CDN NEWS | 
US NEWS 
CALGARY, Alberta, May 23, 2018 (GLOBE NEWSWIRE) — PetroShale Inc. (“PetroShale” or the “Company”) (TSXV:PSH) (OTCQX:PSHIF) is pleased to announce its financial and operating results for the three month period ended March 31, 2018.
The Company’s unaudited 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 OTCQX website at www.otcqx.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.
During the first quarter of 2018, PetroShale acquired additional acreage in our core South Berthold area for US$17.8 million and achieved record quarterly production, revenue and cash flow as a result of bringing on several new operated wells that have significantly increased our current average working interest production to in excess of 6,000 barrels of oil equivalent per day (“boepd”) compared to 2,121 boepd in the fourth quarter of 2017.
FIRST QUARTER 2018 HIGHLIGHTS
- Production averaged 3,315 boepd (92% liquids) in the first quarter, a 56% increase from the fourth quarter of 2017. The increase in production reflects four (3.7 net) new operated wells which commenced production during February and March of 2018, and the recommencement of production from our first operated Primus ‘8H’ well, following a workover completed at the end of March.
- Current average working interest production is in excess of 6,000 boepd, reflecting new production from the first quarter capital program.
- Revenue totaled $19.3 million, an increase of 28% over the same period of 2017.
- EBITDA increased to $10.9 million, 36% higher than the first quarter of 2017.
- Operating netback, prior to the impact of hedging, was $42.09 per boe (Company interest, gross of royalty; $52.36 per boe net of royalty), an increase of 38% over the first quarter of 2017.
- Capital expenditures totaled $53.7 million, including the acquisition of significant undrilled acreage in our core South Berthold area for US$17.8 million.
- Closed a strategic financing with a US-based private equity investor, First Reserve, in January 2018 for US$75 million of preferred shares with a 5-year term and a 9% coupon rate. Proceeds were used to repay and terminate the Company’s subordinated loan facility and repay amounts drawn under the senior loan.
RESULTS OF OIL AND GAS ACTIVITIES
| Three months ended |
||||||
| March 31, 2018 |
March 31, 2017 | |||||
| Sales volumes | ||||||
| Crude Oil (Bbl/d) | 2,779 | 2,655 | ||||
| Natural gas (Mcf/d) | 1,669 | 1,658 | ||||
| NGLs (Bbl/d) | 258 | 282 | ||||
| Barrel of oil equivalent (Boe/d) | 3,315 | 3,213 | ||||
| Operating Netback ($/Boe) (1) | ||||||
| Revenue | $ | 64.59 | $ | 52.08 | ||
| Royalties | (12.40 | ) | (10.92 | ) | ||
| Realized loss on hedge | (3.67 | ) | – | |||
| Operating costs | (4.15 | ) | (5.82 | ) | ||
| Production taxes | (5.01 | ) | (3.91 | ) | ||
| Transportation expense | (0.94 | ) | (0.98 | ) | ||
| Operating netback(2) | $ | 38.42 | $ | 30.45 | ||
| Operating netback prior to hedging(2) | $ | 42.09 | $ | 30.45 | ||
| Operating netback, on a net of royalty basis(2) | $ | 52.36 | $ | 38.48 | ||
| (1) | See “Oil and Gas Advisories”. |
| (2) | See “Non-GAAP Measures”. |
MESSAGE FROM THE CEO
The first quarter of 2018 has been a very active start to the year for PetroShale with production growing 56% quarter-over-quarter through a successful drilling program, adding new acreage within our core areas, and enhancing our financial flexibility through a strategic financing. The significant production increase reflects volumes from four (3.7 net) new operated wells and the resumption of production from our first operated Primus ‘8H’ well following a workover. These wells have had a significant impact to PetroShale with current average working interest production increasing to over 6,000 boepd.
Continued strengthening of WTI benchmark prices and stabilizing Bakken oil price differentials during the first quarter contributed to strong operating netbacks and EBITDA. Increased production has led to lower average operating costs, declining from $5.82 per Boe in the first quarter of 2017 to $4.15 per Boe in the first quarter of 2018.
PetroShale completed an acquisition of significant undrilled operated acreage in our core South Berthold area for US$17.8 million, adding a number of new locations to our high-quality drilling inventory.
PetroShale continued to exploit our non-operated acreage with the participation in four (1.6 net) non-operated wells in the South Berthold area which we anticipate will commence production near the beginning of the third quarter.
In January, we completed a US$75 million placement of preferred shares to First Reserve, a US-based energy-focused private equity firm, which continued to enhance our financial position. Proceeds from this financing were used to repay all amounts owing under our subordinated and senior credit facilities. This financing and an anticipated increase in our borrowing base, following our senior lender’s review of our December 31, 2017 reserve report, has positioned PetroShale to increase our operated drilling and acquisition activity.
With our high-quality asset base and increasing number of operated DSUs, we are excited by the opportunities that PetroShale has ahead. In the third quarter of this year we will commence an operated drilling program that will continue into 2019. As we move forward, we will strive to achieve per share increases in production, reserves and EBITDA.
As always, I wish to thank all of PetroShale’s employees, directors and shareholders for your continued support and look forward to updating you on our progress and achievements through the balance of 2018.
((signed))
Mike Wood
President & CEO
AMENDMENTS TO PREFERRED SHARES
The Company also announces that it has amended the terms of the outstanding preferred shares in its US subsidiary, PetroShale (US), Inc. (“PetroShale US”), to provide that PetroShale US may, in certain circumstances and subject to certain limits, elect to pay certain quarterly dividend amounts “in kind” at a rate of 12% per annum in lieu of paying a cash dividend for such quarter at a rate of 9% per annum. First Reserve is the sole holder of such preferred shares. As a result of such amendments, PetroShale US will be permitted to exercise its payment in kind election, on or after the first anniversary of the date of issuance of the preferred shares (being January 25, 2018), with respect to a maximum of two fiscal quarters during any consecutive twelve month period and six fiscal quarters in total. In the event any dividend is elected to be paid in kind, the dollar amount repayable to First Reserve at the end of the term of the preferred shares will increase by the dollar amount represented by the “in kind” dividend, and, concurrent with any increase, additional special voting shares of the Company (“Special Voting Shares”) will be issued by the Company to First Reserve. As such, in the event that PetroShale US elects to pay the maximum number of dividends “in kind” as described above, PetroShale estimates that up to an additional 8,349,057 Special Voting Shares may be issuable to First Reserve. The Company intends to seek shareholder approval, in accordance with the rules of the TSX Venture Exchange, for First Reserve as a “control person” of the Company at the Company’s upcoming annual and special meeting of shareholders. A copy of the terms of the preferred shares, as amended, will be available for review on the Company’s SEDAR profile at www.sedar.com.
About PetroShale
PetroShale is an oil company engaged in the acquisition, development and consolidation of interests in the North Dakota Bakken / Three Forks.
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