Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is
pleased to report financial and operating results as at and for the
three months ended March 31, 2022.
Q1 2022 HIGHLIGHTS:
- Production up 25%
– Production was up 25% quarter over quarter from 5,880
boe/d in the fourth quarter of 2021 to 7,379 boe/d in the first
quarter of 2022 primarily due to the new wells drilled in late
2021. The acquisition (as discussed below) contributed only 90
boe/d to the quarterly average as it closed on March 14, 2022.
- Funds flow increased 137%
– Generated funds flow of $16.6 million ($0.17 per share)
for the first three months of 2022, 137% higher than funds flow of
$7.0 million in the first quarter of 2021.
- Operating
netback(1) up 75% –
Operating netback increased by 75% to $33.78/boe in the first
quarter of 2022 up from $19.22/boe in the first quarter of
2021.
- Commodity price
improvement – Realized price per boe
increased by 61% in the first quarter of 2022 compared to the first
quarter of 2021; from $30.55/boe to $49.31/boe. The realized oil,
natural gas and NGL prices increased by 65%, 56% and 63%,
respectively.
- Net
debt(2) reduction continues
– Net debt was $50.0 million at March 31, 2022, a decrease
of $66.6 million since the first quarter of 2021 ($116.6 million)
and a decrease of $11.8 million from the fourth quarter of 2021
($61.8 million). The Company will continue to strengthen its
balance sheet by further reducing net debt and maintaining a net
debt to funds flow ratio of under 1x.
- Reduced cash finance
expense – Cash finance expense has decreased 33% since the
first quarter of 2021, totaling $0.7 million during the first
quarter of 2022 in comparison to $1.0 million during the first
quarter of 2021 due to the elimination of the term loan in the
third quarter of 2021 as well as a reduced first lien loan
balance.
- Acquisition –
Completed a strategic acquisition of Cardium assets located in the
core Ferrier area, adding an estimated 40 gross drilling
locations(3) and stable base production of 425 boe/d.
- Backstopped rights offering
– Petrus announced a $20 million rights offering that was
backstopped by the Company's major shareholders. Subsequent to the
first quarter of 2022, the rights offering closed and was
oversubscribed by 84%.
DEBT RESTRUCTURING COMPLETE
Subsequent to March 31, 2022, the Company
entered into agreements with new lenders, providing two new credit
facilities totaling $55 million. Upon closing, which is expected in
late May 2022, the new credit facilities, together with the $20
million rights offering, will be used to repay all amounts owing
under Petrus' existing revolving credit facility ("RCF"). The
refinancing completes the Company’s debt restructuring. Replacing
the existing RCF with the new credit facilities is an opportunity
for Petrus to move forward with supportive lenders and benefit from
a debt structure with greater liquidity and stability.
2022
OUTLOOK(4)
Market conditions have improved dramatically
since the release of our initial 2022 budget in December 2021 with
2022 WTI strip prices increasing by approximately US$25/bbl and
2022 AECO strip prices increasing by over C$2.00/GJ. Despite these
increases, the Company recognizes the inherent volatility of
commodity prices and remains disciplined and flexible from an
operational and financial perspective. The capital budget remains
unchanged at this time but is constantly reviewed to incorporate
the current outlook for pricing and costs and may be adjusted in
the future to reflect changing business dynamics. The Company's
2022 capital program will resume during the second quarter
following break-up.
(1)Non-GAAP ratio. Refer to "Non-GAAP and Other
Financial Measures".(2)Non-GAAP measure. Refer to "Non-GAAP and
Other Financial Measures".(3)Refer to "Estimates of Drilling
Locations".(4)Refer to "Advisories - Forward-Looking
Statements".
SELECTED FINANCIAL INFORMATION
OPERATIONS |
Three months ended Mar. 31,
2022 |
Three months
ended Mar. 31,
2021 |
Three months
ended Dec. 31,
2021 |
Three months
ended Sept. 30,
2021 |
Three months
ended Jun. 30,
2021 |
Average Production |
|
|
|
|
|
Natural gas (mcf/d) |
29,530 |
|
22,985 |
|
23,494 |
|
23,942 |
|
24,291 |
|
Oil (bbl/d) |
1,250 |
|
923 |
|
1,002 |
|
937 |
|
1,214 |
|
NGLs (bbl/d) |
1,207 |
|
1,158 |
|
962 |
|
1,010 |
|
1,046 |
|
Total (boe/d) |
7,379 |
|
5,912 |
|
5,880 |
|
5,937 |
|
6,309 |
|
Total (boe) |
664,010 |
|
532,099 |
|
540,924 |
|
546,227 |
|
574,084 |
|
Light oil weighting |
17 |
% |
15 |
% |
20 |
% |
21 |
% |
19 |
% |
Realized Prices |
|
|
|
|
|
Natural gas ($/mcf) |
5.20 |
|
3.33 |
|
5.45 |
|
4.04 |
|
3.28 |
|
Oil ($/bbl) |
110.12 |
|
66.61 |
|
89.71 |
|
82.56 |
|
75.99 |
|
NGLs ($/bbl) |
60.12 |
|
36.79 |
|
56.35 |
|
45.10 |
|
39.76 |
|
Total realized price ($/boe) |
49.31 |
|
30.55 |
|
46.29 |
|
37.00 |
|
33.87 |
|
Royalty income |
0.29 |
|
0.15 |
|
0.06 |
|
0.18 |
|
0.19 |
|
Royalty expense |
(6.89 |
) |
(3.74 |
) |
(6.34 |
) |
(3.94 |
) |
(4.87 |
) |
Net oil and natural gas revenue ($/boe) |
42.71 |
|
26.96 |
|
40.01 |
|
33.24 |
|
29.19 |
|
Operating expense |
(6.76 |
) |
(6.12 |
) |
(5.02 |
) |
(5.57 |
) |
(6.80 |
) |
Transportation expense |
(2.17 |
) |
(1.62 |
) |
(1.87 |
) |
(1.81 |
) |
(1.84 |
) |
Operating netback(1) ($/boe) |
33.78 |
|
19.22 |
|
33.12 |
|
25.86 |
|
20.55 |
|
Realized gain (loss) on derivatives ($/boe) |
(6.98 |
) |
(2.28 |
) |
(9.52 |
) |
(6.41 |
) |
(3.21 |
) |
Other income |
0.07 |
|
0.04 |
|
0.04 |
|
0.02 |
|
1.77 |
|
General & administrative expense |
(0.82 |
) |
(1.65 |
) |
(2.24 |
) |
(1.47 |
) |
(2.41 |
) |
Cash finance expense |
(1.04 |
) |
(1.93 |
) |
(1.58 |
) |
(3.30 |
) |
(2.52 |
) |
Decommissioning expenditures |
(0.02 |
) |
(0.27 |
) |
(0.56 |
) |
(0.27 |
) |
(0.14 |
) |
Funds flow & corporate netback
($/boe)(2) |
24.99 |
|
13.13 |
|
19.26 |
|
14.43 |
|
14.04 |
|
|
|
|
|
|
|
FINANCIAL (000s except $ per share) |
Three months ended Mar. 31,
2022 |
Three months
ended Mar. 31,
2021 |
Three months ended Dec. 31,
2021 |
Three months ended Sept. 30,
2021 |
Three months ended Jun. 30,
2021 |
Oil and natural gas revenue |
32,940 |
|
16,339 |
|
25,070 |
|
20,306 |
|
19,553 |
|
Net income (loss) |
10,903 |
|
(3,155 |
) |
114,633 |
|
7,343 |
|
(4,265 |
) |
Net income (loss) per share |
|
|
|
|
|
Basic |
0.11 |
|
(0.06 |
) |
1.19 |
|
0.04 |
|
(0.09 |
) |
Fully diluted |
0.11 |
|
(0.06 |
) |
1.11 |
|
0.03 |
|
(0.09 |
) |
Funds flow |
16,601 |
|
6,993 |
|
10,418 |
|
7,874 |
|
8,070 |
|
Funds flow per share |
|
|
|
|
|
Basic |
0.17 |
|
0.14 |
|
0.11 |
|
0.15 |
|
0.16 |
|
Fully diluted |
0.16 |
|
0.14 |
|
0.10 |
|
0.14 |
|
0.16 |
|
Capital expenditures |
5,064 |
|
7,917 |
|
12,235 |
|
6,101 |
|
663 |
|
Acquisitions |
15,200 |
|
— |
|
— |
|
— |
|
— |
|
Weighted average shares outstanding |
|
|
|
|
|
Basic |
99,189 |
|
49,469 |
|
96,660 |
|
54,167 |
|
49,513 |
|
Fully diluted |
103,250 |
|
49,469 |
|
102,868 |
|
57,638 |
|
49,513 |
|
As at period
end |
|
|
|
|
|
Common shares outstanding |
|
|
|
|
|
Basic |
106,907 |
|
49,469 |
|
96,708 |
|
96,603 |
|
49,559 |
|
Fully diluted |
113,883 |
|
49,469 |
|
103,889 |
|
100,074 |
|
49,559 |
|
Total assets |
308,744 |
|
177,587 |
|
290,492 |
|
173,101 |
|
176,629 |
|
Non-current liabilities |
46,702 |
|
42,028 |
|
42,172 |
|
40,200 |
|
40,838 |
|
Net debt(1) |
50,044 |
|
116,634 |
|
61,779 |
|
60,071 |
|
110,346 |
|
(1)Non-GAAP ratio or non-GAAP measure. Refer to
"Non-GAAP and Other Financial Measures". (2)Corporate netback is
equal to funds flow which is a comparable additional GAAP measure.
Petrus analyzes these measures on an absolute value and per unit
basis. Refer to "Non-GAAP and Other Financial Measures".
OPERATIONS UPDATE
First quarter average production by area was as
follows:
For the three months ended March 31, 2022 |
Ferrier |
North Ferrier |
Foothills |
Central Alberta |
Kakwa |
Total |
Natural gas (mcf/d) |
18,311 |
3,405 |
3,036 |
4,588 |
195 |
29,535 |
Oil (bbl/d) |
718 |
150 |
87 |
264 |
36 |
1,255 |
NGLs (bbl/d) |
950 |
102 |
8 |
128 |
13 |
1,201 |
Total (boe/d) |
4,720 |
820 |
601 |
1,157 |
81 |
7,379 |
First quarter average production was 7,379 boe/d
in 2022 compared to 5,912 boe/d in 2021. The increase in production
is due to the capital activity in the second half of 2021 as well
as certain wells in the Foothills area brought back on-stream due
to improved pricing.
DEBT RESTRUCTURINGSubsequent to
March 31, 2022, the Company entered into agreements with new
lenders, providing two new credit facilities totaling $55 million.
Upon closing, which is expected in late May 2022, the new credit
facilities, together with the $20 million rights offering, will be
used to repay all amounts owing under Petrus' existing revolving
credit facility ("RCF"). The refinancing completes the Company’s
debt restructuring. Replacing the existing RCF with the new credit
facilities is an opportunity for Petrus to move forward with
supportive lenders and benefit from a debt structure with greater
liquidity and stability.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be
held at 240FOURTH (previously BP Centre) 240, 4th Ave SW Calgary,
Alberta, on Thursday May 12, 2022, at 1:30 p.m. (Calgary time). The
Company does not plan to have a formal presentation at the
conclusion of the Meeting. We encourage all shareholders and
proxyholders not to attend the meeting in person, particularly if
they are experiencing any of the described COVID‐19 symptoms.
Shareholders and guests can listen to the Meeting via
teleconference at 1‐888‐433‐2192 (participant code 9350829) however
shareholders and proxyholders will not be able to vote their shares
via teleconference. We encourage all shareholders to submit their
proxies in advance of the Meeting.
An updated corporate presentation can be found
on the Company's website at www.petrusresources.com.
For further information, please
contact:
Ken Gray, P.Eng.President and Chief Executive
OfficerT: (403) 930-0889E: kgray@petrusresources.com
NON-GAAP AND OTHER FINANCIAL
MEASURES
This press release makes reference to the terms
"operating netback", "corporate netback" and "net debt". These
non-GAAP and other financial measures are not recognized measures
under GAAP (IFRS) and do not have a standardized meaning prescribed
by GAAP (IFRS). Accordingly, the Company's use of these terms may
not be comparable to similarly defined measures presented by other
companies. These non-GAAP and other financial measures should not
be considered to be more meaningful than GAAP measures which are
determined in accordance with IFRS as indicators of our
performance. Management uses these non-GAAP and other financial
measures for the reasons set forth below.
Operating Netback
Operating netback is a common non-GAAP financial
measure used in the oil and natural gas industry which is a useful
supplemental measure to evaluate the specific operating performance
by product type at the oil and natural gas lease level. The most
directly comparable GAAP measure to operating netback is oil and
natural gas revenue. Operating netback is calculated as oil and
natural gas revenue less royalty expenses, operating expenses and
transportation expenses. It is presented on an absolute value and
on a per unit (boe) basis. See below and under "Summary of
Quarterly Results" for a reconciliation of operating netback to oil
and natural gas revenue.
Corporate Netback
Corporate netback is a common non-GAAP financial
measure used in the oil and natural gas industry which evaluates
the Company’s profitability at the corporate level. Corporate
netback is equal to funds flow, which is a directly comparable GAAP
measure. Petrus analyzes these measures on an absolute value and on
a per unit (boe) basis as a non-GAAP ratio. Management believes
that funds flow and corporate netback provide information to assist
a reader in understanding the Company's profitability relative to
current commodity prices. They are calculated as the operating
netback less general and administrative expense, finance expense,
decommissioning expenditures, plus other income and the net
realized gain (loss) on financial derivatives.
Net Debt Net debt is a non-GAAP
financial measure and is calculated as current assets less the
current portion of long term debt and accounts payable and accrued
liabilities. Petrus uses net debt as a key indicator of its
leverage and strength of its balance sheet.
ADVISORIES
Basis of PresentationFinancial
data presented above has largely been derived from the Company’s
audited financial statements, prepared in accordance with GAAP
which require publicly accountable enterprises to prepare their
financial statements using IFRS. Accounting policies adopted by the
Company are set out in the notes to the consolidated financial
statements as at and for the twelve months ended December 31,
2021. The reporting and the measurement currency is the Canadian
dollar. All financial information is expressed in Canadian dollars,
unless otherwise stated.
Forward-Looking
StatementsCertain information regarding Petrus set forth
in this press release contains forward-looking statements within
the meaning of applicable securities law, that involve substantial
known and unknown risks and uncertainties. The use of any of the
words “anticipate”, “continue”, “estimate”, “expect”, “may”,
“will”, “project”, “should”, “believe” and similar expressions are
intended to identify forward-looking statements. Such statements
represent Petrus’ internal projections, estimates, beliefs, plans,
objectives, assumptions, intentions or statements about future
events or performance. These statements are only predictions and
actual events or results may differ materially. Although Petrus
believes that the expectations reflected in the forward-looking
statements are reasonable, it cannot guarantee future results,
levels of activity, performance or achievement since such
expectations are inherently subject to significant business,
economic, competitive, political and social uncertainties and
contingencies. Many factors could cause Petrus’ actual results to
differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, Petrus.
In particular, forward-looking statements
included in this press release include, but are not limited to,
statements with respect to: that the Company will continue to
strengthen its balance sheet by further reducing net debt and
maintaining a debt to funds flow ratio of under 1x; the timing for
closing on our new credit facilities, the anticipated material
terms of such facilities, and that such facilities and the proceeds
of our rights offering will be used to repay all amounts owing
under Petrus' RCF; that replacing the existing RCF with the new
credit facilities is an opportunity for Petrus to move forward with
supportive lenders and benefit from a debt structure with greater
liquidity and stability; that we may adjust our capital budget;
that our capital program will resume during the second quarter
following break-up; the Company's hedging strategy and its ability
to provide stability and sustainability to the Company's economic
returns, funds flow and capital development plan; the Company's
approach to managing liquidity risk; and that management expects to
comply with all financial covenants under its RCF during the
subsequent 12 month period. In addition, statements relating to
“reserves” are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the reserves described can be profitably produced
in the future.
These forward-looking statements are subject to
numerous risks and uncertainties, most of which are beyond the
Company’s control, including: the impact of general economic
conditions; volatility in market prices for crude oil, NGL and
natural gas; the ability of the Company to close on its new credit
facilities prior to the maturity of the RCF and repay the RCF in
full; industry conditions; currency fluctuation; imprecision of
reserve estimates; liabilities inherent in crude oil and natural
gas operations; environmental risks; incorrect assessments of the
value of acquisitions and exploration and development programs;
competition; the lack of availability of qualified personnel or
management; changes in income tax laws or changes in tax laws and
incentive programs relating to the oil and gas industry; hazards
such as fire, explosion, blowouts, cratering, and spills, each of
which could result in substantial damage to wells, production
facilities, other property and the environment or in personal
injury; stock market volatility; ability to access sufficient
capital from internal and external sources; and the other risks and
uncertainties described in the AIF. With respect to forward-looking
statements contained in this press release, Petrus has made
assumptions regarding: future commodity prices (including as
disclosed herein) and royalty regimes; availability of skilled
labour; timing and amount of capital expenditures; the timing for
closing on the Company's new credit facilities and the amount of
credit available thereunder; future exchange rates; the impact of
increasing competition; conditions in general economic and
financial markets; availability of drilling and related equipment
and services; effects of regulation by governmental agencies; the
effects of inflation on our profitability; and future operating
costs. Management has included the above summary of assumptions and
risks related to forward-looking information provided in this press
release in order to provide investors with a more complete
perspective on Petrus’ future operations and such information may
not be appropriate for other purposes. Petrus’ actual results,
performance or achievement could differ materially from those
expressed in, or implied by, these forward-looking statements and,
accordingly, no assurance can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur, or if any of them do so, what benefits that the Company will
derive therefrom. Readers are cautioned that the foregoing lists of
factors are not exhaustive.
This press release contains future-oriented
financial information and financial outlook information
(collectively, "FOFI") about Petrus' prospective results of
operations including, without limitation, its forecast for net debt
levels and net debt to funds flow ratio and ability to repay all
amounts owing under Petrus' RCF, which are subject to the same
assumptions, risk factors, limitations, and qualifications as set
forth above. Readers are cautioned that the assumptions used in the
preparation of such information, although considered reasonable at
the time of preparation, may prove to be imprecise and, as such,
undue reliance should not be placed on FOFI. Petrus' actual
results, performance or achievement could differ materially from
those expressed in, or implied by, these FOFI, or if any of them do
so, what benefits Petrus will derive therefrom. Petrus has included
the FOFI in order to provide readers with a more complete
perspective on Petrus' future operations and such information may
not be appropriate for other purposes.
These forward-looking statements and FOFI are
made as of the date of this press release and the Company disclaims
any intent or obligation to update any forward-looking statements
and FOFI, whether as a result of new information, future events or
results or otherwise, other than as required by applicable
securities laws.
BOE PresentationThe oil and
natural gas industry commonly expresses production volumes and
reserves on a barrel of oil equivalent (“boe”) basis whereby
natural gas volumes are converted at the ratio of six thousand
cubic feet to one barrel of oil. The intention is to sum oil and
natural gas measurement units into one basis for improved
measurement of results and comparisons with other industry
participants. Petrus uses the 6:1 boe measure which is the
approximate energy equivalence of the two commodities at the burner
tip. Boe’s do not represent an economic value equivalence at the
wellhead and therefore may be a misleading measure if used in
isolation.
Estimates of Drilling
LocationsUnbooked drilling locations are the internal
estimates of the Company based on assumptions 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 or resources (including contingent and prospective).
Unbooked locations have been identified by Petrus' management as an
estimation of the multi-year drilling activities based on
evaluation of applicable geologic, seismic, engineering, production
and reserves information. There is no certainty that Petrus will
drill all unbooked drilling locations and if drilled there is no
certainty that such locations will result in additional oil and
natural gas reserves, resources or production. The drilling
locations on which Petrus will actually drill wells, including the
number and timing thereof, is ultimately dependent upon the
availability of funding, regulatory approvals, seasonal
restrictions, oil and natural gas prices, costs, actual drilling
results, additional reservoir information that is obtained and
other factors.
Abbreviations$000’s
$/bbl
$/boe
$/GJ
$/mcf
bbl
bbl/d
boe
mboe
mmboe
boe/d
GJ
GJ/d
mcf
mcf/d
mmcf/d
NGLs
WTI |
|
thousand dollarsdollars per barreldollars per barrel of oil
equivalentdollars per gigajouledollars per thousand cubic
feetbarrelbarrels per daybarrel of oil equivalentthousand barrel of
oil equivalentmillion barrel of oil equivalentbarrel of oil
equivalent per daygigajoulegigajoules per daythousand cubic
feetthousand cubic feet per daymillion cubic feet per daynatural
gas liquidsWest Texas Intermediate |
|
|
|
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