Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is
pleased to report financial and operating results as at and for the
three and twelve months ended December 31, 2019 and to provide 2019
year end reserves information as evaluated by Sproule Associates
Limited ("Sproule"). The Company's Management's Discussion and
Analysis ("MD&A") and audited consolidated financial statements
are available on SEDAR (the System for Electronic Document Analysis
and Retrieval) at www.sedar.com.
In 2019, the Company's primary objectives were
to generate funds flow in excess of capital expenditures to repay
debt and to maximize the profitability of its production by
increasing its light oil weighting. Petrus generated funds flow of
$33.6 million in 2019 and invested approximately half ($18.1
million) to drill 10 gross (3.1 net) Cardium light oil wells in
Ferrier. The Company exceeded its debt repayment target for the
year and used $15.5 million of its funds flow to reduce net
debt(1). Despite average annual production being 8% lower year over
year, funds flow was higher in 2019 due to increased light oil
weighting, lower costs and improved commodity pricing.
- Debt repayment -
Reduction of debt is the Company's first and foremost priority.
Since December 31, 2015 Petrus has repaid $103 million (45%) of net
debt(1). This includes a $55 million reduction of the Company's
second lien term loan ("Term Loan") which was $90 million in 2014
and currently has $35 million outstanding. The Company's revolving
credit facility ("RCF") and Term Loan are due in 2020 and therefore
have been reclassified to current liabilities in the December 31,
2019 consolidated financial statements. The RCF maturity date is
May 31, 2020 which was set prior to the Term Loan maturity of
October 8, 2020 due to the inter-creditor relationship between the
RCF and the Term Loan. The Company requires an extension of its
Term Loan before the syndicate of lenders will contemplate an
extension to the RCF. Management is currently in discussion with
the Term Loan lender and continues to focus on its disciplined debt
reduction strategy.
- Stronger natural gas
pricing - The average benchmark natural gas price in
Canada (AECO 5A monthly index) was $2.35/GJ in the fourth quarter,
a significant increase from the third quarter 2019 average price of
$0.87/GJ. In January 2020 the AECO 5A monthly index was $2.18/ GJ.
Petrus anticipates the impacts of TC Energy Corporation's
previously announced Temporary Service Protocol, continued
expansion of the NGTL system in 2020 and 2021 and current Alberta
natural gas storage levels will all continue to support Canadian
natural gas prices(2).
- Higher funds flow per
share - Fourth quarter 2019 production of 8,292 boe/d was
5% higher than the prior year and quarterly funds flow per share
was $0.19 in 2019, significantly higher (90%) than the $0.10
generated in the prior year.
- Free funds flow -
In 2019 Petrus generated funds flow of $33.6 million ($0.68 per
share), invested $18.1 million of capital to maintain production
and exceeded its debt reduction target of $1 to $2 million per
quarter; net debt(1) was reduced by $15.5 million. During the
fourth quarter of 2019, Petrus generated funds flow of $9.3
million, more than double the funds flow generated in the third
quarter.
- Increased light oil
weighting - Fourth quarter average production included
1,834 bbl/d of light oil, which was a 47% increase from the third
quarter. This was attributable to the new wells brought on
production during the fourth quarter.
- Increased light oil reserve
volumes - In 2019, the Company realized Finding
Development and Acquisition (“FD&A”) costs of $13.31 per boe
for PDP reserves. These finding costs were consistent with the best
in the Company’s history. In 2019, Petrus’ development program
generated PDP reserve volume additions of 1.3 mmboe which were
comprised of 45% light oil. The Company produced 3.0 mmboe during
2019 and ended the year with 11.7 mmboe of PDP reserve volume (34%
oil and liquids).
- Company best operating
costs - Total annual operating costs were 11% lower than
2018 at $4.25 per boe in 2019, which is the lowest in the Company's
history (a 68% decrease since 2012). This marks the fourth
consecutive year of operating cost reductions. The Company
continues to focus on optimizing its cost structure, particularly
in the Ferrier area, through facility ownership and control.
- Non-core asset
disposition - In December 2019, Petrus entered into an
agreement for the sale of its oil and natural gas interests in the
Foothills area of Alberta to an arm's length private company for
total consideration of $1.8 million (the "Disposition"). The
Disposition is expected to close in the first quarter of 2020,
subject to regulatory approvals. The Company expects it will reduce
Petrus’ undiscounted, uninflated decommissioning obligation by
approximately $7.5 million or 18%. The cash proceeds from the
Disposition will be used to reduce the borrowings under the
Company's credit facility(2).
2020 OutlookPetrus’ Board of
Directors has approved a first quarter 2020 capital budget of $9.0
million to drill 2 (2.0 net) Cardium wells in the Ferrier area.
First quarter funds flow combined with proceeds from the previously
announced non-core asset disposition are expected to total $9.5
million which will permit excess funds to be directed toward debt
repayment(2). Petrus is committed to maintaining its financial
flexibility and the Company will determine subsequent quarter
capital spending as the year progresses. For the coming year there
is significant optionality in the number, the commodity composition
and the location of drilling opportunities. Management anticipates
that the 2020 capital plan will be funded by funds flow, and will
continue to systematically reduce debt each quarter by
approximately $1 to $2 million. The objectives of the 2020 capital
plan are to reduce debt, maintain or grow production, grow funds
flow per share and increase the Company’s liquids weighting. Petrus
continues its efforts to divest additional non-core assets to
improve the balance sheet and also continues its discussions with
its lenders in order to extend the upcoming 2020 debt maturity
dates.
(1) Refer to "Non-GAAP Financial Measures".(2) Refer to
"Advisories - Forward-Looking Statements".(3) Refer to "Oil and Gas
Disclosures".
SELECTED FINANCIAL INFORMATION
OPERATIONS |
Twelve monthsendedDec. 31,
2019 |
Twelve monthsendedDec. 31,
2018 |
Three monthsendedDec. 31,
2019 |
Three monthsendedSept. 30,
2019 |
Three monthsendedJun. 30,
2019 |
Three monthsendedMar. 31,
2019 |
Average Production |
|
|
|
|
|
|
Natural gas (mcf/d) |
32,032 |
|
37,101 |
|
32,641 |
|
30,998 |
|
32,350 |
|
32,145 |
|
Oil (bbl/d) |
1,616 |
|
1,402 |
|
1,834 |
|
1,247 |
|
1,679 |
|
1,704 |
|
NGLs (bbl/d) |
1,351 |
|
1,433 |
|
1,018 |
|
1,372 |
|
1,576 |
|
1,444 |
|
Total (boe/d) |
8,306 |
|
9,019 |
|
8,292 |
|
7,785 |
|
8,647 |
|
8,505 |
|
Total (boe) |
3,031,659 |
|
3,292,828 |
|
762,874 |
|
716,220 |
|
786,819 |
|
765,488 |
|
Light oil weighting |
19 |
% |
16 |
% |
22 |
% |
16 |
% |
19 |
% |
20 |
% |
Realized Prices |
|
|
|
|
|
|
Natural gas ($/mcf) |
1.89 |
|
1.73 |
|
2.65 |
|
1.12 |
|
1.30 |
|
2.44 |
|
Oil ($/bbl) |
64.11 |
|
69.74 |
|
65.16 |
|
65.64 |
|
70.96 |
|
55.10 |
|
NGLs ($/bbl) |
22.13 |
|
40.50 |
|
20.62 |
|
11.49 |
|
19.91 |
|
36.02 |
|
Total realized price ($/boe) |
23.35 |
|
24.40 |
|
27.39 |
|
16.99 |
|
22.29 |
|
26.36 |
|
Royalty income |
0.20 |
|
0.12 |
|
0.13 |
|
0.48 |
|
0.15 |
|
0.06 |
|
Royalty expense |
(2.35 |
) |
(3.54 |
) |
(2.91 |
) |
(1.65 |
) |
(1.72 |
) |
(3.08 |
) |
Net oil and natural gas revenue ($/boe) |
21.20 |
|
20.98 |
|
24.61 |
|
15.82 |
|
20.72 |
|
23.34 |
|
Operating expense |
(4.25 |
) |
(4.75 |
) |
(4.47 |
) |
(4.44 |
) |
(4.33 |
) |
(3.76 |
) |
Transportation expense |
(1.26 |
) |
(1.15 |
) |
(1.30 |
) |
(1.25 |
) |
(1.22 |
) |
(1.27 |
) |
Operating netback(1) ($/boe) |
15.69 |
|
15.08 |
|
18.84 |
|
10.13 |
|
15.17 |
|
18.31 |
|
Realized gain (loss) on derivatives ($/boe) |
(0.44 |
) |
(0.90 |
) |
(1.86 |
) |
0.50 |
|
(1.02 |
) |
0.67 |
|
Other income |
0.03 |
|
0.13 |
|
— |
|
0.03 |
|
0.10 |
|
— |
|
General & administrative expense |
(1.20 |
) |
(1.57 |
) |
(1.91 |
) |
(1.08 |
) |
(0.67 |
) |
(1.15 |
) |
Cash finance expense |
(2.72 |
) |
(2.51 |
) |
(2.54 |
) |
(3.11 |
) |
(2.70 |
) |
(2.54 |
) |
Decommissioning expenditures |
(0.28 |
) |
(0.14 |
) |
(0.41 |
) |
(0.29 |
) |
(0.24 |
) |
(0.18 |
) |
Funds flow & corporate netback(1)(2)
($/boe) |
11.08 |
|
10.09 |
|
12.12 |
|
6.18 |
|
10.64 |
|
15.11 |
|
FINANCIAL (000s except $ per share) |
Twelve months endedDec. 31,
2019 |
Twelve months endedDec. 31,
2018 |
Three months endedDec. 31,
2019 |
Three months endedSept. 30,
2019 |
Three months endedJun. 30,
2019 |
Three months endedMar. 31,
2019 |
Oil and natural gas revenue |
71,398 |
|
80,716 |
|
20,998 |
|
12,517 |
|
17,652 |
20,231 |
|
Net income (loss) |
(42,176 |
) |
(3,284 |
) |
(3,332 |
) |
(29,569 |
) |
2,863 |
(12,138 |
) |
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
(0.85 |
) |
(0.07 |
) |
(0.06 |
) |
(0.60 |
) |
0.06 |
(0.25 |
) |
Fully diluted |
(0.85 |
) |
(0.07 |
) |
(0.06 |
) |
(0.60 |
) |
0.06 |
(0.25 |
) |
Funds flow |
33,625 |
|
33,184 |
|
9,260 |
|
4,427 |
|
8,366 |
11,573 |
|
Funds flow per share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
0.68 |
|
0.67 |
|
0.19 |
|
0.09 |
|
0.17 |
0.23 |
|
Fully diluted |
0.68 |
|
0.67 |
|
0.19 |
|
0.09 |
|
0.17 |
0.23 |
|
Capital expenditures |
18,073 |
|
24,098 |
|
4,351 |
|
2,734 |
|
2,505 |
8,483 |
|
Net dispositions |
651 |
|
448 |
|
— |
|
651 |
|
— |
— |
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
Basic |
49,472 |
|
49,492 |
|
49,469 |
|
49,469 |
|
49,469 |
49,483 |
|
Fully diluted |
49,472 |
|
49,492 |
|
49,469 |
|
49,469 |
|
49,469 |
49,483 |
|
As at year end |
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
Basic |
49,469 |
|
49,492 |
|
49,469 |
|
49,469 |
|
49,469 |
49,469 |
|
Fully diluted |
49,469 |
|
49,492 |
|
49,469 |
|
49,469 |
|
49,469 |
49,469 |
|
Total assets |
289,225 |
|
341,820 |
|
289,225 |
|
296,367 |
|
328,912 |
336,974 |
|
Non-current liabilities |
42,346 |
|
171,646 |
|
42,346 |
|
82,650 |
|
81,249 |
176,093 |
|
Net debt(1) |
123,744 |
|
139,214 |
|
123,744 |
|
128,553 |
|
130,619 |
136,382 |
|
(1)Refer to "Non-GAAP Financial
Measures".(2)Corporate netback is equal to funds flow which is a
directly comparable GAAP measure. Petrus analyzes these measures on
an absolute value and per unit basis.
OPERATIONS UPDATE |
|
Fourth quarter average production by area was as follows: |
For the three months ended December 31, 2019 |
Ferrier |
Foothills |
Central Alberta |
Total |
Natural gas (mcf/d) |
25,149 |
1,745 |
5,747 |
32,641 |
Oil (bbl/d) |
1,357 |
135 |
342 |
1,834 |
NGLs (bbl/d) |
852 |
8 |
158 |
1,018 |
Total (boe/d) |
6,401 |
433 |
1,458 |
8,292 |
Fourth quarter average production was 8,292
boe/d in 2019 compared to 7,785 boe/d in the third quarter of 2019.
During the second half of 2019 the Company drilled 7 gross (1.6
net) Cardium light oil wells. Average production from the 1.6 net
wells over the fourth quarter, net to Petrus, was approximately 560
bbl/d of oil and approximately 1,600 mcf/d of natural gas. The
Company's development plan is strategically balanced between
increasing its Cardium light oil weighting in the Ferrier area and
continuing to improve its balance sheet. In 2019, Petrus drilled 10
gross (3.1 net) Cardium light oil wells, increased its light oil
weighting 24% from the beginning of 2018 and reduced net debt(1)
$15.5 million. Since December 31, 2017 Petrus has repaid $24.3
million (16%) of net debt.
The average benchmark natural gas price in
Canada (AECO 5A monthly index) was $2.35/GJ in the fourth quarter,
a significant increase from the third quarter 2019 average price of
$0.87/GJ. Petrus anticipates the impacts of TC Energy Corporation's
previously announced Temporary Service Protocol, continued
expansion of the NGTL system in 2020 and 2021 and current Alberta
natural gas storage levels will all continue to support Canadian
natural gas prices(2).
Petrus’ Board of Directors has approved a first
quarter 2020 capital budget of $9.0 million to drill 2 (2.0 net)
Cardium light oil wells in the Ferrier area. First quarter funds
flow combined with proceeds from the previously announced non-core
asset disposition are expected to total $9.5 million which will
provide excess funds to be directed toward debt repayment.
Management anticipates that the 2020 capital plan will be funded by
funds flow, and will continue to systematically reduce debt each
quarter by approximately $1 to $2 million. The objectives of the
2020 capital plan are to reduce debt, maintain or grow production,
grow funds flow per share and increase the Company’s liquids
weighting(2).
Petrus believes it is unique in the junior
E&P company space, as few gas-weighted companies are able to
repay debt and grow production and funds flow all within funds from
operations. Over the past four years, Petrus has dramatically
strengthened its business in order to improve its sustainability as
well as mitigate commodity price risk. Operating costs have been
reduced by 68% since 2012 and management believes Petrus’ total
cash costs of $9.43/boe are consistently one of the lowest
amongst its peers. The Company intends to continue its disciplined
focus on balance sheet improvement and capital deployment in
2020(2).
CREDIT FACILITY UPDATEIn
November 2019, Petrus completed its semi-annual revolving credit
facility ("RCF") review where its $100 million facility was
reconfirmed. On December 31, 2019 Petrus reduced its borrowings
under the RCF by $2 million and expects to make another $2 million
repayment on March 31, 2020. The Company's RCF maturity date is May
31, 2020 which was set prior to the Company's term loan maturity
date of October 8, 2020 ("Term Loan"), due to the inter-creditor
relationship between the RCF and the Term Loan. The Company
requires an extension of its Term Loan before the syndicate of
lenders will contemplate an extension to the RCF. The borrowings
under the RCF and Term Loan are classified as current liabilities
in the December 31, 2019 consolidated financial statements which
has no impact on the debt covenants and the Company remains, and
expects to continue to be, in compliance with each of its
covenants. Management is actively engaged in discussions with its
lenders in order to extend the upcoming 2020 maturity dates. The
Company continues its efforts to divest certain non-core assets to
improve its balance sheet.
NON-CORE ASSET DISPOSITIONIn
December 2019, Petrus entered into an agreement for the sale of its
oil and natural gas interests in the Foothills area of Alberta to
an arm's length private company for total consideration of $1.8
million, subject to regulatory approvals and customary closing
conditions and adjustments (the “Disposition”). The Disposition has
an effective date of November 1, 2019 and is expected to close in
the first quarter of 2020. In the fourth quarter of 2019,
production in the Company’s Foothills area averaged approximately
433 boe/d (67% natural gas), which comprised 5% of Petrus’ total
production. The Foothills assets include facility interests and
35,127 net acres of undeveloped land. The Disposition is expected
to reduce the Company's indebtedness, operating expenses and future
abandonment liabilities. It is expected to reduce Petrus’
undiscounted, uninflated decommissioning obligation by $7.5 million
or 18%. The cash proceeds from the Disposition will be used to
reduce the borrowings under the Company's RCF.
(1)Refer to "Non-GAAP Financial
Measures".(2)Refer to "Advisories - Forward-Looking
Statements".
RESERVES
Petrus’ 2019 year end reserves were evaluated by
independent reserves evaluator, Sproule Associates Limited, in
accordance with the definitions, standards and procedures contained
in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”)
and National instrument 51-101 - Standards of Disclosure for Oil
and Gas Activities (“NI 51-101”) as of December 31, 2019 ("2019
Sproule Report"). Additional reserve information as required under
NI 51-101 will be included in our Annual Information Form for the
year ended December 31, 2019, which will be available under the
Company's profile on SEDAR (the System for Electronic Document
Analysis and Retrieval) at www.sedar.com.
Petrus has a reserves committee, comprised of
independent board members, that reviews the qualifications and
appointment of the independent reserves evaluator. The committee
also reviews the procedures for providing information to the
evaluators. All booked reserves are based upon annual evaluations
by the independent qualified reserve evaluator conducted in
accordance with the COGE Handbook and NI 51-101. The evaluations
are conducted using all available geological and engineering data.
The reserves committee has reviewed the reserves information and
approved the 2019 Sproule Report.
The following table provides a summary of the
Company’s before tax reserves as evaluated by Sproule:
As at December 31, 2019 |
|
|
Total Company Interest (1)(3) |
|
|
Reserve Category |
ConventionalNatural Gas(mmcf) |
Light andMediumCrude Oil(mbbl) |
NGL(mbbl) |
Total(mboe) |
NPV 0%(2)($000s) |
NPV 5%(2)($000s) |
NPV 10%(2)($000s) |
Proved Producing |
46,105 |
1,248 |
2,723 |
11,655 |
143,061 |
151,543 |
138,707 |
Proved Non-Producing |
18,202 |
5 |
91 |
3,129 |
15,255 |
11,428 |
9,032 |
Proved Undeveloped |
56,397 |
1,260 |
4,763 |
15,422 |
204,442 |
138,197 |
95,400 |
Total Proved |
120,703 |
2,513 |
7,576 |
30,207 |
362,758 |
301,168 |
243,140 |
Proved + Probable Producing |
59,232 |
1,671 |
3,414 |
14,957 |
212,786 |
194,341 |
167,735 |
Total Probable |
62,672 |
2,477 |
3,773 |
16,696 |
306,799 |
207,302 |
149,307 |
Total Proved Plus Probable |
183,376 |
4,990 |
11,350 |
46,902 |
669,557 |
508,470 |
392,446 |
(1)Tables may not add due to rounding.(2)NPV 0%,
NPV 5% and NPV 10% refer to the risked net present value of the
future net revenue of the Company's reserves, discounted by 0%, 5%
and 10%, respectively and is presented before tax and based on
Sproule's pricing assumptions.(3)Total company interest reserve
volumes presented above and in the remainder of this Annual Report
are presented as the Company's total working interest before the
deduction of royalties (but after including any royalty interests
of Petrus).
In 2019, Petrus’ development program generated
Proved Developed Producing ("PDP") reserve volume additions of 1.3
mmboe which were comprised of 45% light oil. The Company produced
3.0 mmboe during 2019 and ended the year with 11.7 mmboe of PDP
reserve volume (34% oil and liquids).
Petrus ended 2019 with $147.7 million, $243.1
million and $392.4 million of Proved Developed ("PD"), Total Proved
("TP"), and Proved plus Probable (“P+P”), respectively, reserve
value before-tax, discounted at 10%, based on the 2019 Sproule
Report. In 2019, the Company realized Finding and Development
(“FD&A”)(1)(2) costs of $13.31/boe for PDP reserves.
Based on the 2019 Sproule Report, the Company’s
PDP reserve value before-tax, discounted at 10% is $2.80 per share.
On the same basis, the P+P reserve value is $7.93 per share.
(1)Refer to "Oil and Gas Disclosures".(2)Certain
changes in FD&A and F&D produce non-meaningful figures as
discussed in "Oil and Gas Disclosures".While FD&A and F&D
costs, reserve life index, reserve replacement ratio and finding
and development costs are commonly used in the oil and nature gas
industry and have been prepared by management, these terms do not
have a standardized meaning and may not be comparable to similar
measures presented by other companies and, therefore, should not be
used to make such comparisons.
FUTURE DEVELOPMENT COSTFuture
Development Cost ("FDC") reflects Sproule's best estimate of what
it will cost to bring the P+P undeveloped reserves on production.
The following table provides a summary of the Company's FDC as set
forth in the 2019 Sproule Report:
Future Development Cost ($000s) |
|
|
|
Total Proved |
Total Proved + Probable |
2020 |
41,019 |
54,452 |
2021 |
72,106 |
135,558 |
2022 |
50,186 |
57,561 |
2023 |
5,782 |
15,147 |
Thereafter |
4,934 |
4,934 |
Total FDC, Undiscounted |
174,027 |
267,652 |
Total FDC, Discounted at 10% |
149,383 |
229,770 |
PERFORMANCE RATIOSThe following
table highlights annual performance ratios for the Company from
2015 to 2019:
|
December 31, 2019 |
December 31, 2018 |
December 31, 2017 |
December 31, 2016 |
December 31, 2015 |
Proved Producing |
|
|
|
|
|
FD&A ($/boe) (1)(2) |
13.31 |
|
37.76 |
13.05 |
(0.43 |
) |
23.18 |
F&D ($/boe) (1)(2) |
12.81 |
|
42.27 |
11.57 |
9.89 |
|
29.80 |
Reserve Life Index (yr) (1) |
3.8 |
|
4.6 |
4.1 |
4.4 |
|
5.2 |
Reserve Replacement Ratio (1) |
0.4 |
|
0.2 |
1.6 |
0.4 |
|
0.7 |
FD&A Recycle Ratio (1) |
1.2 |
|
0.4 |
1.1 |
(24.8 |
) |
0.7 |
Proved Developed |
|
|
|
|
|
FD&A ($/boe) (1)(2) |
12.49 |
|
11.34 |
16.74 |
(0.23 |
) |
39.85 |
F&D ($/boe) (1)(2) |
12.03 |
|
11.55 |
14.62 |
7.69 |
|
65.74 |
Reserve Life Index (yr) (1) |
4.8 |
|
5.6 |
4.5 |
5.3 |
|
5.8 |
Reserve Replacement Ratio (1) |
0.5 |
|
0.6 |
1.2 |
0.7 |
|
0.4 |
FD&A Recycle Ratio (1) |
1.3 |
|
1.4 |
0.9 |
(46.3 |
) |
0.4 |
Total Proved |
|
|
|
|
|
FD&A ($/boe) (1)(2) |
1.09 |
|
8.73 |
14.33 |
(15.78 |
) |
16.77 |
F&D ($/boe) (1)(2) |
(6.83 |
) |
8.16 |
12.03 |
2.46 |
|
21.02 |
Reserve Life Index (yr) (1) |
9.9 |
|
11.1 |
8.0 |
9.8 |
|
10.9 |
Reserve Replacement Ratio (1) |
0.3 |
|
1.3 |
1.1 |
0.5 |
|
2.9 |
FD&A Recycle Ratio (1) |
14.4 |
|
1.8 |
1.0 |
(0.7 |
) |
0.9 |
Future Development Cost ($000s) |
174,027 |
|
194,757 |
182,086 |
201,556 |
|
223,409 |
Total Proved + Probable |
|
|
|
|
|
FD&A ($/boe) (1)(2) |
(7.32 |
) |
6.49 |
14.87 |
350.09 |
|
15.40 |
F&D ($/boe) (1)(2) |
190.21 |
|
5.15 |
17.28 |
(8.06 |
) |
19.01 |
Reserve Life Index (yr) (1) |
15.4 |
|
17.1 |
12.3 |
14.6 |
|
16.4 |
Reserve Replacement Ratio (1) |
— |
|
1.5 |
1.7 |
(0.1 |
) |
3.7 |
FD&A Recycle Ratio (1) |
(2.1 |
) |
2.4 |
1.0 |
— |
|
1.0 |
Future Development Cost ($000s) |
267,652 |
|
290,876 |
283,030 |
269,144 |
|
325,325 |
(1)Refer to "Oil and Gas Disclosures".(2)Certain
changes in FD&A and F&D produce non-meaningful figures as
discussed in "Oil and Gas Disclosures".While FD&A and F&D
costs, reserve life index, reserve replacement ratio and finding
and development costs are commonly used in the oil and nature gas
industry and have been prepared by management, these terms do not
have a standardized meaning and may not be comparable to similar
measures presented by other companies and, therefore, should not be
used to make such comparisons.
NET ASSET VALUEThe following table shows the
Company's Net Asset Value ("NAV"), calculated using Sproule's
December 31, 2019 price forecast:
As at December 31, 2019 ($000s except per
share) |
|
|
|
|
Proved DevelopedProducing |
Total Proved |
Proved + Probable |
Present Value Reserves, before tax (discounted at 10%) (1) |
|
138,707 |
|
|
243,140 |
|
|
392,446 |
|
Undeveloped Land Value (2) |
|
36,116 |
|
|
36,116 |
|
|
36,116 |
|
Net Debt (3) |
|
(123,744 |
) |
|
(123,744 |
) |
|
(123,744 |
) |
Net Asset Value |
|
51,079 |
|
|
155,512 |
|
|
304,818 |
|
Estimated Net Asset Value per Share |
|
$1.03 |
|
|
$3.14 |
|
|
$6.16 |
|
(1)Based on the 2019 Sproule Report, using the forecast future
prices and costs.(2)Based on the exploration and evaluation assets
as per the Company's December 31, 2019 audited consolidated
financial statements.(3)See "Non-GAAP Financial Measures".
ANNUAL GENERAL MEETINGThe
Company's Annual General Meeting will be held at 240FOURTH
(previously BP Centre) 240, 4th Ave SW Calgary, Alberta, on Tuesday
May 5, 2020 at 2:00 p.m. (Calgary time).
An updated corporate presentation can be found on the Company's
website at www.petrusresources.com.
For further information, please contact:Neil
Korchinski, P.Eng.President and Chief Executive Officer T: (403)
930-0889E: nkorchinski@petrusresources.com
NON-GAAP FINANCIAL MEASURESThis
press release makes reference to the terms "operating netback",
"corporate netback" and "net debt". These indicators 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. Management uses
these terms for the reasons set forth below.
Operating NetbackOperating
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 at the oil
and natural gas lease level. The most directly comparable GAAP
measure to operating netback is funds flow. Operating netback is
calculated as oil and natural gas revenue less royalties, operating
and transportation expenses. It is presented on an absolute value
and per unit basis.
Funds Flow and Corporate
NetbackCorporate 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
per unit basis. 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. It is
calculated, in the following table, 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 DebtNet debt is a non-GAAP
financial measure and is calculated as current assets (excluding
unrealized financial derivative assets) less current liabilities
(excluding unrealized financial derivative liabilities,
right-of-use lease obligations, and deferred share unit
liabilities) and long term debt. Petrus uses net debt as a key
indicator of its leverage and strength of its balance sheet. There
is no GAAP measure that is reasonably comparable to net debt.
ADVISORIESBasis of
PresentationFinancial data presented above has largely
been derived from the Company’s 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, 2019. The reporting and the measurement currency
is the Canadian dollar. All financial information is expressed in
Canadian dollars, unless otherwise stated.
Forward-Looking
StatementsCertain information regarding Petrus set forth
in this press release contains forward-looking statements within
the meaning of applicable securities law, that involve substantial
known and unknown risks and uncertainties. The use of any of the
words “anticipate”, “continue”, “estimate”, “expect”, “may”,
“will”, “project”, “should”, “believe” and similar expressions are
intended to identify forward-looking statements. Such statements
represent Petrus’ internal projections, estimates or beliefs
concerning, among other things, an outlook on the estimated amounts
and timing of capital investment, anticipated future debt,
production, revenues or other expectations, beliefs, plans,
objectives, assumptions, intentions or statements about future
events or performance. These statements are only predictions and
actual events or results may differ materially. Although Petrus
believes that the expectations reflected in the forward-looking
statements are reasonable, it cannot guarantee future results,
levels of activity, performance or achievement since such
expectations are inherently subject to significant business,
economic, competitive, political and social uncertainties and
contingencies. Many factors could cause Petrus’ actual results to
differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, Petrus.
In particular, forward-looking statements
included in this press release include, but are not limited to,
statements with respect to: the anticipated impacts of TSP;
continued expansion of the NGTL system and low Alberta natural gas
storage levels; Petrus' ability to modify its operations; Petrus'
business plan and expected debt repayment in 2020 and the
anticipated results thereof; the Closing of the Disposition,
including the timing and results thereof; Petrus' expected drilling
and operations activities in 2020; the results of Petrus' 2019
capital plan and the targets thereof; Petrus' 2020 capital plan and
the expected results thereof; expectations regarding the adequacy
of Petrus' liquidity and the funding of its financial liabilities;
Petrus' ability to extend the RCF and Term Loan and the timing
thereof; the impact of the current economic environment on Petrus;
the performance characteristics of the Company's crude oil, NGL and
natural gas properties; future prospects; the focus of and timing
of capital expenditures; access to debt and equity markets; Petrus'
future operating and financial results; capital investment
programs; supply and demand for crude oil, NGL and natural gas;
future royalty rates; drilling, development and completion plans
and the results therefrom; and treatment under governmental
regulatory regimes and tax laws. In addition, statements relating
to “reserves” are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the reserves described can be profitably produced
in the future.
These forward-looking statements are subject to
numerous risks and uncertainties, most of which are beyond the
Company’s control, including the impact of general economic
conditions; volatility in market prices for crude oil, NGL and
natural gas; industry conditions; currency fluctuation; imprecision
of reserve estimates; liabilities inherent in crude oil and natural
gas operations; environmental risks; incorrect assessments of the
value of acquisitions and exploration and development programs;
competition; the lack of availability of qualified personnel or
management; changes in income tax laws or changes in tax laws and
incentive programs relating to the oil and gas industry; hazards
such as fire, explosion, blowouts, cratering, and spills, each of
which could result in substantial damage to wells, production
facilities, other property and the environment or in personal
injury; stock market volatility; ability to access sufficient
capital from internal and external sources; completion of the
financing on the timing planned and the receipt of applicable
approvals; and the other risks. With respect to forward-looking
statements contained in this press release, Petrus has made
assumptions regarding: future commodity prices and royalty regimes;
availability of skilled labour; timing and amount of capital
expenditures; future exchange rates; the impact of increasing
competition; conditions in general economic and financial markets;
availability of drilling and related equipment and services;
effects of regulation by governmental agencies; and future
operating costs. Management has included the above summary of
assumptions and risks related to forward-looking information
provided in this press release in order to provide shareholders
with a more complete perspective on Petrus’ future operations and
such information may not be appropriate for other purposes. Petrus’
actual results, performance or achievement could differ materially
from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance can be given that any of
the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what benefits that the
Company will derive therefrom. Readers are cautioned that the
foregoing lists of factors are not exhaustive.
This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about Petrus' prospective results of
operations including, without limitation, its ability to repay
debt, which are subject to the same assumptions, risk factors,
limitations, and qualifications as set forth above. Readers are
cautioned that the assumptions used in the preparation of such
information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance
should not be placed on FOFI. Petrus' actual results, performance
or achievement could differ materially from those expressed in, or
implied by, these FOFI, or if any of them do so, what benefits
Petrus will derive therefrom. Petrus has included the FOFI in order
to provide readers with a more complete perspective on Petrus'
future operations and such information may not be appropriate for
other purposes.
These forward-looking statements and FOFI are
made as of the date of this press release and the Company disclaims
any intent or obligation to update any forward-looking statements
and FOFI, whether as a result of new information, future events or
results or otherwise, other than as required by applicable
securities laws.
BOE PresentationThe oil and
natural gas industry commonly expresses production volumes and
reserves on a barrel of oil equivalent (“boe”) basis 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
measurement of results and comparisons with other industry
participants. Petrus uses the 6:1 boe measure which is the
approximate energy equivalence of the two commodities at the burner
tip. Boe’s do not represent an economic value equivalence at the
wellhead and therefore may be a misleading measure if used in
isolation.
Abbreviations |
|
$000’s |
thousand dollars |
$/bbl |
dollars per barrel |
$/boe |
dollars per barrel of oil
equivalent |
$/GJ |
dollars per gigajoule |
$/mcf |
dollars per thousand cubic
feet |
bbl |
barrel |
bbl/d |
barrels per day |
boe |
barrel of oil equivalent |
mboe |
barrel of oil equivalent |
mmboe |
thousand barrel of oil
equivalent |
boe/d |
million barrel of oil equivalent
per day |
GJ |
gigajoule |
GJ/d |
gigajoules per day |
mcf |
thousand cubic feet |
mcf/d |
thousand cubic feet per day |
mmcf/d |
million cubic feet per day |
NGLs |
natural gas liquids |
WTI |
West Texas Intermediate |
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