Delphi Energy Corp. (“Delphi” or the “Company”) is pleased to
announce its financial and operational results for the quarter
ended June 30, 2017 and to provide an update on plans for the
remainder of 2017.
Based on strong results from drilling and
completions in the first half of 2017, Delphi will continue to
execute an accelerated capital program for its liquid-rich Bigstone
Montney property through the remainder of 2017.
Second Quarter 2017 Highlights
- Produced an average of 9,420 barrels of oil equivalent per day
(“boe/d”) based on field estimates during the 55 days of the second
quarter of 2017 which were not affected by the turnaround of the
SemCAMS K3 natural gas processing facility. Production in July
averaged 9,730 boe/d;
- Produced 6,484 boe/d in the second quarter of 2017, a twelve
percent increase from 5,802 boe/d in the comparative quarter of
2016. Production was curtailed by approximately 2,500 boe/d due to
a 36 day long turnaround of SemCAMS K3 natural gas processing
facility and a concurrent nine day turnaround of Company’s
7-11-60-23W5 compression and dehydration facility (“7-11 Montney
facility”);
- Montney field and plant condensate yield averaged 81 barrels
per million cubic feet of natural gas (“bbls/mmcf”) or 70 percent
of the total 122 bbls/mmcf of Montney liquids yield;
- Realized an operating netback of $16.44 per barrel of oil
equivalent (“boe”) before gains on risk management contracts, up
from $3.55 per boe for the same period in 2016;
- Closed a $65.0 million financing by way of private placement
consisting of $35.0 million of equity priced at $1.27 per common
share and $30.0 million of senior secured notes;
- Repaid the Company’s senior secured revolving credit
facility;
- Generated adjusted funds from operation of $7.0 million in the
second quarter, a 69 percent increase over the comparative period
in 2016, and net earnings of $4.6 million;
- Drilled four gross (2.5 net) wells and completed five gross
(3.2 net) wells on the Company’s Bigstone Montney property;
and
- Completed the turnaround and upgrade of the 7-11 Montney
facility and expansion of the 5-8-59-22W5 compression and
dehydration facility (5.8 Montney facility”).
FINANCIAL AND OPERATIONAL
HIGHLIGHTS |
|
|
|
|
|
|
|
Three months ended June 30 |
Six months ended June 30 |
|
|
2017 |
|
2016 |
|
% Change |
2017 |
|
2016 |
|
% Change |
Operating |
|
|
|
|
|
|
|
(boe conversion – 6:1
basis) |
|
|
|
|
|
|
|
Production: |
|
|
|
|
|
|
|
Field condensate
(bbls/d) |
|
1,540 |
|
1,060 |
|
45 |
|
1,738 |
|
1,382 |
|
26 |
|
Ethane (bbls/d) |
|
5 |
|
6 |
|
- |
|
5 |
|
7 |
|
(3 |
) |
Propane (bbls/d) |
|
473 |
|
412 |
|
15 |
|
527 |
|
501 |
|
5 |
|
Butane (bbls/d) |
|
331 |
|
304 |
|
9 |
|
367 |
|
350 |
|
5 |
|
Pentanes & plant
condensate (bbls/d) |
|
210 |
|
301 |
|
(30 |
) |
261 |
|
322 |
|
19 |
|
Total field condensate and natural gas liquids
|
|
2,559 |
|
2,083 |
|
23 |
|
2,898 |
|
2,562 |
|
13 |
|
Natural
gas (mcf/d) |
|
23,551 |
|
22,311 |
|
6 |
|
26,628 |
|
27,219 |
|
(2 |
) |
Total (boe/d) |
|
6,484 |
|
5,802 |
|
12 |
|
7,336 |
|
7,099 |
|
3 |
|
Average realized sales
prices, beforefinancial instruments |
|
|
|
|
|
|
|
Field condensate
($/bbl) |
|
59.74 |
|
46.26 |
|
29 |
|
60.39 |
|
43.77 |
|
38 |
|
Natural gas liquids
($/bbl) |
|
27.02 |
|
20.16 |
|
34 |
|
29.92 |
|
16.53 |
|
81 |
|
Natural gas
($/mcf) |
|
4.31 |
|
2.22 |
|
94 |
|
4.24 |
|
2.72 |
|
56 |
|
|
|
|
|
|
|
|
|
Netbacks ($/boe) |
|
|
|
|
|
|
|
Crude oil and natural
gas revenues |
|
34.17 |
|
20.72 |
|
65 |
|
34.51 |
|
21.87 |
|
58 |
|
Marketing revenue |
|
1.72 |
|
- |
|
- |
|
0.77 |
|
- |
|
- |
|
Realized
gain (loss) on financial instruments |
|
0.77 |
|
11.51 |
|
(93 |
) |
- |
|
9.32 |
|
- |
|
Revenue, after realized
financial instruments |
|
36.66 |
|
32.23 |
|
14 |
|
35.28 |
|
31.19 |
|
13 |
|
Royalties |
|
(1.49 |
) |
(2.43 |
) |
(39 |
) |
(2.48 |
) |
(2.42 |
) |
2 |
|
Operating expense |
|
(12.72 |
) |
(7.95 |
) |
60 |
|
(10.21 |
) |
(7.88 |
) |
30 |
|
Transportation expense |
|
(5.24 |
) |
(6.79 |
) |
(23 |
) |
(5.81 |
) |
(6.09 |
) |
(4 |
) |
Operating
netback(1) |
|
17.21 |
|
15.06 |
|
14 |
|
16.78 |
|
14.81 |
|
13 |
|
General and
administrative expenses |
|
1.69 |
|
2.82 |
|
(40 |
) |
2.24 |
|
2.32 |
|
(3 |
) |
Paid out restricted
share units |
|
- |
|
0.37 |
|
- |
|
- |
|
- |
|
- |
|
Interest |
|
3.63 |
|
4.01 |
|
(9 |
) |
3.11 |
|
2.78 |
|
12 |
|
Cash
netback (1) |
|
11.89 |
|
7.86 |
|
51 |
|
11.43 |
|
9.71 |
|
18 |
|
|
|
|
|
|
|
|
|
Financial |
|
|
|
|
|
|
|
($ thousands, except
per share) |
|
|
|
|
|
|
|
Oil and natural gas
revenues |
|
20,162 |
|
10,942 |
|
84 |
|
45,833 |
|
28,258 |
|
62 |
|
Adjusted funds from
operations(1) |
|
7,020 |
|
4,152 |
|
69 |
|
15,184 |
|
12,342 |
|
23 |
|
Per share
– basic and diluted |
|
0.04 |
|
0.03 |
|
33 |
|
0.09 |
|
0.08 |
|
13 |
|
Net earnings
(loss) |
|
4,578 |
|
(18,638 |
) |
- |
|
12,930 |
|
(13,379 |
) |
- |
|
Per share
– basic and diluted |
|
0.03 |
|
(0.12 |
) |
- |
|
0.08 |
|
(0.09 |
) |
- |
|
Net debt(1) |
|
90,638 |
|
117,959 |
|
(23 |
) |
90,638 |
|
117,959 |
|
(23 |
) |
Capital expenditures,
net of dispositions |
|
22,610 |
|
(186 |
) |
- |
|
52,861 |
|
11,889 |
|
345 |
|
Weighted average shares
(000s) |
|
|
|
|
|
|
|
Basic |
|
164,591 |
|
155,510 |
|
6 |
|
160,712 |
|
155,510 |
|
3 |
|
Diluted |
|
165,612 |
|
155,510 |
|
6 |
|
162,171 |
|
155,510 |
|
4 |
|
(1) Refer to non-GAPP measures
MESSAGE TO SHAREHOLDERS
Delphi continues to successfully execute its
planned 2017 development program at its Bigstone Montney property
ahead of schedule as a result of an active drilling program through
spring break-up in the second quarter. Through the first six
months of 2017, the Company has drilled 8.0 gross (5.1 net) wells
compared to 2.0 gross (1.7 net) wells in the first six months of
2016.
Delphi’s production capability remains ahead of
forecast despite a larger impact than originally expected from the
scheduled turnaround of the SemCAMS K3 processing plant. With the
five wells completed in the second quarter now on production and
currently restricted during their initial frac water clean-up
phase, and two wells drilled after the end of the second quarter
ready for completions later in August, production is forecast to
continue to grow through the second half of 2017, on track with the
of the Company’s production guidance.
Well results continue to meet or exceed our
expectations. Although full production capability has not yet been
realized from the new wells, in general, initial condensate yields
continue to trend higher than forecast supporting continued
attractive returns on capital invested in the current commodity
price environment. The new wells continue to deliver strong
field netbacks in the current pricing environment, resulting in a
recycle ratio of approximately two times, achieving our objective
of returning $2.00 for every $1.00 invested.
The Company continues to maintain a significant
risk management program with 65 percent of its natural gas hedged
through the remainder of 2017 at $4.20 per thousand cubic feet
(“mcf”) and 42 percent of its field condensate hedged at an average
WTI price of CDN$66.67 per barrel (“bbl”). The Company also
continues to contract approximately 90 percent of its natural gas
production into the Chicago market through firm transportation on
the Alliance pipeline.
With an undrawn $80.0 million credit facility, a
growing production base focused on increased condensate yields, and
superior marketing arrangements with a significant hedge position,
Delphi remains well positioned to execute its 2017 drilling
plans.
Financial Update
Delphi continued an active development program
at its Bigstone Montney property in the second quarter of 2017
drilling four gross (2.5 net) wells, performing completions
operations on five gross (3.2 net) wells and completing various
infrastructure upgrade and expansion projects. Capital
expenditures in the second quarter amounted to $22.6 million of
which $21.4 million was for drilling and completion operations.
Production volumes in the second quarter of 2017
were impacted by the planned turnaround of the SemCAMS K3 natural
gas processing facility and the concurrent turnaround of Delphi’s
7-11 Montney facility which together curtailed production from the
Bigstone Montney by about 2,500 boe/d. Based on field estimates,
Delphi produced an average of 9,420 boe/d during the 55 days of the
second quarter of 2017 which were not affected by the plant
turnarounds and an average of 9,730 boe/d during July. For the full
second quarter of 2017, including the impact of the turnarounds,
production volumes averaged 6,484 boe/d. On a boe basis, production
volumes in the second quarter were 40 percent weighted to
condensate and natural gas liquids and 60 percent to natural
gas.
Delphi’s realized prices before hedging gains in
the second quarter were $4.31 per mcf for natural gas, $59.74 per
bbl for field condensate and $27.02 per bbl for natural gas
liquids. Hedging gains in the second quarter increased the realized
price of natural gas by $0.15 per mcf and the realized price of
field condensate by $1.00 per bbl.
In the second quarter of 2017, Delphi generated
revenue of $20.2 million and adjusted funds from operations of $7.0
million, equivalent to $0.04 per basic and diluted share. As at
June 30, 2017, Delphi had no debt outstanding under its $80.0
million senior secured revolving credit facility while net debt,
comprised of senior secured notes and working capital deficiency,
amounted to $90.6 million dollars.
Operating expenses in the first half and second
quarter of 2017 were impacted by a number of factors some of which
are ongoing and others which were one-time or intermittent.
Ongoing factors include a reclassification of certain costs from
transportation expense to operating expense, an additional
processing tariff commencing on January 1, 2017 and lasting for
three years to recover operating costs associated with the SemCAMS
K3 natural gas plant turnaround, and loss of processing income
through the disposition of a 35 percent interest in certain
facilities as part of the industry partner transaction completed in
December 2016. Non-recurring or intermittent factors included
operating costs associated with turnaround of the Company’s 7-11
Montney facility and the costs of handling large amounts of
produced frac water from the significant increase of new wells
completed in the first half of 2017. The capacity of Delphi’s
16-34-59-21W5 water disposal facility (“16-34 water disposal
facility”) along with restricted access due to wet weather and road
bans forced Delphi to truck water greater distances to third-party
facilities for disposal. An upgrade and expansion of Delphi’s
65 percent owned water disposal facility will be completed in the
fourth quarter of 2017 and will reduce the costs of trucking and
disposal of water at third-party facilities.
Operations Update
Despite wet weather conditions during the second
quarter of 2017, Delphi remained active in the field at
Bigstone. Following a busy first quarter where the Company
drilled four (2.6 net) wells and brought four (2.6 net) wells on
production, two rigs continued drilling through spring break-up,
rig releasing four (2.5 net) horizontal Montney wells.
Average horizontal lateral length for these second quarter wells
was 2,858 metres. All four of these wells, plus a fifth that
was drilled in the first quarter, were also completed in the second
quarter, each with a forty stage fracture stimulation. Over
47 million pounds of sand were used to complete these five wells
with sand concentrations ranging 850 to 1,150 pounds per horizontal
lateral foot.
Three of these wells, 13-09, 14-09 and
15-09-60-23W5 (all 61.8 percent working interest) are located just
to the east of Delphi’s successful western-most drill,
15-08-60-23W5. After short clean-up tests, the wells were all
brought on production at the end of June at restricted rates in
order to handle continued load water recovery. Initial
average production rates over the first 30 days for the three wells
were 895 boe/d, 865 boe/d and 756 boe/d respectively, including an
estimated plant natural gas liquids yield of 46 bbls/mmcf of sales
gas. Field condensate to natural gas yields were 185
bbls/mmcf sales, 213 bbls/mmcf sales and 196 bbls/mmcf sales
respectively, placing these three wells in the top five of the
richest Delphi Montney wells at Bigstone, behind only 15-8-60-23W5
and 13-21-60-23W5.
The other two completed wells, at the southern
portion of the field, at 13-17 and 16-18-59-22W5 (both 65 percent
working interest) were tied-in to the Company’s 5-8 Montney
facility in late July and brought on production at restricted
rates. Although early time, the Company is encouraged about
initial field condensate to gas ratios being higher than initial
ratios at the direct offset at 12-17-59-22W5, validating design
enhancements with Delphi’s third and fourth generation fracs.
Initial production performance over the first 30 days of these
wells will be reported when available. During the second
quarter, Delphi completed an upgrade and expansion of the 5-8
Montney facility bringing capacity of the facility to ten million
cubic feet per day (“mmcf/d”) of natural gas with fluid storage of
2,600 bbls.
During the 36 day scheduled turnaround at the
SemCAMS K3 natural gas processing plant, Delphi took advantage of
this outage by completing the triennial turnaround at its 7-11
Montney facility over a nine day period. With major repair and
maintenance now completed at these facilities, Delphi expects
related downtimes to be minimal. Based on field estimates,
corporate production for the month of July averaged 9,730
boe/d.
Delphi’s amine project at the 7-11 Montney
facility to sweeten a portion of its slightly sour Montney
production for processing at the 14-28-59-22W5 Bigstone Gas Plant,
where the Company owns a 25 percent working interest, has commenced
with the submission of regulatory applications and procurement of
equipment. Construction is expected to start early in 2018
with start-up planned for the second quarter of 2018.
During second quarter operations, significant
flow-back load volumes from fracturing operations that took place
on all five wells within approximately one month of each other,
caused longer wait times for water disposal as well as having to
truck volumes to third party water disposal facilities. In
order to reduce costs associated with water disposal, Delphi has
begun an expansion of the 16-34 water disposal facility that will
double the fluid storage and increase pumping capacity of its 16-34
disposal well. The expansion is expected to be completed
early in the fourth quarter of 2017 to help handle the volumes
associated with the significant increase in activity.
Both drilling rigs remain active with one
currently drilling the first of three horizontal Montney wells from
a surface pad located at 13-31-59-23W5, making these the
western-most Montney wells drilled by the Company at
Bigstone. Completion operations for this pad are expected to
commence in November with first production expected later in 2017
or early in 2018. The second rig has finished drilling the
9-21-59-22W5 well (“9-21”) to a total depth of 5,865 metres with a
horizontal lateral in the Montney of 2,841 metres. 9-21 was
drilled from spud of the well to total depth in a Company record
22.6 days; a full two days faster than the previous record.
Completion operations for 9-21 are scheduled to start in August and
will be done consecutively with the 13-10-59-23W5 well that
finished drilling in early July.
Marketing and Risk
Management
The Company has approximately 22 mmcf/d, or 65%
of its remainder of 2017 forecast natural gas production, hedged at
an average price of CDN$4.20 per million British thermal units
(“mmbtu”) and approximately 900 barrels per day (“ bbls/d”) of
condensate hedged at an average WTI price of CDN$66.67 per barrel.
Delphi has mitigated the persistent widening of the AECO and
Station 2 basis differentials by contracting most of its gas into
the Chicago market where pricing has materially outperformed local
western Canada pricing, even with the incremental transportation
costs.
Natural Gas |
Q3 – Q4/17 |
|
2018 |
|
|
2019 |
|
Percent
Hedged * |
|
65% |
|
|
54% |
|
|
21% |
|
Hedge
Price (CDN $/mmbtu)
|
|
$4.20 |
|
|
$3.92 |
|
|
$3.89 |
|
Crude Oil |
Q3 – Q4/17 |
|
2018 |
|
|
2019 |
|
Percent
Hedged * |
|
42% |
|
|
14% |
|
|
14% |
|
Hedge
Price (WTI CDN $/bbl)
|
|
$66.67 |
|
|
$70.00 |
|
|
$70.00 |
|
* Based on average 2017 production of 33.5
mmcf/d of natural gas and 2,150 bbls/d of field condensate.
Outlook
The Company continues to forecast absolute and
per share growth during 2017, while maintaining balance sheet
strength, highlighted by a significant increase in drilling
activity over 2016 levels.
Having remained active through spring break-up,
the Company is ahead of its planned drilling schedule, with a total
of nine (5.7 net) new wells on production and two additional wells
scheduled for completion later in August. With a growing production
base, significant hedge position in 2017 and 2018 as well as an
undrawn credit facility, Delphi remains well positioned to execute
its 2017 drilling plans.
Delphi has secured the required firm service
transportation for 100 percent of forecasted 2017 natural gas
production growth. The contracted Alliance full path service to
Chicago with its incremental priority interruptible service handles
approximately 90 percent of the current Company’s natural gas
sales, and together with the existing and incremental 2018
contracted firm TCPL service, will provide the Company with firm
service to handle growth plans beyond 2017.
The Company’s primary focus remains on creating
significant value for its shareholders through its successful
development of the Bigstone Montney property, while maintaining an
adequate level of financial flexibility given the volatile
commodity price environment. Delphi is continuing with its planned
2017 capital program, but will re-assess its contemplated pace of
capitalization into the 2017-18 winter program commensurate with
the commodity price environment.
The existing Board of Directors welcomes the
addition of Mr. Glenn A. Hamilton, Mr. Peter T. Harrison, and Mr.
Ian Wild to the Board of Directors, elected at the Annual General
Meeting in May. “Glenn, Peter and Ian bring tremendous depth to our
Board,” said David J. Reid, President and CEO.
On behalf of the Board of Directors and all the
employees of Delphi, we would like to thank our shareholders for
their continued support.
CONFERENCE CALL AND WEBCAST
A conference call and webcast to review second quarter 2017
results is scheduled for 9:00 a.m. Mountain Time (11:00 a.m.
Eastern Time) on Thursday, August 3, 2017. The conference
call number is 1-844-358-8760. A brief presentation by David J.
Reid, President and CEO and Mark D. Behrman, CFO, will be followed
by a question and answer period. The conference call will
also be broadcast live on the internet and may be accessed through
Delphi’s website at www.delphienergy.ca or by entering
http://edge.media-server.com/m/p/qbucc4nw in your web browser. A
rebroadcast will also be available on Delphi’s website or at
http://edge.media-server.com/m/p/qbucc4nw on your web browser.
This news release does not constitute an offer
to sell or a solicitation of any offer to buy the securities in the
United States. The securities offered have not been and will not be
registered under the U.S. Securities Act of 1933, as amended and
will not be offered or sold in the United States absent an
exemption from the registration requirements thereof.
About Delphi Energy Corp.
Delphi Energy Corp. is an industry-leading
producer of liquids-rich natural gas. The Company has
achieved top decile results through the development of our high
quality Montney property, uniquely positioned in the Deep Basin of
Bigstone, in northwest Alberta. Delphi continues to outperform key
industry players by improving operational efficiencies and growing
our dominant Bigstone land position in this world-class play.
Delphi is headquartered in Calgary, Alberta and trades on the
Toronto Stock Exchange under the symbol DEE.
FOR FURTHER INFORMATION PLEASE
CONTACT:
|
DELPHI ENERGY CORP.2300 - 333 – 7th Avenue
S.W.Calgary, AlbertaT2P 2Z1Telephone: (403) 265-6171
Facsimile: (403) 265-6207 Email: info@delphienergy.ca
Website: www.delphienergy.ca |
|
|
|
|
DAVID J. REID |
|
MARK D. BEHRMAN |
President & CEO |
|
CFO |
|
|
|
|
|
|
|
|
|
Forward-Looking
Statements. This news release contains
forward-looking statements and forward-looking information within
the meaning of applicable Canadian securities laws. These
statements relate to future events or the Company’s future
performance and are based upon the Company’s internal assumptions
and expectations. All statements other than statements of
present or historical fact are forward-looking statements.
Forward-looking statements are often, but not always, identified by
the use of any of the words “expect”, “anticipate”, “continue”,
“estimate”, “may”, “will”, “should”, “believe”, "intends”,
“forecast”, “plans”, “guidance”, “budget” and similar
expressions.
More particularly and without limitation, this
release contains forward-looking statements and information
relating to petroleum and natural gas production estimates and
weighting, projected crude oil and natural gas prices, future
exchange rates, expectations as to royalty rates, expectations as
to transportation and operating costs, expectations as to general
and administrative costs and interest expense, expectations as to
capital expenditures and net debt, planned capital spending, future
liquidity and Delphi’s ability to fund ongoing capital requirements
through operating cash flows and its credit facilities, supply and
demand fundamentals for oil and gas commodities, timing and success
of development and exploitation activities, cash availability for
the financing of capital expenditures, access to third-party
infrastructure, treatment under governmental regulatory regimes and
tax laws and future environmental regulations.
Furthermore, 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 profitable in the future.
The forward-looking statements and information
contained in this release are based on certain key expectations and
assumptions made by Delphi. The following are certain
material assumptions on which the forward-looking statements and
information contained in this release are based: the stability of
the global and national economic environment, the stability of and
commercial acceptability of tax, royalty and regulatory regimes
applicable to Delphi, exploitation and development activities being
consistent with management’s expectations, production levels of
Delphi being consistent with management’s expectations, the absence
of significant project delays, the stability of oil and gas prices,
the absence of significant fluctuations in foreign exchange rates
and interest rates, the stability of costs of oil and gas
development and production in Western Canada, including operating
costs, the timing and size of development plans and capital
expenditures, availability of third party infrastructure for
transportation, processing or marketing of oil and natural gas
volumes, prices and availability of oilfield services and equipment
being consistent with management’s expectations, the availability
of, and competition for, among other things, pipeline capacity,
skilled personnel and drilling and related services and equipment,
results of development and exploitation activities that are
consistent with management’s expectations, weather affecting
Delphi’s ability to develop and produce as expected, contracted
parties providing goods and services on the agreed timeframes,
Delphi’s ability to manage environmental risks and hazards and the
cost of complying with environmental regulations, the accuracy of
operating cost estimates, the accurate estimation of oil and gas
reserves, future exploitation, development and production results
and Delphi’s ability to market oil and natural gas successfully to
current and new customers. Additionally, estimates as to expected
average annual production rates assume that no unexpected outages
occur in the infrastructure that the Company relies on to produce
its wells, that existing wells continue to meet production
expectations and any future wells scheduled to come on in the
coming year meet timing and production expectations.
Commodity prices used in the determination of
forecast revenues are based upon general economic conditions,
commodity supply and demand forecasts and publicly available price
forecasts. The Company continually monitors its forecast
assumptions to ensure the stakeholders are informed of material
variances from previously communicated expectations.
Financial outlook information contained in this
release about prospective results of operations, financial position
or cash flows is based on assumptions about future events,
including economic conditions and proposed courses of action, based
on management’s assessment of the relevant information currently
available. Readers are cautioned that such financial outlook
information contained in this release should not be used for
purposes other than for which it is disclosed.
Although the Company believes that the
expectations reflected in such forward-looking statements and
information are reasonable, it can give no assurance that such
expectations will prove to be correct and such forward-looking
statements should not be unduly relied upon. Since forward-looking
statements and information address future events and conditions, by
their very nature they involve inherent known and unknown risks and
uncertainties. Delphi’s actual results, performance or
achievements 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 Delphi will derive therefrom. Should one
or more of these risks or uncertainties materialize, or should
assumptions underlying forward-looking statements prove incorrect,
actual results may vary materially from those currently anticipated
due to a number of factors and risks. These include, but are
not limited to, the risks associated with the oil and gas industry
in general such as operational risks in development, exploration
and production, delays or changes in plans with respect to
exploration or development projects or capital expenditures, the
uncertainty of estimates and projections relating to production
rates, costs and expenses, commodity price and exchange rate
fluctuations, marketing and transportation, environmental risks,
competition from others for scarce resources, the ability to access
sufficient capital from internal and external sources, changes in
governmental regulation of the oil and gas industry and changes in
tax, royalty and environmental legislation. Additional
information on these and other factors that could affect the
Company’s operations or financial results are included in the
Company’s most recent Annual Information Form and other reports on
file with the applicable securities regulatory authorities and may
be accessed through the SEDAR website (www.sedar.com).
Readers are cautioned that the foregoing list of
factors is not exhaustive. Furthermore, the forward-looking
statements contained in this release are made as of the date of
this release for the purpose of providing the readers with the
Company’s expectations for the coming year. The
forward-looking statements and information may not be appropriate
for other purposes. Delphi 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,
unless so required by applicable securities laws. The
forward-looking statements contained in this release are expressly
qualified in their entirety by this cautionary statement.
Basis of Presentation.
For the purpose of reporting production
information, reserves and calculating unit prices and costs,
natural gas volumes have been converted to a barrel of oil
equivalent (boe) using six thousand cubic feet equal to one
barrel. A boe conversion ratio of 6:1 is based upon an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the
wellhead. This conversion conforms to the Canadian Securities
Administrators’ National Instrument 51-101 when boes are
disclosed. Boes may be misleading, particularly if used in
isolation.
As per CSA Staff Notice 51-327 initial test results and initial
production performance should be considered preliminary data and
such data is not necessarily indicative of long-term performance or
of ultimate recovery.
Non-GAAP Measures. The
release contains the terms “adjusted funds from operations”,
“adjusted funds from operations per share”, “net debt”, “net debt
to adjusted funds from operations ratio”, “operating netbacks”
“cash netbacks” and “netbacks” which are not recognized measures
under GAAP. The Company uses these measures to help evaluate
its performance. Management considers netbacks an important
measure as it demonstrates its profitability relative to current
commodity prices and costs of production. Management uses adjusted
funds from operations to analyze performance and considers it a key
measure as it demonstrates the Company’s ability to generate the
cash necessary to fund future capital investments and to repay
debt. Adjusted funds from operations is a non-GAAP measure and has
been defined by the Company as cash flow from operating activities
before accretion on long term and subordinated debt,
decommissioning expenditures and changes in non-cash working
capital from operating activities. The Company also presents
adjusted funds from operations per share whereby amounts per share
are calculated using weighted average shares outstanding consistent
with the calculation of earnings per share. Delphi’s determination
of adjusted funds from operations may not be comparable to that
reported by other companies nor should it be viewed as an
alternative to cash flow from operating activities, net earnings or
other measures of financial performance calculated in accordance
with GAAP. The Company has defined net debt as the sum of
bank debt and senior secured notes plus/minus working capital
excluding the current portion of the fair value of financial
instruments. Net debt is used by management to monitor remaining
availability under its credit facilities. Operating netbacks
have been defined as revenue plus marketing income less royalties,
transportation and operating costs. Cash netbacks have been
defined as operating netbacks less interest on bank debt and senior
secured notes, general and administrative costs and cash costs
related to the Company’s restricted share units. Netbacks are
generally discussed and presented on a per boe basis.