Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) is pleased to announce our operating and financial results for the three months and year ended December 31, 2019. PPR’s audited consolidated financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three months and year ended December 31, 2019 and annual information form dated March 26, 2020 (“AIF”) are available on our website at www.ppr.ca and filed on SEDAR.
Prairie Provident continued to successfully execute our strategic plan throughout the year, delivering strong operational performance and responsibly maintaining stable production volumes while generating positive adjusted funds flow1 and solid operating netbacks1 despite continued uncertain market conditions.
2019 HIGHLIGHTS
1 Non-IFRS measure – see below under “Non-IFRS Measures”
2 2019 average production is comprised of 3,716 bbl/d of light/medium oil, 251 bbl/d of heavy oil, 11,506 Mcf/d of conventional natural gas, 128 Mcf/d of coal bed methane and 166 bbl/d of natural gas liquids. Q4 2019 average production included 3,436 bbl/d of light/medium oil, 278 bbl/d of heavy oil, 11,049 Mcf/d of conventional natural gas, 120 Mcf/d of coal bed methane and 149 bbl/d of natural gas liquids.
1 Non-IFRS measure – see below under “Non-IFRS Measures”
2 For additional details, please refer to the Company’s news release dated February 3, 2020, available at www.ppr.ca (filed on SEDAR and available under PPR’s issuer profile at www.sedar.com).
FINANCIAL AND OPERATING SUMMARY
Three Months Ended December 31, | Year Ended December 31, | |||||||||||
($000s except per unit amounts) | 2019 | 2018 | 2019 | 2018 | ||||||||
Production Volumes | ||||||||||||
Crude oil (bbls/d) | 3,715 | 4,042 | 3,966 | 3,676 | ||||||||
Natural gas (Mcf/d) | 11,169 | 10,523 | 11,635 | 9,426 | ||||||||
Natural gas liquids (bbls/d) | 149 | 141 | 166 | 125 | ||||||||
Total (boe/d) | 5,725 | 5,937 | 6,071 | 5,372 | ||||||||
% Liquids | 67 | % | 70 | % | 68 | % | 71 | % | ||||
Average Realized Prices | ||||||||||||
Crude oil ($/bbl) | 59.62 | 30.47 | 61.30 | 57.47 | ||||||||
Natural gas ($/Mcf) | 2.21 | 1.74 | 1.72 | 1.59 | ||||||||
Natural gas liquids ($/bbl) | 31.08 | 40.70 | 30.48 | 49.38 | ||||||||
Total ($/boe) | 43.81 | 24.79 | 44.18 | 43.26 | ||||||||
Operating Netback ($/boe)1 | ||||||||||||
Realized price | 43.81 | 24.79 | 44.18 | 43.26 | ||||||||
Royalties | (4.49 | ) | (3.48 | ) | (4.55 | ) | (6.66 | ) | ||||
Operating costs | (21.62 | ) | (19.01 | ) | (21.04 | ) | (19.34 | ) | ||||
Operating netback | 17.70 | 2.30 | 18.59 | 17.26 | ||||||||
Realized losses on derivative instruments | (0.85 | ) | (2.32 | ) | (0.98 | ) | (4.60 | ) | ||||
Operating netback, after realized losses on derivative instruments | 16.85 | (0.02 | ) | 17.61 | 12.66 |
Notes:
1 Operating netback is a Non-IFRS measure (see “Non-IFRS Measures” below).
Capital Structure ($ millions) |
As at December 31, 2019 |
As at December 31, 2018 |
||
Working capital (deficit)1 | 2.2 | (16.1 | ) | |
Long-term debt | (113.6 | ) | (101.1 | ) |
Total net debt2 | (111.4 | ) | (117.3 | ) |
Debt capacity3 | 3.1 | 21.8 | ||
Common shares outstanding (in millions) | 171.4 | 171.9 |
Notes:
1 Working capital (deficit) is a non-IFRS measure (see “Non-IFRS Measures” below) calculated as current assets less current portion of derivative instruments, minus accounts payable and accrued liabilities.
2 Net debt is a non-IFRS measure (see “Non-IFRS Measures” below), calculated by adding working capital (deficit) and long-term debt.
3 Debt capacity reflects the undrawn capacity of the Company’s revolving facility of USD$60 million at December 31, 2019 and USD$65 million at December 31, 2018, converted at an exchange rate of $1.0000 USD to $1.2988 CAD on December 31, 2019 and $1.0000 USD to $1.3642 CAD on December 31, 2018.
Three Months Ended December 31, |
Year Ended December 31, |
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Drilling Activity | 2019 | 2018 | 2019 | 2018 |
Gross wells | 2.0 | 6.0 | 3.0 | 14.0 |
Net (working interest) wells | 2.0 | 5.9 | 3.0 | 13.9 |
Success rate, net wells (%)1 | 100 | 67 | 100 | 86 |
1.For the three months ended December 31, 2019, the company drilled one development well with a 100% success rate and one stratigraphic well. For the year ended December 31, 2019, the company drilled two development wells with a 100% success rate and one stratigraphic well. |
Throughout 2019, PPR continued to execute our business strategy and posted numerous key achievements. In addition to integrating a corporate acquisition, we successfully invested $12.1 million in development and exploration effort focused on generating robust capital efficiencies; prudently and swiftly responded to volatile and unexpected changes in commodity prices; and posted solid reserves and production.
OUTLOOK
In March 2020, the COVID19 pandemic coupled with the price war between Saudi Arabia and Russia resulted in significant downfall in global oil prices. PPR is cautious with its capital spending in light of uncertainties around worldwide energy consumption and supplies and the duration of this turmoil. The Company initiated the drilling of one Michichi well in February and plans to complete the well in late March. After completing the Michichi well, PPR plans to suspend its capital program to preserve future development economics unless oil prices recover in due course. Over 80% of PPR’s 2020 forecast base oil production (net of royalties) is hedged, which is expected to help PPR weather the depressed pricing environment. In addition, PPR is reviewing its 2020 budget, including exploring all avenues to reduce debt, G&A and operating expenses.
The Company has reviewed its compensation program in light of the current commodity volatility. Effective April 2020, all executives’ annual salary will be reduced by 20% while the Board of Directors has also agreed to reduce their annual remuneration by 25%.
At forward prices for crude oil being traded in the futures market and with the oil hedges PPR has in place, PPR forecasts that it continues to meet its obligations with its internally generated cash flows and available borrowing capacity, however, there are no assurances that the lenders will maintain the borrowing base of the Revolving Facility at current levels or that the Company will be able to comply with its financial covenants in the future.
ABOUT PRAIRIE PROVIDENT
Prairie Provident is a Calgary-based company engaged in the exploration and development of oil and natural gas properties in Alberta. The Company’s strategy is to grow organically in combination with accretive acquisitions of conventional oil prospects, which can be efficiently developed. Prairie Provident’s operations are primarily focused at the Michichi and Princess areas in Southern Alberta targeting the Banff, the Ellerslie and the Lithic Glauconite formations, along with an established and proven waterflood project at our Evi area in the Peace River Arch. Prairie Provident protects its balance sheet through an active hedging program and manages risk by allocating capital to opportunities offering maximum shareholder returns.
For further information, please contact:
Prairie Provident Resources Inc.
Tim Granger President and Chief Executive Officer
Tel: (403) 292-8110
Email: tgranger@ppr.ca