PXL 10 cents cash flow for the quarter. So roughly 1.5x annualized. Pulled back on the news. These are strong results.
Palliser Oil & Gas Corporation reports second quarter 2013 results, record funds flow from operating activities /NOT FOR DISTRIBUTION IN THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, Aug. 21, 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 six months ended June 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 at www.sedar.com and the Company's website at www.palliserogc.com.
Operating & Financial Highlights - Three and Six Months Ended June 30, 2013 and 2012 (unaudited)
| | | | | | | | | | | | Three months ended | | | Six months ended | | | | | June 30 | | | June 30 | | | | | 2013 | | 2012 | % Change | | | 2013 | | 2012 | % Change | | Operating | | | | | | | | | | | | | | Wells drilled, re-entered or reactivated (gross and net) | | | | | | | | | | | | | | Oil | | | 2 | | 4 | -50% | | | 12 | | 6 | 100% | | Salt water disposal | | | - | | 1 | -100% | | | 1 | | 2 | -50% | | Total | | | 2 | | 5 | -60% | | | 13 | | 8 | 63% | | Success (%) | | | 100% | | 100% | 0% | | | 100% | | 88% | 14% | | Undeveloped land Greater Lloydminster (net acres) | | | 34,922 | | 23,617 | 48% | | | 34,922 | | 23,617 | 48% | | Undeveloped land Medicine Hat (net acres) | | | 24,410 | | 29,042 | -16% | | | 24,410 | | 29,042 | -16% | | Total undeveloped land (net acres) | | | 59,332 | | 52,659 | 13% | | | 59,332 | | 52,659 | 13% | | Average daily production | | | | | | | | | | | | | | Crude oil (bbl per day) | | | 2,730 | | 1,877 | 45% | | | 2,449 | | 1,810 | 35% | | Natural gas (Mcf per day) | | | 257 | | 390 | -34% | | | 276 | | 383 | -28% | | Barrels of oil equivalent (boe per day, 6:1) | | | 2,773 | | 1,942 | 43% | | | 2,495 | | 1,874 | 33% | | Crude oil production (%) | | | 98% | | 97% | 1% | | | 98% | | 97% | 1% | | Average sales prices | | | | | | | | | | | | | | Crude oil ($ per bbl) | | $ | 69.30 | $ | 60.67 | 14% | | $ | 61.59 | $ | 65.50 | -6% | | Natural gas ($ per Mcf) | | $ | 3.43 | $ | 1.80 | 91% | | $ | 3.16 | $ | 1.97 | 60% | | Barrels of oil equivalent ($ per boe, 6:1) | | $ | 68.54 | $ | 59.00 | 16% | | $ | 60.82 | $ | 63.79 | -5% | | Operating netback ($ per boe) | | | | | | | | | | | | | | Petroleum and natural gas sales | | $ | 68.54 | $ | 59.00 | 16% | | $ | 60.82 | $ | 63.79 | -5% | | Realized gain (loss) on financial derivatives | | $ | 2.20 | $ | 3.53 | -38% | | $ | 3.93 | $ | 0.72 | 446% | | Royalties | | $ | 16.88 | $ | 12.69 | 33% | | $ | 14.50 | $ | 14.37 | 1% | | Production, operating & transportation expenses | | $ | 22.95 | $ | 21.75 | 6% | | $ | 26.02 | $ | 24.05 | 8% | | Operating netback (1) | | $ | 30.91 | $ | 28.09 | 10% | | $ | 24.23 | $ | 26.09 | -7% |
Financial ($000's except per share amounts)
| | | | | | | | | | | | | | | | | Three months ended | | Six months ended | | | | June 30 | | June 30 | | | | | 2013 | | 2012 | % Change | | | 2013 | | 2012 | % Change | | | | | | | | | | | | | | | | Oil and natural gas sales | | $ | 17,294 | $ | 10,428 | 66% | | $ | 27,470 | $ | 21,756 | 26% | | | | | | | | | | | | | | | | Funds flow from | | | | | | | | | | | | | | | operating activities (2) | | $ | 6,103 | $ | 3,666 | 66% | | $ | 7,785 | $ | 6,366 | 22% | | Per share - basic and diluted | | $ | 0.10 | $ | 0.07 | 43% | | $ | 0.12 | $ | 0.12 | 0% | | | | | | | | | | | | | | | | Net income (loss) and | | | | | | | | | | | | | | | comprehensive income (loss) | | $ | (610) | $ | 4,538 | - | | $ | (5,097) | $ | 5,139 | - | | Per share - basic and diluted | | $ | (0.01) | $ | 0.08 | - | | $ | (0.08) | $ | 0.09 | - | | | | | | | | | | | | | | | | Weighted average | | | | | | | | | | | | | | | shares outstanding | | | 63,915,979 | | 54,130,348 | 18% | | | 63,059,625 | | 54,130,348 | 16% | | Shares outstanding | | | 63,915,979 | | 54,130,348 | 18% | | | 63,915,979 | | 54,130,348 | 18% | | | | | | | | | | | | | | | | Capital expenditures (3) | | $ | 3,987 | $ | 6,491 | -39% | | $ | 12,711 | $ | 15,597 | -19% | | Working capital (net debt) (4) | | $ | (39,539) | $ | (30,098) | 31% | | $ | (39,539) | $ | (30,098) | 31% | | Shareholders' equity | | $ | 43,602 | $ | 45,698 | -5% | | $ | 43,602 | $ | 45,698 | -5% |
| (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.
Second Quarter 2013 Highlights
- Achieved record production of 2,773 boe/d. Production increased 25% compared to the first quarter of 2013 and increased 43% compared to the second quarter of 2012;
- Achieved production, operating, and transportation expenses of $22.95 per boe. Production, operating and transportation expenses decreased 23% compared to the first quarter of 2013 and increased 6% compared to the prior year comparative quarter. The Company remains focused on being a low operating cost producer;
- Achieved operating netback of $30.91 per boe. Operating netbacks improved 96% compared to the first quarter of 2013 and 10% compared to the second quarter of 2012;
- Record funds flow from operating activities of $6.1 million, or $0.10 per share in the second quarter. Funds flow from operating activities increased 263% compared to $1.7 million in the first quarter of 2013 and increased 66% compared to $3.7 million in the second quarter of 2012;
- Executed a $4.0 million capital program in the second quarter. The capital program included two wells completed for heavy oil production with a 100% success rate. Year to date capital expenditures of $12.7 million include 12 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 June 30, 2013 was 34,922 net acres, a 3% increase from March 31, 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 second quarter to 1,101 boe/d, or 40% of the Company's production.
Operations
The second quarter of 2013 was a relatively quiet quarter for Palliser with capital expenditures totalling $4.0 million, representing 17% of the budgeted yearly capital program of $24 million. Activity levels were lower than the first quarter primarily due to spring breakup conditions. This 100% working interest capital program included reactivating two heavy oil wells, as well as upgrades and expansions to salt water disposal "SWD" facilities at Edam, Lloydminster and Manitou. The Company also expanded its net undeveloped heavy oil land holdings to 34,922 net acres as at June 30, 2013.
Second quarter production exceeded budgeted levels due primarily to production from 10 new wells drilled during the first quarter but not brought on stream until late in that quarter. These higher production volumes resulted in production, operating and transportation expenses of $22.95 per barrel in the second quarter of 2013, which represents a 23% reduction from the first quarter of 2013 and a 6% increase from the second quarter of 2012. The transportation component increased from $1.01 in the second quarter of 2012 to $2.01 per boe in the second quarter of 2013 as the Company intentionally incurred additional trucking costs to deliver oil to more lucrative rail contracts, which provide significantly higher netbacks per boe.
Financial
Differentials improved dramatically in the second quarter of 2013, with a narrowing of heavy oil differentials between West Texas Intermediate "WTI" and Western Canadian Select "WCS" pricing relative to the first quarter. This resulted in a 34% increase in net sales price from the first quarter of 2013 and a 16% increase in net sales price from the second quarter of the previous year. Operating netbacks were $30.91 per boe which is a 96% increase over the first quarter of 2013 and 10% higher than the second quarter of 2012.
The Company's net debt at the end of the second quarter was $39.5 million, relative to a current total credit facility of $52 million. The significant improvement in funds flow in the second quarter, relative to the first quarter, resulted in a second quarter debt to annualized funds flow ratio of 1.6 times. The remaining $11.3 million capital program budgeted for 2013 will be financed through funds flow and existing credit facilities with year-end net debt budgeted to be approximately $39 million.
Outlook
The second quarter of 2013 represented a strong quarter for Palliser, on the heels of an active first quarter capital program. Production ramped up through the second quarter from ten new wells brought on stream late in the first quarter. A prolonged spring breakup along with wet weather late in the second quarter, which extended into the third quarter, caused some production downtime in the field and the delay of numerous capital projects further into the third quarter. As a result, current production levels are approximately 2,500 boe/d, based on field estimates.
The third quarter drilling program commenced in August with two new heavy oil wells and one salt water disposal well for a 100% success rate to date. Production additions from the ongoing capital program, as well as improved run time on existing production with improved weather conditions, should result in production growth through the remainder of the third and fourth quarters.
With approximately 40% of budgeted capital expenditures remaining to be spent, the Company is on track to achieve its 2013 production guidance of 2,700 - 2,800 boe/d. Production, operating and transportation costs returned to the $23 per boe level in the second quarter and the Company remains on track to be a sustainable low operating cost heavy oil producer.
Heavy oil differentials, narrowed favorably during the second quarter, returning to more historic averages at or below the $20 per barrel level. Funds flow from operating activities in the second quarter exceeded $6 million due to improved heavy oil pricing, growing production, and a return to lower operating expenses. Palliser is on track to achieve its 2013 budget: funds flow from operating activities of approximately $20 million, operating netbacks of $26 per boe, and year-end net debt of $39 million.
To reduce funds flow risk from commodity price volatility, Palliser has recently added to its hedge positions. The Company currently has approximately 40% of budgeted second half 2013 production volumes hedged at an average WTI CAD price of approximately $96 per barrel and approximately 20% of budgeted second half 2013 volumes hedged at an average WCS price of approximately $75 per barrel. The Company has also entered into WTI CAD fixed price swaps for calendar 2014. This should provide the Company with greater price certainty and funds flow support.
Palliser is currently shipping approximately 45% of its oil production by rail 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 market conditions are favourable, with minimal incremental capital expenditure required.
Our original $24 million capital budget for 2013 assumed US$93 WTI per barrel and CAD$63 WCS per barrel pricing. Our internally driven capital program is to be funded by cash flow and credit facilities. With pricing in the second half of the year forecast to be higher than budgeted, the Company will be well positioned with flexibility to deploy any excess funds flow to the most prudent use of funds.
On behalf of the Board of Directors,
"Signed"
Kevin J. Gibson
Chief Executive Officer
"Signed"
Allan B. Carswell
President and Chief Operating Officer
August 21, 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. |
