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 months ended March 31, 2021. Petrus is focused on generating free cash flow for debt repayment and further development of its Ferrier Cardium asset.
Following extreme market volatility throughout 2020, the first quarter of 2021 brought encouraging signs of rebalancing. Global economies continue to recover, bolstering demand and improving market conditions, which has translated to higher oil and natural gas prices. Petrus generated funds flow of $7.0 million during the first quarter of 2021. This was 9% higher than the previous quarter despite the Company’s first quarter production of 5,912 boe/d (65% natural gas) being 7% lower than production in the fourth quarter of 2020. This increase in funds flow is entirely due to commodity price improvement. The decrease in production quarter over quarter is a result of the natural declines of previously drilled wells coupled with an intentionally restrained approach to capital spending.
In light of the continued uncertainty associated with the COVID-19 pandemic and the Company’s sustained commitment to debt repayment, Petrus executed a disciplined capital strategy throughout the first quarter. Petrus’ Board of Directors approved a first quarter capital budget of $9.0 million, of which $7.9 million was deployed with the majority being directed toward the drilling of four (2.2 net) Cardium wells in the Company’s core area in Ferrier. Petrus continues to focus capital investment in Ferrier where ownership of critical infrastructure supports low operating costs and high rates of return.
Balance sheet strength remains Petrus’ top priority. Between the first quarter of 2020 and 2021, Petrus reduced net debt(1) by $9.3 million; a 7% decrease. Since December 31, 2015 the Company has repaid 49% or $110 million of net debt. Petrus’ revolving credit facility (“RCF”) matures May 31, 2021, and the second lien loan matures July 31, 2021. Management is currently working with the lenders on extension terms and continues to focus on its disciplined debt reduction strategy.
HIGHLIGHTS:
- Commodity price improvements – Realized price per boe increased by 27% in the first quarter of 2021 compared to the fourth quarter of 2020; from $24.05/boe to $30.55/boe. The increase was largely associated with the improvement in the realized pricing of oil and NGLs, which increased by 33% and 59%, respectively, quarter over quarter.
- Funds flow – Generated funds flow of $7.0 million ($0.14 per share) for the first three months of 2021, 9% higher than the previous quarter.
- Capital activity – During the quarter, Petrus drilled 4 gross (2.2 net) wells with capital expenditures of $7.9 million.
- Low operating costs – Corporate operating expense for the three months ended March 31, 2021 was $6.12/boe. The Company continues to focus on optimizing its cost structure through facility ownership and control, particularly in the Ferrier area where first quarter 2021 operating expense was $3.00/boe.
2021 OUTLOOK
Consistent with the company’s strategy of financial flexibility and balance sheet strength, Petrus will determine and provide guidance around quarterly capital spending as the year progresses. Petrus’ second quarter 2021 capital budget is forecasted to be $1.3 million and consists of mostly maintenance capital with no drilling planned for the quarter. Management continues to review pricing regularly and the Company has the financial and operational flexibility to adjust capital spending plans quickly in response to changing market conditions. Throughout 2021, Petrus plans on continuing to take a controlled approach to capital investments while reducing the amount drawn on the RCF.
(1)Refer to “Non-GAAP Financial Measures”.
(2)Refer to “Advisories – Forward-Looking Statements”.
SELECTED FINANCIAL INFORMATION
OPERATIONS |
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Average Production | ||||||||||
Natural gas (mcf/d) | 22,985 | 30,604 | 26,177 | 26,181 | 27,630 | |||||
Oil (bbl/d) | 923 | 1,134 | 980 | 1,103 | 867 | |||||
NGLs (bbl/d) | 1,158 | 1,088 | 1,014 | 997 | 819 | |||||
Total (boe/d) | 5,912 | 7,323 | 6,357 | 6,463 | 6,291 | |||||
Total (boe) | 532,099 | 666,361 | 584,860 | 594,599 | 572,440 | |||||
Light oil weighting | 15 | % | 15 | % | 15 | % | 17 | % | 14 | % |
Realized Prices | ||||||||||
Natural gas ($/mcf) | 3.33 | 2.40 | 3.07 | 2.51 | 2.35 | |||||
Oil ($/bbl) | 66.61 | 50.02 | 49.64 | 46.46 | 27.18 | |||||
NGLs ($/bbl) | 36.79 | 23.19 | 23.52 | 22.05 | 12.87 | |||||
Total realized price ($/boe) | 30.55 | 21.23 | 24.05 | 21.48 | 15.73 | |||||
Royalty income | 0.15 | 0.30 | 0.13 | 0.12 | 0.06 | |||||
Royalty expense | (3.74 | ) | (2.85 | ) | (2.02 | ) | (2.09 | ) | (1.51 | ) |
Net oil and natural gas revenue ($/boe) | 26.96 | 18.68 | 22.16 | 19.51 | 14.28 | |||||
Operating expense | (6.12 | ) | (4.55 | ) | (5.53 | ) | (4.05 | ) | (4.44 | ) |
Transportation expense | (1.62 | ) | (1.05 | ) | (1.68 | ) | (1.63 | ) | (1.40 | ) |
Operating netback(1)($/boe) | 19.22 | 13.08 | 14.95 | 13.83 | 8.44 | |||||
Realized gain (loss) on derivatives ($/boe) | (2.28 | ) | 1.76 | 0.65 | 2.20 | 6.39 | ||||
Other income | 0.04 | 0.07 | 0.31 | 0.04 | 0.17 | |||||
General & administrative expense | (1.65 | ) | (1.35 | ) | (1.81 | ) | (1.07 | ) | (1.43 | ) |
Cash finance expense | (1.93 | ) | (3.13 | ) | (2.49 | ) | (2.16 | ) | (3.20 | ) |
Decommissioning expenditures | (0.27 | ) | (0.56 | ) | (0.63 | ) | (0.13 | ) | (0.15 | ) |
Funds flow & corporate netback(1)(2)($/boe) | 13.13 | 9.87 | 10.98 | 12.71 | 10.22 |
FINANCIAL (000s except $ per share) |
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Oil and natural gas revenue | 16,339 | 14,344 | 14,143 | 12,840 | 9,041 | |||||
Net loss | (3,155 | ) | (87,444 | ) | (151 | ) | (3,678 | ) | (6,281 | ) |
Net loss per share | ||||||||||
Basic | (0.06 | ) | (1.77 | ) | — | (0.07 | ) | (0.13 | ) | |
Fully diluted | (0.06 | ) | (1.77 | ) | — | (0.07 | ) | (0.13 | ) | |
Funds flow | 6,993 | 6,566 | 6,423 | 7,551 | 5,855 | |||||
Funds flow per share | ||||||||||
Basic | 0.14 | 0.13 | 0.13 | 0.15 | 0.12 | |||||
Fully diluted | 0.14 | 0.13 | 0.13 | 0.15 | 0.12 | |||||
Capital expenditures | 7,917 | 8,655 | 2,797 | 2,543 | 305 | |||||
Weighted average shares outstanding | ||||||||||
Basic | 49,469 | 49,469 | 49,469 | 49,469 | 49,469 | |||||
Fully diluted | 49,469 | 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 | |||||
Fully diluted | 49,469 | 49,469 | 49,469 | 49,469 | 49,469 | |||||
Total assets | 177,587 | 193,679 | 177,914 | 179,895 | 184,532 | |||||
Non-current liabilities | 42,028 | 38.533 | 45,321 | 44,471 | 43,017 | |||||
Net debt(1) | 116,634 | 125,974 | 114,361 | 116,717 | 120,570 |
(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
First quarter average production by area was as follows: | ||||
For the three months ended March 31, 2021 | Ferrier | Foothills | Central Alberta | Total |
Natural gas (mcf/d) | 16,660 | 1,346 | 4,978 | 22,984 |
Oil (bbl/d) | 532 | 115 | 273 | 920 |
NGLs (bbl/d) | 1,020 | 5 | 138 | 1,163 |
Total (boe/d) | 4,328 | 343 | 1,241 | 5,912 |
First quarter average production was 5,912 boe/d in 2021 compared to 7,323 boe/d in 2020. The decrease in production can be attributed to natural declines and reduced capital activity as the Company continues to strategically restrain capital spending and focus on debt reduction.
In the first quarter of 2021, the Company invested capital of $7.9 million, which was largely directed to the drilling of one (1.0 net) Petrus operated well and three (1.2 net) non-operated wells in Ferrier. As all four of these wells began producing late in the quarter, production increases will not be fully realized until the second quarter.
CREDIT FACILITY UPDATE
Petrus’ revolving credit facility (“RCF”) matures May 31, 2021, and the second lien loan matures July 31, 2021. Management is currently working with the lenders on extension terms and continues to focus on its disciplined debt reduction strategy.
ANNUAL GENERAL MEETING
The Corporation currently intends to hold its Annual General Meeting (“Meeting”) on Tuesday, June 15, 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 9350829) 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.