CALGARY, Alberta, Nov. 09, 2022 (GLOBE NEWSWIRE) — Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) today announces our financial and operating results for the three and nine months ended September 30, 2022. PPR’s unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2022 and related Management’s Discussion and Analysis (“MD&A”) for the same periods are available on our website at www.ppr.ca and filed on SEDAR.
MESSAGE TO SHAREHOLDERS
Tony Berthelet, President & Chief Executive Officer commented: “The team continued to execute on our reactivation and optimization plan in the 3rd Quarter. We are pleased with results from the first tranche of opportunities and will continue to execute on additional project inventory in the coming months. Our latest Princess Glauconite well highlights the success of that program in generating repeatable quick payout projects. We also continued work on debt refinancing initiatives during the quarter and will provide updates to shareholders of any material developments arising from these discussions. And finally, we look forward to an improved hedge position in 2023 providing improved realized netback.”
Q3 2022 HIGHLIGHTS
- Higher operating netback1: Operating netback for Q3 2022 was $29.96/boe before realized loss on derivatives, an increase from $23.72/boe in Q3 2021. PPR generated cash flow of $11.3 million at the field level, representing a 22% increase from $9.3 million in Q3 2021. After realized derivative losses, PPR recognized $4.9 million ($13.10/boe) of operating netback compared to $7.1 million ($17.93/boe) in Q3 2021.
- Production: Production during Q3 2022 averaged 4,096 boed (64% liquids), a 4% or 173 boed decrease from Q2 2022. The decrease was primarily driven by natural well decline offset by production additions from our optimization program and one Princess Glauconite well (1.0 net) coming on in mid-September.
- Optimization Update: Q3 saw the Company deliver positive results from the previously announced optimization program delivering approximately 875 MBOE of internally estimated proved plus probable reserves with an NPV(10)2 before tax of $11.7 million (based on Sproule’s September 30, 2022 price forecast) on cumulative spending of $2.5 million, resulting in an internal rate of return of approximately 343%. Thirty-four individual projects were executed, most of which were in the southern properties of Michichi and Provost. One of the many successes of this program was the doubling of net production from 160 boed to a peak of 329 boed in Provost.
- Net loss: Net loss totaled $1.5 million for Q3 2022, compared to a net loss of $9.9 million for Q3 2021. The decrease in net loss was primarily driven by higher revenues, net of royalties and realized losses and unrealized gains on derivatives.
- Net debt3: Net debt as of September 30, 2022 totaled $142.7 million, an increase of $15.3 million from June 30, 2022 primarily due to the impact of strengthening in the U.S. Dollar with respect to the Company’s U.S. dollar denominated debt, accrual of deferred interest of $6.9 million and a $10.3 decrease in working capital4 offset by a $1.9 million repayment. Net debt at September 30, 2022 includes US$49.4 million drawn on the Company’s senior secured revolving note facility, the borrowing base for which is currently US$53.8 million and is scheduled to be reset to $50.0 million on December 31, 2022.
- Refinancing: During the third quarter of 2022 the Company continued its debt refinancing initiatives, including discussions with its current lenders to defer the scheduled borrowing base reduction for the revolving note facility. The Company will announce any material developments arising from these initiatives as they become available. There can be no assurance as to the outcome of these efforts.
- Princess drilling update: During the third quarter, the Company completed drilling one (1.0 net) Glauconite formation well at Princess. The well was brought on production above the type curve in mid-September with an IP30 of 2725 boed. The well is continuing to improve as it cleans up with liquids comprising 78% of production.
- CFO departure: Jason Dranchuk, Vice President, Finance and Chief Financial Officer, will be leaving the Company effective November 14, 2022 for personal reasons. We want to thank Jason for his support and wish him all the best. We are actively recruiting for a replacement and will provide an update as details become available.
1 “Operating Netback” is a non-IFRS measure (see “Non-IFRS Measures” below),
2 Readers are cautioned that net present value (NPV) estimates should not be assumed to represent the fair market value. There is no assurance that the forecast prices and cost assumptions will be attained and the variances could be material.
3 “Net Debt” is a non-IFRS measure (see “Non-IFRS Measures” below).
4 “Working Capital” is a non-IFRS measure (see Non-IFRS Measures” below).
5 Average initial production over a 30-day period commencing September 16, 2022, during which the well produced an average of 181 bbl/d of heavy crude oil and 547 Mcf/d of conventional natural gas from the Glauconite formation. Readers are cautioned that short-term initial production rates are preliminary in nature and may not be indicative of stabilized on-stream production rates, future product types, long-term well or reservoir performance, or ultimate recovery. Actual future results will differ from those realized during an initial short-term production period, and the difference may be material.
OUTLOOK
Inflationary pressures and supply chain constraints have continued to persist throughout 2022. As a result, the fourth quarter will see Prairie Provident take a conservative approach and focus on the most efficient use of capital in the current environment, which Prairie Provident believes is through production optimization, operating cost reduction and inventory preparation for a continuation of the optimization program over the first half 2023. Prairie Provident intends to revisit its inventory of approximately 700 suspended wells, many of which were shut- in at commodity prices much lower than today or were not previously economic for optimization at lower commodity prices. This capital outlay will be spread across multiple short-cycle optimization and reactivation projects (estimated project cost range of $7,000 – $150,000). Prairie Provident intends to target projects with a capital efficiency1 of $6,000-$15,000/boe. With an estimated corporate decline rate2 of 16%, Prairie Provident will aim to keep production volumes reasonably steady with prudent capital spending. This should maximize the level of free cash flow3 that can be directed towards debt repayment. Further information will be provided as part of Prairie Provident’s detailed 2023 capital program and guidance when released. Additional details on Prairie Provident’s 2022 capital program and guidance can be found on the Company’s website at www.ppr.ca.
1 Capital efficiency is defined as project costs/incremental boed. Readers are cautioned that capital efficiency estimates should not be assumed to represent fair market value. There is no assurance that forecast cost or production assumptions will be attained and the variances could be material.
2 Estimated corporate decline rate is defined as the expected rate of decline in corporate production over the coming year.
3 Free cash flow is defined as the cash the Company generates after taking into consideration the cash outflows that support its financing, operations and capital expenditures.
FINANCIAL AND OPERATING SUMMARY | ||||||||||||||||
Three Months Ended | Nine months ended | |||||||||||||||
($000s except per unit amounts) | September 30, 2022 |
September 30, 2021 |
September 30, 2022 |
September 30, 2021 |
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Production Volumes | ||||||||||||||||
Light & medium crude oil (bbl/d) | 1,965 | 2,261 | 1,944 | 2,408 | ||||||||||||
Heavy crude oil (bbl/d) | 535 | 384 | 638 | 228 | ||||||||||||
Conventional natural gas (Mcf/d) | 8,857 | 8,986 | 8,869 | 8,783 | ||||||||||||
Natural gas liquids (bbl/d) | 120 | 131 | 120 | 133 | ||||||||||||
Total (boe/d) | 4,096 | 4,273 | 4,180 | 4,234 | ||||||||||||
% Liquids | 64% | 65% | 65% | 65% | ||||||||||||
Average Realized Prices | ||||||||||||||||
Light & medium crude oil ($/bbl) | 102.39 | 76.12 | 116.51 | 69.06 | ||||||||||||
Heavy crude oil ($/bbl) | 113.51 | 71.78 | 101.62 | 66.18 | ||||||||||||
Conventional natural gas ($/Mcf) | 4.27 | 3.69 | 5.66 | 3.32 | ||||||||||||
Natural gas liquids ($/bbl) | 77.99 | 59.16 | 83.00 | 51.70 | ||||||||||||
Total ($/boe) | 75.47 | 56.30 | 84.09 | 51.35 | ||||||||||||
Operating Netback ($/boe)1 | ||||||||||||||||
Realized price | 75.47 | 56.30 | 84.09 | 51.35 | ||||||||||||
Royalties | (14.15) | (6.89) | (13.23) | (5.41) | ||||||||||||
Operating costs | (31.36) | (25.69) | (28.99) | (25.15) | ||||||||||||
Operating netback | 29.96 | 23.72 | 41.87 | 20.79 | ||||||||||||
Realized losses on derivatives | (16.86) | (5.79) | (18.58) | (4.85) | ||||||||||||
Operating netback, after realized losses on derivatives | 13.10 | 17.93 | 23.29 | 15.94 |
1 Operating netback is a non-IFRS measure (see “Non-IFRS Measures” below).
Capital Structure | ||||
($000s) | September 30, 2022 | December 31, 2021 | ||
Working capital1 | (6.3 | ) | (0.4 | ) |
Borrowings outstanding (principal plus deferred interest) | (136.3 | ) | (124.0 | ) |
Total net debt2 | (142.7 | ) | (124.3 | ) |
Debt capacity3 | 6.0 | 14.3 | ||
Common shares outstanding (in millions) | 130.1 | 128.7 |
1 Working capital is a non-IFRS measure (see “Non-IFRS Measures” below) calculated as current assets less current portion of derivative instruments, minus accounts payable and accrued liabilities.
2 Net debt is a non-IFRS measure (see “Non-IFRS Measures” below), calculated by adding working capital and long-term debt.
3 Debt capacity reflects the undrawn capacity of the Company’s revolving facility, which had a borrowing base of USD$53.8 million at September 30, 2022 and December 31, 2021, converted at an exchange rate of $1.00 USD to $1.37 CAD on September 30, 2022 and $1.00 USD to $1.27 CAD on December 31, 2021. The borrowing base of the revolving facility is scheduled to be reset to USD $50.0 million on December 31, 2022.
ABOUT PRAIRIE PROVIDENT
Prairie Provident is a Calgary-based company engaged in the exploration and development of oil and natural gas properties in Alberta. The Company’s strategy is to optimize cash flow from our existing assets, grow a base waterflood business in Evi (Slave Point Formation) and Michichi (Banff Formation) providing stable low decline cash flow, and use those funds to improve the balance sheet and manage liabilities. The Princess area in Southern Alberta continues to provide short cycle returns through successful development of the Glauconite and Ellerslie Formations.