Petrobank Reports Q1 2012 Financial Results and Operational Update
May 14 2012 - 5:45PM
Marketwired Canada
Petrobank Energy and Resources Ltd. (TSX:PBG) announces our 2012 first quarter
financial and operating results highlighted by funds flow from operations of
$1.69 per diluted share, an increase of eight percent from the first quarter of
2011.
Petrobank's results include the financial and operating results of PetroBakken
Energy Ltd. (TSX:PBN), 59% owned by Petrobank at March 31, 2012. PetroBakken
announced first quarter financial and operating results on May 2, 2012.
This news release includes forward-looking statements and information within the
meaning of applicable securities laws. Readers are advised to review
"Forward-Looking Information and Statements" at the conclusion of this news
release. Readers are also referred to "Non-GAAP Measures" at the end of this
news release for information regarding the presentation of the financial
information in this news release. A full copy of our 2012 First Quarter
Financial Statements and MD&A have been filed on our website at
www.petrobank.com and under our profile on SEDAR at www.sedar.com.
In this report, quarterly comparisons are first quarter 2012 compared to first
quarter 2011 unless otherwise noted. All financial figures are unaudited and in
Canadian dollars ($) unless otherwise noted.
HIGHLIGHTS
Q1 2012 Financial and Operating Highlights
-- Funds flow from operations increased eight percent from the first
quarter of 2011 to $181.3 million, or $1.69 per diluted share, primarily
as a result of PetroBakken's higher production and gross operating
netbacks.
-- PetroBakken's first quarter production, after dispositions, averaged
46,722 barrels of oil equivalent per day ("boepd") (86% light oil and
liquids weighted), a 12% increase over the first quarter of 2011.
-- Capital expenditures before dispositions totalled $224.3 million in the
first quarter with PetroBakken drilling 68 (47 net) wells.
-- Petrobank sold the May River property for gross proceeds of $225 million
and PetroBakken completed four transactions to sell non-core assets in
the first quarter for total gross proceeds of $624 million.
-- Both Petrobank and PetroBakken improved their financial liquidity
significantly with Petrobank having over $100 million of cash at March
31 and PetroBakken's currently available credit facility capacity rising
to more than $1.1 billion.
Petrobank Standalone Highlights
-- Kerrobert production averaged 193 barrels of upgraded THAI(R) oil per
day ("bopd") in Q1 2012 and continued to increase with April 2012
production averaging 278 bopd.
-- We sold the May River property, including the Conklin demonstration
project, on February 28, 2012 for cash proceeds of approximately $225
million, net of closing adjustments, and concurrently cancelled our
credit facility and withdrew our May River regulatory application.
-- We initiated purchases under our Normal Course Issuer Bid ("NCIB") and
have repurchased and cancelled approximately 2.2 million shares at an
average cost of $14.84 per share.
-- Through our Automatic Share Repurchase and PetroBakken Share Sale Plan,
we have sold 944,600 shares of PetroBakken for cash proceeds of
approximately $12.9 million.
-- We are revising our 2012 development plan to bring certain incremental
conventional cold heavy oil production on-stream. Additionally, we
intend to place our horizontal wells at Dawson on conventional cold
production in order to pre-condition the reservoir prior to initiation
of our THAI(R) project.
OPERATIONAL UPDATE AND REVISED 2012 DEVELOPMENT PLAN
Kerrobert THAI(R) Project
Petrobank is pleased to report that THAI(R) production continues to increase.
Production in April 2012 averaged 278 bopd compared to 264 bopd in March and 193
bopd in the first quarter of 2012. These production volumes represent actual
sale volumes for each period reported. Our operating philosophy remains
unchanged with a focus on gradually increasing production, reducing pump and
surface downtime and reducing per-barrel operating costs.
We plan to drill a water disposal well near our Kerrobert Project this summer
which will significantly reduce water disposal costs.
Dawson THAI(R) Demonstration Project
Petrobank deferred completion of the Dawson Demonstration Project in late 2011
to save on costs associated with winter start-up of a THAI(R) project. Since
that time, we have continued to review the Dawson reservoir and project plans.
Based on this analysis, we have determined that the Dawson reservoir would
benefit from being pre-conditioned for THAI(R) operations by producing
conventional cold heavy oil from our current horizontal production wells. We
expect to begin the two-well THAI(R) demonstration project in 2013 and the full
field THAI(R) development application is expected to be filed after the THAI(R)
demonstration project is on production.
Saskatchewan Conventional Cold Heavy Oil Production
Petrobank has identified multiple opportunities to utilize some of the existing
wells on our Saskatchewan lands for conventional cold heavy oil production. Some
of these wells offset our Kerrobert THAI(R) project and others are on our Plover
and Luseland properties. While Petrobank's primary focus is THAI(R) production,
we will take advantage of existing opportunities on our lands to increase
production. Success with these completions and reactivations may lead to
additional conventional drilling opportunities.
2012 Capital Plan and Production
Petrobank forecasts that our 2012 development capital will remain unchanged at
approximately $34 million. Capital in our original plan which was allocated to
May River and completing the Dawson Demonstration Project has been reallocated
to reduce operating costs, add conventional cold heavy oil production and
pre-condition the reservoir for our Dawson THAI(R) project.
NORMAL COURSE ISSUER BID AND PETROBAKKEN SHARE SALE PLAN
In March, we repurchased 1,246,000 common shares under our NCIB at an average
cost of $16.05 per share. In April, we entered into an Automatic Share
Repurchase and PetroBakken Share Sale Plan (the "Plan") pursuant to which our
designated broker has been instructed to automatically sell one PetroBakken
share for each Petrobank share purchased under the Plan, subject to certain
trading parameters set forth in the Plan and to daily and aggregate trading
limits imposed by the rules and policies of the Toronto Stock Exchange. The
broker may repurchase and sell up to 6,027,401 Petrobank shares and PetroBakken
shares, respectively. The Plan will cease on the earlier of the termination of
the Plan by Petrobank, the purchase of the maximum number of shares under the
NCIB or the expiry of the NCIB on September 13, 2012. Under the Plan, the
broker has repurchased 944,600 Petrobank shares and sold 944,600 PetroBakken
shares for net proceeds to Petrobank of approximately $380,000. Since January,
2012, Petrobank has also received approximately 1.8 million PetroBakken shares
under PetroBakken's dividend reinvestment plan ("DRIP"), including approximately
1.3 million shares for the March and April 2012 dividends.
PETROBANK'S LIQUIDITY AND CAPITAL RESOURCES
Petrobank and PetroBakken manage their capital structure independently, 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 March 31, 2012, on a standalone basis independent of
PetroBakken, Petrobank's HBU and Corporate operating segment had cash and cash
equivalents of $116.8 million and a net working capital surplus (including cash)
of $103.9 million.
Based on Petrobank's current ownership and PetroBakken's current annual dividend
of $0.96 per PetroBakken share, Petrobank expects to receive approximately $106
million of dividends annually from PetroBakken, paid monthly. PetroBakken
instituted a DRIP in early 2012, which allows shareholders to reinvest monthly
cash dividends in new shares at a five percent discount to the then current
market price. Due to Petrobank's significant positive working capital balance,
we elected 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 our 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.
SUMMARY OF FINANCIAL AND OPERATING RESULTS
The following table provides a summary of Petrobank's financial and operating
results for the three months ending March 31, 2012 and 2011. Unaudited condensed
interim 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.
Summary of Results
Three months ended March 31, 2012 2011 % Change
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Financial
($000s, except where noted)
Oil and natural gas sales 330,361 281,297 17
Funds flow from operations (1) 181,290 168,384 8
Per share - basic ($) 1.70 1.58 8
- diluted ($) 1.69 1.57 8
Adjusted net income (loss) attributable
to Petrobank shareholders (1) 82,307 (21) -
Per share - basic ($) 0.77 0.00 -
- diluted ($) 0.76 0.00 -
Capital expenditures (1)
PetroBakken 206,421 307,481 (33)
Heavy Oil Business Unit ("HBU") 17,878 54,255 (67)
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Total capital expenditures (1) 224,299 361,736 (38)
Total assets 6,363,826 6,538,606 (3)
Common shares outstanding, end of period
(000s)
Basic 105,667 106,257 (1)
Diluted (2) 109,987 109,953 -
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Operations
PetroBakken operating netback ($/boe)
(1) (3)
Oil, NGL and natural gas revenue (4) 77.36 74.46 4
Royalties 11.92 11.84 1
Production expenses 12.61 10.20 24
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Operating netback (1) (3) (5) 52.83 52.42 1
Average daily production (3)
PetroBakken - oil and NGL (bbls) 40,336 36,140 12
PetroBakken - natural gas (Mcf) 38,320 32,534 18
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Total conventional (boe) (3)(6) 46,722 41,562 12
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(1) Non-GAAP measure. See "Non-GAAP Measures" section.
(2) Consists of common shares, stock options, directors deferred common shares,
deferred common shares, and incentive shares as at the period end date.
(3) Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe").
(4) Net of transportation expenses.
(5) Excludes hedging activities.
(6) HBU heavy oil volumes are excluded from average daily production as HBU
operations are considered to be in the exploration and evaluation phase and
accordingly are capitalized.
INVESTOR CONFERENCE CALL
Management of Petrobank will be holding a conference call for investors,
financial analysts, media and any interested persons on Tuesday, May 15, 2012 at
9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss Petrobank's first
quarter financial and operating results. The investor conference call details
are as follows:
Live call dial-in number(s): 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/051512/index.php and is also
available on our website at:
http://www.petrobank.com/investors/presentations-webcasts.
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
and 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, adding back any losses or deducting any gains on settlement of
convertible debentures, 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.
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. Capital expenditures represent expenditures on property, plant
and equipment, exploration and evaluation expenditures and other expenditures.
Funds flow from operations, funds flow per share, adjusted net income, adjusted
net income per share, operating netbacks, 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: Certain information provided in this press release
constitutes forward-looking statements. Specifically, this press release
contains forward-looking statements relating to financial results, results from
operations, the timing of certain projects and anticipated sources of available
financing. Forward-looking statements are necessarily based on a number of
assumptions and judgments, including but not limited to, assumptions relating to
the outlook for commodity and capital markets, the success of future resource
evaluation and development activities, the successful application of our
technology, the performance of producing wells and reservoirs, well development
and operating performance, general economic conditions, weather and the
regulatory and legal environment. 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. You can
find a discussion of those risks and uncertainties in our Canadian securities
filings. Such factors include, but are not limited to: general economic, market
and business conditions; weather conditions and access to our properties;
fluctuations in oil prices; the results of exploration and development drilling,
recompletions and related activities; timing and rig availability; outcome of
exploration contract negotiations; fluctuation in foreign currency exchange
rates; the uncertainty of reserve estimates; changes in environmental and other
regulations; uncertainties associated with the regulatory review and approval
process in respect to our projects; risks associated with the application of
early stage technology; risks associated with oil and gas operations; and other
factors, many of which are beyond the control of the Company. 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 forecasted. Except as may
be required by applicable securities laws, Petrobank assumes no obligation to
publicly update or revise any forward-looking statements made herein 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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