Pieridae Energy Limited (“Pieridae” or the “Company”)
(PEA.TO) released its Q3 2021 financial and operating
results today, highlighted by solid increases in petroleum and
natural gas revenue and AFFO and the successful completion of the
Company’s second major facility turnaround of 2021, at the Caroline
Gas Complex.
“We maintained solid production and revenue in
the quarter despite the scheduled shutdown of a second gas plant
this year. I was pleased to see we were able to demonstrate our
commitment to ‘safety first’ through this necessary maintenance,
while keeping production up and taking advantage of increased
commodity prices,” said Pieridae’s Chief Executive Officer Alfred
Sorensen.
“The Strategic Review of the Company assisted by our advisor,
Peters & Co., is progressing well and we remain hopeful it will
result in a successful conclusion,” added Sorensen. “Pieridae
formed a special Board committee in late July to oversee the
identification, examination and consideration of a range of
strategic alternatives with a view to enhancing shareholder value.
We are advancing the review in a timely and constructive
manner.
“Last quarter, the Company also announced it would analyze
options that could make a reconfigured LNG initiative more
compatible with the current environment. We are in the midst of a
detailed analysis of a potential floating LNG Project, one that
would produce net-negative GHG emissions, provide a bridge fuel to
countries eager to switch from coal-fired to natural-gas-fuelled
power facilities, provide an opportunity for Indigenous
reconciliation and create much-needed jobs in Atlantic Canada and
Alberta,” concluded Sorensen.
Pieridae deferred its Q2 earnings call due to the Strategic
Review process and the analysis of alternatives for the Goldboro
LNG Project. We will defer the call again this quarter but intend
to schedule an update call for investors and analysts in late
November should there be something material to report from the
Strategic Review.
___________________________________
1 Refer to the “Non-GAAP measures” section on pages 13-15 of the
Company’s Q3 2021 MD&A.
Q3 2021 Financial
HighlightsPieridae produced an average of 38,595 boe/day
during the third quarter, a 1% increase from the prior quarter, and
a 1% increase from the comparative quarter in 2020. Pieridae
continues to cost-effectively minimize the impact of our natural
reserve declines by optimizing field activities, exercising low
investment quit claims and conducting other asset consolidation
activities.
A scheduled major turnaround of the Company’s
Caroline Gas Complex was successfully completed, the second major
turnaround conducted on our midstream assets in 2021. The majority
of Pieridae’s production normally processed through Caroline was
redirected to a third-party facility for the duration of the
shutdown.
Third party pipeline maintenance also required
Pieridae’s Waterton Gas Plant to be shut down for eight days. We
took advantage of that closure to complete previously deferred
maintenance projects at the Plant.
The Company’s realized natural gas price was
$2.70/mcf in the third quarter compared to an AECO benchmark of
$3.59/mcf. While below benchmark as a result of our fixed-price
forward sales hedge portfolio, realized prices for natural gas were
4% higher compared to the second quarter of 2021 and 59% higher
than the comparative quarter in 2020.
Since May 2020, Pieridae’s senior secured lender
Third Eye Capital Corporation has waived the requirement to hedge
60% of production on an 18-month rolling basis in order to allow
the Company to benefit from strengthening crude and natural gas
markets. As of September 30, 2021, Pieridae has hedged
approximately 30% of production over the 18-month period ending
March 2023. Natural gas hedges consist of roughly 65,231 GJ/d to
March 2023 at an average of $2.59/GJ. Condensate hedges consist of
1,500bbl/day to December 2021 at an average price of USD
$54.95/bbl.
In the third quarter of 2021, Pieridae generated
cashflow from operating activities of $6.9 million and AFFO of
$11.0 million, an increase of $17.8 million or 262% as compared to
the same period in 2020. This was primarily due to the strength in
revenues from higher commodity prices, partially offset by higher
royalties and lower third- party processing income.
Petroleum and natural gas revenue in the third
quarter of 2021 was $77.1 million, an increase of $28.7 million or
59% compared to the same quarter in 2020. Thus far this year, this
revenue was $230.2 million, an increase of $62.8 million or 38%
compared to the same period in 2020. The increase was primarily due
to significant increases in year-to-date realized prices for
natural gas (36%), condensate (21%) and NGLs (108%), as production
was relatively consistent year over year in the third quarter.
Third party processing revenue is generated from
fees charged to other companies for processing their production and
sulphur volumes at our three sour gas plants and other facilities.
This income adds significantly to the economic benefits at the
facilities by helping offset their fixed operating costs. Q3 2021
third party processing income was $3.6 million, a decrease of $2.4
million or 40% compared to the same quarter in 2020. On a year-to-
date basis, this revenue was $12.3 million, a decrease of $7.5
million or 38% compared to the same period in 2020. These decreases
are due to third-party owned production assets being shut-in
leading to lower throughput volumes, the Jumping Pound and Caroline
turnarounds, and Pieridae’s fall 2020 acquisition of working
interest ownership in Waterton which lowered third party processing
revenue while increasing Pieridae’s own production volumes and
revenues.
Q3 2021 Operations
HighlightsThird quarter 2021 production mentioned above of
38,595 boe/d was an increase of 386 boe/day or 1% compared to the
same quarter in 2020. The increase was primarily due to higher
production from properties in the Northern area partially offset by
scheduled downtime at Caroline and Waterton.
Additionally, as a result of market fundamentals, ethane was
reinjected back into the natural gas sales stream at two of
Pieridae’s gas processing facilities resulting in a 2% increase in
natural gas heat content but negatively impacting production by 760
boe/day and 1,187 boe/day for the three and nine months ended
September 30, 2021. Pieridae is compensated for the price
differential when reinjecting ethane versus selling it, resulting
in no material impact to revenue; however, production volume, and
resulting per boe figures, are negatively impacted.
Through the first nine months of 2021, production has averaged
40,312 boe/d, a decrease of 748 boe/day or 2% compared to the same
period in 2020. This was primarily due to downtime from the
scheduled turnaround at the Jumping Pound Gas Complex and ethane
reinjection into the natural gas stream, partially offset by
incremental volumes from Pieridae’s fall 2020 acquisition of
working interest ownership in Waterton.
Quarterly Highlights
|
2021 |
2020 |
2019 |
($ 000s unless otherwise noted) |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Production |
|
|
|
|
|
|
|
|
Natural gas (mcf/day) |
191,439 |
194,232 |
215,179 |
212,220 |
184,080 |
208,689 |
199,234 |
204,262 |
Condensate (bbl/day) |
2,555 |
2,950 |
3,158 |
3,259 |
2,807 |
3,166 |
2,850 |
2,840 |
NGLs (bbl/day) |
4,133 |
3,083 |
4,975 |
6,171 |
4,722 |
5,843 |
5,156 |
5,253 |
Sulphur (ton/day) |
1,518 |
1,710 |
1,713 |
1,829 |
2,232 |
1,970 |
1,906 |
938 |
Total production (boe/d) |
38,595 |
38,404 |
43,997 |
44,800 |
38,209 |
43,791 |
41,211 |
42,137 |
|
|
|
|
|
|
|
|
|
Financial |
|
|
|
|
|
|
|
|
Net loss |
(14,846) |
(10,058) |
(19,547) |
(45,968) |
(29,845) |
(13,396) |
(11,484) |
(25,873) |
Net loss per share, basic and diluted |
(0.09) |
(0.06) |
(0.12) |
(0.29) |
(0.19) |
(0.09) |
(0.07) |
(0.18) |
Net operating income (loss) (1) |
17,920 |
14,444 |
20,876 |
12,829 |
(646) |
19,301 |
19,239 |
24,470 |
Cashflow provided by (used in) operating activities |
6,885 |
12,093 |
11,000 |
1,037 |
(4,541) |
(2,013) |
6,426 |
(17,748) |
Adjusted funds flow from operations (1) |
10,981 |
8,516 |
14,877 |
8,535 |
(6,779) |
12,466 |
12,644 |
14,448 |
Total assets |
560,782 |
575,690 |
557,696 |
612,651 |
583,942 |
588,415 |
609,437 |
602,474 |
Working capital (deficit) surplus |
(52,534) |
(47,862) |
(28,314) |
(19,615) |
(9,164) |
15,109 |
15,596 |
19,105 |
Capital expenditures |
9,852 |
17,959 |
5,614 |
8,926 |
6,033 |
264 |
2,020 |
165,764 |
Development expenses |
783 |
(4,862) |
8,604 |
8,682 |
2,472 |
4,129 |
3,459 |
805 |
(1) Refer to the “Non-GAAP measures” section on
pages 13-15 of the Company’s Q3 2021 MD&A. |
COVID-19 UpdatePieridae remains
committed to the health and safety of its employees as they
continue to do a remarkable job operating our assets safely and
reliably as the pandemic stretches into month 20.
In early July, a majority of Pieridae employees
working from home returned to work following the Alberta Government
lifting all restrictions. This return was short-lived, however, as
many employees were back working from home in mid-September due to
the provincial government re-introducing a mandated work from home
policy.
The company continues to support health
officials in urging vaccinations for all those who are able.
As a result of the ongoing vigilance by our
staff, Pieridae has not suffered any significant loss of
productivity due to COVID-19.
Q3 2021 Developments
Term Loan Deferred Fee Payment Date
DelayedPieridae announced on October 12, 2021 it had
reached an agreement with its senior secured lender Third Eye
Capital Corporation (“TEC”) to delay payment of the $50.0 million
deferred fee owing under Pieridae’s Credit Agreement signed with
TEC in October 2019. The deferred fee was to have been paid by
October 16, 2021. The payment deadline has now been extended to the
first business day of January 2022.
“I am pleased we have achieved this payment
extension and want to thank TEC for their continued support of the
Company and the Strategic Review currently underway with Peters
& Co. that is focused on enhancing shareholder value,” said
Pieridae’s Chief Executive Officer Alfred Sorensen in a news
release. “This extension to the beginning of 2022 gives us the time
to continue to pursue the Strategic Review process with the goal of
concluding a transaction that is beneficial to the Company.”
2021 GuidanceThe Company’s
guidance was adjusted in the second quarter of 2021, with an
updated production forecast of 40,000-42,500 boe/day for the
remainder of the year, compared to previous guidance of
40,000-45,000 boe/day. We also guided NOI in the range of $85-$100
million, down from the previous forecast of $100-$130 million.
Heading into the remainder of 2021, we are now guiding to the
higher end of that $85-$100 million NOI range. As well, the Company
updated the expectation for adjusted operating expenses per boe
from $9.50-$10.50 to $12.50-$13.00 primarily due to increased power
prices and processing fees for the rest of the year. The bulk of
the Company’s $35-$45 million upstream capital budget continues to
be invested to ensure the safe, reliable operation of our assets,
including the successful completion of the Caroline Gas Complex
turnaround in the third quarter.
About PieridaePieridae is a
majority Canadian-owned corporation based in Calgary that was
founded in 2011. The Company is focused on the exploration,
extraction and processing of natural gas as well as analyzing
options for a reconfigured LNG Project that fits with the current
environment and would supply Europe and other markets. Pieridae
provides the energy to fuel people’s daily lives while supporting
the environment and the transition to a lower-carbon economy. After
completion of all the transactions disclosed in this news release,
Pieridae has 157,641,871 common shares issued and outstanding which
trade on the TSX (PEA.TO).
For
further information please contact: |
|
|
|
Alfred Sorensen, Chief Executive
Officer |
James Millar, Director, External
Relations |
Telephone: (403) 261-5900 |
Telephone: (403) 261-5900 |
Forward-Looking
StatementsCertain statements contained herein may
constitute "forward-looking statements" or "forward-looking
information" within the meaning of applicable securities laws
(collectively "forward-looking statements"). Words such as "may",
"will", "should", "could", "anticipate", "believe", "expect",
"intend", "plan", "potential", "continue", "shall", "estimate",
"expect", "propose", "might", "project", "predict", "forecast" and
similar expressions may be used to identify these forward-looking
statements.
Forward-looking statements involve significant
risk and uncertainties. A number of factors could cause actual
results to differ materially from the results discussed in the
forward-looking statements including, but not limited to, risks
associated with oil and gas exploration, development, exploitation,
production, marketing and transportation, loss of markets,
volatility of commodity prices, currency fluctuations, imprecision
of resources estimates, environmental risks, competition from other
producers, incorrect assessment of the value of acquisitions,
failure to realize the anticipated benefits or synergies from
acquisitions, delays resulting from or inability to obtain required
regulatory approvals and ability to access sufficient capital from
internal and external sources and the risk factors outlined under
"Risk Factors" and elsewhere herein. The recovery and resources
estimate of Pieridae's reserves provided herein are estimates only
and there is no guarantee that the estimated resources will be
recovered. As a consequence, actual results may differ materially
from those anticipated in the forward-looking statements.
Forward-looking statements are based on a number
of factors and assumptions which have been used to develop such
forward-looking statements, but which may prove to be incorrect.
Although Pieridae believes that the expectations reflected in such
forward-looking statements are reasonable, undue reliance should
not be placed on forward-looking statements because Pieridae can
give no assurance that such expectations will prove to be correct.
In addition to other factors and assumptions which may be
identified in this document, assumptions have been made regarding,
among other things: the impact of increasing competition; the
general stability of the economic and political environment in
which Pieridae operates; the timely receipt of any required
regulatory approvals; the ability of Pieridae to obtain qualified
staff, equipment and services in a timely and cost efficient
manner; the ability of the operator of the projects which Pieridae
has an interest in, to operate the field in a safe, efficient and
effective manner; the ability of Pieridae to obtain financing on
acceptable terms; the ability to replace and expand oil and natural
gas resources through acquisition, development and exploration; the
timing and costs of pipeline, storage and facility construction and
expansion and the ability of Pieridae to secure adequate product
transportation; future commodity prices; currency, exchange and
interest rates; the regulatory framework regarding royalties, taxes
and environmental matters in the jurisdictions in which Pieridae
operates; timing and amount of capital expenditures, future sources
of funding, production levels, weather conditions, success of
exploration and development activities, access to gathering,
processing and pipeline systems, advancing technologies, and the
ability of Pieridae to successfully market its oil and natural gas
products.
Readers are cautioned that the foregoing list of
factors is not exhaustive. Additional information on these and
other factors that could affect Pieridae's operations and financial
results are included in reports on file with Canadian securities
regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com), and at Pieridae's website
(www.pieridaeenergy.com). Although the forward-looking statements
contained herein are based upon what management believes to be
reasonable assumptions, management cannot assure that actual
results will be consistent with these forward-looking statements.
Investors should not place undue reliance on forward-looking
statements. These forward-looking statements are made as of the
date hereof and Pieridae assumes no obligation to update or review
them to reflect new events or circumstances except as required by
Applicable Securities Laws.
Forward-looking statements contained herein
concerning the oil and gas industry and Pieridae's general
expectations concerning this industry are based on estimates
prepared by management using data from publicly available industry
sources as well as from reserve reports, market research and
industry analysis and on assumptions based on data and knowledge of
this industry which Pieridae believes to be reasonable. However,
this data is inherently imprecise, although generally indicative of
relative market positions, market shares and performance
characteristics. While Pieridae is not aware of any misstatements
regarding any industry data presented herein, the industry involves
risks and uncertainties and is subject to change based on various
factors.
Barrels of oil equivalent (“boes”) may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 Mcf: 1 Bbl is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.
Neither TSX nor its Regulation Services
Provider (as that term is defined in policies of the TSX) accepts
responsibility for the adequacy or accuracy of this
release.
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