CALGARY, Alberta, Nov. 11, 2021 (GLOBE NEWSWIRE) — Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is pleased to report financial and operating results as at and for the three and nine months ended September 30, 2021. Petrus is focused on generating free cash flow to support further development of its Ferrier Cardium assets to benefit all stakeholders.
HIGHLIGHTS
- Transformative debt reduction – During the quarter Petrus executed certain transactions, transforming its debt situation as follows:
- Reduced net debt(1) by 46% from $110.3 million to $60.1 million during the third quarter of 2021. Debt to annualized funds flow (excluding realized hedge settlements) is now 1.3x;
- Second Lien Term Loan settled in full;
- First Lien debt is the only remaining debt and is now fully conforming;
- interest expense has been reduced by approximately $5 million annually; and
- the going concern disclosure in the second quarter 2021 interim consolidated financial statements has been removed with concurrence from the Company’s auditors.
- Commodity price improvements – Realized price per boe increased by 70% in the third quarter of 2021 compared to the third quarter of 2020 due to strengthening oil and gas prices which increased by 78% and 61%, respectively.
- Operating netback – Operating netback(1) increased by 87% to $25.86/boe in the third quarter of 2021 from $13.83/boe in the third quarter of 2020.
- Funds flow – Petrus generated funds flow(1) and corporate netback of $7.9 million ($14.43/boe) in the third quarter of 2021, which was 4% higher than the third quarter of the previous year. Realized derivative losses were the main reason for the smaller increase in corporate netback (4%) relative to the increase in operating netback (87%). Petrus remains significantly hedged at below current market prices through the first quarter of 2022. Hedging contracts beyond that point are reflective of current strip pricing.
- Production – Petrus has held production relatively flat through the first nine months of 2021 with the focus on debt repayment, limiting capital reinvestment. Third quarter 2021 production of 5,937 boe/d was essentially unchanged from the 5,912 boe/d of production in the first quarter of 2021. Production for the first nine months of 2021 averaged 6,053 boe/d.
During the third quarter of 2021, the Company reduced net debt from $110.3 million to $60.1 million; a 46% decrease. To achieve this, the Company’s subordinated secured term loan (the “Second Lien Loan”), in the principal amount of $39.4 million, was settled in full (the “Second Lien Settlement”) in consideration for the issuance of $15.8 million of common shares of Petrus (“Common Shares”) to the holders of the Second Lien Loan at an issue price of $0.55 per share. In addition, the Company completed a private placement financing of an aggregate of $10 million of Common Shares at an issue price of $0.55 per share (the “Equity Financing”) the proceeds from which were applied to outstanding indebtedness under the First Lien Loan. The First Lien Loan is now Petrus’ sole credit facility and at September 30, 2021 had $59.9 million drawn. The maturity date of the Company’s First Lien Loan has been extended to May 31, 2022.
2021 OUTLOOK
The completion of the debt restructuring transactions during the third quarter of 2021 transformed Petrus from a company with limited capital resources to one with the ability to create meaningful shareholder value. The substantial debt reduction associated with the Second Lien Settlement and Equity Financing has bolstered the Company’s financial position and provides the flexibility required to invest in the development of its land base and unlock proven value. The Company will start to accelerate its capital program in the fourth quarter of 2021 with the planned drilling of three (3.0 net) wells.
Petrus has a concentrated land base in its core area of Ferrier, where the liquids rich Cardium is one of the leading plays in North America. The asset includes owned and operated infrastructure, which affords optionality, operational efficiency and a low cost structure. The results of recent operated drills in the area show compelling rates of return with payouts of less than 6 months at current commodity prices. The Company also has a material land position and ownership in critical infrastructure in North Ferrier where recent non-operated drilling results have proven to be highly competitive. The Company’s premier land position in these areas combined with a strengthened balance sheet make Petrus well positioned for growth. We expect to continue to increase capital spending in 2022. Further details will be communicated once our 2022 budget has been finalized.
(1)Refer to “Non-GAAP Financial Measures” attached hereto.
(2)Refer to “Advisories – Forward-Looking Statements” attached hereto.
SELECTED FINANCIAL INFORMATION
OPERATIONS |
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Average production | ||||||||||
Natural gas (mcf/d) | 23,942 | 26,181 | 24,291 | 22,985 | 26,177 | |||||
Oil (bbl/d) | 937 | 1,103 | 1,214 | 923 | 980 | |||||
NGLs (bbl/d) | 1,010 | 997 | 1,046 | 1,158 | 1,014 | |||||
Total (boe/d) | 5,937 | 6,463 | 6,309 | 5,912 | 6,357 | |||||
Total (boe) | 546,227 | 594,599 | 574,084 | 532,099 | 584,860 | |||||
Light oil weighting | 21 | % | 17 | % | 19 | % | 15 | % | 15 | % |
Realized Prices | ||||||||||
Natural gas ($/mcf) | 4.04 | 2.51 | 3.28 | 3.33 | 3.07 | |||||
Oil ($/bbl) | 82.56 | 46.46 | 75.99 | 66.61 | 49.64 | |||||
NGLs ($/bbl) | 45.10 | 22.05 | 39.76 | 36.79 | 23.52 | |||||
Total realized price ($/boe) | 37.00 | 21.48 | 33.87 | 30.55 | 24.05 | |||||
Royalty income | 0.18 | 0.12 | 0.19 | 0.15 | 0.13 | |||||
Royalty expense | (3.94 | ) | (2.09 | ) | (4.87 | ) | (3.74 | ) | (2.02 | ) |
Net oil and natural gas revenue ($/boe) | 33.24 | 19.51 | 29.19 | 26.96 | 22.16 | |||||
Operating expense | (5.57 | ) | (4.05 | ) | (6.80 | ) | (6.12 | ) | (5.53 | ) |
Transportation expense | (1.81 | ) | (1.63 | ) | (1.84 | ) | (1.62 | ) | (1.68 | ) |
Operating netback(1)($/boe) | 25.86 | 13.83 | 20.55 | 19.22 | 14.95 | |||||
Realized gain (loss) on derivatives ($/boe) | (6.41 | ) | 2.20 | (3.21 | ) | (2.28 | ) | 0.65 | ||
Other income (cash) | 0.02 | 0.04 | 1.77 | 0.04 | 0.31 | |||||
General & administrative expense | (1.47 | ) | (1.07 | ) | (2.41 | ) | (1.65 | ) | (1.81 | ) |
Cash finance expense | (3.30 | ) | (2.16 | ) | (2.52 | ) | (1.93 | ) | (2.49 | ) |
Decommissioning expenditures | (0.27 | ) | (0.13 | ) | (0.14 | ) | (0.27 | ) | (0.63 | ) |
Funds flow & corporate netback(1)(2)($/boe) | 14.43 | 12.71 | 14.04 | 13.13 | 10.98 |
FINANCIAL (000s except $ per share) |
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Oil and natural gas revenue | 20,306 | 12,840 | 19,553 | 16,339 | 14,143 | ||||
Net income (loss) | 7,343 | (3,678 | ) | (4,265 | ) | (3,155 | ) | (151 | ) |
Net income (loss) per share | |||||||||
Basic | 0.14 | (0.07 | ) | (0.09 | ) | (0.06 | ) | — | |
Fully diluted | 0.13 | (0.07 | ) | (0.09 | ) | (0.06 | ) | — | |
Funds flow | 7,874 | 7,551 | 8,070 | 6,993 | 6,423 | ||||
Funds flow per share | |||||||||
Basic | 0.15 | 0.15 | 0.16 | 0.14 | 0.13 | ||||
Fully diluted | 0.14 | 0.15 | 0.16 | 0.14 | 0.13 | ||||
Capital expenditures | 6,101 | 2,543 | 663 | 7,917 | 2,797 | ||||
Weighted average shares outstanding | |||||||||
Basic | 54,167 | 49,469 | 49,513 | 49,469 | 49,469 | ||||
Fully diluted | 57,638 | 49,469 | 49,513 | 49,469 | 49,469 | ||||
As at period end | |||||||||
Common shares outstanding | |||||||||
Basic | 96,603 | 49,469 | 49,559 | 49,469 | 49,469 | ||||
Fully diluted | 100,074 | 49,469 | 49,559 | 49,469 | 49,469 | ||||
Total assets | 173,101 | 179,895 | 176,629 | 177,587 | 177,914 | ||||
Non-current liabilities | 40,200 | 44,471 | 40,838 | 42,028 | 45,321 | ||||
Net debt(1) | 60,071 | 116,717 | 110,346 | 116,634 | 114,361 |
(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
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Third quarter average production by area was as follows: | |||||
For the three months ended September 30, 2021 | Ferrier | Foothills | Central Alberta | Kakwa | Total |
Natural gas (mcf/d) | 17,648 | 1,449 | 4,603 | 236 | 23,936 |
Oil (bbl/d) | 540 | 100 | 252 | 43 | 935 |
NGLs (bbl/d) | 868 | 6 | 128 | 10 | 1,012 |
Total (boe/d) | 4,349 | 348 | 1,148 | 92 | 5,937 |
Third quarter 2021 production averaged 5,937 boe/d compared to 6,309 boe/d in the second quarter of 2021. Two gross (1.2 net) wells were drilled and brought on production in August, adding 452 boe/d to the third quarter average which largely offset natural declines; however, third party and non-operated downtime resulted in a 6% decrease in production quarter over quarter.
Capital expenditures (net of dispositions) totaled $6.1 million in the third quarter of 2021, compared to $2.5 million in the prior year comparative period. Third quarter 2021 capital spending was largely directed toward the drilling, completion and tie-in of two gross (1.2 net) wells in the Ferrier area which accounted for $4.2 million of the total. Also of note, the Company invested approximately $1.0 million in the expansion of a third-party processing plant in the North Ferrier area, in which Petrus holds a working interest.