Paramount Resources Ltd. First Quarter 2014 Results; Musreau Deep Cut Facility Construction Complete; Final Commissioning Und...
07 Mai 2014 - 10:57PM
Marketwired
Paramount Resources Ltd. First Quarter 2014 Results; Musreau Deep
Cut Facility Construction Complete; Final Commissioning Underway -
First Sales Gas In June
CALGARY, ALBERTA--(Marketwired - May 7, 2014) - Paramount
Resources Ltd. (TSX:POU)
FIRST QUARTER OVERVIEW
Oil and Gas Operations
- Construction of Paramount's wholly-owned 200 MMcf/d Musreau
Deep Cut Facility is complete and the final stages of commissioning
are underway. The expected total cost of the facility remains
in-line with the original budget at approximately $190
million.
- First quarter sales volumes averaged 21,028 Boe/d. Sales
volumes will begin to ramp-up after the Musreau Deep Cut Facility
starts up in June.
- 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. NGLs volumes are projected to increase from 15 percent of
total sales volumes in the first quarter to approximately 40
percent by the end of the year.
- The Company's first quarter netback increased 72 percent to
$55.7 million in 2014 from $32.4 million in 2013, driven mainly by
higher realized natural gas prices. Paramount's first quarter 2014
gas production remained unhedged, enabling the Company to capture
strong winter pricing, including significant increases in daily
spot prices.
- First quarter drilling activities in the Kaybob area were
focused on two 10-well Montney pads and one 5-well Montney pad on
the northern portion of the Company's lands, where liquids yields
are anticipated to be the highest. Drilling operations are expected
to be finished on all 25 wells by the end of July, with completion
and tie-in operations to follow.
- In March 2014, Paramount closed the sale of coal bed methane
properties producing approximately 6 MMcf/d in the Chain-Delia area
of Alberta for $11.7 million in common shares of a TSX-Venture
Exchange listed Company.
Strategic Investments
- In April 2014, Paramount entered into an agreement with MGM
Energy Corp. ("MGM Energy") to acquire all of the shares of MGM
Energy that it does not already own (the "Arrangement"). All
shareholders of MGM Energy other than Paramount would receive one
Common Share of Paramount for every 300 shares of MGM Energy. The
Arrangement is subject to MGM Energy shareholder and court
approvals. It is anticipated that Paramount would issue
approximately 1.1 million Common Shares to MGM Energy shareholders
under the arrangement.
- Shale gas exploration drilling operations at Dunedin in
northeast British Columbia have been suspended due to spring
break-up and are scheduled to resume in the winter of 2014 /
2015.
FINANCIAL AND OPERATING HIGHLIGHTS (1) |
|
($ millions, except as noted) |
|
Three months ended March 31 |
2014 |
|
2013 (2 |
) |
%
Change |
|
|
|
|
|
|
|
|
FINANCIAL |
|
|
|
|
|
|
Petroleum and natural gas sales |
86.2 |
|
61.3 |
|
41 |
|
Funds flow from operations |
33.5 |
|
16.6 |
|
102 |
|
|
Per share - diluted ($/share) |
0.34 |
|
0.18 |
|
|
|
Net income (loss) |
(8.9 |
) |
0.4 |
|
NM |
|
|
Per share - diluted ($/share) |
(0.09 |
) |
- |
|
|
|
Exploration and development expenditures |
173.2 |
|
145.2 |
|
19 |
|
Investments in other entities - market value (3) |
718.5 |
|
719.6 |
|
- |
|
Total assets |
2,614.6 |
|
2,076.5 |
|
26 |
|
Net debt |
1,273.7 |
|
857.9 |
|
48 |
|
Common shares outstanding (thousands) |
97,532 |
|
90,130 |
|
8 |
|
|
|
|
|
|
|
|
OPERATING |
|
|
|
|
|
|
Sales volumes |
|
|
|
|
|
|
|
Natural gas (MMcf/d) |
104.7 |
|
113.6 |
|
(8 |
) |
|
NGLs
(Bbl/d) |
3,079 |
|
2,662 |
|
16 |
|
|
Oil
(Bbl/d) |
500 |
|
998 |
|
(50 |
) |
|
Total
(Boe/d) |
21,028 |
|
22,591 |
|
(7 |
) |
Average realized price |
|
|
|
|
|
|
|
Natural gas ($/Mcf) |
6.04 |
|
3.47 |
|
74 |
|
|
NGLs
($/Bbl) |
86.97 |
|
73.78 |
|
18 |
|
|
Oil
($/Bbl) |
96.56 |
|
84.37 |
|
14 |
|
|
Total
($/Boe) |
45.56 |
|
30.16 |
|
51 |
|
|
|
|
|
|
|
|
Operating expense ($/Boe) |
9.75 |
|
10.18 |
|
(4 |
) |
Netback ($/Boe) |
29.40 |
|
15.28 |
|
92 |
|
|
|
|
|
|
|
|
Net Wells (excluding oil sands evaluation) |
12 |
|
9 |
|
33 |
|
Net oil sands evaluation wells |
- |
|
6 |
|
(100 |
) |
(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
Management's Discussion and Analysis for the three months ended
March 31, 2014. |
(3) |
Based
on the period-end closing prices of publicly-traded enterprises and
the book value of the remaining investments. |
NM - Not meaningful |
OUTLOOK
Paramount's 2014 capital budget for exploration and development
("E&D") and Strategic Investments remains at $650 million,
excluding land acquisitions and capitalized interest. E&D
spending will continue to focus on the Company's Deep Basin
developments, including drilling and completing wells in the Kaybob
area and at Karr-Gold Creek, and the completion of new deep cut
facilities and related infrastructure. Shale gas exploration
activities in the Liard Basin are substantially complete for this
winter season.
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.
Despite achieving sales volumes of approximately 25,000 Boe/d in
April 2014, second quarter sales volumes are expected to average
between 17,500 Boe/d and 20,000 Boe/d. The Company's production
will be impacted later in the quarter by a scheduled third-party
plant outage in the Grande Prairie COU, as well as outages in the
Kaybob COU resulting from the integration of the non-operated Smoky
deep cut facility expansion and final commissioning activities for
the Musreau Deep Cut Facility. Production will ramp-up
significantly in the third quarter following the start-up of the
Musreau Deep Cut Facility.
ADDITIONAL INFORMATION
ABOUT PARAMOUNT
Paramount is an independent, publicly traded, Canadian
corporation that explores for and develops conventional petroleum
and natural gas prospects, pursues longer-term non-conventional
exploration and pre-development projects and holds investments in
other entities. The Company's principal properties are primarily
located in Alberta and British Columbia. Paramount's Class A Common
Shares are listed on the Toronto Stock Exchange under the symbol
"POU".
Paramount's first quarter 2014 report, including Management's
Discussion and Analysis and the Company's unaudited Interim
Condensed Consolidated Financial Statements can be obtained at:
http://media3.marketwire.com/docs/944113_pr.pdf
This information will also be made available through Paramount's
website at www.paramountres.com and 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", "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;
- 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; 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, 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, de-ethanization, 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" 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 2014, the value ratio between crude
oil and natural gas was approximately 16:1. 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.
Paramount Resources Ltd.J.H.T. (Jim) RiddellPresident and Chief
Operating Officer(403) 290-3600(403) 262-7994Paramount Resources
Ltd.B.K. (Bernie) LeeChief Financial Officer(403) 290-3600(403)
262-7994www.paramountres.com
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