | 38,533 | ||||||
Net debt(1) | 114,361 | 123,744 | 114,361 | 116,717 | 120,570 | 125,974 |
(1)Refer to “Non-GAAP Financial Measures”.
(2)Corporate netback is equal to funds flow which is a comparable additional GAAP measure. Petrus analyzes these measures on an absolute value and per unit basis.
OPERATIONS UPDATE |
Fourth quarter average production by area was as follows:
For the three months ended December 31, 2020FerrierFoothillsCentral AlbertaTotalNatural gas (mcf/d)19,6371,4255,11826,180Oil (bbl/d)569113298980NGLs (bbl/d)86071471,014Total (boe/d)4,7023571,2986,357
Fourth quarter production averaged 6,357 boe/d in 2020 versus 6,463 boe/d in the third quarter. Production was lower due to natural declines as no new wells were brought on production during the quarter. One well completed during the fourth quarter is awaiting tie-in and is expected to be brought on production in the first quarter of 2021.
Petrus’ Board of Directors has approved a first quarter 2021 capital budget of $9.0 million to drill 3 gross (2.1 net) Cardium wells in the Ferrier area. With current commodity prices and the low operating cost structure utilizing company owned infrastructure, new wells operated by Petrus in the Ferrier area are expected to reach payout in under one year.
With stronger forward oil and natural gas prices than were experienced through most of 2020, Petrus management is forecasting stronger cash flow in 2021 than 2020 that will be used to fund a larger capital program and grow production from 2020 levels. Management anticipates that the 2020 capital plan will be funded by funds flow, with free funds flow used to continue significant debt reduction targets. With improved commodity pricing so far in 2021, Petrus has been active in adding price protection for the remainder of the year through additional forward sale contracts. The average volume of oil hedged for 2021 (825 bbl/d) represents 41% of fourth quarter 2020 average oil production. The 15,250 GJ/day average natural gas hedged for 2021 represents 61% of fourth quarter 2020 average natural gas production.
RESERVES
Petrus’ 2020 year end reserves were evaluated by independent reserves evaluator, Sproule Associates Limited, in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) as of December 31, 2020 (“2020 Sproule Report”). Additional reserve information as required under NI 51-101 will be included in our Annual Information Form for the year ended December 31, 2020, which will be available under the Company’s profile on SEDAR (the System for Electronic Document Analysis and Retrieval) at www.sedar.com.
Petrus has a reserves committee, comprised of independent board members, that reviews the qualifications and appointment of the independent reserves evaluator. The committee also reviews the procedures for providing information to the evaluators. All booked reserves are based upon annual evaluations by the independent qualified reserve evaluator conducted in accordance with the COGE Handbook and NI 51-101. The evaluations are conducted using all available geological and engineering data. The reserves committee has reviewed the reserves information and approved the 2020 Sproule Report.
The following table provides a summary of the Company’s before tax reserves as evaluated by Sproule:
As at December 31, 2020 | Total Company Interest (1)(3) | ||||||
Reserve Category | Conventional Natural Gas (mmcf) | Light and Medium Crude Oil (mbbl) | NGL (mbbl) |
Total (mboe) |
NPV 0%(2) ($000s) |
NPV 5%(2) ($000s) |
NPV 10%(2) ($000s) |
Proved Producing | 53,172 | 1,158 | 2,150 | 12,170 | 120,922 | 130,024 | 119,122 |
Proved Non-Producing | 309 | 8 | 14 | 74 | 726 | 639 | 571 |
Proved Undeveloped | 52,448 | 943 | 3,492 | 13,177 | 113,185 | 68,344 | 39,745 |
Total Proved | 105,929 | 2,109 | 5,657 | 25,421 | 234,833 | 199,007 | 159,438 |
Proved + Probable Producing | 66,071 | 1,435 | 2,650 | 15,097 | 167,144 | 154,424 | 133,562 |
Total Probable | 65,186 | 2,231 | 2,894 | 15,989 | 224,418 | 142,949 | 97,553 |
Total Proved Plus Probable | 171,115 | 4,340 | 8,551 | 41,410 | 459,251 | 341,956 | 256,991 |
(1)Tables may not add due to rounding.
(2)NPV 0%, NPV 5% and NPV 10% refer to the risked net present value of the future net revenue of the Company’s reserves, discounted by 0%, 5% and 10%, respectively and is presented before tax and based on Sproule’s pricing assumptions.
(3)Total company interest reserve volumes presented above and in the remainder of this Annual Report are presented as the Company’s total working interest before the deduction of royalties (but after including any royalty interests of Petrus).
In 2020, Petrus’ development program generated Proved Developed Producing (“PDP”) reserve volume additions of 1.3 mmboe. The Company produced 2.4 mmboe during 2019 and ended the year with 12.2 mmboe of PDP reserve volume (34% oil and liquids).
Petrus ended 2020 with $119.7 million, $159.4 million and $257.0 million of Proved Developed (“PD”), Total Proved (“TP”), and Proved plus Probable (“P+P”), respectively, reserve value before-tax, discounted at 10%, based on the 2020 Sproule Report. In 2020, the Company realized Finding and Development (“FD&A”)(1)(2) costs of $4.83/boe for PDP reserves.
Based on the 2020 Sproule Report, the Company’s PDP reserve value before-tax, discounted at 10% is $2.41 per share. On the same basis, the P+P reserve value is $5.20 per share.
(1)Refer to “Oil and Gas Disclosures”.
(2)Certain changes in FD&A and F&D produce non-meaningful figures as discussed in “Oil and Gas Disclosures”.
While FD&A and F&D costs, reserve life index, reserve replacement ratio and finding and development costs are commonly used in the oil and nature gas industry and have been prepared by management, these terms do not have a standardized meaning and may not be comparable to similar measures presented by other companies and, therefore, should not be used to make such comparisons.
FUTURE DEVELOPMENT COST
Future Development Cost (“FDC”) reflects Sproule’s best estimate of what it will cost to bring the P+P undeveloped reserves on production. The following table provides a summary of the Company’s FDC as set forth in the 2020 Sproule Report:
Future Development Cost ($000s) |
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Total Proved | Total Proved + Probable | |
2021 | 28,582 | 36,242 |
2022 | 45,758 | 70,913 |
2023 | 57,783 | 65,731 |
2024 | 6,164 | 20,582 |
2025 | 12,944 | 28,895 |
2026 | 5,583 | 11,129 |
2027 | — | 18,844 |
Thereafter | — | — |
Total FDC, Undiscounted | 156,815 | 252,335 |
Total FDC, Discounted at 10% | 129,059 | 198,745 |
PERFORMANCE RATIOS
The following table highlights annual performance ratios for the Company from 2016 to 2020:
December 31, 2020 | December 31, 2019 | December 31, 2018 | December 31, 2017 | December 31, 2016 | ||||||
Proved Producing | ||||||||||
FD&A ($/boe) (1)(2) | 4.83 | 13.31 | 37.76 | 13.05 | (0.43 | ) | ||||
F&D ($/boe) (1)(2) | 4.83 | 12.81 | 42.27 | 11.57 | 9.89 | |||||
Reserve Life Index (yr) (1) | 5.2 | 3.8 | 4.6 | 4.1 | 4.4 | |||||
Reserve Replacement Ratio (1) | 1.2 | 0.4 | 0.2 | 1.6 | 0.4 | |||||
FD&A Recycle Ratio (1) | 2.6 | 1.2 | 0.4 | 1.1 | (24.8 | ) | ||||
Proved Developed | ||||||||||
FD&A ($/boe) (1)(2) | 4.71 | 12.49 | 11.34 | 16.74 | (0.23 | ) | ||||
F&D ($/boe) (1)(2) | 4.71 | 12.03 | 11.55 | 14.62 | 7.69 | |||||
Reserve Life Index (yr) (1) | 5.2 | 4.8 | 5.6 | 4.5 | 5.3 | |||||
Reserve Replacement Ratio (1) | 1.2 | 0.5 | 0.6 | 1.2 | 0.7 | |||||
FD&A Recycle Ratio (1) | 2.7 | 1.3 | 1.4 | 0.9 | (46.3 | ) | ||||
Total Proved | ||||||||||
FD&A ($/boe) (1)(2) | 1.29 | 1.09 | 8.73 | 14.33 | (15.78 | ) | ||||
F&D ($/boe) (1)(2) | 1.29 | (6.83 | ) | 8.16 | 12.03 | 2.46 | ||||
Reserve Life Index (yr) (1) | 10.9 | 9.9 | 11.1 | 8.0 | 9.8 | |||||
Reserve Replacement Ratio (1) | (1.0 | ) | 0.3 | 1.3 | 1.1 | 0.5 | ||||
FD&A Recycle Ratio (1) | 9.8 | 14.4 | 1.8 | 1.0 | (0.7 | ) | ||||
Future Development Cost ($000s) | 156,815 | 174,027 | 194,757 | 182,086 | 201,556 | |||||
Total Proved + Probable | ||||||||||
FD&A ($/boe) (1)(2) | 0.37 | (7.32 | ) | 6.49 | 14.87 | 350.09 | ||||
F&D ($/boe) (1)(2) | 0.37 | 190.21 | 5.15 | 17.28 | (8.06 | ) | ||||
Reserve Life Index (yr) (1) | 17.7 | 15.4 | 17.1 | 12.3 | 14.6 | |||||
Reserve Replacement Ratio (1) | (1.3 | ) | — | 1.5 | 1.7 | (0.1 | ) | |||
FD&A Recycle Ratio (1) | 33.7 | (2.1 | ) | 2.4 | 1.0 | — | ||||
Future Development Cost ($000s) | 252,335 | 267,652 | 290,876 | 283,030 | 269,144 |
(1)Refer to “Oil and Gas Disclosures”.
(2)Certain changes in FD&A and F&D produce non-meaningful figures as discussed in “Oil and Gas Disclosures”. While FD&A and F&D costs, reserve life index, reserve replacement ratio and finding and development costs are commonly used in the oil and nature gas industry and have been prepared by management, these terms do not have a standardized meaning and may not be comparable to similar measures presented by other companies and, therefore, should not be used to make such comparisons.
NET ASSET VALUE
The following table shows the Company’s Net Asset Value (“NAV”), calculated using Sproule’s December 31, 2020 price forecast:
As at December 31, 2020 ($000s except per share) | ||||||
Proved Developed Producing | Total Proved | Proved + Probable | ||||
Present Value Reserves, before tax (discounted at 10%) (1) | 119,122 | 159,438 | 256,991 | |||
Undeveloped Land Value (2) | 17,568 | 17,568 | 17,568 | |||
Net Debt (3) | (114,361 | ) | (114,361 | ) | (114,361 | ) |
Net Asset Value | 22,329 | 62,645 | 160,198 | |||
Estimated Net Asset Value per Share | $0.45 | $1.27 | $3.24 |
(1)Based on the 2020 Sproule Report, using the forecast future prices and costs.
(2)Based on the exploration and evaluation assets as per the Company’s December 31, 2020 audited consolidated financial statements.
(3)See “Non-GAAP Financial Measures”.
ANNUAL GENERAL MEETING
The Corporation currently intends to hold its Annual General Meeting (“Meeting”) on Thursday, May 13, 2021 at 2:00 p.m. (Calgary time). Due to the COVID-19 pandemic and restrictions on indoor gatherings implemented by the Government of Alberta in response thereto, and out of concern for the wellbeing of all participants, access to the Meeting may be limited. The Company does not plan to have a formal presentation at the conclusion of the Meeting. We encourage all shareholders and proxyholders not to attend the meeting in person, particularly if they are experiencing any of the described COVID-19 symptoms. Shareholders and guests can listen to the Meeting via teleconference at 1-888-433-2192 (participant code 6841494) however shareholders and proxyholders will not be able to vote their shares via teleconference. We encourage all shareholders to submit their proxies in advance of the Meeting.
An updated corporate presentation can be found on the Company’s website at www.petrusresources.com.