CALGARY, ALBERTA--(Marketwire - March 14, 2012) - Petrobank Energy and Resources Ltd. ("Petrobank" or the "Company") (TSX:PBG) is pleased to announce 2011 fourth quarter and year-end financial and operating results.
Petrobank's results include the financial and operating results of PetroBakken Energy Ltd. ("PetroBakken") (TSX:PBN), 59% owned by Petrobank at December 31, 2011. PetroBakken announced fourth quarter and 2011 year-end financial and operating results on March 7, 2012.
The results of Petrominerales Ltd. ("Petrominerales") (TSX:PMG), previously majority owned by Petrobank, have been separately disclosed as discontinued operations up until December 31, 2010, the date this business unit was spun off to Petrobank shareholders.
All references to $ are Canadian dollars unless otherwise noted.
FINANCIAL AND OPERATING HIGHLIGHTS
Petrobank Corporate and Heavy Oil Business Unit 2011 and Year End Highlights
- Funds flow from continuing operations increased 8% to $690.5 million in 2011, primarily as a result of PetroBakken's higher operating netbacks. On a per basic and diluted share basis, funds flow from operations increased 7% and 8%, respectively.
- Adjusted net income from continuing operations increased to $64.9 million in 2011 compared to $4.1 million in 2010. The increase is driven mainly from PetroBakken's higher operating income partially offset by a deferred tax adjustment at Petrobank.
- Adjusted net income attributable to Petrobank shareholders totaled $64.9 million in 2011 compared to $2,143.4 million in 2010. The decrease is due mainly to the recognition of a non-cash $1,919.5 million gain on distribution of Petrominerales recorded in 2010.
- The Kerrobert expansion project was completed at the end of the third quarter and full field operations were initiated.
- Kerrobert is in the early stages of THAI® production with increasing temperatures in the reservoir, increasing production and upgraded oil being produced.
- In early 2011, we acquired seven sections of land in Saskatchewan that are being evaluated for future THAI® projects.
- Our 2012 capital budget of $35 million will be focused on Kerrobert operations, Dawson, and evaluation of existing lands and 50% of our capital plan is discretional.
- We completed the drilling of the Dawson demonstration project well pairs and plan to complete the wells and construct the surface facilities later in 2012.
- We signed a five year collaboration agreement with Pemex Exploración y Producción as the first step to licensing our THAI® technology in Mexico.
- We elected to participate in PetroBakken's dividend reinvestment plan starting with the January 2012 dividend paid in February 2012.
- We enhanced our leadership team by appointing three new executives: Mr. Chad Magus as Controller, Mr. Dwight Mervold as Vice President Production and Operations, and, in January 2012, Mr. Robert Richardson as Vice President Exploitation.
PetroBakken Fourth Quarter and Year End Highlights
- December 2011 production averaged 50,250 barrels of oil equivalent per day ("boepd"), exceeding exit production guidance estimates and setting a new corporate benchmark. This is an 18% increase over December 2010.
- Fourth quarter production was 48,007 boepd (87% light oil and liquids weighted), a 23% increase over the third quarter of 2011.
- Operating netback for the fourth quarter was $59.21/boe, an 18% increase over the third quarter of 2011.
- Record fourth quarter funds flow from operations of $231 million ($1.24 per basic share), a 52% increase over the third quarter of 2011.
- Proved plus probable ("2P") reserves increased by 19% to 203.5 million barrels of oil equivalent ("MMboe") at December 31, 2011, replacing 2011 production by 315%.
- Net capital expenditures totaled $909 million in 2011, with 88% of the program invested in drilling and completions. 293 (205 net) wells were drilled in 2011 with a 99% success rate.
- In late 2011, and early 2012, PetroBakken implemented a number of initiatives which further improved their liquidity, with available credit capacity rising to more than $1.1 billion following the completion of a non-core Bakken asset disposition in mid-March.
Petrobank Corporate and Heavy Oil Business Unit
- On February 28, 2012, Petrobank sold the May River property, including the Conklin demonstration project, for cash proceeds of approximately $225 million, net of closing adjustments, and concurrently cancelled our credit facility and withdrew our May River regulatory application.
- On January 30, 2012, PetroBakken closed a private placement of Senior Unsecured Notes (the "Notes") with a principal amount of US$900 million. The Notes bear interest at a rate of 8.625% per annum and mature February 1, 2020. In conjunction with the Notes issuance, on January 31, 2012, PetroBakken exercised the accordion feature on its credit facility, which increased the borrowing limit by $150 million to $1.5 billion.
- On January 31, 2012, in conjunction with the Notes issuance, PetroBakken completed the repurchase of US$450 million of principal amount on the Convertible Debentures at a price of US$99,000 per US$100,000 of principal amount.
- On February 16, 2012, PetroBakken announced the disposition of non-core southeast Saskatchewan assets for gross proceeds of $427.0 million, subject to closing adjustments.
- On February 24, 2012, PetroBakken closed the disposition of its non-core 2.2% interest in the Weyburn unit for gross proceeds of $105.0 million.
- PetroBakken's 2012 capital plan was updated as a result of two asset dispositions and plan to use a portion of the sales proceeds to increase the capital program by $175 million. The majority of the additional capital spending will be directed toward the Cardium play and, as a result of the increased capital expenditures PetroBakken now expects 2012 exit production rates of between 52,000 boepd and 56,000 boepd.
SUMMARY OF FINANCIAL AND OPERATING RESULTS
The following table provides a summary of Petrobank's financial and operating results for the three and twelve month periods ended December 31, 2011 and 2010. Consolidated financial statements with Management's Discussion and Analysis ("MD&A") will be available on the Company's website at www.petrobank.com and on the SEDAR website at www.sedar.com.
|Three months ended December 31,||Years ended December 31,|
|2011||2010||% Change||2011||2010||% Change|
|($000s, except where noted)|
|Oil and natural gas sales from continuing operations||366,881||258,359||42||1,195,476||1,008,556||19|
|Funds flow from continuing operations (2)||226,273||155,344||46||690,549||636,754||8|
|Per share - basic ($)||2.13||1.46||46||6.50||6.10||7|
|- diluted ($)||2.10||1.46||44||6.44||5.96||8|
|Adjusted net income from continuing operations (2)||26,712||17,543||52||64,867||4,087||1,487|
|Per share - basic ($)||0.25||0.17||47||0.61||0.04||1,425|
|- diluted ($)||0.25||0.16||56||0.59||0.04||1,375|
|Adjusted net income attributable to Petrobank shareholders (2) (3)||26,712||1,974,118||(99||)||64,867||2,143,394||(97||)|
|Per share - basic ($)||0.25||18.61||(99||)||0.61||20.53||(97||)|
|- diluted ($)||0.25||18.55||(99||)||0.59||20.06||(97||)|
|Capital expenditures (4)|
|Heavy Oil Business Unit ("HBU")||28,235||37,521||(25||)||168,903||121,492||39|
|Total capital expenditures from continuing operations||303,050||300,279||1||1,136,070||933,363||22|
|Common shares outstanding, end of period (000s)|
|PetroBakken operating netback ($/boe) (2) (6)|
|Crude oil and NGL sales price ($/bbl) (7)||92.13||75.19||23||88.65||72.77||22|
|Natural gas sales price ($/Mcf) (7)||3.44||3.96||(13||)||3.92||4.22||(7||)|
|Oil equivalent sales price (7)||82.69||67.00||23||79.38||65.28||22|
|Operating netback (2) (6) (8)||59.21||48.19||23||54.76||47.76||15|
|Average daily production (6)|
|PetroBakken - oil and NGL (bbls)||41,660||34,754||20||35,156||35,109||-|
|PetroBakken - natural gas (Mcf)||38,083||39,474||(4||)||35,052||39,473||(11||)|
|Total conventional (boe) (6)(9)||48,007||41,333||16||40,998||41,688||(2||)|
(1) Petrominerales Ltd. ("Petrominerales") has been presented as discontinued operations in the comparative period as this business unit was distributed to Petrobank shareholders at December 31, 2010.
(2) Non-GAAP measure. See "Non-GAAP Measures".
(3) Net income attributable to Petrobank shareholders for the three months and year ended December 31, 2010 includes the operating results of Petrominerales.
(4) Includes expenditures on property, plant and equipment, exploration and evaluation and other intangible assets.
(5) Consists of common shares, stock options, directors deferred common shares, deferred common shares, and incentive shares as at the period end date.
(6) Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe").
(7) Net of transportation expenses.
(8) Excludes hedging activities.
(9) Heavy Oil Business Unit bitumen and heavy oil volumes are excluded from average daily production as Heavy Oil Business Unit operations are considered to be in the exploration and evaluation phase and accordingly are capitalized.
PETROBANK'S LIQUIDITY AND CAPITAL RESOURCES
Petrobank and PetroBakken manage their capital structure independently and generate their own cash flows, and have the ability to fund their operations through the issuance of secured and unsecured debt as well as equity financing. Petrobank's capital resources are focused on funding corporate and Heavy Oil Business Unit expenditures. At December 31, 2011, on a standalone basis independent of PetroBakken, Petrobank's HBU and Corporate operating segment had bank debt of $74.4 million and a working capital deficit of $9.1 million.
As previously disclosed, Petrobank received cash proceeds of approximately $225 million, net of closing adjustments, on February 28, 2012 from the sale of our May River property. Proceeds from this transaction have been used to repay outstanding bank debt and results in Petrobank having a positive cash and working capital balance of approximately $130 million. We cancelled our credit facility concurrent with the closing of the sale of our May River property due to our cash availability and to save on standby fees.
Based on Petrobank's current ownership and PetroBakken's current annual dividend of $0.96 per PetroBakken share, Petrobank expects to receive $105 million of dividends annually from PetroBakken, paid monthly. PetroBakken has instituted a dividend reinvestment plan ("DRIP") in 2012, which allows shareholders to reinvest monthly cash dividends in new shares at a five percent discount to the then current market price. Petrobank has received two monthly dividends totalling approximately $8.8 million in cash and approximately 588,000 PetroBakken common shares from the DRIP. Due to Petrobank's significant positive working capital balance, we are electing to participate at a 100% level in PetroBakken's DRIP starting with the March dividend. We believe that receiving additional shares in PetroBakken is an attractive investment at this time. Petrobank may change its participation level in the future.
Petrobank currently expects to fund our working capital requirements and HBU capital expenditure program with available cash and cash from operations.
INVESTOR CONFERENCE CALL
Management of Petrobank will be holding a conference call for investors, financial analysts, media and any interested persons on Thursday, March 15, 2012 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss Petrobank's fourth quarter financial and operating results. The investor conference call details are as follows:
Live call dial-in numbers: 416-695-6616 / 800-952-6845
Replay dial-in numbers: 905-694-9451 / 800-408-3053
Replay pass code: 4657181
The live audio webcast link is: http://events.digitalmedia.telus.com/petrobank/031512/index.php.
Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas exploration and production company with operations in western Canada. The Company operates high-impact projects through two business units and a technology subsidiary. Petrobank's 59% owned TSX-listed subsidiary, PetroBakken Energy Ltd. (TSX:PBN), is an oil and gas exploration and production company combining light oil Bakken and Cardium resource plays with conventional light oil assets. Whitesands Insitu Partnership, a partnership between Petrobank and its wholly-owned subsidiary Whitesands Insitu Inc., applies Petrobank's patented THAI® heavy oil recovery process in the field. THAI® is an evolutionary in-situ combustion technology for the recovery of bitumen and heavy oil. THAI® and CAPRI® are registered trademarks of Archon Technologies Ltd., a wholly-owned subsidiary of Petrobank Energy and Resources Ltd., for specialized methods for recovery of oil from subterranean formations through in-situ combustion techniques and methodologies with or without upgrading catalysts. Used under license by Petrobank Energy and Resources Ltd.
Non-GAAP Measures. This press release contains financial terms that are not considered measures under IFRS, such as funds flow from operations, adjusted net income, funds flow per share, adjusted net income per share, operating netback, working capital deficit and net capital expenditures. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Specifically, funds flow from operations reflects cash generated from operating activities before changes in non-cash working capital. Adjusted net income is determined by adding back any losses or deducting any gains on the derivative liabilities and adding back impairments. Management considers funds flow from operations, funds flow per share, adjusted net income and adjusted net income per share important as it helps evaluate performance and demonstrate the ability to generate sufficient cash to fund future growth opportunities and repay debt. Profitability relative to commodity prices per unit of production is demonstrated by an operating netback. Operating netback reflects revenues less royalties, transportation costs, and production expenses divided by production for the period. Net capital expenditures represent capital expenditures, including exploration and evaluation expenditures, less proceeds from asset dispositions. Working capital deficit is calculated as current liabilities less current assets, excluding assets and liabilities held for sale and risk management assets and liabilities. The HBU and Corporate operating segment's working capital position combined with cash or bank debt are used to evaluate the segment's financial leverage. Funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, operating netbacks, working capital deficit and net capital expenditures may not be comparable to those reported by other companies nor should they be viewed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with IFRS. Further information in respect of these non-GAAP measures is set forth in our MD&A.
Forward-Looking Statements. In addition to historical information, the press release contains forward-looking statements that are generally identifiable as any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance. Specifically, this press release contains forward-looking statements relating to future capital plans and projects, sources of funding and future PetroBakken dividend rates. Forward-looking statements are necessarily based upon assumptions and judgments with respect to the future including, but not limited to, the outlook for commodity markets and capital markets, success of future evaluation and development activities, the successful application of technology, prevailing commodity prices, the performance of producing wells and reservoirs, well development and operating performance, general economic and business conditions, weather, and the regulatory and legal environment. These statements are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil and gas prices; the results of exploration and development of drilling and related activities; costs and availability of services; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; the ability to economically test, develop and utilize the Company's patented technologies, the feasibility of the technologies; and other factors, many of which are beyond the control of the Company. Accordingly, there is no representation by Petrobank that actual results achieved during the forecast period will be the same in whole or in part as those forecasts. Except to the extent required by law, Petrobank assumes no obligation to publicly update or revise any forward-looking statements made in this press release or otherwise, whether as a result of new information, future events or otherwise.
Natural gas volumes have been converted to barrels of oil equivalent ("boe"). Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil equivalent based on an energy equivalency conversion method primarily attributable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.