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MarketScreener Homepage  >  Equities  >  TSX VENTURE EXCHANGE  >  PetroShale Inc.    PSH   CA71676H1064

PETROSHALE INC.

(PSH)
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PetroShale : Announces Third Quarter 2020 Results and Executive Appointment

11/25/2020 | 07:15am EST

PETROSHALE ANNOUNCES THIRD QUARTER 2020 RESULTS AND

EXECUTIVE APPOINTMENT

CALGARY, ALBERTA, November 25, 2020 - PetroShale Inc. ("PetroShale" or the "Company") (TSXV: PSH,

OTCQX: PSHIF) is pleased to announce our financial and operating results for the three and nine month periods ended September 30, 2020.

The Company's unaudited interim consolidated financial statements and corresponding management's discussion and analysis (MD&A) for the period will be available on SEDAR at www.sedar.com, on the OTCQX website at www.otcmarkets.com, and on PetroShale's website at www.petroshaleinc.com. Copies of the materials can also be obtained upon request without charge by contacting the Company directly. Please note, currency figures presented herein are reflected in Canadian dollars, unless otherwise noted.

FINANCIAL AND OPERATING HIGHLIGHTS

  • Production averaged 11,961 and 13,171 barrels of oil equivalent per day ("Boe/d") in the third quarter of 2020 and the first nine months of the year, respectively, representing increases of 4% and 76% over the same periods of 2019 due to new wells brought online during mid to late 2019, offset by natural declines and the impact of shut-in wells during both periods. Current production is approximately 11,800 Boe/d (comprised of 66% crude oil, 18% NGLs and 16% natural gas).
  • PetroShale's senior lenders agreed to reaffirm the amount of the existing borrowing capacity of US$177.5 million.
  • Revenue totaled $32.9 million in Q3 2020, a 36% increase from the preceding quarter as realized crude oil and natural gas prices significantly improved through the period. In Q3 2020 and the first nine months of the year, revenue decreased by 38% and increased by 2%, respectively, over the same periods in 2019, as higher production volumes were offset by lower crude oil prices year-over-year stemming from severe commodity price declines caused by the COVID-19 pandemic.
  • Adjusted EBITDA1 totaled $10.2 million ($0.05 per fully diluted share) in the third quarter of 2020, a 23% increase over Q2 2020, reflecting stronger crude oil prices during the period, and totaled $43.5 million ($0.22 per fully diluted share) in the first nine months of the year.
  • Total per unit operating expense decreased 6% to $7.62 per Boe in Q3 2020 and 18% to $8.02 per Boe in the first nine months of 2020 from the comparable periods in 2019, due primarily to reduced per unit production taxes, offset by increased lease operating costs per Boe.
  • Operating netback prior to hedging1 was $14.45 per Boe in Q3 2020 compared to $29.41 per Boe in the same period of 2019, reflecting a significant year-over-year decline in crude oil prices, realized loss on financial derivatives and increased lease operating costs, offset by lower per unit royalty expenses, production taxes and transportation expenses.
  • Net loss totaled $9.1 million ($0.05 per fully diluted share) in the third quarter, reflecting lower realized crude oil prices year-over-year due to the impact of COVID-19.
  • Net general and administrative ("G&A") expense per Boe was $1.57 in the third quarter of 2020 and $1.06 in the first nine months of the year, reflecting lower overhead recoveries and reduced capitalized G&A as a result of reduced capital activity.
  • Capital expenditures totaled approximately $2.6 million in the third quarter, reflecting the Company's continued efforts to minimize discretionary expenditures. In the first nine months of 2020, capital expenditures of $32.5 million were mainly related to completion activities on 3.2 net non-operated wells and operated well workover activities. For the balance of 2020, PetroShale expects to invest approximately $3.3 million into capital expenditures and generate free cash flow1.

RECENT EVENTS

The Company exercised our right to settle the third quarter 2020 preferred share cash dividend payment of approximately US$1.8 million ($2.3 million) in kind rather than with cash, resulting in an increase to the current US$79.57 million liquidation preference of the Preferred Shares, at a rate of 12% per annum, or US$2.387 million (approximately $3.1 million). This share dividend settlement is expected to preserve liquidity through this period of severe commodity price weakness and the Company intends to direct any free cash flow1 generated to debt repayment to enhance our financial position.

On November 18, 2020, PetroShale's senior lenders agreed to reaffirm the amount of the existing borrowing capacity of US$177.5 million. The Company's next borrowing base redetermination is scheduled to occur in the second quarter of 2021. At September 30, 2020, net debt1 totalled $349.5 million, and the Company was drawn US$171.1 million under the senior credit facility, net of cash of US$2.3 million. Additional redetermination details can be found within our third quarter 2020 MD&A.

PetroShale has been actively pursuing additional financial oil price hedges to provide price protection through the remainder of 2020 and for calendar 2021. A complete list of the Company's hedging contracts can be found within our third quarter 2020 MD&A.

The Company also announces that Mr. Caleb Morgret, PetroShale's current Chief Financial Officer (CFO), has advised PetroShale that he is relocating abroad with his family for personal reasons, and as such, has tendered his resignation effective November 30, 2020. The Company and our Board of Directors wishes to thank Caleb for his years of service and significant contributions to PetroShale. We are also pleased to announce that Mr. Scott Pittman has been appointed as CFO of PetroShale effective November 30, 2020. Mr. Pittman has over 15 years of senior financial management, commercial and investment banking experience. Most recently, Mr. Pittman served as the Chief Financial Officer of Chaparral Energy, an exploration and production company focused on Mid-Continent oil & gas exploration. Previously, he served as Chief Financial Officer and Vice President-Finance at two other production companies, and as a Vice President in commercial and investment banking at J.P. Morgan Securities Inc. for nine years. Prior to entering the energy industry, Mr. Pittman served as a Captain in the United States Marine Corps. Mr. Pittman holds a Bachelor of Business Administration from the University of Oklahoma and a Master of Business Administration from the University of Texas.

1 See "Non-IFRSMeasures" within this press release

FINANCIAL & OPERATING REVIEW

Three months ended

Nine months ended

FINANCIAL

Sept 30,

Sept 30,

Sept 30,

Sept 30,

(in thousands, except per share & share data)

2020

2019

2020

2019

Petroleum and natural gas revenue

32,928

52,887

106,238

104,689

Cash provided by (used in) operating activities

1,491

32,275

56,665

50,859

Net income (loss)

(9,134)

4,982

(49,568)

5,719

Per share - diluted

(0.05)

0.03

(0.26)

0.03

Adjusted EBITDA(1)

10,217

29,996

43,522

55,921

Drilling and completion capital expenditures

(2,559)

(63,798)

(32,454)

(171,138)

Net debt(1)

349,459

301,865

Common shares outstanding

Weighted average - basic

187,803,375

192,168,550

188,117,408

192,014,140

Weighted average - diluted

195,913,542

197,273,567

196,227,575

197,191,551

OPERATING

Daily production volumes(2)

Crude oil (Bbls/d)

7,983

8,427

9,180

5,504

Natural gas (Mcf/d)

11,471

8,974

11,567

6,127

Natural gas liquids (Bbls/d)

2,066

1,544

2,063

979

Barrels of oil equivalent (Boe/d)

11,961

11,467

13,171

7,504

Average realized prices

Crude oil ($/Bbl)

46.61

69.90

43.85

70.43

Natural gas ($/Mcf)

1.15

1.93

1.46

2.49

Natural gas liquids ($/Bbl)

10.52

4.82

6.97

9.84

Operating netback ($/Boe) (1)

Petroleum and natural gas revenue

29.92

50.13

29.44

51.10

Royalties

(5.43)

(10.08)

(5.42)

(10.15)

Realized gain on financial derivatives

(3.57)

-

(0.46)

-

Lease operating costs

(3.95)

(2.78)

(4.84)

(4.38)

Workover expense

(1.24)

(1.22)

(0.74)

(1.31)

Production taxes

(2.43)

(4.09)

(2.44)

(4.05)

Transportation expense

(2.42)

(2.55)

(2.42)

(2.30)

Operating netback(1)

10.88

29.41

13.12

28.91

Operating netback prior to hedging(1)

14.45

29.41

13.58

28.91

  1. See "Non-IFRSMeasures" within this press release
  2. See "Oil and Gas Advisories" within this press release

MESSAGE TO SHAREHOLDERS

As the incoming CEO, I am pleased to share some additional context and insights regarding PetroShale's third quarter 2020 results and preliminary outlook for the balance of the year.

COVID-19 has caused significant disruptions in global energy supply and demand in 2020, leading to severe declines in realized pricing compared to the prior year. However, during most of the third quarter, crude oil benchmark prices systematically strengthened which positively contributed to our third quarter revenue, Adjusted EBITDA2 and operating netbacks prior to hedging2 quarter-over-quarter. These increases were somewhat offset by wider oil differentials averaging $5.94 in Q3 2020 compared to $3.55 in Q3 2019 and

2 See "Non-IFRSMeasures" within this press release

$5.79 in the previous quarter, stemming from ongoing uncertainty around legal proceedings to determine whether the Dakota Access Pipeline ("DAPL") can continue operations post-2020. PetroShale's production increased 4% in Q3 2020 over Q3 2019, although declined 10% relative to Q2 2020 as a result of natural declines and non-operatedshut-in wells, the majority of which were brought back online by the end of the third quarter.

While the ultimate duration and impact of the COVID-19 pandemic remains uncertain, our highest priority remains on securing the health and safety of employees and stakeholders, while continuing to conduct our operations as safely and efficiently as possible. PetroShale has implemented several operational and financial improvements to support the Company through this period of volatility. These proactive measures include reducing discretionary capital expenditures, streamlining operating costs and lowering general and administrative expenses, in addition to actively hedging to mitigate risk for the remainder of 2020 and calendar 2021. Our team remains committed to identifying and implementing further efficiency-enhancing measures as we move forward.

Building on our success to date in streamlining operations, we captured incremental per unit cost reductions in the third quarter, with transportation expense, royalties, and production taxes declining by 5%, 46% and 41%, respectively, compared to the third quarter of 2019, supporting an operating netback prior to hedging3 of $14.45 per Boe. We invested $2.6 million in a limited capital program during the third quarter which was directed toward both development as well as maintenance activity and we will continue to prioritize the management of capital expenditures in accordance with the broader commodity price environment. We expect a limited capital program for the remainder of 2020, directed primarily towards sustaining production and maintaining the long-term integrity of the assets, and will continue to apply key learnings from our efforts to enhance efficiency in 2020 to ensure future capital activities and operations are executed in the most effective manner.

OUTLOOK

PetroShale's proven North Dakota Bakken strategy, supportive capital providers and cost-effective operations position us well to weather global market volatility while prudently managing and maintaining our high-quality production and reserves base. For the remainder of 2020 and into 2021, PetroShale will continue to focus on controlling per unit cash costs to optimize margins and increase operating efficiencies, while taking a disciplined approach to capital allocation based on project economics, payback and the potential for free cash flow3 generation.

As part of our ongoing risk mitigation strategy, we have entered into crude oil derivative contracts designed to provide added stability and further mitigate the effects of severe market volatility for the remainder of 2020 and in calendar 2021. We currently have crude oil hedges on 5,000 Bbls/d of fourth quarter production in the form of costless collar contracts, and have secured additional oil price hedges on 6,500 Bbls/d throughout 2021 in the form of three-way collar contracts. The complete list of contracts can be found within our third quarter 2020 MD&A.

PetroShale is maintaining our previously stated guidance for 2020 production, which is anticipated to average between 11,000 and 12,000 Boe/d (comprised of 7,800 - 8,500 bbls/d of oil, 1,550 - 1,700 bbls/d of NGLs and 9,900 - 10,800 mcf/d of natural gas) and will continue to actively monitor external market conditions to respond as needed to protect the underlying value of our assets and financial flexibility.

3 See "Non-IFRSMeasures" within this press release

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

PetroShale Inc. published this content on 25 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 November 2020 12:14:08 UTC


© Publicnow 2020
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Financials
Sales 2020 142 M 112 M 112 M
Net income 2020 - - -
Net Debt 2020 311 M 244 M 244 M
P/E ratio 2020 -
Yield 2020 -
Capitalization 37,7 M 29,6 M 29,6 M
EV / Sales 2020 2,45x
EV / Sales 2021 2,00x
Nbr of Employees 15
Free-Float 63,3%
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Income Statement Evolution
Consensus
Sell
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Mean consensus OUTPERFORM
Number of Analysts 3
Average target price 0,22 CAD
Last Close Price 0,20 CAD
Spread / Highest target 50,0%
Spread / Average Target 8,34%
Spread / Lowest Target -25,0%
Managers and Directors
NameTitle
Jacob Roorda President, Chief Executive Officer & Director
Michael Bruce Chernoff Executive Chairman
Scott Pittman Chief Financial Officer
Brett Herman Independent Director
David James Rain Director
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