Perpetual Energy Inc. Releases Third Quarter 2012 Financial and Operating Results
CALGARY, Nov. 12, 2012 /PRNewswire/ – (TSX:PMT) - Perpetual Energy Inc. (“Perpetual” or the “Corporation”) is pleased to
release its financial and operating results for the three and nine
months ended September 30, 2012. A copy of Perpetual’s unaudited
interim consolidated financial statements and related notes and
management’s discussion and analysis for the three and nine months
ended September 30, 2012 and 2011 can be obtained through the
Corporation’s website at www.perpetualenergyinc.com and SEDAR at www.sedar.com.
THIRD QUARTER SUMMARY
Perpetual continued to execute effectively on its top priorities for
2012, which include:
1. Profitable capital investment in two chosen proven diversifying
growth strategies to increase oil and natural gas liquids ("NGL")
production;
2. Debt reduction;
3. Advancing the assessment and value of high impact, longer term
resource opportunities with risk-managed investment; and
4. Managing downside risks related to commodity price volatility.
Capital Activity
-- The Corporation executed a $17.9 million capital program
focused primarily on heavy oil exploration and development in
the Mannville area of eastern Alberta. Operational results
continue to be positive, and development activity in this area
will continue in the fourth quarter and throughout 2013.
-- In the Mannville area, Perpetual drilled 12 (11.3 net)
horizontal oil wells, 10 of which are currently on production.
Two wells penetrated new heavy oil pools which are still being
evaluated.
-- The capital program included $2.5 million to complete two (2.0
net) Wilrich natural gas wells (1 vertical and 1 horizontal)
drilled in late 2011 and the first quarter of 2012.
-- Fourth quarter capital spending will be focused on continued
development at Edson and West Edson, with plans to drill up to
four (2.5 net) Wilrich gas wells and the tie-in of the
horizontal well completed in the third quarter.
-- Perpetual has a 50 percent working interest in 78 sections of
Montney liquids-rich natural gas-prone lands at Elmworth in
west central Alberta. During the third quarter Perpetual
participated in the drilling of one vertical well (0.5 net).
The drilling operation was finished in October 2012 at a total
cost of $1.8 million net to Perpetual.
Acquisitions and Dispositions
-- Net cash proceeds from dispositions increased to $16.2 million
from $7.0 million for the third quarter in 2011. Dispositions
included non-core natural gas assets in northeast Alberta,
shut-in gas over bitumen reserves, and the strategic sale of a
portion of a heavy oil pool in the Mannville area to help
advance the development of an enhanced oil recovery scheme.
Total gains on sale of $7.3 million were recorded in earnings
for these dispositions.
-- Perpetual further enhanced financial flexibility with the
disposition of non-core oil and gas properties for $16.2
million during the period, reducing net debt by $7.0 million
for the quarter. Net debt decreased by $132.0 million in the
first nine months of the year to $394.9 million at September
30, 2012.
Production and Pricing
-- The positive effects of Perpetual's commodity diversification
strategy are evident as oil and NGL production represented 17.6
percent of total actual production in the third quarter of 2012
(16.4 percent for the first nine months) as compared to 8.8
percent and 7.6 percent for the respective periods in 2011.
-- Oil and NGL production volumes increased 67 percent from the
third quarter of 2011, and 90 percent on a nine-month basis,
due primarily to ongoing development of the Corporation's heavy
oil pools at Mannville, partially offset by the reduction in
oil production linked to the heavy oil pool strategic
partnership, and reduced NGL volumes related to property
dispositions in the West Central district in the first quarter
and a facility turnaround at Edson. Heavy oil production in the
Mannville area has been maintained at over 2,600 bbl/d for two
consecutive quarters, despite the sale of 150 bbl/d of
production effective July 1, 2012.
-- Natural gas production volumes decreased 24 percent to 93.7
MMcf/d from 123.5 MMcf/d for the third quarter of 2011 and
decreased 21 percent for the nine month period, primarily due
to property dispositions combined with the preferential
allocation of capital to heavy oil production over the past
year, which led to a decline in natural gas production in favor
of bringing higher priced heavy oil onstream. Approximately 4.2
MMcfe/d of oil and natural gas production was lost during the
quarter due to voluntary shut-ins at higher operating cost
fields and a facility turnaround at Edson in west central
Alberta.
-- Total actual and deemed production decreased 15 percent to
139.7 MMcfe/d from 165.3 MMcfe/d for the comparative quarter in
2011, as reduced natural gas production from property
dispositions combined with natural declines were partially
offset by increasing oil and NGL production. For the nine month
period actual and deemed production decreased 10 percent
compared to 2011. The properties disposed of in the first nine
months of 2012 were producing approximately 10.9 MMcf/d of
natural gas and 735 bbl/d of oil and NGL (15.3 MMcfe/d) at the
dates of disposition.
-- Total production and operating costs decreased to $20.7 million
for the third quarter of 2012 from $22.5 million for the same
period in 2011, due primarily to reduced labour costs and
dispositions, including the disposition of 90 percent of
Perpetual's gas storage business, Warwick Gas Storage LP ("WGS
LP"), effective April 25, 2012, partially offset by higher well
suspension costs. Unit operating costs increased to $1.98 per
Mcfe and $1.83 per Mcfe for the three and nine months ended
September 30, 2012 from $1.81 per Mcfe and $1.65 per Mcfe for
comparative periods in 2011. Operating costs were higher on a
unit-of-production basis as fixed operating costs for natural
gas operations were higher relative to reduced natural gas
production volumes, and operating costs associated with
increasing heavy oil production in the Eastern district were
higher relative to gas production operations.
-- Perpetual's realized gas prices decreased to $3.44 per Mcf and
$3.28 per Mcf, respectively for the third quarter and first
nine months of 2012 (2011 - $3.75 per Mcf and $3.98 per Mcf)
due to lower AECO prices which averaged $2.19 per Mcf and $2.18
per Mcf for the three and nine month periods respectively (2011
- $3.72 per Mcf and $3.74 per Mcf). The impact of lower gas
prices was largely offset by realized gains on derivatives of
$9.4 million and $27.0 million respectively.
-- Perpetual's realized oil and NGL price decreased 15 percent to
$59.63 per bbl from the third quarter 2011 as a result of wider
heavy oil differentials, lower NGL prices and losses of $1.4
million on financial WTI contracts.
-- Perpetual realized a modest increase in commodity prices on a
natural gas equivalent basis to $4.58 per Mcfe for the third
quarter of 2012 as compared to $4.46 per Mcfe in the same
period in 2011. This demonstrates that the Corporation's risk
management and commodity diversification strategies are
partially mitigating the negative impacts of reduced commodity
prices as the percentage of higher priced oil and NGL
production in Perpetual's production mix has grown.
Financial
-- Funds flow netbacks decreased 35 percent to $1.01 per Mcfe in
the third quarter of 2012 from $1.56 per Mcfe in the comparable
period for 2011, driven primarily by lower gas prices and
production, partially offset by higher realized gains on
derivatives, lower cash costs and a 67 percent increase in oil
and NGL production.
-- Funds flow declined to $10.8 million ($0.07 per common share)
from $19.3 million ($0.13 per common share) for the third
quarter of 2011. Funds flow for the nine month period totaled
$37.9 million ($0.26 per common share) as compared to $61.1
million ($0.41 per common share) for the first nine months of
2011. The decrease was caused primarily by lower natural gas
revenues, partially offset by higher oil and NGL production,
realized gains on derivatives, and a decrease in royalties and
general and administrative expenses.
-- The Corporation reported a net loss of $6.2 million ($0.04 per
basic and diluted common share) for the three months ended
September 30, 2012 as compared to a net loss of $24.3 million
($0.17 per basic and diluted common share) for the 2011 period.
The lower net loss was primarily a result of the
reclassification of $28.5 million in gas over bitumen royalty
adjustments to revenue in the quarter and gains on property
dispositions of $7.3 million, partially offset by an unrealized
loss on derivatives of $21.0 million.
-- Net earnings for the first nine months of 2012 increased to
$6.7 million ($0.05 per basic and diluted common share) from a
loss of $57.2 million ($0.39 per basic and diluted common
share) in 2011 as a result of the gain on WGS LP of $40.8
million and the reclassification of gas over bitumen
adjustments to revenue.
-- Net debt decreased 25 percent or $132.0 million over the first
nine months of 2012, as a result of continued success on
Perpetual's asset disposition program. Net debt to trailing
four quarters' funds flow increased to 8.0 times for the three
months ended September 30, 2012 compared to 7.2 times for the
quarter ended December 31, 2011, primarily due a decrease in
funds flows for the trailing four quarters driven by lower
natural gas prices.
Subsequent Events
-- Subsequent to the reporting date, the Corporation entered into
contracts to offset 64,250 GJ/d of fixed price sales contracts
for November and December 2012 with purchases at an average
price of $3.24 per GJ, crystallizing a gain of $0.6 million.
Outlook and Sensitivities
The Board of Directors has approved a $10 million expansion to the
capital spending budget for the fourth quarter of 2012 to $16.4
million, bringing total capital spending to $75 million for 2012.
Spending will be focused primarily on Wilrich drilling in the Edson
area, where operations are underway to drill up to four (2.5 net)
liquids-rich natural gas wells to further delineate the West Edson and
Edson South Wilrich trends.
The Corporation has risk management contracts in place for approximately
40 percent of estimated actual plus deemed natural gas production for
the fourth quarter of 2012 at an average price of $2.96 per GJ and 11
percent of projected 2013 actual plus deemed natural gas production at
an average price of $3.74 per GJ. Oil price management contracts are
also in place to protect average WTI floor prices of $US84.25 for the
fourth quarter of 2012 and $US88.00 for 2013 on 2,000 bbl/d of
production.
The following sensitivity table reflects Perpetual’s projected funds
flow for the fourth quarter of 2012 at various commodity price levels.
These sensitivities incorporate average daily production of 3,300 bbl/d
of oil & NGL, 92 MMcf/d of natural gas, operating costs of $20 million,
cash general and administrative expenses of $7 million and an interest
rate on bank debt of 5.4 percent.
Projected funds flow, fourth quarter of 2012(2) AECO Gas Price (1)
($millions) ($/GJ)
$3.00 $3.25 $3.50 $4.00
WTI oil price $75.00 7 9 10 13
($US/bbl) $85.00 8 9 11 14
$95.00 9 11 12 15
$105.00 10 11 13 16
(1) The current settled and forward average AECO and WTI prices for
October to December
2012 as of November 9, 2012 were $2.85 per GJ and $US87.23 per
bbl, respectively.
(2) These are non-GAAP measures; see "Other non-GAAP measures" in
management's
discussion and analysis.
For 2013 Perpetual’s Board of Directors has approved a capital spending
plan of up to $75 million which will be highly focused on continued
development of heavy oil in the Mannville area of eastern Alberta and
liquids-rich natural gas at Edson. The program incorporates a two rig
development drilling program for Mannville heavy oil in the first
quarter, but allows flexibility to manage spending in the second half
of the year, to be focused either on Mannville heavy oil or at Edson
depending on commodity prices.
The following table reflects Perpetual’s projected funds flow for 2013
at various commodity price levels. These sensitivities incorporate
monthly settlement of existing derivatives, average daily production of
4,100 bbl/d of oil and NGL, 82 MMcf/d of natural gas, operating costs
of $86 million, cash general and administrative expenses of $24 million
and an interest rate on bank debt of 5.4 percent.
Projected funds flow for 2013(2) ($ millions) AECO Gas Price
(1) ($/GJ)
$3.00 $3.25 $3.50 $4.00
WTI oil
price (1) $75.00 33 40 48 62
($US/bbl) $85.00 38 45 52 67
$95.00 41 48 55 70
$105.00 47 54 61 76
(1) The current forward average AECO and WTI prices for 2013 as of
November 9,
2012 were $3.19 per GJ and $US 88.98 per bbl, respectively.
(2) These are non-GAAP measures; see "Other non-GAAP measures" in
management's discussion and analysis.
Further to the above forecasts, Perpetual will continue to pursue
additional dispositions in 2013, including the potential divestiture of
its Elmworth Montney assets, and anticipates consummating additional
disposition transactions in the first quarter of 2013. Proceeds from
the potential divestitures would be utilized to strengthen the balance
sheet and to enhance the Corporation’s ability to pursue further
investment opportunities, depending upon the outlook for commodity
prices at that time.
FirstEnergy/Societe Generale Energy Growth Conference
Perpetual also advises that management will be presenting at the
FirstEnergy/Societe Generale Energy Growth Conference at the Ritz
Carlton Hotel in Toronto at 8:40 a.m. Eastern Time on Wednesday,
November 14, 2012. A copy of the presentation will be posted to
Perpetual’s website, www.perpetualenergyinc.com, shortly before the presentation and the webcast archive will also be
accessible through the website following the presentation.
Forward-Looking Information
Certain information regarding Perpetual Energy in this news release
including management’s assessment of future plans and operations and
including the information contained under the heading “Outlook and
Sensitivities” above may constitute forward-looking statements under
applicable securities laws. The forward-looking information includes,
without limitation, statements regarding expected access to capital
markets; prospective drilling activities; forecast production,
production type, operations, funds flows, and timing thereof; forecast
and realized commodity prices; expected funding, allocation and timing
of capital expenditures; projected use of funds flow; planned drilling
and development and the results thereof; expected dispositions and the
use of proceeds therefrom; commodity prices; and estimated funds flow
sensitivity. Various assumptions were used in drawing the conclusions
or making the forecasts and projections contained in the
forward-looking information contained in this press release, which
assumptions are based on management analysis of historical trends,
experience, current conditions, and expected future developments
pertaining to Perpetual and the industry in which it operates as well
as certain assumptions regarding the matters outlined above.
Forward-looking information is based on current expectations, estimates
and projections that involve a number of risks, which could cause
actual results to vary and in some instances to differ materially from
those anticipated by Perpetual and described in the forward looking
information contained in this press release. Undue reliance should not
be placed on forward-looking information, which is not a guarantee of
performance and is subject to a number of risks or uncertainties,
including without limitation those described under “Risk Factors” in
Perpetual’s MD&A for the year ended December 31, 2011 and those
included in reports on file with Canadian securities regulatory
authorities which may be accessed through the SEDAR website (www.sedar.com and at Perpetual’s website www.perpetualenergyinc.com). Readers are cautioned that the foregoing list of risk factors is not
exhaustive. Forward-looking information is based on the estimates and
opinions of Perpetual’s management at the time the information is
released and Perpetual disclaims any intent or obligation to update
publicly any such forward-looking information, whether as a result of
new information, future events or otherwise, other than as expressly
required by applicable securities laws.
Non-GAAP Measures
This news release contains financial measures that may not be calculated
in accordance with generally accepted accounting principles in Canada
(“GAAP”). Readers are referred to advisories and further discussion on
non-GAAP measures contained in the “Significant Accounting Policies and
non-GAAP Measures” section of management’s discussion and analysis.
Perpetual Energy Inc. is a natural gas-focused Canadian energy company
with a growing base of oil and NGL assets. Perpetual’s shares and
convertible debentures are listed on the Toronto Stock Exchange under
the symbol “PMT”, “PMT.DB.D” and “PMT.DB.E”, respectively. Further
information with respect to Perpetual can be found at its website at www.perpetualenergyinc.com.
The Toronto Stock Exchange has neither approved nor disapproved the
information contained herein.
FINANCIAL AND Three Months Ended Nine Months Ended
OPERATING HIGHLIGHTS September 30 September 30
($Cdn thousands
except volume and per % %
share amounts) 2012 2011 Change 2012 2011 Change
Financial
Revenue (1) 47,973 60,594 (21) 155,462 189,165 (18)
Funds flow (2) 10,760 19,318 (44) 37,929 61,093 (38)
Per share (3) 0.07 0.13 (46) 0.26 0.41 (37)
Net earnings (loss) (6,158) (24,343) (76) 6,701 (57,229) 113
Per share - basic
(3) (0.04) (0.17) (76) 0.05 (0.39) 113
Per share - diluted
(3) (0.04) (0.17) (76) 0.05 (0.39) 113
Total assets 802,094 1,013,923 (21) 802,094 1,013,923 (21)
Net bank debt
outstanding (2) 84,925 120,304 (29) 84,925 120,304 (29)
Senior notes, at
principal amount 150,000 150,000 - 150,000 150,000 -
Convertible
debentures, at
principal amount 159,972 234,897 (32) 159,972 234,897 (32)
Total net debt (2) 394,897 505,201 (22) 394,897 505,201 (22)
Shareholders' equity 88,233 118,093 (25) 88,233 118,093 (25)
Capital expenditures
Exploration,
development and gas
storage 17,922 41,099 (56) 58,590 111,825 (48)
Acquisitions, net
of dispositions (14,498) (1,996) (626) (157,840) (31,207) (406)
Other 44 289 (85) 197 491 (60)
Net capital
expenditures 3,468 39,392 (91) (99,053) 81,109 (222)
Common Shares
outstanding
(thousands)
End of period 147,122 147,236 - 147,122 147,236 -
Weighted average 147,123 147,408 - 148,748 147,960 1
Shares outstanding at
November 12, 2012 147,137 147,137
Operating
Daily average
production
Natural gas
(MMcf/d)(5) 93.7 123.5 (24) 104.1 131.3 (21)
Oil and NGL (bbl/d)
(5) 3,336 1,995 67 3,418 1,803 90
Total (MMcfe/d) (5) 113.7 135.5 (16) 124.7 142.1 (12)
Gas over bitumen
deemed production
(MMcf/d) (4) 26.0 29.8 (13) 27.0 26.1 3
Average daily
(actual and deemed
- MMcfe/d) (4,5) 139.7 165.3 (15) 151.7 168.2 (10)
Per common share
(cubic feet
equivalent/d/Share)
(3) 0.95 1.12 (15) 1.02 1.14 (11)
Average prices
Natural gas,
before derivatives
($/Mcf) 2.36 3.56 (34) 2.33 3.91 (40)
Natural gas,
including
derivatives ($/Mcf) 3.44 3.75 (8) 3.28 3.98 (18)
Oil and NGL,
before derivatives
($/bbl) 64.24 70.15 (8) 65.04 71.28 (9)
Oil and NGL,
including
derivatives ($/bbl) 59.63 70.15 (15) 61.64 71.28 (14)
Natural gas
equivalent,
including
derivatives
($/Mcfe) 4.58 4.46 3 4.43 4.58 (3)
Land(thousands of net
acres)
Undeveloped land
holdings 1,689 1,854 (9) 1,689 1,854 (9)
Drilling(wells
drilled gross/net)
Gas (80)/ (50)/
1/0.5 5/5.0 (90) 5/4.0 10/9.5 (58)
Gas storage (100)/ (100)/
-/- 1/1.0 (100) -/- 3/3.0 (100)
Oil 12/11.3 8/8.0 50/41 34/32.6 23/22 48/48
Oil sands (100)/ (100)/
evaluation -/- 1/1.0 (100) -/- 8/8.0 (100)
Total (13)/
13/11.8 15/15.0 (21) 39/36.6 23/22.5 70/63
Success rate (%) 100/100 100/100 -/- 100/100 100/100 -/-
(1) Revenue includes realized gains (losses) on derivatives.
(2) These are non-GAAP measures. Please refer to "Non-GAAP Measures"
included in management's discussion and analysis.
(3) Based on weighted average basic or diluted Common Shares
outstanding for the period.
(4) The deemed production volume describes all gas shut-in or denied
production pursuant to a decision report, corresponding order or
general bulletin of the Alberta Energy and Utilities Board
("AEUB"), or through correspondence in relation to an AEUB ID
99-1 application.
This deemed production volume is not actual gas sales but
represents shut-in gas that is the basis of the gas over bitumen
financial
solution which is received monthly from the Alberta Crown as a
reduction against other royalties payable.
(5) Production amounts are based on the Corporation's interest
before royalties expense.
SOURCE Perpetual Energy Inc.
