CALGARY, Alberta – (PIPE – TSX) Pipestone Energy Corp. (“Pipestone” or the “Company”) is pleased to report its Q1 2021 financial and operational results, as well as provide an update on its operations.
Pipestone continues to efficiently grow its highly economic condensate-rich Montney asset. The Company is well on track to deliver its 2021 production guidance of 24,000 to 26,000 boe/d. The increase in natural gas and condensate prices, coupled with improving capital efficiencies and strong well results, positions Pipestone to deliver significant annual free cash flow for shareholders beginning in Q4 2021 and beyond.
Pipestone also generated strong returns on invested capital during the quarter, with annualized ROCE and CROIC of 10.9% and 16.5% respectively, demonstrating the high-quality nature of the Company’s asset base.
FIRST QUARTER 2021 CORPORATE HIGHLIGHTS:
- Record average quarterly production of 21,595 boe/d (32% condensate, 46% total liquids), a 22% quarterly increase over Q4 2020 and a 54% increase over Q1 2020;
- Improvement in operating netback to a corporate record of $17.54/boe, an increase of 74% over Q4 2020 and a 29% increase over Q1 2020;
- The Company generated record revenue of $71.5 million and record adjusted funds flow from operations of $28.2 million ($0.15 per share basic and $0.10 per share fully diluted);
- Pipestone commenced its 2021 capital program with 7 wells drilled and rig-released and 6 wells completed during the first quarter of 2021. Total capital expenditures, including capitalized G&A, were $46.3 million during the three months ended March 31, 2021; and
- Subsequent to March 31, 2021, Pipestone successfully redetermined its reserve-based loan (“RBL”) and maintained its borrowing capacity at $225.0 million on a fully conforming basis. The revolving period of the RBL was extended to May 30, 2022 with an additional one-year term out period thereafter. The next redetermination is now scheduled for November 30, 2021.
PIPESTONE DEVELOPMENT MAP:
RECENT OPERATIONS HIGHLIGHTS:
- Sustained Production Growth: Based on field estimates, April 2021 production averaged ~22,850 boe/d (31% condensate, 44% total liquids), with no new wells brought on production since the three well 8-15 pad in February. The Company expects to bring 18 additional wells on production during 2021, including three wells on the 6-13 pad in May, and six wells on the 15-25 pad in July. The 6-13 pad includes one additional Lower Montney well, following up on the recently disclosed Lower Montney success at 3-12.Construction and commissioning of the production facilities and pipeline connecting Pipestone’s 6-30 pad to the Veresen Midstream 16-28 battery and compressor station remains on-track for a Q4 2021 start-up, which will add an additional 50 MMcf/d plus associated liquids of processing capacity for Pipestone;
- Strong Well Results: The six well 3-12 pad has achieved an IP90 of 490 bbl/d wellhead condensate and 4.3 MMcf/d raw gas (condensate gas ratio, or “CGR”, of 114 bbl/MMcf), with the previously disclosed step-out Lower Montney ‘D’ well performing in-line with the average Montney ‘B’ well performance. The three well 8-15 pad has achieved an average per well IP60 of 754 bbl/d wellhead condensate and 3.3 MMcf/d raw gas (CGR of 236 bbl/MMcf). The condensate yields at 8-15 are significantly higher than previously seen in the southwest corner of our land base. Pipestone is following up the success on its 8-15 pad with two southeast directed wells on the six well 15-25 pad, located approximately three miles to the north of 8-15;
- Peer Leading Capital Program Performance: The six well pad at 15-25 achieved an average drilling cost of $2.1 million per well with a pad average lateral length of 2,914 metres (~$752 per lateral metre), in-line with the previous pacesetter pad. Additionally at 15-25, Pipestone drilled its longest lateral since inception, measuring 3,772 metres at a cost of $2.3 million (~$617 per lateral metre). At the 6-13 pad, the Company completed three wells, piloting 3.5 tonnes per metre of proppant intensity with an average lateral length of 2,633 metres for $3.3 million per well. At ~$358 per tonne of proppant placed, this pad represents the new pacesetter on a dollars per tonne placed basis.
Pipestone Energy Corp. – Financial and Operating Highlights
|Three months ended March 31,
|($ thousands, except per unit and per share amounts)||2021||2020|
|Sales of liquids and natural gas||$||71,485||$||32,017|
|Cash from operating activities||18,097||31,067|
|Adjusted funds flow from operations (1)||28,242||11,820|
|Per share, basic||0.15||0.06|
|Per share, diluted (4)||0.10||0.06|
|Per share, basic and diluted||(0.00||)||0.08|
|Working capital deficit (end of period)||47,209||7,103|
|Bank debt (end of period)||166,659||163,000|
|Net debt (end of period) (1)||190,213||187,140|
|Shareholders’ equity (end of period)||354,747||386,147|
|Available funding (end of period) (1)||$||34,552||$||23,608|
|Undrawn credit facility capacity (end of period)||58,106||47,748|
|Annualized cash return on invested capital (CROIC) (1)||16.5||%||9.5||%|
|Annualized return on capital employed (ROCE) (1)||10.9||%||1.8||%|
|Shares outstanding (end of period)||191,348||189,906|
|Weighted-average number of basic shares outstanding||190,891||189,820|
|Weighted-average number of diluted shares outstanding (4)||276,524||189,942|
|Other natural gas liquids (NGLs) (bbls/d)||2,745||1,265|
|Total NGLs (bbls/d)||9,749||5,220|
|Crude oil (bbls/d)||91||88|
|Natural gas (Mcf/d)||70,527||52,546|
|Total (boe/d) (2)||21,595||14,066|
|Condensate and crude oil (% of total production)||33||%||29||%|
|Total liquids (% of total production)||46||%||38||%|
|Crude oil – WTI (C$/bbl)||$||73.24||$||61.34|
|Condensate – Edmonton Condensate (C$/bbl)||74.59||60.12|
|Natural gas – AECO (C$/GJ)||3.07||1.92|
|Average realized prices (3)|
|Condensate (per bbl)||65.03||52.89|
|Other NGLs (per bbl)||26.79||17.97|
|Total NGLs (per bbl)||54.26||44.43|
|Crude oil (per bbl)||59.52||40.99|
|Natural gas (per Mcf)||3.69||2.21|
|Revenue (per boe)||36.78||25.01|
|Realized (loss) gain on commodity risk management contracts (per boe) (5)||(4.32||)||4.82|
|Royalties (per boe)||(1.66||)||(1.14||)|
|Operating expenses (per boe)||(10.64||)||(11.42||)|
|Transportation (per boe)||(2.62||)||(3.66||)|
|Operating netback (per boe) (1) (5)||17.54||13.61|
|Adjusted funds flow netback (per boe) (1)||$||14.52||$||9.24|
(1) See “Non-GAAP measures” section of the press release Advisories for description.
(2) For a description of the boe conversion ratio, see “Basis of Barrel of Oil Equivalent”. References to crude oil in production amounts are to the product type “tight oil” and references to natural gas in production amounts are to the product type “shale gas”. References to total liquids include oil and natural gas liquids (including condensate, butane and propane).
(3) Figures calculated before hedging.
(4) Weighted-average number of diluted shares outstanding for the purpose of calculating diluted adjusted funds flow from operations per share in the 2021 period presented includes 85,281,505 common shares that are issuable at the discretion of preferred shareholders as of March 31, 2021 for no additional proceeds to the Company. The preferred shares have a total convertible value of $72.5 million as of March 31, 2021 and are convertible at $0.85 per common share.
(5) Realized gain (loss) on commodity risk management contracts reclassified to be included under operating netback for 2021, prior period figures have been adjusted to conform with current presentation.
Increase to the EDC Letter of Credit Facility:
Pipestone has closed a renewal and expansion of its unsecured letter of credit (“LC”) facility with Export Development Canada’s (“EDC”) performance security guarantee (“PSG”) program. Effective May 11, 2021, the capacity of this facility is $22.5 million, an increase from $15.0 million. Pipestone currently has LCs outstanding of just under $15 million. The Company expects to increase its total committed LCs over the next 12 months to accommodate the inclusion of additional processing and transportation LCs related to the gas handling arrangement with Veresen Midstream.
First Quarter 2021 Conference Call
A conference call has been scheduled for May 12th, 2021 at 9:00 a.m. Mountain Daylight Time (11:00 a.m. Eastern Daylight Time) to update interested investors, analysts, brokers, and media representatives on the Company’s operations and Q1 2021 highlights.
Conference Call Details:
Toll-Free: (866) 953-0776 International: (630) 652-5852 Conference ID: 8981815
An archived recording of the conference call will be available shortly after the event and will be available until May 19, 2021. To access the replay please dial toll free in North America (855) 859-2056 or International (404) 537-3406 and enter 8981815 when prompted.
Pipestone Energy Corp.
Pipestone Energy is an oil and gas exploration and production company focused on developing its large contiguous and condensate-rich Montney asset base in the Pipestone area near Grande Prairie. Pipestone Energy is fully funded to grow its production from 15.6 Mboe/d in 2020 to 35 Mboe/d (midpoint) in 2022, while maintaining a conservative leverage profile. Beginning in 2022, the Company expects to generate annual free cash flow above growth and maintenance expenditures. Pipestone Energy is committed to building long term value for our shareholders while maintaining the highest possible environmental and operating standards, as well as being an active and contributing member to the communities in which it operates. Pipestone Energy shares trade under the symbol PIPE on the TSX. For more information, visit www.pipestonecorp.com.