Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is
pleased to report financial and operating results as at and for the
three and six months ended June 30, 2021. Petrus is focused on
generating free cash flow for debt repayment and further
development of its Ferrier Cardium asset.
Throughout the second quarter of 2021, global
economies continued to show promise of a post-pandemic recovery.
Increased demand for oil and natural gas persisted, which further
strengthened commodity prices. Petrus generated funds flow of $8.1
million in the second quarter of 2021, which was 15% higher than in
the first quarter of 2021. The Company’s production was 6,309 boe/d
in the second quarter of 2021, an increase of 7% from 5,912 boe/d
in the first quarter of 2021. The incremental production is
attributable to 5 (3.2 net) recently drilled wells that were
brought on production in late March and early April.
As uncertainty surrounding the COVID-19 pandemic
endured and Petrus remained committed to debt repayment, the
Company continued to execute a disciplined capital strategy
throughout Q2 2021. Petrus will closely monitor the Canadian
commodity price environment and evaluate subsequent quarter capital
spending on an ongoing basis. Capital investments will remain
focused in Ferrier where ownership of critical infrastructure
supports low operating costs and high rates of return.
With balance sheet strength remaining a top
priority for the Company, Petrus reduced net debt by $6.3 million
in the second quarter of 2021, 5% reduction.
HIGHLIGHTS
- Commodity price improvements -
Realized price per boe increased by 11% in the second quarter of
2021 compared to the first quarter. This is attributable to
strengthening oil and NGL prices, which increased by 14% and 8%,
respectively, quarter over quarter.
- Production - Increased production
of 6,309 boe/d was associated with two new operated and three
non-operated (1.2 net) wells being brought on production early in
the quarter. These wells were drilled in the fourth quarter of 2020
and the first quarter of 2021 and the associated capital costs were
largely incurred in those quarters.
- Operating netback - Operating netback increased to $11.8
million ($20.55 per boe) in the second quarter of 2021 from $10.2
million ($19.22 per boe) in the first quarter 2021, a 15% increase,
and was up 144% from the COVID depressed second quarter of
2020.
- Funds flow - Petrus generated funds
flow(1) of $8.1 million ($0.16 per share) in Q2 2021, which is 15%
higher than the previous quarter and up 38% year over year.
CREDIT FACILITY EXTENSION
Subsequent to June 30, 2021, the lenders
have extended the maturity date of the RCF from July 14 to August
13, 2021. The Company is actively engaged with the RCF lenders to
further extend the maturity date of RCF. The Company is currently
$73.5 million drawn against the RCF.
SECOND LIEN TERM LOAN
EXTENSION
Effective June 15, 2021 Macquarie Bank Limited
assigned the Company’s second lien term loan (“Term Loan”) to Blue
Oak Partners (Canada) Inc. Subsequent to June 30, 2021, the
Company extended the maturity of the Term Loan to October 14, 2021.
The Company is actively engaged with the Term Loan lender to
further extend the maturity date of Term Loan. The Company has
approximately $39 million outstanding on the Term Loan.
2021 OUTLOOK
Consistent with the Company’s strategy of
financial flexibility and balance sheet strength, Petrus will
determine and provide guidance around quarterly capital spending as
the year progresses. Throughout the balance of 2021 Petrus will
continue to take a controlled approach to capital investments while
also making quarterly payments of $2.75 million per quarter to the
revolving credit facility. The Company has the financial and
operational flexibility to respond quickly to changing market
conditions and adjust capital investment plans accordingly. For the
third quarter of 2021, the Board of Directors has approved a
capital budget of $7.5 million for the drilling of 4 gross (1.5
net) Ferrier wells and investment in facility expansion in North
Ferrier.
(1)Refer to "Non-GAAP Financial Measures" in the
Management's Discussion & Analysis attached hereto.(2)Refer to
"Advisories - Forward-Looking Statements" in the Management's
Discussion & Analysis attached hereto.
SELECTED FINANCIAL
INFORMATION
OPERATIONS |
Three months ended Jun. 30,
2021 |
Three months ended Jun. 30,
2020 |
Three months ended Mar. 31,
2021 |
Three months ended Dec. 31,
2020 |
Three months ended Sept. 30,
2020 |
Average Production |
|
|
|
|
|
Natural gas (mcf/d) |
24,291 |
|
27,630 |
|
22,985 |
|
26,177 |
|
26,181 |
|
Oil (bbl/d) |
1,214 |
|
867 |
|
923 |
|
980 |
|
1,103 |
|
NGLs (bbl/d) |
1,046 |
|
819 |
|
1,158 |
|
1,014 |
|
997 |
|
Total (boe/d) |
6,309 |
|
6,291 |
|
5,912 |
|
6,357 |
|
6,463 |
|
Total (boe) |
574,084 |
|
572,440 |
|
532,099 |
|
584,860 |
|
594,599 |
|
Light oil weighting |
19 |
% |
14 |
% |
15 |
% |
15 |
% |
17 |
% |
Realized Prices |
|
|
|
|
|
Natural gas ($/mcf) |
3.28 |
|
2.35 |
|
3.33 |
|
3.07 |
|
2.51 |
|
Oil ($/bbl) |
75.99 |
|
27.18 |
|
66.61 |
|
49.64 |
|
46.46 |
|
NGLs ($/bbl) |
39.76 |
|
12.87 |
|
36.79 |
|
23.52 |
|
22.05 |
|
Total realized price ($/boe) |
33.87 |
|
15.73 |
|
30.55 |
|
24.05 |
|
21.48 |
|
Royalty income |
0.19 |
|
0.06 |
|
0.15 |
|
0.13 |
|
0.12 |
|
Royalty expense |
(4.87 |
) |
(1.51 |
) |
(3.74 |
) |
(2.02 |
) |
(2.09 |
) |
Net oil and natural gas revenue ($/boe) |
29.19 |
|
14.28 |
|
26.96 |
|
22.16 |
|
19.51 |
|
Operating expense |
(6.80 |
) |
(4.44 |
) |
(6.12 |
) |
(5.53 |
) |
(4.05 |
) |
Transportation expense |
(1.84 |
) |
(1.40 |
) |
(1.62 |
) |
(1.68 |
) |
(1.63 |
) |
Operating netback(1) ($/boe) |
20.55 |
|
8.44 |
|
19.22 |
|
14.95 |
|
13.83 |
|
Realized gain (loss) on derivatives ($/boe) |
(3.21 |
) |
6.39 |
|
(2.28 |
) |
0.65 |
|
2.20 |
|
Other income |
1.77 |
|
0.17 |
|
0.04 |
|
0.31 |
|
0.04 |
|
General & administrative expense |
(2.41 |
) |
(1.43 |
) |
(1.65 |
) |
(1.81 |
) |
(1.07 |
) |
Cash finance expense |
(2.52 |
) |
(3.20 |
) |
(1.93 |
) |
(2.49 |
) |
(2.16 |
) |
Decommissioning expenditures |
(0.14 |
) |
(0.15 |
) |
(0.27 |
) |
(0.63 |
) |
(0.13 |
) |
Funds flow & corporate
netback(1)(2) ($/boe) |
14.04 |
|
10.22 |
|
13.13 |
|
10.98 |
|
12.71 |
|
|
|
|
|
|
|
FINANCIAL (000s except $ per share) |
Three months ended Jun. 30,
2021 |
Three months ended Jun. 30,
2020 |
Three months ended Mar. 31,
2021 |
Three months ended Dec. 31,
2020 |
Three months ended Sept. 30,
2020 |
Oil and natural gas revenue |
19,553 |
|
9,041 |
|
16,339 |
|
14,143 |
|
12,840 |
|
Net loss |
(4,265 |
) |
(6,281 |
) |
(3,155 |
) |
(151 |
) |
(3,678 |
) |
Net loss per share |
|
|
|
|
|
Basic |
(0.09 |
) |
(0.13 |
) |
(0.06 |
) |
— |
|
(0.07 |
) |
Fully diluted |
(0.09 |
) |
(0.13 |
) |
(0.06 |
) |
— |
|
(0.07 |
) |
Funds flow |
8,070 |
|
5,855 |
|
6,993 |
|
6,423 |
|
7,551 |
|
Funds flow per share |
|
|
|
|
|
Basic |
0.16 |
|
0.12 |
|
0.14 |
|
0.13 |
|
0.15 |
|
Fully diluted |
0.16 |
|
0.12 |
|
0.14 |
|
0.13 |
|
0.15 |
|
Capital expenditures |
663 |
|
305 |
|
7,917 |
|
2,797 |
|
2,543 |
|
Net dispositions |
— |
|
— |
|
— |
|
— |
|
— |
|
Weighted average shares outstanding |
|
|
|
|
|
Basic |
49,513 |
|
49,469 |
|
49,469 |
|
49,469 |
|
49,469 |
|
Fully diluted |
49,513 |
|
49,469 |
|
49,469 |
|
49,469 |
|
49,469 |
|
As at period end |
|
|
|
|
|
Common shares outstanding |
|
|
|
|
|
Basic |
49,559 |
|
49,469 |
|
49,469 |
|
49,469 |
|
49,469 |
|
Fully diluted |
49,559 |
|
49,469 |
|
49,469 |
|
49,469 |
|
49,469 |
|
Total assets |
176,629 |
|
184,532 |
|
177,587 |
|
177,914 |
|
179,895 |
|
Non-current liabilities |
40,838 |
|
43,017 |
|
42,028 |
|
45,321 |
|
44,471 |
|
Net debt(1) |
110,346 |
|
120,570 |
|
116,634 |
|
114,361 |
|
116,717 |
|
(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
Second quarter average production by area was as
follows:
For the three months ended June 30, 2021 |
Ferrier |
|
Foothills |
|
Central Alberta |
|
Other |
|
Total |
|
Natural gas (mcf/d) |
17,628 |
|
1,468 |
|
4,808 |
|
387 |
|
24,291 |
|
Oil (bbl/d) |
667 |
|
111 |
|
272 |
|
164 |
|
1,214 |
|
NGLs (bbl/d) |
902 |
|
— |
|
125 |
|
19 |
|
1,046 |
|
Total (boe/d) |
4,507 |
|
356 |
|
1,199 |
|
247 |
|
6,309 |
|
Second quarter production averaged 6,309 boe/d
in 2021 compared to 6,291 boe/d in 2020. During the second quarter
of 2021, production increased marginally compared to the same
period in 2021 due to 5 gross (3.2 net) new wells being brought on
production at the start of Q2 2021 offsetting production
declines.
In the second quarter of 2021, the Company invested $0.7 million
of capital spending consisting almost entirely of non-discretionary
maintenance capital.
For further information, please contact:
Ken Gray, P.Eng.President and Chief Executive OfficerT: (403)
930-0889E: kgray@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 Debt Net 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.
ADVISORIES
Basis 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, 2020. 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 new 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: prospective changes to the terms of the
RCF and Term Loan; Petrus' capital program, flexibility and
utilization of free cash flow; Petrus' utilization of Federal and
Provincial programs; Petrus' expectations regarding second half
2021 production volumes; Petrus' ability to modify its operations,
including its ability to adjust liquid volumes and the results
thereof; expectations regarding the adequacy of Petrus' liquidity
and the funding of its financial liabilities; 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; impact of the economic crisis on the Company's
lenders; willingness of the company's lenders to negotiate;
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; willingness of its lenders to negotiate; the impact
of the current financial crisis; 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 |
$000’s$/bbl$/boe$/GJ$/mcfbblbbl/dboemboemmboeboe/dGJGJ/dmcfmcf/dmmcf/dNGLsWTI |
|
thousand dollarsdollars per barreldollars per barrel of oil
equivalentdollars per gigajouledollars per thousand cubic
feetbarrelbarrels per daybarrel of oil equivalentbarrel of oil
equivalentthousand barrel of oil equivalentmillion barrel of oil
equivalent per daygigajoulegigajoules per daythousand cubic
feetthousand cubic feet per daymillion cubic feet per daynatural
gas liquidsWest Texas Intermediate |
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