CALGARY, AB, Nov. 5, 2020
/CNW/ - TORC Oil & Gas Ltd. ("TORC" or the "Company")
(TSX: TOG) is pleased to announce its financial and operating
results for the three and nine months ended September 30, 2020. The associated
management's discussion and analysis ("MD&A") and unaudited
interim financial statements as at and for the three and nine
months ended September 30, 2020 can
be found at www.sedar.com and www.torcoil.com.
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Highlights
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Three months
ended
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Nine months
ended
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(in thousands,
except per share data)
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September
30
2020
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June 30
2020
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September
30
2019
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September
30
2020
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September
30
2019
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Financial
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Adjusted funds flow, including
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transaction related
costs (1)
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$35,707
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$5,694
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$73,768
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$88,547
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$230,960
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Per share
basic
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$0.16
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$0.03
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$0.34
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$0.40
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$1.06
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Per share
diluted
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$0.16
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$0.03
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$0.33
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$0.39
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$1.04
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Adjusted funds flow, excluding
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transaction related
costs (1), (2)
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$35,707
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$5,704
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$73,768
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$88,577
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$230,960
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Per share
basic
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$0.16
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$0.03
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$0.34
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$0.40
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$1.06
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Per share
diluted
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$0.16
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$0.03
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$0.33
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$0.39
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$1.04
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Net cash from operating activities
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$41,006
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$619
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$62,559
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$99,580
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$217,254
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Net income (loss)
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($4,434)
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($41,023)
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$5,664
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($925,352)
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$23,463
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Per share
basic
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($0.02)
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($0.18)
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$0.03
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($4.16)
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$0.11
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Per share
diluted
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($0.02)
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($0.18)
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$0.03
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($4.16)
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$0.11
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Exploration and development
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Expenditures
(1)
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$6,157
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$1,601
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$57,006
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$72,459
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$145,967
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Property acquisitions, net of
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Dispositions
(1)
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$57
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$1,083
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($565)
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$5,031
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$270
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Net debt (1)
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$359,651
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$382,115
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$369,571
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$359,651
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$369,571
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Cash dividends declared (3)
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-
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$1,112
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$11,434
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$13,334
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$32,124
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Dividends declared per common share
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-
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$0.005
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$0.075
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$0.060
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$0.213
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Common shares
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Shares
outstanding, end of period
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222,612
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222,445
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220,338
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222,612
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220,338
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Weighted
average shares (basic)
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222,540
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222,372
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219,622
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222,355
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218,356
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Weighted
average shares (diluted)
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225,636
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225,054
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221,952
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225,950
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221,115
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Operations
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Production
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Crude oil
(Bbls per day)
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20,616
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21,039
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23,382
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21,772
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23,538
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NGL (Bbls
per day)
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1,466
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1,316
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1,587
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1,455
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1,536
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Natural
gas (Mcf per day)
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17,479
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15,301
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20,206
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17,449
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19,422
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Barrels of
oil equivalent (Boepd, 6:1)
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24,995
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24,905
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28,337
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26,135
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28,311
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Average realized price
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Crude oil
($ per Bbl)
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$45.54
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$23.33
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$64.65
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$39.25
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$66.51
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NGL ($ per
Bbl)
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$10.32
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$4.24
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$11.91
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$8.26
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$14.67
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Natural
gas ($ per Mcf)
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$1.90
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$1.72
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$0.75
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$1.74
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$1.18
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Barrels of
oil equivalent
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($ per Boe,
6:1)
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$39.50
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$20.99
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$54.55
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$34.32
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$56.90
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Operating netback per Boe (6:1)
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Operating
netback (1)
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$18.48
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$4.55
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$30.90
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$14.90
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$32.62
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Operating
netback (prior to hedging) (1)
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$18.53
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$3.24
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$30.90
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$14.23
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$32.62
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Adjusted funds flow netback per Boe (6:1)
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Including
transaction related costs (1)
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$15.53
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$2.51
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$28.30
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$12.37
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$29.88
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Excluding
transaction related costs (1)
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$15.53
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$2.52
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$28.30
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$12.37
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$29.88
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Wells drilled:
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Gross
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-
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25
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33
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72
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Net
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19.0
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28.2
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56.7
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Success
(%)
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-
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-
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100
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100
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100
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(1)
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Management uses
these non-GAAP financial measures to analyze operating performance,
leverage and investing activity. These measures do not have a
standardized meaning under GAAP and therefore may not be comparable
with the calculation of similar measures for other companies.
See Non-GAAP Measurements within this document for additional
information
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(2)
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For ease of
readability, in this press release, adjusted funds flow, excluding
transaction related costs will be referred to as "cash
flow"
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(3)
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Cash dividends
declared are net of the share dividend program participation.
On May 5, 2020, TORC announced the temporary suspension of its
monthly dividend
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PRESIDENT'S MESSAGE
During the third quarter of 2020, TORC maintained a disciplined
approach to the economic uncertainty created by the ongoing
COVID-19 global pandemic and related volatility of crude oil
prices. The Company's top priority remains the health and
safety of the Company's employees, contractors, partners, service
providers and the communities in which we operate.
TORC's proactive responses to volatility experienced in 2020
continue to demonstrate the Company's focus on the long-term
objectives of delivering disciplined growth while displaying the
strength and flexibility of the Company's business strategy and
asset base.
TORC remains well positioned both operationally and financially
to continue to execute the Company's long-term business plan and
take advantage of opportunities as they arise.
The Company's key achievements in the third quarter of 2020
included the following:
- Achieved quarterly production of 24,995 boepd, relative to
24,905 boepd in the second quarter of 2020 and 28,337 boepd in the
third quarter of 2019;
- Generated cash flow of $35.7
million relative to $5.7
million in the second quarter of 2020 and $73.8 million in the third quarter of 2019;
- Generated cash flow per share of $0.16 compared to $0.03 in the second quarter of 2020 and
$0.34 in the third quarter of
2019;
- During the third quarter of 2020, the Company incurred
$6.2 million of capital expenditures
on cash flow of $35.7 million, for a
payout ratio of 17%;
- Exited the quarter with net debt of $359.7 million, down from $382.1 as at June 30,
2020, with $335.7 million
drawn on the Company's credit facility; and
- Subsequent to the end of the quarter, completed the Company's
inaugural Sustainability Report, highlighting TORC's efforts and
commitment to responsibly develop the Company's natural resources.
The full 2020 Sustainability Report can be found on the Company's
website at www.torcoil.com. Highlights from the Sustainability
Report include:
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- Reductions in greenhouse gas, methane and fugitive
emissions
- Reductions in the amount of fresh water used
- Continued prevention and reduction of oil and saltwater
spills
- Continued safety focus and reduction of workplace
incidents
- Ongoing community engagement and support
- Continued efforts to establish best-in-class governance
practices including linking executive and employee compensation to
environmental, social and governance matters
OPERATIONAL UPDATE
TORC's third quarter production averaged 24,995 boepd with the
continued strong performance from the Company's successful first
quarter drilling program and the long history of managing the
production decline profile. TORC spent a total of
$6.2 million of exploration and
development capital in the third quarter primarily on optimization
and asset maintenance programs bringing total spending for the
first nine months of 2020 to $72.5
million.
SOUTHEAST SASKATCHEWAN
TORC has drilled 19 (15.5 net) wells on the southeast
Saskatchewan conventional assets
in 2020, all in the first quarter. TORC has identified more
than 400 net conventional light oil drilling locations in southeast
Saskatchewan, providing multiple
years of high quality drilling inventory.
TORC maintains an inventory of 5 (4.0 net) drilled but
uncompleted Torquay/Three Forks
resource play wells associated with the Company's first quarter
drilling program. Additionally, TORC has identified over 150
net development locations in the Torquay/Three Forks play providing multiple
years of drilling inventory.
On the unconventional Midale
light oil resource play in southeast Saskatchewan, TORC successfully drilled 6 (5.7
net) wells in the first quarter. TORC has identified 175 net
future unconventional Midale
drilling locations on the Company's land base to add value in
future years.
CARDIUM
TORC drilled 3 (3.0 net) Cardium development wells in the first
quarter of 2020. The Company has identified more than 290 net
undrilled Cardium locations for future development. With a
decline profile below 20% and a deep inventory of high quality
development locations, the Cardium continues to support TORC's
long-term strategy.
CAPITAL BUDGET AND PRODUCTION GUIDANCE
TORC maintains that the revised $80
million 2020 capital budget (down from $190 million pre pandemic) will result in 2020
exit production of 25,000 boepd (83% light oil; 5% NGLs).
Based on this production profile and the Company's long term
focus on production decline management, TORC expects that the
Company's production decline will decrease to approximately 20% by
year-end 2020.
Due to the proactive reduction in the 2020 budget, TORC was able
to reduce net debt from $382.1
million as at June 30, 2020 to
$359.7 million as at September 30, 2020. Based on current
commodity prices and budgeted costs, the Company expects to achieve
free cash flow above the current capital program during the
remainder of 2020. The free cash flow will continue to
position the Company to further reduce debt and take advantage of
opportunities to enhance the growth, sustainability and
repeatability of the Company's business model.
TORC's asset base provides flexibility in volatile commodity
price environments due to the following key characteristics:
greater than 90% operated capital program to control capital
spending, low decline rate, year-round access, low capital costs
per well, no drilling commitments, limited take-or-pay contracts,
and no land expiry concerns.
TORC anticipates announcing the Company's 2021 capital budget
and production guidance in December.
DIVIDEND
TORC's dividend strategy is reviewed regularly with the Board of
Directors and is an important component of TORC's overall long-term
business plan. With the crude oil market experiencing a
significant and rapid decline in world prices resulting from severe
dynamics coinciding with significant impacts to both supply and
demand uncertainty, TORC elected to temporarily suspend the monthly
dividend during the second quarter.
TORC will continue to assess the free cash flow profile and
dividend policy of the Company following a continued increase in
economic activity and stability of oil market dynamics.
OUTLOOK
TORC has developed significant trust and credibility as a
corporate citizen, which provides a solid foundation for the
long-term success of the business. Sustainability of the
business includes focusing on overall social responsibility to
support strong values and relationships in the workplace, and
communities where TORC operates.
The stability of the high quality, low decline, light oil assets
in southeast Saskatchewan and the
low risk Cardium development inventory in central Alberta, combined with exposure to
unconventional light oil resource plays in southeast Saskatchewan, positions TORC to provide value
creation through a disciplined long term focused growth
strategy.
TORC has the following key operational and financial
attributes:
Production
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2020E Exit: 25,000
boepd (83% light oil, 5% NGLs, 12% natural gas)
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Total Proved plus
Probable Reserves (1)
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139 mmboe (78% light
oil; 6% NGLs, 16% natural gas)
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Southeast
Saskatchewan Light Oil Development Inventory
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Greater than 400 net
undrilled conventional locations
Greater than 150 net
undrilled Torquay/Three Forks locations
Greater than 175 net
undrilled unconventional Midale locations
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Cardium Light Oil
Development Inventory
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Greater than 290 net
undrilled locations
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2020 Capital
Program
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$80
million
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Monthly
Dividend
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Suspended
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Net Debt as at Sept
30, 2020 (2)
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$359.7 million;
$335.7 million drawn
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Shares
Outstanding
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222.6 million
(basic)
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Tax Pools
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Approximately $1.8
billion
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Notes:
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(1)
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All reserves
information in this press release are gross reserves. The reserve
information for TORC in the foregoing table is derived from the
independent engineering report effective December 31, 2019 prepared
by Sproule & Associates Limited ("Sproule") evaluating the oil,
NGL and natural gas reserves attributable to all of our properties
(the "TORC Reserve Report")
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(2)
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See "Non-GAAP
Measurements"
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READER ADVISORIES
Forward Looking Statements
This press release contains forward–looking
statements and forward–looking information
(collectively "forward–looking information") within
the meaning of applicable securities laws relating to the Company's
plans, strategy, business model, focus, objectives and other
aspects of TORC's anticipated future operations and financial,
operating and drilling and development plans and results,
including, expected future production, production mix, reserves,
drilling inventory, net debt, cash flow and free cash flow,
financial flexibility and liquidity, capital costs, operating
netbacks, operational efficiencies, decline rate and decline
profile, product mix, capital expenditure program,
capital efficiencies, commodity prices, royalties, tax pools and
future growth. In addition, and without limiting the generality of
the foregoing, this press release contains
forward–looking information regarding: the focus and
allocation of TORC's 2020 capital budget; anticipated average and
exit production rates, available free cash flow, management's view
of the characteristics and quality of the opportunities available
to the Company; TORC's dividend policy and plans; and other matters
ancillary or incidental to the foregoing.
Forward–looking information typically uses
words such as "anticipate", "believe", "project", "target",
"guidance", "expect", "goal", "plan", "intend" or similar words
suggesting future outcomes, statements that actions, events or
conditions "may", "would", "could" or "will" be taken or occur in
the future. The forward–looking information is based
on certain key expectations and assumptions made by TORC's
management, including expectations concerning prevailing commodity
prices, exchange rates, interest rates, applicable royalty rates
and tax laws; capital efficiencies; decline rates; future
production rates and estimates of operating costs; performance of
existing and future wells; reserve and resource volumes;
anticipated timing and results of capital expenditures; the success
obtained in drilling new wells; the sufficiency of budgeted capital
expenditures in carrying out planned activities; the timing,
location and extent of future drilling operations; the state of the
economy and the exploration and production business; results of
operations; performance; business prospects and opportunities; the
availability and cost of financing, labour and services; the impact
of increasing competition; ability to market oil and natural gas
successfully and TORC's ability to access capital.
Statements relating to "reserves" are also deemed to be
forward looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated and that
the reserves can be profitably produced in the future.
Although the Company believes that the expectations and
assumptions on which such forward–looking information
is based are reasonable, undue reliance should not be placed on the
forward–looking information because TORC can give no
assurance that they will prove to be correct. Since
forward–looking information addresses future events
and conditions, by its very nature they involve inherent risks and
uncertainties. The Company's actual results, performance or
achievement could differ materially from those expressed in, or
implied by, the forward–looking information and,
accordingly, no assurance can be given that any of the events
anticipated by the forward–looking information will
transpire or occur, or if any of them do so, what benefits that the
Company will derive there from. Management has included the above
summary of assumptions and risks related to
forward–looking information provided in this press
release in order to provide securityholders with a more complete
perspective on TORC's future operations and such information may
not be appropriate for other purposes.
Readers are cautioned that the foregoing lists of factors are
not exhaustive. Additional information on these and other factors
that could affect TORC's operations or financial results are
included in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website
(www.sedar.com).
These forward–looking statements are made as of
the date of this press release and TORC disclaims any intent or
obligation to update publicly any forward–looking
information, whether as a result of new information, future events
or results or otherwise, other than as required by applicable
securities laws.
Dividends
The payment and the amount of dividends declared in any month
will be subject to the discretion of the board of directors and
will depend on the board of director's assessment of TORC's outlook
for growth, capital expenditure requirements, funds from
operations, potential acquisition opportunities, debt position and
other conditions that the board of directors may consider relevant
at such future time. The amount of future cash dividends, if any,
may also vary depending on a variety of factors, including
fluctuations in commodity prices and differentials, production
levels, capital expenditure requirements, debt service
requirements, operating costs, royalty burdens and foreign exchange
rates.
Non–GAAP
Measurements
This press release includes non-GAAP measures commonly used
in the oil and natural gas industry. These non-GAAP measures do not
have a standardized meaning prescribed by International Financial
Reporting Standards ("IFRS", or alternatively, "GAAP") and
therefore may not be comparable with the calculation of similar
measures by other companies. For details, descriptions and
reconciliations of these non-GAAP measurements, see the Company's
Management's Discussion and Analysis for the three and nine months
ended September 30, 2020.
"Adjusted funds flow, including transaction related
costs" represents cash flow from operating activities
prior to changes in non-cash operating working capital and
settlement of decommissioning obligations. "Adjusted funds flow,
excluding transaction related costs" represents cash flow from
operating activities prior to changes in non-cash operating working
capital, settlement of decommissioning obligations and transaction
related costs. Management considers these measures to be useful as
they assist in the determination of the Company's ability to
generate liquidity necessary to finance capital expenditures,
settlement of decommissioning obligations and funding of its
dividend. Transaction related costs are incurred during asset
and/or corporate acquisitions and are typically not considered a
cost incurred in the normal course of business. As a result,
excluding transaction related costs from adjusted funds flow
further assists in the determination of the Company's ability to
generate liquidity in the normal course of business.
For ease of readability, in this press release, "adjusted funds
flow, excluding transaction related costs" is also referred to as
"cash flow". TORC calculates cash flow per share using the same
method and shares outstanding that are used in the determination of
earnings per share.
"Net debt" is calculated as current
assets (excluding financial derivative assets) less: i) current
liabilities (excluding financial derivative liabilities) and ii)
bank debt. Management considers this measure to be useful in
determining the Company's leverage.
"Operating netback" or "netback"
represents revenue and realized gain or loss on financial
derivatives, less royalties, operating expenses and transportation
expenses and has been presented on a per Boe basis. Management
believes that in addition to net income, operating netback is a
useful measure as it assists in the determination of the Company's
operating performance and profitability.
"Exploration and development
expenditures" represents expenditures on
property, plant and equipment ("PP&E") excluding: acquisitions,
non-cash PP&E additions and capitalized general and
administrative expenses. See Capital Expenditures in the MD&A
for further details.
"Property acquisitions, net of
dispositions" represents additions to
PP&E related to the Company's asset and/or corporate
acquisition and disposition activity.
"Free cash flow" represents
adjusted funds flow, excluding transaction related costs, less i)
exploration and development expenditures", and ii) cash dividends
paid. Management considers this measure to be useful in
determining its ability to finance capital expenditures and fund
its dividend.
"Payout ratio" represents cash
dividends paid, plus exploration and development expenditures,
divided by adjusted funds flow, excluding transaction related
costs. The Company considers this to be a key measure of
sustainability.
Oil and Gas Disclosures
The term "boe" or barrels of oil equivalent may be
misleading, particularly if used in isolation. A boe conversion
ratio of six thousand cubic feet of natural gas to one barrel of
oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Additionally,
given that the value ratio based on the current price of crude oil,
as compared to natural gas, is significantly different from the
energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may
be misleading as an indication of value.
This press release discloses drilling locations in three
categories: (i) proved locations; (ii) probable locations; and
(iii) unbooked locations. Proved locations and probable locations
are derived from the reserves evaluation prepared by Sproule as of
December 31, 2019 and account for
drilling locations that have associated proved and/or probable
reserves, as applicable. Unbooked locations are internal estimates
prepared by a qualified reserves evaluator based on TORC's
prospective acreage and an assumption as to the number of wells
that can be drilled per section based on industry practice and
internal review. Unbooked locations do not have attributed
reserves. Of the 1015 net drilling locations identified herein, 357
are proved locations, 133 are probable locations and 525 are
unbooked locations. Of the 400 net conventional drilling locations
identified herein, 161 are proved locations, 56 are probable
locations and 183 are unbooked locations. Of the 150 net
Torquay/Three Forks drilling
locations identified herein, 51 are proved locations, 27 are
probable locations and 72 are unbooked locations. Of the 175 net
unconventional Midale drilling
locations identified herein, 78 are proved locations, 17 are
probable locations and 80 are unbooked locations. Of the 290 net
Cardium drilling locations identified herein, 68 are proved
locations, 33 are probable locations and 189 are unbooked
locations. Unbooked locations have been identified by management as
an estimation of our multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that TORC will
drill all unbooked drilling locations and, if drilled, there is no
certainty that such locations will result in additional oil and gas
reserves or production. The drilling locations on which we actually
drill wells will ultimately depend upon the availability of
capital, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors. While
certain of the unbooked drilling locations have been derisked by
drilling existing wells in relative close proximity to such
unbooked drilling locations, some of other unbooked drilling
locations are farther away from existing wells where management has
less information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and, if drilled, there is more uncertainty that
such wells will result in additional oil and gas reserves or
production.
Unbooked locations have been identified by management as an
estimation of our multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that TORC will
drill all unbooked drilling locations and, if drilled, there is no
certainty that such locations will result in additional oil and gas
reserves or production. The drilling locations on which we actually
drill wells will ultimately depend upon the availability of
capital, regulatory approvals, seasonal restrictions, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained and other factors. While
certain of the unbooked drilling locations have been derisked by
drilling existing wells in relative close proximity to such
unbooked drilling locations, some of other unbooked drilling
locations are farther away from existing wells where management has
less information about the characteristics of the reservoir and
therefore there is more uncertainty whether wells will be drilled
in such locations and, if drilled, there is more uncertainty that
such wells will result in additional oil and gas reserves or
production.
SOURCE TORC Oil & Gas Ltd.