Peyto Exploration & Development Corp. (TSX:PEY) ("Peyto" or the "Company") is
pleased to present its operating and financial results for the first quarter of
the 2014 fiscal year. Production per share growth of 28%, combined with earnings
per share growth of 64%, support a 25% dividend increase. First quarter 2014
highlights, including a 77% operating margin(1) and a 30% profit margin(2), were
as follows:
-- Production per share up 28%. First quarter 2014 production increased 30%
(28% per share) from 332 MMcfe/d (55,372 boe/d) in Q1 2013 to 433
MMcfe/d (72,209 boe/d) in Q1 2014.
-- Funds from operations per share up 54%. Generated a Company record $161
million in Funds from Operations ("FFO") in Q1 2014 up 56% (54% per
share) from $103 million in Q1 2013 due to increased production volumes
and improved commodity prices.
-- Cash costs of $1.25/Mcfe. Total cash costs, including royalties,
operating costs, transportation, G&A and interest, were up from
$1.02/Mcfe in Q1 2013 but still remain industry leading. This increase
was primarily due to higher royalties, driven by higher commodity
prices, and higher operating costs, due to front-end loaded chemical and
maintenance costs. Higher revenues, combined with these cash costs,
resulted in a cash netback of $4.12/Mcfe ($24.74/boe) or a 77% operating
margin.
-- Capital investment of $179 million. A capital program of $179 million
was executed in the quarter resulting in production additions of 11,500
boe/d at quarter end. The annualized cost (trailing twelve months) to
build this new production was $17,140/boe/d. A total of 31 gross wells
were drilled during the first quarter.
-- Earnings of $0.41/share, dividends of $0.24/share. Earnings of $62
million were generated in the quarter while dividends of $37 million
were paid to shareholders, representing a before tax payout ratio of 23%
of FFO.
-- Dividend increase to $0.10/share. The Board of Directors has approved a
monthly dividend increase of $0.02/share, starting in May 2014, to be
paid on June 13, 2014 to shareholders of record as of May 31, 2014.
First Quarter 2014 in Review
The first quarter of 2014 was another active period for the Company with 9
drilling rigs developing the many Deep Basin resource plays within Peyto's
portfolio. Natural gas prices during the quarter were extremely volatile as cold
winter weather reduced storage volumes to multi-year lows causing gas prices to
increase dramatically. Peyto increased its pace of activity and accelerated 2014
spending plans in response to the increase in natural gas prices with an urgency
to deploy more capital earlier in the year, before potential cost inflation
could occur. Drilling through spring break-up became part of that plan, as did
stockpiling chemicals and accelerating facility maintenance during unscheduled
transportation outages. These efforts, combined with increased government and
regulatory fees, resulted in higher per unit operating costs for the first
quarter. At just over $3/boe, Peyto's operating costs, inclusive of
transportation, continue to lead the industry by a wide margin. Average first
quarter production of 72,209 boe/d was up 7% sequentially from the fourth
quarter 2013, while average realized prices were up 25%. These contributed to a
record $161 million in FFO, despite a $30 million hedging loss. Progress on
facility expansions continued in the quarter in anticipation of ongoing
production growth later in 2014. The strong financial and operating performance
delivered in the quarter resulted in an annualized 20% Return on Equity (ROE)
and 15% Return on Capital Employed (ROCE).
1. Operating Margin is defined as funds from operations divided by revenue
before royalties but including realized hedging gains/losses.
2. Profit Margin is defined as net earnings for the quarter divided by
revenue before royalties but including realized hedging gains/losses.
Natural gas volumes recorded in thousand cubic feet (mcf) are converted
to barrels of oil equivalent (boe) using the ratio of six (6) thousand
cubic feet to one (1) barrel of oil (bbl). Natural gas liquids and oil
volumes in barrel of oil (bbl) are converted to thousand cubic feet
equivalent (Mcfe) using a ratio of one (1) barrel of oil to six (6)
thousand cubic feet. This could be misleading, particularly if used in
isolation as it is based on an energy equivalency conversion method
primarily applied at the burner tip and does not represent a value
equivalency at the wellhead.
----------------------------------------------------------------------------
3 Months Ended Mar. 31 %
2014 2013 Change
----------------------------------------------------------------------------
Operations
Production
Natural gas (mcf/d) 389,002 297,191 31%
Oil & NGLs (bbl/d) 7,375 5,840 26%
Thousand cubic feet equivalent (mcfe/d @
1:6) 433,252 332,230 30%
Barrels of oil equivalent (boe/d @ 6:1) 72,209 55,372 30%
Production per million common shares
(boe/d)(i) 476 372 28%
Product prices
Natural gas ($/mcf) 4.45 3.49 28%
Oil & NGLs ($/bbl) 80.49 75.88 6%
Operating expenses ($/mcfe) 0.39 0.31 26%
Transportation ($/mcfe) 0.13 0.12 8%
Field netback ($/mcfe) 4.39 3.67 20%
General & administrative expenses
($/mcfe) 0.04 0.02 100%
Interest expense ($/mcfe) 0.23 0.21 10%
Financial ($000, except per share(i))
Revenue 209,318 133,203 57%
Royalties 17,861 10,591 69%
Funds from operations 160,785 102,856 56%
Funds from operations per share 1.06 0.69 54%
Total dividends 36,505 26,766 36%
Total dividends per share 0.24 0.18 33%
Payout ratio 23 26 (12)%
Earnings 62,129 36,405 71%
Earnings per diluted share 0.41 0.25 64%
Capital expenditures 179,378 169,099 6%
Weighted average common shares outstanding 151,826,431 148,672,664 2%
As at March 31
End of period shares outstanding 153,690,808 148,758,923 3%
Net debt 838,495 749,546 12%
Shareholders' equity 1,344,704 1,197,254 12%
Total assets 2,686,661 2,281,287 18%
(i)all per share amounts using weighted
average common shares outstanding
----------------------------------------------------------------------------
Three Months ended Mar. 31
($000) 2014 2013
----------------------------------------------------------------------------
Cash flows from operating activities 146,452 92,543
Change in non-cash working capital 7,964 8,784
Change in provision for performance based
compensation 6,369 1,529
----------------------------------------------------------------------------
Funds from operations 160,785 102,856
----------------------------------------------------------------------------
Funds from operations per share(i) 1.06 0.69
----------------------------------------------------------------------------
(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 distributions may vary.
Exploration & Development
Peyto's first quarter 2014 activity continued to be diversified across the many
stacked resource plays in the Alberta Deep Basin, with all zones yielding
liquids rich, sweet natural gas. A total of 31 wells were drilled across the
land base, targeting the many prospective zones, as shown in the following
table:
Field
Total
Kisku/ Wells
Zone Sundance Nosehill Wildhay Ansell Berland Kakwa Brazeau Drilled
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cardium 1 1 1 1 4
Notikewin 3 3
Falher 2 4 1 7
Wilrich 2 1 1 6 1 11
Bluesky 2 3 1 6
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total 7 9 5 8 1 1 31
----------------------------------------------------------------------------
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The majority of the activity in the quarter focused on the deeper Falher,
Wilrich and Bluesky formations. These formations are yielding greater economic
returns due to a combination of higher natural gas prices, greater deep gas
drilling royalty incentives combined with higher productivity and reserve
recoveries.
Both the average depth and lateral length of Peyto's horizontal wells continued
to increase in Q1 2014, as the Company attempts to develop more resource with
each wellbore. At the same time, the drilling cost per meter and time required
to drill, complete, and bring a new well on production continues to fall as
Peyto's infrastructure (roads, wellsites, pipelines, etc.) expands and drilling
practices are refined. The following table illustrates the ongoing efficiency
gains which should contribute to lower development costs and greater returns:
2011 2012 2013 2014 Q1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross Spuds 70 86 99 31
Measured Depth (m) 3,903 4,017 4,179 4,236
HZ Length (m) 1,303 1,358 1,409 1,468
Average Drilling ($MM) $ 2.823 $ 2.789 $ 2.720 $ 2,767
$ per MD meter $ 723 $ 694 $ 651 $ 653
Spud-Onstream (days) 59 50 59 41
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital Expenditures
During the first quarter of 2014, Peyto spent $80.2 million to drill 31 gross
(28.4 net) horizontal wells and $36.1 million completing 22 gross (21.5 net)
wells. Wellsite equipment and tie-ins accounted for $15.7 million, while a total
of $40.4 million was invested in pipelines and facilities. A 27 km, 8" pipeline
was installed which connected a new growth area called Pedley to Peyto's Wildhay
gas plant. This new pipeline corridor provides the necessary infrastructure for
future wells and the ultimate expansion of the Wildhay gas plant later in the
year. Additional compression was installed at Swanson and Oldman North gas
plants, as well as two compressors and a refrigeration unit at the Brazeau River
gas plant. New lands in Brazeau and Sundance were acquired for $2.9 million, or
$246/acre, while new 3D seismic was acquired in Brazeau, Ansell and Sundance
accounted for $3.9 million.
By the end of the quarter, the 22 gross (21.6 net) wells that were brought
onstream were contributing 11,500 boe/d to the quarter end exit rate of 72,000
boe/d.
Financial Results
Alberta (AECO) daily natural gas prices averaged $5.36/GJ in Q1 2014, while AECO
monthly prices averaged $4.52/GJ. Typically, the monthly price exceeds the daily
price but this was not the case in the first quarter. As Peyto had committed 88%
of its production to the monthly price, Peyto realized a volume weighted average
natural gas price of $4.57/GJ or $5.23/mcf, prior to a $0.78/mcf hedging loss.
Peyto realized a blended oil and natural gas liquids price of $84.64/bbl in Q1
2014, prior to a $4.15/bbl hedging loss, for its blend of condensate, pentane,
butane and propane, which represented 85% of the $99.81/bbl average Edmonton
light oil price.
Combining realized natural gas and liquids prices, Peyto's unhedged revenues
totaled $6.14/mcfe ($5.37/mcfe including hedging losses), or 134% of the dry gas
price, illustrating the benefit of high heat content, liquids rich natural gas
production.
Royalties of $0.46/mcfe, operating costs of $0.39/mcfe, transportation costs of
$0.13/mcfe, G&A of $0.04/mcfe and interest costs of $0.23/mcfe, combined for
total cash costs of $1.25/mcfe ($7.47/boe). These industry leading total cash
costs resulted in a cash netback of $4.12/mcfe or a 77% operating margin.
Depletion, depreciation and amortization charges of $1.77/mcfe, along with a
provision for future tax and market based bonus payments reduced the cash
netback to earnings of $1.59/mcfe, or a 30% profit margin, which funded
dividends of $0.94/mcfe.
Subsequent to the end of the first quarter, Peyto's $1.0 billion covenant based
unsecured credit facility was renewed and extended for an additional two years.
This new revolver has more attractive pricing and the same covenants as the
previous revolver (see the Management's Discussion & Analysis for a description
of the covenants). Including the $270 million of senior unsecured notes, Peyto's
total borrowing capacity is $1.27 billion, leaving over $430 million of
available capacity as at March 31, 2014.
Marketing
Significantly colder than normal winter weather across much of North America
during the first quarter caused natural gas storage inventories to be drawn down
to multi-year lows. This led to higher natural gas prices, especially in Alberta
where AECO daily natural gas prices fluctuated from lows of $3.66/GJ to highs of
$24.82/GJ. The average daily price over the 90 day period of $5.36/GJ was 19%
higher than the average monthly price at $4.52/GJ.
For the quarter, approximately 57% of Peyto's natural gas production received a
fixed price of $3.38/GJ from hedges that were put in place over the previous 24
months, while the balance received the blended daily and monthly price of
$4.57/GJ, resulting in an after-hedge price of $3.89/GJ or $4.45/mcf.
Peyto's practice of layering in future sales in the form of fixed price swaps,
and thus smoothing out the volatility in gas prices, continued throughout the
quarter. As at March 31, 2014 Peyto had committed to the future sale of
100,285,000 GJ of natural gas at an average price of $3.58/GJ or $4.12/mcf based
on Peyto's historical heat content. The following table summarizes the remaining
hedged volumes and prices for the upcoming years as of May 14, 2014.
----------------------------------------------------------------------------
Future Sales Average Price (CAD)
----------------------------------------------------------------------------
GJ Mcf $/GJ $/Mcf
----------------------------------------------------------------------------
2014 65,095,000 56,604,348 3.58 4.12
2015 34,480,000 29,982,609 3.73 4.29
2016 1,820,000 1,582,609 3.97 4.57
----------------------------------------------------------------------------
Total 101,395,000 88,169,566 3.64 4.19
----------------------------------------------------------------------------
(i)prices and volumes in mcf use Peyto's historic heat content premium of 1.15.
As illustrated in the following table, Peyto's realized natural gas liquids
prices (1) were up 6% year over year with all but Butane receiving greater
prices.
----------------------------------------------------------------------------
Three Months ended March 31
2014 2013
----------------------------------------------------------------------------
Condensate ($/bbl) 100.68 92.18
Propane ($/bbl) (includes hedging) 36.65 25.52
Butane ($/bbl) 55.98 58.57
Pentane ($/bbl) 105.37 102.19
----------------------------------------------------------------------------
Total oil and natural gas liquids ($/bbl) 80.49 75.88
----------------------------------------------------------------------------
Edmonton par crude postings ($/bbl) 99.81 86.28
----------------------------------------------------------------------------
(1) liquids prices are Peyto realized prices in Canadian dollars adjusted for
fractionation and transportation.
Peyto's hedging practice with respect to propane also continued in the quarter
and as at March 31, 2014, Peyto had committed to the future sale of 204,000 bbls
of propane at an average price of $45.82 CAD/bbl or $41.45USD/bbl.
Activity Update
Peyto has successfully maintained a high level of activity through April and
into the beginning of May while most of the industry has shut down for spring
break-up. Activity will continue provided that weather and surface access
conditions remain acceptable. Peyto currently has 7 of its 9 rigs drilling and 3
completion spreads running. Since the end of the first quarter, an additional 11
gross (9.7 net) wells have been, or are in the process of being drilled and 12
more wells (11.2 net) have been completed and brought on production. New wells
for 2014 are contributing 15,000 boe/d to the current total production of 73,000
boe/d.
Most recently, Peyto has drilled and completed the longest horizontal well so
far in the Company's history. This Sundance horizontal Wilrich well was drilled
with a 2,888 m horizontal lateral and completed with a 21 stage slickwater
fracture stimulation. The Company expects that longer horizontal laterals will
not be applicable to all zones, nor in all areas, and while it is still too
early to determine with certainty, Peyto expects this well will achieve above
average rates of return.
Facility and pipeline expansion work continues to progress in anticipation of
production growth in the second half of the year. A twinning of the Wildhay
sales pipeline is in the final stages of completion, as are fabrication of a
second refrigeration package and compressor for the Oldman North plant expansion
which is scheduled for a September startup.
Recent investment success has prompted renewed focus on the Wilrich and Falher
formations in Ansell, the Bluesky play in North Sundance, the Falher and
Notikewin in Central Sundance, and the Wilrich in Brazeau River.
Dividend Increase
In keeping with Peyto's total return model, profitable growth in the Company's
assets should ultimately yield growth in sustainable dividends for shareholders.
Over the last year, production per share and Proved Developed Producing reserves
per share have grown 28% and 12%, respectively, while earnings per share have
increased 64%. Based on this profitable growth, and irrespective of the recent
strength in natural gas prices, the Board of Directors of Peyto has approved a
$0.02/share increase to the monthly dividend starting in May 2014. This is the
second dividend increase since Peyto converted to a dividend-paying, growth
corporation at the end of 2010.
Outlook
Commodity prices for the balance of 2014 continue to look robust, and while
higher commodity prices will drive higher funds from operations, Peyto will
remain vigilant with respect to service cost inflation. Peyto is executing more
of its 2014 capital program in the first half of the year in an attempt to
mitigate this potential cost inflation and fully expects to meet its rate of
return objectives. The Company remains committed to maximizing the returns on
shareholder's capital by continuing to be one of the lowest cost, most efficient
and most profitable energy companies in the industry.
Conference Call and Webcast
A conference call will be held with the senior management of Peyto to answer
questions with respect to the 2014 first quarter financial results on Thursday,
May 15th, 2014, at 9:00 a.m. Mountain Daylight Time (MDT), or 11:00 a.m. Eastern
Daylight Time (EDT). To participate, please call 1-416-340-9432 (Toronto area)
or 1-800-769-8320 for all other participants. The conference call will also be
available on replay by calling 1-905-694-9451(Toronto area) or 1-800-408-3053
for all other parties, using passcode 9633376. The replay will be available at
11:00 a.m. MDT, 1:00 p.m. EDT Thursday, May 15th, 2014 until midnight EDT on
Thursday, May 22nd, 2014. The conference call can also be accessed through the
internet at http://www.gowebcasting.com/5336. After this time the conference
call will be archived on the Peyto Exploration & Development website at
www.peyto.com.
Shareholders are invited to attend Peyto's AGM at 3:00 p.m. on Tuesday, May 27,
2014 at Livingston Place Conference Centre, +15 level, 222-3rd Avenue SW,
Calgary, Alberta.
Management's Discussion and Analysis
Management's Discussion and Analysis of this first quarter report is available
on the Peyto website at http://www.peyto.com/news/Q12014MDandA.pdf. A complete
copy of the first quarter report to shareholders, including the Management's
Discussion and Analysis, and Financial Statements is also available at
www.peyto.com and will be filed at SEDAR, www.sedar.com, at a later date.
Darren Gee, President and CEO
May 14, 2014
Certain information set forth in this document and Management's Discussion and
Analysis, including management's assessment of Peyto's future plans and
operations, capital expenditures and capital efficiencies, contains
forward-looking statements. By their nature, forward-looking statements are
subject to numerous risks and uncertainties, some of which are beyond these
parties' control, including the impact of general economic conditions, industry
conditions, volatility of commodity prices, currency fluctuations, imprecision
of reserve estimates, environmental risks, competition from other industry
participants, the lack of availability of qualified personnel or management,
stock market volatility and ability to access sufficient capital from internal
and external sources. 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. In addition, Peyto is providing future oriented financial
information set out in this press release for the purposes of providing clarity
with respect to Peyto's strategic direction and readers are cautioned that this
information may not be appropriate for any other purpose. Other than is required
pursuant to applicable securities law, Peyto does not undertake to update
forward looking statements at any particular time.
Peyto Exploration & Development Corp.
Condensed Balance Sheet (unaudited)
(Amount in $ thousands)
March 31 December 31
2014 2013
----------------------------------------------------------------------------
Assets
Current assets
Accounts receivable 108,164 83,714
Due from private placement (Note 6) - 6,245
Prepaid expenses 11,586 5,666
----------------------------------------------------------------------------
119,750 95,625
----------------------------------------------------------------------------
Property, plant and equipment, net (Note 3) 2,566,911 2,459,531
----------------------------------------------------------------------------
2,566,911 2,459,531
----------------------------------------------------------------------------
2,686,661 2,555,156
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 185,950 155,265
Dividends payable (Note 6) 12,295 11,901
Derivative financial instruments (Note 8) 64,221 26,606
Provision for future performance based
compensation (Note 7) 11,470 5,100
----------------------------------------------------------------------------
273,936 198,872
----------------------------------------------------------------------------
Long-term debt (Note 4) 760,000 875,000
Long-term derivative financial instruments
(Note 8) 17,735 5,180
Provision for future performance based
compensation (Note 7) 5,426 3,200
Decommissioning provision (Note 5) 67,330 61,184
Deferred income taxes 217,530 211,082
----------------------------------------------------------------------------
1,068,021 1,155,646
----------------------------------------------------------------------------
Equity
Share capital (Note 6) 1,292,384 1,130,069
Shares to be issued (Note 6) - 6,245
Retained earnings 112,599 86,975
Accumulated other comprehensive loss (Note 6) (60,279) (22,651)
----------------------------------------------------------------------------
1,344,704 1,200,638
----------------------------------------------------------------------------
2,686,661 2,555,156
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the financial statements.
Approved by the Board of Directors
Michael MacBean, Director
Darren Gee, Director
Peyto Exploration & Development Corp.
Condensed Income Statement (unaudited)
(Amount in $ thousands)
Three months ended March 31
2014 2013
----------------------------------------------------------------------------
Revenue
Oil and gas sales 239,421 128,424
Realized (loss) gain on hedges (Note 8) (30,103) 4,779
Royalties (17,861) (10,591)
----------------------------------------------------------------------------
Petroleum and natural gas sales, net 191,457 122,612
----------------------------------------------------------------------------
Expenses
Operating 15,230 9,306
Transportation 5,145 3,659
General and administrative 1,556 481
Future performance based compensation (Note 7) 8,596 2,538
Interest 8,741 6,310
Accretion of decommissioning provision (Note
5) 498 368
Depletion and depreciation (Note 3) 68,851 51,625
----------------------------------------------------------------------------
108,617 74,287
----------------------------------------------------------------------------
Earnings before taxes 82,840 48,325
----------------------------------------------------------------------------
Income tax
Deferred income tax expense 20,711 11,920
----------------------------------------------------------------------------
Earnings for the period 62,129 36,405
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share (Note 6)
Basic and diluted $ 0.41 $ 0.25
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average number of common shares
outstanding (Note 6)
Basic and diluted 151,826,431 148,672,664
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Condensed Statement of Comprehensive Income (unaudited)
(Amount in $ thousands)
Three months ended March
31
2014 2013
----------------------------------------------------------------------------
Earnings for the period 62,129 36,405
Other comprehensive income
Change in unrealized loss on cash flow hedges (80,273) (28,128)
Deferred tax expense 12,543 8,227
Realized (gain) loss on cash flow hedges 30,103 (4,779)
----------------------------------------------------------------------------
Comprehensive income 24,502 11,725
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Condensed Statement of Changes in Equity (unaudited)
(Amount in $ thousands)
Three months ended March
31
2014 2013
----------------------------------------------------------------------------
Share capital, beginning of period 1,130,069 1,124,382
----------------------------------------------------------------------------
Common shares issued by private placement 6,997 5,742
Equity offering 160,480 -
Common shares issuance costs (net of tax) (5,162) (55)
----------------------------------------------------------------------------
Share capital, end of period 1,292,384 1,130,069
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Common shares to be issued, beginning of period 6,245 3,459
----------------------------------------------------------------------------
Common shares issued (6,245) (3,459)
----------------------------------------------------------------------------
Common shares to be issued, end of period - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Retained earnings, beginning of period 86,975 75,247
----------------------------------------------------------------------------
Earnings for the period 62,129 36,405
Dividends (Note 6) (36,505) (26,766)
----------------------------------------------------------------------------
Retained earnings, end of period 112,599 84,886
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated other comprehensive (loss) income,
beginning of period (22,651) 6,979
----------------------------------------------------------------------------
Other comprehensive loss (37,628) (24,680)
----------------------------------------------------------------------------
Accumulated other comprehensive loss, end of
period (60,279) (17,701)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total equity 1,344,704 1,197,254
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto Exploration & Development Corp.
Condensed Statement of Cash Flows (unaudited)
(Amount in $ thousands)
The following amounts are included in cash flows from operating activities:
----------------------------------------------------------------------------
Three months ended March
31
2014 2013
----------------------------------------------------------------------------
Cash provided by (used in) operating activities
Earnings 62,129 36,405
Items not requiring cash:
Deferred income tax 20,711 11,920
Depletion and depreciation 68,851 51,625
Accretion of decommissioning provision 498 368
Long term portion of future performance based
compensation 2,227 1,009
Change in non-cash working capital related to
operating activities (7,964) (8,784)
----------------------------------------------------------------------------
146,452 92,543
----------------------------------------------------------------------------
Financing activities
Issuance of common shares 167,477 5,742
Issuance costs (6,883) (73)
Cash dividends paid (36,110) (26,752)
Increase (decrease) in bank debt (115,000) 60,000
----------------------------------------------------------------------------
9,484 38,917
----------------------------------------------------------------------------
Investing activities
Additions to property, plant and equipment (179,378) (169,099)
Change in prepaid capital 8,795 3,714
Change in non-cash working capital relating to
investing activities 14,647 33,925
----------------------------------------------------------------------------
(155,936) (131,460)
----------------------------------------------------------------------------
Net increase (decrease) in cash - -
Cash, Beginning of Period - -
----------------------------------------------------------------------------
Cash, End of Period - -
----------------------------------------------------------------------------
Cash interest paid 8,330 7,867
Cash taxes paid - 1,890
Peyto Exploration & Development Corp.
Notes to Condensed Financial Statements (unaudited)
As at March 31, 2014 and 2013
(Amount in $ thousands, except as otherwise noted)
1. Nature of operations
Peyto Exploration & Development Corp. ("Peyto" or the "Company") is a Calgary
based oil and natural gas company. Peyto conducts exploration, development and
production activities in Canada. Peyto is incorporated and domiciled in the
Province of Alberta, Canada. The address of its registered office is 1500, 250 -
2nd Street SW, Calgary, Alberta, Canada, T2P 0C1.
These financial statements were approved and authorized for issuance by the
Audit Committee of Peyto on May 13, 2014.
2. Basis of presentation
The condensed financial statements have been prepared by management and reported
in Canadian dollars in accordance with International Accounting Standard ("IAS")
34, "Interim Financial Reporting". These condensed financial statements do not
include all of the information required for full annual financial statements and
should be read in conjunction with the Company's financial statements as at and
for the years ended December 31, 2013 and 2012.
Significant Accounting Policies
(a) Significant Accounting Judgments, Estimates and Assumptions
The timely preparation of the condensed financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingencies, if any, as at the date of the
financial statements and the reported amounts of revenue and expenses during the
period. By their nature, estimates are subject to measurement uncertainty and
changes in such estimates in future years could require a material change in the
condensed financial statements.
Except as disclosed below, all accounting policies and methods of computation
followed in the preparation of these financial statements are the same as those
disclosed in Note 2 of Peyto's financial statements as at and for the years
ended December 31, 2013 and 2012.
(b) Recent Accounting Pronouncements
Certain new standards, interpretations, amendments and improvements to existing
standards were issued by the International Accounting Standards Board (IASB) or
International Financial Reporting Interpretations Committee (IFRIC) that are
mandatory for accounting periods beginning January 1, 2014 or later periods. The
affected standards are consistent with those disclosed in Peyto's financial
statements as at and for the years ended December 31, 2013 and 2012.
Peyto adopted the following standards on January 1, 2014:
IAS 36 "Impairment of Assets" has been amended to reduce the circumstances in
which the recoverable amount of cash generating units "CGUs" are required to be
disclosed and clarify the disclosures required when an impairment loss has been
recognized or reversed in the period. The retrospective adoption of these
amendments will only impact Peyto's disclosures in the notes to the financial
statements in periods when an impairment loss or impairment reversal is
recognized.
IFRIC 21 "Levies" was developed by the IFRS Interpretations Committee ("IFRIC")
and is applicable to all levies imposed by governments under legislation, other
than outflows that are within the scope of other standards (e.g., IAS 12 "Income
Taxes") and fines or other penalties for breaches of legislation. The
interpretation clarifies that an entity recognizes a liability for a levy when
the activity that triggers payment, as identified by the relevant legislation,
occurs. It also clarifies that a levy liability is accrued progressively only if
the activity that triggers payment occurs over a period of time, in accordance
with the relevant legislation. Lastly, the interpretation clarifies that a
liability should not be recognized before the specified minimum threshold to
trigger that levy is reached. The retrospective adoption of this interpretation
does not have any impact on Peyto's financial statements.
Standards issued but not yet effective
IFRS 9, as issued, reflects part of the IASB's work on the replacement of IAS 39
"Financial Instruments: Recognition and Measurement" and applies to
classification and measurement of financial assets and financial liabilities as
defined in IAS 39 and hedging transactions. The standard has no effective date.
In subsequent phases, the IASB will address impairment of financial assets. The
adoption of IFRS 9 may have an effect on the classification and measurement of
the company's financial assets and financial liabilities. The Company will
quantify the effect in conjunction with the other phases, when the final
standard including all phases is issued with an effective date.
3. Property, plant and equipment, net
Cost
----------------------------------------------------------------------------
At December 31, 2013 3,071,245
----------------------------------------------------------------------------
Additions 179,378
Decommissioning provision additions 5,648
Prepaid capital (8,795)
----------------------------------------------------------------------------
At March 31, 2014 3,247,476
----------------------------------------------------------------------------
Accumulated depletion and depreciation
----------------------------------------------------------------------------
At December 31, 2013 (611,714)
----------------------------------------------------------------------------
Depletion and depreciation (68,851)
----------------------------------------------------------------------------
At March 31, 2014 (680,565)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at December 31, 2013 2,459,531
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carrying amount at March 31, 2014 2,566,911
----------------------------------------------------------------------------
----------------------------------------------------------------------------
During the period ended March 31, 2014, Peyto capitalized $2.8 million (2013 -
$2.6 million) of general and administrative expense directly attributable to
production and development activities.
4. Long-term debt
----------------------------------------------------------------------------
March 31, 2014 December 31, 2013
----------------------------------------------------------------------------
Bank credit facility 490,000 605,000
Senior secured notes 270,000 270,000
----------------------------------------------------------------------------
Balance, end of the year 760,000 875,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at March 31, 2014, the Company had a syndicated $1 billion extendible
revolving credit facility with a stated term date of April 26, 2015. The bank
facility is made up of a $30 million working capital sub-tranche and a $970
million production line. The facilities are available on a revolving basis for a
two year period. Borrowings under the facility bear interest at Canadian bank
prime (3% at both December 31, 2013 and 2012) or US base rate, or, at Peyto's
option, Canadian dollar bankers' acceptances or US dollar LIBOR loan rates, plus
applicable margin and stamping fees. The total stamping fees range between 80
basis points and 225 basis points on Canadian bank prime and US base rate
borrowings and between 180 basis points and 325 basis points on Canadian dollar
bankers' acceptance and US dollar LIBOR borrowings. The undrawn portion of the
facility is subject to a standby fee in the range of 40.5 to 73.13 basis points.
On December 4, 2013, Peyto issued $120 million of senior unsecured notes
pursuant to a note purchase agreement. The notes were issued by way of private
placement and rank equally with Peyto's obligations under its bank facility. The
notes have a coupon rate of 4.50% and mature on December 4, 2020. Interest will
be paid semi-annually in arrears.
Peyto is subject to the following financial covenants as defined in the credit
facility and note purchase agreements:
-- Long-term debt plus the average working capital deficiency (surplus) at
the end of the two most recently completed fiscal quarters adjusted for
non-cash items not to exceed 3.0 times trailing twelve month net income
before non-cash items, interest and income taxes;
-- Long-term debt and subordinated debt plus the average working capital
deficiency (surplus) at the end of the two most recently completed
fiscal quarters adjusted for non-cash items not to exceed 4.0 times
trailing twelve month net income before non-cash items, interest and
income taxes;
-- Trailing twelve months net income before non-cash items, interest and
income taxes to exceed 3.0 times trailing twelve months interest
expense;
-- Long-term debt and subordinated debt plus the average working capital
deficiency (surplus) at the end of the two most recently completed
fiscal quarters adjusted for non-cash items not to exceed 55 per cent of
the book value of shareholders' equity and long-term debt and
subordinated debt.
Peyto is in compliance with all financial covenants at March 31, 2014.
Total interest expense for the period ended March 31, 2014 was $8.7 million
(2013 - $6.3 million) and the average borrowing rate for the period was 4.4%
(2013 - 4.0%).
Subsequent to March 31, 2014, Peyto's banking syndicate agreed to extend the
stated term date of the credit facility to April 26, 2017. Borrowings under the
amended facility bear interest at Canadian bank prime or US base rate, or, at
Peyto's option, Canadian dollar bankers' acceptances or US dollar LIBOR loan
rates, plus applicable margin and stamping fees. The total stamping fees range
between 50 basis points and 215 basis points on Canadian bank prime and US base
rate borrowings and between 150 basis points and 315 basis points on Canadian
dollar bankers' acceptance and US dollar LIBOR borrowings. The undrawn portion
of the facility is subject to a standby fee in the range of 30 to 63 basis
points.
5. Decommissioning provision
Peyto makes provision for the future cost of decommissioning wells, pipelines
and facilities on a discounted basis based on the commissioning of these assets.
The decommissioning provision represents the present value of the
decommissioning costs related to the above infrastructure, which are expected to
be incurred over the economic life of the assets. The provisions have been based
on Peyto's internal estimates of the cost of decommissioning, the discount rate,
the inflation rate and the economic life of the infrastructure. Assumptions,
based on the current economic environment, have been made which management
believes are a reasonable basis upon which to estimate the future liability.
These estimates are reviewed regularly to take into account any material changes
to the assumptions. However, actual decommissioning costs will ultimately depend
upon the future market prices for the necessary decommissioning work required
which will reflect market conditions at the relevant time. Furthermore, the
timing of the decommissioning is likely to depend on when production activities
ceases to be economically viable. This in turn will depend and be directly
related to the current and future commodity prices, which are inherently
uncertain.
The following table reconciles the change in decommissioning provision:
----------------------------------------------------------------------------
Balance, December 31, 2013 61,184
----------------------------------------------------------------------------
New or increased provisions 2,630
Accretion of decommissioning provision 498
Change in discount rate and estimates 3,018
----------------------------------------------------------------------------
Balance, March 31, 2014 67,330
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Current -
Non-current 67,330
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Peyto has estimated the net present value of its total decommissioning provision
to be $67.3 million as at March 31, 2014 ($61.2 million at December 31, 2013)
based on a total future undiscounted liability of $178.5 million ($177.8 million
at December 31, 2013). At March 31, 2014 management estimates that these
payments are expected to be made over the next 50 years with the majority of
payments being made in years 2040 to 2063. The Bank of Canada's long term bond
rate of 2.96 per cent (3.24 per cent at December 31, 2013) and an inflation rate
of two per cent (two per cent at December 31, 2013) were used to calculate the
present value of the decommissioning provision.
6. Share capital
Authorized: Unlimited number of voting common shares
Issued and Outstanding
Number of Common Amount
Common Shares (no par value) Shares $
----------------------------------------------------------------------------
Balance, December 31, 2012 148,518,713 1,124,382
----------------------------------------------------------------------------
Common shares issued by private placement 240,210 5,742
Common share issuance costs (net of tax) - (55)
----------------------------------------------------------------------------
Balance, December 31,2013 148,758,923 1,130,069
----------------------------------------------------------------------------
Common shares issued by private placement 211,885 6,997
Equity offering 4,720,000 160,480
Common share issuance costs, (net of tax) - (5,162)
----------------------------------------------------------------------------
Balance, March 31, 2014 153,690,808 1,292,384
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On December 31, 2012, Peyto completed a private placement of 154,550 common
shares to employees and consultants for net proceeds of $3.5 million ($22.38 per
share). These common shares were issued January 7, 2013.
On March 19, 2013, Peyto completed a private placement of 85,660 common shares
to employees and consultants for net proceeds of $2.2 million ($26.65 per
share).
On December 31, 2013, Peyto completed a private placement of 190,525 common
shares to employees and consultants for net proceeds of $6.2 million ($32.78 per
share). These common shares were issued January 8, 2014.
On February 5, 2014, Peyto closed an offering for 4,720,000 common shares at a
price of $34.00 per common share, receiving net proceeds of $153.6 million.
On March 17, 2014, Peyto completed a private placement of 21,360 common shares
to employees and consultants for net proceeds of $ 0.8 million ($35.20 per
common share).
Per share amounts
Earnings per share or unit have been calculated based upon the weighted average
number of common shares outstanding for the period ended March 31, 2014 of
151,826,431 (2013 - 148,672,664). There are no dilutive instruments outstanding.
Dividends
During the period ended March 31, 2014, Peyto declared and paid dividends of
$0.24 per common share or $0.08 per common share per month, totaling $36.5
million (2013 - $0.18 or $0.06 per common share per month, $26.8 million).
Comprehensive income
Comprehensive income consists of earnings and other comprehensive income
("OCI"). OCI comprises the change in the fair value of the effective portion of
the derivatives used as hedging items in a cash flow hedge. "Accumulated other
comprehensive income" is an equity category comprised of the cumulative amounts
of OCI.
Accumulated hedging gains and losses
Gains and losses from cash flow hedges are accumulated until settled. These
outstanding hedging contracts are recognized in earnings on settlement with
gains and losses being recognized as a component of net revenue. Further
information on these contracts is set out in Note 8.
7. Future performance based compensation
Peyto awards performance based compensation to employees annually. The
performance based compensation is comprised of reserve and market value based
components.
Reserve based component
The reserves value based component is 4% of the incremental increase in value,
if any, as adjusted to reflect changes in debt, equity, dividends, general and
administrative costs and interest, of proved producing reserves calculated using
a constant price at December 31 of the current year and a discount rate of 8%.
Market based component
Under the market based component, rights with a three year vesting period are
allocated to employees. The number of rights outstanding at any time is not to
exceed 6% of the total number of common shares outstanding. At December 31 of
each year, all vested rights are automatically cancelled and, if applicable,
paid out in cash. Compensation is calculated as the number of vested rights
multiplied by the total of the market appreciation (over the price at the date
of grant) and associated dividends of a common share for that period.
The fair values were calculated using a Black-Scholes valuation model. The
principal inputs to the option valuation model were:
March 31, 2014 March 31, 2013
----------------------------------------------------------------------------
Share price $22.58 - $37.72 $22.58 - $26.94
Exercise price $19.91 - $32.03 $19.30 - $22.58
Expected volatility 24% 25%
Option life 1 year 1 year
Dividend yield 0% 0%
Risk-free interest rate 1.07% 1.02%
----------------------------------------------------------------------------
8. Financial instruments and Capital management
Financial instrument classification and measurement
Financial instruments of the Company carried on the condensed balance sheet are
carried at amortized cost with the exception of cash and financial derivative
instruments, specifically fixed price contracts, which are carried at fair
value. There are no significant differences between the carrying amount of
financial instruments and their estimated fair values as at March 31, 2014.
The Company's areas of financial risk management and risks related to financial
instruments remained unchanged from December 31, 2013.
The fair value of the Company's cash and financial derivative instruments are
quoted in active markets. The Company classifies the fair value of these
transactions according to the following hierarchy.
-- Level 1 - quoted prices in active markets for identical financial
instruments.
-- Level 2 - quoted prices for similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are
not active; and model-derived valuations in which all significant inputs
and significant value drivers are observable in active markets.
-- Level 3 - valuations derived from valuation techniques in which one or
more significant inputs or significant value drivers are unobservable.
The Company's cash and financial derivative instruments have been assessed on
the fair value hierarchy described above and classified as Level 1.
Fair values of financial assets and liabilities
The Company's financial instruments include cash, accounts receivable, financial
derivative instruments, due from private placement, current liabilities,
provision for future performance based compensation and long term debt. At March
31, 2014, cash and financial derivative instruments are carried at fair value.
Accounts receivable, due from private placement, current liabilities and
provision for future performance based compensation approximate their fair value
due to their short term nature. The carrying value of the long term debt
approximates its fair value due to the floating rate of interest charged under
the credit facility.
Commodity price risk management
Peyto uses derivative instruments to reduce its exposure to fluctuations in
commodity prices. Peyto considers all of these transactions to be effective
economic hedges for accounting purposes.
Following is a summary of all risk management contracts in place as at March 31,
2014:
----------------------------------------------------------------------------
Propane Price
Period Hedged Type Monthly Volume (USD)
----------------------------------------------------------------------------
January 1, 2014 to December 31, 2014 Fixed Price 4,000 bbl $ 35.70/bbl
January 1, 2014 to December 31, 2014 Fixed Price 4,000 bbl $37.485/bbl
April 1, 2014 to September 30, 2014 Fixed Price 4,000 bbl $ 41.79/bbl
April 1, 2014 to September 30, 2014 Fixed Price 4,000 bbl $ 42.63/bbl
April 1, 2014 to September 30, 2014 Fixed Price 4,000 bbl $ 44.31/bbl
April 1, 2014 to September 30, 2014 Fixed Price 4,000 bbl $ 46.20/bbl
October 1, 2014 to December 31, 2014 Fixed Price 4,000 bbl $ 42.84/bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural Gas Price
Period Hedged Type Daily Volume (CAD)
----------------------------------------------------------------------------
November 1, 2012 to October 31, 2014 Fixed Price 5,000 GJ $ 3.0575/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.25/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.30/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.33/GJ
April 1, 2013 to October 31, 2014 Fixed Price 7,500 GJ $ 3.20/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.22/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.20/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.1925/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.25/GJ
April 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.30/GJ
November 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.50/GJ
November 1, 2013 to October 31, 2014 Fixed Price 5,000 GJ $ 3.53/GJ
November 1, 2013 to March 31, 2015 Fixed Price 5,000 GJ $ 3.6025/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.505/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.555/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.48/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.335/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.10/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.80/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.825/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.95/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 3.98/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 4.07/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 4.32/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 4.35/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 4.55/GJ
April 1, 2014 to October 31, 2014 Fixed Price 5,000 GJ $ 4.42/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.82/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.44/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.52/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.4725/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.525/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.60/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.27/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.41/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.5575/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.465/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.43/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.54/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.50/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.25/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.25/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.23/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.23/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.23/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.31/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.3525/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.40/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.49/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.54/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.61/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.70/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.75/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.81/GJ
April 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.83/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.81/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 3.95/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.05/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.12/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.20/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.44/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.585/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.78/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.60/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.58/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.68/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.285/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.30/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.35/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.40/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.47/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.48/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.52/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.70/GJ
April 1, 2015 to October 31, 2015 Fixed Price 5,000 GJ $ 3.75/GJ
----------------------------------------------------------------------------
As at March 31, 2014, Peyto had committed to the future sale of 204,000 barrels
of propane at an average price of $45.82 CAD ($41.45 USD) per barrel and
100,285,000 gigajoules (GJ) of natural gas at an average price of $3.58 per GJ
or $4.12 per mcf. Had these contracts been closed on March 31, 2014, Peyto would
have realized a loss in the amount of $82.0 million. If the AECO gas price on
March 31, 2014 were to increase by $1/GJ, the unrealized loss would increase by
approximately $100.3 million. An opposite change in commodity prices rates would
result in an opposite impact on other comprehensive income.
Subsequent to March 31, 2014 Peyto entered into the following contracts:
----------------------------------------------------------------------------
Natural Gas Price
Period Hedged Type Daily Volume (CAD)
----------------------------------------------------------------------------
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.68/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.80/GJ
November 1, 2014 to March 31, 2015 Fixed Price 5,000 GJ $ 4.87/GJ
April 1, 2015 to March 31, 2016 Fixed Price 5,000 GJ $ 3.9175/GJ
April 1, 2015 to March 31, 2016 Fixed Price 5,000 GJ $ 3.93/GJ
April 1, 2015 to March 31, 2016 Fixed Price 5,000 GJ $ 4.00/GJ
April 1, 2015 to March 31, 2016 Fixed Price 5,000 GJ $ 4.05/GJ
----------------------------------------------------------------------------
9. Commitments
Following is a summary of Peyto's contractual obligations and commitments as at
March 31, 2014.
2014 2015 2016 2017 2018 Thereafter
----------------------------------------------------------------------------
Note repayment(1) - - - - - 270,000
Interest payments(2) 8,815 12,230 12,230 12,230 12,230 22,755
Transportation commitments 13,580 19,531 18,796 14,975 11,261 13,356
Operating leases 2,126 2,380 1,863 1,654 1,295 10,356
----------------------------------------------------------------------------
Total 24,521 34,141 32,889 28,859 24,786 316,467
----------------------------------------------------------------------------
(1) Long-term debt repayment on senior secured notes
(2) Fixed interest payments on senior secured notes
10. Contingencies
On October 31, 2013, Peyto was named as a party to a statement of claim received
with respect to transactions between Poseidon Concepts Corp. and Open Range
Energy Corp. The allegations contained in the claim are based on factual matters
that pre-existed Peyto's involvement with New Open Range which makes them
difficult to assess at this time. However, Peyto intends to aggressively protect
its interests and the interests of its shareholders and will seek all available
legal remedies in defending the action. Management continues to assess the
nature of this claim, in conjunction with their legal advisors.
Officers
Darren Gee, President and Chief
Executive Officer Tim Louie, Vice President, Land
Scott Robinson, Executive Vice
President and Chief Operating David Thomas, Vice President,
Officer Exploration
Kathy Turgeon, Vice President, Jean-Paul Lachance, Vice President,
Finance and Chief Financial Officer Exploitation
Stephen Chetner, Corporate Secretary
Directors
Don Gray, Chairman
Stephen Chetner
Brian Davis
Michael MacBean, Lead Independent Director
Darren Gee
Gregory Fletcher
Scott Robinson
Auditors
Deloitte LLP
Solicitors
Burnet, Duckworth & Palmer LLP
Bankers
Bank of Montreal
Union Bank, Canada Branch
Royal Bank of Canada
Canadian Imperial Bank of Commerce
The Toronto-Dominion Bank
Bank of Nova Scotia
HSBC Bank Canada
Alberta Treasury Branches
Canadian Western Bank
Transfer Agent
Valiant Trust Company
Head Office
1500, 250 - 2nd Street SW
Calgary, AB
T2P 0C1
Phone: 403.261.6081
Fax: 403.451.4100
Web: http://www.peyto.com/
Stock Listing Symbol: PEY.TO
Toronto Stock Exchange
FOR FURTHER INFORMATION PLEASE CONTACT:
Peyto Energy Trust
Darren Gee
President and CEO
403.261.6081
403.451.4100 (FAX)
www.peyto.com
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