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Peyto Announces Q2 2017 Results, Maintains Industry Leading Cash Costs – Part 3


See accompanying notes to the financial statements.

Peyto Exploration & Development Corp.
Condensed Income Statement (unaudited)
(Amount in $ thousands except earnings per share amount)

/T/

Three months ended June 30 Six months ended June 30 2017 2016 2017 2016 ---------------------------------------------------------------------------- Revenue Oil and gas sales 182,097 86,444 379,133 222,647 Realized (loss) gain on hedges (Note 8) (3,115) 54,447 (12,201) 97,596 Royalties (9,071) (4,874) (19,707) (11,859) ---------------------------------------------------------------------------- Petroleum and natural gas sales, net 169,911 136,017 347,225 308,384 ----------------------------------------------------------------------------
Expenses Operating 13,018 12,732 28,703 25,273 Transportation 9,742 8,190 19,209 16,859 General and administrative 2,646 2,853 4,959 4,710 Future performance based compensation (Note 7) 4,305 12,533 7,674 17,088 Interest 11,018 10,063 21,563 19,456 Accretion of decommissioning provision (Note 5) 715 543 1,465 1,147 Depletion and depreciation (Note 3) 73,731 76,635 153,775 166,594 Gain on disposition of assets (Note 3) - - - (12,668) ---------------------------------------------------------------------------- 115,175 123,549 237,348 238,459 ---------------------------------------------------------------------------- Earnings before taxes 54,736 12,468 109,877 69,925 ----------------------------------------------------------------------------
Income tax Deferred income tax expense 14,779 3,366 29,666 18,880 ---------------------------------------------------------------------------- Earnings for the period 39,957 9,102 80,211 51,045 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
---------------------------------------------------------------------------- Earnings per share (Note 6) Basic and diluted $0.24 $0.06 $0.49 $0.32 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

/T/

See accompanying notes to the financial statements.

Peyto Exploration & Development Corp.
Condensed Statement of Comprehensive Income (Loss) (unaudited)
(Amount in $ thousands)

/T/

Three months ended June 30 Six months ended June 30 2017 2016 2017 2016 ---------------------------------------------------------------------------- Earnings for the period 39,957 9,102 80,211 51,045 Other comprehensive income (loss) Change in unrealized gain (loss) on cash flow hedges 36,879 (110,733) 168,839 (15,178) Deferred tax (expense) recovery (10,798) 44,598 (48,881) 30,449 Realized loss (gain) on cash flow hedges 3,115 (54,446) 12,201 (97,596) ---------------------------------------------------------------------------- Comprehensive income (loss) 69,153 (111,479) 212,370 (31,280) ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

/T/

See accompanying notes to the financial statements.

Peyto Exploration & Development Corp.
Condensed Statement of Changes in Equity (unaudited)
(Amount in $ thousands)

/T/

Six months ended June 30 2017 2016 ---------------------------------------------------------------------------- Share capital, beginning of period 1,641,982 1,467,264 ---------------------------------------------------------------------------- Common shares issued by private placement 7,574 7,644 Equity offering - 172,500 Common shares issuance costs (net of tax) (19) (5,402) ---------------------------------------------------------------------------- Share capital, end of period 1,649,537 1,642,006 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
---------------------------------------------------------------------------- Shares to be issued, beginning of period 4,930 3,769 ---------------------------------------------------------------------------- Shares issued (4,930) (3,769) ---------------------------------------------------------------------------- Shares to be issued, end of period - - ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
---------------------------------------------------------------------------- Retained earnings (deficit), beginning of 776 103,339 period ---------------------------------------------------------------------------- Earnings for the period 80,211 51,045 Dividends (Note 6) (108,796) (106,255) ---------------------------------------------------------------------------- Retained earnings (deficit), end of period (27,809) 48,129 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
---------------------------------------------------------------------------- Accumulated other comprehensive income, (106,754) 49,185 beginning of period ---------------------------------------------------------------------------- Other comprehensive loss (income) 132,159 (82,325) ---------------------------------------------------------------------------- Accumulated other comprehensive (loss) income, 25,405 (33,140) end of period ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
---------------------------------------------------------------------------- Total equity 1,647,133 1,656,995 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------

/T/

See accompanying notes to the financial statements.

Peyto Exploration & Development Corp.
Condensed Statement of Cash Flows (unaudited)
(Amount in $ thousands)

/T/

Three months ended June 30 Six months ended June 30 2017 2016 2017 2016 ---------------------------------------------------------------------------- Cash provided by (used in) operating activities Earnings 39,957 9,102 80,211 51,045 Items not requiring cash: Deferred income tax 14,779 3,366 29,666 18,880 Depletion and depreciation 73,731 76,635 153,775 166,594 Accretion of decommissioning provision 715 543 1,465 1,147 Gain on disposition of assets - - - (12,668) Long term portion of future performance based compensation 989 4,198 2,351 5,852 Change in non-cash working capital related to operating activities (2,191) 9,279 (18,351) 10,391 ---------------------------------------------------------------------------- 127,980 103,123 249,117 241,241 ---------------------------------------------------------------------------- Financing activities Issuance of common shares - 172,507 7,574 180,144 Issuance costs - (7,381) (26) (7,399) Cash dividends paid (54,408) (53,142) (108,769) (105,631) Increase (decrease) in bank debt 70,000 (95,000) 135,000 - ---------------------------------------------------------------------------- 15,592 16,984 33,779 67,114 ---------------------------------------------------------------------------- Investing activities Additions to property, plant and equipment (97,738) (50,634) (251,612) (226,397) Change in prepaid capital 3,770 233 (2,829) 7,733 Change in non-cash working capital relating to investing activities (45,369) (47,991) (26,322) (64,234) ---------------------------------------------------------------------------- (139,337) (98,392) (280,763) (282,898) ---------------------------------------------------------------------------- Net increase in cash 4,235 21,715 2,133 25,457 Cash, beginning of period - 3,742 2,102 - ---------------------------------------------------------------------------- Cash, end of period 4,235 25,457 4,235 25,457 ----------------------------------------------------------------------------

----------------------------------------------------------------------------
The following amounts are
included in cash flows from
operating activities:
----------------------------------------------------------------------------

Cash interest paid 15,597 13,764 25,209 19,407 Cash taxes paid - - - - ----------------------------------------------------------------------------

/T/

See accompanying notes to the financial statements.

Peyto Exploration & Development Corp.
Notes to Condensed Financial Statements (unaudited)
As at June 30, 2017 and 2016
(Amount in $ thousands, except as otherwise noted)

1. Nature of operations

Peyto Exploration & Development Corp. ("Peyto" or the "Company") is a Calgary based oil and natural gas company. Peyto conducts exploration, development and production activities in Canada. Peyto is incorporated and domiciled in the Province of Alberta, Canada. The address of its registered office is 300, 600 - 3rd Avenue SW, Calgary, Alberta, Canada, T2P 0G5.

These financial statements were approved and authorized for issuance by the Audit Committee of Peyto on August 8, 2017.

2. Basis of presentation

The condensed financial statements have been prepared by management and reported in Canadian dollars in accordance with International Accounting Standard ("IAS") 34, "Interim Financial Reporting". These condensed financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the Company's financial statements as at and for the years ended December 31, 2016 and 2015.

Significant Accounting Policies

(a) Significant Accounting Judgments, Estimates and Assumptions

The timely preparation of the condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies, if any, as at the date of the financial statements and the reported amounts of revenue and expenses during the period. By their nature, estimates are subject to measurement uncertainty and changes in such estimates in future years could require a material change in the condensed financial statements.

All accounting policies and methods of computation followed in the preparation of these financial statements are the same as those disclosed in Note 2 of Peyto's financial statements as at and for the years ended December 31, 2016 and 2015.

(b) Standards issued but not yet effective

In July 2014, the IASB completed the final elements of IFRS 9 "Financial Instruments." The Standard supersedes earlier versions of IFRS 9 and completes the IASB's project to replace IAS 39 "Financial Instruments: Recognition and Measurement." IFRS 9, as amended, includes a principle-based approach for classification and measurement of financial assets, a single 'expected loss' impairment model and a substantially-reformed approach to hedge accounting. The Standard will come into effect for annual periods beginning on or after January 1, 2018, with earlier adoption permitted. IFRS 9 will be applied by Peyto on January 1, 2018. The impact of the standard has been evaluated and is expected to have no material impact on the Company's financial statements.



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