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TORC Oil & Gas Ltd. Announces Second Quarter 2017 Financial & Operational Results; Increases 2017 Production Guidance


CALGARY, Aug. 2, 2017 /CNW/ – TORC Oil & Gas Ltd. (“TORC” or the “Company”) (TSX: TOG) is pleased to announce its financial and operating results for the three and six months ended June 30, 2017.  The associated management’s discussion and analysis (“MD&A”) and unaudited interim financial statements as at and for the three and six months ended June 30, 2017 can be found at www.sedar.com and www.torcoil.com.

Highlights Three months ended Six months ended
(in thousands, except per share data) June 30

2017

March 31

2017

June 30

2016

June 30

2017

June 30

2016

Financial
Adjusted funds flow from operations (1) $52,471 $51,483 $27,521 $103,954 $41,603
Per share basic $0.28 $0.28 $0.17 $0.56 $0.26
Per share diluted $0.28 $0.28 $0.17 $0.56 $0.25
Net income (loss) $2,532 $2,744 ($15,750) $5,276 ($41,010)
Per share basic $0.01 $0.01 ($0.10) $0.03 ($0.25)
Per share diluted $0.01 $0.01 ($0.10) $0.03 ($0.25)
Exploration and development expenditures $17,166 $32,219 $7,626 $49,385 $24,074
Property acquisitions, net of dispositions $29,105 ($127) $6,029 $28,978 $4,315
Net debt (2) $241,912 $258,582 $298,613 $241,912 $298,613
Cash dividends declared (3) $7,543 $6,983 $5,019 $14,526 $13,364
Dividends declared per common share $0.060 $0.060 $0.060 $0.120 $0.145
Common shares
Shares outstanding, end of period 187,402 183,862 163,349 187,402 163,349
Weighted average shares (basic) 186,893 183,519 163,015 185,216 162,557
Weighted average shares (diluted) 188,456 185,081 166,098 187,045 165,446
Operations
Production
Crude oil (Bbls per day) 17,677 16,718 15,255 17,200 15,295
NGL (Bbls per day) 739 585 542 663 502
Natural gas (Mcf per day) 14,156 15,020 14,446 14,586 14,321
Barrels of oil equivalent (Boepd, 6:1) 20,775 19,806 18,205 20,294 18,184
Average realized price
Crude oil ($ per Bbl) $57.32 $59.05 $48.44 $58.15 $41.92
NGL ($ per Bbl) $18.20 $29.60 $14.69 $23.20 $15.25
Natural gas ($ per Mcf) $2.33 $2.39 $1.21 $2.36 $1.37
Barrels of oil equivalent ($ per Boe, 6:1) $51.01 $52.53 $41.98 $51.74 $36.76
Operating netback per Boe (6:1) $30.34 $31.40 $19.69 $30.84 $15.51
Adjusted funds flow netback per Boe (6:1) (1) $27.75 $28.88 $16.61 $28.30 $12.57
Wells drilled:
Gross 3 22 3 25 15
Net 1.9 16.0 2.0 17.9 13.3
Success (%) 100 100 100 100 100

 

(1) Management uses these financial measures to analyze operating performance and leverage.  The definitions of these measures are found in the Company’s Management’s Discussion and Analysis (“the MD&A”) for the three and six months ended June 30, 2017.  These measures do not have any standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures for other companies. 
(2) Net debt is calculated as current assets (excluding financial derivative assets) less: i) current liabilities (excluding financial derivative liabilities), ii) bank debt, and iii) non-current deferred lease incentives.
(3) Cash dividends declared are net of the share dividend program participation.

PRESIDENT’S MESSAGE

The second quarter of 2017 represents the continued execution of TORC’s business plan. TORC maintains a consistent focus on delivering the Company’s long term objectives of disciplined growth in combination with maintaining financial flexibility and providing a sustainable dividend.

The Company’s key achievements in the second quarter of 2017 included the following:

  • Achieved record quarterly production of 20,775 boepd, up from 19,806 boepd in the first quarter of 2017 and 18,205 boepd in the second quarter of 2016;
  • Generated cash flow of $52.5 million relative to $51.5 million in the first quarter of 2017 and $27.5 million in the second quarter of 2016;
  • Generated cash flow per share of $0.28 as compared to $0.28 in the first quarter of 2017 and $0.17 in the second quarter of 2016;
  • Successfully drilled three (1.9 net) wells and completed seven (5.0 net) wells;
  • During the second quarter, TORC declared dividends of $11.2 million of which $3.7 million was paid under the share dividend program;
  • Achieved a payout ratio (excluding acquisitions) of 47% in the second quarter and 61% for the first half while still growing production (exclusive of acquisitions);
  • Successfully closed the previously announced complementary light oil acquisitions in the Company’s southeast Saskatchewan core area; and
  • Exited the quarter with net debt of approximately $241.9 million (down from $271.0 million at year end) with $196.4 million drawn on the Company’s $400 million credit facility.

OPERATIONAL UPDATE

TORC achieved production of 20,775 boepd during the second quarter, up from 19,806 boepd in the first quarter. The continued outperformance of the Company’s existing low decline production base combined with solid drilling results contributed to the record production achievement.

TORC spent a total of $17.2 million of exploration and development capital in the second quarter, including drilling three (1.9 net) wells and completing seven (5.0 net) Torquay/Three Forks wells.  Combined with the first quarter, total first half capital spending was $49.4 million representing 38% of the planned 2017 $130 million capital budget. With 62% of the capital program planned for the second half of the year, TORC remains well positioned to continue to grow the Company’s low decline production base.

SOUTHEAST SASKATCHEWAN

TORC drilled two (1.5 net) development wells in the Torquay/Three Forks resource play during the second quarter of 2017. These wells, along with five (3.5 net) Torquay/Three Forks wells that were drilled in the first quarter, were completed during the second quarter and have been recently brought on production with strong initial results.  Seven (7.0 net) Torquay wells are scheduled to be drilled in the second half of 2017 for a total of 15 (12.5 net) wells this year.

TORC participated in the drilling of one (0.4 net) conventional well in the second quarter following an active first quarter which included the drilling of 11 (8.3 net) conventional wells. With a total of 38 (31.5 net) wells budgeted to be drilled in 2017, 26 (22.8 net) additional conventional wells are planned to be drilled in the second half of 2017.

CARDIUM

In 2017, TORC has budgeted to drill 12 (10.7 net) Cardium wells. The Company drilled five (3.7 net) wells in the first half of 2017, all in the first quarter. As planned, no Cardium wells were drilled in the second quarter of 2017. TORC’s Cardium program includes drilling an additional seven (7.0 net) wells along with completing one (1.0 net) well that was drilled but not completed in the first quarter of 2017.

CAPITAL PROGRAM AND INCREASED GUIDANCE

TORC’s 2017 capital budget of $130 million maintains TORC’s balanced approach to the current commodity price environment. The Company continues to focus on disciplined long term organic growth while protecting the Company’s strong financial position.

TORC spent $49 million in the first half of 2017. With approximately $80 million to be spent in the second half of 2017, TORC remains well positioned to grow the Company’s production base while preserving a consistent decline profile to maintain repeatability of the business plan.

TORC is increasing 2017 average production guidance to 20,600 boepd (88% light oil & liquids) from 20,400 boepd (87% light oil & liquids) previously as a result of the strong performance of the Company’s underlying production base. With significant capital still to be spent in the second half of the year, TORC is maintaining 2017 exit production guidance of 21,200 boepd (88% light oil & liquids) until the second half drilling program has been evaluated.

The 2017 capital program remains concentrated on the Company’s primary core areas in southeast Saskatchewan, focused on both conventional opportunities and the emerging Torquay/Three Forks play, and the Cardium play in central Alberta. TORC has the operational flexibility to adjust the current 2017 budget based on the commodity price environment and will continue to focus on operational efficiencies with a goal of achieving results that exceed budget expectations.

Based on current commodity prices and budgeted cost estimates, TORC is expected to achieve free cash flow in 2017 after organically growing production and paying the dividend. This free cash flow continues to position the Company to take advantage of opportunities as they arise.

DIVIDEND

TORC’s dividend is reviewed regularly with the Board of Directors and is an important component of TORC’s overall strategy. During the second quarter, TORC declared dividends of $11.2 million of which $3.7 million was paid under the share dividend plan.

The Board of Directors has confirmed a dividend of $0.02 per common share will be paid on August 15, 2017 to shareholders of record on July 31, 2017.

TORC’s priorities are to act prudently to protect TORC’s financial flexibility while positioning the Company to continue to achieve per share growth over a long term basis while paying out a sustainable dividend.

OUTLOOK

TORC has built a sustainable growth platform of light oil focused assets and continues to advance this platform.  The stability of the high quality, low decline, light oil assets in southeast Saskatchewan and the low risk Cardium development inventory in central Alberta, combined with exposure to the light oil resource play in the Torquay/Three Forks in southeast Saskatchewan, positions TORC to provide value creation through a disciplined long term strategy.

TORC has the following key operational and financial attributes:

High Netback Production (1) 2017E Average: 20,600 boepd

2017E Exit: 21,200 boepd

Total Proved plus Probable Reserves (2) Greater than 101 mmboe (~83% light oil & liquids)
Southeast Saskatchewan Light Oil
Development Inventory
Greater than 400 net undrilled conventional locations

Greater than 150 net Torquay/Three Forks locations

Cardium Light Oil Development Inventory Greater than 290 net undrilled locations
Sustainability Assumptions (3) Corporate decline ~23%

Capital Efficiency ~$24,000/boepd (IP 365)

2017 Capital Program $130 million
Annual Dividend (paid monthly) $0.24 ($0.02 per share per month)

$45 million

$27 million (net of assumed 40% SDP participation)

Net Debt & Bank Debt (4) $241.9 million (Q2 2017)

$196.4 million drawn on a bank line of $400 million

Shares Outstanding 186.9 million (basic)
Tax Pools Approximately $1.6 billion
Notes:
(1) ~88% light oil & NGLs.
(2) All reserves information in this press release are gross reserves. The reserve information in the foregoing table is derived from the independent engineering report effective December 31, 2016 prepared by Sproule & Associates Limited (“Sproule”) evaluating the oil, NGL and natural gas reserves attributable to all of our properties (the “TORC Reserve Report”).  The reserves associated with net acquisitions completed in 2017 are based on TORC’s internal evaluation prepared by a qualified reserves evaluator in accordance NI-51-101 and COGE Handbook.
(3) Refers to full cycle capital efficiency which is the all-in corporate capital budget divided by the IP365 of the associated wells. Corporate decline refers to TORC’s estimated oil and gas production decline rate in the normal life cycle of a well.
(4) See “Non-GAAP Measures”.

 



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