Peyto Exploration & Development Corp. (“Peyto” or the
“Company”) is pleased to present its operating and financial
results for the first quarter of the 2019 fiscal year. A 68%
Operating Margin(1) and a 16% Profit Margin(2) in the quarter
delivered a 6% return on capital employed (ROCE) and a 6% return on
equity (ROE), on a trailing twelve month basis. Additional
highlights included:
- Liquids yield increases 31%. Condensate and
NGL yields increased from 17.7 bbl/mmcf in Q1 2018 to 23.2 bbl/mmcf
in Q1 2019, due to continued deployment of capital in Peyto’s
liquids rich Cardium play. Total liquids production of 10,703 bbl/d
in Q1 2019 was up 7% year over year, despite suspended deep cut
operations during February and March. Natural gas production was
down 19% to 462 mmcf/d as Peyto replaced declining dry gas with
significantly higher liquids-rich gas. Total Q1 2019 production of
87,703 boe/d was up slightly from Q4 2018 of 86,738 boe/d and Q3
2018 of 85,242 boe/d.
- Funds from operations of $0.63/share.
Generated $103 million in Funds from operations (“FFO”) in Q1 2019
down from $149 million in Q1 2018 due to lower commodity prices and
lower production levels. FFO exceeded both capital expenditures
($62 million) and dividend payments ($10 million) by $31 million
resulting in reduced net debt levels.
- Total cash costs of $1.02/Mcfe (or $0.88/Mcfe
($5.30/boe) excluding royalties). Industry leading total
cash costs, included $0.14/Mcfe royalties, $0.35/Mcfe operating
costs, $0.19/Mcfe transportation, $0.06/Mcfe G&A and $0.28/Mcfe
interest, combined with a realized price of $3.20/Mcfe, resulted in
a $2.18/Mcfe ($13.06/boe) cash netback, down 17% from $2.63/Mcfe in
Q1 2018.
- Capital investment of $62 million. A total of
15 gross wells (13.5 net) were drilled in the first quarter, 15
gross wells (14 net) were completed, and 15 gross wells (14 net)
were brought on production. Over the last 12 months the 69 gross
(64.8 net) wells brought on production accounted for 17,500 boe/d
at the end of the quarter, which, when combined with a trailing
twelve month capital investment of $259 million, equates to an
annualized capital efficiency of $14,800/boe/d. Peyto anticipates
the 2019 full year capital efficiency will be $10,000/boe/d.
- Earnings of $0.15/share, dividends of
$0.06/share. Earnings of $25 million were generated in the
quarter while dividends of $10 million were paid to shareholders.
The Company has never incurred a write down nor recorded an
impairment of its assets and this quarter represents Peyto’s 57th
consecutive quarter of earnings.
First Quarter 2019 in Review
Peyto spent the majority of the first quarter
advancing its Greater Sundance, liquids-rich, Cardium play with all
drilling and completions focused on the Cardium. Success with this
program was evidenced by some of the strongest initial production
and most consistent well results in the Company’s 20 year history
in this play. As well, Peyto added 49 sections of new Cardium lands
in the quarter, all with multiple identified drilling locations,
for an average cost of $52/acre. This brings total Cardium land
additions to 157 gross (123 net) sections since 2017. Cardium
production, with a minimum 50 bbl/mmcf of NGLs (67% pentanes and
condensate), now represents 22% of total corporate production and
has increased Peyto’s proportion of oil and NGL production to 13%.
It is anticipated that Cardium production will represent
approximately 40% of total production by year end. The added
liquids production and Peyto’s gas market diversification efforts
in the quarter helped strengthen Peyto’s revenues and contributed
to stronger netbacks despite consistently weak AECO monthly gas
prices. In total, 78% of Peyto’s natural gas had been hedged for
the quarter, and 8% was exported to markets outside of Alberta,
leaving just 14% exposed to the domestic Alberta market. Cost
control remained a consistent focus, and despite higher methanol
costs and usage due to an extremely cold February, cash costs
continued to be industry leading. Significant free cashflow
generated in the quarter was utilized to reduce net debt levels and
improve Peyto’s balance sheet. Also in the quarter, the Company
extended its four year revolving credit facility which included a
revised, peer equivalent, covenant package.
1. Operating Margin is defined as funds from
operations divided by revenue before royalties but including
realized hedging gains/losses. 2. Profit Margin is defined as net
earnings for the quarter divided by revenue before royalties but
including realized hedging gains/losses.Natural gas volumes
recorded in thousand cubic feet (mcf) are converted to barrels of
oil equivalent (boe) using the ratio of six (6) thousand cubic feet
to one (1) barrel of oil (bbl). Natural gas liquids and oil volumes
in barrel of oil (bbl) are converted to thousand cubic feet
equivalent (Mcfe) using a ratio of one (1) barrel of oil to six (6)
thousand cubic feet. This could be misleading, particularly if used
in isolation as it is based on an energy equivalency conversion
method primarily applied at the burner tip and does not represent a
value equivalency at the wellhead.
|
Three Months Ended March 31 |
% |
|
2019 |
2018 |
Change |
Operations |
|
|
|
Production |
|
|
|
Natural gas (mcf/d) |
462,003 |
568,496 |
-19% |
Oil & NGLs (bbl/d) |
10,703 |
10,043 |
7% |
Liquid to Gas Ratio (bbl/mmcf) |
23.2 |
17.7 |
31% |
Barrels of oil equivalent (boe/d @ 6:1) |
87,703 |
104,793 |
-16% |
Production per million common shares (boe/d)* |
532 |
636 |
-16% |
Product prices |
|
|
|
Natural gas ($/mcf) |
2.48 |
2.86 |
-13% |
Oil & NGLs ($/bbl) |
50.37 |
59.67 |
-16% |
Operating expenses ($/mcfe) |
0.35 |
0.29 |
21% |
Transportation ($/mcfe) |
0.19 |
0.13 |
46% |
Field netback ($/mcfe) |
2.52 |
2.95 |
-15% |
General & administrative expenses ($/mcfe) |
0.06 |
0.08 |
-25% |
Interest expense ($/mcfe) |
0.28 |
0.24 |
17% |
Financial ($000, except per
share*) |
|
|
|
Revenue |
151,660 |
200,397 |
-24% |
Royalties |
6,673 |
9,543 |
-30% |
Funds from operations |
103,078 |
148,986 |
-31% |
Funds from operations per share |
0.63 |
0.90 |
-31% |
Total dividends |
9,893 |
29,677 |
-67% |
Total dividends per share |
0.06 |
0.18 |
-67% |
Payout ratio (%) |
10 |
20 |
-50% |
Earnings |
24,970 |
47,749 |
-48% |
Earnings per diluted share |
0.15 |
0.29 |
-48% |
Capital expenditures |
62,395 |
35,454 |
76% |
Weighted average common shares outstanding |
164,874,175 |
164,874,175 |
- |
As at March 31 |
|
|
|
End of period shares outstanding (includes shares to be
issued) |
164,874,175 |
164,874,175 |
- |
Net debt |
1,189,849 |
1,243,291 |
-4% |
Shareholders' equity |
1,654,076 |
1,725,131 |
-4% |
Total assets |
3,6534,039 |
3,762,835 |
-3% |
*all per share amounts using weighted average common
shares outstanding |
|
|
|
|
Three Months Ended March 31 |
($000 except per share) |
2019 |
2018 |
Cash flows from operating
activities |
91,511 |
143,995 |
Change in non-cash working capital |
9,061 |
3,913 |
Change in provision for performance based compensation |
215 |
1,078 |
Performance based compensation |
2,291 |
- |
Funds from operations |
103,078 |
148,986 |
Funds
from operations per share |
0.63 |
0.90 |
(1) Funds from operations (“FFO”) - Management
uses FFO to analyze the operating performance of its energy assets.
In order to facilitate comparative analysis, FFO is defined
throughout this report as earnings before performance based
compensation, non‑cash and non‑recurring expenses. Management
believes that FFO is an important parameter to measure the value of
an asset when combined with reserve life. FFO is not a measure
recognized by Canadian generally accepted accounting principles
("GAAP") and does not have a standardized meaning prescribed by
GAAP. Therefore, FFO, as defined by Peyto, may not be comparable to
similar measures presented by other issuers, and investors are
cautioned that FFO should not be construed as an alternative to net
earnings, cash flow from operating activities or other measures of
financial performance calculated in accordance with GAAP. FFO
cannot be assured and future dividends may vary.
Exploration & Development
First quarter 2019 activity was focused
exclusively in the Greater Sundance area on the Cardium play as
shown in the following table:
|
Field |
Total WellsDrilled |
Zone |
Sundance |
Nosehill |
Wildhay |
Ansell |
Whitehorse |
Kisku/Kakwa |
Brazeau |
Belly River |
- |
- |
- |
- |
- |
- |
- |
- |
Cardium |
6 |
- |
9 |
- |
- |
- |
- |
15 |
Notikewin |
- |
- |
- |
- |
- |
- |
- |
- |
Falher |
- |
- |
- |
- |
- |
- |
- |
- |
Wilrich |
- |
- |
- |
- |
- |
- |
- |
- |
Bluesky |
- |
- |
- |
- |
- |
- |
- |
- |
Total |
6 |
- |
9 |
- |
- |
- |
- |
15 |
The Company continues to drive down costs with
its preferred Cardium drilling and completion design. As
illustrated in the following table, drilling cost per meter have
continued to drop as have completion costs per frac stage.
|
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019Q1 |
Gross Hz Spuds |
52 |
70 |
86 |
99 |
123 |
140 |
126 |
135 |
70 |
15 |
Measured Depth (m) |
3,762 |
3,903 |
4,017 |
4,179 |
4,251 |
4,309 |
4,197 |
4,229 |
4,020 |
3,853 |
|
|
|
|
|
|
|
|
|
|
|
Drilling ($MM/well) |
$2.76 |
$2.82 |
$2.79 |
$2.72 |
$2.66 |
$2.16 |
$1.82 |
$1.90 |
$1.71 |
$1.54 |
$
per meter |
$734 |
$723 |
$694 |
$651 |
$626 |
$501 |
$433 |
$450 |
$425 |
$400 |
|
|
|
|
|
|
|
|
|
|
|
Completion ($MM/well) |
$1.36 |
$1.68 |
$1.67 |
$1.63 |
$1.70 |
$1.21 |
$0.86 |
$1.00 |
$1.13 |
$1.15 |
Hz Length (m) |
1,335 |
1,303 |
1,358 |
1,409 |
1,460 |
1,531 |
1,460 |
1,241 |
1,348 |
1,528 |
$
per Hz Length (m) |
$1,017 |
$1,286 |
$1,231 |
$1,153 |
$1,166 |
$792 |
$587 |
$803 |
$835 |
$751 |
$ ‘000 per Stage |
$231 |
$246 |
$257 |
$188 |
$168 |
$115 |
$79 |
$81 |
$51 |
$46 |
Capital Expenditures
During the first quarter of 2019, Peyto spent
$24.2 million on drilling, $20.2 million on completions, $5.1
million on wellsite equipment and tie-ins, $8.9 million on
facilities and major pipeline projects, and $4.0 million acquiring
new lands and seismic, for total capital investments of $62.4
million.
The $8.9 million on new facilities and major
pipeline projects included two pipeline looping projects in
Sundance and liquid handling modifications to our Wildhay, Oldman
and Oldman North gas plants.
Commodity Prices
Average Monthly AECO natural gas prices were
$1.84/GJ in Q1 2019, up from $1.80/GJ in the previous quarter and
$1.76/GJ in the prior year. This is in contrast to the average
Daily AECO gas price of $2.49/GJ in Q1 2019. Historically, monthly
prices have outperformed daily prices, however, this was not the
case in the first quarter. Peyto typically hedges the majority of
the AECO exposed production using fixed price swaps settled against
the monthly price which is why such a large portion of Peyto’s
unhedged gas received the monthly price.
On average for Q1 2019, Peyto realized a natural
gas price of $2.48/Mcf ($2.16/GJ) or 135% of the AECO monthly
average price. This was the result of a combination of
approximately 14% of natural gas production being sold into the
daily or monthly spot market at an average of $1.94/GJ,
approximately 78% having been pre-sold at an average hedged price
of $2.04/GJ, and approximately 8% being sold to export markets in
Eastern Canada at $3.69/GJ.
In the first quarter of 2019, NGL prices,
relative to natural gas prices, justified the operation of Peyto’s
Oldman deep cut plant only during the month of January. As a
result, Peyto realized a blended oil and natural gas liquids price
of $50.37/bbl, which represented 69% of the $72.98/bbl average
Canadian WTI price. Details of realized commodity prices by
component are shown in the following table:
Commodity Prices by Component
|
|
Three Months ended Mar 31 |
|
|
2019 |
2018 |
AECO monthly |
($/GJ) |
1.84 |
1.76 |
AECO daily |
($/GJ) |
2.49 |
1.97 |
Henry Hub spot |
($US/MMBTU) |
2.92 |
3.08 |
Peyto natural gas – prior to
hedging |
($/GJ) |
2.05 |
1.72 |
|
($/mcf) |
2.36 |
1.98 |
Peyto natural gas – after
hedging |
($/GJ) |
2.16 |
2.49 |
|
($/mcf) |
2.48 |
2.86 |
|
|
|
|
Condensate ($/bbl) |
|
71.23 |
72.56 |
Propane ($/bbl) |
|
16.99 |
26.04 |
Butane ($/bbl) |
|
26.69 |
40.83 |
Pentane ($/bbl) |
|
64.16 |
79.26 |
Total Oil
and natural gas liquids ($/bbl) |
|
50.37 |
59.67 |
Canadian
WTI ($/bbl) |
|
72.98 |
79.54 |
Peyto
Realized liquids price/Canadian WTI |
|
69% |
75% |
Liquids prices are Peyto realized prices in Canadian dollars
adjusted for fractionation and transportation.
Financial Results
Approximately 34%, or $1.02/Mcfe, of Peyto’s
unhedged revenue came from its associated natural gas liquids sales
while 66%, or $2.00/Mcfe, came from natural gas. Natural gas
hedging activity contributed $0.18/Mcfe for total revenue of
$3.20/Mcfe. Liquids production represented 12% of total production
but 34% of revenue which covered all cash costs. Cash costs of
$1.02/Mcfe, included royalties of $0.14/Mcfe, operating costs of
$0.35/Mcfe, transportation costs of $0.19/Mcfe, G&A of
$0.06/Mcfe and interest costs of $0.28/Mcfe. Cash costs per unit of
production were higher than the previous quarter and previous year
due to increased royalties, related to higher liquids pricing,
higher operating and transportation costs, reduced production
levels, and increased interest rates. For the balance of the year,
Peyto expects to lower per unit operating and interest costs as
chemical requirements diminish in summer months and as debt is
reduced.
Total cash costs, when deducted from realized
revenues of $3.20/Mcfe, resulted in a cash netback of $2.18/Mcfe or
a 68% operating margin. Historical cash costs and operating margins
are shown in the following table.
|
2016 |
2017 |
2018 |
2019 |
($/Mcfe) |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Revenue |
3.24 |
2.92 |
3.16 |
3.38 |
3.44 |
3.36 |
3.24 |
3.50 |
3.54 |
3.20 |
3.27 |
3.03 |
3.20 |
Royalties |
0.13 |
0.10 |
0.12 |
0.18 |
0.19 |
0.17 |
0.09 |
0.15 |
0.17 |
0.10 |
0.14 |
0.12 |
0.14 |
Op Costs |
0.23 |
0.26 |
0.25 |
0.26 |
0.29 |
0.24 |
0.26 |
0.28 |
0.29 |
0.30 |
0.31 |
0.33 |
0.35 |
Transportation |
0.16 |
0.17 |
0.16 |
0.16 |
0.17 |
0.18 |
0.17 |
0.16 |
0.13 |
0.18 |
0.19 |
0.19 |
0.19 |
G&A |
0.03 |
0.06 |
0.04 |
0.03 |
0.04 |
0.05 |
0.03 |
0.03 |
0.08 |
0.05 |
0.03 |
0.04 |
0.06 |
Interest |
0.17 |
0.21 |
0.19 |
0.18 |
0.20 |
0.21 |
0.21 |
0.21 |
0.24 |
0.26 |
0.27 |
0.27 |
0.28 |
Cash Costs |
0.72 |
0.80 |
0.76 |
0.81 |
0.89 |
0.85 |
0.76 |
0.83 |
0.91 |
0.89 |
0.94 |
0.95 |
1.02 |
Netback |
2.52 |
2.12 |
2.40 |
2.57 |
2.55 |
2.51 |
2.48 |
2.67 |
2.63 |
2.31 |
2.33 |
2.08 |
2.18 |
Operating Margin |
78% |
73% |
76% |
76% |
74% |
75% |
76% |
76% |
74% |
72% |
71% |
69% |
68% |
Depletion, depreciation and amortization charges
of $1.38/Mcfe, along with a provision for deferred tax and market
based bonus payments reduced the cash netback to earnings of
$0.53/Mcfe, or a 16% profit margin. Dividends of $0.21/Mcfe were
paid to shareholders.
Natural Gas Marketing
Peyto continues to make meaningful progress on
its market diversification strategy. This thoughtful plan is
designed to complement the Company’s highly successful hedging
strategy and endeavors to achieve, over the long term, a balanced
marketing approach whereby 40% of natural gas sales are linked to
AECO based pricing, 40% are linked to US-based pricing and 20% are
sold directly to intra-Alberta industrial markets. The Company has
been actively securing both synthetic and physical transportation
arrangements to link gas sales to US-based markets and Eastern
Canadian markets that are more closely tied to NYMEX price.
For 2019, Peyto has 25% of forecast natural gas
volumes linked to NYMEX prices with 84% of this volume already
hedged, 12% linked to Eastern Canadian markets in Dawn and Ventura
where 13% is hedged (100% of Ventura volumes are hedged for this
summer), and 63% to the AECO market where 72% is hedged. The result
of these arrangements means less than 5% of annual revenue is
exposed to the AECO spot market.
For 2020, Peyto has 47% of forecast natural gas
volumes linked to NYMEX prices, 13% to Dawn and Ventura, and 40% to
AECO. At those markets, 6% of the NYMEX and 38% of the AECO volume
has already been hedged.
For a real time summary of Peyto’s market
diversification portfolio and future hedges refer to Peyto’s
website at:
http://www.peyto.com/Files/Operations/Marketing/hedges.pdf
Activity Update
Drilling activity was shut down in mid-April for
the annual spring breakup period while completion activity
continued with the completion of four standing Cardium wells. Four
additional wells remain standing, awaiting completion which is
expected to occur in June.
No new wells were brought on production in
April, however, 5 gross (4.5 net) Cardium wells have recently been
equipped and tied in during the first week of May. Production in
April was impacted by extremely volatile AECO natural gas prices,
where at times Peyto had approximately 10% of its dry gas
production shut in due to low prices. This reduced April average
production by approximately 1,000 boe/d. The new, liquids-rich
wells added in May, all with NGL yields in excess of 75 bbl/mmcf,
have grown current liquid production to 12,500 bbl/d. This added
liquid volume has created high gathering system pressures which has
backed out approximately 1,500 boe/d of existing production.
Pipeline looping and plant liquid handling projects are ready to be
installed immediately following spring breakup to recover this
production.
Also, since the end of the first quarter, Peyto
has acquired 7 net sections of Cardium rights at an average cost of
$55/acre, increasing total crown purchases this year to 67
sections.
Peyto’s first Montney well, which was drilled in
the fourth quarter of 2018, will also be completed in June. The
Company plans to complete the well using a slick-water fracture
stimulation which will incorporate approximately 3,400 tonnes of
sand pumped along the 1,935m horizontal lateral.
New Ventures
Peyto continues to work on design attributes for
its Big Sunny storage scheme. Reservoir simulation work has been
completed and a pilot project utilizing existing vertical wells is
currently being contemplated. The Company is also awaiting the
imminent market impact to local propane prices by a new West Coast
export terminal before making a final investment decision on the
Swanson Deep Cut facility installation, as this facility will
primarily extract liquid propane from the sales gas stream. In
addition, Peyto continues to evaluate opportunities to vertically
integrate its energy business to extract maximum value from
existing and future reserves and infrastructure assets.
Outlook
The current capital program for 2019 remains
unchanged with an expected range of $150 to $200 million, involving
the drilling of approximately 50 Cardium liquids-rich gas wells,
the testing of Peyto’s new Montney play, the continued accumulation
of new lands which add profitable drilling inventory, and continued
debt reduction. The rapidly growing liquids revenue, particularly
from free wellhead condensate, is expected to help offset weak
summer spot gas prices. By replacing declining dry gas production
with more liquids rich gas, Peyto will be able to increase its
sales revenue on a unit of production basis while continuing to
drive down total supply cost resulting in increasing cash netbacks.
Peyto’s continues to pursue its long term
strategy of becoming a more fully integrated energy business.
Opportunities to invest in new infrastructure to extend the value
chain will continue to be investigated, as will additional
opportunities for market diversification for all of its produced
products.
Conference Call and Webcast
A conference call will be held with the senior
management of Peyto to answer questions with respect to the 2019
first quarter financial results on Wednesday, May 8th, 2019, at
9:00 a.m. Mountain Daylight Time (MDT), or 11:00 a.m. Eastern
Daylight Time (EDT). To participate, please call 1-844-492-6041
(North America) or 1-478-219-0837 (International). Shareholders and
interested investors are encouraged to ask questions about Peyto
and its most recent results. Questions can be submitted prior to
the call at info@peyto.com. The conference call can also be
accessed through the internet:
https://edge.media-server.com/m6/p/6y9beph5. The conference call
will be archived on the Peyto Exploration & Development website
at www.peyto.com.
Management’s Discussion and
Analysis/Financial Statements
A copy of the first quarter report to shareholders, including
the MD&A, unaudited financial statements and related notes, is
available at
http://www.peyto.com/Files/Financials/2019/Q12019FS.pdf and at
http://www.peyto.com/Files/Financials/2019/Q12019MDA.pdf and will
be filed at SEDAR, www.sedar.com at a later date.
Darren GeePresident and CEOMay 7, 2019Phone:
(403) 261-6081Fax: (403) 451-4100
Cautionary Statements
Forward-Looking Statements
This news release contains certain
forward-looking statements or information ("forward-looking
statements") as defined by applicable securities laws that involve
substantial known and unknown risks and uncertainties, many of
which are beyond Peyto's control. These statements relate to future
events or the Company's future performance. All statements other
than statements of historical fact may be forward-looking
statements. The use of any of the words "plan", "expect",
"prospective", "project", "intend", "believe", "should",
"anticipate", "estimate", or other similar words or statements that
certain events "may" or "will" occur are intended to identify
forward-looking statements. The projections, estimates and beliefs
contained in such forward-looking statements are based on
management's estimates, opinions, and assumptions at the time the
statements were made, including assumptions relating to: the impact
of economic conditions in North America and globally; industry
conditions; changes in laws and regulations including, without
limitation, the adoption of new environmental laws and regulations
and changes in how they are interpreted and enforced; increased
competition; the availability of qualified operating or management
personnel; fluctuations in commodity prices, foreign exchange or
interest rates; stock market volatility and fluctuations in market
valuations of companies with respect to announced transactions and
the final valuations thereof; results of exploration and testing
activities; and the ability to obtain required approvals and
extensions from regulatory authorities. Management of the Company
believes the expectations reflected in those forward-looking
statements are reasonable, but no assurances 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
Peyto will derive from them. As such, undue reliance should not be
placed on forward-looking statements. Forward-looking statements
contained herein include, but are not limited to, statements
regarding: the anticipated 2019 annual capital efficiency; the
amount of gas volumes expected to be exposed to US based pricing in
2019 and 2020; the timing for the Company’s analysis of the
production results from its Cardium and Montney evaluation;
expectations regarding future drilling and completion costs; the
Company's natural gas marketing diversification strategy; Peyto's
hedging program; the Company’s drilling and completion program for
the remainder of 2019; timing expectations for an investment
decision on Peyto’s Swanson plant deep cut conversion and other
deep cut projects; future supply source opportunities for the
Company and potential LNG export projects the Company may become
involved with; Peyto’s 2019 budget and new production estimates for
year-end 2019, including the Company’s expected capital program for
2019; expectations for exit production for 2019; pricing
expectations for the winter and summer seasons; and the Company’s
overall strategy and focus.
The forward-looking statements contained herein
are subject to numerous known and unknown risks and uncertainties
that may cause Peyto's actual financial results, performance or
achievement in future periods to differ materially from those
expressed in, or implied by, these forward-looking statements,
including but not limited to, risks associated with: imprecision of
reserves estimates; competition from other industry participants;
failure to secure required equipment; changes in general global
economic conditions including, without limitations, the economic
conditions in North America; increased competition; the lack of
availability of qualified operating or management personnel;
fluctuations in commodity prices, foreign exchange or interest
rates; environmental risks; changes in laws and regulations
including, without limitation, the adoption of new environmental
and tax laws and regulations and changes in how they are
interpreted and enforced; the results of exploration and
development drilling and related activities; the ability to access
sufficient capital from internal and external sources; and stock
market volatility. In addition, to the extent that any
forward-looking statements presented herein constitutes
future-oriented financial information or financial outlook, as
defined by applicable securities legislation, such information has
been approved by management of Peyto and has been presented to
provide management's expectations used for budgeting and planning
purposes and for providing clarity with respect to Peyto's
strategic direction based on the assumptions presented herein and
readers are cautioned that this information may not be appropriate
for any other purpose. Readers are encouraged to review the
material risks discussed in Peyto's annual information form for the
year ended December 31, 2018 under the heading "Risk Factors" and
in Peyto's annual management's discussion and analysis under the
heading "Risk Management".
The Company cautions that the foregoing list of
assumptions, risks and uncertainties is not exhaustive. 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 forward-looking statements. Peyto's 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 Peyto will derive
there from. The forward-looking statements, including any
future-oriented financial information or financial outlook,
contained in this news release speak only as of the date hereof and
Peyto does not assume any obligation to publicly update or revise
them to reflect new information, future events or circumstances or
otherwise, except as may be required pursuant to applicable
securities laws.
Barrels of Oil Equivalent
To provide a single unit of production for
analytical purposes, natural gas production and reserves volumes
are converted mathematically to equivalent barrels of oil (BOE).
Peyto uses the industry-accepted standard conversion of six
thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1
bbl). The 6:1 BOE ratio is based on an energy equivalency
conversion method primarily applicable at the burner tip. It does
not represent a value equivalency at the wellhead and is not based
on current prices. While the BOE ratio is useful for comparative
measures and observing trends, it does not accurately reflect
individual product values and might be misleading, particularly if
used in isolation. As well, given that the value ratio, based on
the current price of crude oil to natural gas, is significantly
different from the 6:1 energy equivalency ratio, using a 6:1
conversion ratio may be misleading as an indication of value.
Non-IFRS Measurements
Within this news release references are made to
terms commonly used in the oil and gas industry. Funds from
operations, funds from operations per share and netbacks do not
have any standardized meaning under IFRS and previous GAAP and are
referred to as non-IFRS measures. Funds from operations are
described in footnote 1 to the first table on page 2 of this news
release. Netbacks are a non-IFRS measure that represents the profit
margin associated with the production and sale of petroleum and
natural gas. Netbacks are per unit of production measures used to
assess Peyto's performance and efficiency. The primary
factors that produce Peyto's strong netbacks and high margins are a
low cost structure and the high heat content of its natural gas
that results in higher commodity prices. The Company's calculation
of the non-IFRS measures included herein may differ from the
calculation of similar measures by other issuers. Therefore, the
Company's non-IFRS measures may not be comparable to other similar
measures used by other issuers. Non-IFRS measures should only be
used in conjunction with the Company's annual audited and interim
financial statements. A reconciliation of these measures can be
found in Peyto's management's discussion and analysis for the three
months ended March 31, 2019.
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