Palliser Oil & Gas Corporation Reports First Quarter 2013 Financial and Operating Results
| 16 May 2013 18:05 ET || |
/NOT FOR DISTRIBUTION IN THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
Palliser Oil & Gas Corporation ("Palliser" or the "Company") (TSXV: PXL) is pleased to announce financial and operating results for the three months ended March 31, 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 at www.sedar.com and the Company's website at www.palliserogc.com.
Operating & Financial Highlights - Three months ended March 31, 2013 and 2012 (unaudited)
Three months ended March 31 2013 2012 % ChangeOperatingWells drilled, re-entered orreactivated (gross and net)Oil 10 2 400%Salt water 1 0%disposal 1Total 11 3 267%Success (%) 100% 67% 49%Undeveloped land Greater 33,988 19,618Lloydminster (net acres) 73%Undeveloped land Medicine 29,042 -11%Hat (net acres) 25,850Total undeveloped land 48,660 23%(net acres) 59,838Average dailyproductionCrude oil (bbl per 2,166 1,743 24%day)Natural gas (Mcf 295 376 -22%per day)Barrels of oil equivalent 1,806 23%(boe per day, 6:1) 2,215Crude oil 98% 97% 1%production (%)Average salespricesCrude oil ($ $ 51.76 $ -27%per bbl) 70.93Natural gas ($ per 2.92 $ 2.15 36%Mcf) $Barrels of oil equivalent $ $ 68.94 -26%($ per boe, 6:1) 51.04Operating netback($ per boe)Petroleum and 51.04 $ 68.94 -26%natural gas sales $Realized gain (loss) on $ $ (2.31) -financial derivatives 6.13Royalties $ 11.48 $ 16.18 -29%Production, operating & $ 29.90 $ 26.52 13%transportation expensesOperating netback ( 15.79 $ 23.93 -34%(1)) $
00's except per share amounts)
Three months ended March 31 % 2013 2012 ChangeOil and naturalgas sales $ 10,175 $ 11,329 -10%Funds flow from operating activities ( (2)) $ 1,682 $ 2,701 -38%Per share -basic anddiluted $ 0.03 $ 0.05 -40%Income (loss)and comprehensive income (loss) $ (4,486) $ 600 -Per share -basic anddiluted $ (0.07) $ 0.01 -Weightedaverage shares outstanding 62,193,757 54,130,348 15%Sharesoutstanding 63,915,979 54,130,348 18%Capitalexpenditures(3) 8,724 $ 9,106 -4%Working capital(net debt) (4) (41,655) $ (27,269) 53%Shareholders'equity 43,993 $ 40,755 8%
((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.
First Quarter 2013 Highlights
-- Achieved production of 2,215 boe/d. Production increased 23% compared to the prior year; -- Executed an $8.7 million capital program. The capital program included 10 wells completed for heavy oil production with a 100% success rate, expansion of the Company's salt water disposal infrastructure, and three strategic property acquisitions; -- Increased undeveloped heavy oil land position. The Company's undeveloped heavy oil land position at March 31, 2013 was 33,988 net acres, a 4% increase from year end; -- 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 to 729 boe/d, or 34% of the Company's production.
The first quarter of 2013 was a very active quarter for Palliser, with capital expenditures totalling $8.7 million, representing 36% of the budgeted yearly capital program of $24 million. This 100% working interest capital program included 11 wells, which resulted in 10 heavy oil wells and one salt water disposal well, for a 100% success rate. These wells were all brought on production late in the quarter, and thus had no impact on first quarter production. The Company also expanded its net undeveloped heavy oil land holdings to 33,988 net acres and closed three strategic property acquisitions during the quarter.
As previously announced, first quarter 2013 production was below budget, largely due to offset drilling, which necessitated the temporary shut in of approximately 300 bbl/d. First quarter 2013 production averaged 2,215 boe/d (98% oil weighting) which represents a 23% increase over the first quarter of 2012. These lower production volumes, combined with unusually harsh winter operating conditions, resulted in production, operating and transportation expenses of $29.90 per barrel in the first quarter of 2013, which represents a 13% increase from the same quarter in 2012.
The first quarter of 2013 saw a dramatic widening of heavy oil differentials between West Texas Intermediate "WTI" and Western Canadian Select "WCS" pricing. This unusually wide differential resulted in a 26% reduction in net sales price from the first quarter of the previous year and a 38% reduction in funds flow from operating activities over the same time period. Operating netback was also reduced by 34% compared to the prior year comparative quarter.
The Company's net debt at quarter end was $41.7 million, relative to an existing total credit facility of $52.0 million, which was renewed in May 2013. The remaining $15.3 million capital program budgeted for 2013 will be financed through cash flow and existing credit facilities with year-end net debt budgeted to be approximately $39 million. The Company also closed an equity financing during the first quarter of 2013 with gross proceeds of $3.15 million.
The first quarter of 2013 presented several challenges to the Company, however, we are on track and well positioned to deliver continued strong results in 2013. Production continues to ramp up from the first quarter, with current production of approximately 2,600 boe/d based on field estimates. In anticipation of a harsh spring breakup, Palliser proactively increased the operating budget for snow removal, road enhancements, and well and facility maintenance. Although this resulted in increased operating expenditures during the first quarter, we are benefiting from this expenditure and are well positioned to see production continue to increase and operating costs decrease through the second quarter of 2013. As a result, we believe the Company is on track to achieve its 2013 production guidance of 2700 - 2800 boe/d. With production, operating and transportation costs expected to return to approximately $23/boe, the Company remains on track to be a sustainable low operating cost heavy oil producer.
The dramatic widening in heavy oil differentials, seen during the first quarter of 2013, have narrowed favorably with the second quarter differentials expected to return to more historic averages near the $20 per barrel level. Funds flow from operating activities in the second quarter continues to increase favorably due to improved current heavy oil pricing, growing production, and the return to lower production, operating, and transportation expenses. We believe this keeps us on track to achieve our 2013 budget: funds flow from operating activities of approximately $20 million, operating netbacks of $26/boe, and year-end net debt of $39 million.
To reduce funds flow risk from commodity price volatility, Palliser currently has approximately 33% of budgeted 2013 production volumes hedged at an average WTI CAD price of $100 per barrel and approximately 14% of budgeted volumes hedged at an average WCS price of $78 per barrel. This should provide the Company with greater certainty and funds flow support.
Palliser has continued to increase its shipment of oil by rail, and is currently shipping approximately 40% of total production to the Gulf Coast. The Company is realizing a significant price premium on volumes shipped by rail. By year end, we will have the ability to increase our rail shipments to in excess of 50% of production, if pricing conditions make it favourable to do so, with minimal incremental capital expenditure required.
Our original $24 million capital budget for 2013 assumed US$93.00 WTI per barrel and CAD$63.00 WCS per barrel pricing. Our internally driven capital program is to be funded by cash flow and credit facilities. As previously noted, the heavy oil differential has narrowed favourably, and WCS pricing for the second quarter is forecast to be higher than the budgeted $63.00 WCS per barrel. If heavy oil differentials continue to remain favourable, the Company will be well positioned with flexibility to deploy any excess funds flow to the most prudent use of funds.
Full article at Reuters.
PS. Accrding to a BNN analyst.....differentials should improve better for companies like PXL, he also mentioned a few other companies (not PXL).