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.
HIGHLIGHTS
Q3 2012 Financial and Operating Highlights
-- Funds 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 RESOURCES
Petrobank 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 REORGANIZATION
On 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(R) 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 RESULTS
The 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 Results
Three months ended Nine months ended
Sept. 30, Sept. 30,
% %
2012 2011 Change 2012 2011 Change
----------------------------------------------------------------------------
Financial
($000s, except where
noted)
Oil and natural gas
sales 237,833 272,346 (13) 808,399 828,595 (2)
Funds flow from
operations (1) 119,570 147,452 (19) 419,750 464,276 (10)
Per share
- basic ($) 1.20 1.39 (14) 4.06 4.37 (7)
- diluted ($) 1.19 1.37 (13) 4.02 4.27 (6)
Adjusted net income
attributable to
Petrobank
shareholders (1) 13,495 7,517 80 127,801 38,155 235
Per share
- basic ($) 0.14 0.07 100 1.24 0.36 244
- diluted ($) 0.13 0.07 86 1.22 0.34 259
Capital expenditures
(1)
PetroBakken 283,078 271,861 4% 599,255 692,352 (13)
Heavy Oil Business
Unit ("HBU") 9,624 30,772 (69) 32,027 140,668 (77)
----------------------------------------------------------------------------
Total capital
expenditures 292,702 302,633 (3) 631,282 833,020 (24)
Total assets 6,471,738 6,852,270 (6) 6,471,738 6,852,270 (6)
Common shares
outstanding, end of
period (000s)
Basic 98,741 106,327 (7) 98,741 106,327 (7)
Diluted (2) 102,892 111,216 (7) 102,892 111,216 (7)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
PetroBakken operating
netback ($/boe) (1)
(3)
Oil, NGL and natural
gas revenue (4) 66.58 75.37 (12) 71.04 77.98 (9)
Royalties 9.09 12.20 (25) 10.26 12.36 (17)
Production expenses 12.40 13.13 (6) 12.78 12.73 -
----------------------------------------------------------------------------
Operating netback
(1) (3) (5) 45.09 50.04 (10) 48.00 52.89 (9)
Average daily
production (3)
PetroBakken - oil
and NGL (bbls) 31,662 33,112 (4) 34,733 32,965 5
PetroBakken -
natural gas (Mcf) 41,048 35,776 15 39,420 34,030 16
----------------------------------------------------------------------------
Total conventional
(boe) (3)(6) 38,503 39,074 (1) 41,303 38,636 7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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 / 888-789-9572
Live pass code: 5264057
Replay dial-in numbers: 905-694-9451 / 800-408-3053
Replay pass code: 5146272
The 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(R) heavy oil recovery process in the field. THAI(R) is an evolutionary
in-situ combustion technology for the recovery of bitumen and heavy oil. THAI(R)
and CAPRI(R) 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:
Petrobank Energy and Resources Ltd.
John D. Wright
President and Chief Executive Officer
403.750.4400
Petrobank Energy and Resources Ltd.
Chris J. Bloomer
Senior Vice President and Chief Operating Officer, Heavy Oil
403.750.4400
Petrobank Energy and Resources Ltd.
Peter Cheung
Vice President Finance and Chief Financial Officer
403.750.4400
Petrobank Energy and Resources Ltd.
Suite 3000, 525 - 8th Avenue S.W.,
Calgary, Alberta, T2P 1G1
403.750.4400
403.266.5794 (FAX)
ir@petrobank.com
www.petrobank.com
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