Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is
pleased to report financial and operating results as at and for the
three and nine months ended September 30, 2021. Petrus is focused
on generating free cash flow to support further development of its
Ferrier Cardium assets to benefit all stakeholders.
HIGHLIGHTS
- Transformative debt
reduction – During the quarter Petrus executed
certain transactions, transforming its debt situation as follows:
- Reduced net debt(1) by 46% from
$110.3 million to $60.1 million during the third quarter of 2021.
Debt to annualized funds flow (excluding realized hedge
settlements) is now 1.3x;
- Second Lien Term Loan settled in
full;
- First Lien debt is the only remaining
debt and is now fully conforming;
- interest expense has been reduced by
approximately $5 million annually; and
- the going concern disclosure in the
second quarter 2021 interim consolidated financial statements has
been removed with concurrence from the Company's auditors.
- Commodity price
improvements – Realized price per boe increased by
70% in the third quarter of 2021 compared to the third quarter of
2020 due to strengthening oil and gas prices which increased by 78%
and 61%, respectively.
- Operating netback – Operating
netback(1) increased by 87% to $25.86/boe in the third quarter of
2021 from $13.83/boe in the third quarter of 2020.
- Funds flow –
Petrus generated funds flow(1) and corporate netback of $7.9
million ($14.43/boe) in the third quarter of 2021, which was 4%
higher than the third quarter of the previous year. Realized
derivative losses were the main reason for the smaller increase in
corporate netback (4%) relative to the increase in operating
netback (87%). Petrus remains significantly hedged at below current
market prices through the first quarter of 2022. Hedging contracts
beyond that point are reflective of current strip pricing.
- Production –
Petrus has held production relatively flat through the first nine
months of 2021 with the focus on debt repayment, limiting capital
reinvestment. Third quarter 2021 production of 5,937 boe/d was
essentially unchanged from the 5,912 boe/d of production in the
first quarter of 2021. Production for the first nine months of 2021
averaged 6,053 boe/d.
During the third quarter of 2021, the Company
reduced net debt from $110.3 million to $60.1 million; a 46%
decrease. To achieve this, the Company’s subordinated secured term
loan (the "Second Lien Loan"), in the principal amount of $39.4
million, was settled in full (the "Second Lien Settlement") in
consideration for the issuance of $15.8 million of common shares of
Petrus ("Common Shares") to the holders of the Second Lien Loan at
an issue price of $0.55 per share. In addition, the Company
completed a private placement financing of an aggregate of $10
million of Common Shares at an issue price of $0.55 per share (the
"Equity Financing") the proceeds from which were applied to
outstanding indebtedness under the First Lien Loan. The First Lien
Loan is now Petrus’ sole credit facility and at September 30, 2021
had $59.9 million drawn. The maturity date of the Company’s First
Lien Loan has been extended to May 31, 2022.
2021 OUTLOOK
The completion of the debt restructuring
transactions during the third quarter of 2021 transformed Petrus
from a company with limited capital resources to one with the
ability to create meaningful shareholder value. The substantial
debt reduction associated with the Second Lien Settlement and
Equity Financing has bolstered the Company’s financial position and
provides the flexibility required to invest in the development of
its land base and unlock proven value. The Company will start to
accelerate its capital program in the fourth quarter of 2021 with
the planned drilling of three (3.0 net) wells.
Petrus has a concentrated land base in its core
area of Ferrier, where the liquids rich Cardium is one of the
leading plays in North America. The asset includes owned and
operated infrastructure, which affords optionality, operational
efficiency and a low cost structure. The results of recent operated
drills in the area show compelling rates of return with payouts of
less than 6 months at current commodity prices. The Company also
has a material land position and ownership in critical
infrastructure in North Ferrier where recent non-operated drilling
results have proven to be highly competitive. The Company’s premier
land position in these areas combined with a strengthened balance
sheet make Petrus well positioned for growth. We expect to continue
to increase capital spending in 2022. Further details will be
communicated once our 2022 budget has been finalized.
(1)Refer to "Non-GAAP Financial Measures"
attached hereto.(2)Refer to "Advisories - Forward-Looking
Statements" attached hereto.
SELECTED FINANCIAL
INFORMATION
OPERATIONS |
Three months
endedSept. 30,
2021 |
Three months
endedSept. 30,
2020 |
Three months
endedJun. 30,
2021 |
Three months
endedMar. 31,
2021 |
Three months
endedDec. 31,
2020 |
Average production |
|
|
|
|
|
Natural gas (mcf/d) |
23,942 |
|
26,181 |
|
24,291 |
|
22,985 |
|
26,177 |
|
Oil (bbl/d) |
937 |
|
1,103 |
|
1,214 |
|
923 |
|
980 |
|
NGLs (bbl/d) |
1,010 |
|
997 |
|
1,046 |
|
1,158 |
|
1,014 |
|
Total (boe/d) |
5,937 |
|
6,463 |
|
6,309 |
|
5,912 |
|
6,357 |
|
Total (boe) |
546,227 |
|
594,599 |
|
574,084 |
|
532,099 |
|
584,860 |
|
Light oil weighting |
21 |
% |
17 |
% |
19 |
% |
15 |
% |
15 |
% |
Realized Prices |
|
|
|
|
|
Natural gas ($/mcf) |
4.04 |
|
2.51 |
|
3.28 |
|
3.33 |
|
3.07 |
|
Oil ($/bbl) |
82.56 |
|
46.46 |
|
75.99 |
|
66.61 |
|
49.64 |
|
NGLs ($/bbl) |
45.10 |
|
22.05 |
|
39.76 |
|
36.79 |
|
23.52 |
|
Total realized
price ($/boe) |
37.00 |
|
21.48 |
|
33.87 |
|
30.55 |
|
24.05 |
|
Royalty income |
0.18 |
|
0.12 |
|
0.19 |
|
0.15 |
|
0.13 |
|
Royalty expense |
(3.94 |
) |
(2.09 |
) |
(4.87 |
) |
(3.74 |
) |
(2.02 |
) |
Net oil and
natural gas
revenue ($/boe) |
33.24 |
|
19.51 |
|
29.19 |
|
26.96 |
|
22.16 |
|
Operating expense |
(5.57 |
) |
(4.05 |
) |
(6.80 |
) |
(6.12 |
) |
(5.53 |
) |
Transportation expense |
(1.81 |
) |
(1.63 |
) |
(1.84 |
) |
(1.62 |
) |
(1.68 |
) |
Operating netback(1)
($/boe) |
25.86 |
|
13.83 |
|
20.55 |
|
19.22 |
|
14.95 |
|
Realized gain (loss) on derivatives ($/boe) |
(6.41 |
) |
2.20 |
|
(3.21 |
) |
(2.28 |
) |
0.65 |
|
Other income (cash) |
0.02 |
|
0.04 |
|
1.77 |
|
0.04 |
|
0.31 |
|
General & administrative expense |
(1.47 |
) |
(1.07 |
) |
(2.41 |
) |
(1.65 |
) |
(1.81 |
) |
Cash finance expense |
(3.30 |
) |
(2.16 |
) |
(2.52 |
) |
(1.93 |
) |
(2.49 |
) |
Decommissioning expenditures |
(0.27 |
) |
(0.13 |
) |
(0.14 |
) |
(0.27 |
) |
(0.63 |
) |
Funds flow & corporate netback(1)(2)
($/boe) |
14.43 |
|
12.71 |
|
14.04 |
|
13.13 |
|
10.98 |
|
FINANCIAL (000s
except $ per
share) |
Three months
endedSept. 30,
2021 |
Three months
endedSept. 30,
2020 |
Three months
endedJun. 30,
2021 |
Three months
endedMar. 31,
2021 |
Three months
endedDec. 31,
2020 |
Oil and natural gas revenue |
20,306 |
12,840 |
|
19,553 |
|
16,339 |
|
14,143 |
|
Net income (loss) |
7,343 |
(3,678 |
) |
(4,265 |
) |
(3,155 |
) |
(151 |
) |
Net income (loss) per share |
|
|
|
|
|
|
|
|
|
Basic |
0.14 |
(0.07 |
) |
(0.09 |
) |
(0.06 |
) |
— |
|
Fully diluted |
0.13 |
(0.07 |
) |
(0.09 |
) |
(0.06 |
) |
— |
|
Funds flow |
7,874 |
7,551 |
|
8,070 |
|
6,993 |
|
6,423 |
|
Funds flow per share |
|
|
|
|
|
|
|
|
|
Basic |
0.15 |
0.15 |
|
0.16 |
|
0.14 |
|
0.13 |
|
Fully diluted |
0.14 |
0.15 |
|
0.16 |
|
0.14 |
|
0.13 |
|
Capital expenditures |
6,101 |
2,543 |
|
663 |
|
7,917 |
|
2,797 |
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
Basic |
54,167 |
49,469 |
|
49,513 |
|
49,469 |
|
49,469 |
|
Fully diluted |
57,638 |
49,469 |
|
49,513 |
|
49,469 |
|
49,469 |
|
As at period
end |
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
|
|
|
|
|
|
|
|
Basic |
96,603 |
49,469 |
|
49,559 |
|
49,469 |
|
49,469 |
|
Fully diluted |
100,074 |
49,469 |
|
49,559 |
|
49,469 |
|
49,469 |
|
Total assets |
173,101 |
179,895 |
|
176,629 |
|
177,587 |
|
177,914 |
|
Non-current liabilities |
40,200 |
44,471 |
|
40,838 |
|
42,028 |
|
45,321 |
|
Net debt(1) |
60,071 |
116,717 |
|
110,346 |
|
116,634 |
|
114,361 |
|
(1)Refer to "Non-GAAP Financial Measures".(2)Corporate netback
is equal to funds flow which is a directly comparable GAAP measure.
Petrus analyzes these measures on an absolute value and per unit
basis.
OPERATIONS UPDATE |
|
Third quarter average production by area was as follows: |
For the three
months ended
September 30,
2021 |
Ferrier |
Foothills |
Central Alberta |
Kakwa |
Total |
Natural gas (mcf/d) |
17,648 |
1,449 |
4,603 |
236 |
23,936 |
Oil (bbl/d) |
540 |
100 |
252 |
43 |
935 |
NGLs (bbl/d) |
868 |
6 |
128 |
10 |
1,012 |
Total (boe/d) |
4,349 |
348 |
1,148 |
92 |
5,937 |
Third quarter 2021 production averaged 5,937
boe/d compared to 6,309 boe/d in the second quarter of 2021. Two
gross (1.2 net) wells were drilled and brought on production in
August, adding 452 boe/d to the third quarter average which largely
offset natural declines; however, third party and non-operated
downtime resulted in a 6% decrease in production quarter over
quarter.
Capital expenditures (net of dispositions)
totaled $6.1 million in the third quarter of 2021, compared to $2.5
million in the prior year comparative period. Third quarter 2021
capital spending was largely directed toward the drilling,
completion and tie-in of two gross (1.2 net) wells in the Ferrier
area which accounted for $4.2 million of the total. Also of note,
the Company invested approximately $1.0 million in the expansion of
a third-party processing plant in the North Ferrier area, in which
Petrus holds a working interest.
For further
information, please
contact:
Ken Gray, P.Eng.President and Chief Executive Officer T: (403)
930-0889E: kgray@petrusresources.com
NON-GAAP
FINANCIAL MEASURESThis press
release makes reference to the terms "operating netback",
"corporate netback" and "net debt". These indicators are not
recognized measures under GAAP (IFRS) and do not have a
standardized meaning prescribed by GAAP (IFRS). Accordingly, the
Company's use of these terms may not be comparable to similarly
defined measures presented by other companies. Management uses
these terms for the reasons set forth below.
Operating
NetbackOperating netback is a common non-GAAP
financial measure used in the oil and natural gas industry which is
a useful supplemental measure to evaluate the specific operating
performance by product at the oil and natural gas lease level. The
most directly comparable GAAP measure to operating netback is funds
flow. Operating netback is calculated as oil and natural gas
revenue less royalties, operating and transportation expenses. It
is presented on an absolute value and per unit basis.
Funds Flow
and Corporate
NetbackCorporate netback is a common non-GAAP
financial measure used in the oil and natural gas industry which
evaluates the Company’s profitability at the corporate level.
Corporate netback is equal to funds flow which is a directly
comparable GAAP measure. Petrus analyzes these measures on an
absolute value and per unit basis. Management believes that funds
flow and corporate netback provide information to assist a reader
in understanding the Company's profitability relative to current
commodity prices. It is calculated, in the following table, as the
operating netback less general and administrative expense, finance
expense, decommissioning expenditures, plus other income and the
net realized gain (loss) on financial derivatives.
Net DebtNet
debt is a non-GAAP financial measure and is calculated as current
assets (excluding unrealized financial derivative assets) less
current liabilities (excluding unrealized financial derivative
liabilities, right-of-use lease obligations, and deferred share
unit liabilities) and long term debt. Petrus uses net debt as a key
indicator of its leverage and strength of its balance sheet. There
is no GAAP measure that is reasonably comparable to net debt.
ADVISORIESBasis
of PresentationFinancial data
presented above has largely been derived from the Company’s
financial statements, prepared in accordance with GAAP which
require publicly accountable enterprises to prepare their financial
statements using IFRS. Accounting policies adopted by the Company
are set out in the notes to the consolidated financial statements
as at and for the twelve months ended December 31, 2020. The
reporting and the measurement currency is the Canadian dollar. All
financial information is expressed in Canadian dollars, unless
otherwise stated.
Forward-Looking
StatementsCertain information regarding Petrus set
forth in this new release contains forward-looking statements
within the meaning of applicable securities law, that involve
substantial known and unknown risks and uncertainties. The use of
any of the words “anticipate”, “continue”, “estimate”, “expect”,
“may”, “will”, “project”, “should”, “believe” and similar
expressions are intended to identify forward-looking statements.
Such statements represent Petrus’ internal projections, estimates
or beliefs concerning, among other things, an outlook on the
estimated amounts and timing of capital investment, anticipated
future debt, production, revenues or other expectations, beliefs,
plans, objectives, assumptions, intentions or statements about
future events or performance. These statements are only predictions
and actual events or results may differ materially. Although Petrus
believes that the expectations reflected in the forward-looking
statements are reasonable, it cannot guarantee future results,
levels of activity, performance or achievement since such
expectations are inherently subject to significant business,
economic, competitive, political and social uncertainties and
contingencies. Many factors could cause Petrus’ actual results to
differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, Petrus.
In particular, forward-looking statements
included in this press release include, but are not limited to,
statements with respect to: prospective changes to the terms of the
RCF and Term Loan; Petrus' capital program, flexibility and
utilization of free cash flow; Petrus' utilization of Federal and
Provincial programs; Petrus' expectations regarding second half
2021 production volumes; Petrus' ability to modify its operations,
including its ability to adjust liquid volumes and the results
thereof; expectations regarding the adequacy of Petrus' liquidity
and the funding of its financial liabilities; the impact of the
current economic environment on Petrus; the performance
characteristics of the Company's crude oil, NGL and natural gas
properties; future prospects; the focus of and timing of capital
expenditures; access to debt and equity markets; Petrus' future
operating and financial results; capital investment programs;
supply and demand for crude oil, NGL and natural gas; future
royalty rates; drilling, development and completion plans and the
results therefrom; and treatment under governmental regulatory
regimes and tax laws. In addition, statements relating to
“reserves” are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the reserves described can be profitably produced
in the future.
These forward-looking statements are subject to
numerous risks and uncertainties, most of which are beyond the
Company’s control, including the impact of general economic
conditions; volatility in market prices for crude oil, NGL and
natural gas; impact of the economic crisis on the Company's
lenders; willingness of the company's lenders to negotiate;
industry conditions; currency fluctuation; imprecision of reserve
estimates; liabilities inherent in crude oil and natural gas
operations; environmental risks; incorrect assessments of the value
of acquisitions and exploration and development programs;
competition; the lack of availability of qualified personnel or
management; changes in income tax laws or changes in tax laws and
incentive programs relating to the oil and gas industry; hazards
such as fire, explosion, blowouts, cratering, and spills, each of
which could result in substantial damage to wells, production
facilities, other property and the environment or in personal
injury; stock market volatility; ability to access sufficient
capital from internal and external sources; completion of the
financing on the timing planned and the receipt of applicable
approvals; and the other risks. With respect to forward-looking
statements contained in this press release, Petrus has made
assumptions regarding: future commodity prices and royalty regimes;
availability of skilled labour; timing and amount of capital
expenditures; willingness of its lenders to negotiate; the impact
of the current financial crisis; future exchange rates; the impact
of increasing competition; conditions in general economic and
financial markets; availability of drilling and related equipment
and services; effects of regulation by governmental agencies; and
future operating costs. Management has included the above summary
of assumptions and risks related to forward-looking information
provided in this press release in order to provide shareholders
with a more complete perspective on Petrus’ future operations and
such information may not be appropriate for other purposes. Petrus’
actual results, performance or achievement could differ materially
from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance can be given that any of
the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what benefits that the
Company will derive therefrom. Readers are cautioned that the
foregoing lists of factors are not exhaustive.
This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about Petrus' prospective results of
operations including, without limitation, its ability to repay
debt, which are subject to the same assumptions, risk factors,
limitations, and qualifications as set forth above. Readers are
cautioned that the assumptions used in the preparation of such
information, although considered reasonable at the time of
preparation, may prove to be imprecise and, as such, undue reliance
should not be placed on FOFI. Petrus' actual results, performance
or achievement could differ materially from those expressed in, or
implied by, these FOFI, or if any of them do so, what benefits
Petrus will derive therefrom. Petrus has included the FOFI in order
to provide readers with a more complete perspective on Petrus'
future operations and such information may not be appropriate for
other purposes.
These forward-looking statements and FOFI are
made as of the date of this press release and the Company disclaims
any intent or obligation to update any forward-looking statements
and FOFI, whether as a result of new information, future events or
results or otherwise, other than as required by applicable
securities laws.
BOE
PresentationThe oil and natural gas industry
commonly expresses production volumes and reserves on a barrel of
oil equivalent (“boe”) basis whereby natural gas volumes are
converted at the ratio of six thousand cubic feet to one barrel of
oil. The intention is to sum oil and natural gas measurement units
into one basis for improved measurement of results and comparisons
with other industry participants. Petrus uses the 6:1 boe measure
which is the approximate energy equivalence of the two commodities
at the burner tip. Boe’s do not represent an economic value
equivalence at the wellhead and therefore may be a misleading
measure if used in isolation.
Abbreviations |
$000’s |
thousand dollars |
$/bbl |
dollars per barrel |
$/boe |
dollars per barrel of oil
equivalent |
$/GJ |
dollars per gigajoule |
$/mcf |
dollars per thousand cubic
feet |
bbl |
barrel |
bbl/d |
barrels per day |
boe |
barrel of oil equivalent |
mboe |
barrel of oil equivalent |
mmboe |
thousand barrel of oil
equivalent |
boe/d |
million barrel of oil
equivalent per day |
GJ |
gigajoule |
GJ/d |
gigajoules per day |
mcf |
thousand cubic feet |
mcf/d |
thousand cubic feet per
day |
mmcf/d |
million cubic feet per
day |
NGLs |
natural gas liquids |
WTI |
West Texas Intermediate |
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