CALGARY, Nov. 2, 2017 /CNW/ - Yangarra Resources
Ltd. ("Yangarra" or the "Company") (TSX:YGR)
announces its financial and operating results for the three and
nine months ended September 30,
2017.
Third Quarter Highlights
- Production averaged 6,025 boe/d (55% liquids), an increase of
131% from the third quarter of 2016.
- Production per share growth of 126% from the third quarter of
2016.
- Funds flow from operations of $12.9
million ($0.16 per share -
basic) an increase of 289% compared to the third quarter of
2016.
- Adjusted EBITDA (which excludes changes in derivative financial
instruments) was $13.3 million
($0.16 per share - basic).
- Oil and gas sales were $17.7
million
- Net income of $4.0 million
($0.05 per share - basic) or
$5.5 million net income before
tax.
- Operating costs were $6.86 per
boe (including $1.45 per boe of
transportation costs).
- Operating netbacks, including the impact of commodity
contracts, were $25.53 per boe.
- Funds flow netbacks were $24.07
per boe.
- Operating and funds flow margins were 80% and 76%,
respectively.
- G&A costs of $0.74/boe.
- Royalties were 8% of oil and gas revenue 7% including the
impact of commodity contracts.
- Total capital expenditures were $20.9
million.
- Net debt (excluding current derivative financial instruments)
was $80.4 million.
- Net Debt to annualized third quarter funds flow from operations
was 1.55: 1.
- 16 wells were abandoned during the quarter, corporate LMR is
7.3 with decommissioning liabilities of $8.4
million ($11.0 million
undiscounted).
Operations Update
The Company has now drilled six wells in the post break-up
drilling program (11 total wells for the year), and is currently
drilling the 7th. Five of the wells have been
completed and are on-stream and the sixth well will be completed
shortly. The first three wells in the post break-up program were
placed to push the boundaries of the Cardium acreage, step out into
an untested area and test a new Cardium play concept. Frack stages
have been increased to 125-135 per 2-mile (from 105 stages), sand
placement has been increased to 0.8-1.1 tonnes/m (from 0.5
tonnes/m) and well design continues to be optimized.
Production rates over the first 30 days on the initial three
wells have averaged 470 boe/d per well (74% liquids) with one
of the wells restricted approximately 50% due to capacity
constraints.
Drilling and completion costs for the first three wells
increased by 11% to $1,420 per
lateral meter (from $1,280 per
lateral meter on the last ten well program) due to the increased
number of stages, more sand placement and larger water
volumes. Costs are now trending lower as the Company
mitigates the higher frack intensity with more efficient
operations.
A new oil handling facility has been constructed which will
generate savings in operating and transportation costs. The
Company is also implementing several water handling initiatives
designed to increase recycling and reduce frack water costs.
To-date 2017, the Company has added 24 Cardium sections to its
Central Alberta inventory and
continues efforts to consolidate working interests on existing
acreage. Yangarra will provide a new well inventory update in
January 2018 as well as a capital
budget and guidance for 2018.
The Company has 1,300 bbl/d of oil hedged at an average price of
C$70.24/bbl and 4,000 GJ/d of natural
gas hedged at an average price of $3.06/GJ for the balance of 2017.
Financial Summary
|
|
|
|
|
|
2017
|
2016
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
|
Q3
|
Q2
|
Q3
|
|
2017
|
2016
|
Statements of
Comprehensive Income
|
|
|
|
|
|
|
Petroleum &
natural gas sales
|
$
|
17,663,925
|
$
|
19,527,395
|
$
|
5,939,598
|
|
$
|
52,740,708
|
$
|
17,950,262
|
|
|
|
|
|
|
|
Net income (before
tax)
|
$
|
5,511,977
|
$
|
7,893,731
|
$
|
(144,625)
|
|
$
|
20,747,441
|
$
|
8,819,319
|
|
|
|
|
|
|
|
Net income
|
$
|
3,975,606
|
$
|
5,611,218
|
$
|
(470,783)
|
|
$
|
14,803,369
|
$
|
10,507,948
|
Net income per share
- basic
|
$
|
0.05
|
$
|
0.07
|
$
|
(0.01)
|
|
$
|
0.18
|
$
|
0.14
|
Net income per share
- diluted
|
$
|
0.05
|
$
|
0.07
|
$
|
(0.01)
|
|
$
|
0.18
|
$
|
0.14
|
|
|
|
|
|
|
|
Statements of Cash
Flow
|
|
|
|
|
|
|
Funds flow from
operations
|
$
|
12,948,149
|
$
|
12,047,670
|
$
|
3,331,966
|
|
$
|
35,339,023
|
$
|
9,482,426
|
Funds flow from
operations per share - basic
|
$
|
0.16
|
$
|
0.15
|
$
|
0.04
|
|
$
|
0.44
|
$
|
0.13
|
Funds flow from
operations per share - diluted
|
$
|
0.15
|
$
|
0.14
|
$
|
0.04
|
|
$
|
0.42
|
$
|
0.13
|
Cash from operating
activities
|
$
|
13,381,396
|
$
|
9,241,194
|
$
|
4,866,167
|
|
$
|
31,233,002
|
$
|
9,282,616
|
|
|
|
|
|
|
|
Statements of
Financial Position
|
|
|
|
|
|
|
Property and
equipment
|
$
|
315,064,829
|
$
|
299,963,241
|
$
|
270,291,202
|
|
$
|
315,064,829
|
$
|
270,291,202
|
Total
assets
|
$
|
342,983,774
|
$
|
326,865,302
|
$
|
289,495,918
|
|
$
|
342,983,774
|
$
|
289,495,918
|
Working capital
deficit
|
$
|
79,069,633
|
$
|
69,864,913
|
$
|
58,221,548
|
|
$
|
79,069,633
|
$
|
58,221,548
|
Adjusted working
capital deficit (which excludes current derivative financial
instruments)
|
$
|
80,449,394
|
$
|
72,674,034
|
$
|
58,387,741
|
|
$
|
80,449,394
|
$
|
58,387,741
|
Non-Current
Liabilities
|
$
|
40,523,942
|
$
|
39,580,252
|
$
|
35,205,085
|
|
$
|
40,523,942
|
$
|
35,205,085
|
Shareholders
equity
|
$
|
202,437,802
|
$
|
197,280,541
|
$
|
183,627,034
|
|
$
|
202,437,802
|
$
|
183,627,034
|
|
|
|
|
|
|
|
Weighted average
number of shares - basic
|
|
81,033,965
|
|
80,555,880
|
|
79,181,805
|
|
|
80,523,866
|
|
73,054,066
|
Weighted average
number of shares - diluted
|
|
84,772,793
|
|
84,065,109
|
|
79,181,805
|
|
|
83,692,914
|
|
73,433,974
|
|
|
|
|
|
|
|
Net income for the nine months ended September 30, 2016 included $13,082,687 from a gain on settlement of a
lawsuit.
Company Netbacks ($/boe)
|
|
|
|
|
|
2017
|
2016
|
|
Nine Months
Ended
|
|
Q3
|
Q2
|
Q3
|
|
2017
|
2016
|
|
|
|
|
|
|
|
Sales
price
|
$
|
31.87
|
$
|
37.61
|
$
|
24.95
|
|
$
|
35.71
|
$
|
22.92
|
|
Royalty
expense
|
|
(2.43)
|
|
(2.86)
|
|
(1.14)
|
|
|
(2.75)
|
|
(0.79)
|
|
Production
costs
|
|
(5.41)
|
|
(8.26)
|
|
(6.97)
|
|
|
(6.84)
|
|
(7.09)
|
|
Transportation
costs
|
|
(1.45)
|
|
(0.73)
|
|
(1.17)
|
|
|
(1.06)
|
|
(1.41)
|
Field operating
netback
|
|
22.58
|
|
25.76
|
|
15.67
|
|
|
25.06
|
|
13.63
|
|
Realized gain on
commodity contract settlement
|
|
2.95
|
|
0.92
|
|
1.95
|
|
|
1.49
|
|
2.38
|
Operating
netback
|
|
25.53
|
|
26.68
|
|
17.62
|
|
|
26.55
|
|
16.01
|
|
G&A
|
|
(0.74)
|
|
(0.92)
|
|
(1.58)
|
|
|
(0.74)
|
|
(1.71)
|
|
Finance
expenses
|
|
(0.71)
|
|
(1.95)
|
|
(1.85)
|
|
|
(1.39)
|
|
(2.01)
|
Funds flow
netback
|
|
24.07
|
|
23.81
|
|
14.19
|
|
|
24.42
|
|
12.29
|
|
Depletion and
depreciation
|
|
(10.95)
|
|
(10.68)
|
|
(13.37)
|
|
|
(10.83)
|
|
(13.18)
|
|
E&E
Impairment
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
(0.96)
|
|
Accretion
|
|
(0.08)
|
|
(0.09)
|
|
(0.18)
|
|
|
(0.09)
|
|
(0.18)
|
|
Stock-based
compensation
|
|
(0.71)
|
|
(0.71)
|
|
(0.80)
|
|
|
(0.74)
|
|
(1.01)
|
|
Unrealized gain
(loss) on financial instruments
|
|
(2.39)
|
|
2.88
|
|
(0.44)
|
|
|
1.29
|
|
(2.37)
|
|
Gain on Settlement of
Lawsuit
|
|
-
|
|
-
|
|
-
|
|
|
-
|
|
16.60
|
|
Deferred income
tax
|
|
(2.77)
|
|
(4.40)
|
|
(1.36)
|
|
|
(4.02)
|
|
2.14
|
Net Income
netback
|
$
|
7.17
|
$
|
10.81
|
$
|
(1.96)
|
|
$
|
10.02
|
$
|
13.33
|
Business Environment
|
|
|
|
|
|
2017
|
2016
|
|
Nine Months
Ended
|
|
Q3
|
Q2
|
Q3
|
|
2017
|
2016
|
Realized Pricing
(Including realized commodity contracts)
|
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
60.41
|
$
|
63.69
|
$
|
59.21
|
|
$
|
62.66
|
$
|
54.79
|
|
NGL
($/bbl)
|
$
|
37.52
|
$
|
29.14
|
$
|
28.22
|
|
$
|
32.51
|
$
|
25.92
|
|
Gas
($/mcf)
|
$
|
1.88
|
$
|
3.00
|
$
|
2.47
|
|
$
|
2.62
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized Pricing
(Excluding commodity contracts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
56.51
|
$
|
62.63
|
$
|
57.88
|
|
$
|
60.85
|
$
|
49.11
|
|
NGL
($/bbl)
|
$
|
33.39
|
$
|
27.85
|
$
|
18.98
|
|
$
|
30.58
|
$
|
20.27
|
|
Gas
($/mcf)
|
$
|
1.60
|
$
|
2.89
|
$
|
2.47
|
|
$
|
2.45
|
$
|
2.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil Price
Benchmarks
|
|
|
|
|
|
|
|
|
|
|
|
|
West Texas
Intermediate ("WTI") (US$/bbl)
|
$
|
48.20
|
$
|
48.29
|
$
|
44.95
|
|
$
|
49.45
|
$
|
41.35
|
|
Edmonton Par
(C$/bbl)
|
$
|
57.05
|
$
|
61.92
|
$
|
55.10
|
|
$
|
61.20
|
$
|
50.90
|
|
Edmonton Par to WTI
differential (US$/bbl)
|
$
|
2.56
|
$
|
2.20
|
$
|
2.52
|
|
$
|
2.61
|
$
|
2.67
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Price
Benchmarks
|
|
|
|
|
|
|
|
|
|
|
|
|
AECO gas
(Cdn$/mcf)
|
$
|
1.45
|
$
|
2.78
|
$
|
2.30
|
|
$
|
2.30
|
$
|
1.85
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S./Canadian Dollar
Exchange
|
$
|
0.80
|
$
|
0.74
|
$
|
0.77
|
|
$
|
0.77
|
$
|
0.76
|
Operations Summary
Net petroleum and natural gas production, pricing and revenue
are summarized below:
|
|
|
|
|
|
2017
|
2016
|
|
Nine Months
Ended
|
|
Q3
|
Q2
|
Q3
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily production
volumes
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
|
16,142
|
|
15,586
|
|
9,429
|
|
|
14,260
|
|
10,004
|
|
Oil
(bbl/d)
|
|
2,380
|
|
2,281
|
|
569
|
|
|
2,165
|
|
724
|
|
NGL's
(bbl/d)
|
|
955
|
|
826
|
|
469
|
|
|
866
|
|
485
|
|
Combined (boe/d
6:1)
|
|
6,025
|
|
5,705
|
|
2,609
|
|
|
5,408
|
|
2,876
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum &
natural gas sales - Gross
|
$
|
17,663,925
|
$
|
19,527,395
|
$
|
5,988,310
|
|
$
|
52,740,708
|
$
|
18,064,181
|
Realized gain on
commodity contract settlement
|
|
1,632,783
|
|
477,734
|
|
468,105
|
|
|
2,196,435
|
|
1,877,098
|
Total
sales
|
|
19,296,708
|
|
20,005,129
|
|
6,456,415
|
|
|
54,937,143
|
|
19,941,279
|
Royalty
expense
|
|
(1,344,746)
|
|
(1,487,371)
|
|
(272,840)
|
|
|
(4,063,292)
|
|
(622,978)
|
Total Revenue - Net
of royalties
|
$
|
17,951,962
|
$
|
18,517,758
|
$
|
6,183,575
|
|
$
|
50,873,851
|
$
|
19,318,301
|
Working Capital Summary
The following table summarizes the change in working capital
during the nine months ended September 30,
2017 and the year ended December
31, 2016:
|
2017
|
2016
|
Adjusted Working
capital (deficit) - beginning of period
|
$
|
(65,005,805)
|
$
|
(60,886,556)
|
|
|
|
|
|
Funds flow from
operations
|
|
35,339,022
|
|
16,263,727
|
Additions to
property and equipment
|
|
(52,307,819)
|
|
(27,672,766)
|
Property
Acquisition
|
|
-
|
|
(3,707,693)
|
Decommissioning
costs incurred
|
|
(387,234)
|
|
(180,862)
|
Issuance of
shares
|
|
1,943,984
|
|
11,218,610
|
Other
Debt
|
|
(31,542)
|
|
(40,265)
|
Adjusted
Working capital (deficit) - end of period
|
$
|
(80,449,394)
|
$
|
(65,005,805)
|
|
|
|
|
|
Credit facility
limit
|
$
|
100,000,000
|
$
|
80,000,000
|
Capital Spending
Capital spending is summarized as follows:
|
|
|
|
|
|
|
|
2017
|
2016
|
Nine Months
Ended
|
Cash
additions
|
|
Q3
|
Q2
|
Q3
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
Land, acquisitions
and lease rentals
|
$
|
3,503,852
|
$
|
1,726,569
|
$
|
1,405,870
|
$
|
6,001,336
|
$
|
1,693,892
|
Cash property
acquisitions
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3,707,693
|
Drilling and
completion
|
|
14,939,137
|
|
4,299,243
|
|
8,360,031
|
|
39,289,999
|
|
9,760,638
|
Geological and
geophysical
|
|
134,283
|
|
284,010
|
|
136,404
|
|
562,085
|
|
729,538
|
Equipment
|
|
2,248,622
|
|
1,382,772
|
|
517,188
|
|
6,541,666
|
|
1,726,000
|
Other asset
additions
|
|
84,631
|
|
208,438
|
|
16,579
|
|
299,967
|
|
89,706
|
|
$
|
20,910,525
|
$
|
7,901,032
|
$
|
10,436,072
|
$
|
52,695,053
|
$
|
17,707,467
|
Disclosure Items
The Company's financial statements, notes to the financial
statements and management's discussion and analysis have been filed
on SEDAR (www.sedar.com) and are available on the Company's website
(www.yangarra.ca).
Forward looking information
Certain information regarding Yangarra set forth in this news
release, including but not limited to, management's expectation on
improvements to costs and productive capability for the next
drilling program based on certain changes made to Yangarra's
drilling and completion program, management's assessment of future
plans, operations and operational results may constitute
forward-looking statements under applicable securities law and
necessarily involve risks associated with oil and gas exploration,
production, marketing and transportation such as loss of market,
volatility of prices, currency fluctuations, imprecision of
reserves estimates, environmental risks, competition from other
producers and ability to access sufficient capital from internal
and external sources. As a consequence, actual results may
differ materially from those anticipated in the forward-looking
statements. Certain of these risks are set out in more detail
in Yangarra's current Annual Information Form, which is available
on Yangarra's SEDAR profile at www.sedar.com.
Forward-looking statements are based on estimates and
opinions of management of Yangarra at the time the statements are
presented. Yangarra may, as considered necessary in the
circumstances, update or revise such forward-looking statements,
whether as a result of new information, future events or otherwise,
but Yangarra undertakes no obligation to update or revise any
forward-looking statements, except as required by applicable
securities laws.
The initial production rates discussed in this press release
are not necessarily indicative of long-term performance or of
ultimate recovery due to high initial decline rates.
Barrels of Oil Equivalent
Natural gas has been converted to a barrel of oil equivalent
(Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one
barrel of oil (6:1), unless otherwise stated. The Boe
conversion ratio of 6 Mcf to 1 Bbl is based on an energy
equivalency conversion method and does not represent a value
equivalency; therefore Boe's may be misleading if used in
isolation. References to natural gas liquids ("NGLs") in this news
release include condensate, propane, butane and ethane and one
barrel of NGLs is considered to be equivalent to one barrel of
crude oil equivalent (Boe). One ("BCF") equals one billion
cubic feet of natural gas. One ("Mmcf") equals one million
cubic feet of natural gas. Operating netbacks are calculated
as revenue from all products less operating costs.
Non-GAAP Financial Measures
This press release contains references to measures used in
the oil and natural gas industry such as "funds flow from
operations", "operating netback", "adjusted working capital
deficit", and "net debt". These measures do not have
standardized meanings prescribed by generally accepted accounting
principles ("GAAP") and, therefore should not be considered
in isolation. These reported amounts and their underlying
calculations are not necessarily comparable or calculated in an
identical manner to a similarly titled measure of other companies
where similar terminology is used. Where these measures are
used they should be given careful consideration by the
reader. These measures have been described and presented in
this press release in order to provide shareholders and potential
investors with additional information regarding the Company's
liquidity and its ability to generate funds to finance its
operations.
Funds flow from operations should not be considered an
alternative to, or more meaningful than, cash provided by
operating, investing and financing activities or net income as
determined in accordance with GAAP, as an indicator of Yangarra's
performance or liquidity. Funds flow from operations is used
by Yangarra to evaluate operating results and Yangarra's ability to
generate cash flow to fund capital expenditures and repay
indebtedness. Funds flow from operations denotes cash flow
from operating activities as it appears on the Company's Statement
of Cash Flows before decommissioning expenditures and changes in
non-cash operating working capital. Funds flow from operations is
also derived from net income (loss) plus non-cash items including
deferred income tax expense, depletion and depreciation expense,
impairment expense, stock-based compensation expense, accretion
expense, unrealized gains or losses on financial instruments and
gains or losses on asset divestitures. Funds from operations
netback is calculated on a per boe basis and funds from operations
per share is calculated as funds from operations divided by the
weighted average number of basic and diluted common shares
outstanding. Operating netback denotes petroleum and natural
gas revenue and realized gains or losses on financial instruments
less royalty expenses, operating expenses and transportation and
marketing expenses calculated on a per boe basis. Adjusted
working capital deficit includes current assets less current
liabilities excluding the current portion of the amount drawn on
the credit facilities, the current portion of the fair value of
financial instruments and the deferred premium on financial
instruments. Yangarra uses net debt as a measure to assess
its financial position. Net debt includes current assets less
current liabilities excluding the current portion of the fair value
of financial instruments and the deferred premium on financial
instruments, plus the long-term financial obligation.
Readers should also note that Adjusted EBITDA is a non-GAAP
financial measures and do not have any standardized meaning under
GAAP and is therefore unlikely to be comparable to similar measures
presented by other companies. Yangarra believes that Adjusted
EBITDA is a useful supplemental measure, which provide an
indication of the results generated by the Yangarra's primary
business activities prior to consideration of how those activities
are financed, amortized or taxed. Readers are cautioned, however,
that Adjusted EBITDA should not be construed as an alternative to
comprehensive income (loss) determined in accordance with GAAP as
an indicator of Yangarra's financial performance.
All reference to $ (funds) are in Canadian dollars.
Neither the TSX nor its Regulation Service Provider (as that
term is defined in the Policies of the TSX) accepts responsibility
for the adequacy and accuracy of this release.
SOURCE Yangarra Resources Ltd.