PR Newswire
CALGARY, March 15, 2017
CALGARY, March 15, 2017 /PRNewswire/ - (TSX:PMT) – Perpetual Energy Inc. ("Perpetual", the "Corporation" or the "Company") is pleased to release its fourth quarter and year end 2016 financial and operating results. A complete copy of Perpetual's audited consolidated financial statements, Management's Discussion and Analysis ("MD&A") and Annual Information Form for the year ended December 31, 2016 will be available through the Corporation's website at www.perpetualenergyinc.com and SEDAR at www.sedar.com.
FOURTH QUARTER 2016 HIGHLIGHTS AND SUBSEQUENT EVENTS
2016 ANNUAL FINANCIAL AND OPERATING HIGHLIGHTS
Capital Spending and Property Dispositions
2016 Year-End Reserve Highlights
Production and Operations Highlights
Financial Highlights
2017 OUTLOOK
Success in advancing the Company's strategic priorities has established a foundation for strong growth in production and adjusted funds flow in 2017. Perpetual's top four strategic priorities for 2017 include:
Closing of the suite of financing transactions during the first quarter of 2017 has established sufficient liquidity to execute the planned growth-oriented capital program and manage debt maturities into 2018 at current commodity prices. The Company will continue its diligent focus on increasing netbacks through reductions in all areas of spending, including operating, financing and administrative costs, to confirm the sustainable cost structure established through strategic decisions over the past two years.
In 2017, Perpetual will focus its capital spending on its core operating areas, with spending at East Edson, representing close to 85 percent of total forecast exploration and development expenditures. In the first quarter of 2017, the Company will spend close to $26 million. Activity will include frac and tie-in operations on the East Edson well drilled in the fourth quarter of 2016 and drilling of five additional Wilrich horizontal wells. A minimum of four of the six new drills are forecast to be completed, tied in and on production prior to spring break up, with the timing of the complete and frac operations on the additional two drills dependent on surface access conditions. The Company plans to recommence its one rig drilling program after break up to continue to grow production at East Edson, with the drilling of up to an additional eight wells. The one rig drilling program in East Edson is expected to re-establish throughput using Company-owned infrastructure approaching the capacity of 60 to 65 MMcf/d plus associated liquids by year-end 2017.
The Company is also finishing the execution of it first quarter drilling program at Mannville. Four horizontal heavy oil wells, three of which are exploratory, have been successfully drilled, completed, equipped and tied in with results pending as all four wells are currently cleaning up on initial flow back. Pending successful drilling results and commodity prices, up to four additional heavy oil wells are planned for the second half of 2017 in Mannville. Two horizontal wells to evaluate shallow shale gas plays in the Viking and Colorado formations have been drilled, taking advantage of synergies with the heavy oil drilling program. Completion and testing operations are currently ongoing. The first quarter 2017 capital program also includes expenditures for high return conventional shallow gas workovers and recompletions as well as waterflood operations in the Mannville area.
The table below summarizes expected capital spending and drilling activities for the first and second half of 2017.
Exploration and development |
H1 2017 $ millions |
# of wells (gross/net) |
H2 2017 $ millions |
# of wells (gross/net) |
Total $ millions |
# of wells (gross/net) |
East Edson liquids-rich gas |
25 |
5/5.0 |
30 |
8/8.0 |
55 |
13/13.0 |
Mannville heavy oil |
4 |
4/3.3 |
4 |
4/4.0 |
8 |
8/7.3 |
Eastern shallow gas and other |
3 |
1/1.0 |
1 |
- |
4 |
1/1.0 |
Total capital spending(1) |
32 |
9/8.3 |
35 |
12/12.0 |
67 |
22/21.3 |
(1) |
Excludes budgeted abandonment and reclamation spending of up to $4 million in 2017. |
Capital spending during 2017 will be funded through a combination of adjusted funds flow and proceeds from the financing transactions closed on March 14, 2017.
Based on the total capital spending plan in 2017 of $67 million, Perpetual expects to exit 2017 at a production rate of 13,000 to 13,500 boe/d in December 2017, with full year 2017 production averaging between 10,750 to 11,000 boe/d (85 percent natural gas). This represents growth in average daily production from fourth quarter 2016 to full year 2017 of close to 30 percent and an increase in exit rate based on average December production of approximately 60 percent year over year.
In order to protect a base level of adjusted funds flow, Perpetual has commodity price contracts in place in 2017 on an estimated 45 percent of forecast production for the remainder of the year. These include natural gas contracts at AECO hub from April to December 2017 on close to 27,500 GJ/d at an estimated price of $3.15/GJ; and oil sales arrangements on 750 bbl/d protecting a WTI floor price of $USD50.00/bbl.
Based on these assumptions and the current forward market for oil and natural gas prices, Perpetual forecasts 2017 adjusted funds flow of approximately $40 million ($0.68 per share). Incorporating the current market value of 1.67 million TOU shares of $28.95 per share, the Company estimates year-end 2017 total net debt of approximately $80 million, with a corresponding debt to trailing twelve months adjusted funds flow ratio of approximately 2.0.
Incorporating the assumptions outlined above, the following table shows Perpetual's estimated 2017 forecast adjusted funds flow using various commodity price sensitivities for the full year of 2017:
Projected 2017 adjusted funds flow(2) ($ millions) 2017 AECO gas price ($/GJ)(1)
2017 WTI price |
$2.00 |
$2.50 |
$3.00 |
$3.50 |
$4.00 |
$4.50 | ||
$40.00 |
30.6 |
34.4 |
38.3 |
42.1 |
46.0 |
49.8 | ||
$45.00 |
31.9 |
35.7 |
39.6 |
43.4 |
47.3 |
51.1 | ||
$50.00 |
33.2 |
37.0 |
40.9 |
44.7 |
48.6 |
52.4 | ||
$55.00 |
36.2 |
40.0 |
43.9 |
47.7 |
51.6 |
55.5 | ||
$60.00 |
39.1 |
42.9 |
46.8 |
50.6 |
54.5 |
58.3 | ||
$65.00 |
40.5 |
44.4 |
48.2 |
52.1 |
55.9 |
59.8 |
(1) |
The current settled and forward average AECO and WTI prices for calendar 2017 as of March 14, 2017 were $2.58 per GJ and US$49.98 per bbl, respectively. |
(2) |
Adjusted funds flow is a non-GAAP measures. Please refer to "Non-GAAP Measures" in Perpetual's Management Discussion and Analysis dated March 14, 2017. |
Financial and Operating Highlights |
THREE MONTHS Ended December 31 |
YEAR ENDED December 31, | |||||
($Cdn thousands except volume and per share amounts) |
2016 |
2015 |
Change |
2016 |
2015 |
Change | |
Financial |
|||||||
Oil and natural gas revenue |
17,940 |
33,044 |
(46%) |
81,403 |
142,437 |
(43%) | |
Cash flow from (used in) operating activities |
4,470 |
11,980 |
(63%) |
(7,136) |
12,406 |
(158%) | |
Adjusted funds flow (1) |
3,326 |
362 |
819% |
920 |
2,004 |
(54%) | |
Per share (1) (2) |
0.06 |
0.05 |
20% |
0.02 |
0.27 |
93% | |
Net earnings (loss) |
20,379 |
(93,539) |
122% |
107,149 |
(89,274) |
220% | |
Per share (2) |
0.39 |
(12.34) |
103% |
2.11 |
(11.89) |
118% | |
Total assets |
361,405 |
603,450 |
(40%) |
361,405 |
603,450 |
(40%) | |
Net bank debt outstanding (1) |
43,870 |
73,891 |
(38%) |
43,870 |
73,891 |
(38%) | |
Senior notes, at principal amount |
60,573 |
275,000 |
(78%) |
60,573 |
275,000 |
(78%) | |
Carrying value of marketable securities |
(66,343) |
(145,275) |
(54%) |
(66,343) |
(145,275) |
(54%) | |
Total net debt (1) |
38,100 |
203,616 |
(80%) |
38,100 |
203,616 |
(80%) | |
Net capital expenditures |
|||||||
Exploration and development |
7,044 |
806 |
774% |
14,039 |
75,431 |
(81%) | |
Other |
25 |
25 |
– |
541 |
910 |
(41%) | |
Capital expenditures |
7,069 |
831 |
751% |
14,580 |
76,341 |
(81%) | |
Geological and geophysical expenditures |
(3) |
(93) |
97% |
23 |
1,526 |
(98%) | |
Dispositions, net of acquisitions |
1,248 |
3 |
415% |
(26,212) |
(23,710) |
(11%) | |
Net capital expenditures |
8,314 |
741 |
1002% |
11,609 |
54,157 |
(79%) | |
Common shares outstanding (thousands) (5) |
|||||||
End of period |
53,421 |
19,067 |
180% |
53,421 |
19,067 |
180% | |
Weighted average |
52,924 |
7,582 |
598% |
50,733 |
7,507 |
576% | |
Operating |
|||||||
Average production |
|||||||
Natural gas (MMcf/d) (3) |
40.3 |
105.1 |
(62%) |
74.7 |
104.2 |
(28%) | |
Oil and NGL (bbl/d) (3) |
1,403 |
2,144 |
(35%) |
1,672 |
2,337 |
(28%) | |
Total (boe/d) |
8,118 |
19,661 |
(59%) |
14,128 |
19,706 |
(28%) | |
Average prices |
|||||||
Natural gas, before derivatives ($/Mcf) |
3.31 |
2.74 |
21% |
2.19 |
2.87 |
(24%) | |
Natural gas, including derivatives ($/Mcf) |
2.41 |
2.92 |
(17%) |
2.42 |
3.01 |
(20%) | |
Oil, before derivatives ($/bbl) |
42.35 |
33.04 |
28% |
34.93 |
41.27 |
(15%) | |
Oil, including derivatives ($/bbl) |
38.95 |
39.81 |
(2%) |
37.60 |
52.48 |
(28%) | |
NGL ($/boe) |
46.99 |
33.68 |
40% |
35.45 |
33.72 |
5% | |
Drilling (wells drilled gross/net) |
|||||||
Gas |
3/3.0 |
– |
4/4.0 |
6/4.5 |
|||
Oil |
– |
– |
– |
– |
|||
Observation/Service |
– |
– |
– |
2/2.0 |
|||
Total |
3/3.0 |
– |
4/4.0 |
8/6.5 |
|||
Success rate (%) |
66.7/66.7 |
– |
75/75 |
100/100 |
(1) |
These are non-GAAP measures. Please refer to "Non-GAAP Measures" below. |
(2) |
Based on weighted average basic common shares outstanding for the period. |
(3) |
Exploration and development costs include geological and geophysical expenditures. |
(4) |
Production amounts are based on the Corporation's interest before royalty expense. |
(5) |
Common shares and per share amounts have been retroactively adjusted to reflect the consolidation of outstanding common shares on the basis of 20 common shares to one common share at March 24, 2016. All ommon shares are net of shares held in trust. |
Forward-Looking Information
Certain information regarding Perpetual in this news release including management's assessment of future plans and operations may constitute forward-looking information or statements under applicable securities laws. The forward looking information includes, without limitation, statements made under the heading "2017 Outlook"; anticipated amounts and allocation of capital spending; statements pertaining to adjusted funds flow levels, self-funding, future development and capital efficiencies; statements regarding estimated production and timing thereof; forecast average production; completions and development activities; infrastructure expansion and construction; anticipated effect of commodity prices on reserves; estimates of gross recoverable gas sales; estimated net asset value as at December 31, 2016 and on a pro forma basis; prospective oil and natural gas liquids production capability; projected realized natural gas prices and adjusted funds flow; estimated asset retirement obligations; anticipated effect of commodity prices on future development capital and reserves; commodity prices and foreign exchange rates; and gas price management. Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking information contained in this press release, which assumptions are based on management's analysis of historical trends, experience, current conditions and expected future developments pertaining to Perpetual and the industry in which it operates as well as certain assumptions regarding the matters outlined above. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Perpetual and described in the forward-looking information contained in this press release. Undue reliance should not be placed on forward-looking information, which is not a guarantee of performance and is subject to a number of risks or uncertainties, including without limitation those described under "Risk Factors" in Perpetual's MD&A for the year-ended December 31, 2016 and those included in other reports on file with Canadian securities regulatory authorities which may be accessed through the SEDAR website (www.sedar.com) and at Perpetual's website (www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not exhaustive. Forward-looking information is based on the estimates and opinions of Perpetual's management at the time the information is released and Perpetual disclaims any intent or obligation to update publicly any such forward-looking information, whether as a result of new information, future events or otherwise, other than as expressly required by applicable securities law.
Uncertainties in Estimating Reserves
There are numerous uncertainties inherent in estimating quantities of crude oil, natural gas and NGL reserves and the future adjusted funds flows attributed to such reserves. The reserve and associated adjusted funds flow information set forth above are estimates only. In general, estimates of economically recoverable crude oil, natural gas and NGL reserves and the future net adjusted funds flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially. For those reasons, estimates of the economically recoverable crude oil, NGL and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves prepared by different engineers, or by the same engineers at different times, may vary. The Company's actual production, revenues, taxes and development and operating expenditures with respect to its reserves will vary from estimates thereof and such variations could be material.
BOE Equivalents
Perpetual's aggregate proved and probable reserves are reported in barrels of oil equivalent (boe). Boe may be misleading, particularly if used in isolation. In accordance with NI 51-101 a boe conversion ratio for natural gas of 6 Mcf: 1 boe has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. The following abbreviations used in this news release have the meanings set forth below:
Bcfe |
billion cubic feet equivalent |
MMboe |
million barrels of oil equivalent |
Mboe |
thousand barrels of oil equivalent |
Non-GAAP Financial Measures
This press release includes references to financial measures commonly used in the oil and gas industry of adjusted funds flow, operating netback and net debt, which do not have a standardized meaning prescribed by International Financial Reporting Standards ("GAAP"). Accordingly, the Company's use of these terms may not be comparable to similarly defined measures presented by other companies. Management uses the term "adjusted funds flow" for its own performance measures and to provide shareholders and potential investors with a measurement of the Company's efficiency and its ability to generate the cash necessary to fund a portion of its future growth expenditures or to repay debt. Perpetual considers operating netback an important performance measure as it demonstrates its profitability relative to current commodity prices. Operating netbacks are calculated by deducting royalties, operating costs, and transportation from realized revenue. Operating netbacks are also calculated on a per boe basis using average boe production for the period. Operating netbacks on a per boe basis can vary significantly for each of the Company's operating areas. Net bank debt is measured as current and long term bank indebtedness including adjusted working capital deficiency (surplus). Net debt includes the carrying value of net bank debt and the TOU share margin loans and the principal amount of senior notes reduced for the mark-to-market value of TOU shares held. Net bank debt and net debt are used by management to analyze leverage. Investors are cautioned that non-GAAP measures should not be construed as alternatives to measures of financial performance determined in accordance with GAAP as an indication of the Company's performance. See Non-GAAP Financial Measures" in the Management's Discussion and Analysis for the definition and description of these terms.
Industry Metrics
The terms FDC, operating netbacks and net asset value, while commonly used in the oil and gas industry, do not have standardized meanings and may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons.
SOURCE Perpetual Energy Inc.