Palliser Oil & Gas Corporation Reports Third Quarter 2013 Results
/NOT FOR DISTRIBUTION IN THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, Nov. 14, 2013 /CNW/ - Palliser Oil & Gas Corporation ("Palliser" or the "Company") (TSX VENTURE:PXL) is pleased to announce financial and operating results for the three and nine months ended September 30, 2013. Certain selected financial and operational information is set out below and should be read in conjunction with Palliser's unaudited condensed financial statements complete with the notes to the financial statements and related MD&A which will be available on SEDAR at www.sedar.com and will also be posted on the Company's website at www.palliserogc.com on November 14, 2013.
Operating & Financial Highlights - Three and Nine Months Ended September 30, 2013 and 2012 (unaudited)
| Three months ended September 30 |
Nine months ended September 30 |
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| Operating | 2013 | 2012 | % Change | 2013 | 2012 | % Change | ||||||
| Wells drilled, re-entered or reactivated (gross and net) | ||||||||||||
| Oil | 3 | 6 | -50% | 15 | 12 | 25% | ||||||
| Salt water disposal | 1 | 1 | 0% | 2 | 3 | -33% | ||||||
| Total | 4 | 7 | -43% | 17 | 15 | 13% | ||||||
| Success (%) | 100% | 100% | 0% | 100% | 93% | 8% | ||||||
| Undeveloped land Greater Lloydminster (net acres) | 36,007 | 29,760 | 21% | 36,007 | 29,760 | 21% | ||||||
| Undeveloped land Medicine Hat (net acres) | 12,885 | 33,522 | -62% | 12,885 | 33,522 | -62% | ||||||
| Total undeveloped land (net acres) | 48,892 | 63,282 | -23% | 48,892 | 63,282 | -23% | ||||||
| Average daily production | ||||||||||||
| Crude oil (bbl per day) | 2,302 | 2,185 | 5% | 2,400 | 1,936 | 24% | ||||||
| Natural gas (Mcf per day) | 219 | 344 | -36% | 257 | 370 | -31% | ||||||
| Barrels of oil equivalent (boe per day, 6:1) | 2,339 | 2,242 | 4% | 2,443 | 1,998 | 22% | ||||||
| Crude oil production (%) | 98% | 97% | 1% | 98% | 97% | 1% | ||||||
| Average sales prices | ||||||||||||
| Crude oil ($ per bbl) | $ | 86.98 | $ | 61.43 | 42% | $ | 69.80 | $ | 64.02 | 9% | ||
| Natural gas ($ per Mcf) | $ | 2.54 | $ | 2.16 | 18% | $ | 2.97 | $ | 2.03 | 46% | ||
| Barrels of oil equivalent ($ per boe, 6:1) | $ | 85.85 | $ | 60.19 | 43% | $ | 68.90 | $ | 62.43 | 10% | ||
| Operating netback ($ per boe) | ||||||||||||
| Petroleum and natural gas sales | $ | 85.85 | $ | 60.19 | 43% | $ | 68.90 | $ | 62.43 | 10% | ||
| Realized gain (loss) on financial derivatives | $ | (11.34) | $ | 7.92 | -243% | $ | (0.99) | $ | 3.43 | -129% | ||
| Royalties | $ | 22.13 | $ | 15.32 | 44% | $ | 16.96 | $ | 14.73 | 15% | ||
| Production, operating & transportation expenses | $ | 26.59 | $ | 21.45 | 24% | $ | 26.20 | $ | 23.07 | 14% | ||
| Operating netback (1) | $ | 25.79 | $ | 31.34 | -18% | $ | 24.75 | $ | 28.06 | -12% | ||
| Financial ($000's except per share amounts) | ||||||||||||||
| Three months ended September 30 |
Nine months ended September 30 |
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| 2013 | 2012 | % Change | 2013 | 2012 | % Change | |||||||||
| Oil and natural gas sales | $ | 18,473 | $ | 12,417 | 49% | 45,942 | $ | 34,174 | 34% | |||||
| Funds flow from | ||||||||||||||
| operating activities (2) | $ | 4,090 | $ | 5,101 | -20% | $ | 11,876 | $ | 11,468 | 4% | ||||
| Per share - basic and diluted | $ | 0.06 | $ | 0.09 | -33% | $ | 0.19 | $ | 0.21 | -10% | ||||
| Net income (loss) and | ||||||||||||||
| comprehensive income (loss) | $ | (1,443) | $ | (3,087) | -53% | $ | (6,541) | $ | 2,052 | -419% | ||||
| Per share - basic and diluted | $ | (0.02) | $ | (0.06) | -67% | $ | (0.10) | $ | 0.04 | -350% | ||||
| Weighted average | ||||||||||||||
| shares outstanding | 63,915,979 | 54,708,261 | 17% | 63,348,213 | 54,324,392 | 17% | ||||||||
| Shares outstanding | 63,915,979 | 57,453,348 | 11% | 63,915,979 | 57,453,348 | 11% | ||||||||
| Capital expenditures (3) | $ | 6,132 | $ | 12,873 | -52% | $ | 18,842 | $ | 28,470 | -34% | ||||
| Working capital (net debt) (4) | $ | (41,581) | $ | (35,884) | 16% | $ | (41,581) | $ | (35,884) | 16% | ||||
| Shareholders' equity | $ | 42,319 | $ | 44,945 | -6% | $ | 42,319 | $ | 44,945 | -6% | ||||
| (1) | Operating netback is a non-GAAP measure and is the net of petroleum and natural gas sales, realized gain or loss on financial derivatives, royalties and production, operating and transportation expenses. |
| (2) | Funds flow from operating activities is a non-GAAP measure that represents cash flow from operations less decommissioning expenditures and changes in non-cash working capital related to operating activities. Funds flow per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net income per share. Funds flow from operating activities is a key measure as it demonstrates the Company's ability to generate the funds necessary to achieve future growth through capital investment. |
| (3) | Capital expenditures exclude decommissioning liability costs and capitalized share-based compensation. |
| (4) | Working capital (net debt) is a non-GAAP measure representing the total bank loan, accounts payable and accrued liabilities, less accounts receivable, deposits and prepaid expenses. |
Management believes these are useful supplemental measures of, firstly, the total net position of current assets and current liabilities of the Company and secondly, the profitability relative to commodity prices. Other entities may calculate these figures differently than Palliser.
Third Quarter 2013 Highlights
- Achieved production of 2,339 boe per day. Production rose 4% compared to the third quarter of 2012;
- Achieved production, operating, and transportation expenses of $26.59 per boe. Production, operating and transportation expenses increased 24% compared to the third quarter of 2012;
- Achieved operating netback of $25.79 per boe. Operating netbacks decreased 18% compared to the third quarter of 2012;
- Recorded funds flow from operating activities of $4.1 million, or $0.06 per share in the third quarter. Funds flow from operating activities decreased 20% compared to $5.1 million in the third quarter of 2012;
- Executed a $6.1 million capital program in the third quarter. The third quarter capital program included three wells completed for heavy oil production with a 100% success rate;
- Increased undeveloped heavy oil land position. The Company's undeveloped heavy oil land position at September 30, 2013 was 36,007 net acres, a 3% increase from June 30, 2013;
- Maintained a significant prospect inventory. The Company's prospect inventory stands at 140 locations, none of which are included in the 2012 independent reserves report; and
- Increased rail shipments to improve operating netbacks. Palliser increased rail shipments in the third quarter to 1,112 barrels per day, or 48% of total sales volumes for the quarter.
Operations
The third quarter of 2013 saw capital expenditures totalling $6.1 million, representing 25% of the budgeted yearly capital program of $24 million. This 100% working interest capital program included one new drill, one re-entry and one heavy oil reactivation. The Company also drilled a salt water disposal well and expanded its salt water disposal infrastructure during the quarter. Year to date, capital expenditures of $18.8 million include 15 wells completed for heavy oil production with a 100% success rate. The Company also increased its net undeveloped heavy oil land holdings to 36,007 net acres as at September 30, 2013.
As anticipated and previously announced, the third quarter of 2013 saw lower average production compared to the record production achieved in the second quarter of 2013. A prolonged spring breakup, which continued well into the third quarter contributed to significant downtime on several wells and delayed budgeted capital projects until late in the quarter. As a result, production declines outpaced additions.
Palliser continues to expand crude shipments by rail. The Company completed construction of a clean oil treating facility in the third quarter, which is estimated to increase capacity to ship crude by rail to 75% of total volumes, up from the previous capacity of approximately 50%.
Production, operating and transportation expenses in the third quarter were $26.59 per barrel, which represents a 24% increase from the third quarter of 2012 and a 16% increase from the second quarter of 2013. The transportation component increased from $1.21 per boe in the third quarter of 2012 to $2.10 per boe in the third quarter of 2013 as the Company intentionally incurred additional trucking costs to deliver oil to more lucrative rail contracts, which provide significantly higher netbacks. Production, operating and transportation costs for the nine month period ended September 30, 2013 were $26.20 per boe. The Company remains focused on being a sustainable low operating cost heavy oil producer.
Financial
The third quarter of 2013 saw a significant increase in West Texas Intermediate ("WTI") crude oil pricing, which averaged $106 per barrel. Palliser's realized crude oil sales price increased by 42% from $61 per barrel in the third quarter of 2012 to $87 per barrel in the third quarter of 2013. Palliser had a significant portion of volumes hedged in the current quarter at WTI CAD pricing of $96 per barrel. As a result, the Company realized hedging losses in the quarter that offset a portion of the increase in the realized crude oil sales price. Operating netbacks in the third quarter were $25.79 per boe which is an 18% reduction from the prior year comparative quarter. Funds flow from operating activities for the quarter amounted to $4.1 million, or $0.06 per share, compared to $5.1 million, or $0.09 per share in the third quarter last year.
The Company's net debt at the end of the third quarter was $42 million, relative to a current total credit facility of $52 million. A reduction of funds flow in the third quarter compared to the second quarter, resulted in a third quarter debt to annualized funds flow from operating activities ratio of 2.5 times, compared to 1.6 times in the second quarter. The remaining $6 million capital program budgeted for 2013 will be financed through funds flow from operating activities and existing credit facilities with year-end net debt forecast to be approximately $44 million.
Outlook
The majority of third quarter capital projects were delayed until late in the third quarter and early fourth quarter. As a result, production additions from these wells will not be seen until the fourth quarter. In addition, the Company experienced water breakthrough in a number of CHOPS wells in the Manitou area, resulting in a loss of approximately 250 barrels per day of oil production. The Company has been installing a new salt water disposal facility and pipelines, and anticipates that the new facility will be operational by the end of November. This new salt water disposal infrastructure will allow the affected wells to be optimized using high volume lift.
The fourth quarter capital program has been very busy thus far with approximately $5 million spent, leaving approximately $1 million of the 2013 capital budget remaining to be spent. Production additions from the third and fourth quarter capital program are anticipated to result in production gains through the remainder of the year.
Based on field estimates, October production averaged approximately 2,200 boe per day, and the Company is forecasting fourth quarter production to average between 2,400 - 2,450 boe per day. Similarly, 2013 annual production is now forecast to average between 2,400 - 2,450 boe per day, approximately 100 boe per day lower than previously forecast.
To reduce funds flow risk from commodity price volatility, Palliser has significant crude oil volumes hedged. The Company currently has approximately 64% of forecasted fourth quarter 2013 production volumes hedged at an average WTI CAD price of approximately $96 per barrel and approximately 14% of fourth quarter 2013 volumes hedged at an average Western Canada Select (WCS) price of approximately $72 per barrel. The Company also has significant volumes hedged at WTI CAD fixed price swaps for calendar 2014.
Palliser is currently shipping approximately 60% of its oil production by rail to the Gulf Coast. The Company is realizing a significant price premium on volumes shipped by rail. The Company will look to continue to increase its oil shipments by rail in light of the currently wide heavy oil differentials.
Management Changes
The Company announces the departure of Mr. Brett Frostad, Vice President Exploration. Mr. Frostad is leaving Palliser to pursue other opportunities. Palliser would like to thank Brett for his contributions to the Company. Palliser also announces the appointment of Mr. Lamont Brooks as Exploration Manager. Mr. Brooks has been a long standing employee with the Company, most recently as Senior Explorationist.
On behalf of the Board of Directors,
"Signed"
Kevin J. Gibson
Chief Executive Officer
"Signed"
Allan B. Carswell
President and Chief Operating Officer
November 14, 2013
Calgary, Alberta
For further information regarding Palliser Oil & Gas Corporation, the reader is invited to visit the Company's website at www.palliserogc.com.
Palliser is a Calgary-based emerging junior oil and gas company currently focused on high netback heavy oil production in the greater Lloydminster area of both Alberta and Saskatchewan.
Advisory Regarding Forward-Looking Statements
Certain statements contained herein constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation, including, but not limited to management's assessment of future plans and operations, including: commodity focus; drilling plans and potential locations; expected production levels; expected transportation methods; development and acquisition plans; reserves growth; production and operating sales and expenses; reservoir characteristics; the results of applying certain operational development techniques; certain economic factors; and capital expenditures. In addition, statements relating to oil and gas reserves and resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves or resources described, as the case may be, exist in the quantities predicted or estimated and can be profitably produced in the future. With respect to forward-looking statements herein, Palliser has made assumptions regarding, among other things; future capital expenditure levels; future oil and natural gas prices; "differentials" between West Texas Intermediate and Western Canada Select benchmark pricing; future oil and natural gas production levels; future water disposal capacity; future exchange rates and interest rates; ability to obtain equipment and services in a timely manner to carry out development activities; ability to market oil and natural gas successfully to current and new customers; the ability to ship volumes by rail; the impact of increasing competition; the ability to obtain financing on acceptable terms; and the ability to add production and reserves through development and exploitation activities.
Although Palliser believes that the expectations reflected in the forward-looking statements contained herein, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included herein, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous risks and uncertainties that contribute to the possibility that the forward-looking statements will not occur, which may cause Palliser's actual performance and financial results in future periods to differ materially from any estimates or projections. Additional information on these and other factors that could affect Palliser's results are included in reports on file with Canadian securities regulatory authorities, including the Company's Annual Information Form, and may be accessed through the SEDAR website at www.sedar.com.
The forward-looking statements contained herein speak only as of the date hereof. Except as expressly required by applicable securities laws, Palliser does not undertake any obligation to, nor does it intend to, publicly update or revise any forward-looking statements. The forward-looking statements contained herein are expressly qualified by this cautionary statement. In addition, readers are cautioned that historical results are not necessarily indicative of future performance.
Barrels of Oil Equivalent Conversions
Production volumes are commonly expressed on a barrel of equivalent (boe) basis whereby natural gas volumes are converted at a ratio of six thousand cubic feet to one barrel of oil. The intention is to convert oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. The term boe may be misleading, particularly if used in isolation. The conversion ratio is based on an energy equivalent method and does not represent an economic value equivalency at the wellhead.
Non-GAAP Measurements
The Company evaluates its performance using several criteria, including funds flow from operating activities and funds flow from operating activities per share. Funds flow from operating activities is a non-GAAP measure that represents cash flow from operating activities less decommissioning expenditures and changes in non-cash working capital related to operating activities. Funds flow per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net income per share. Funds flow from operating activities is a key measure as it demonstrates the Company's ability to generate the funds necessary to achieve future growth through capital investment.
The Company also assesses its performance utilizing operating netback. Operating netback represents the profit margin associated with the production and sale of petroleum and natural gas, and is calculated as petroleum and natural gas revenue, less realized gain or loss on financial derivatives, royalties and production, operating and transportation expenses, on a barrel of oil equivalent basis.
Working capital (net debt) is a non-GAAP measure representing the total bank loan, accounts payable and accrued liabilities, less accounts receivable, deposits and prepaid expenses.
These non-GAAP measures are not standardized and therefore may not be comparable to similar measures utilized by other entities.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this Press release.
SOURCE: Palliser Oil & Gas Corporation
Kevin J. Gibson
CEO
[email protected]
(403) 209-5717
or
Allan B. Carswell
President and COO
[email protected]
(403) 209-5709
or
Ivan J. Condic
Vice President, Finance and CFO
[email protected]
(403) 209-5718
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