PetroShale Announces Financial and Operating Results for Second Quarter 2018

CALGARY, Aug. 28, 2018 /CNW/ – PetroShale Inc. (“PetroShale” or the “Company”) (TSXV: PSH, OTCQX: PSHIF) is pleased to announce its financial and operating results for the three and six month periods ending June 30, 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. 

PetroShale recently announced a strategic acquisition of assets within our North Dakota Bakken core area for total consideration of US$52.6 million (the “Acquisition”).  The assets include three undeveloped drilling units that PetroShale will operate, an enhancement of our drilling location inventory (increasing it by 14 net wells), a significant increase to our undeveloped land base, and 550 barrels of oil equivalent per day (“boepd”) of light oil, low decline production (the “Acquired Assets”).  A concurrent bought deal public equity financing and private placement financing (the “Equity Financings”) closed on August 14, 2018, and raised aggregate gross proceeds of $46 million and $12.5 million, respectively. Net proceeds from the Equity Financings, along with a draw of US$10.5 million on the Company’s credit facility, were used to fund the Acquisition.  The Acquisition provides numerous benefits that we believe will position PetroShale for further production growth and enhanced sustainability.

HIGHLIGHTS

• Production averaged 6,350 boepd (89% liquids) in the second quarter, a 147% increase from the second quarter of 2017 and 92% higher than the first quarter 0f 2018.
• Revenue totaled $36.2 million, an increase of 242% over the second quarter of 2017, and 88% higher than the first quarter of 2018, driven by both pricing increases and production growth.
• Adjusted EBITDA for the second quarter increased to $20.3 million, 347% higher than the second quarter of 2017 and 186% higher than the first quarter of 2018.
• Operating netback for the quarter, prior to the impact of hedging, was $40.95 per boe, an increase of 70% over the second quarter of 2017.
• Capital expenditures of $77.8 million in the first half of 2018 were directed to participating in 7.0 net wells, and included a significant undeveloped land acquisition for US$17.9 million.
• The borrowing base under our senior credit facility increased to US$82.0 million based on the Company’s year end 2017 reserves, and was further increased to US$92.0 million following closing of the Acquisition.

RESULTS OF OIL AND GAS ACTIVITIES

MESSAGE FROM THE CEO

PetroShale maintained its positive momentum through the second quarter of 2018, which contributed to an active and successful first half of the year.  Our second quarter production increased 92% over the previous quarter and 147% over the same period in 2017.  The significant increase reflects a full quarter’s impact of new volumes from four (3.7 net) operated wells that were completed in the first quarter and the resumption of production from our first operated Primus ‘8H’ well following a workover.

During the quarter we continued to focus on driving value through the development of our high-quality assets in the prolific South Berthold and Antelope areas.  We invested $24.1 million in capital expenditures to participate in 14 gross (1.0 net) wells in various stages of completion and in the completion of four (1.6 net) non-operated wells that commenced production in July.  In addition to our successful drilling and completion activity, we completed two acquisitions of additional high-quality acreage within South Berthold, the first of which closed during the first quarter and the second, described earlier as the Acquisition, that closed in August.  The Acquisition increases PetroShale’s existing undeveloped land position by over 34% and increases our inventory of low-risk infill drilling locations by 24%.

WTI benchmark prices continued to strengthen during the quarter and averaged just under $68 per barrel.  The improved price environment and increase in production volumes led to higher revenue, cash flow from operations and adjusted EBITDA in the second quarter of 2018 relative to the same period in 2017.  Adjusted EBITDA for the quarter was $20.3 million, an increase of 347% over the second quarter of last year.  Pre-hedging operating netbacks of $40.95 were 70% higher than the second quarter of 2017, reflecting higher oil and NGL pricing and reduced workover costs relative to 2017.  PetroShale’s operating costs in the second quarter were $3.72 per boe, a reduction of 47% from the second quarter of 2017 and 10% from the first quarter of 2018.

Following the recent growth in production, reserves and acreage, the borrowing capacity of our senior credit facility increased to US$82 million from US$50 million in July and further increased to US$92 million on closing of the Acquisition.  Following the closing of the Acquisition and Equity Financings, we were drawn US$44 million on our credit facility, leaving US$48 million undrawn.

PetroShale’s drilling, completions and acquisition activity during the first half of 2018 set the stage for an exciting second half of the year.  We commenced a drilling program in the third quarter, and have completed drilling two wells and are now drilling a third well.  Completion of these wells and the drilling of more wells is scheduled through the first quarter of 2019 as part of an ongoing development program where we expect results from these high-value opportunities to generate per share growth in production, reserves and EBITDA.

As always, we 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 in the future.

((signed))

Mike Wood
President & CEO

About PetroShale

PetroShale is an oil company engaged in the acquisition, development and consolidation of interests in the North Dakota Bakken / Three Forks.