First Quarter Highlights:
- Royalty production averaged 23,892 BOE per day, representing a 17% increase over Q4 2021 and a 23% increase over Q1 2021.
- Total revenues grew to
$139.9 million , a 39% increase over Q4 2021 and a 135% increase over Q1 2021, comprised of royalty production revenues of$134.7 million and other revenues of$5.2 million . - Achieved record quarterly funds from operations of
$105.0 million ($0.44 per common share basic and diluted), a 3% increase over Q4 2021 and a 115% increase over Q1 2021 driven by a combination of royalty production growth, 2021 acquisitions and strong commodity pricing. - Declared a first quarter dividend of
$28.7 million ($0.12 per common share), representing a payout ratio of 27%, with remaining cash flow allocated to$6.3 million of royalty acquisitions and the balance to retiring bank debt. - At
March 31, 2022 , PrairieSky’s net debt totaled$568.9 million , a reduction of$66.1 million fromDecember 31, 2021 as excess funds from operations were used to reduce indebtedness incurred in connection with acquisitions completed during the second half of 2021. - Advanced several ESG and alternative energy initiatives, including completing a large-scale Lithium exploration lease in
Saskatchewan for$0.6 million in bonus consideration with near-term drilling plans, receiving initial government approval for theMeadowbrook CCUS Project inAlberta , and achieving independently measured targets which resulted in the realization of the full positive pricing adjustment on our sustainability-linked credit facility.
President’s Message
PrairieSky achieved record quarterly royalty production revenue in Q1 2022 due to a combination of strong commodity pricing and royalty production growth. The differentiation of our business model is evident in an accelerating capital environment as we lease our vast underdeveloped land base to qualified, well-capitalized industry partners. PrairieSky believes leasing is a leading indicator of future third-party drilling activity on our lands and organic per share growth in royalty production. During Q1 2022, PrairieSky generated
Many of the third-party wells drilled on PrairieSky lands in the second half of 2021 have now come on production and we are seeing the impacts reflected in our growing royalty production volumes. Royalty production volumes totaled 23,892 BOE per day in Q1 2022, including 2,640 BOE per day of incremental royalty production volumes from the Heritage Royalty acquisition which was effective
Our record Q1 2022 funds from operations of
PrairieSky declared dividends of
Owning fee simple mineral title offers considerable optionality for oil and gas exploration and development as well as for energy transition opportunities. We are proud to partner with
During Q1 2022, PrairieSky also completed a large-scale Lithium specific leasing arrangement in southwest
2022 has started exceptionally well for our business. We would like to thank our shareholders for their continued support, and our staff for their hard work integrating the incremental approximately 3.0 million net acres of royalty properties acquired in 2021.
Q1 2022 Financial Highlights
- Funds from operations grew to
$105.0 million driven by a combination of royalty production growth, the impact of 2021 acquisitions and strong commodity pricing. - Royalty production revenue expanded to
$134.7 million , a 43% increase over Q4 2021 and a 138% increase over Q1 2021, generated from total royalty production volumes of 23,892 BOE per day. A further breakdown is as follows:- Oil royalty production volumes averaged 11,188 barrels per day and included 2,358 barrels per day of incremental oil royalty production volumes associated with the Heritage Royalty acquisition which was effective
December 31, 2021 . Excluding all acquisitions completed in 2021, organic growth on the royalty properties totaled 6% over Q4 2021 and 13% over Q1 2021. - Increased oil royalty production combined with strong average WTI pricing of
US$94.29 per barrel grew oil royalty revenue to$98.7 million , 61% above Q4 2021 and 170% above Q1 2021. - Natural gas royalty production volumes averaged 60.5 MMcf per day, in line with Q4 2021 and a 5% increase over Q1 2021. Natural gas royalty production included 1.4 MMcf per day of incremental royalty production volumes from the Heritage Royalty acquisition as well as production from new wells on stream. Natural gas volumes were negatively impacted by approximately 1.0 MMcf per day of cold weather freeze-offs throughout January and February.
- Natural gas royalty revenue increased to
$22.9 million , 3% above Q4 2021 and 80% above Q1 2021 primarily due to strong natural gas index pricing with daily and monthly AECO pricing averaging$4.67 per MCF in the quarter. - NGL royalty production volumes averaged 2,621 barrels per day, 29% above Q4 2021 and 5% above Q1 2021 due to 77 barrels per day of incremental royalty production volumes from the Heritage Royalty acquisition, new wells on stream and the return of ethane volumes post curtailments.
- NGL royalty revenue increased to
$13.1 million , 22% over Q4 2021 and 75% over Q1 2021, due to increased royalty production volumes and strong benchmark pricing.
- Oil royalty production volumes averaged 11,188 barrels per day and included 2,358 barrels per day of incremental oil royalty production volumes associated with the Heritage Royalty acquisition which was effective
- PrairieSky generated other revenue of
$5.2 million in Q1 2022 comprised of$1.2 million of lease rentals,$0.5 million in other income, including$0.2 million of potash revenue, and$3.5 million in bonus consideration earned on entering into 52 new leasing arrangements with 43 different counterparties. Bonus consideration and leasing activity was up from$1.4 million in Q1 2021 from 33 leasing arrangements with 29 counterparties. Compliance recoveries totaled$1.5 million in Q1 2022. - Cash administrative expenses totaled
$10.3 million or$4.79 per BOE and included the annual cash payment of long-term incentives for staff and executives of$5.0 million (2021 annual LTI payment -$0.7 million for staff and $nil for executives as performance share units expired unvested due to share price performance). PrairieSky expects cash administrative expense per BOE to be below$3.00 per BOE for 2022. - PrairieSky declared a first quarter dividend of
$28.7 million ($0.12 per common share) which represented a 27% payout ratio, with remaining funds from operations allocated to reducing bank debt. - At
March 31, 2022 , PrairieSky’s net debt balance totaled$568.9 million , a$66.1 million decrease fromDecember 31, 2021 .
ACTIVITY ON PRAIRIESKY’S ROYALTY PROPERTIES
During Q1 2022, third-party operators spud 194 wells (87% oil) with 91 wells spud on our GORR acreage, 86 wells spud on our
FINANCIAL AND OPERATIONAL INFORMATION
The following table summarizes select operational and financial information of the Company for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted.
A full version of PrairieSky’s management’s discussion and analysis ("MD&A") and unaudited interim condensed consolidated financial statements and notes thereto for the fiscal period ended
Three Months Ended | ||||||||||
(millions, except per share or as otherwise noted) | 2022 | 2021 | 2021 | |||||||
FINANCIAL | ||||||||||
Revenues | $ | 139.9 | $ | 100.6 | $ | 59.5 | ||||
Funds from Operations | 105.0 | 101.8 | 48.8 | |||||||
Per Share - basic and diluted(1) | 0.44 | 0.45 | 0.22 | |||||||
Net Earnings | 63.9 | 43.7 | 18.4 | |||||||
Per Share - basic and diluted(1) | 0.27 | 0.19 | 0.08 | |||||||
Dividends declared(2) | 28.7 | 21.5 | 14.5 | |||||||
Per Share | 0.120 | 0.090 | 0.065 | |||||||
Acquisitions | 6.3 | 745.3 | 45.6 | |||||||
Net debt at period end(3) | 568.9 | 635.0 | 57.2 | |||||||
Common share repurchases | - | 1.5 | - | |||||||
Shares Outstanding | ||||||||||
Shares outstanding at period end | 238.8 | 238.8 | 223.3 | |||||||
Weighted average - basic | 238.8 | 224.8 | 223.3 | |||||||
Weighted average - diluted | 239.0 | 225.3 | 223.7 | |||||||
OPERATIONAL Royalty Production Volumes | ||||||||||
Crude Oil (bbls/d) | 11,188 | 8,311 | 7,278 | |||||||
NGL (bbls/d) | 2,621 | 2,029 | 2,502 | |||||||
Natural Gas (MMcf/d) | 60.5 | 60.0 | 57.6 | |||||||
Royalty Production (BOE/d)(4) | 23,892 | 20,340 | 19,380 | |||||||
Realized Pricing | ||||||||||
Crude Oil ($/bbl) | 97.99 | 80.13 | 55.71 | |||||||
NGL ($/bbl) | 55.66 | 57.27 | 33.18 | |||||||
Natural Gas ($/Mcf) | 4.20 | 4.04 | 2.45 | |||||||
Total ($/BOE)(4) | 62.64 | 50.34 | 32.51 | |||||||
Operating Netback per BOE(5) | 56.97 | 46.76 | 28.67 | |||||||
Funds from Operations per BOE | 48.83 | 54.40 | 27.98 | |||||||
Oil Price Benchmarks | ||||||||||
Western Texas Intermediate (WTI) (US$/bbl) | 94.29 | 77.19 | 57.86 | |||||||
Edmonton | 115.66 | 93.30 | 66.60 | |||||||
Western Canadian Select (WCS) crude oil differential to WTI (US$/bbl) | (14.53 | ) | (14.64 | ) | (12.47 | ) | ||||
Natural Gas Price Benchmarks | ||||||||||
AECO monthly index ($/Mcf) | 4.59 | 4.94 | 2.93 | |||||||
AECO daily index ($/Mcf) | 4.74 | 4.66 | 3.15 | |||||||
Foreign Exchange Rate (US$/CAD$) | 0.7842 | 0.7909 | 0.7899 | |||||||
(1) Net Earnings and Funds from Operations per Share are calculated using the weighted average number of basic and diluted common shares outstanding.
(2) A dividend of
(3) See Note 14 "Capital Management" in the interim condensed consolidated financial statements for the three months ended
(4) See "Conversions of Natural Gas to BOE".
(5) Operating Netback per BOE is defined under the Non-GAAP Measures and Ratios section of this press release.
CONFERENCE CALL DETAILS
A conference call to discuss the results will be held for the investment community on
(844) 657-2668 (toll free in (612) 979-9882 (International) Conference ID: 7958733 |
VIRTUAL ANNUAL GENERAL MEETING
PrairieSky’s virtual annual general meeting of holders of common shares is scheduled for
Registered shareholders and duly appointed proxyholders will be able to listen to the virtual meeting, ask questions and vote online, all in real time, provided they are connected to the Internet and properly follow the instructions contained on the website. Non-registered (beneficial) shareholders who have not duly appointed themselves as proxyholders may still attend the virtual meeting as guests. Guests will be able to listen to the meeting but will not be able to vote at the meeting or ask questions. To attend the meeting:
- Follow the link https://virtual-meetings.tsxtrust.com/1287 in your web browser.
- Password: prairie2022 (case sensitive).
- If you have voting rights (Registered Shareholders and duly appointed proxyholders), select "I have a Control Number" and follow the instructions.
- If you do not have voting rights (Beneficial Shareholders and guests), select "I am a Guest" and fill in the form.
- For details, refer to the "Virtual Meeting Guide" that was provided with the enclosed form of proxy or voting instruction form and is available on our website at www.prairiesky.com/investors.
We recommend that you log in to the webcast at least one hour before the time of the virtual meeting. PrairieSky encourages all shareholders to participate in the virtual annual general meeting.
NORMAL COURSE ISSUER BID
PrairieSky will apply to extend its normal course issuer bid ("NCIB") for an additional one-year period. Under the renewed NCIB, and subject to prior approval of the TSX, PrairieSky intends to repurchase up to 16,965,000 common shares over a 12-month period based on the calculation of 10% of the public float as of
PrairieSky will file a Notice of Intention to Make a NCIB to purchase and cancel up to 10% of the public float. The 10% limit would be set based on the issued and outstanding shares, after excluding common shares beneficially owned by directors and executive officers of PrairieSky and persons who beneficially own or exercise control or direction over more than 10% of the issued and outstanding common shares of PrairieSky, which for illustrative purposes would be 169,656,768 common shares as of
PrairieSky will be entering into an automatic purchase plan with its broker in order to facilitate purchases of its common shares. The automatic purchase plan allows for purchases by the Company of its common shares at any time, including, without limitation, when the Company would ordinarily not be permitted to make purchases due to regulatory restriction or self-imposed blackout periods. Purchases will be made by PrairieSky’s broker based upon the parameters prescribed by the TSX and the terms of the parties’ written agreement.
PrairieSky believes renewing the NCIB as part of its capital management strategy is in the best interests of the Company and represents an attractive opportunity to use cash resources to reduce PrairieSky’s share count over time and thereby enhance the value of the shares held by remaining shareholders. The Board currently intends to evaluate the NCIB, and the level of purchases thereunder, on an annual basis in conjunction with PrairieSky’s annual financial results. The next regularly scheduled review will be in
While PrairieSky currently intends to only purchase up to 16,965,000 common shares over the next 12 months based on the calculation of 10% of the public float as of
FORWARD-LOOKING STATEMENTS
This press release includes certain statements regarding PrairieSky’s future plans and operations and contains forward-looking statements that we believe allow readers to better understand our business and prospects. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information or statements. Forward-looking statements contained in this press release include estimates regarding our expectations with respect to PrairieSky’s business and growth strategy, future growth from PrairieSky’s existing royalty asset portfolio and contributions from acquisitions, the quality of PrairieSky’s existing royalty asset portfolio, leasing being a leading indicator for third-party drilling and exploration on our royalty asset portfolio, optionality for oil and gas exploration and development as well as for energy transition opportunities, the
With respect to forward-looking statements contained in this press release, we have made several assumptions including those described in detail in our MD&A and the Annual Information Form for the year ended
By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control, including the impact of general economic conditions including inflation, industry conditions, volatility of commodity prices, lack of pipeline capacity, currency fluctuations, imprecision of reserve estimates, competitive factors impacting royalty rates, environmental risks, taxation, regulation, changes in tax or other legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility, political and geopolitical instability and our ability to access sufficient capital from internal and external sources. In addition, PrairieSky is subject to numerous risks and uncertainties in relation to acquisitions. These risks and uncertainties include risks relating to the potential for disputes to arise with counterparties, and limited ability to recover indemnification under certain agreements. The foregoing and other risks are described in more detail in PrairieSky’s MD&A, and the Annual Information Form for the year ended
Further, any forward-looking statement is made only as of the date of this press release, and PrairieSky undertakes no obligation to update or revise any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws. New factors emerge from time to time, and it is not possible for PrairieSky to predict all of these factors or to assess in advance the impact of each such factor on PrairieSky’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The forward-looking information contained in this document is expressly qualified by this cautionary statement.
CONVERSIONS OF NATURAL GAS TO BOE
To provide a single unit of production for analytical purposes, natural gas production and reserves volumes are converted mathematically to equivalent barrels of oil (BOE). PrairieSky uses the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 BOE ratio is based on an energy equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the BOE ratio is useful for comparative measures and observing trends, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.
NON-GAAP MEASURES AND RATIOS
Certain measures and ratios in this document do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS") and, therefore, are considered non-GAAP measures and ratios. These measures and ratios may not be comparable to similar measures and ratios presented by other issuers. These measures and ratios are commonly used in the crude oil and natural gas industry and by PrairieSky to provide potential investors with additional information regarding the Company’s liquidity and its ability to generate funds to conduct its business. Non-GAAP measures and ratios include operating netback per BOE, payout ratio, cash administrative expenses and cash administrative expenses per BOE. Management’s use of these measures and ratios is discussed further below. Further information can be found in the Non-GAAP Measures and Ratios section of PrairieSky’s MD&A.
"Operating Netback per BOE" represents the cash margin for products sold on a BOE basis. Operating netback per BOE is calculated by dividing the operating netback (royalty production revenues less production and mineral taxes and cash administrative expenses) by the average daily production volumes for the period. Operating netback per BOE is used to assess the cash generating and operating performance per unit of product sold and the comparability of the underlying performance between years. Operating netback per BOE measures are commonly used in the crude oil and natural gas industry to assess performance comparability.
"Payout Ratio" is calculated as dividends declared as a percentage of funds from operations. Payout ratio is used by dividend paying companies to assess dividend levels in relation to the funds generated and used in operating activities.
"Cash Administrative Expenses" represent administrative expenses excluding the volatility and fluctuations in share-based compensation expense for RSUs, PSUs, ODSUs and DSUs and stock options that were not settled in cash in the current period. Cash administrative expenses are calculated as total administrative expenses, adjusting for share-based compensation expense in the period, plus any actual cash payments made under the RSU, PSU, ODSU or DSU plans. Management believes cash administrative expenses are a common benchmark used by investors when comparing companies to evaluate operating performance.
"Cash Administrative Expenses per BOE" represents cash administrative expenses on a BOE basis and is calculated by dividing cash administrative expenses by the average daily production volumes for the period. Cash administrative expenses per BOE assists management and investors in evaluating operating performance on a comparable basis.
Cash Administrative Expenses
The following table presents the computation of Cash Administrative Expenses:
Three Months Ended | |||||||||||
($ millions) | 2022 | 2021 | 2021 | ||||||||
Total Administrative Expenses | $ | 15.0 | $ | 9.8 | $ | 10.2 | |||||
Share-Based Compensation Expense | (9.7 | ) | (4.4 | ) | (5.2 | ) | |||||
Cash Payments Made - Share Unit Awards Incentive Plan | 5.0 | - | 0.7 | ||||||||
Cash Administrative Expenses | $ | 10.3 | $ | 5.4 | $ | 5.7 | |||||
ABOUT
PrairieSky is a royalty company, generating royalty production revenues as petroleum and natural gas are produced from its properties. PrairieSky has a diverse portfolio of properties that have a long history of generating funds from operations and that represent the largest and most consolidated independently-owned fee simple mineral title position in
FOR FURTHER INFORMATION PLEASE CONTACT:
President & Chief Executive Officer (587) 293-4005 | Vice President, Finance & Chief Financial Officer (587) 293-4089 |
Investor Relations (587) 293-4000 www.prairiesky.com | |
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