PR Newswire
CALGARY, Nov. 7, 2017
CALGARY, Nov. 7, 2017 /PRNewswire/ - (TSX:PMT) – Perpetual Energy Inc. ("Perpetual", the "Corporation" or the "Company") is pleased to release its third quarter 2017 financial and operating results. A complete copy of Perpetual's unaudited condensed interim consolidated financial statements and related Management Discussion and Analysis ("MD&A") for the three and nine months ended September 30, 2017 can be obtained through the Company's website at www.perpetualenergyinc.com and SEDAR at www.sedar.com.
The strategic focusing of our asset base, strengthening of our balance sheet, and steady execution of our growth-oriented capital program delivered attractive results in the third quarter. Adjusted funds flow of $8.2 million ($0.14 per share) was up 56% ($3.0 million) over the second quarter and $8.8 million over the comparative period in 2016. The main drivers of improved performance were a combination of production growth of 12%, despite voluntary shut-ins, and significant cost improvements in all aspects of our business, particularly at East Edson where operating costs were driven down another 22% to $2.42/boe during the third quarter. Furthermore, proactive natural gas price optimization strategies mitigated the impact of extremely low and volatile natural gas prices in Alberta and translated into an average realized natural gas sales price of $3.11/Mcf, more than 50% higher than AECO monthly index prices.
THIRD QUARTER 2017 HIGHLIGHTS
Production and Operations
Financial Highlights
OUTLOOK
Success in advancing the Company's strategic priorities has established a foundation for strong growth in production and adjusted funds flow in 2017 and 2018. The Company expects to continue to drive capital efficiency improvements and reductions in operating, financing and administrative costs to improve upon the sustainable cost structure achieved through strategic decisions implemented over the past two years.
Based on the total capital spending plan in 2017 of $73 to $78 million, Perpetual continues to expect to exit 2017 at a production rate approaching 13,000 boe/d (85% natural gas). This represents growth in exit rate based on average December production of approximately 60% compared to the prior year.
Capital spending during the remainder of 2017 will be funded through adjusted funds flow generation, the final $10 million drawdown of the Term Loan and borrowings under the Credit Facility. Perpetual is currently in discussions with its Credit Facility lenders regarding the redetermination of its borrowing limit effective November 30, 2017, and anticipates an increase to the Credit Facility borrowing base.
Based on these assumptions and the current forward market for oil and natural gas prices, Perpetual forecasts 2017 adjusted funds flow of approximately $28 to $32 million. Incorporating the current market value of 1.67 million TOU shares, the Company estimates year-end 2017 total net debt of approximately $100 to $105 million, with a corresponding estimated net debt to trailing twelve months adjusted funds flow ratio of approximately 3.4 at year end 2017.
For 2018, Perpetual is planning a capital program that will be funded by adjusted funds flow. Annual production in 2018 is anticipated to increase by approximately 30% over 2017.
The Company will continue to monitor commodity market fundamentals closely over the coming months and adjust activities as required, balancing the positive momentum that is translating into operational excellence in executing our East Edson development program with spending within our means to maintain adequate liquidity and balance sheet strength.
2017 STRATEGIC PRIORITIES
During the third quarter of 2017, significant progress was made to advance Perpetual's top four strategic priorities for 2017 which include:
Grow value of Greater Edson liquids-rich gas
Optimize value potential of Eastern Alberta assets
Advance high impact opportunities
Optimize balance sheet for growth
About Perpetual
Perpetual is an oil and natural gas exploration, production and marketing company headquartered in Calgary, Alberta. Perpetual operates a diversified asset portfolio, including liquids-rich natural gas assets in the deep basin of west central Alberta, heavy oil and shallow natural gas in eastern Alberta, with longer term opportunities through undeveloped oil sands leases in northern Alberta. Additional information on Perpetual can be accessed at www.sedar.com or from the Corporation's website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.
FINANCIAL AND OPERATING HIGHLIGHTS | |||||||
Three Months Ended September 30, |
Nine Months Ended September 30, | ||||||
(Cdn$ thousands except volume and per share amounts) |
2017 |
2016 |
% Change |
2017 |
2016 |
% Change | |
Financial |
|||||||
Oil and natural gas revenue |
20,026 |
22,268 |
(10) |
57,912 |
63,463 |
(9) | |
Cash flow from (used in) operating activities |
5,778 |
(1,710) |
N/A |
8,217 |
(11,876) |
N/A | |
Adjusted funds flow(1) |
8,199 |
(602) |
N/A |
18,552 |
(2,406) |
N/A | |
Per share(1)(2) |
0.14 |
(0.01) |
N/A |
0.32 |
(0.05) |
N/A | |
Net income (loss) |
(8,082) |
(10,919) |
26 |
(29,473) |
86,770 |
(134) | |
Per share - basic(2) |
(0.14) |
(0.21) |
33 |
(0.51) |
1.74 |
(129) | |
Per share - diluted(2) |
(0.14) |
(0.21) |
33 |
(0.51) |
1.65 |
(131) | |
Total assets |
356,449 |
471,185 |
(24) |
356,449 |
471,185 |
(24) | |
Revolving bank debt |
29,262 |
10,632 |
175 |
29,262 |
10,632 |
175 | |
Term Loan, at principal amount |
35,000 |
– |
N/A |
35,000 |
- |
N/A | |
TOU share margin loans, at principal amount |
18,740 |
22,623 |
(17) |
18,740 |
22,623 |
(17) | |
Senior notes, at principal amount |
32,490 |
60,573 |
(46) |
32,490 |
60,573 |
(46) | |
Carrying value of TOU share investment |
(42,304) |
(65,659) |
(36) |
(42,304) |
(65,659) |
(36) | |
Adjusted working capital deficiency |
19,556 |
2,031 |
863 |
19,556 |
2,031 |
863 | |
Net debt(1) |
92,744 |
30,200 |
207 |
92,744 |
30,200 |
207 | |
Net capital expenditures |
|||||||
Capital expenditures |
25,392 |
1,411 |
1,700 |
53,988 |
7,511 |
619 | |
Geological and geophysical costs |
– |
– |
– |
(22) |
26 |
N/A | |
Net payments (proceeds) on acquisitions and dispositions |
680 |
(988) |
N/A |
1,452 |
(7,756) |
N/A | |
Net capital expenditures |
26,072 |
423 |
6,064 |
55,418 |
(219) |
N/A | |
Common shares outstanding (thousands)(3) |
|||||||
End of period |
59,316 |
52,327 |
13 |
59,316 |
52,327 |
13 | |
Weighted average – basic |
59,152 |
52,253 |
13 |
57,572 |
49,997 |
15 | |
Weighted average – diluted |
59,152 |
52,253 |
13 |
57,572 |
52,529 |
10 | |
Operating |
|||||||
Average production |
|||||||
Natural gas (MMcf/d)(4) |
51.8 |
75.5 |
(31) |
45.9 |
86.3 |
(47) | |
Oil and NGL (bbl/d)(4) |
1,711 |
1,528 |
12 |
1,595 |
1,764 |
(10) | |
Total (boe/d)(4) |
10,330 |
14,123 |
(27) |
9,240 |
16,146 |
(43) | |
Average prices |
|||||||
Natural gas ($/Mcf) |
3.11 |
2.12 |
47 |
3.65 |
2.42 |
51 | |
Oil ($/bbl) |
43.01 |
38.90 |
11 |
39.86 |
37.21 |
7 | |
NGL ($/bbl) |
39.06 |
35.80 |
9 |
43.59 |
32.72 |
33 | |
Drilling (wells drilled gross/net) |
|||||||
Gas |
5/4.4 |
– |
12/11.4 |
1/1.0 |
|||
Oil |
– |
– |
4/3.3 |
- |
|||
Total |
5/4.4 |
– |
16/14.7 |
1/1.0 |
|||
(1) |
These are non-GAAP measures. Please refer to "Non-GAAP Measures" below. |
(2) |
Based on weighted average basic or diluted common shares outstanding for the period. |
(3) |
Common shares are net of shares held in trust. |
(4) |
Production amounts are based on the Corporation's interest before royalty expense. |
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 "Outlook"; anticipated amounts and allocation of capital spending; statements pertaining to adjusted funds flow levels, future development and capital efficiencies; statements regarding estimated production and timing thereof; forecast year end exit and average production rates; completions and development activities; infrastructure expansion and construction; prospective oil and natural gas liquids production capability; projected realized natural gas prices and adjusted funds flow; 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.
The forward-looking information and statements contained in this news release speak only as of the date of this news release and neither the Corporation nor any of it subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, unless expressly required to do so by applicable securities laws.
Financial Outlook
Also included in this news release are estimates of Perpetual's 2017 adjusted funds flow, total net debt and net debt to trailing twelve months adjusted funds flow ratio, which are based on, among other things, the various assumptions as to production levels, capital expenditures, and other assumptions disclosed in this news release. To the extent such estimates constitute a financial outlook, they were approved by management and the Board of Directors of Perpetual on November 6, 2017 and are included to provide readers with an understanding of Perpetual's anticipated adjusted funds flow, total net debt and net debt to trailing twelve months adjusted funds flow ratio based on the capital expenditure, production and other assumptions described herein and readers are cautioned that the information may not be appropriate for other purposes.
Initial Production Rates
Any references in this news release to initial clean up and flow back rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.
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.
Non-GAAP Financial Measures
This press release includes references to financial measures commonly used in the oil and gas industry of realized revenue, 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. Realized revenue is used by management to calculate the Corporation's net realized commodity prices taking into account monthly settlements on financial crude oil and natural gas forward sales, collars and basis differentials. 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 debt includes adjusted working capital deficiency (surplus), the TOU share margin loans and the principal amount of the term loan and senior notes reduced for the mark-to-market value of TOU shares held. Net debt is used by management to analyze borrowing capacity. 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.
SOURCE Perpetual Energy Inc.