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, 2022.
Q1 2022 HIGHLIGHTS:
- Production up 25% – Production was up 25% quarter over quarter from 5,880 boe/d in the fourth quarter of 2021 to 7,379 boe/d in the first quarter of 2022 primarily due to the new wells drilled in late 2021. The acquisition (as discussed below) contributed only 90 boe/d to the quarterly average as it closed on March 14, 2022.
- Funds flow increased 137% – Generated funds flow of $16.6 million ($0.17 per share) for the first three months of 2022, 137% higher than funds flow of $7.0 million in the first quarter of 2021.
- Operating netback(1) up 75% – Operating netback increased by 75% to $33.78/boe in the first quarter of 2022 up from $19.22/boe in the first quarter of 2021.
- Commodity price improvement – Realized price per boe increased by 61% in the first quarter of 2022 compared to the first quarter of 2021; from $30.55/boe to $49.31/boe. The realized oil, natural gas and NGL prices increased by 65%, 56% and 63%, respectively.
- Net debt(2) reduction continues – Net debt was $50.0 million at March 31, 2022, a decrease of $66.6 million since the first quarter of 2021 ($116.6 million) and a decrease of $11.8 million from the fourth quarter of 2021 ($61.8 million). The Company will continue to strengthen its balance sheet by further reducing net debt and maintaining a net debt to funds flow ratio of under 1x.
- Reduced cash finance expense – Cash finance expense has decreased 33% since the first quarter of 2021, totaling $0.7 million during the first quarter of 2022 in comparison to $1.0 million during the first quarter of 2021 due to the elimination of the term loan in the third quarter of 2021 as well as a reduced first lien loan balance.
- Acquisition – Completed a strategic acquisition of Cardium assets located in the core Ferrier area, adding an estimated 40 gross drilling locations(3) and stable base production of 425 boe/d.
- Backstopped rights offering – Petrus announced a $20 million rights offering that was backstopped by the Company’s major shareholders. Subsequent to the first quarter of 2022, the rights offering closed and was oversubscribed by 84%.
DEBT RESTRUCTURING COMPLETE
Subsequent to March 31, 2022, the Company entered into agreements with new lenders, providing two new credit facilities totaling $55 million. Upon closing, which is expected in late May 2022, the new credit facilities, together with the $20 million rights offering, will be used to repay all amounts owing under Petrus’ existing revolving credit facility (“RCF”). The refinancing completes the Company’s debt restructuring. Replacing the existing RCF with the new credit facilities is an opportunity for Petrus to move forward with supportive lenders and benefit from a debt structure with greater liquidity and stability.
2022 OUTLOOK(4)
Market conditions have improved dramatically since the release of our initial 2022 budget in December 2021 with 2022 WTI strip prices increasing by approximately US$25/bbl and 2022 AECO strip prices increasing by over C$2.00/GJ. Despite these increases, the Company recognizes the inherent volatility of commodity prices and remains disciplined and flexible from an operational and financial perspective. The capital budget remains unchanged at this time but is constantly reviewed to incorporate the current outlook for pricing and costs and may be adjusted in the future to reflect changing business dynamics. The Company’s 2022 capital program will resume during the second quarter following break-up.
(1)Non-GAAP ratio. Refer to “Non-GAAP and Other Financial Measures”.
(2)Non-GAAP measure. Refer to “Non-GAAP and Other Financial Measures”.
(3)Refer to “Estimates of Drilling Locations”.
(4)Refer to “Advisories – Forward-Looking Statements”.
SELECTED FINANCIAL INFORMATION
OPERATIONS | Three months ended
Mar. 31, 2022 |
Three months ended
Mar. 31, 2021 |
Three months ended
Dec. 31, 2021 |
Three months ended Sept. 30, 2021 |
Three months ended
Jun. 30, 2021 |
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Average Production | ||||||||||
Natural gas (mcf/d) | 29,530 | 22,985 | 23,494 | 23,942 | 24,291 | |||||
Oil (bbl/d) | 1,250 | 923 | 1,002 | 937 | 1,214 | |||||
NGLs (bbl/d) | 1,207 | 1,158 | 962 | 1,010 | 1,046 | |||||
Total (boe/d) | 7,379 | 5,912 | 5,880 | 5,937 | 6,309 | |||||
Total (boe) | 664,010 | 532,099 | 540,924 | 546,227 | 574,084 | |||||
Light oil weighting | 17 | % | 15 | % | 20 | % | 21 | % | 19 | % |
Realized Prices | ||||||||||
Natural gas ($/mcf) | 5.20 | 3.33 | 5.45 | 4.04 | 3.28 | |||||
Oil ($/bbl) | 110.12 | 66.61 | 89.71 | 82.56 | 75.99 | |||||
NGLs ($/bbl) | 60.12 | 36.79 | 56.35 | 45.10 | 39.76 | |||||
Total realized price ($/boe) | 49.31 | 30.55 | 46.29 | 37.00 | 33.87 | |||||
Royalty income | 0.29 | 0.15 | 0.06 | 0.18 | 0.19 | |||||
Royalty expense | (6.89 | ) | (3.74 | ) | (6.34 | ) | (3.94 | ) | (4.87 | ) |
Net oil and natural gas revenue ($/boe) | 42.71 | 26.96 | 40.01 | 33.24 | 29.19 | |||||
Operating expense | (6.76 | ) | (6.12 | ) | (5.02 | ) | (5.57 | ) | (6.80 | ) |
Transportation expense | (2.17 | ) | (1.62 | ) | (1.87 | ) | (1.81 | ) | (1.84 | ) |
Operating netback(1) ($/boe) | 33.78 | 19.22 | 33.12 | 25.86 | 20.55 | |||||
Realized gain (loss) on derivatives ($/boe) | (6.98 | ) | (2.28 | ) | (9.52 | ) | (6.41 | ) | (3.21 | ) |
Other income | 0.07 | 0.04 | 0.04 | 0.02 | 1.77 | |||||
General & administrative expense | (0.82 | ) | (1.65 | ) | (2.24 | ) | (1.47 | ) | (2.41 | ) |
Cash finance expense | (1.04 | ) | (1.93 | ) | (1.58 | ) | (3.30 | ) | (2.52 | ) |
Decommissioning expenditures | (0.02 | ) | (0.27 | ) | (0.56 | ) | (0.27 | ) | (0.14 | ) |
Funds flow & corporate netback ($/boe)(2) | 24.99 | 13.13 | 19.26 | 14.43 | 14.04 | |||||
FINANCIAL (000s except $ per share) | Three months ended
Mar. 31, 2022 |
Three months ended
Mar. 31, 2021 |
Three months ended
Dec. 31, 2021 |
Three months ended
Sept. 30, 2021 |
Three months ended
Jun. 30, 2021 |
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Oil and natural gas revenue | 32,940 | 16,339 | 25,070 | 20,306 | 19,553 | |||||
Net income (loss) | 10,903 | (3,155 | ) | 114,633 | 7,343 | (4,265 | ) | |||
Net income (loss) per share | ||||||||||
Basic | 0.11 | (0.06 | ) | 1.19 | 0.04 | (0.09 | ) | |||
Fully diluted | 0.11 | (0.06 | ) | 1.11 | 0.03 | (0.09 | ) | |||
Funds flow | 16,601 | 6,993 | 10,418 | 7,874 | 8,070 | |||||
Funds flow per share | ||||||||||
Basic | 0.17 | 0.14 | 0.11 | 0.15 | 0.16 | |||||
Fully diluted | 0.16 | 0.14 | 0.10 | 0.14 | 0.16 | |||||
Capital expenditures | 5,064 | 7,917 | 12,235 | 6,101 | 663 | |||||
Acquisitions | 15,200 | — | — | — | — | |||||
Weighted average shares outstanding | ||||||||||
Basic | 99,189 | 49,469 | 96,660 | 54,167 | 49,513 | |||||
Fully diluted | 103,250 | 49,469 | 102,868 | 57,638 | 49,513 | |||||
As at period end | ||||||||||
Common shares outstanding | ||||||||||
Basic | 106,907 | 49,469 | 96,708 | 96,603 | 49,559 | |||||
Fully diluted | 113,883 | 49,469 | 103,889 | 100,074 | 49,559 | |||||
Total assets | 308,744 | 177,587 | 290,492 | 173,101 | 176,629 | |||||
Non-current liabilities | 46,702 | 42,028 | 42,172 | 40,200 | 40,838 | |||||
Net debt(1) | 50,044 | 116,634 | 61,779 | 60,071 | 110,346 |
(1)Non-GAAP ratio or non-GAAP measure. Refer to “Non-GAAP and Other 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. Refer to “Non-GAAP and Other Financial Measures”.
OPERATIONS UPDATE
First quarter average production by area was as follows:
For the three months ended March 31, 2022 | Ferrier | North Ferrier | Foothills | Central Alberta | Kakwa | Total |
Natural gas (mcf/d) | 18,311 | 3,405 | 3,036 | 4,588 | 195 | 29,535 |
Oil (bbl/d) | 718 | 150 | 87 | 264 | 36 | 1,255 |
NGLs (bbl/d) | 950 | 102 | 8 | 128 | 13 | 1,201 |
Total (boe/d) | 4,720 | 820 | 601 | 1,157 | 81 | 7,379 |
First quarter average production was 7,379 boe/d in 2022 compared to 5,912 boe/d in 2021. The increase in production is due to the capital activity in the second half of 2021 as well as certain wells in the Foothills area brought back on-stream due to improved pricing.
DEBT RESTRUCTURING
Subsequent to March 31, 2022, the Company entered into agreements with new lenders, providing two new credit facilities totaling $55 million. Upon closing, which is expected in late May 2022, the new credit facilities, together with the $20 million rights offering, will be used to repay all amounts owing under Petrus’ existing revolving credit facility (“RCF”). The refinancing completes the Company’s debt restructuring. Replacing the existing RCF with the new credit facilities is an opportunity for Petrus to move forward with supportive lenders and benefit from a debt structure with greater liquidity and stability.
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held at 240FOURTH (previously BP Centre) 240, 4th Ave SW Calgary, Alberta, on Thursday May 12, 2022, at 1:30 p.m. (Calgary time). 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.
For further information, please contact:
Ken Gray, P.Eng.
President and Chief Executive Officer
T: (403) 930-0889
E: kgray@petrusresources.com
NON-GAAP AND OTHER FINANCIAL MEASURES
This press release makes reference to the terms “operating netback”, “corporate netback” and “net debt”. These non-GAAP and other financial measures are not recognized measures under GAAP (IFRS) and do not have a standardized meaning prescribed by GAAP (IFRS). Accordingly, the Company’s use of these terms may not be comparable to similarly defined measures presented by other companies. These non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS as indicators of our performance. Management uses these non-GAAP and other financial measures for the reasons set forth below.
Operating Netback
Operating netback is a common non-GAAP financial measure used in the oil and natural gas industry which is a useful supplemental measure to evaluate the specific operating performance by product type at the oil and natural gas lease level. The most directly comparable GAAP measure to operating netback is oil and natural gas revenue. Operating netback is calculated as oil and natural gas revenue less royalty expenses, operating expenses and transportation expenses. It is presented on an absolute value and on a per unit (boe) basis. See below and under “Summary of Quarterly Results” for a reconciliation of operating netback to oil and natural gas revenue.
Corporate Netback
Corporate netback is a common non-GAAP financial measure used in the oil and natural gas industry which evaluates the Company’s profitability at the corporate level. Corporate netback is equal to funds flow, which is a directly comparable GAAP measure. Petrus analyzes these measures on an absolute value and on a per unit (boe) basis as a non-GAAP ratio. Management believes that funds flow and corporate netback provide information to assist a reader in understanding the Company’s profitability relative to current commodity prices. They are calculated as the operating netback less general and administrative expense, finance expense, decommissioning expenditures, plus other income and the net realized gain (loss) on financial derivatives.
Net Debt
Net debt is a non-GAAP financial measure and is calculated as current assets less the current portion of long term debt and accounts payable and accrued liabilities. Petrus uses net debt as a key indicator of its leverage and strength of its balance sheet.
ADVISORIES
Basis of Presentation
Financial data presented above has largely been derived from the Company’s audited financial statements, prepared in accordance with GAAP which require publicly accountable enterprises to prepare their financial statements using IFRS. Accounting policies adopted by the Company are set out in the notes to the consolidated financial statements as at and for the twelve months ended December 31, 2021. The reporting and the measurement currency is the Canadian dollar. All financial information is expressed in Canadian dollars, unless otherwise stated.