Paramount Resources Ltd. (TSX:POU)
SECOND QUARTER OVERVIEW
Principal Properties
-- The final stages of construction of the Company's wholly-owned 200
MMcf/d deep cut facility at Musreau (the "Musreau Deep Cut Facility")
will be completed over the next few months and the project remains in-
line with budget. Commissioning of the major components will begin in
the fourth quarter of 2013.
-- Advance drilling for the deep cut facility expansions at Musreau and
Smoky continued. Paramount currently has an inventory of 45 (37.2 net)
wells with estimated first month deliverability exceeding 250 MMcf/d
(200 MMcf/d net) of raw gas.
-- The Company achieved significant reductions in drilling time with its
walking drilling rigs on its latest pads, drilling Montney wells in
Musreau in less than 30 days compared to approximately 45 days for
Montney wells drilled in 2012.
-- Based on positive middle-Montney drilling results at Karr-Gold Creek in
the Grande Prairie COU, the Company is planning to drill up to five
additional horizontal wells during the remainder of 2013.
-- Second quarter netbacks increased 80 percent to $37.8 million in 2013
from $21.0 million in 2012, despite the impact of third-party downstream
disruptions and spring road bans which curtailed production by
approximately 4,000 Boe/d, including the temporary shut-in of high
liquids content Montney wells.
-- Kaybob COU sales volumes increased 14 percent to 13,901 Boe/d in the
second quarter of 2013 compared to 12,236 Boe/d in 2012. Total Company
sales volumes in the second quarter of 2013 averaged 20,790 Boe/d
compared to 21,474 Boe/d in 2012.
-- Kaybob COU operating expenses have averaged approximately $4.00 per Boe
in 2013, and less than $4.00 per Boe within the Musreau area, after
accounting for processing income.
-- Paramount continued to rationalize its non-core assets, including the
disposition of its Ante Creek property, to focus on the opportunities
that generate the best returns.
Corporate
-- Paramount's bank credit facility (the "Facility") has been increased by
$150 million to $450 million. The Facility was undrawn at June 30, 2013.
-- The Company raised $150.9 million through the issuance of 4.0 million
common shares in May 2013.
Strategic Investments
-- Drilling operations at the Company's shale gas exploratory well in
Dunedin will resume in September following the completion of an all-
season access road. The Company's shale gas exploratory well at Patry is
expected to be tied-in later in the year.
-- Paramount's wholly-owned subsidiary, Cavalier Energy Inc., continued
with front-end engineering and design work for the first phase of the
Hoole Grande Rapids project, funded with Cavalier's own credit facility.
-- Fox Drilling's five rigs are fully deployed on the Company's lands in
the Deep Basin.
FINANCIAL AND OPERATING HIGHLIGHTS(1)(2)
($ millions, except as noted)
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Three months ended June 30 Six months ended June 30
2013 2012 % Change 2013 2012 % Change
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Financial
Petroleum and
natural gas sales 59.4 46.5 28 120.8 101.2 19
Funds flow from
operations 22.3 12.1 84 38.8 25.0 55
Per share -
diluted ($/share) 0.24 0.15 60 0.42 0.28 50
Net income (loss) (22.1) - (100) (21.8) 124.5 (118)
Per share - basic
($/share) (0.24) - (0.24) 1.46
Per share -
diluted ($/share) (0.24) - (0.24) 1.43
Exploration and
development
expenditures 94.0 66.4 42 239.2 208.6 15
Investments in other
entities - market
value(3) 759.1 611.4 24
Total assets 2,084.4 1,777.3 17
Net debt(4) 803.3 472.8 70
Common shares
outstanding
(thousands) 95,375 85,498 12
Operating
Sales volumes
Natural gas
(MMcf/d) 107.6 106.2 1 110.6 97.4 14
NGLs (Bbl/d) 2,126 1,973 8 2,392 1,813 32
Oil (Bbl/d) 722 1,808 (60) 859 2,097 (59)
Total (Boe/d) 20,790 21,474 (3) 21,685 20,144 8
Average realized
price
Natural gas
($/Mcf) 3.97 2.09 90 3.71 2.40 55
NGLs ($/Bbl) 71.84 69.63 3 72.90 73.71 (1)
Oil ($/Bbl) 85.98 78.65 9 85.05 84.66 -
Total ($/Boe) 31.41 23.82 32 30.76 27.62 11
Net wells drilled
(excluding oil
sands evaluation) 6 8 (25) 15 19 (21)
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 and six
months ended June 30, 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 and six months ended June 30,
2013.
OUTLOOK
As a result of continued drilling success in Paramount's Deep Basin lands and
higher than expected liquids yields from Montney formation wells, the Company
has increased its total 2013 exploration and development ("E&D") and Strategic
Investments budget by $100 million to approximately $650 million, excluding land
acquisitions and capitalized interest.
The Company's 2013 E&D spending is primarily focused on the Kaybob COU's Deep
Basin development, including completing construction of the Musreau Deep Cut
Facility and drilling wells to feed the new facility. The Company is also active
drilling middle Montney wells at Karr-Gold Creek in the Grande Prairie COU.
Strategic Investment capital spending is being 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 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, until the expansion of a third-party NGLs pipeline is completed,
additional NGLs fractionation capacity is available and the Musreau Deep Cut
Facility is on-stream.
Upon start-up of the Musreau Deep Cut Facility, the Company will have owned and
firm-service contracted natural gas processing capacity of 279 MMcf/d, which
will increase to 309 MMcf/d with the expansion of the non-operated processing
facility at Smoky in the second half of 2014. Corporate production is expected
to ramp up in 2014 to over 50,000 Boe/d, with the timing dependent on the
completion of downstream NGLs 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 second 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/807pou.pdf.
This information will also be made available through: SEDAR at www.sedar.com and
Paramount's website at
http://www.paramountres.com/investor_relations/quarterlies.html.
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:
-- 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 (including planned drilling programs and well tie-ins) and
the anticipated timing thereof;
-- the projected availability of third party facilities to process,
transport and/or fractionate natural gas and NGLs production;
-- projected timelines for constructing, commissioning and/or starting-up
new and expanded deep cut gas processing facilities, and the Kaybob
COU's projected processing capacity following the completion of such
facilities; and
-- business strategies and objectives.
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 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 are reasonable, undue reliance should not be placed on them
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 and/or relate (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 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);
-- 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 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;
-- potential lawsuits and regulatory actions; and
-- other risks and uncertainties described elsewhere in this document and
in Paramount's other filings with Canadian securities authorities,
including its Annual Information Form.
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 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, MEG Energy, MGM
Energy, Strategic, RMP 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 second quarter of 2013, the value ratio between crude oil and natural
gas was approximately 22:1. 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.
The Kaybob COU's estimated behind pipe production inventory is based on the
Company's 4.9 Bcf type curve for Falher formation wells and 3.7 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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