CALGARY, AB – Yangarra Resources Ltd. (“Yangarra” or the “Company“) (TSX: YGR) announces its financial and operating results for the three and nine months ended September 30, 2021.
Third Quarter Highlights
- Average production of 8,710 BOE/D (46% liquids) during the quarter, a 4% increase from the same period in 2020
- Sales were $35.9 million, an increase of 90% from the same period in 2020
- Funds flow from operations of $24.1 million ($0.28 per share – basic), an increase of 140% from the same period in 2020
- Adjusted EBITDA was $26.6 million ($0.28 per share – basic)
- Net income of $13.5 million ($0.16 per share – basic, $17.7 million before tax)
- Operating costs were $6.69/BOE (including $0.98/BOE of transportation costs)
- Field operating netbacks were $34.92/BOE
- Operating netbacks, which include the impact of commodity contracts, were $34.58/BOE
- Operating margins were 77% and funds flow from operations margins were 66%
- G&A costs were $0.95/BOE
- Royalties were 7% of revenue
- All in cash costs were $14.69/BOE
- Capital expenditures were $23.5 million
- Adjusted net debt was $201.8 million
- Adjusted net debt to third quarter annualized funds flow from operations was 2.1: 1
- Retained earnings of $139.1 million
- Corporate LMR is 6.4 with decommissioning liabilities of $12.7 million (discounted)
Strategic Update
Yangarra remains committed to being a low-cost producer in Central Alberta with a focus on return on capital employed by generating positive net income. The Company strategically built out the oilfield services group (“OFS”) while equipment was favourably priced and quality operations staff were available. The internally owned OFS group includes 50 staff, lease and pipeline construction, fluid hauling, rig-move, pressure trucks, vac/combo trucks, crew trucks and trailers, wireline, proprietary water completion access, three mechanics and a fully equipped service facility. The OFS group will insulate against inflationary pressures as oilfield activity ramps up and will mitigate wait times for scarce services.
Also, because of improving drilling rig efficiencies, the Company will only require one fully utilized rig to drill 30 gross wells a year.
With prevailing commodity prices, Yangarra expects to generate material free cash flow in 2022 and once the Company reaches a 1.0x debt to cash flow, it expects to return a portion of the free cash flow to shareholders via a dividend policy.
Operations Summary
Yangarra drilled seven wells and completed seven wells during the third quarter and has continued to execute on the full-year capital program with well costs averaging at or below previous guidance. Q3 2021 production volumes were negatively impacted by below type-curve initial flush performance at the Company’s Chedderville and O’Cheise pad sites. The wells took longer than anticipated to clean up during flowback, however, the initial underperformance is offset by the wells leveling out at a lower decline rate relative to type curve.
In addition, several high-volume wells were shut in during the quarter due to access issues caused by the drilling rig being on location and workovers on recent wells were delayed while Yangarra staff prioritized ongoing completions.
Four additional wells were recently completed at West Ferrier as a follow-up to two confidential wells that were brought on in the summer. These wells did not have the same low initial flush issues during cleanup and as a result, Yangarra remains confident with the corporate type-curve.
The Company has implemented initiatives on a sample of existing wells to flatten declines, improve production profiles and maximize recoveries. Initial results have been very positive and Yangarra expects these initiatives can be applied through-out the inventory of producing wells at a low-cost with short paybacks.
During the fourth quarter of 2021, the Company will drill and complete a four well pad in the Chedderville area and then begin drilling a fourteen well pad in West Ferrier, with completions scheduled for early 2022.
Financial Summary
2021 |
2020 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2021 |
2020 |
|||||||
Statements of Income and Comprehensive Income |
|||||||||||
Petroleum & natural gas sales |
$ |
35,880 |
$ |
28,529 |
$ |
18,910 |
$ |
92,884 |
$ |
62,635 |
|
Income before tax |
$ |
17,657 |
$ |
10,090 |
$ |
691 |
$ |
39,666 |
$ |
1,635 |
|
Net income |
$ |
13,500 |
$ |
7,753 |
$ |
537 |
$ |
30,370 |
$ |
571 |
|
Net income per share – basic |
$ |
0.16 |
$ |
0.09 |
$ |
0.01 |
$ |
0.35 |
$ |
0.01 |
|
Net income per share – diluted |
$ |
0.15 |
$ |
0.09 |
$ |
0.01 |
$ |
0.34 |
$ |
0.01 |
|
Statements of Cash Flow |
|||||||||||
Funds flow from operations |
$ |
24,126 |
$ |
17,240 |
$ |
10,038 |
$ |
58,457 |
$ |
33,064 |
|
Funds flow from operations per share – basic |
$ |
0.28 |
$ |
0.20 |
$ |
0.12 |
$ |
0.68 |
$ |
0.39 |
|
Funds flow from operations per share – diluted |
$ |
0.27 |
$ |
0.19 |
$ |
0.12 |
$ |
0.66 |
$ |
0.39 |
|
Cash from operating activities |
$ |
22,078 |
$ |
19,367 |
$ |
7,411 |
$ |
54,431 |
$ |
24,680 |
|
Statements of Financial Position |
|||||||||||
Property and equipment |
$ |
606,945 |
$ |
589,275 |
$ |
557,827 |
$ |
606,945 |
$ |
557,827 |
|
Total assets |
$ |
656,849 |
$ |
636,534 |
$ |
603,817 |
$ |
656,849 |
$ |
603,817 |
|
Working capital (deficit) surplus |
$ |
5,946) |
$ |
6,667) |
$ |
6,622) |
$ |
(5,946) |
$ |
6,622) |
|
Adjusted net debt |
$ |
201,811 |
$ |
202,662 |
$ |
193,878 |
$ |
201,811 |
$ |
193,878 |
|
Shareholders equity |
$ |
344,397 |
$ |
330,039 |
$ |
307,322 |
$ |
344,397 |
$ |
307,322 |
|
Weighted average number of shares – basic |
86,051 |
85,637 |
85,380 |
85,704 |
85,380 |
||||||
Weighted average number of shares – diluted |
89,802 |
89,098 |
85,677 |
88,916 |
85,758 |
||||||
Company Netbacks ($/BOE)
2021 |
2020 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2021 |
2020 |
|||||||
Sales price |
$ |
44.78 |
$ |
38.21 |
$ |
24.44 |
$ |
39.79 |
$ |
22.57 |
|
Royalty expense |
(3.17) |
(1.69) |
(1.26) |
(2.33) |
(1.06) |
||||||
Production costs |
(5.71) |
(5.49) |
(4.83) |
(5.31) |
(5.34) |
||||||
Transportation costs |
(0.98) |
(1.25) |
(1.28) |
(1.11) |
(1.06) |
||||||
Field operating netback |
34.92 |
29.78 |
17.08 |
31.04 |
15.11 |
||||||
Realized gain (loss) on commodity contract settlement |
(0.33) |
(2.07) |
(0.41) |
(1.57) |
(0.12) |
||||||
Operating netback |
34.58 |
27.71 |
16.67 |
29.48 |
14.99 |
||||||
G&A |
(0.95) |
(0.85) |
(0.28) |
(0.83) |
(0.58) |
||||||
Cash Finance expenses |
(3.96) |
(4.16) |
(3.41) |
(2.81) |
(4.35) |
||||||
Depletion and depreciation |
(7.62) |
(8.09) |
(8.60) |
(7.91) |
(8.46) |
||||||
Non Cash – Finance expenses |
0.60 |
(0.79) |
(1.98) |
(0.05) |
(0.05) |
||||||
Stock-based compensation |
(0.49) |
(0.45) |
(0.13) |
(0.41) |
(0.78) |
||||||
Unrealized gain (loss) on financial instruments |
(0.12) |
0.15 |
(1.37) |
(0.47) |
(0.18) |
||||||
Deferred income tax |
(5.19) |
(3.13) |
(0.20) |
(3.98) |
(0.38) |
||||||
Net Income netback |
$ |
16.85 |
$ |
10.39 |
$ |
0.69 |
$ |
13.02 |
$ |
0.21 |
|
Business Environment
2021 |
2020 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2021 |
2020 |
|||||||
Realized Pricing (Including realized commodity contracts) |
|||||||||||
Light Crude Oil ($/bbl) |
$ |
84.78 |
$ |
67.01 |
$ |
49.49 |
$ |
71.26 |
$ |
45.71 |
|
NGL ($/bbl) |
$ |
51.13 |
$ |
38.69 |
$ |
19.01 |
$ |
42.97 |
$ |
16.45 |
|
Natural Gas ($/mcf) |
$ |
3.71 |
$ |
3.44 |
$ |
2.47 |
$ |
3.37 |
$ |
2.17 |
|
Realized Pricing (Excluding commodity contracts) |
|||||||||||
Light Crude Oil ($/bbl) |
$ |
84.90 |
$ |
75.55 |
$ |
49.49 |
$ |
76.58 |
$ |
45.65 |
|
NGL ($/bbl) |
$ |
51.06 |
$ |
38.53 |
$ |
18.96 |
$ |
42.94 |
$ |
16.47 |
|
Natural Gas ($/mcf) |
$ |
3.81 |
$ |
3.42 |
$ |
2.47 |
$ |
3.43 |
$ |
2.21 |
|
Oil Price Benchmarks |
|||||||||||
West Texas Intermediate (“WTI”) (US$/bbl) |
$ |
70.62 |
$ |
66.09 |
$ |
40.89 |
$ |
64.83 |
$ |
38.35 |
|
Edmonton Par ($/bbl) |
$ |
81.39 |
$ |
75.26 |
$ |
48.66 |
$ |
75.83 |
$ |
42.92 |
|
Edmonton Par to WTI differential (US$/bbl) |
$ |
(6.02) |
$ |
(4.81) |
$ |
(4.35) |
$ |
(4.24) |
$ |
(6.50) |
|
Natural Gas Price Benchmarks |
|||||||||||
AECO gas ($/mcf) |
$ |
3.41 |
$ |
3.14 |
$ |
2.28 |
$ |
3.18 |
$ |
2.07 |
|
Foreign Exchange |
|||||||||||
Canadian Dollar/U.S. Exchange |
0.79 |
0.81 |
0.75 |
0.80 |
0.74 |
||||||
Operations Summary
Net petroleum and natural gas production, pricing and revenue are summarized below:
2021 |
2020 |
Nine Months Ended |
|||||||||
Q3 |
Q2 |
Q3 |
2021 |
2020 |
|||||||
Daily production volumes |
|||||||||||
Natural Gas (mcf/d) |
27,965 |
26,558 |
27,445 |
27,515 |
33,103 |
||||||
Light Crude Oil (bbl/d) |
2,274 |
2,088 |
2,135 |
2,250 |
2,728 |
||||||
NGL’s (bbl/d) |
1,776 |
1,691 |
1,700 |
1,715 |
1,884 |
||||||
Combined (BOE/d 6:1) |
8,710 |
8,205 |
8,409 |
8,550 |
10,129 |
||||||
Revenue |
|||||||||||
Petroleum & natural gas sales – Gross |
$ |
35,880 |
$ |
28,529 |
$ |
18,910 |
$ |
92,884 |
$ |
62,635 |
|
Realized gain (loss) on commodity contract settlement |
(267) |
(1,545) |
(319) |
(3,657) |
(335) |
||||||
Total sales |
35,613 |
26,984 |
18,591 |
89,227 |
62,300 |
||||||
Royalty expense |
(2,539) |
(1,263) |
(976) |
(5,435) |
(2,930) |
||||||
Total Revenue – Net of royalties |
$ |
33,074 |
$ |
25,721 |
$ |
17,615 |
$ |
83,792 |
$ |
59,370 |
|
Working Capital Summary
The following table summarizes the change in adjusted net debt during the three and nine months ended September 30, 2021:
Three months ended |
Nine months ended |
Year ended |
||||
September 30, 2021 |
September 30, 2021 |
December 31, 2020 |
||||
Adjusted net debt – beginning of period |
$ |
(202,662) |
$ |
(197,414) |
$ |
(187,711) |
Funds flow from operations |
24,126 |
58,457 |
45,524 |
|||
Additions to property and equipment |
(23,474) |
(61,529) |
(51,093) |
|||
Decommissioning costs incurred |
(121) |
(465) |
(389) |
|||
Additions to E&E Assets |
(41) |
(175) |
(426) |
|||
Issuance of shares |
406 |
623 |
– |
|||
Other |
(45) |
(1,308) |
(3,319) |
|||
Adjusted net debt – end of period |
$ |
(201,811) |
$ |
(201,811) |
$ |
(197,414) |
Credit facility limit |
$ |
210,000 |
$ |
210,000 |
$ |
210,000 |
Capital Spending
Capital spending is summarized as follows:
2021 |
2020 |
Nine Months Ended |
|||||||||
Cash additions |
Q3 |
Q2 |
Q3 |
2021 |
2020 |
||||||
Land, acquisitions and lease rentals |
$ |
327 |
$ |
(63) |
$ |
258 |
$ |
143 |
$ |
398 |
|
Drilling and completion |
19,847 |
17,621 |
8,036 |
53,997 |
30,971 |
||||||
Geological and geophysical |
42 |
121 |
190 |
433 |
506 |
||||||
Equipment |
3,136 |
1,616 |
1,232 |
6,522 |
3,473 |
||||||
Other asset additions |
122 |
173 |
281 |
434 |
740 |
||||||
$ |
23,474 |
$ |
19,468 |
$ |
9,997 |
$ |
61,529 |
$ |
36,089 |
||
Exploration & evaluation assets |
$ |
41 |
$ |
134 |
$ |
– |
$ |
175 |
$ |
426 |
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).