First Quarter 2020 Highlights: | ||
• | Royalty production averaged 22,160 BOE per day (52% liquids), in line with royalty production in Q4 2019 of 22,203 BOE per day (53% liquids) and Q1 2019 of 22,007 BOE per day (52% liquids). | |
• | Revenues totaled | |
• | Funds from Operations totaled | |
• | First quarter dividends declared of | |
• | Common share repurchases of |
PRESIDENT’S MESSAGE
PrairieSky’s high margin, low cost business model and financial strategy provides a stable and sustainable business platform that is well positioned to withstand the unprecedented global health crisis that we are currently experiencing. PrairieSky remains committed to maintaining a strong balance sheet and at
Despite unprecedented volatility in commodity prices and instability in the global economy more broadly, PrairieSky delivered a strong first quarter with funds from operations of
Other revenue in the quarter totaled
During the quarter, 170 wells (99% oil) were spud on PrairieSky lands which was ahead of Q4 2019 spuds of 150 wells (99% oil) but below Q1 2019 when 209 wells (93% oil) were spud. There were 77 wells spud on
Cash administrative expenses totaled
During Q1 2020, PrairieSky repurchased 0.5 million common shares for
In March, PrairieSky took decisive action and adjusted to a quarterly dividend effective Q2 2020 of
The novel coronavirus (COVID-19) pandemic has prompted the Government of
FINANCIAL AND OPERATIONAL INFORMATION
The following table summarizes selected 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) | 2020 | 2019 | ||||
FINANCIAL | ||||||
Revenues | $ | 52.7 | $ | 73.2 | ||
Funds from Operations | 46.5 | 57.8 | ||||
Per Share – basic and diluted(1) | 0.20 | 0.25 | ||||
Net Earnings and Comprehensive Income | 8.6 | 26.4 | ||||
Per Share - basic and diluted(1) | 0.04 | 0.11 | ||||
Dividends declared(2) | 45.4 | 45.6 | ||||
Per Share | 0.1950 | 0.1950 | ||||
Acquisitions, including non-cash consideration | 0.5 | 1.6 | ||||
Working Capital (Deficiency) at period end | (5.2 | ) | (6.2 | ) | ||
Shares Outstanding | ||||||
Shares outstanding at period end | 232.6 | 233.9 | ||||
Weighted average – basic | 233.0 | 234.0 | ||||
Weighted average – diluted | 233.4 | 234.2 | ||||
OPERATIONAL Royalty Production Volumes | ||||||
Crude Oil (bbls/d) | 8,582 | 8,904 | ||||
NGL (bbls/d) | 2,945 | 2,586 | ||||
Natural Gas (MMcf/d) | 63.8 | 63.1 | ||||
Total (BOE/d)(3) | 22,160 | 22,007 | ||||
Realized Pricing | ||||||
Crude Oil ($/bbl) | $ | 42.30 | $ | 57.75 | ||
NGL ($/bbl) | 26.10 | 39.00 | ||||
Natural Gas ($/Mcf) | 1.57 | 1.97 | ||||
Total ($/BOE)(3) | $ | 24.35 | $ | 33.58 | ||
Operating Netback per BOE(4) | $ | 21.48 | $ | 29.49 | ||
Funds from Operations per BOE | $ | 23.06 | $ | 29.18 | ||
Oil Price Benchmarks | ||||||
Western Texas Intermediate (WTI) (US$/bbl) | $ | 46.17 | $ | 54.90 | ||
Edmonton | $ | 51.44 | $ | 66.53 | ||
Western Canadian Select (WCS) crude oil differential to WTI (US$/bbl) | $ | (20.53 | ) | $ | (12.28 | ) |
Foreign Exchange Rate (US$/CAD$) | 0.7450 | 0.7535 | ||||
Natural Gas Price Benchmarks | ||||||
AECO monthly index ($/Mcf) | $ | 2.14 | $ | 1.94 | ||
AECO daily index ($/Mcf) | $ | 2.03 | $ | 2.62 | ||
(1) Net Earnings and Comprehensive Income and Funds from Operations per Common Share are calculated using the weighted average number of common shares outstanding. | ||||||
(2) A dividend of | ||||||
(3) See "Conversions of Natural Gas to BOE". | ||||||
(4) A non-GAAP measure which is defined under the Non-GAAP Measures section in the MD&A. |
CONFERENCE CALL DETAILS
A conference call to discuss the results will be held for the investment community on
(844) 657-2668 (toll in free in | |
(612) 979-9882 (International) |
VIRTUAL ANNUAL GENERAL MEETING
As the
The virtual meeting will be conducted via live audio webcast at https://web.lumiagm.com/285970493 commencing at
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.
- https://web.lumiagm.com/285970493 in your web browser.
- Password: prairie2020 (case sensitive).
- If you have voting rights, select “Login” and follow the instructions.
- If you do not have voting rights, select “Guest” and fill in the form.
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. If you are unable to attend the virtual meeting, we encourage you to complete the form of proxy or voting instruction form previously mailed to you and return it within the time frames indicated on such forms so that your vote is counted at the virtual meeting.
Please note that in light of the rapidly evolving environment related to the COVID-19 outbreak, the ability to hold the virtual meeting as planned could be compromised. Should PrairieSky be required to alter its plans regarding the virtual meeting, leading to a cancellation or postponement, the details of any such change would be communicated via press release and made available on the Company's website at www.prairiesky.com.
NORMAL COURSE ISSUER BID
PrairieSky will apply to extend its 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 11.6 million common shares over a 12-month period. The NCIB has been approved by the Company's board of directors; however, it is subject to acceptance by the TSX and, if accepted, will be made in accordance with the applicable rules and policies of the TSX and applicable securities laws. Under the NCIB, common shares may be repurchased in open market transactions on the TSX, and/or other Canadian exchanges or alternative trading systems. The price that PrairieSky will pay for common shares in open market transactions will be the market price at the time of purchase. Common shares acquired under the NCIB will be cancelled.
PrairieSky will file a Notice of Intention to Make a NCIB to purchase and cancel up to 5% of the issued and outstanding common shares. The 5% limit would be set based on the issued and outstanding shares as at
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 11.6 million common shares over the next 12 months, the Company's board of directors may consider, from time to time, applying to the TSX to increase the amount of NCIB purchases. Decisions regarding increases to the NCIB will be based on market conditions, share price, best use of funds from operations, and other factors including other options to expand our portfolio of royalty assets.
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, improvement in the business in the near, medium and long term, future collections from compliance activities and future activity on PrairieSky’s lands, and the Company's expectations regarding future dividends, the application of PrairieSky to renew the NCIB, and the timing thereof, the number of common shares which may be purchased under the NCIB in the future and the factors in determining the timing and quantum of such purchases, and PrairieSky's belief that repurchasing such common shares under the NCIB is a good investment of PrairieSky's cash resources.
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 period 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, 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
Certain measures in this document do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS") and, therefore, are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers. These measures 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 include operating netback per BOE, payout ratio and cash administrative expenses per BOE. Management’s use of these measures is discussed further below. Further information can be found in the Non-GAAP Measures 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 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 per BOE" represents cash administrative expenses on a BOE basis. Cash administrative expenses per BOE is calculated by dividing cash administrative expenses (administrative expenses excluding the volatility and fluctuations in share-based compensation expense that was not settled in cash in the current period) 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 March 31 | |||||
(millions) | 2020 | 2019 | |||
Total Administrative Expenses | $ | 4.5 | $ | 6.7 | |
Share-Based Compensation Recovery (Expense) | 0.8 | (1.3 | ) | ||
Cash Payments made under RSU and PSU Plans(1) | 1.7 | 2.2 | |||
Cash Administrative Expenses | $ | 7.0 | $ | 7.6 |
(1) See PrairieSky’s MD&A for details on its share-based compensation plans.
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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