Paramount Resources Ltd. (TSX:POU)
FIRST QUARTER OVERVIEW
Principal Properties
-- Paramount achieved record sales volumes of 23,600 Boe/d in March 2013,
the highest since the spin-out of Trilogy in 2005, despite 800 Boe/d of
property dispositions and 2,000 Boe/d of third party disruptions.
-- First quarter 2013 sales volumes increased 20 percent from the first
quarter of 2012 to 22,591 Boe/d. Kaybob COU sales volumes increased 46
percent to 14,156 Boe/d.
-- Netbacks increased 38 percent to $31.1 million in the first quarter of
2013 from $22.5 million in the first quarter of 2012 as a result of
higher sales volumes and higher natural gas prices.
-- Construction of the Company's wholly-owned 200 MMcf/d deep cut facility
at Musreau (the "Musreau Deep Cut Facility") remains on-schedule and in-
line with budget. Commissioning is scheduled to commence towards the end
of the third quarter of 2013.
-- Advance drilling for the deep cut facility expansions at Musreau and
Smoky continued. The Company currently has an inventory of 45 (35.5 net)
Kaybob Deep Basin wells awaiting startup of the new facilities.
-- In the first quarter of 2013, the Company sold its remaining US
properties for US$21.8 million and properties in the Bistcho area of
Alberta and the Cameron Hills area of the Northwest Territories for net
proceeds of $9.1 million. The Company continues to rationalize its asset
base to focus on the opportunities that generate the best returns.
Strategic Investments
-- Four of Fox Drilling's rigs are drilling through break-up in the Kaybob
COU. Both of the new walking rigs are currently drilling on multi-well
pad sites.
-- Paramount's wholly-owned subsidiary, Cavalier Energy Inc., continued
with front-end engineering and design work for the first phase of the
Hoole Grand Rapids project. These activities are being funded with
drawings on Cavalier's $40 million credit facility.
-- The Company's shale gas exploratory well at Patry is expected to be
tied-in later in the year. Drilling operations at Dunedin were suspended
in March due to warm weather, and will resume after break-up.
Corporate
-- At March 31, 2013, Paramount had cash balances of $48.0 million and its
credit facility was undrawn.
-- Corporate segment general and administrative costs per Boe decreased 16
percent to $1.48 in the first quarter of 2013 compared to $1.77 in the
first quarter of 2012.
FINANCIAL AND OPERATING HIGHLIGHTS(1)(2)
($ millions, except as noted)
Three months ended March 31 2013 2012 % Change
Financial
Petroleum and natural gas sales 61.3 54.7 12
Funds flow from operations 16.6 12.8 30
Per share - diluted ($/share) 0.18 0.15 20
Net income 0.4 124.5 (100)
Per share - basic ($/share) - 1.46
Per share - diluted ($/share) - 1.42
Exploration and development
expenditures 145.2 142.2 2
Investments in other entities -
market value(3) 719.6 675.6 7
Total assets 2,076.5 1,810.9 15
Net debt(4) 857.9 474.0 81
Common shares outstanding (thousands) 90,130 85,569 5
Operating
Sales volumes
Natural gas (MMcf/d) 113.6 88.6 28
NGLs (Bbl/d) 2,662 1,652 61
Oil (Bbl/d) 998 2,386 (58)
Total (Boe/d) 22,591 18,813 20
Average realized price
Natural gas ($/Mcf) 3.47 2.77 25
NGLs ($/Bbl) 73.78 78.57 (6)
Oil ($/Bbl) 84.37 89.21 (5)
Total ($/Boe) 30.16 31.95 (6)
Net wells drilled (excluding oil
sands evaluation) 9 11 (18)
Net oil sands evaluation wells
drilled 6 1 500
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(1) Readers are referred to the advisories concerning non-GAAP measures and
oil and gas 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 three months
ended March 31, 2013.
(3) Based on the period-end closing prices of publicly traded enterprises
and the book value of the remaining investments.
(4) Net debt is a non-GAAP measure, it is calculated and defined in the
Liquidity and Capital Resources section of Paramount's Management's
Discussion and Analysis for the three months ended March 31, 2013.
OUTLOOK
Paramount's 2013 capital budget for exploration and development
("E&D") and Strategic Investments remains at approximately $550
million, excluding land acquisitions and capitalized interest.
E&D spending will focus primarily on the Kaybob COU's Deep
Basin development. Construction of the Musreau Deep Cut Facility is
progressing on-schedule for completion in the fourth quarter and
construction of the third-party Smoky Deep Cut Facility will
continue into 2014. Drilling activities are continuing in the
Kaybob COU through breakup in preparation for the start-up of the
deep cut facilities. Strategic Investment capital spending will be
directed towards shale gas exploration activities in the Liard
Basin and continued front-end engineering and design work for the
initial phase of the Hoole Grand Rapids development within Cavalier
Energy.
Sales volumes for the second and third quarters of 2013 are
expected to range between 21,000 Boe/d and 25,000 Boe/d, depending
upon the availability of downstream NGLs transportation and
processing capacity. Sales volumes are expected to increase in the
fourth quarter once the expansion of a third-party NGLs pipeline is
completed, additional fractionation capacity is secured and the
Musreau Deep Cut Facility is on-stream.
After the Musreau Deep Cut Facility starts up in late-2013, the
Company will have owned and firm-service contracted natural gas
processing capacity of 279 MMcf/d, which will increase to over 300
MMcf/d in 2014 with the addition of the Smoky Deep Cut Facility.
Corporate production is expected to ramp up in 2014 to over 50,000
Boe/d, with the timing dependent on the completion of downstream
fractionation facilities expansions in which Paramount has secured
long-term firm service 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".
A copy of the Company's first quarter 2013 report, including
Management's Discussion and Analysis and the unaudited Interim
Condensed Consolidated Financial Statements, can be obtained at
http://media3.marketwire.com/docs/507pou_q1.pdf.
This information will also be made available through:
Paramount's website at:
http://www.paramountres.com/investor_relations/quarterlies.html
SEDAR at: www.sedar.com.
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", "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:
-- expected production and sales volumes and the timing thereof;
-- exploration, development and strategic investment plans and strategies
and the anticipated costs, timing, and results thereof;
-- budget allocations and capital spending flexibility;
-- the availability and adequacy of facilities to process, fractionate and
transport natural gas and NGLs production;
-- the scope, timing, and cost of proposed new facilities and facilities
expansions and the expected capacity and benefits of such facilities;
-- the timing and scope of the anticipated development of oilsands,
carbonate bitumen, and shale gas assets;
-- business strategies and objectives;
-- sources of and plans for funding Paramount's exploration, development,
facilities and other expenditures;
-- acquisition and disposition plans; and
-- expected drilling programs, well tie-ins, facility construction and
expansions, completions and the timing, scope and results thereof.
Such forward-looking information is based on a number of
assumptions which may prove to be incorrect. The following
assumptions have been made, in addition to any other assumptions
identified in this document:
-- future oil, gas, NGLs, and bitumen prices and general economic,
business, and market conditions;
-- the ability to obtain required capital, through access to capital
markets and other means, to finance exploration and development
activities and new and expanded facilities;
-- the ability to obtain equipment, services, supplies and personnel in a
timely manner and at an acceptable cost to carry out activities;
-- the ability to market oil, natural gas, NGLs and bitumen successfully to
current and new customers;
-- the ability to secure adequate product processing, fractionation,
transportation and storage;
-- the ability of Paramount and its industry partners to obtain drilling
success and production levels consistent with expectations, including
with respect to anticipated reserves additions and NGLs yields;
-- the timely receipt of required regulatory approvals;
-- expected timelines and budgets being met and anticipated results
achieved, in respect of facilities and infrastructure development;
-- anticipated rates of return from existing and planned projects relative
to other opportunities;
-- estimates of input and labour costs; and
-- currency exchange and interest rates.
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 current 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. These risks and uncertainties include, but are not
limited to:
-- fluctuations in oil, natural gas, NGLs and bitumen prices and commodity
price differentials;
-- fluctuations in foreign currency exchange rates and interest rates;
-- the uncertainty of estimates and projections relating to future revenue,
future production, NGLs yields, costs and expenses and the timing
thereof;
-- the ability to secure adequate product processing, de-ethanization,
fractionation, transportation and storage;
-- uncertainties associated with exploration and development drilling and
related activities;
-- operational risks in exploring for, developing and producing oil,
natural gas, NGLs and bitumen and the timing thereof;
-- the ability to obtain equipment, services, supplies and personnel in a
timely manner and at an acceptable cost;
-- potential disruptions, unexpected technical difficulties or other
constraints in designing, developing, operating or utilizing new,
expanded or existing facilities, including third-party facilities;
-- risks and uncertainties involving the geology of oil and gas deposits;
-- the uncertainty of reserves and resource estimates;
-- the ability to generate sufficient cash flow from operations and obtain
other sources of financing at an acceptable cost to fund planned
operational, exploration and development activities, including costs of
anticipated new and expanded facilities and other projects, and to meet
current and future obligations;
-- the ability to fulfill pipeline transportation, processing, de-
ethanization and fractionation commitments;
-- changes to, or in the interpretation or application of, laws,
regulations or policies;
-- changes in environmental laws including potential emission reduction
obligations and fracing regulations;
-- the receipt, timing, and scope of governmental or regulatory approvals;
-- potential title defects affecting Paramount's properties;
-- uncertainties regarding aboriginal land claims and co-existing with
local populations and stakeholders;
-- the effects of weather;
-- the timing and cost of future abandonment and reclamation activities;
-- clean-up costs or business interruptions resulting from environmental
damage and contamination;
-- the ability to enter into or continue leases;
-- existing and potential lawsuits and regulatory actions;
-- general economic, business and market conditions;
-- industry wide pipeline, processing, de-ethanization and fractionation
constraints; 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. Additional
information concerning these and other factors which could impact
Paramount, its operations and its financial condition are included
in Paramount's most recent 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", "Funds flow from
operations per share - diluted", "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 Reports 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 Management's Discussion and Analysis 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, MEG Energy, MGM Energy 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" 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 the first quarter of 2013, the value ratio between crude
oil and natural gas was approximately 24:1. 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.
Contacts: Paramount Resources Ltd. J.H.T. (Jim) Riddell
President and Chief Operating Officer (403) 290-3600 Paramount
Resources Ltd. B.K. (Bernie) Lee Chief Financial Officer (403)
290-3600 (403) 262-7994 (FAX) www.paramountres.com
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