Prairie Provident Resources Inc. announces our financial and operating results for the three and nine months ended September 30, 2020. PPR’s unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2020 (“Interim Financial Statements”) and related Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2020 are available on our website at www.ppr.ca and filed on SEDAR.
PPR’s third quarter financial results continue to reflect the significant decline in global energy demand and resultant impact on crude oil pricing caused by the COVID-19 pandemic since early 2020. While the health and safety of our employees, partners and communities remains a priority, the Company has proactively taken steps to maintain our liquidity and financial position during this unprecedented time.
Initiatives undertaken include suspending the capital program; identifying immediate and targeted operating cost reductions; reducing compensation across the organization; and reaching an agreement with our lenders to defer the Company’s borrowing base re-determination and to suspend cash interest payments on our 15% subordinated unsecured notes due October 31, 2021 (“Senior Notes”).
As a result of these initiatives, the Company expects to realize adjusted funds flow (“AFF”)1 savings of approximately $8.0 million to $10.0 million for 2020. In addition, PPR has WTI hedges on over 80% of our 2020 and 30% of our 2021 forecast base oil production (net of royalties), respectively, which protect our operating cash flows and provide further resiliency amid continued volatility. At September 30, 2020, our hedges were fair valued at over $4.7 million.
Q3 2020 HIGHLIGHTS
1 Non-IFRS measure – see below under “Non-IFRS Measures”
Prairie Provident also announces that Tim Granger, Chief Executive Officer and a director of the Company, has decided to retire after almost eight years of service to PPR and its predecessor, Lone Pine Resources, and that Tony van Winkoop will be appointed Chief Executive Officer.
“The board of directors, shareholders and employees of Prairie Provident wish to thank Tim for his years of loyal service, sound leadership and stewardship. We wish him well in his future endeavors,” said Patrick McDonald, Chair of the Board of Directors. “On behalf of the Board, I would also like to congratulate Tony on his appointment as CEO, a well-deserved recognition of his contribution to the Company and moreover demonstration of our confidence in his abilities to lead the Company,” said McDonald.
Mr. van Winkoop, who has served as Vice President, Exploration for over 5 years and now President, was Chief Executive Officer of Arsenal Energy until its combination with Lone Pine Resources to form Prairie Provident in September 2016, and has been an integral member of the executive leadership team ever since.
The changes will be effective at the annual meeting of PPR shareholders to be held on December 18, 2020, at which Mr. van Winkoop will also stand for election to the board of directors together with Patrick McDonald (Chairman), Derek Petrie, William Roach, Ajay Sabherwal and Rob Wonnacott. Mr. Granger and Terence (Tad) Flynn are not standing for re-election.
A notice of meeting and information circular for the 2020 shareholders’ meeting has been filed on SEDAR under the Company’s issuer profile at www.sedar.com, and will be disseminated to shareholders in the coming days.
FINANCIAL AND OPERATING SUMMARY
|Three Months Ended
|Nine Months Ended
|($000s except per unit amounts)||2020||2019||2020||2019|
|Crude oil (bbls/d)||2,931||4,029||3,188||4,051|
|Natural gas (Mcf/d)||8,704||12,092||9,411||11,792|
|Natural gas liquids (bbls/d)||135||169||134||172|
|Average Realized Prices|
|Crude oil ($/bbl)||43.70||61.83||35.81||61.81|
|Natural gas ($/Mcf)||2.26||1.14||2.09||1.57|
|Natural gas liquids ($/bbl)||24.96||25.53||22.47||30.26|
|Operating Netback ($/boe)1|
|Realized gains (losses) on derivatives||6.85||(0.29||)||9.65||(1.02||)|
|Operating netback, after realized gains (losses) on
|September 30, 2020||December 31, 2019|
|Total net debt3||(117.6||)||(111.4||)|
|Common shares outstanding (in millions)||172.1||171.4|
|Three Months Ended
|Nine Months Ended
|Net (working interest) wells||n/a||n/a||1.0||1.0|
|Success rate, net wells (%)1||n/a||n/a||100%||100%|
The COVID-19 pandemic has resulted in a sharp decline in global economic activity, and consequently, a significant drop in energy demand. There has been a recent resurgence of COVID-19 cases in certain areas and the timing and extent of an eventual economic recovery remains highly uncertain.
The downturn in oil prices has adversely affected PPR’s operating results and financial position, although the impact has been somewhat muted given that 80% of our 2020 forecast base oil production (net of royalties) is protected by hedges. Our hedging program has shielded the Company against the severe price deterioration that has occurred during these unprecedented times, underpinning the importance of maintaining liquidity and financial position. After completing the Michichi well in March 2020, PPR has suspended our capital program to preserve liquidity and protect development economics.
Operationally, PPR conducted a bottom-up review of all of our operating expenses and identified and moved forward with immediate reduction opportunities. Operating cost reductions are being realized through rate negotiations, workforce optimizations, shutting-in uneconomic production and the deferral of activities, and are expected to total approximately $2.9 million for the year or $4.0 million on an annualized basis.
In addition, effective April 2020, executive and non-executive salaries and director annual remuneration were reduced. Certain employee benefit programs have also been suspended. These measures are expected to result in approximately $2.0 million of gross G&A reductions for 2020 or $2.2 million on an annualized basis.
PPR continues to actively monitor and pursue available COVID-19 relief programs and has to date realized some benefit under the Canada Emergency Wage Subsidy and the Site Rehabilitation Program for federal funding of abandonment and reclamation work.
As a result of the ongoing impacts caused by COVID-19, the Company expects the remainder of 2020 and first half of 2021 to be a challenging time for our industry and for the global economy in general. While PPR cannot control or influence the macro environment, we are committed to maintaining our balance sheet and liquidity through active cost reduction efforts and will continue to work closely with our lenders.
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 our 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 – Chief Executive Officer
Tel: (403) 292-8110
Tony van Winkoop – President
Tel: (403) 292-8071