The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Marketwire

Petrobank Reports Q1 2012 Financial Results and Operational Update

Monday, May 14, 2012

Petrobank Reports Q1 2012 Financial Results and Operational Update18:45 EDT Monday, May 14, 2012CALGARY, ALBERTA--(Marketwire - May 14, 2012) - Petrobank Energy and Resources Ltd. (TSX:PBG) announces our 2012 first quarter financial and operating results highlighted by funds flow from operations of $1.69 per diluted share, an increase of eight percent from the first quarter of 2011.Petrobank's results include the financial and operating results of PetroBakken Energy Ltd. (TSX:PBN), 59% owned by Petrobank at March 31, 2012. PetroBakken announced first quarter financial and operating results on May 2, 2012. This news release includes forward-looking statements and information within the meaning of applicable securities laws. Readers are advised to review "Forward-Looking Information and Statements" at the conclusion of this news release. Readers are also referred to "Non-GAAP Measures" at the end of this news release for information regarding the presentation of the financial information in this news release. A full copy of our 2012 First Quarter Financial Statements and MD&A have been filed on our website at and under our profile on SEDAR at this report, quarterly comparisons are first quarter 2012 compared to first quarter 2011 unless otherwise noted. All financial figures are unaudited and in Canadian dollars ($) unless otherwise noted.HIGHLIGHTSQ1 2012 Financial and Operating HighlightsFunds flow from operations increased eight percent from the first quarter of 2011 to $181.3 million, or $1.69 per diluted share, primarily as a result of PetroBakken's higher production and gross operating netbacks. PetroBakken's first quarter production, after dispositions, averaged 46,722 barrels of oil equivalent per day ("boepd") (86% light oil and liquids weighted), a 12% increase over the first quarter of 2011. Capital expenditures before dispositions totalled $224.3 million in the first quarter with PetroBakken drilling 68 (47 net) wells. Petrobank sold the May River property for gross proceeds of $225 million and PetroBakken completed four transactions to sell non-core assets in the first quarter for total gross proceeds of $624 million. Both Petrobank and PetroBakken improved their financial liquidity significantly with Petrobank having over $100 million of cash at March 31 and PetroBakken's currently available credit facility capacity rising to more than $1.1 billion. Petrobank Standalone Highlights Kerrobert production averaged 193 barrels of upgraded THAI® oil per day ("bopd") in Q1 2012 and continued to increase with April 2012 production averaging 278 bopd. We sold the May River property, including the Conklin demonstration project, on February 28, 2012 for cash proceeds of approximately $225 million, net of closing adjustments, and concurrently cancelled our credit facility and withdrew our May River regulatory application. We initiated purchases under our Normal Course Issuer Bid ("NCIB") and have repurchased and cancelled approximately 2.2 million shares at an average cost of $14.84 per share. Through our Automatic Share Repurchase and PetroBakken Share Sale Plan, we have sold 944,600 shares of PetroBakken for cash proceeds of approximately $12.9 million. We are revising our 2012 development plan to bring certain incremental conventional cold heavy oil production on-stream. Additionally, we intend to place our horizontal wells at Dawson on conventional cold production in order to pre-condition the reservoir prior to initiation of our THAI® project. OPERATIONAL UPDATE AND REVISED 2012 DEVELOPMENT PLANKerrobert THAI® ProjectPetrobank is pleased to report that THAI(R) production continues to increase. Production in April 2012 averaged 278 bopd compared to 264 bopd in March and 193 bopd in the first quarter of 2012. These production volumes represent actual sale volumes for each period reported. Our operating philosophy remains unchanged with a focus on gradually increasing production, reducing pump and surface downtime and reducing per-barrel operating costs.We plan to drill a water disposal well near our Kerrobert Project this summer which will significantly reduce water disposal costs. Dawson THAI® Demonstration ProjectPetrobank deferred completion of the Dawson Demonstration Project in late 2011 to save on costs associated with winter start-up of a THAI(R) project. Since that time, we have continued to review the Dawson reservoir and project plans. Based on this analysis, we have determined that the Dawson reservoir would benefit from being pre-conditioned for THAI® operations by producing conventional cold heavy oil from our current horizontal production wells. We expect to begin the two-well THAI(R) demonstration project in 2013 and the full field THAI® development application is expected to be filed after the THAI(R) demonstration project is on production.Saskatchewan Conventional Cold Heavy Oil ProductionPetrobank has identified multiple opportunities to utilize some of the existing wells on our Saskatchewan lands for conventional cold heavy oil production. Some of these wells offset our Kerrobert THAI® project and others are on our Plover and Luseland properties. While Petrobank's primary focus is THAI® production, we will take advantage of existing opportunities on our lands to increase production. Success with these completions and reactivations may lead to additional conventional drilling opportunities. 2012 Capital Plan and ProductionPetrobank forecasts that our 2012 development capital will remain unchanged at approximately $34 million. Capital in our original plan which was allocated to May River and completing the Dawson Demonstration Project has been reallocated to reduce operating costs, add conventional cold heavy oil production and pre-condition the reservoir for our Dawson THAI® project. NORMAL COURSE ISSUER BID AND PETROBAKKEN SHARE SALE PLANIn March, we repurchased 1,246,000 common shares under our NCIB at an average cost of $16.05 per share. In April, we entered into an Automatic Share Repurchase and PetroBakken Share Sale Plan (the "Plan") pursuant to which our designated broker has been instructed to automatically sell one PetroBakken share for each Petrobank share purchased under the Plan, subject to certain trading parameters set forth in the Plan and to daily and aggregate trading limits imposed by the rules and policies of the Toronto Stock Exchange. The broker may repurchase and sell up to 6,027,401 Petrobank shares and PetroBakken shares, respectively. The Plan will cease on the earlier of the termination of the Plan by Petrobank, the purchase of the maximum number of shares under the NCIB or the expiry of the NCIB on September 13, 2012. Under the Plan, the broker has repurchased 944,600 Petrobank shares and sold 944,600 PetroBakken shares for net proceeds to Petrobank of approximately $380,000. Since January, 2012, Petrobank has also received approximately 1.8 million PetroBakken shares under PetroBakken's dividend reinvestment plan ("DRIP"), including approximately 1.3 million shares for the March and April 2012 dividends. PETROBANK'S LIQUIDITY AND CAPITAL RESOURCESPetrobank and PetroBakken manage their capital structure independently, 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 March 31, 2012, on a standalone basis independent of PetroBakken, Petrobank's HBU and Corporate operating segment had cash and cash equivalents of $116.8 million and a net working capital surplus (including cash) of $103.9 million. Based on Petrobank's current ownership and PetroBakken's current annual dividend of $0.96 per PetroBakken share, Petrobank expects to receive approximately $106 million of dividends annually from PetroBakken, paid monthly. PetroBakken instituted a DRIP in early 2012, which allows shareholders to reinvest monthly cash dividends in new shares at a five percent discount to the then current market price. Due to Petrobank's significant positive working capital balance, we elected 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 our 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.SUMMARY OF FINANCIAL AND OPERATING RESULTSThe following table provides a summary of Petrobank's financial and operating results for the three months ending March 31, 2012 and 2011. Unaudited condensed interim consolidated financial statements with Management's Discussion and Analysis ("MD&A") will be available on the Company's website at and on the SEDAR website at of ResultsThree months ended March 31,20122011% ChangeFinancial($000s, except where noted)Oil and natural gas sales330,361281,29717Funds flow from operations (1)181,290168,3848Per share - basic ($)1.701.588- diluted ($)1.691.578Adjusted net income (loss) attributable to Petrobank shareholders (1)82,307(21)-Per share - basic ($)0.770.00-- diluted ($)0.760.00-Capital expenditures (1)PetroBakken206,421307,481(33)Heavy Oil Business Unit ("HBU")17,87854,255(67)Total capital expenditures (1)224,299361,736(38)Total assets6,363,8266,538,606(3)Common shares outstanding, end of period (000s)Basic105,667106,257(1)Diluted (2)109,987109,953-OperationsPetroBakken operating netback ($/boe) (1) (3)Oil, NGL and natural gas revenue (4)77.3674.464Royalties11.9211.841Production expenses12.6110.2024Operating netback (1) (3) (5)52.8352.421Average daily production (3)PetroBakken - oil and NGL (bbls)40,33636,14012PetroBakken - natural gas (Mcf)38,32032,53418Total conventional (boe) (3)(6)46,72241,56212(1) Non-GAAP measure. See "Non-GAAP Measures" section. (2) Consists of common shares, stock options, directors deferred common shares, deferred common shares, and incentive shares as at the period end date.(3) Six Mcf of natural gas is equivalent to one barrel of oil equivalent ("boe"). (4) Net of transportation expenses. (5) Excludes hedging activities. (6) HBU heavy oil volumes are excluded from average daily production as HBU operations are considered to be in the exploration and evaluation phase and accordingly are capitalized.INVESTOR CONFERENCE CALLManagement of Petrobank will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, May 15, 2012 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) to discuss Petrobank's first quarter financial and operating results. The investor conference call details are as follows:Live call dial-in number(s): 416-695-6616 / 800-952-6845Replay dial-in numbers: 905-694-9451 / 800-408-3053Replay pass code: 4657181The live audio webcast link is: and is also available on our website at: Energy and Resources 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 and 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, adding back any losses or deducting any gains on settlement of convertible debentures, 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. 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. Capital expenditures represent expenditures on property, plant and equipment, exploration and evaluation expenditures and other expenditures. Funds flow from operations, funds flow per share, adjusted net income, adjusted net income per share, operating netbacks, 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:Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to financial results, results from operations, the timing of certain projects and anticipated sources of available financing. Forward-looking statements are necessarily based on a number of assumptions and judgments, including but not limited to, assumptions relating to the outlook for commodity and capital markets, the success of future resource evaluation and development activities, the successful application of our technology, the performance of producing wells and reservoirs, well development and operating performance, general economic conditions, weather and the regulatory and legal environment. 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. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; weather conditions and access to our properties; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability; outcome of exploration contract negotiations; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; uncertainties associated with the regulatory review and approval process in respect to our projects; risks associated with the application of early stage technology; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. 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 forecasted. Except as may be required by applicable securities laws, Petrobank assumes no obligation to publicly update or revise any forward-looking statements made herein 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.FOR FURTHER INFORMATION PLEASE CONTACT: John D. WrightPetrobank Energy and Resources Ltd.President and Chief Executive Officer403.750.4400ORChris J. BloomerPetrobank Energy and Resources Ltd.Senior Vice President and Chief Operating Officer, Heavy Oil403.750.4400ORPeter CheungPetrobank Energy and Resources Ltd.Vice President Finance and Chief Financial