CALGARY, AB, Nov. 22, 2021 /CNW/ - PetroShale Inc.
("PetroShale" or the "Company") (TSXV: PSH) (OTCQB: PSHIF) is
pleased to announce our financial and operating results for the
three and nine month periods ended September
30, 2021.
The Company's unaudited interim consolidated financial
statements and corresponding management's discussion and analysis
(MD&A) for the period will be available on SEDAR at
www.sedar.com, on the OTCQB website at www.otcmarkets.com, and on
PetroShale's website at www.petroshaleinc.com. Copies of the
materials can also be obtained upon request without charge by
contacting the Company directly. Please note, currency figures
presented herein are reflected in Canadian dollars, unless
otherwise noted.
FINANCIAL AND OPERATING HIGHLIGHTS
- Production averaged 11,814 barrels of oil equivalent per day
("Boe/d") in the third quarter of 2021, with the Company's recent
capital program reinforcing our production base at guidance levels
into 2022.
- Continued strength in commodity prices drove improved revenue
from petroleum and natural gas sales, which totaled $68.2 million during the third quarter, a 107%
increase over the same period in 2020, and totaled $156.5 million for the first nine months of 2021,
a 47% increase over the prior year.
- Adjusted EBITDA1 grew 137% to $24.3 million ($0.06 per fully diluted share) in the third
quarter of 2021 as compared to the same period in 2020, primarily
due to improved commodity prices. Adjusted EBITDA1
totalled $53.2 million ($0.13 per fully diluted share) in the first nine
months of the year.
- Net income totaled $15.0 million
($0.03 per fully diluted share) in
the third quarter of 2021 compared to a net loss of $9.1 million ($0.05
per fully diluted share) during the same period of the prior
year.
- Operating netback prior to hedging1 increased 156%
to $37.02 per Boe in the third
quarter of 2021 and was $31.56 per
Boe in the first nine months of the year, led by commodity price
improvements net of royalties and production taxes.
- Net debt1 of $185.9
million at September 30, 2021
represents a 47% and 43% reduction from the third quarter of 2020
and year-end 2020, respectively, primarily due to the closing of
the transformative recapitalization transaction in the second
quarter of 2021 which reduced net debt and enhanced financial
flexibility. Maintenance of a strong balance sheet remains a high
priority moving forward.
- Net capital expenditures in the third quarter of 2021 were
$20.4 million, continuing our focus
on pursuing a fully funded capital program. Nineteen gross (4.24
net) non-operated wells were placed on production in the quarter,
comprised of 14 wells previously drilled and uncompleted ("DUCs")
and five wells drilled and completed during the quarter. Initial
production rates were consistent with management expectations.
- Lease operating costs were $6.41
and $6.01 per Boe in the third
quarter of 2021 and the first nine months of the year,
respectively, reflecting a larger number of workovers completed in
the period to optimize production rates and return wells to
production given the favorable price environment.
_________________________
|
1
See "Non-IFRS Measures" within this press release.
|
FINANCIAL & OPERATING REVIEW
|
Three months
ended
|
Nine months
ended
|
FINANCIAL (in thousands, except per
share & share data)
|
Sept
30, 2021
|
Sept
30, 2020
|
Sept 30,
2021
|
Sept 30,
2020
|
Petroleum and natural
gas revenue
|
68,198
|
32,928
|
156,457
|
106,238
|
Cash provided by
operating activities
|
23,884
|
1,491
|
54,782
|
56,665
|
Net income
(loss)
|
14,954
|
(9,134)
|
(25,893)
|
(49,568)
|
Per
share - diluted
|
0.03
|
(0.05)
|
(0.06)
|
(0.26)
|
Adjusted
EBITDA(1)
|
24,254
|
10,217
|
53,172
|
43,522
|
Capital expenditures,
net
|
20,386
|
2,559
|
33,099
|
32,454
|
Net
debt(1)
|
|
|
185,864
|
349,759
|
Common shares
outstanding
|
|
|
|
|
Weighted
average – basic
|
521,032,038
|
187,803,375
|
401,671,289
|
188,117,408
|
Weighted
average – diluted
|
535,727,797
|
195,913,542
|
416,367,048
|
196,227,575
|
(1)
See "Non-IFRS Measures" within this press release.
|
OPERATING
|
Three months
ended
|
Nine months
ended
|
Daily production
volumes(2)
|
Sept
30, 2021
|
Sept
30, 2020
|
Sept 30,
2021
|
Sept 30,
2020
|
Tight oil
(Bbl/d)
|
8,122
|
7,983
|
6,791
|
9,180
|
Shale gas
(Mcf/d)
|
11,384
|
11,471
|
11,095
|
11,567
|
NGLs
(Bbl/d)
|
1,794
|
2,066
|
1,787
|
2,063
|
Barrels of oil
equivalent (Boe/d)
|
11,814
|
11,961
|
10,427
|
13,171
|
|
|
|
|
|
Average realized
prices(2)
|
|
|
|
|
Tight oil
($/Bbl)
|
85.49
|
46.61
|
78.98
|
43.85
|
Shale gas
($/Mcf)
|
3.98
|
1.15
|
3.74
|
1.46
|
NGLs
($/Bbl)
|
34.26
|
10.52
|
28.58
|
6.97
|
Operating netback
($/Boe) (1)
|
Sept
30, 2021
|
Sept
30, 2020
|
Sept 30,
2021
|
Sept 30,
2020
|
Revenue
|
62.75
|
29.92
|
54.96
|
29.44
|
Royalties
|
(11.66)
|
(5.43)
|
(10.16)
|
(5.42)
|
Realized loss on
derivatives
|
(13.68)
|
(3.57)
|
(11.47)
|
(0.46)
|
Lease operating
costs
|
(6.41)
|
(3.95)
|
(6.01)
|
(4.84)
|
Workover
expense
|
(1.12)
|
(1.24)
|
(1.21)
|
(0.74)
|
Production
taxes
|
(4.71)
|
(2.43)
|
(4.07)
|
(2.44)
|
Transportation
expense
|
(1.83)
|
(2.42)
|
(1.95)
|
(2.42)
|
Operating
netback(1)
|
23.34
|
10.88
|
20.09
|
13.12
|
Operating
netback prior to hedging(1)
|
37.02
|
14.45
|
31.56
|
13.58
|
(1)
See "Non-IFRS Measures" within this press release.
|
(2)
See "Oil and Gas Advisories" within this press
release
|
MESSAGE TO SHAREHOLDERS
PetroShale continued to benefit from strong pricing of crude
oil, natural gas, and natural gas liquids driven by steady global
demand for petroleum products and disciplined supply growth from
both OPEC nations and the US shale industry. The improved price
environment supported meaningful quarterly increases in petroleum
and natural gas revenue for PetroShale, which increased 107% over
the third quarter of 2020, while operating netbacks before
hedging[2] improved 156% to average $37.02 per Boe. Q3 2021 production averaged
11,814 Boe/d, which was broadly in line with the same period of
2020, and supported a 15-fold increase in cash flow from operating
activities to $23.9 million.
Despite a potentially stronger commodity price environment,
PetroShale will continue to prioritize prudent capital allocation
to achieve a manageable pace of development which also has the
potential to create meaningful cash flows as significant low-price
hedges roll-off during the fourth quarter of 2021. Our preliminary
capital allocation plans would anticipate a mix of drilling and
completion of operated wells, along with the continued
participation in economic non-operated wells. Looking into 2022, we
are setting the stage for production maintenance, cost management
and prioritization of free cash flow generation, which would also
contribute to further debt reduction and a more robust balance
sheet. With a substantial drilling inventory, the Company remains
well-positioned to generate positive investor returns over the long
term and capture value from its high-quality assets focused in the
most prolific part of the North Dakota Bakken / Three Forks.
As always, PetroShale will continue to operate in accordance
with the highest standards of environmental, social and governance
("ESG") principles. This includes maintaining a strong culture of
governance, oversight and accountability, which is responsible for
a strong safety track record and a commitment to meet or exceed
environment regulations across all aspects of the Company's
operations.
OUTLOOK
The continued improvement in commodity prices has driven a
meaningful expansion of corporate netbacks, cash flow and free cash
flow. Combined with prior efforts to strategically reposition the
Company, PetroShale is in a strong position to continue developing
its North Dakota Bakken light oil resource at a measured pace,
while maintaining discipline in both commodity risk management and
management of its balance sheet. The Company plans to prudently
approach commodity price risk in accordance with existing policies.
Nevertheless, the rolling-off of lower-priced hedges through the
fourth quarter of 2021 provides further upside to cash flow
generation as the Company enters 2022.
The Company is forecasting 2021 average annual production
between 10,500 Boe/d and 11,000 Boe/d[3], with total net capital
investments matching previously provided guidance of $70 to 75 million. This level of capital
investment is in line with the previously announced acceleration of
the capital program, which is expected to further bolster free cash
flow beginning in January 2022 from
the additional volumes coming on-stream in the current higher
commodity price environment. Six gross (4.95 net) operated wells
are planned for drilling and completion operations in the fourth
quarter of 2021 with initial production expected in early 2022. The
Company intends to provide 2022 guidance before year-end.
With line of sight to meaningful further expansion of cash flow
and strong returns on invested capital, PetroShale thanks its
dedicated employees for their tireless efforts, its shareholders
for entrusting management with their capital, and other
stakeholders for their continued support.
_________________________
|
2
See "Non-IFRS Measures" within this press release.
|
About PetroShale
PetroShale is an oil company engaged in the acquisition,
development and production of high-quality oil-weighted assets in
the North Dakota Bakken / Three Forks.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Note Regarding Forward-Looking Statements and Other
Advisories:
This press release contains forward-looking statements and
forward-looking information (collectively "forward-looking
information") within the meaning of applicable securities laws
relating to, among other things, available aspects of management
focus, objectives, strategies and business opportunities. More
particularly and without limitation, this press release contains
forward-looking information concerning the Company's expectations:
that PetroShale will continue to focus on further streamlining per
unit cash costs to optimize margins, the Company's anticipated
capital spending for full year 2021, and the remainder of the year;
the Company's next borrowing base review, the Company's intention
to direct any free cash flow to debt reduction; the Company's
intention to prioritize managing capital expenditures in accordance
with the broader commodity price environment and the expectation of
a limited capital program, directed primarily towards sustaining
production and maintaining the long-term integrity of the Company's
assets; the Company's anticipated level of capital investment and
average production rates for 2021; the Company's expectations on
the continued availability of DAPL and other alternative
transportation options and the potential affects on differentials;
PetroShale's liquidity for the coming year; and, the general
outlook of the Company. PetroShale provided such forward-looking
statements in reliance on certain expectations and assumptions that
it believes are reasonable at the time, including expectations and
assumptions concerning prevailing commodity prices, weather,
regulatory approvals, liquidity, Bakken oil differentials
(including as a result of any interruptions from DAPL or
otherwise), the ability of the Company to transport its production
through DAPL or other forms of transportation (and the continued
availability and capacity of such transportation means); the
Company's lenders willingness to maintain the Company's borrowing
capacity; activities by third party operators; exchange rates,
interest rates, applicable royalty rates and tax laws; future
production rates and estimates of operating costs; performance of
existing and future wells; plant turnaround times and continued
rail service to transport products; reserve volumes; business
prospects and opportunities; the future trading price of the
Company's shares; the availability and cost of financing, labor and
services; the impact of increasing competition; ability to market
oil and natural gas successfully; and the Company's ability to
access capital (including its senior credit facility).
_____________________________________
|
3 2021 forecast volumes are comprised
of 65%-68% of tight oil, 15%-18% of natural gas liquids and
15%-18% shale gas.
|
Although the Company believes that the expectations and
assumptions on which such forward-looking information is based are
reasonable, undue reliance should not be placed on the
forward-looking information because the Company can give no
assurance that they will prove to be correct. Forward-looking
information addresses future events and conditions, which by their
very nature involve inherent risks and uncertainties. The Company's
actual results, performance or achievement could differ materially
from those expressed in, or implied by, the forward-looking
information and, accordingly, no assurance can be given that any of
the events anticipated by the forward-looking information will
transpire or occur, or if any of them do so, what benefits the
Company will derive therefrom. Management has included the above
summary of assumptions and risks related to forward-looking
information provided in this press release in order to provide
security holders with a more complete perspective on the Company's
future operations and such information may not be appropriate for
other purposes.
Readers are cautioned that the foregoing lists of factors are
not exhaustive. Additional information on these and other factors
that could affect our operations or financial results are included
in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website
(www.sedar.com). These forward-looking statements are made as of
the date of this press release and the Company disclaims any intent
or obligation to update publicly any forward-looking information,
whether as a result of new information, future events or results or
otherwise, other than as required by applicable securities
laws.
All references herein to fully diluted share basis is based upon
the weighted average number of fully diluted shares as disclosed in
the Company's Management & Discussion Analysis as at
September 30, 2021 and for the three
and nine months ended September 30,
2021 and 2020 – "Financial and Operational Highlights".
This news release contains future oriented financial information
and financial outlook information (together, "FOFI") about the
Company's prospective results of operations, including generating
free cash flow in 2021 or 2022, which is subject to the same
assumptions, risk factors, limitations and qualifications as set
forth above as well as the following additional assumptions: annual
average production rates in 2021 of between 10,500 and 11,000
Boe/d, $60.00 WTI, Bakken
differential of US$3.00, and
US$1 = C$1.25. Readers are cautioned that the
assumptions used in the preparation of such information, although
considered reasonable at the time of preparation, may prove to be
imprecise and, as such, undue reliance should not be placed on
FOFI. The Company's actual results, performance or achievement
could differ materially from those expressed in or implied by these
FOFI, or is any of them do so, what benefits the Company will
derive therefrom. Such financial outlook or future oriented
financial information is provided for the purpose of providing
information about management's reasonable expectations as to the
anticipated results of its proposed business activities in the
future. The Company disclaims any intention or obligation to update
or revise any FOFI statements, whether as a result of new
information, future events or otherwise, except as required by
law.
Non-IFRS Measures:
Within this press release, references are made to "operating
netback", "operating netback prior to hedging", "net debt",
"Adjusted EBITDA" and "free cash flow", which are not defined by
IFRS and therefore may not be comparable to performance measures
presented by others. Operating netback represents revenue, plus or
minus any realized gain or loss on financial derivatives less
royalties, production taxes, operating costs and transportation
expense. The operating netback is then divided by the working
interest production volumes to derive the operating netback on a
per Boe basis. Operating netback prior to hedging represents
operating netback prior to any realized gain or loss on financial
derivatives. Net debt represents total liabilities, excluding
decommissioning obligation, lease liabilities and any financial
derivative liability, less current assets. Adjusted EBITDA
represents cash flow from operating activities prior to changes in
non-cash working capital. The Company believes that Adjusted EBITDA
provides useful information to the reader in that it measures the
Company's ability to generate funds to service its debt and other
obligations and to fund its operations, without the impact of
changes in non-cash working capital which can vary based solely on
timing of settlement of accounts receivable and accounts payable.
Free cash flow is a non-IFRS measure which should not be considered
an alternative to, or more meaningful than, cash flow from
operating activities as determined in accordance with IFRS. Free
cash flow is presented to assist management and investors in
analyzing performance by the Company as a measure of financial
liquidity and the capacity of the Company to repay debt and pursue
other corporate objectives. Free cash flow equals cash flow from
operating activities less capital expenditures. Management
believes that in addition to net income (loss) and cash flow from
operating activities, operating netback, Adjusted EBITDA and
free cash flow are useful supplemental measures as they assist in
the determination of the Company's operating performance, leverage
and liquidity. Operating netback is commonly used by investors to
assess performance of oil and gas properties and the possible
impact of future commodity price changes on energy producers.
Investors should be cautioned, however, that these measures should
not be construed as an alternative to either net income (loss) or
cash flow from operating activities, which are determined in
accordance with IFRS, as indicators of the Company's
performance.
The reconciliation between Adjusted EBITDA and cash flow from
operating activities, and the calculation of net debt, can be found
within the Company's third quarter 2021 MD&A and financial
statements for the three and nine months ended September 30, 2021 and 2020.
Oil and Gas Advisories:
Where amounts are expressed on a barrel of oil equivalent
("Boe") basis, natural gas volumes have been converted to Boe using
a ratio of 6,000 cubic feet of natural gas to one barrel of oil (6
Mcf: 1 Bbl). This Boe conversion ratio is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Given the value ratio based on the current price of crude oil as
compared to natural gas is significantly different from the energy
equivalency of 6 Mcf: 1 Bbl, utilizing a conversion ratio at 6 Mcf:
1 Bbl may be misleading as an indication of value. In this release,
Mmboe refers to millions of barrels of oil equivalent.
All dollar figures included herein are presented in Canadian
dollars, unless otherwise noted.
SOURCE PetroShale Inc.