CALGARY, Alberta , Feb. 25, 2019 (GLOBE NEWSWIRE) — Prairie Provident Resources Inc. (“Prairie Provident”, “PPR” or the “Company”) is pleased to announce our planned 2019 capital expenditure budget, approved by the Company’s Board of Directors, which underspends forecast 2019 cash flow.
With continued volatility and uncertainty in Canadian oil and natural gas prices, coupled with PPR’s ongoing commitment to enhance financial flexibility, the Company believes it has developed a disciplined and conservative budget that reflects the prevailing commodity price environment and the broader market, while supporting balance sheet strength and flexibility. All 2018 financial amounts herein are unaudited (see Cautionary Statements).
2019 BUDGET HIGHLIGHTS
- Capital budget of $18.9 million will underspend forecast 2019 cash flow by 12%, or approximately $3.0 million, and is designed to generate annual average production that will remain stable between 6,100 and 6,500 boe/d (69% oil and liquids) through the year, and is expected to achieve a target exit rate of approximately 6,650 boe/d. The midpoint of the annual average range is 17% higher than PPR’s 2018 average volumes.
- PPR elected to set our 2019 capital expenditure budget approximately 57% lower than 2018 pro forma1capital to reflect prevailing commodity prices and lack of equity market support for growth. This more conservative capital spending level, coupled with the impact of some non-core dispositions and production that remains shut-in due to low natural gas prices, contributes to 2019 forecast annual production that is only 17% lower than pro forma1 volumes.
- Of the total budget, development capital of $12.3 million will be directed to drill three horizontal Glauconite wells at Princess, complete two Slave Point wells at Evi, advance the Evi waterflood, and fulfill all remaining flow-through share commitments arising from PPR’s equity financing completed in October 2018. PPR also plans to invest $4.7 million into the clean-up and reclamation of inactive wells as part of the Company’s ongoing abandonment and reclamation obligations (“ARO”), with $1.9 million for capitalized G&A.
- Forecast 2019 operating expenses of $44.4 million ($18.70 to $19.95/boe) are 21% lower than the pro forma1 estimate of $56.5 million ($19.57/boe), demonstrating PPR’s successful synergy capture, the impact of ongoing cost controls, and improved operational efficiencies.
- With over 90% of PPR’s 2019 forecast revenue expected to be derived from oil production, the Company continues to proactively hedge volumes in order to protect economics and currently has approximately 68% of our 2019 forecast oil production hedged with an average swap and put option strike price of US$51.58 per bbl, with incremental hedges expected to be added through the year.
- General and administrative expenses (“G&A”) excluding stock-based compensation, are forecast to remain stable compared to 2018, despite growth in corporate infrastructure and production, and are expected to be $8.5 million, with an ongoing focus on reducing absolute operating and corporate cash costs. On a per unit basis, G&A costs are forecast to be 15% lower in 2019 ranging between $3.60 to $3.80/boe compared to $4.26/boe (unaudited) in 2018.
- Based on the Company’s spending and activity profile through 2019, corporate production decline rates are expected to average 22%, and excluding the three higher decline Princess wells, would be expected to average approximately 16%.
1 Within this release, pro forma metrics represent the combined full year 2018 financial and operating results for Prairie Provident and Marquee Energy Ltd. (“Marquee”), which PPR acquired on November 21, 2018.
In light of continued volatility in benchmark oil prices and Canadian crude oil differentials, coupled with the lack of market support for growth in publicly-traded energy equities, PPR’s 2019 capital expenditure budget and associated production profile is expected to be fully funded and underspends forecast 2019 cash flow by approximately $3.0 million. Management and the Board will continuously review the capital budget through the year and may elect to adjust spending depending on commodity price assumptions, project economics, contingencies and market opportunities.
|PPR’s 2019 financial and operating guidance and assumptions are as follows:|
|Average daily production||6,100 – 6,500 boe/d|
|2019 exit production||6,650 boe/d|
|Capital expenditures||$18.9 million|
|Development capital||$12.3 million|
|Operating expenses||$18.70 – $19.95/boe|
|General & administrative expenses||$3.60 – $3.80/boe|
|CAD WTI (C$/bbl)||$75.00|
|Edmonton Light Diff (C$/bbl)||$(6.80)|
|WCS Diff (C$/bbl)||$(22.30)|
|AECO gas (C$/GJ)||$1.90|
Prairie Provident is well positioned for further success in 2019 with predictable funds flow from our low-decline oil assets, an attractive inventory of drilling locations, and the ability to scale-up the capital program should supportive commodity prices be sustained. Our three core areas of Michichi/Wayne, Princess and Evi all offer light/medium oil exposure and focused, lower-risk capital allocation opportunities, and we benefit from a relatively low base decline rate of approximately 22% after incorporating in the higher initial production rate wells at Princess, which feature steeper declines. With over 90% of our production operated and an average working interest exceeding 98% in our three core areas, the Company will optimally allocate capital in order to maximize value for shareholders. PPR remains focused on continuing to expand our inventory of high-quality drilling locations that can support our longer-term growth and enhance our per share production, reserves and funds flow metrics.
ABOUT PRAIRIE PROVIDENT:
Prairie Provident is a Calgary-based company engaged in the exploration and development of oil and natural gas properties in Alberta. The Company’s strategy is to grow organically in combination with accretive acquisitions of conventional oil prospects, which can be efficiently developed. Prairie Provident’s operations are primarily focused at the Michichi/Wayne and Princess areas in Southern Alberta targeting the Banff, the Ellerslie and the Lithic Glauconite formations, along with an early-stage waterflood project at our Evi area in the Peace River Arch. Prairie Provident protects its balance sheet through an active hedging program and manages risk by allocating capital to opportunities offering maximum shareholder returns.