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Press release from Marketwire

Petrobank Reports Q3 2012 Financial and Operating Results

Monday, November 12, 2012

Petrobank Reports Q3 2012 Financial and Operating Results15:46 EST Monday, November 12, 2012CALGARY, ALBERTA--(Marketwire - Nov. 12, 2012) - Petrobank Energy and Resources Ltd. (TSX:PBG) announces our 2012 third quarter financial and operating results highlighted by funds flow from operations of $1.19 per diluted share.Petrobank's results include the financial and operating results of PetroBakken Energy Ltd. (TSX:PBN), 57% owned by Petrobank at September 30, 2012. PetroBakken announced third quarter financial and operating results on November 7, 2012. This news release includes forward-looking statements and information within the meaning of applicable securities laws. Readers are advised to review "Forward-Looking Information and Statements" at the conclusion of this news release. Readers are also referred to "Non-GAAP Measures" at the end of this news release for information regarding the presentation of the financial information in this news release. A full copy of our 2012 Third Quarter Financial Statements and MD&A have been filed on our website at www.petrobank.com and under our profile on SEDAR at www.sedar.com.In this report, quarterly comparisons are third quarter 2012 compared to third quarter 2011 unless otherwise noted. All financial figures are unaudited and in Canadian dollars ($) unless otherwise noted.HIGHLIGHTSQ3 2012 Financial and Operating HighlightsFunds flow from operations decreased 19 percent from the third quarter of 2011 to $119.6 million, or $1.19 per diluted share, primarily as a result of lower realized commodity prices, as light oil differentials to WTI were wider than historical levels. PetroBakken's third quarter production averaged 38,503 barrels of oil equivalent per day ("boepd") (82% light oil and liquids), relatively flat over the third quarter of 2011, due primarily to the disposition of producing assets in the first half of 2012 and a delayed start to the second half 2012 capital program. PetroBakken's nine month production averaged 41,303 boepd, a 7% increase over the same period in 2011. Capital expenditures before dispositions totalled $292.7 million in the third quarter with PetroBakken drilling 82 net wells. Production from Petrobank's Kerrobert project averaged 305 barrels of upgraded THAI(R) oil per day ("bopd") in Q3 2012, an increase from 236 bopd in Q2 2012. In mid-September, we renewed our Normal Course Issuer Bid ("NCIB") and can repurchase and cancel up to 7,784,304 Petrobank shares until September 13, 2013. Under this NCIB and through our Automatic Share Repurchase and PetroBakken Share Sale Plan, we have repurchased 3.5 million Petrobank shares and sold an equivalent number of PetroBakken shares through to October 31, 2012. The sale of one PetroBakken share for each Petrobank share repurchased under this plan resulted in net cash proceeds to Petrobank of $1.1 million. On October 29, 2012, Petrobank and PetroBakken entered into an agreement to complete a corporate reorganization that will see Petrobank shareholders effectively receive Petrobank's proportionate interest in our PetroBakken share holdings while maintaining their interest in the remaining Petrobank assets (the "Reorganization"). A joint information circular describing the Reorganization is expected to be mailed to shareholders in mid-November for a shareholder vote in mid-December. Subject to approval of shareholders of both Companies and other standard approvals, the Reorganization will be effective December 31, 2012.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 September 30, 2012, on a standalone basis independent of PetroBakken, Petrobank's HBU and Corporate operating segment had cash and cash equivalents of $96.1 million and a net working capital surplus (including cash) of $84.9 million. Based on Petrobank's current ownership and PetroBakken's current annual dividend of $0.96 per PetroBakken share, Petrobank expects to receive approximately $8.5 million of dividends per month. 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. We anticipate that we will receive the October and November PetroBakken dividends in PetroBakken shares through the DRIP and the December dividend (payable in January 2013) in cash.Petrobank currently expects to fund our future working capital requirements and HBU capital expenditure program with available cash and cash from operations.PETROBANK AND PETROBAKKEN REORGANIZATIONOn October 29, 2012, PetroBakken and Petrobank entered into an arrangement agreement that will see Petrobank shareholders receive Petrobank's proportionate interest in PetroBakken (the "Reorganization"). Pursuant to the Reorganization, a new Alberta corporation will be formed ("New Petrobank") which will acquire all of the existing assets and liabilities of Petrobank, including THAI® and related technologies, but excluding Petrobank's ownership interest in PetroBakken shares, and existing shareholders of Petrobank will receive one share of New Petrobank for each Petrobank share held. Following this distribution of Petrobank's heavy oil business to New Petrobank, Petrobank and PetroBakken will, through a series of transactions, amalgamate, with the resulting company to continue under the name "PetroBakken Energy Ltd." ("New PetroBakken"). Existing PetroBakken shareholders will receive one share of New PetroBakken for every share of PetroBakken held prior to the Reorganization and Petrobank shareholders will receive, in aggregate, a number of New PetroBakken shares equal to the number of PetroBakken shares held by Petrobank immediately prior to the Reorganization, being approximately 1.06 to 1.10 New PetroBakken shares for each Petrobank share held. The number of shares outstanding in New PetroBakken will be the same as the number of shares outstanding in PetroBakken immediately prior to the Reorganization. The Reorganization will not result in any changes to the business of Petrobank or our existing Board and senior management. The Reorganization is subject to the approval of the shareholders of each of Petrobank and PetroBakken. SUMMARY OF FINANCIAL AND OPERATING RESULTSThe following table provides a summary of Petrobank's financial and operating results for the three and nine months ending September 30, 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 www.petrobank.com and on the SEDAR website at www.sedar.com.Summary of ResultsThree months ended Sept. 30,Nine months ended Sept. 30,20122011% Change20122011% ChangeFinancial($000s, except where noted)Oil and natural gas sales237,833272,346(13)808,399828,595(2)Funds flow from operations (1)119,570147,452(19)419,750464,276(10) Per share - basic ($)1.201.39(14)4.064.37(7)- diluted ($)1.191.37(13)4.024.27(6)Adjusted net income attributable to Petrobank shareholders (1)13,4957,51780127,80138,155235Per share - basic ($)0.140.071001.240.36244- diluted ($)0.130.07861.220.34259Capital expenditures (1)PetroBakken283,078271,8614%599,255692,352(13)Heavy Oil Business Unit ("HBU")9,62430,772(69)32,027140,668(77)Total capital expenditures292,702302,633(3)631,282833,020(24)Total assets6,471,7386,852,270(6)6,471,7386,852,270(6)Common shares outstanding, end of period (000s)Basic98,741106,327(7)98,741106,327(7)Diluted (2)102,892111,216(7)102,892111,216(7)OperationsPetroBakken operating netback ($/boe) (1) (3)Oil, NGL and natural gas revenue (4)66.5875.37(12)71.0477.98(9)Royalties9.0912.20(25)10.2612.36(17)Production expenses12.4013.13(6)12.7812.73-Operating netback (1) (3) (5)45.0950.04(10)48.0052.89(9)Average daily production (3)PetroBakken - oil and NGL (bbls)31,66233,112(4)34,73332,9655PetroBakken - natural gas (Mcf)41,04835,7761539,42034,03016Total conventional (boe) (3)(6)38,50339,074(1)41,30338,6367(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 CALL (NEW TIME)Management of Petrobank will be holding a conference call for investors, financial analysts, media and any interested persons on Tuesday, November 13, 2012 at 8:30 a.m. Mountain Time (10:30 a.m. Eastern Time) to discuss Petrobank's third quarter financial and operating results. The investor conference call details are as follows:Live call dial-in number(s): 416-695-7806 / 888-789-9572Live pass code: 5264057 Replay dial-in numbers: 905-694-9451 / 800-408-3053Replay pass code: 5146272The live audio webcast link is: http://events.digitalmedia.telus.com/petrobank/111312/index.php and is also available on our website at: http://www.petrobank.com/investors/presentations-webcasts.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 57% 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, timing for the Reorganization 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: Contact Information: Petrobank Energy and Resources Ltd.John D. WrightPresident and Chief Executive Officer403.750.4400Petrobank Energy and Resources Ltd.Chris J. BloomerSenior Vice President and Chief Operating Officer, Heavy Oil403.750.4400Petrobank Energy and Resources Ltd.Peter CheungVice President Finance and Chief Financial Officer403.750.4400Petrobank Energy and Resources Ltd.Suite 3000, 525 - 8th Avenue S.W.,Calgary, Alberta, T2P 1G1403.750.4400403.266.5794 (FAX)ir@petrobank.comwww.petrobank.com