CALGARY, ALBERTA--(Marketwire - May 2, 2012) - PetroBakken Energy Ltd. (the "Company" or "PetroBakken") (TSX:PBN) is pleased to announce our first quarter financial and operating results.
FINANCIAL & OPERATING HIGHLIGHTS
(In this press release, quarterly comparisons are first quarter 2012 compared to first quarter 2011 unless otherwise noted.)
- First quarter production, after dispositions, averaged 46,722 barrels of oil equivalent per day ("boepd") (86% light oil and liquids weighted), a 12% increase over the first quarter of 2011.
- Funds flow from operations was $185 million ($0.99 per basic share), a 7% increase over the first quarter of 2011.
- Our operating netback for the first quarter was $52.83/boe, similar to the first quarter of 2011.
- Capital expenditures before dispositions totaled $206 million in the first quarter, with 68 (47 net) wells being drilled.
- We completed four transactions to sell non-core assets in the first quarter resulting in total gross proceeds of $624 million.
- The amount drawn on our credit facility at the end of the first quarter was reduced to $218 million, with current available credit facility capacity rising to more than $1.1 billion.
Summary of Results
|Three months ended
|Oil and natural gas revenue||330,361||281,297|
|Funds flow from operations (1)||185,327||173,024|
|Per share - basic ($)||0.99||0.92|
|Adjusted Net income(1)||102,609||25,105|
|Per share - basic ($)||0.55||0.13|
|Net Capital Expenditures(1)||(410,086||)||306,197|
|Net debt (1)||1,311,060||1,190,268|
|Dividends per share ($)||0.24||0.24|
|Cash dividends per share ($)||0.14||0.24|
|Common Shares, end of period (000) (2)||187,895||187,193|
|Operating netback ($/boe) (1) (3) (4)||52.83||52.42|
|Average daily production (3) (boe)||46,722||41,562|
|(1)||Non-GAAP measure. See "Non-GAAP Measures" section.|
|(2)||Denotes basic common shares outstanding.|
|(3)||Six Mcf (thousand cubic feet) of natural gas is equivalent to one barrel of oil equivalent ("boe").|
|(4)||Net of transportation expenses.|
Operationally, we have carried forward the momentum from the last part of 2011 with a solid start to 2012. First quarter production increased 12% year-over-year to 46,722 boepd (net of dispositions) primarily due to the execution of our drilling program. This production average takes into account the disposition of our non-core Weyburn unit (580 boepd) and non-core Bakken assets (2,900 boepd). Because these dispositions were completed at the end of February and mid-March respectively, the production impact for the quarter was a net decrease of approximately 700 boepd. When combined with the 450 boepd of non-Cardium central Alberta gas production sold at the end of December 2011, our production for the first quarter of 2012, absent dispositions, would have been relatively flat to the record production level of 48,007 achieved in the fourth quarter of 2011.
|Average Daily Production|
|Three months ended March 31,|
|Business Unit||Oil &NGL (bbl/d||)||Gas (Mcf/d||)||Total (boe/d||)|
|Conventional (SE SK)||5,913||1,568||6,174|
|Cardium (central AB)||13,635||17,598||16,568|
Production expenses were higher in the first quarter of 2012 as compared to 2011, mainly due to trucking cost increases in the Cardium caused by facility constraints. These constraints are expected to be alleviated in the second and third quarters of 2012.
|Q1 2012 Drilling Activity|
|Conventional (SE SK)||12||7||10||5||7||4||9||4|
|Cardium (central AB)||24||17||43||35||18||13||22||14|
|(1)||Inventory refers to the number of wells pending completion and/or tie-in.|
Our capital program in the first quarter resulted in drilling 47 net wells and bringing 36 net wells on production. During the same period, we completed 65 net wells and had 24 wells in our inventory waiting to be brought on production at the end of the quarter. Subsequent to the end of the first quarter, we have brought an additional 5 net wells on to production, leaving us with an inventory of 19 net wells during spring break-up.
Bakken Business Unit Update
In southeast Saskatchewan, the Bakken business unit had an active quarter drilling 23 net wells and bringing 18 net wells on production, while averaging 20,735 boepd of production. We experienced a production decrease from the fourth quarter, primarily due to our non-core Bakken disposition of approximately 2,900 boepd and the moderation of field activity as spring break-up approached.
Cardium Business Unit Update
In Alberta, we continued to execute on our drilling program and grow production in the Cardium Business Unit, which averaged 16,568 boepd, an increase of 89% over the first quarter of 2011 and 7% over the fourth quarter of 2011. We were able to bring 13 net wells on production in the first quarter of 2012, leaving 14 net wells waiting to be completed and/or brought on production at the end of the quarter, which is consistent with our normal operating cycle.
The remainder of our production came from our southeast Saskatchewan Conventional business unit and our Alberta/BC business unit.
Our southeast Saskatchewan Conventional business unit continued to provide a light oil-rich production base. In the first quarter of 2012, we drilled 7 net wells in the area with 4 wells waiting to be brought on production after spring break-up. Production decreased 7% compared to the fourth quarter of 2011, primarily due to the disposition of our interest in the Weyburn unit which represented approximately 580 boepd. We anticipate that further additions to infrastructure in 2012 will continue to increase our productive capacity.
In our Alberta/BC business unit, we have assembled over 190 net sections in potential new oil resource plays targeting four zones: Nordegg, Montney, Duvernay and Swan Hills. We continued to evaluate our exploratory acreage in the first quarter and now estimate that we have over 125 drilling locations on these future development opportunities.
In northeast British Columbia, we continue to maintain our land position but, given current natural gas prices, we have no short term growth or development plans in this area.
Our production of 46,722 boepd and operating netback of $52.83/boe resulted in funds flow from operations of $185 million ($0.99 per basic share) for the first quarter, a 7% increase over the same period in 2011 due primarily to higher production and higher oil prices. While oil reference prices increased over the prior year, the impact was diminished by widening light oil differentials compared to WTI prices. The largest impact occurred in March and April, but our corporate differentials are now trending down toward the historical level of 5% off of WTI. Our adjusted net income for the first quarter was approximately $103 million ($0.55 per basic share), which exceeded previous quarters largely as a result of the gains generated by the asset dispositions. Capital expenditures have moderated compared to the first quarter of 2011, in line with our capital plan for the year.
We have maintained a monthly dividend of $0.08 per share since the Company's inception, resulting in total dividends of $46 million for the first quarter. The dividend represented 25% of funds flow from operations for the quarter, before participation in the Dividend Reinvestment Plan ("DRIP") is considered. DRIP participation in the first quarter averaged 43%, resulting in cash dividends of approximately $26 million in the quarter, or 14% of quarterly funds flow from operations. Current participation in the DRIP is approximately 63%.
Balance Sheet Management
Starting in late 2011 with the implementation of the DRIP program, we executed on a number of initiatives to increase our liquidity and capitalize on the value of our assets. On January 30, 2012, we completed a private placement of US$900 million of senior unsecured notes ("Notes"). The Notes have an interest rate of 8.625% per annum and mature on February 1, 2020. A portion of the proceeds were used to repurchase US$450 million of our convertible debentures at a price of US$99,000 per US$100,000 of principal amount, with the remaining proceeds, net of fees, applied against our credit facility. In conjunction with the Notes issuance, we exercised the accordion feature on our credit facility, which increased the borrowing limit by $150 million to $1.5 billion on January 31, 2012. On April 30, 2012, the credit facility was reduced to a limit of $1.4 billion to reflect the issuance of senior unsecured notes and the disposition of reserves during the first quarter of 2012.
In the first quarter of 2012, we also added a significant amount of liquidity to our balance sheet through the strategic disposition of four non-core assets, which generated $624 million in gross proceeds and resulted in a gain of $129 million. Monetizing these assets allowed us to maximize their current value and provides us with additional financial flexibility. The transactions completed in the first quarter were:
- The disposition of our non-core 2.2% working interest in the Weyburn unit for gross proceeds of $105 million, representing sales metrics of $25.85/boe (including proved plus probable ("2P") future development capital ("FDC") of $32 million) and $180,000/boepd;
- The disposition of non-core southeast Saskatchewan Bakken assets for gross proceeds of $427 million, representing sales metrics of $47.13/boe (including 2P FDC of $67 million) and $147,250/boepd;
- The sale of our mineral rights in Montana for $7.8 million; and
- The sale of a portion of our Duvernay mineral rights in central Alberta for $82.5 million.
As at March 31, 2012, PetroBakken had $218 million of debt drawn on our credit facility. We currently have more than $1.1 billion of available credit and a debt capital structure with diversified sources of credit and a layered maturity profile that compliments the long term nature of our light oil focused assets.
OUTLOOK & PREVIOUSLY ANNOUNCED REVISED CAPITAL PLAN
At the end of March we headed into spring break-up, which is a period of reduced activity in the Western Canadian Sedimentary Basin due to weather related conditions. Average monthly production in April, based on field estimates, was 40,500 boepd. Production in April decreased from March due to the full impact of dispositions being realized and the onset of spring break up. Early road bans have limited our lease access and ability to service wells resulting in additional shut-in production of over 2,300 boepd. We expect to have this shut-in production recovered once road bans are lifted.
The 2012 capital plan is focused on the continued exploitation of our southeast Saskatchewan Bakken and conventional Mississippian assets, the development of our Cardium light oil properties in central Alberta and the continued exploration and development of our Alberta properties to leverage our significant undeveloped land base into new resource opportunities. Our 2012 capital plan was updated as a result of the two asset dispositions and, as previously announced, we plan to use a portion of the sales proceeds to increase our capital program by $175 million to $875 million. The majority of the additional capital spending will be directed toward the Cardium play and we expect 2012 exit production rates of between 52,000 boepd and 56,000 boepd.
FIRST QUARTER FINANCIAL & OPERATING TABLES
The following table provides a summary of PetroBakken's financial and operating results for the three months ended March 31, 2012 and 2011. The interim consolidated financial statements with Management's Discussion and Analysis ("MD&A") are available on the Company's website at www.petrobakken.com and will be available on the SEDAR website at www.sedar.com.
|Three months ended March 31,|
|Financial ($000s, except where noted)|
|Oil and natural gas revenue||330,361||281,297||17|
|Funds flow from operations (1)||185,327||173,024||7|
|Per share - basic ($)||0.99||0.92||8|
|- diluted ($)(2)||0.95||0.86||10|
|Adjusted Net income(1)||102,609||25,105||309|
|Per share - basic ($)||0.55||0.13||323|
|- diluted ($)||0.54||0.13||315|
|Net Capital expenditures(1)||(410,086||)||306,197||-|
|Net debt (1)||1,311,060||1,190,268||10|
|Per share ($)||0.24||0.24||-|
|Per share ($)||0.14||0.24||(42||)|
|Payout ratio (%)(1)||25||26||(4||)|
|Cash payout ratio (%)(1)||14||26||(46||)|
|Common shares, end of period (000)|
|Oil, NGL and natural gas revenue (3)||77.36||74.46||4|
|Operating netback ($/boe) (1) (4)||52.83||52.42||1|
|Average daily production (4)|
|Oil and NGL (bbls)||40,336||36,140||12|
|Natural gas (Mcf)||38,320||32,534||18|
|(1)||Non-GAAP measure. See "Non-GAAP Measures" section.|
|(2)||Consists of common shares, stock options, deferred common shares, and incentive shares on the same basis as net income. Convertible debentures have been included as at the period end date based on the conversion price as of that date.|
|(3)||Net of transportation expenses.|
|(4)||Six Mcf (thousand cubic feet) of natural gas is equivalent to one barrel of oil equivalent ("boe").|
INVESTOR CONFERENCE CALL
Management of PetroBakken will be holding a conference call for investors, financial analysts, media and any interested persons on Thursday May 3, 2012 at 9:00 a.m. (MDT) (11:00 a.m. EDT) to discuss PetroBakken's first quarter financial and operating results.
The investor conference call details are as follows:
Live call dial-in numbers: 416-695-6616 / 800-355-4959
Replay dial-in numbers: 905-694-9451 / 800-408-3053
Replay pass code: 4733679
The live audio webcast link will be available at: http://events.digitalmedia.telus.com/petrobakken/050312/index.php
PetroBakken Energy Ltd. is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations, along with a significant inventory of opportunities in the Horn River and Montney gas resource plays in northeast BC. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.
Non-GAAP Measures. This press release contains financial terms that are not considered measures under IFRS, such as funds flow from operations, adjusted net income, funds flow per share, adjusted net income per share, payout ratio, net debt, total debt, operating netback and net capital expenditures. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Specifically, funds flow from operations reflects cash generated from operating activities before changes in non-cash working capital. Adjusted net income is determined by adding back any losses or deducting any gains on the derivative liabilities, adding back any losses or deducting any gains on settlement of convertible debentures, and adding back impairments. Payout ratio is determined as dividends paid as a percentage of funds flow from operations. Management considers funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, and payout ratio important as it helps evaluate performance and demonstrate the ability to generate sufficient cash to fund future growth opportunities, pay dividends and repay debt. Net debt includes bank debt outstanding plus accounts payable less accounts receivable and prepaid expenses plus the full value outstanding on the senior unsecured notes converted to Canadian dollars at the exchange rate on the period end date. Total debt includes net debt plus the full value outstanding on the convertible debentures converted to Canadian dollars at the exchange rate on the period end date. Net debt and total debt are used to evaluate PetroBakken's financial leverage. Profitability relative to commodity prices per unit of production is demonstrated by an operating netback. Operating netback reflects revenues less royalties, transportation costs, and production expenses divided by production for the period. Net capital expenditures represent capital expenditures, including exploration and evaluation expenditures, less proceeds from asset dispositions. Funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, payout ratio, net debt, total debt, operating netbacks, and net capital expenditures may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with IFRS. Further information in respect of these non-GAAP measures is set forth in our MD&A.
Forward Looking Statements. Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to financial results, results from operations, future production rates, proposed exploration and development activities, our drilling prospect inventory, projected costs, the timing of certain projects and our future debt levels and liquidity position. The forward-looking statements are based on certain key expectations and assumptions, including expectations and assumptions concerning the availability of capital, the success of future drilling, completion, recompletion and development activities, the performance of new and existing wells, prevailing commodity prices and economic conditions, the availability of labour and services, weather and access to drilling locations and the geological nature of the formations targeted. Although we believe that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because we can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, reliance on industry partners, availability of equipment and personnel, uncertainty surrounding timing for drilling and completion activities resulting from weather and other factors, changes in applicable regulatory regimes and health, safety and environmental risks), commodity price and exchange rate fluctuations and general economic conditions. Certain of these risks are set out in more detail in our Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com. Except as may be required by applicable securities laws, PetroBakken assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.
Natural gas volumes have been converted to barrels of oil equivalent ("boe"). Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil equivalent based on an energy equivalency conversion method primarily attributable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.
John D. Wright
President and Chief Executive Officer
PetroBakken Energy Ltd.
Peter D. Scott
Senior Vice President and Chief Financial Officer
PetroBakken Energy Ltd.
Bill A. Kanters
Vice President Capital Markets