CALGARY, Aug. 8, 2018 /CNW/ - Yangarra
Resources Ltd. ("Yangarra" or the
"Company") (TSX:YGR) announces its financial and operating
results for the three and six months ended June 30, 2018.
Second Quarter Highlights
- Reached 10,000 boe/d of production at the end of the
quarter.
- Average production of 7,570 boe/d (60% liquids) during the
quarter an increase of 1% from the first quarter of 2018 and 33%
increase from the same period in 2017.
- Oil and gas sales were $29.9
million, an increase of 53% from the same period in 2017.
- Funds flow from operations of $17.0
million ($0.20 per share -
basic), an increase of 41% from the same period in 2017.
- Adjusted EBITDA (which excludes changes in derivative financial
instruments) was $16.6 million
($0.20 per share - basic).
- Net income of $1.6 million
($0.02 per share - basic) or
$2.6 million net income before
tax.
- Operating costs were $7.72/boe
(including $1.31/boe of
transportation costs).
- Field netbacks were $31.82 per
boe.
- Operating netbacks, which include the impact of commodity
contracts, were $26.64 per boe.
- Operating margins were 61% and cash flow margins were
57%.
- G&A costs of $0.56/boe.
- Royalties were 9% of oil and gas revenue.
- Total capital expenditures were $26
million.
- Commissioned the 20 mmcf/d Ferrier West facility together with
the Company's third oil treating facility.
- Net debt (which excludes current derivative financial
instruments) was $115.1 million.
- Net Debt to annualized second quarter funds flow from
operations was 1.69:1.
- Corporate LMR is 8.78, with decommissioning liabilities of
$11.4 million (discounted).
Operations Update
Yangarra has now drilled a total of 42 bioturbated Cardium
wells. IP 30 results for wells 21-30 had a 10% improvement from
wells 11-20 and a 25% improvement from wells 1-10 (all wells
adjusted for lateral length).
The Company resumed drilling operations in late May and drilled
5 gross/net wells in the second quarter consisting of 3 two-mile
and 2 one-mile horizontal wells. The Q2 drilling program included
various inter-frack spacings on pads ranging from 60-96 stages per
mile which will be compared to the current standard 80 stages per
mile to assist with determining optimal frack spacing.
As a result of continuously improving drilling and production
results, Yangarra continues to update future drilling inventory.
The Company's Cardium type curve is the weighted average of all
future inventory in all areas of the Cardium portfolio. Current
inventory is estimated at 913 gross (716 net) locations (1-mile
wells). Based on current inventory, drilling with 2 rigs year-round
other than breakup, Yangarra estimates it has 16 years (net) of
future inventory. In 2018, the Company added 17 sections of Cardium
land.
Budget Update
The Board of Directors approved an increase in the capital
budget from $90 million to
$120 million for 2018. This
budget will allow the Company to continue to utilize 2 drilling
rigs which optimizes drilling operations and provides economies of
scale.
As the additional spending will occur in the fourth quarter, the
existing guidance of 9,000 - 10,000 boe/d average production for
2018 remains unchanged.
Yangarra estimates that 22 gross (19 net) wells will be put on
production during the second half of 2018, including wells drilled
in the first half of 2018 but expected to be completed in the
second half of 2018.
Management Changes
Yangarra has appointed Gurdeep
Gill as Vice President, Business Development with
responsibilities for business development and capital
markets. Mr. Gill has 18 years of experience in investment
banking and capital markets, most recently as the head of
investment banking at AltaCorp Capital Inc. prior to that, he
worked at National Bank Financial and Tristone Capital Inc.
Financial Summary
|
2018
|
2017
|
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2018
|
2017
|
Statements of
Comprehensive Income
|
|
|
|
|
|
|
Petroleum &
natural gas sales
|
$
|
29,922,471
|
$
|
29,749,716
|
$
|
19,527,395
|
|
$
|
59,672,187
|
$
|
35,076,783
|
|
|
|
|
|
|
|
Net income (before
tax)
|
$
|
2,604,506
|
$
|
8,046,711
|
$
|
7,893,731
|
|
$
|
10,651,217
|
$
|
15,235,464
|
|
|
|
|
|
|
|
Net income
|
$
|
1,646,498
|
$
|
5,658,059
|
$
|
5,611,218
|
|
$
|
7,304,557
|
$
|
10,827,763
|
Net income per share
- basic
|
$
|
0.02
|
$
|
0.07
|
$
|
0.07
|
|
$
|
0.09
|
$
|
0.13
|
Net income per share
- diluted
|
$
|
0.02
|
$
|
0.07
|
$
|
0.07
|
|
$
|
0.08
|
$
|
0.13
|
|
|
|
|
|
|
|
Statements of Cash
Flow
|
|
|
|
|
|
|
Funds flow from
operations
|
$
|
17,004,713
|
$
|
18,637,949
|
$
|
12,047,670
|
|
$
|
35,642,663
|
$
|
22,390,874
|
Funds flow from
operations per share - basic
|
$
|
0.20
|
$
|
0.22
|
$
|
0.15
|
|
$
|
0.42
|
$
|
0.28
|
Funds flow from
operations per share - diluted
|
$
|
0.19
|
$
|
0.22
|
$
|
0.14
|
|
$
|
0.41
|
$
|
0.27
|
Cash from operating
activities
|
$
|
16,288,319
|
$
|
14,988,928
|
$
|
9,241,194
|
|
$
|
31,277,247
|
$
|
17,851,606
|
|
|
|
|
|
|
|
Statements of
Financial Position
|
|
|
|
|
|
|
Property and
equipment
|
$
|
387,733,694
|
$
|
367,513,370
|
$
|
299,963,241
|
|
$
|
387,733,694
|
$
|
299,963,241
|
Total
assets
|
$
|
430,520,160
|
$
|
411,579,250
|
$
|
326,865,302
|
|
$
|
430,520,160
|
$
|
326,865,302
|
Working capital
deficit
|
$
|
18,600,280
|
$
|
18,844,775
|
$
|
69,864,913
|
|
$
|
18,600,280
|
$
|
69,864,913
|
Net Debt (which
excludes current derivative financial instruments)
|
$
|
115,118,849
|
$
|
108,019,791
|
$
|
72,674,034
|
|
$
|
115,118,849
|
$
|
72,674,034
|
Non-Current
Liabilities, excluding bank debt
|
$
|
51,546,663
|
$
|
47,626,159
|
$
|
39,580,252
|
|
$
|
51,546,663
|
$
|
39,580,252
|
Shareholders
equity
|
$
|
224,991,440
|
$
|
218,030,997
|
$
|
197,280,541
|
|
$
|
224,991,440
|
$
|
197,280,541
|
|
|
|
|
|
|
|
Weighted average
number of shares - basic
|
85,019,808
|
82,885,794
|
80,555,880
|
|
83,958,696
|
80,264,589
|
Weighted average
number of shares - diluted
|
87,782,665
|
86,336,165
|
84,065,109
|
|
86,406,125
|
83,388,671
|
|
|
|
|
|
|
|
|
Company Netbacks ($/boe)
|
2018
|
2017
|
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2018
|
2017
|
|
|
|
|
|
|
|
Sales
price
|
$
|
43.43
|
$
|
44.03
|
$
|
37.61
|
|
$
|
43.73
|
$
|
38.02
|
|
Royalty
expense
|
(3.90)
|
(4.15)
|
(2.86)
|
|
(4.02)
|
(2.95)
|
|
Production
costs
|
(6.40)
|
(6.40)
|
(8.26)
|
|
(6.40)
|
(7.70)
|
|
Transportation
costs
|
(1.31)
|
(1.65)
|
(0.73)
|
|
(1.48)
|
(0.82)
|
Field operating
netback
|
31.82
|
31.84
|
25.76
|
|
31.83
|
26.55
|
|
Realized gain (loss)
on commodity contract settlement
|
(5.18)
|
(2.25)
|
0.92
|
|
(3.73)
|
0.61
|
Operating
netback
|
26.64
|
29.59
|
26.68
|
|
28.10
|
27.16
|
|
G&A
|
(0.56)
|
(0.57)
|
(0.92)
|
|
(0.56)
|
(0.74)
|
|
Finance
expenses
|
(1.39)
|
(1.29)
|
(1.95)
|
|
(1.34)
|
(1.79)
|
Funds flow
netback
|
24.69
|
27.73
|
23.81
|
|
26.19
|
24.63
|
|
Depletion and
depreciation
|
(10.00)
|
(10.07)
|
(10.68)
|
|
(10.04)
|
(10.75)
|
|
Accretion
|
(0.08)
|
(0.07)
|
(0.09)
|
|
(0.07)
|
(0.10)
|
|
Stock-based
compensation
|
(1.95)
|
(1.21)
|
(0.71)
|
|
(1.59)
|
(0.76)
|
|
Unrealized gain
(loss) on financial instruments
|
(8.87)
|
(4.47)
|
2.88
|
|
(6.69)
|
3.50
|
|
Deferred income
tax
|
(1.39)
|
(3.54)
|
(4.40)
|
|
(2.45)
|
(4.78)
|
Net Income
netback
|
$
|
2.39
|
$
|
8.37
|
$
|
10.81
|
|
$
|
5.35
|
$
|
11.74
|
Business Environment
|
|
|
|
|
|
|
|
2018
|
2017
|
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2018
|
2017
|
Realized Pricing
(Including realized commodity contracts)
|
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
71.34
|
$
|
68.51
|
$
|
63.69
|
|
$
|
69.89
|
$
|
63.97
|
|
NGL
($/bbl)
|
$
|
31.71
|
$
|
40.50
|
$
|
29.14
|
|
$
|
35.56
|
$
|
29.51
|
|
Gas
($/mcf)
|
$
|
1.16
|
$
|
2.21
|
$
|
3.00
|
|
$
|
1.69
|
$
|
3.08
|
|
|
|
|
|
|
|
Realized Pricing
(Excluding commodity contracts)
|
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
80.03
|
$
|
72.04
|
$
|
62.63
|
|
$
|
75.95
|
$
|
63.39
|
|
NGL
($/bbl)
|
$
|
40.38
|
$
|
45.24
|
$
|
27.85
|
|
$
|
42.51
|
$
|
28.89
|
|
Gas
($/mcf)
|
$
|
1.16
|
$
|
2.21
|
$
|
2.89
|
|
$
|
1.69
|
$
|
2.97
|
|
|
|
|
|
|
|
Oil Price
Benchmarks
|
|
|
|
|
|
|
|
West Texas
Intermediate ("WTI") (US$/bbl)
|
$
|
67.88
|
$
|
62.87
|
$
|
48.29
|
|
$
|
65.37
|
$
|
50.10
|
|
Edmonton Par
(C$/bbl)
|
$
|
80.54
|
$
|
72.06
|
$
|
61.92
|
|
$
|
76.25
|
$
|
62.95
|
|
Edmonton Par to WTI
differential (US$/bbl)
|
$
|
(5.46)
|
$
|
(5.87)
|
$
|
(2.20)
|
|
$
|
(5.67)
|
$
|
(2.89)
|
|
|
|
|
|
|
|
Natural Gas Price
Benchmarks
|
|
|
|
|
|
|
|
AECO gas
(Cdn$/mcf)
|
$
|
1.03
|
$
|
1.85
|
$
|
2.78
|
|
$
|
1.44
|
$
|
2.79
|
|
|
|
|
|
|
|
Foreign
Exchange
|
|
|
|
|
|
|
|
U.S./Canadian Dollar
Exchange
|
$
|
0.78
|
$
|
0.79
|
$
|
0.74
|
|
$
|
0.78
|
$
|
0.75
|
Operations Summary
Net petroleum and natural gas production, pricing and revenue
are summarized below:
|
2018
|
2017
|
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2018
|
2017
|
|
|
|
|
|
|
|
Daily production
volumes
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
18,336
|
18,538
|
15,586
|
|
18,436
|
13,315
|
|
Oil
(bbl/d)
|
3,162
|
3,352
|
2,281
|
|
3,252
|
2,060
|
|
NGL's
(bbl/d)
|
1,353
|
1,066
|
826
|
|
1,214
|
818
|
|
Combined (boe/d
6:1)
|
7,570
|
7,507
|
5,705
|
|
7,539
|
5,097
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Petroleum &
natural gas sales - Gross
|
$
|
29,922,471
|
$
|
29,749,716
|
$
|
19,527,395
|
|
$
|
59,672,187
|
$
|
35,076,783
|
Realized gain (loss)
on commodity contract settlement
|
(3,569,273)
|
(1,522,025)
|
477,734
|
|
(5,091,298)
|
563,652
|
Total
sales
|
26,353,198
|
28,227,691
|
20,005,129
|
|
54,580,889
|
35,640,435
|
Royalty
expense
|
(2,684,294)
|
(2,801,221)
|
(1,487,371)
|
|
(5,485,515)
|
(2,718,546)
|
Total Revenue - Net
of royalties
|
$
|
23,668,904
|
$
|
25,426,470
|
$
|
18,517,758
|
|
$
|
49,095,374
|
$
|
32,921,889
|
Working Capital Summary
The following table summarizes the change in working capital
during the six months ended June 30,
2018 and the year ended December
31, 2017:
|
2018
|
2017
|
Net Debt - beginning
of period
|
$
|
(93,533,252)
|
$
|
(65,005,805)
|
|
|
|
Funds flow from
operations
|
35,642,662
|
52,902,650
|
Additions to
property and equipment
|
(57,322,323)
|
(83,472,094)
|
Decommissioning
costs incurred
|
-
|
(95,433)
|
Additions to
E&E Assets
|
(6,520,031)
|
-
|
Issuance of
shares
|
6,758,792
|
2,179,593
|
Other
|
(144,697)
|
(42,163)
|
Net Debt - end
of period
|
$
|
(115,118,849)
|
$
|
(93,533,252)
|
|
|
|
Credit facility
limit
|
$
|
150,000,000
|
$
|
120,000,000
|
Capital Spending
Capital spending is summarized as follows:
|
2018
|
2017
|
|
Six months
ended
|
Cash
additions
|
Q2
|
Q1
|
Q2
|
|
2018
|
2017
|
|
|
|
|
|
|
|
Land, acquisitions
and lease rentals
|
$
|
92,348
|
$
|
57,142
|
$
|
1,726,569
|
|
$
|
149,490
|
$
|
2,497,484
|
Drilling and
completion
|
19,519,585
|
26,771,512
|
4,299,243
|
|
46,291,097
|
23,963,628
|
Geological and
geophysical
|
199,680
|
139,091
|
284,010
|
|
338,771
|
427,802
|
Equipment
|
6,112,877
|
4,340,961
|
1,382,772
|
|
10,453,838
|
4,293,044
|
Other asset
additions
|
85,687
|
3,439
|
208,438
|
|
89,126
|
215,336
|
|
$
|
26,010,177
|
$
|
31,312,145
|
$
|
7,901,032
|
|
$
|
57,322,322
|
$
|
31,397,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration &
evaluation assets
|
$
|
1,471,820
|
$
|
5,048,211
|
$
|
-
|
|
$
|
6,520,031
|
$
|
-
|
Capital spending is summarized as follows:
Total wells drilled in the half were 15 gross (13.2 net)
consisting of 8 gross (7.7 net) two-mile wells and 7 gross (5.5
net) one-mile wells. The two wells drilling over year-end
2017 were completed in January 2018. The Ferrier West plant
was constructed in the second quarter.
Quarter End Disclosure
The Company's financial statements, notes to the financial
statements and management's discussion and analysis for the year
ended December 31, 2017 and three and
six months ended June 30, 2018 have
been filed on SEDAR (www.sedar.com) and are available on the
Company's website (www.yangarra.ca).
Forward looking information
Certain information regarding Yangarra set forth in this news
release, management's assessment of future plans, operations
and operational results may constitute forward-looking statements
under applicable securities law and necessarily involve risks
associated with oil and gas exploration, production, marketing and
transportation such as loss of market, volatility of prices,
currency fluctuations, imprecision of reserves estimates,
environmental risks, competition from other producers and ability
to access sufficient capital from internal and external
sources. As a consequence, actual results may differ
materially from those anticipated in the forward-looking
statements. Certain of these risks are set out in more detail
in Yangarra's current Annual Information Form, which is available
on Yangarra's SEDAR profile at www.sedar.com.
Forward-looking statements are based on estimates and
opinions of management of Yangarra at the time the statements are
presented. Yangarra may, as considered necessary in the
circumstances, update or revise such forward-looking statements,
whether as a result of new information, future events or otherwise,
but Yangarra undertakes no obligation to update or revise any
forward-looking statements, except as required by applicable
securities laws.
Barrels of Oil Equivalent
Natural gas has been converted to a barrel of oil equivalent
(Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one
barrel of oil (6:1), unless otherwise stated. The Boe
conversion ratio of 6 Mcf to 1 Bbl is based on an energy
equivalency conversion method and does not represent a value
equivalency; therefore Boe's may be misleading if used in
isolation. References to natural gas liquids ("NGLs") in this news
release include condensate, propane, butane and ethane and one
barrel of NGLs is considered to be equivalent to one barrel of
crude oil equivalent (Boe). One ("BCF") equals one billion
cubic feet of natural gas. One ("Mmcf") equals one million
cubic feet of natural gas.
Non-GAAP Financial Measures
This press
release contains references to measures used in the oil and natural
gas industry such as "funds flow from operations", "operating
netback", "adjusted working capital deficit", and "net debt".
These measures do not have standardized meanings prescribed by
generally accepted accounting principles ("GAAP") and,
therefore should not be considered in isolation. These
reported amounts and their underlying calculations are not
necessarily comparable or calculated in an identical manner to a
similarly titled measure of other companies where similar
terminology is used. Where these measures are used they
should be given careful consideration by the reader. These
measures have been described and presented in this press release in
order to provide shareholders and potential investors with
additional information regarding the Company's liquidity and its
ability to generate funds to finance its operations.
Funds flow from operations should not be considered an
alternative to, or more meaningful than, cash provided by
operating, investing and financing activities or net income as
determined in accordance with GAAP, as an indicator of Yangarra's
performance or liquidity. Funds flow from operations is used
by Yangarra to evaluate operating results and Yangarra's ability to
generate cash flow to fund capital expenditures and repay
indebtedness. Funds flow from operations denotes cash flow
from operating activities as it appears on the Company's Statement
of Cash Flows before decommissioning expenditures and changes in
non-cash operating working capital. Funds flow from operations is
also derived from net income (loss) plus non-cash items including
deferred income tax expense, depletion and depreciation expense,
impairment expense, stock-based compensation expense, accretion
expense, unrealized gains or losses on financial instruments and
gains or losses on asset divestitures. Funds from operations
netback is calculated on a per boe basis and funds from operations
per share is calculated as funds from operations divided by the
weighted average number of basic and diluted common shares
outstanding. Operating netback denotes petroleum and natural
gas revenue and realized gains or losses on financial instruments
less royalty expenses, operating expenses and transportation and
marketing expenses calculated on a per boe basis. Adjusted
working capital deficit includes current assets less current
liabilities excluding the current portion of the amount drawn on
the credit facilities, the current portion of the fair value of
financial instruments and the deferred premium on financial
instruments. Yangarra uses net debt as a measure to assess
its financial position. Net debt includes current assets less
current liabilities excluding the current portion of the fair value
of financial instruments and the deferred premium on financial
instruments, plus the long-term financial obligation.
Readers should also note that adjusted earnings before
interest, taxes, depletion & depreciation, amortization
("Adjusted EBITDA") is a non-GAAP financial measures and do
not have any standardized meaning under GAAP and is therefore
unlikely to be comparable to similar measures presented by other
companies. Yangarra believes that Adjusted EBITDA is a useful
supplemental measure, which provide an indication of the results
generated by the Yangarra's primary business activities prior to
consideration of how those activities are financed, amortized or
taxed. Readers are cautioned, however, that Adjusted EBITDA should
not be construed as an alternative to comprehensive income (loss)
determined in accordance with GAAP as an indicator of Yangarra's
financial performance.
Any references in this press release to initial and/or final
raw test or production rates and/or "flush" production rates are
useful in confirming the presence of hydrocarbons, however, such
rates are not determinative of the rates at which such wells will
commence production and decline thereafter. These test results are
not necessarily indicative of long-term performance or ultimate
reserve recovery. While encouraging, readers are cautioned not to
place reliance on such rates in calculating the aggregate
production.
This press release discloses unbooked drilling locations.
Unbooked locations are internal estimates based on the
Corporation's prospective acreage and an assumption as to the
number of wells that can be drilled per section based on industry
practice and internal review. Unbooked locations do not have
attributed reserves or resources. Unbooked locations have been
identified by management as an estimation of our multi-year
drilling activities based on evaluation of applicable geologic,
seismic, engineering, production and reserves information. There is
no certainty that the Corporation will drill all unbooked drilling
locations and if drilled there is no certainty that such locations
will result in additional oil and gas reserves, resources or
production. The drilling locations on which we actually drill wells
will ultimately depend upon the availability of capital, regulatory
approvals, seasonal restrictions, oil and natural gas prices,
costs, actual drilling results, additional reservoir information
that is obtained and other factors. While certain of the unbooked
drilling locations have been derisked by drilling existing wells in
relative close proximity to such unbooked drilling locations, other
unbooked drilling locations are farther away from existing wells
where management has less information about the characteristics of
the reservoir and therefore there is more uncertainty whether wells
will be drilled in such locations and if drilled there is more
uncertainty that such wells will result in additional oil and gas
reserves, resources or production.
All reference to $ (funds) are in Canadian dollars.
Neither the TSX nor its Regulation Service Provider (as that
term is defined in the Policies of the TSX) accepts responsibility
for the adequacy and accuracy of this release.
SOURCE Yangarra Resources Ltd.