Petrobank Energy and Resources Ltd. ("Petrobank" or the "Company") (TSX:PBG) is
pleased to announce 2011 fourth quarter and year-end financial and operating
results.
Petrobank's results include the financial and operating results of PetroBakken
Energy Ltd. ("PetroBakken") (TSX:PBN), 59% owned by Petrobank at December 31,
2011. PetroBakken announced fourth quarter and 2011 year-end financial and
operating results on March 7, 2012.
The results of Petrominerales Ltd. ("Petrominerales") (TSX:PMG), previously
majority owned by Petrobank, have been separately disclosed as discontinued
operations up until December 31, 2010, the date this business unit was spun off
to Petrobank shareholders.
All references to $ are Canadian dollars unless otherwise noted.
FINANCIAL AND OPERATING HIGHLIGHTS
Petrobank Corporate and Heavy Oil Business Unit 2011 and Year End Highlights
-- Funds flow from continuing operations increased 8% to $690.5 million in
2011, primarily as a result of PetroBakken's higher operating netbacks.
On a per basic and diluted share basis, funds flow from operations
increased 7% and 8%, respectively.
-- Adjusted net income from continuing operations increased to $64.9
million in 2011 compared to $4.1 million in 2010. The increase is driven
mainly from PetroBakken's higher operating income partially offset by a
deferred tax adjustment at Petrobank.
-- Adjusted net income attributable to Petrobank shareholders totaled $64.9
million in 2011 compared to $2,143.4 million in 2010. The decrease is
due mainly to the recognition of a non-cash $1,919.5 million gain on
distribution of Petrominerales recorded in 2010.
-- The Kerrobert expansion project was completed at the end of the third
quarter and full field operations were initiated.
-- Kerrobert is in the early stages of THAI(R) production with increasing
temperatures in the reservoir, increasing production and upgraded oil
being produced.
-- In early 2011, we acquired seven sections of land in Saskatchewan that
are being evaluated for future THAI(R) projects.
-- Our 2012 capital budget of $35 million will be focused on Kerrobert
operations, Dawson, and evaluation of existing lands and 50% of our
capital plan is discretional.
-- We completed the drilling of the Dawson demonstration project well pairs
and plan to complete the wells and construct the surface facilities
later in 2012.
-- We signed a five year collaboration agreement with Pemex Exploracion y
Produccion as the first step to licensing our THAI(R) technology in
Mexico.
-- We elected to participate in PetroBakken's dividend reinvestment plan
starting with the January 2012 dividend paid in February 2012.
-- We enhanced our leadership team by appointing three new executives: Mr.
Chad Magus as Controller, Mr. Dwight Mervold as Vice President
Production and Operations, and, in January 2012, Mr. Robert Richardson
as Vice President Exploitation.
PetroBakken Fourth Quarter and Year End Highlights
-- December 2011 production averaged 50,250 barrels of oil equivalent per
day ("boepd"), exceeding exit production guidance estimates and setting
a new corporate benchmark. This is an 18% increase over December 2010.
-- Fourth quarter production was 48,007 boepd (87% light oil and liquids
weighted), a 23% increase over the third quarter of 2011.
-- Operating netback for the fourth quarter was $59.21/boe, an 18% increase
over the third quarter of 2011.
-- Record fourth quarter funds flow from operations of $231 million ($1.24
per basic share), a 52% increase over the third quarter of 2011.
-- Proved plus probable ("2P") reserves increased by 19% to 203.5 million
barrels of oil equivalent ("MMboe") at December 31, 2011, replacing 2011
production by 315%.
-- Net capital expenditures totaled $909 million in 2011, with 88% of the
program invested in drilling and completions. 293 (205 net) wells were
drilled in 2011 with a 99% success rate.
-- In late 2011, and early 2012, PetroBakken implemented a number of
initiatives which further improved their liquidity, with available
credit capacity rising to more than $1.1 billion following the
completion of a non-core Bakken asset disposition in mid-March.
Subsequent Events
Petrobank Corporate and Heavy Oil Business Unit
-- On February 28, 2012, Petrobank sold the May River property, including
the Conklin demonstration project, for cash proceeds of approximately
$225 million, net of closing adjustments, and concurrently cancelled our
credit facility and withdrew our May River regulatory application.
PetroBakken
-- On January 30, 2012, PetroBakken closed a private placement of Senior
Unsecured Notes (the "Notes") with a principal amount of US$900 million.
The Notes bear interest at a rate of 8.625% per annum and mature
February 1, 2020. In conjunction with the Notes issuance, on January 31,
2012, PetroBakken exercised the accordion feature on its credit
facility, which increased the borrowing limit by $150 million to $1.5
billion.
-- On January 31, 2012, in conjunction with the Notes issuance, PetroBakken
completed the repurchase of US$450 million of principal amount on the
Convertible Debentures at a price of US$99,000 per US$100,000 of
principal amount.
-- On February 16, 2012, PetroBakken announced the disposition of non-core
southeast Saskatchewan assets for gross proceeds of $427.0 million,
subject to closing adjustments.
-- On February 24, 2012, PetroBakken closed the disposition of its non-core
2.2% interest in the Weyburn unit for gross proceeds of $105.0 million.
-- PetroBakken's 2012 capital plan was updated as a result of two asset
dispositions and plan to use a portion of the sales proceeds to increase
the capital program by $175 million. The majority of the additional
capital spending will be directed toward the Cardium play and, as a
result of the increased capital expenditures PetroBakken now expects
2012 exit production rates of between 52,000 boepd and 56,000 boepd.
SUMMARY OF FINANCIAL AND OPERATING RESULTS
The following table provides a summary of Petrobank's financial and operating
results for the three and twelve month periods ended December 31, 2011 and 2010.
Consolidated financial statements with Management's Discussion and Analysis
("MD&A") will be available on the Company's website at www.petrobank.com and on
the SEDAR website at www.sedar.com.
Three months ended December 31,
2011 2010 % Change
----------------------------------------------------------------------------
Financial (1)
($000s, except where noted)
Oil and natural gas sales from
continuing operations 366,881 258,359 42
Funds flow from continuing
operations (2) 226,273 155,344 46
Per share - basic ($) 2.13 1.46 46
- diluted ($) 2.10 1.46 44
Adjusted net income from continuing
operations (2) 26,712 17,543 52
Per share - basic ($) 0.25 0.17 47
- diluted ($) 0.25 0.16 56
Adjusted net income attributable to
Petrobank shareholders (2) (3) 26,712 1,974,118 (99)
Per share - basic ($) 0.25 18.61 (99)
- diluted ($) 0.25 18.55 (99)
Capital expenditures (4)
PetroBakken 274,815 262,758 5
Heavy Oil Business Unit ("HBU") 28,235 37,521 (25)
----------------------------------------------------------------------------
Total capital expenditures from
continuing operations 303,050 300,279 1
Total assets 6,917,716 6,265,455 10
Common shares outstanding, end of
period (000s)
Basic 106,400 106,236 -
Diluted (5) 111,206 110,046 1
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----------------------------------------------------------------------------
Operations
PetroBakken operating netback
($/boe) (2) (6)
Crude oil and NGL sales price
($/bbl) (7) 92.13 75.19 23
Natural gas sales price ($/Mcf) (7) 3.44 3.96 (13)
Oil equivalent sales price (7) 82.69 67.00 23
Royalties 12.51 9.84 27
Production expenses 10.97 8.97 22
----------------------------------------------------------------------------
Operating netback (2) (6) (8) 59.21 48.19 23
Average daily production (6)
PetroBakken - oil and NGL (bbls) 41,660 34,754 20
PetroBakken - natural gas (Mcf) 38,083 39,474 (4)
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Total conventional (boe) (6)(9) 48,007 41,333 16
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Years ended December 31,
2011 2010 % Change
----------------------------------------------------------------------------
Financial (1)
($000s, except where noted)
Oil and natural gas sales from
continuing operations 1,195,476 1,008,556 19
Funds flow from continuing
operations (2) 690,549 636,754 8
Per share - basic ($) 6.50 6.10 7
- diluted ($) 6.44 5.96 8
Adjusted net income from continuing
operations (2) 64,867 4,087 1,487
Per share - basic ($) 0.61 0.04 1,425
- diluted ($) 0.59 0.04 1,375
Adjusted net income attributable to
Petrobank shareholders (2) (3) 64,867 2,143,394 (97)
Per share - basic ($) 0.61 20.53 (97)
- diluted ($) 0.59 20.06 (97)
Capital expenditures (4)
PetroBakken 967,167 811,871 19
Heavy Oil Business Unit ("HBU") 168,903 121,492 39
----------------------------------------------------------------------------
Total capital expenditures from
continuing operations 1,136,070 933,363 22
Total assets 6,917,716 6,265,455 10
Common shares outstanding, end of
period (000s)
Basic 106,400 106,236 -
Diluted (5) 111,206 110,046 1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
PetroBakken operating netback
($/boe) (2) (6)
Crude oil and NGL sales price
($/bbl) (7) 88.65 72.77 22
Natural gas sales price ($/Mcf) (7) 3.92 4.22 (7)
Oil equivalent sales price (7) 79.38 65.28 22
Royalties 12.41 9.34 33
Production expenses 12.21 8.18 49
----------------------------------------------------------------------------
Operating netback (2) (6) (8) 54.76 47.76 15
Average daily production (6)
PetroBakken - oil and NGL (bbls) 35,156 35,109 -
PetroBakken - natural gas (Mcf) 35,052 39,473 (11)
----------------------------------------------------------------------------
Total conventional (boe) (6)(9) 40,998 41,688 (2)
----------------------------------------------------------------------------
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(1) Petrominerales Ltd. ("Petrominerales") has been presented as discontinued
operations in the comparative period as this business unit was distributed to
Petrobank shareholders at December 31, 2010.
(2) Non-GAAP measure. See "Non-GAAP Measures".
(3) Net income attributable to Petrobank shareholders for the three months and
year ended December 31, 2010 includes the operating results of Petrominerales.
(4) Includes expenditures on property, plant and equipment, exploration and
evaluation and other intangible assets.
(5) Consists of common shares, stock options, directors deferred common shares,
deferred common shares, and incentive shares as at the period end date.
(6) Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe").
(7) Net of transportation expenses.
(8) Excludes hedging activities.
(9) Heavy Oil Business Unit bitumen and heavy oil volumes are excluded from
average daily production as Heavy Oil Business Unit operations are considered to
be in the exploration and evaluation phase and accordingly are capitalized.
PETROBANK'S LIQUIDITY AND CAPITAL RESOURCES
Petrobank and PetroBakken manage their capital structure independently and
generate their own cash flows, and have the ability to fund their operations
through the issuance of secured and unsecured debt as well as equity financing.
Petrobank's capital resources are focused on funding corporate and Heavy Oil
Business Unit expenditures. At December 31, 2011, on a standalone basis
independent of PetroBakken, Petrobank's HBU and Corporate operating segment had
bank debt of $74.4 million and a working capital deficit of $9.1 million.
As previously disclosed, Petrobank received cash proceeds of approximately $225
million, net of closing adjustments, on February 28, 2012 from the sale of our
May River property. Proceeds from this transaction have been used to repay
outstanding bank debt and results in Petrobank having a positive cash and
working capital balance of approximately $130 million. We cancelled our credit
facility concurrent with the closing of the sale of our May River property due
to our cash availability and to save on standby fees.
Based on Petrobank's current ownership and PetroBakken's current annual dividend
of $0.96 per PetroBakken share, Petrobank expects to receive $105 million of
dividends annually from PetroBakken, paid monthly. PetroBakken has instituted a
dividend reinvestment plan ("DRIP") in 2012, which allows shareholders to
reinvest monthly cash dividends in new shares at a five percent discount to the
then current market price. Petrobank has received two monthly dividends
totalling approximately $8.8 million in cash and approximately 588,000
PetroBakken common shares from the DRIP. Due to Petrobank's significant positive
working capital balance, we are electing to participate at a 100% level in
PetroBakken's DRIP starting with the March dividend. We believe that receiving
additional shares in PetroBakken is an attractive investment at this time.
Petrobank may change its participation level in the future.
Petrobank currently expects to fund our working capital requirements and HBU
capital expenditure program with available cash and cash from operations.
INVESTOR CONFERENCE CALL
Management of Petrobank will be holding a conference call for investors,
financial analysts, media and any interested persons on Thursday, March 15, 2012
at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss Petrobank's
fourth quarter financial and operating results. The investor conference call
details are as follows:
Live call dial-in numbers: 416-695-6616 / 800-952-6845
Replay dial-in numbers: 905-694-9451 / 800-408-3053
Replay pass code: 4657181
The live audio webcast link is:
http://events.digitalmedia.telus.com/petrobank/031512/index.php.
Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas
exploration and production company with operations in western Canada. The
Company operates high-impact projects through two business units and a
technology subsidiary. Petrobank's 59% owned TSX-listed subsidiary, PetroBakken
Energy Ltd. (TSX:PBN), is an oil and gas exploration and production company
combining light oil Bakken and Cardium resource plays with conventional light
oil assets. Whitesands Insitu Partnership, a partnership between Petrobank and
its wholly-owned subsidiary Whitesands Insitu Inc., applies Petrobank's patented
THAI(R) heavy oil recovery process in the field. THAI(R) is an evolutionary
in-situ combustion technology for the recovery of bitumen and heavy oil. THAI(R)
and CAPRI(R) are registered trademarks of Archon Technologies Ltd., a
wholly-owned subsidiary of Petrobank Energy and Resources Ltd., for specialized
methods for recovery of oil from subterranean formations through in-situ
combustion techniques and methodologies with or without upgrading catalysts.
Used under license by Petrobank Energy and Resources Ltd.
Non-GAAP Measures. This press release contains financial terms that are not
considered measures under IFRS, such as funds flow from operations, adjusted net
income, funds flow per share, adjusted net income per share, operating netback,
working capital deficit and net capital expenditures. These measures are
commonly utilized in the oil and gas industry and are considered informative for
management and stakeholders. Specifically, funds flow from operations reflects
cash generated from operating activities before changes in non-cash working
capital. Adjusted net income is determined by adding back any losses or
deducting any gains on the derivative liabilities and adding back impairments.
Management considers funds flow from operations, funds flow per share, adjusted
net income and adjusted net income per share important as it helps evaluate
performance and demonstrate the ability to generate sufficient cash to fund
future growth opportunities and repay debt. Profitability relative to commodity
prices per unit of production is demonstrated by an operating netback. Operating
netback reflects revenues less royalties, transportation costs, and production
expenses divided by production for the period. Net capital expenditures
represent capital expenditures, including exploration and evaluation
expenditures, less proceeds from asset dispositions. Working capital deficit is
calculated as current liabilities less current assets, excluding assets and
liabilities held for sale and risk management assets and liabilities. The HBU
and Corporate operating segment's working capital position combined with cash or
bank debt are used to evaluate the segment's financial leverage. Funds flow from
operations, funds flow per share, adjusted net income, adjusted net income per
share, operating netbacks, working capital deficit and net capital expenditures
may not be comparable to those reported by other companies nor should they be
viewed as an alternative to cash flow from operations or other measures of
financial performance calculated in accordance with IFRS. Further information in
respect of these non-GAAP measures is set forth in our MD&A.
Forward-Looking Statements. In addition to historical information, the press
release contains forward-looking statements that are generally identifiable as
any statements that express, or involve discussions as to, expectations,
beliefs, plans, objectives, assumptions or future events of performance.
Specifically, this press release contains forward-looking statements relating to
future capital plans and projects, sources of funding and future PetroBakken
dividend rates. Forward-looking statements are necessarily based upon
assumptions and judgments with respect to the future including, but not limited
to, the outlook for commodity markets and capital markets, success of future
evaluation and development activities, the successful application of technology,
prevailing commodity prices, the performance of producing wells and reservoirs,
well development and operating performance, general economic and business
conditions, weather, and the regulatory and legal environment. These statements
are not historical facts and may be forward-looking and may involve estimates,
assumptions and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in such forward-looking statements. The
reader is cautioned that assumptions used in the preparation of such
information, although considered reasonable at the time of preparation, may
prove to be incorrect. Actual results achieved during the forecast period will
vary from the information provided herein as a result of numerous known and
unknown risks and uncertainties and other factors. Such factors include, but are
not limited to: general economic, market and business conditions; fluctuations
in oil and gas prices; the results of exploration and development of drilling
and related activities; costs and availability of services; fluctuation in
foreign currency exchange rates; the uncertainty of reserve estimates; changes
in environmental and other regulations; risks associated with oil and gas
operations; the ability to economically test, develop and utilize the Company's
patented technologies, the feasibility of the technologies; and other factors,
many of which are beyond the control of the Company. Accordingly, there is no
representation by Petrobank that actual results achieved during the forecast
period will be the same in whole or in part as those forecasts. Except to the
extent required by law, Petrobank assumes no obligation to publicly update or
revise any forward-looking statements made in this press release or otherwise,
whether as a result of new information, future events or otherwise.
Natural gas volumes have been converted to barrels of oil equivalent ("boe").
Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil
equivalent based on an energy equivalency conversion method primarily
attributable at the burner tip and does not represent a value equivalency at the
wellhead. Boes may be misleading, especially if used in isolation.
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