Peyto Exploration & Development Corp. (“Peyto” or the
“Company”) is pleased to present its operating and financial
results for the third quarter of the 2020 fiscal year. While the
COVID-19 pandemic continued to grip the world and global energy
markets, Peyto was able to safely continue conducting drilling
operations, achieving a significant operational milestone in the
Company’s 22 year history with the completion of its 1,000th
horizontal well. Results for the quarter included:
- Funds from operations of $0.30/share.
Generated $49 million in Funds From Operations (“FFO”) in Q3 2020,
down from $68 million in Q3 2019 due to 14% lower realized
commodity prices offset by 2% higher production levels.
- Liquids production up 6%. Natural gas
production increased 1% from 396 MMcf/d in Q3 2019 to 402 MMcf/d in
Q3 2020 while Condensate and NGL production increased 6% from a
year ago to 11,263 bbl/d. Liquid yields were 28 bbl/MMcf, up from
27 bbl/MMcf in Q3 2019, primarily due to new Cardium drilling.
Total liquids production was comprised of 6,493 bbls/d of
Condensate and Pentanes+, and 4,770 bbls/d of Propane and Butane.
Total Q3 2020 production of 78,210 boe/d was up 2% from Q3
2019.
- Total cash costs of $1.01/Mcfe ($0.87/Mcfe or $5.25/boe
excluding royalties). Industry leading total cash costs,
included $0.14/Mcfe royalties, $0.32/Mcfe operating costs,
$0.16/Mcfe transportation, $0.04/Mcfe G&A and $0.35/Mcfe
interest, and combined with a realized price of $2.15/Mcfe,
resulting in a $1.14/Mcfe ($6.83/boe) cash netback, down 29% from
$1.61/Mcfe ($9.65/boe) in Q3 2019. Operating costs per unit for Q3
2020 were up 3% from Q3 2019, largely due to increased power and
chemical costs.
- Capital investment of $62 million. A total of
18 gross wells (16.5 net) were drilled in the third quarter, 21
gross wells (19.5 net) were completed, and 21 gross wells (19.5
net) were brought on production. Over the last 12 months the 74
gross (67.35 net) wells brought on production accounted for
approximately 24,000 boe/d at the end of the quarter, which, when
combined with a trailing twelve month capital investment of $241
million, equates to an annualized capital efficiency of
$10,000/boe/d. Peyto anticipates the 2020 full year capital
efficiency will be approximately $9,000/boe/d based on continued
drilling and completion cost improvements.
- Dividends of $0.01/share, Loss of $0.07/share.
Dividends of $1.6 million were paid to shareholders during the
quarter while a loss of $11.3 million was recorded.
Third Quarter 2020 in
ReviewPeyto increased drilling activity in the third
quarter, following spring break up, with four drilling rigs active
across the Company’s Deep Basin core areas. On September 23, 2020
drilling commenced on the Company’s 1,000th Deep Basin horizontal
well at 14-01-054-19W5. The well was drilled to 4,250m measured
depth with a 1,832m horizontal lateral in the Notikewin formation.
Drilling was conducted by the Ensign #401 rig which has been
drilling for Peyto for over 10 years without a single lost-time
incident. The 14-01 well also set a new drilling pace record at
Peyto, taking only 6.5 days from spud to total depth. The well is
currently being completed as part of a multi-well pad site and will
commence production shortly. Peyto has now drilled more horizontal
wells in the Alberta Deep Basin than any other operator and
continues to lead the industry in innovation, efficiency and safety
while responsibly developing Alberta’s natural gas resources.
Production grew from 76,000 boe/d at the start of the quarter to
exit at 83,000 boe/d. Commodity prices also rebounded from Q2 2020
lows with NYMEX gas and WTI oil up 18% and 47%, respectively.
Although Funds from Operations for the quarter were lower than Q3
2019, the higher commodity prices lifted FFO 49% from the previous
quarter. Peyto maintained its industry leading low cash costs at
$1.01/Mcfe which delivered a 53% Operating Margin1. The Company
anticipates that the recent improvement in natural gas prices and
continued growth in production will significantly improve financial
performance in the quarters ahead.
1. Operating Margin is defined as
funds from operations divided by revenue before royalties but
including realized hedging gains/losses.Natural gas volumes
recorded in thousand cubic feet (mcf) are converted to barrels of
oil equivalent (boe) using the ratio of six (6) thousand cubic feet
to one (1) barrel of oil (bbl). Natural gas liquids and oil
volumes in barrel of oil (bbl) are converted to thousand cubic feet
equivalent (Mcfe) using a ratio of one (1) barrel of oil to six (6)
thousand cubic feet. This could be misleading, particularly
if used in isolation as it is based on an energy equivalency
conversion method primarily applied at the burner tip and does not
represent a value equivalency at the wellhead.
|
Three Months Ended Sep 30 |
% |
Nine Months Ended Sep 30 |
% |
|
2020 |
2019 |
Change |
2020 |
2019 |
Change |
Operations |
|
|
|
|
|
|
Production |
|
|
|
|
|
|
Natural gas (mcf/d) |
401,680 |
|
396,343 |
1% |
401,692 |
|
426,648 |
-6% |
Oil & NGLs (bbl/d) |
11,263 |
|
10,650 |
6% |
11,325 |
|
10,821 |
5% |
Thousand cubic feet equivalent (mcfe/d @ 1:6) |
469,259 |
|
460,243 |
2% |
469,640 |
|
491,572 |
-4% |
Barrels of oil equivalent (boe/d @ 6:1) |
78,210 |
|
76,707 |
2% |
78,273 |
|
81,929 |
-4% |
Production per million common shares (boe/d)* |
474 |
|
465 |
2% |
475 |
|
497 |
-4% |
Product prices |
|
|
|
|
|
|
Natural gas ($/mcf) |
1.64 |
|
1.84 |
-11% |
1.57 |
|
2.07 |
-24% |
Oil & NGLs ($/bbl) |
31.08 |
|
39.65 |
-22% |
29.73 |
|
44.87 |
-34% |
Operating expenses ($/mcfe) |
0.32 |
|
0.31 |
3% |
0.36 |
|
0.34 |
6% |
Transportation ($/mcfe) |
0.16 |
|
0.19 |
-16% |
0.17 |
|
0.19 |
-11% |
Field netback ($/mcfe) |
1.53 |
|
1.97 |
-22% |
1.42 |
|
2.19 |
-35% |
General & administrative expenses ($/mcfe) |
0.04 |
|
0.05 |
-20% |
0.04 |
|
0.05 |
-20% |
Interest expense ($/mcfe) |
0.35 |
|
0.31 |
13% |
0.32 |
|
0.30 |
7% |
Financial ($000, except per share*) |
|
|
|
|
|
|
Revenue and realized hedging gains (losses)
1 |
92,853 |
|
105,944 |
-12% |
264,457 |
|
373,130 |
-29% |
Royalties |
5,867 |
|
1,440 |
307% |
13,508 |
|
8,350 |
62% |
Funds from operations |
49,173 |
|
68,106 |
-28% |
136,697 |
|
247,157 |
-45% |
Funds from operations per share |
0.30 |
|
0.41 |
-28% |
0.83 |
|
1.50 |
-45% |
Total dividends |
1,649 |
|
9,892 |
-83% |
13,191 |
|
29,677 |
-56% |
Total dividends per share |
0.01 |
|
0.06 |
-83% |
0.08 |
|
0.18 |
-56% |
Payout ratio (%) |
3 |
|
15 |
-80% |
10 |
|
12 |
-17% |
Earnings (loss) |
(11,285) |
|
6,275 |
-280% |
(101,506) |
|
130,003 |
-178% |
Earnings (loss) per diluted share |
(0.07) |
|
0.04 |
-275% |
(0.62) |
|
0.79 |
-179% |
Capital expenditures |
61,568 |
|
36,574 |
68% |
167,454 |
|
133,080 |
26% |
Weighted average common shares outstanding |
164,892,979 |
|
164,874,175 |
- |
164,880,489 |
|
164,874,175 |
- |
As at September 30 |
|
|
|
|
|
|
Net debt |
|
|
|
1,183,754 |
|
1,133,869 |
4% |
Shareholders' equity |
|
|
|
1,573,825 |
|
1,721,158 |
-9% |
Total assets |
|
|
|
3,515,148 |
|
3,587,612 |
-2% |
1excludes revenue from sale of third party
volumes |
|
|
|
|
|
|
|
Three Months Ended Sep 30 |
Nine Months Ended Sep 30 |
($000 except per share) |
2020 |
2019 |
2020 |
2019 |
Cash flows from operating
activities |
48,074 |
64,913 |
150,169 |
241,993 |
Change in non-cash working capital |
1,099 |
3,193 |
(13,472) |
2,873 |
Performance based
compensation |
- |
- |
- |
2,291 |
Funds from operations |
49,173 |
68,106 |
136,697 |
247,157 |
Funds
from operations per share |
0.30 |
0.41 |
0.83 |
1.50 |
(1) Funds from operations - Management uses
funds from operations to analyze the operating performance of its
energy assets. In order to facilitate comparative analysis,
funds from operations is defined throughout this report as earnings
before performance based compensation, non‑cash and non‑recurring
expenses. Management believes that funds from operations is
an important parameter to measure the value of an asset when
combined with reserve life. Funds from operations is not a
measure recognized by Canadian generally accepted accounting
principles ("GAAP") and does not have a standardized meaning
prescribed by GAAP. Therefore, funds from operations, as
defined by Peyto, may not be comparable to similar measures
presented by other issuers, and investors are cautioned that funds
from operations 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.
Funds from operations cannot be assured and future dividends may
vary.
Exploration & Development Activity
Third quarter 2020 drilling activity was spread
throughout the Greater Sundance and Brazeau River areas and amongst
both the liquids rich Cardium and drier Spirit River plays as shown
in the following table:
|
Field |
Total Wells Drilled |
Zone |
Sundance |
Nosehill |
Wildhay |
Ansell |
Whitehorse |
Kisku/Kakwa |
Brazeau |
Cardium |
2 |
|
3 |
|
|
|
2 |
7 |
Viking |
1 |
|
|
|
|
|
|
1 |
Notikewin |
2 |
|
|
1 |
|
|
1 |
4 |
Falher |
|
|
|
2 |
|
|
|
2 |
Wilrich |
3 |
|
|
|
|
|
|
3 |
Bluesky |
1 |
|
|
|
|
|
|
1 |
Total |
9 |
|
3 |
3 |
|
|
3 |
18 |
Drilling and completion costs for the third
quarter of 2020 continued their downward trend. Peyto expects 2020
drilling cost per meter and completion costs per stage will be the
lowest in Company history. Repeated success with a new extended
reach horizontal well design is contributing to the lower costs. No
lost time incidents occurred in Q3 2020 as Peyto and its service
providers safely executed operations in drilling, completions,
pipelining, and facility installations all while dealing with the
added concerns of the COVID-19 pandemic.
|
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020Q1 |
2020Q2 |
2020Q3 |
2020YTD |
Gross Hz Spuds |
99 |
123 |
140 |
126 |
135 |
70 |
61 |
17 |
12 |
18 |
47 |
Measured Depth (m) |
4,179 |
4,251 |
4,309 |
4,197 |
4,229 |
4,020 |
3,848 |
4,069 |
4,335 |
4,219 |
4,222 |
|
|
|
|
|
|
|
|
|
|
|
|
Drilling conducted ($MM/well) |
$2.72 |
$2.66 |
$2.16 |
$1.82 |
$1.90 |
$1.71 |
$1.62 |
$1.75 |
$1.69 |
$1.68 |
$1.71 |
$
per meter |
$651 |
$626 |
$501 |
$433 |
$450 |
$425 |
$420 |
$430 |
$390 |
$398 |
$404 |
|
|
|
|
|
|
|
|
|
|
|
|
Completion conducted ($MM/well) |
$1.63 |
$1.70 |
$1.21 |
$0.86 |
$1.00 |
$1.13 |
$1.01* |
$0.98 |
$0.97 |
$0.91 |
$0.93 |
Hz Length MD-TVD (m) |
1,409 |
1,460 |
1,531 |
1,460 |
1,241 |
1,348 |
1,484 |
1,563 |
1,587 |
1,720 |
1,632 |
$
per Hz Length (m) |
$1,153 |
$1,166 |
$792 |
$587 |
$803 |
$835 |
$679 |
$624 |
$610 |
$528 |
$574 |
$ ‘000 per Stage |
$188 |
$168 |
$115 |
$79 |
$81 |
$51 |
$38 |
$38 |
$37 |
$34 |
$36 |
*excluding Peyto’s Wildhay Montney well.
Capital Expenditures
During the third quarter of 2020, Peyto invested
88% of total capital in well related expenditures, with $28.0
million in drilling, $20.1 million in completions and $6.0 million
in wellsite equipment and tie-ins. A further $5.0 million was
invested in facilities and major pipeline projects, and $2.5
million acquiring new land and seismic, for total capital
investments of $61.6 million.
Peyto commissioned its Sundance water disposal
well and associated pipeline during the quarter, along with several
pipeline looping projects to debottleneck portions of the gathering
system in the Greater Sundance area. This work, along with
compressor upgrades and continued installation of reduced methane
emission controllers, made up the majority of the $5 million in
facility and pipeline expenditures. These reduced emission
controllers have allowed Peyto to reduce it's methane emissions per
boe of production by over 40% from 2016.
Commodity Prices
During Q3 2020 Peyto sold 34% of its natural gas
at AECO, 9% at Emerson, 5% at Ventura, and 52% at Henry Hub.
Benchmark prices, Peyto realized prices, and aggregate gas
marketing diversification costs are shown below. Moving forward,
the Company expects to continue to market more of its gas at hubs
outside of AECO but expects that market diversification costs will
be significantly reduced over time.
Benchmark Commodity Prices
|
Three Months ended September 30 |
|
2020 |
2019 |
AECO 7A monthly ($/GJ) |
2.04 |
0.99 |
AECO 5A daily ($/GJ) |
2.12 |
0.86 |
Emerson2 (US$/MMBTU) |
1.78 |
1.90 |
NYMEX (US$/MMbtu) |
1.95 |
2.33 |
Ventura daily (US$/MMbtu) |
1.80 |
2.00 |
Dawn daily (US$/MMbtu) |
1.82 |
2.13 |
Canadian WTI ($/bbl) |
54.50 |
74.55 |
Conway C3 (US$/bbl) |
19.54 |
15.10 |
Q3 2020 average CND/USD exchange rate of
1.332
Peyto Realized Commodity Prices by
Component
|
Three Months ended September 30 |
|
2020 |
2019 |
Natural gas ($/mcf) |
2.62 |
2.17 |
Gas marketing diversification
activities ($/mcf) |
(1.01) |
(0.70) |
Gas hedging ($/mcf) |
0.03 |
0.37 |
Oil, condensate and C5+
($/bbl) |
42.09 |
67.76 |
Butane and propane ($/bbl) |
15.76 |
2.79 |
Oil and NGL hedging ($/bbl) |
(1.78) |
2.26 |
Liquids prices are Peyto realized prices in
Canadian dollars adjusted for fractionation, transportation, and
market differentials.Peyto natural gas has an average heating value
of approximately 1.15 GJ/mcfDetails of Peyto’s ongoing marketing
and diversification efforts are available on Peyto’s website
at:http://www.peyto.com/Files/Operations/Marketing/hedges.pdf
Financial Results
Approximately 36%, or $0.79/Mcfe, of Peyto’s
unhedged revenue came from its associated condensate and natural
gas liquids sales while 64%, or $1.38/Mcfe, is attributable to
natural gas sales. Natural gas hedging increased revenue by
$0.02/Mcfe while liquids hedging reduced revenue by $0.04/Mcfe for
total revenue of $2.15/Mcfe. Cash costs of $1.01/Mcfe, included
royalties of $0.14/Mcfe, operating costs of $0.32/Mcfe,
transportation costs of $0.16/Mcfe, G&A of $0.04/Mcfe and
interest costs of $0.35/Mcfe. Cash costs per unit of production
were higher than Q3 2019 due to increased royalties and interest
charges.
When the total cash costs of $1.01/Mcfe were
deducted from realized revenues of $2.15/Mcfe, it resulted in a
cash netback of $1.14/Mcfe or a 53% operating margin. Historical
cash costs and operating margins are shown in the following
table:
|
2017 |
2018 |
2019 |
2020 |
($/Mcfe) |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Revenue |
3.44 |
3.36 |
3.24 |
3.50 |
3.54 |
3.20 |
3.27 |
3.03 |
3.20 |
2.60 |
2.50 |
2.76 |
2.30 |
1.73 |
2.15 |
Royalties |
0.19 |
0.17 |
0.09 |
0.15 |
0.17 |
0.10 |
0.14 |
0.12 |
0.14 |
0.01 |
0.03 |
0.12 |
0.12 |
0.06 |
0.14 |
Op
Costs |
0.29 |
0.24 |
0.26 |
0.28 |
0.29 |
0.30 |
0.31 |
0.33 |
0.35 |
0.34 |
0.31 |
0.34 |
0.39 |
0.36 |
0.32 |
Transportation |
0.17 |
0.18 |
0.17 |
0.16 |
0.13 |
0.18 |
0.19 |
0.19 |
0.19 |
0.19 |
0.19 |
0.19 |
0.19 |
0.17 |
0.16 |
G&A |
0.04 |
0.05 |
0.03 |
0.03 |
0.08 |
0.05 |
0.03 |
0.04 |
0.06 |
0.05 |
0.05 |
0.02 |
0.04 |
0.04 |
0.04 |
Interest |
0.20 |
0.21 |
0.21 |
0.21 |
0.24 |
0.26 |
0.27 |
0.27 |
0.28 |
0.30 |
0.31 |
0.31 |
0.29 |
0.33 |
0.35 |
Cash Costs |
0.89 |
0.85 |
0.76 |
0.83 |
0.91 |
0.89 |
0.94 |
0.95 |
1.02 |
0.89 |
0.89 |
0.98 |
1.03 |
0.96 |
1.01 |
Netback |
2.55 |
2.51 |
2.48 |
2.67 |
2.63 |
2.31 |
2.33 |
2.08 |
2.18 |
1.71 |
1.61 |
1.78 |
1.27 |
0.77 |
1.14 |
Operating Margin |
74% |
75% |
76% |
76% |
74% |
72% |
71% |
69% |
68% |
66% |
64% |
65% |
55% |
45% |
53% |
Depletion, depreciation, and amortization
charges of $1.34/Mcfe, along with a provision for deferred tax and
stock-based compensation payments reduced the cash netback to a
loss of $0.26/Mcfe ($0.07/share). Dividends of $0.04/Mcfe
($0.01/share) were paid to shareholders in the quarter. No
impairment charges were recorded in the quarter.
Activity Update
Peyto currently has 4 drilling rigs operating in
the Greater Sundance and Brazeau core areas. These four rigs are
scheduled to shut down in mid-December for the Christmas break but
will resume drilling in early January. Since the end of the
quarter, the Company has spud 11 wells, completed 10 wells, and
brought on production 5 new wells. In addition, there are 7 wells
at various stages of completion and tie-in.
Peyto’s recent efforts to increase horizontal
lateral length and increase stimulation intensity has yielded
impressive results across several areas and in several different
formations. The 2020 capital program, so far, has achieved
the lowest total drilling and completion cost per meter of
stimulated reservoir, while still delivering superior production
performance compared to previous years. This superior performance
combined with the strong spot natural gas prices, has resulted in
some of the highest rates of return achieved in the last five
years. Historical costs and the average of the first six months of
production are shown below.
|
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020YTD |
Wells Drilled |
70 |
86 |
99 |
123 |
140 |
126 |
135 |
70 |
61 |
47 |
Measured Depth (m) |
4,041 |
4,017 |
4,179 |
4,251 |
4,309 |
4,197 |
4,229 |
4,020 |
3,848 |
4,222 |
Stimulated Hz Lateral (m) |
1,138 |
1,123 |
1,264 |
1,269 |
1,287 |
1,224 |
1,241 |
1,377 |
1,351 |
1,500 |
Total Avg Drill & Complete ($MM/well) |
$4.50 |
$4.28 |
$4.36 |
$4.31 |
$3.28 |
$2.59 |
$2.78 |
$2.78 |
$2.46 |
$2.63 |
D&C cost per meter of stimulated reservoir |
$3,954 |
$3,809 |
$3,445 |
$3,393 |
$2,549 |
$2,119 |
$2,236 |
$2,018 |
$1,823 |
$1,753 |
|
|
|
|
|
|
|
|
|
|
|
Average IP180 (boe/d) |
426 |
403 |
674 |
466 |
501 |
455 |
441 |
349 |
383 |
520 |
Recently, the Company has started gathering and
processing 8 mmcf/d of third-party production into Peyto’s
under-utilized Sundance infrastructure. This will generate
incremental fee revenue to Peyto while allowing the third party to
share in Peyto’s lower cost structure. The Company is continuing
its efforts in this regard in areas where pipeline and plant
infrastructure have spare capacity and will not impact Peyto’s
current volumes and future plans.
2021 Budget
The improved well performance and recent
strength in both NYMEX and AECO natural gas prices, combined with
the continued reduction in Peyto’s drilling and completion costs,
which has lowered the cost to add new production, significantly
improves the Company’s return on invested capital. Consistent with
year two of Peyto’s strategic three-year plan, the Board of
Directors is currently examining a go-forward capital program that
invests available free cashflow into resource development
opportunities. While specifics of the 2021 budget are not yet
finalized, a capital program of $300 to $350 million, funded
entirely from free cashflow, is being contemplated, which could add
a projected of 33,000-39,000 boe/d, based on current on-stream
metrics. This volume addition would more than offset the annual
forecast of approximately 25% base decline on anticipated 2020 exit
production of 85,000 boe/d. The 2020 exit production and subsequent
base decline will depend on the timing of year end activity.
Peyto believes it currently has all the
necessary equipment and service providers in place to execute the
proposed capital program and has demonstrated during the year an
ability to conduct operations safely and efficiently during the
COVID 19 pandemic. While this proposed capital program will be
funded entirely from available free cashflow, it should result in
production, cashflow and earnings growth, as well as bring total
leverage metrics in line, allowing Peyto to exit its covenant
relief period with lenders earlier than originally contemplated. In
addition, by the end of 2021, a significant portion of Peyto’s
production that had been exposed to higher cost AECO-NYMEX basis
will be subject to much lower market diversification costs,
resulting in improved gas price realizations. The subsequent growth
in free cashflow beyond 2021 could then be used for further debt
repayment and increased dividends.
As always, Peyto will ensure any capital plans
will be nimble with the ability to react to changes in commodity
prices and the global economic environment, both of which continue
to be volatile and uncertain.
Management Change
Mr. Timothy Louie, Peyto’s Vice President of
Land, will be retiring at the end of November 2020. On behalf of
directors, staff, and shareholders of Peyto, management would like
to sincerely thank Mr. Louie for his contributions to Peyto over
the last 9 years and wish him all the best in his retirement.
Outlook
The Peyto business model has always been a
simple one. Use technical expertise to invest capital into
internally generated drilling projects that achieve the highest
possible return on that capital. After 22 successful years of
deploying this strategy, Peyto has built one of the highest
quality, lowest cost natural gas asset bases in the industry. At
times, this strategy requires patience as it takes time to build
value and quality through the drill bit, but after $6.3 billion in
cumulative capital investment to drill 663 vertical wells and over
1,000 horizontal wells, which have delivered $6.4 billion in
cumulative funds from operations, this approach has proven to
deliver.
Globally, the outlook for natural gas continues
to strengthen in recognition that it will be a critical part of any
transition to a larger, cleaner, and reliable energy complex. Peyto
remains confident that demand for the products it is developing
today, will only grow in the future.
Conference Call and Webcast
A conference call will be held with the senior management of
Peyto to answer questions with respect to the 2020 third quarter
financial results on Thursday, November 12th, 2020, at 9:00 a.m.
Mountain Time (MT), or 11:00 a.m. Eastern Time (ET). 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/mmc/p/px5ts8gk. 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 third quarter report to shareholders, including
the MD&A, unaudited financial statements and related notes, is
available at
http://www.peyto.com/Files/Financials/2020/Q32020FS.pdf and at
http://www.peyto.com/Files/Financials/2020/Q32020MDA.pdf and will
be filed at SEDAR, www.sedar.com at a later date.
Darren GeePresident and CEONovember 11,
2020Phone: (403) 261-6081Fax:
(403) 451-4100
Cautionary Statements
Forward-Looking StatementsThis
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:
macro-economic conditions, including public health concerns
(including the impact of the COVID-19 pandemic) and other
geopolitical risks, the condition of the global economy and,
specifically, the condition of the crude oil and natural gas
industry including the collapse of global crude oil prices, other
commodity prices and the decrease in global demand for crude oil in
2020, and the ongoing significant volatility in world markets;
other 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 other 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 future outlook
for realized commodity prices being better in the future than in
the third quarter of 2020; the expectation that financial
performance will significantly improve in the upcoming quarters;
the expectation that the Company will continue to market more of
its gas at hubs outside of AECO; the expectation that market
diversification costs will diminish; the continued need for
precautions to be taken to ensure the health and safety of all
workers during the COVID-19 pandemic; the Company's intention to
offset higher interest charges under its credit facility with lower
per unit operation and transportation costs resulting from a
focused cost reduction program; the expectation that the four
drilling rigs will be at full utilization in 2021 with an expanded
capital program; the Company’s drilling and completion program for
the remainder of 2020, including the timing of bringing on new
wells in the remainder of 2020; the anticipated cost savings as a
result of the newly commission water disposal well and facility;
the anticipated additional cost savings to be realized in the
balance of the year; the expectation for growing capital programs
in 2021 and 2022; the expectation for producing reserve life to
continue to grow and base production declines continue for future
growth and profitability; the Company's ability to continue to be
nimble and flexible in adjusting its program for 2020 as required;
2020 capital efficiency; Peyto's hedging program; 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: continued
changes and volatility in general global economic conditions
including, without limitations, the economic conditions in North
America and public health concerns (including the impact of the
COVID-19 pandemic); continued fluctuations and volatility in
commodity prices, foreign exchange or interest rates; continued
stock market volatility; imprecision of reserves estimates;
competition from other industry participants; failure to secure
required equipment; increased competition; the lack of availability
of qualified operating or management personnel; 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; and the ability to access sufficient capital from
internal and external sources. 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, 2019 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 EquivalentTo
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 MeasurementsWithin
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 September 30, 2020.
Peyto Exploration and De... (TSX:PEY)
Historical Stock Chart
From Jun 2024 to Jul 2024
Peyto Exploration and De... (TSX:PEY)
Historical Stock Chart
From Jul 2023 to Jul 2024