Paramount Resources Ltd. (TSX:POU) -
OVERVIEW
Oil and Gas Operations
-- Proved reserves increased 72 percent year-over-year to 87.7 MMBoe, after
production of 7.6 MMBoe and dispositions of 2.2 MMBoe (replacement ratio
of 6.1 times).
-- Total proved and probable ("P+P") reserves increased 47.3 MMBoe to 227.3
MMBoe, with conventional P+P reserves increasing 54 percent to 133.8
MMBoe (replacement ratio of 7.6 times) and probable oil sands bitumen
reserves increasing to 93.5 MMBoe.
-- Year-end 2013 P+P reserves included 57.8 MMBbl of NGLs (43 percent of
conventional P+P reserves), representing an 88 percent increase in NGLs
reserves over 2012.
-- The value of year-end 2013 conventional P+P reserves (10% discount,
before tax) more than doubled to $1.8 billion.
-- Kaybob COU P+P finding and development costs, excluding major facilities
and gathering system project construction costs, were $10.21 per Boe
compared to $10.31 per Boe in 2012.
-- Sales volumes will begin to ramp-up as the Musreau Deep Cut Facility
starts up in the second quarter of 2014. Paramount's sales volumes are
expected to reach approximately 50,000 Boe/d in 2014 and increase to
approximately 70,000 Boe/d in 2015.
-- Paramount's behind pipe well inventory in the Kaybob Deep Basin has
increased to 66 (47.9 net) wells with estimated first month
deliverability of approximately 300 MMcf/d (230 MMcf/d net).
-- Kaybob COU sales volumes increased 23 percent to 13,402 Boe/d in 2013
compared to 10,910 Boe/d in 2012. Total Company sales volumes increased
5 percent in 2013 to average 20,914 Boe/d, despite third-party
downstream disruptions that curtailed production by approximately 3,500
Boe/d and the sale of 1,500 Boe/d of production.
-- NGLs volumes are projected to increase from 12 percent of total sales
volumes in 2013 to approximately 40 percent by the end of 2014.
-- Netbacks increased by 42 percent to $126.2 million in 2013 from $88.9
million in 2012.
-- In 2013, the Company sold non-core properties in Alberta, the Northwest
Territories and the United States, realizing proceeds of approximately
$70 million in cash and publicly trading securities.
-- In February 2014, Paramount entered into an agreement to sell coal bed
methane properties producing approximately 6 MMcf/d in the Chain-Delia
area of Alberta for approximately $12 million in common shares of a TSX-
Venture listed Company.
Corporate
-- The Company raised a total of approximately $360 million in 2013 through
equity offerings and the $150 million re-opening of its 7 5/8 percent
senior notes due 2019.
-- In November 2013, Paramount's bank credit facility was increased from
$450 million to $600 million based on progress made in the Kaybob Deep
Basin development and increases in reserves to the end of September
2013.
-- Total 2013 capital spending was approximately $100 million lower than
Paramount's $800 million capital guidance because of severe weather
conditions in late-2013 and other factors which deferred spending into
2014.
Strategic Investments
-- The market value of Paramount's investments in publicly-traded and
private corporations was approximately $690 million ($7.10 per Paramount
share) as of December 31, 2013.
-- In the Liard Basin, the Company's first horizontal shale gas exploration
well at Patry was brought-on production in late-December. At Dunedin,
the Company plans to complete its d-57-D shale gas exploration well and
drill an additional shale gas exploration well in 2014 to preserve
lands.
-- Cavalier Energy anticipates regulatory approvals for the initial 10,000
Bbl/d phase of its Hoole project will be received by mid-2014. Front-end
engineering and design work was completed in 2013.
-- Fox Drilling's two new walking rigs are both currently drilling separate
10-well pads in the Kaybob COU.
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FINANCIAL AND OPERATING HIGHLIGHTS(1)(2)
----------------------------------------------------------------------------
($ millions, except as noted)
----------------------------------------------------------------------------
Three months ended December 31 Year ended December 31
2013 2012 % Change 2013 2012 % Change
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FINANCIAL
Petroleum and
natural gas
sales 57.8 54.6 6 232.5 197.1 18
Funds flow from
operations 18.3 17.7 3 70.6 58.1 22
Per share -
diluted
($/share) 0.19 0.20 0.75 0.67
Net income
(loss) 0.3 (151.8) 100 (59.1) (61.9) 5
Per share -
diluted
($/share) - (1.69) (0.63) (0.71)
Exploration and
development
expenditures 175.8 166.8 5 624.9 523.1 19
Investments in
other entities
- market value
(3) 688.5 704.8 (2)
Total assets 2,447.8 2,037.0 20
Net debt 1,119.2 701.4 60
Common shares
outstanding
(thousands) 96,993 89,932 8
OPERATING
Sales volumes
Natural gas
(MMcf/d) 102.5 104.1 (2) 106.1 98.5 8
NGLs (Bbl/d) 2,668 2,110 26 2,498 1,873 33
Oil (Bbl/d) 536 1,213 (56) 726 1,620 (55)
Total (Boe/d) 20,290 20,674 (2) 20,914 19,917 5
Average realized
price
Natural gas
($/Mcf) 3.73 3.45 8 3.57 2.72 31
NGLs ($/Bbl) 74.30 61.23 21 74.73 67.10 11
Oil ($/Bbl) 78.92 79.72 (1) 87.47 83.16 5
Total ($/Boe) 30.99 28.70 8 30.46 27.04 13
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RESERVES (4)
--------------------- --------------------
Proved Proved & Probable
---------------------------------------------------
December December December December
31 31 31 31
2013 2012 2013 2012
---------------------------------------------------
Natural gas
(Bcf) 301.3 201.9 49 450.5 323.7 39
NGLs (MBbl) 36,777 15,662 135 57,844 30,761 88
Light and
medium crude
oil (MBbl) 680 1,540 (56) 885 2,128 (58)
--------------------- --------------------
Total
Conventional
(MBoe) 87,677 50,857 72 133,813 86,842 54
Oil sands
bitumen (MBbl) - - - 93,468 93,091 -
--------------------- --------------------
Total Company
(MBoe) 87,677 50,857 72 227,281 179,933 26
--------------------- --------------------
Conventional F&D
costs excluding
facilities &
gathering
($/Boe) 17.79 16.82 6 10.87 12.18 (11)
Conventional
reserves
replacement 611% 336% 759% 599%
NPV10 future net
revenue before
tax
Conventional 1,093 456 140 1,793 880 104
Total Company 1,093 456 140 2,094 1,259 66
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(1) Readers are referred to the advisories concerning non-GAAP measures and
Oil and Gas Measures and Definitions in the Advisories section of this
document.
(2) Amounts include the results of discontinued operations. Refer to
Paramount's Management's Discussion and Analysis for the year ended
December 31, 2013.
(3) Based on the period-end closing prices of publicly-traded enterprises
and the book value of the remaining investments.
(4) Working interest reserves before royalty deductions. Net present values
were determined using forecast prices and costs and do not represent
fair market value.
OUTLOOK
The Company's 2014 exploration and development ("E&D") and strategic investments
capital budget is $650 million, excluding land acquisitions and capitalized
interest. Paramount's E&D investments will primarily focus on the Company's Deep
Basin developments, including drilling and completing wells in Kaybob to feed
the new deep cut facilities and at Karr-Gold Creek to further delineate the
middle and upper Montney formation. Spending will also be directed to facilities
projects including completion of the deep cut projects at Musreau and at Smoky,
the amine processing train and the condensate stabilizer expansion. In the
Southern and Northern COUs, up to eight wells are planned to be drilled to
explore new opportunities and for land retention. Strategic Investments spending
in 2014 will be directed towards completing the d-57-D shale gas exploration
well at Dunedin and drilling an additional vertical shale gas exploration well
at Dunedin for land retention.
Fourth quarter 2013 sales volumes averaged approximately 20,000 Boe/d and
Paramount expects sales volumes to continue at that level, after giving effect
to the first quarter Chain area disposition. Paramount will begin to ramp-up
production as the Musreau Deep Cut Facility starts up, additional components of
the Company's Kaybob area infrastructure are completed and third-party
de-ethanization capacity becomes available. Sales volumes are expected to reach
approximately 50,000 Boe/d in 2014 and increase to approximately 70,000 Boe/d in
2015, depending upon the availability of downstream third-party de-ethanization
capacity.
ADDITIONAL INFORMATION
ABOUT PARAMOUNT
Paramount Resources Ltd. is a Canadian oil and natural gas exploration,
development and production company with operations focused in Western Canada.
Paramount's common shares are listed on the Toronto Stock Exchange under the
symbol "POU".
Paramount's financial and operating results for 2013, including Management's
Discussion and Analysis and the Company's audited consolidated financial
statements as at and for the year ended December 31, 2013, can be obtained at:
http://media3.marketwire.com/docs/306pou_ar.pdf.
This information will also be made available through: SEDAR at www.sedar.com and
Paramount's website at www.paramountres.com.
Paramount's Annual Information Form ("AIF") for the year ended December 31,
2013, which includes the disclosure and reports relating to reserves data and
other oil and gas information required pursuant to National Instrument 51-101,
will also be made available through Paramount's website and SEDAR.
ADVISORIES
FORWARD-LOOKING INFORMATION
Certain statements in this document constitute forward-looking information under
applicable securities legislation. Forward-looking information typically
contains statements with words such as "anticipate", "believe", "estimate",
"will", "expect", "plan", "schedule", "intend", "propose", or similar words
suggesting future outcomes or an outlook. Forward looking information in this
document includes, but is not limited to:
-- projected production and sales volumes and growth and the timing thereof
(including expected first month production volumes from the Kaybob COU's
inventory of behind-pipe wells);
-- forecast capital expenditures;
-- exploration, development, and associated operational plans and
strategies and the anticipated timing of such activities;
-- projected timelines for constructing, commissioning and/or starting-up
new and expanded deep cut natural gas processing and associated
facilities;
-- the projected availability of third party processing, transportation,
fractionation, de-ethanization and other facilities;
-- the anticipated date for receiving regulatory approvals for the initial
phase of Cavalier Energy's Hoole Grand Rapids oil sands development
project;
-- business strategies and objectives; and
-- estimated reserves and the discounted present value of future net
revenues therefrom.
Such forward-looking information is based on a number of assumptions which may
prove to be incorrect. Assumptions have been made with respect to the following
matters, in addition to any other assumptions identified in this document:
-- future oil, bitumen, natural gas, NGLs and other commodity prices;
-- royalty rates, taxes and capital, operating, general & administrative
and other costs;
-- foreign currency exchange rates and interest rates;
-- general economic and business conditions;
-- the ability of Paramount to obtain the required capital to finance its
exploration, development and other operations;
-- the ability of Paramount to obtain equipment, services, supplies and
personnel in a timely manner and at an acceptable cost to carry out its
activities;
-- the ability of Paramount to secure adequate product processing,
transportation, fractionation, de-ethanization and storage capacity on
acceptable terms;
-- the ability of Paramount to market its oil, bitumen, natural gas and
NGLs successfully to current and new customers;
-- the ability of Paramount and its industry partners to obtain drilling
success (including in respect of anticipated production volumes,
reserves additions and NGLs yields) and operational improvements,
efficiencies and results consistent with expectations;
-- the timely receipt of required governmental and regulatory approvals;
and
-- anticipated timelines and budgets being met in respect of drilling
programs and other operations (including well completions and tie-ins
and the construction, commissioning and start-up of new and expanded
facilities).
Although Paramount believes that the expectations reflected in such forward
looking information is reasonable, undue reliance should not be placed on it as
Paramount can give no assurance that such expectations will prove to be correct.
Forward-looking information is based on expectations, estimates and projections
that involve a number of risks and uncertainties which could cause actual
results to differ materially from those anticipated by Paramount and described
in the forward looking information. The material risks and uncertainties
include, but are not limited to:
-- fluctuations in oil, bitumen, natural gas, NGLs and other commodity
prices;
-- changes in foreign currency exchange rates and interest rates;
-- the uncertainty of estimates and projections relating to future revenue,
future production, NGLs yields, royalty rates, taxes and costs and
expenses;
-- the ability to secure adequate product processing, transportation,
fractionation, de-ethanization and storage capacity on acceptable terms;
-- operational risks in exploring for, developing and producing crude oil,
bitumen, natural gas and NGLs;
-- the ability to obtain equipment, services, supplies and personnel in a
timely manner and at an acceptable cost;
-- potential disruptions or unexpected technical or other difficulties in
designing, developing, expanding or operating new, expanded or existing
facilities (including third party facilities);
-- industry wide processing, pipeline, de-ethanization, and fractionation
infrastructure outages, disruptions and constraints;
-- risks and uncertainties involving the geology of oil and gas deposits;
-- the uncertainty of reserves and resources estimates;
-- general business, economic and market conditions;
-- the ability to generate sufficient cash flow from operations and obtain
financing at an acceptable cost to fund planned exploration, development
and operational activities and meet current and future obligations
(including costs of anticipated new and expanded facilities and other
projects and product, processing, transportation, fractionation and
similar commitments);
-- changes in, or in the interpretation of, laws, regulations or policies
(including environmental laws);
-- the ability to obtain required governmental or regulatory approvals in a
timely manner, and to enter into and maintain leases and licenses;
-- the effects of weather;
-- the timing and cost of future abandonment and reclamation obligations
and potential liabilities for environmental damage and contamination;
-- uncertainties regarding aboriginal claims and in maintaining
relationships with local populations and other stakeholders;
-- the outcome of existing and potential lawsuits, regulatory actions,
audits and assessments; and
-- other risks and uncertainties described elsewhere in this document and
in Paramount's other filings with Canadian securities authorities.
The foregoing list of risks is not exhaustive. For more information relating to
risks, see the section titled "RISK FACTORS" in Paramount's current annual
information form. The forward-looking information contained in this document is
made as of the date hereof and, except as required by applicable securities law,
Paramount undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of new
information, future events or otherwise.
NON-GAAP MEASURES
In this document "Funds flow from operations", "Netback", "Net Debt",
"Exploration and development expenditures" and "Investments in other entities -
market value", collectively the "Non-GAAP measures", are used and do not have
any standardized meanings as prescribed by International Financial Reporting
Standards.
Funds flow from operations refers to cash from operating activities before net
changes in operating non-cash working capital, geological and geophysical
expenses and asset retirement obligation settlements. Funds flow from operations
is commonly used in the oil and gas industry to assist management and investors
in measuring the Company's ability to fund capital programs and meet financial
obligations. Netback equals petroleum and natural gas sales less royalties,
operating costs, production taxes and transportation costs. Netback is commonly
used by management and investors to compare the results of the Company's oil and
gas operations between periods. Net Debt is a measure of the Company's overall
debt position after adjusting for certain working capital amounts and is used by
management to assess the Company's overall leverage position. Refer to the
liquidity and capital resources section of the Company's Management's Discussion
and Analysis for the period for the calculation of Net Debt. Exploration and
development expenditures refer to capital expenditures and geological and
geophysical costs incurred by the Company's COUs (excluding land and
acquisitions). The exploration and development expenditure measure provides
management and investors with information regarding the Company's Principal
Property spending on drilling and infrastructure projects, separate from land
acquisition activity. Investments in other entities - market value reflects the
Company's investments in enterprises whose securities trade on a public stock
exchange at their period end closing price (e.g. Trilogy Energy Corp., MEG
Energy Corp., MGM Energy Corp., Strategic Oil & Gas Ltd. and others), and
investments in all other entities at book value. Paramount provides this
information because the market values of equity-accounted investments, which are
significant assets of the Company, are often materially different than their
carrying values.
Non-GAAP measures should not be considered in isolation or construed as
alternatives to their most directly comparable measure calculated in accordance
with GAAP, or other measures of financial performance calculated in accordance
with GAAP. The Non-GAAP measures are unlikely to be comparable to similar
measures presented by other issuers.
OIL AND GAS MEASURES AND DEFINITIONS
This document contains disclosures expressed as "Boe", "MBoe" and "Boe/d". All
oil and natural gas equivalency volumes have been derived using the ratio of six
thousand cubic feet of natural gas to one barrel of oil. Equivalency measures
may be misleading, particularly if used in isolation. A conversion ratio of six
thousand cubic feet of natural gas to one barrel of oil is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the well head. The term "liquids" is used
to represent oil and natural gas liquids.
During 2013, the value ratio between crude oil and natural gas was approximately
25:1. This value ratio is significantly different from the energy equivalency
ratio of 6:1. Using a 6:1 ratio would be misleading as an indication of value.
Conventional reserve estimates include nominal amounts of volumes and future net
revenues related to Paramount's completed shale gas well. The estimates of
reserves and future net revenue for individual properties may not reflect the
same confidence level as estimates of reserves and future net revenue for all
properties, due to the effects of aggregation. In addition, estimates of future
net revenue do not represent fair market value.
Finding and Development ("F&D") costs exclude capital costs and reserve volumes
related to oil sands and exploratory shale gas properties within Paramount's
Strategic Investments business segment because the relationship between capital
amounts invested and reserve volumes discovered for such properties is not
comparable to conventional oil and gas properties.
The reserves replacement disclosure herein was calculated as the net increase in
proved and proved and probable reserves estimates from extensions and
discoveries, technical revisions and economic factors divided by the Company's
total production in the period. Estimated production from wells that have not
yet produced included in the Kaybob COU's estimated behind pipe production
inventory is based on the Company's 4.4 Bcf type curve for Falher formation
wells and 3.0 Bcf type curve for Montney formation wells.
FOR FURTHER INFORMATION PLEASE CONTACT:
Paramount Resources Ltd.
J.H.T. (Jim) Riddell
President and Chief Operating Officer
(403) 290-3600
(403) 262-7994 (FAX)
Paramount Resources Ltd.
B.K. (Bernie) Lee
Chief Financial Officer
(403) 290-3600
(403) 262-7994 (FAX)
www.paramountres.com
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