Prairie Provident Resources Inc. ("Prairie Provident", "PPR" or the
"Company") is pleased to announce our operating and financial
results for the three months and year ended December 31, 2020.
PPR’s audited consolidated financial statements and related
Management’s Discussion and Analysis (“MD&A”) for the three
months and year ended December 31, 2020 and annual information
form dated March 25, 2021 (“AIF”) are available on our website
at www.ppr.ca and filed on SEDAR.
In the spring of 2020, the world was struck by
the COVID-19 pandemic. Prices for crude oil and natural gas dropped
precipitously. In response, the Company took steps to maintain our
liquidity and financial position. Initiatives undertaken include
suspending the capital program; identifying immediate and targeted
operating cost reductions; reducing compensation across the
organization; and reaching agreements with our lenders to renew and
extend our credit facilities. Our decisive actions allowed us to
strengthen our liquidity, protect stakeholders' capital and deliver
positive financial results while positioning PPR to take advantage
of the rebound in commodity markets.
2020 HIGHLIGHTS
- Annual production:
Production for 2020 averaged 4,781 boe/d (67% liquids), which was
21% lower than 2019. The decrease was primarily driven by natural
declines and production shut-ins. In response to weak oil prices,
beginning Q2 2020, PPR permanently shut-in approximately 130 boe/d
of uneconomic oil production, suspended our capital program, and
deferred our workover activities to preserve reserves value and
liquidity. As oil prices have partially recovered, PPR resumed
select workover activities in the second half of 2020 that met our
economic thresholds. A number of projects remained uneconomic at
the end of 2020, which continued contributing to temporary
production loss. Q4 2020 production averaged 4,455 boe/d (66%
liquids), 22% lower than the same period in 2019.
- Adjusted funds flow
("AFF")1: Despite the
depressed commodity price environment through most of 2020, PPR
generated positive AFF of $12.3 million for 2020 ($0.07 per basic
and diluted share), excluding $1.9 million of decommissioning
settlements. AFF decreased by 45% from 2019 due to lower production
and lower operating netbacks, partially offset by increased
realized hedging gains and a reduction in G&A expenses and cash
interest expenses. AFF, excluding $0.4 million of decommissioning
settlements, was $2.3 million ($0.01 per basic and diluted share)
for Q4 2020, a 53% decrease from Q4 2019 due to the same factors
that contributed to the annual decrease.
- Reduced cost
structure: Annual and Q4 2020 operating expenses reduced
by $9.4 million and $2.0 million (20% and 17%) from the same
periods in 2019, while annual and Q4 2020 gross cash G&A
expenses decreased by $3.4 million and $1.2 million (37% and
56%).
- Operating
netback1: Operating
netback for 2020 was $24.7 million ($14.10/boe) after realized
gains on derivatives and $9.4 million ($5.39/boe) before the impact
of derivatives in 2020, a 37% and 77% decrease from 2019,
respectively. Our hedging program provided $15.2 million of
realized gains in 2020 which partially mitigated a 38% and 34% drop
in realized light & medium and heavy crude oil prices,
respectively, from 2019. Q4 2020 operating netback was
$5.8 million ($14.20/boe) after realized gains on derivatives and
$3.5 million ($8.56/boe) before the impact of derivatives, a 34%
and 62% decrease from Q4 2019, respectively, primarily due to lower
realized commodity prices.
- Net
loss: Net loss totaled $90.8 million in 2020, compared to
a net loss of $33.1 million in 2019, driven primarily by non-cash
items such as impairment loss, depletion and amortization,
partially offset by gains on the modification of debt related to
the refinancing transaction described below. For Q4 2020, net
income totaled $3.1 million driven by Adjusted Fund Flow1 of $2.3
million.
- Exited 2020 with positive
working capital1:
Working capital at year end 2020 was $5.3 million
(December 31, 2019 – $2.2 million), including cash and
restricted cash of $8.9 million. The increase in working capital
was primarily due to lower accounts payable and accrued liabilities
as a result of cost savings initiatives, the suspension of the
capital program and the deferral and reduction of interest payments
on bank debt.
- 2020 capital expenditures
fully funded: Our net capital expenditures1 in 2020 came
in at $3.8 million while Adjusted Funds Flow1 net of
decommissioning settlements totaled $10.5 million. During
2020, PPR directed capital resources primarily in the Michichi area
where the Company drilled, completed and brought on production one
gross (1.0 net) development well prior to the suspension of the
capital program in Q2 2020 as a result of global economic
conditions.
- Net
debt1: As at December 31, 2020, net
debt1 totaled $115.9 million which was up $1.5 million from
December 31, 2019 primarily due to deferred interest
accumulated to the balance.
- Credit facility
renewal: In December 2020, PPR entered into agreements
with our lender providing for the renewal of our credit facilities,
an issuance of US$11.4 million 6-year senior subordinated notes
with proceeds applied against our revolving note facility
("Revolving Facility"), amendments to its existing credit
agreements to reduce overall cash interest costs and reset
financial covenants, and an issuance of warrants to purchase up to
34,292,360 common shares (representing 19.9% of the total number of
shares then outstanding) at a price of $0.0192 per share. Overall,
the agreements extended the term of the Company’s debt instruments,
provided additional liquidity, and reduced annual cash interest
expenses.
- Financial flexibility
remains a priority: At year-end 2020, PPR had US$11.2
million (CAN$14.3 million equivalent2) of borrowing capacity under
the Revolving Facility. Borrowings under the Revolving Facility
totaled US$46.5 million at December 31, 2020, comprised of
US$30.5 million of CAD-denominated borrowing (equivalent to
CAN$41.1 million3) and US$16.0 million of USD-denominated borrowing
(equivalent to CAN$20.4 million of principal2). In addition,
US$47.0 million of senior subordinated notes (equivalent to
CAN$50.8 million of principal and CAN$9.0 million of deferred
interest2) were outstanding at December 31, 2020, for total
borrowings of US$93.4 million (CAN$121.3 million equivalent).
1 Non-IFRS measure – see below under “Non-IFRS
Measures”2 Based on an exchange rate of $1.0000 USD to $1.2732 CAD
on December 31, 2020.3 Converted using an average exchange
rate of $1.00 USD to $1.35 CAD.
FINANCIAL AND OPERATING
SUMMARY
|
Three Months Ended December 31, |
|
Year Ended December 31, |
($000s except per unit amounts) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Production Volumes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Light & medium crude oil
(bbl/d) |
2,639 |
|
|
|
3,436 |
|
|
|
2,881 |
|
|
|
3,716 |
|
|
Heavy crude oil (bbl/d) |
163 |
|
|
|
278 |
|
|
|
210 |
|
|
|
251 |
|
|
Conventional natural gas
(Mcf/d) |
9,080 |
|
|
|
11,169 |
|
|
|
9,328 |
|
|
|
11,635 |
|
|
Natural
gas liquids (bbl/d) |
140 |
|
|
|
149 |
|
|
|
136 |
|
|
|
166 |
|
|
Total (boe/d) |
4,455 |
|
|
|
5,725 |
|
|
|
4,781 |
|
|
|
6,071 |
|
|
% Liquids |
66 |
|
% |
|
67 |
|
% |
|
67 |
|
% |
|
68 |
|
% |
Average Realized Prices |
|
|
|
|
|
|
|
Light & medium crude oil
($/bbl) |
45.04 |
|
|
|
60.04 |
|
|
|
38.05 |
|
|
|
61.83 |
|
|
Heavy crude oil ($/bbl) |
40.91 |
|
|
|
54.70 |
|
|
|
35.26 |
|
|
|
53.33 |
|
|
Conventional natural gas
($/Mcf) |
2.71 |
|
|
|
2.21 |
|
|
|
2.25 |
|
|
|
1.72 |
|
|
Natural
gas liquids ($/bbl) |
30.98 |
|
|
|
31.08 |
|
|
|
24.59 |
|
|
|
30.48 |
|
|
Total ($/boe) |
34.67 |
|
|
|
43.81 |
|
|
|
29.56 |
|
|
|
44.18 |
|
|
Operating Netback ($/boe)1 |
|
|
|
|
|
|
|
Realized price |
34.67 |
|
|
|
43.81 |
|
|
|
29.56 |
|
|
|
44.18 |
|
|
Royalties |
(3.18 |
) |
|
|
(4.49 |
) |
|
|
(2.87 |
) |
|
|
(4.55 |
) |
|
Operating costs |
(22.93 |
) |
|
|
(21.62 |
) |
|
|
(21.30 |
) |
|
|
(21.04 |
) |
|
Operating netback |
8.56 |
|
|
|
17.70 |
|
|
|
5.39 |
|
|
|
18.59 |
|
|
Realized gains (losses) on derivative instruments |
5.64 |
|
|
|
(0.85 |
) |
|
|
8.71 |
|
|
|
(0.98 |
) |
|
Operating netback, after realized gains (losses) on derivative
instruments |
14.20 |
|
|
|
16.85 |
|
|
|
14.10 |
|
|
|
17.61 |
|
|
Notes:
1 Operating netback is a Non-IFRS measure (see
“Non-IFRS Measures” below).
Capital Structure($ millions) |
As atDecember 31, 2020 |
|
|
As atDecember 31, 2019 |
|
|
Working capital1 |
5.3 |
|
|
2.2 |
|
|
Borrowings outstanding (principal plus deferred interest) |
(121.3 |
) |
|
(116.7 |
) |
|
Total net debt2 |
(115.9 |
) |
|
(114.5 |
) |
|
Debt capacity3 |
14.3 |
|
|
21.8 |
|
|
Common
shares outstanding (in millions)4 |
172.3 |
|
|
171.4 |
|
|
Notes:
1 Working capital (deficit) 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 (deficit) and long-term debt. 3 Debt capacity
reflects the undrawn capacity of the Company's revolving facility,
which had a borrowing base of USD$57.7 million at December 31,
2020 and USD$60.0 million at December 31, 2019, converted at
an exchange rate of $1.0000 USD to $1.2732 CAD on December 31,
2020 and $1.0000 USD to $1.3642 CAD on December 31, 2019.4
Subsequent to December 31, 2020, PPR cancelled 44,711,330 common
shares that were surrendered by a shareholder to the Company for
nominal consideration. As of the date of the press release, PPR had
128.0 million common shares outstanding.
|
Three Months Ended December
31, |
|
Year Ended December 31, |
|
Drilling Activity |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Gross wells |
— |
|
2.0 |
|
1.0 |
|
3.0 |
|
Net (working interest) wells |
— |
|
2.0 |
|
1.0 |
|
3.0 |
|
Success rate, net wells (%) |
N/A |
|
100 |
|
100 |
|
100 |
|
OUTLOOK
Subsequent to December 31, 2020, PPR cancelled
44,711,330 common shares, representing approximately 25.9% of the
total number of common shares previously outstanding, that were
surrendered by a shareholder to the Company for nominal
consideration.
PPR enters 2021 with optimism propelled by
additional liquidity, rebounding commodity prices and a lower cost
structure. Our 2021 business strategy focuses on maintaining
production and reserves while prudently investing to meet our
abandonment and reclamation obligations ("ARO"). As commodity
markets improve, PPR is positioned to upscale our capital program
providing torque to stakeholders' return.
- Forecast average 2021 production is
estimated at approximately 4,400 boe/d (65% liquids) through the
year and to achieve a target exit rate of approximately 4,370 boe/d
(67% liquids). Target average production contemplated is comprised
of approximately 2,480 bbl/d of light and medium crude oil, 270
bbl/d of heavy oil, 9,220 Mcf/d of conventional natural gas and 115
bbl/d of natural gas liquids.
- Our 2021 capital budget totals
$16.9 million, $11.0 million of which is dedicated to drill,
complete and tie-in of four wells at the Princess area and $2.4
million is allocated to capitalized G&A, land, seismic and
capital maintenance.
- The remaining $3.5 million of the
2021 capital budget is allocated to abandon and reclaim inactive
wells. Gross investment in ARO is expected to be approximately $6.5
million, $3.0 million of which is expected to be covered by grants
under the government-sponsored site rehabilitation program (SRP).
The scale of our 2021 ARO program is dependent on the ultimate
level of SRP funding approved by the regulators.
- Forecast 2021 operating expenses
are $34.4 million or $21.42/boe.
- Gross cash general and
administrative (“G&A”) expenses (before capitalized G&A and
stock-based compensation expense) for 2021 are forecast to be $7.0
million or $4.36/boe.
- The Company continues to
proactively hedge volumes in order to protect economics and
currently has approximately 59% of 2021 forecast oil production
hedged with an average swap and put option strike price of US$47.52
per bbl. To enhance upside participation, 75% of our oil hedges for
2021 are in three-way collars with an average cap of
US$61.56/bbl.
- PPR’s 2021 capital program is
expected to be funded from cash flows from operations and US$12.7
million of liquidity currently available under the Company's
revolving note facility.
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 grow
organically in combination with accretive acquisitions of
conventional oil prospects, which can be efficiently developed.
Prairie Provident's operations are primarily focused at the
Michichi and Princess areas in Southern Alberta targeting the
Banff, the Ellerslie and the Lithic Glauconite formations, along
with an established and proven waterflood project at our Evi area
in the Peace River Arch. Prairie Provident protects its balance
sheet through an active hedging program and manages risk by
allocating capital to opportunities offering maximum shareholder
returns.
For further information, please contact:
Prairie Provident Resources Inc. Tony van WinkoopPresident and
Chief Executive Officer Tel: (403) 292-8071 Email:
tvanwinkoop@ppr.ca
Forward-Looking Statements
This news release contains certain statements
("forward-looking statements") that constitute forward-looking
information within the meaning of applicable Canadian securities
laws. Forward-looking statements relate to future performance,
events or circumstances, are based upon internal assumptions,
plans, intentions, expectations and beliefs, and are subject to
risks and uncertainties that may cause actual results or events to
differ materially from those indicated or suggested
therein. All statements other than statements of
current or historical fact constitute forward-looking statements.
Forward-looking statements are typically, but not always,
identified by words such as “anticipate”, “believe”, “expect”,
“intend”, “plan”, “budget”, “forecast”, “target”, “estimate”,
“propose”, “potential”, “project”, “continue”, “may”, “will”,
“should” or similar words suggesting future outcomes or events or
statements regarding an outlook.
Without limiting the foregoing, this news
release contains forward-looking statements pertaining to: forecast
average annual production for 2021 and the target composition
thereof by product type; target exit production rate for 2021;
budgeted capital expenditures for 2021 and the allocation thereof;
anticipated capital projects in 2021, including drilling,
completion and facilities plans; anticipated ARO spending in 2021
and expected coverage under the government‐sponsored Site
Rehabilitation Program (SRP); forecast operating expenses and
G&A costs for 2021; the Company's ability to fund its capital
budget from cash flows and available liquidity under its revolving
note facility; continued borrowing capacity under the Company's
revolving note facility; and the Company's ability to adjust its
capital program in response to commodity price changes.
Forward-looking statements are based on a number
of material factors, expectations or assumptions of Prairie
Provident which have been used to develop such statements but which
may prove to be incorrect. Although the Company believes that the
expectations and assumptions reflected in such forward-looking
statements are reasonable, undue reliance should not be placed on
forward-looking statements, which are inherently uncertain and
depend upon the accuracy of such expectations and
assumptions. Prairie Provident can give no assurance
that the forward-looking statements contained herein will prove to
be correct or that the expectations and assumptions upon which they
are based will occur or be realized. Actual results or
events will differ, and the differences may be material and adverse
to the Company. In addition to other factors and assumptions which
may be identified herein, assumptions have been made regarding,
among other things: that Prairie Provident will continue to conduct
its operations in a manner consistent with past operations; results
from drilling and development activities, and their consistency
with past operations; the quality of the reservoirs in which
Prairie Provident operates and continued performance from existing
wells (including with respect to production profile, decline rate
and product type mix); the continued and timely development of
infrastructure in areas of new production; the accuracy of the
estimates of Prairie Provident's reserves volumes; future commodity
prices; future operating and other costs; future USD/CAD exchange
rates; future interest rates; continued availability of external
financing and cash flow to fund Prairie Provident's current and
future plans and expenditures, with external financing on
acceptable terms; the impact of competition; the general stability
of the economic and political environment in which Prairie
Provident operates; the general continuance of current industry
conditions; the timely receipt of any required regulatory
approvals; the ability of Prairie Provident to obtain qualified
staff, equipment and services in a timely and cost efficient
manner; drilling results; the ability of the operator of the
projects in which Prairie Provident has an interest in to operate
the field in a safe, efficient and effective manner; field
production rates and decline rates; the ability to replace and
expand oil and natural gas reserves through acquisition,
development and exploration; the timing and cost of pipeline,
storage and facility construction and expansion and the ability of
Prairie Provident to secure adequate product transportation; the
regulatory framework regarding royalties, taxes and environmental
matters in the jurisdictions in which Prairie Provident operates;
and the ability of Prairie Provident to successfully market its oil
and natural gas products.
The forward-looking statements included in this
news release are not guarantees of future performance or promises
of future outcomes, and should not be relied upon. Such statements,
including the assumptions made in respect thereof, involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements including, without
limitation: changes in realized commodity prices; changes in the
demand for or supply of Prairie Provident's products; the early
stage of development of some of the evaluated areas and zones; the
potential for variation in the quality of the geologic formations
targeted by Prairie Provident’s operations; unanticipated operating
results or production declines; changes in tax or environmental
laws, royalty rates or other regulatory matters; changes in
development plans of Prairie Provident or by third party operators;
increased debt levels or debt service requirements; inaccurate
estimation of Prairie Provident's oil and gas reserves volumes;
limited, unfavourable or a lack of access to capital markets;
increased costs; a lack of adequate insurance coverage; the impact
of competitors; and such other risks as may be detailed from
time-to-time in Prairie Provident's public disclosure documents
(including, without limitation, those risks identified in this news
release and the AIF).
The forward-looking statements contained in this
news release speak only as of the date of this news release, and
Prairie Provident assumes no obligation to publicly update or
revise them to reflect new events or circumstances, or otherwise,
except as may be required pursuant to applicable laws. All
forward-looking statements contained in this news release are
expressly qualified by this cautionary statement.
Barrels of Oil Equivalent
The oil and gas industry commonly expresses
production volumes and reserves on a “barrel of oil equivalent”
basis (“boe”) whereby natural gas volumes are converted at the
ratio of six thousand cubic feet to one barrel of oil. The
intention is to sum oil and natural gas measurement units into one
basis for improved analysis of results and comparisons with other
industry participants. A boe conversion ratio of six thousand cubic
feet to one barrel of oil is based on an energy equivalency
conversion method primarily applicable at the burner tip. It does
not represent a value equivalency at the wellhead nor at the plant
gate, which is where Prairie Provident sells its production
volumes. Boes may therefore be a misleading measure, particularly
if used in isolation. Given that the value ratio based on the
current price of crude oil as compared to natural gas is
significantly different from the energy equivalency ratio of 6:1,
utilizing a 6:1 conversion ratio may be misleading as an indication
of value.
Non-IFRS Measures
The Company uses certain terms in this news
release and within the MD&A that do not have a standardized or
prescribed meaning under International Financial Reporting
Standards (IFRS), and, accordingly these measurements may not be
comparable with the calculation of similar measurements used by
other companies. For a reconciliation of each non-IFRS measure to
its nearest IFRS measure, please refer to the “Non-IFRS Measures”
section in the MD&A. Non-IFRS measures are provided as
supplementary information by which readers may wish to consider the
Company's performance but should not be relied upon for comparative
or investment purposes. The non-IFRS measures used in this news
release are summarized as follows:
Working Capital – Working capital (deficit) is
calculated as current assets excluding the current portion of
derivative instruments, less accounts payable and accrued
liabilities. This measure is used to assist management and
investors in understanding liquidity at a specific point in time.
The current portion of derivatives instruments is excluded as
management intends to hold derivative contracts through to maturity
rather than realizing the value at a point in time through
liquidation. The current portion of decommissioning expenditures is
excluded as these costs are discretionary and warrant liabilities
are excluded as it is a non-monetary liability. Lease liabilities
have historically been excluded as they were not recorded on the
balance sheet until the adoption of IFRS 16 – Leases on January 1,
2019.
Net Debt – Net debt is defined as borrowings
under long-term debt plus working capital surplus. Net debt is
commonly used in the oil and gas industry for assessing the
liquidity of a company.
Operating Netback – Operating netback is a
non-IFRS measure commonly used in the oil and gas industry. This
measurement assists management and investors to evaluate the
specific operating performance at the oil and gas lease level.
Operating netbacks included in this news release were determined as
oil and gas revenues less royalties less operating
costs. Operating netback may be expressed in absolute
dollar terms or on a per unit basis. Per unit amounts
are determined by dividing the absolute value by gross working
interest production. Operating netback after gains or losses on
derivative instruments, adjusts the operating netback for only
realized gains and losses on derivative instruments.
Adjusted Funds Flow – Adjusted funds flow is
calculated based on cash flow from operating activities before
changes in non-cash working capital, transaction costs,
restructuring costs, other non-recurring items and before
decommissioning settlements. Management believes that such a
measure provides an insightful assessment of PPR’s operational
performance on a continuing basis by eliminating certain non-cash
charges and charges that are non-recurring or discretionary and
utilizes the measure to assess its ability to finance capital
expenditures and debt repayments. Adjusted funds flow as presented
is not intended to represent cash flow from operating activities,
net earnings or other measures of financial performance calculated
in accordance with IFRS. Adjusted funds flow per share
is calculated based on the weighted average number of common shares
outstanding consistent with the calculation of earnings per
share.
Net Capital Expenditures – Net capital
expenditures is a non-IFRS measure commonly used in the oil and gas
industry. The measurement assists management and investors to
measure PPR’s investment in the Company’s existing asset base. Net
capital expenditures is calculated by taking total capital
expenditures, which is the sum of property and equipment and
exploration and evaluation expenditures from the consolidated
statement of cash flows, plus capitalized stock-based compensation,
plus acquisitions from business combinations, which is the outflow
cash consideration paid to acquire oil and gas properties, less
asset dispositions (net of acquisitions), which is the cash
proceeds from the disposition of producing properties and
undeveloped lands.
Prairie Provident Resour... (TSX:PPR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Prairie Provident Resour... (TSX:PPR)
Historical Stock Chart
From Apr 2023 to Apr 2024