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Paramount Resources Ltd. Reports 2018 Annual Results and Provides 2019 Guidance


CALGARY, March 7, 2019 /CNW/ –

OIL AND GAS OPERATIONS

  • Annual sales volumes averaged 85,941 Boe/d (37 percent liquids) in 2018, an increase of 91 percent compared to average sales volumes of 44,970 Boe/d (40 percent liquids) in 2017. Fourth quarter 2018 sales volumes averaged 84,495 Boe/d (38 percent liquids).
  • Adjusted funds flow in 2018 was $263.9 million or $2.00 per share. Liquids revenue was $682.6 million or 71 percent of total revenue.
  • Capital spending in 2018, excluding land acquisitions, totalled $569.0 million compared to Paramount’s capital guidance of $600 million. Fourth quarter spending totalled $126.3 million. Cash proceeds from non-core asset sales in 2018 totalled $182.4 million.
  • At Karr, 5 (5.0 net) new Montney wells on the 1-2 pad were brought on production in the third quarter of 2018. These wells averaged 1,869 Boe/d of peak 30-day wellhead production per well, with an average condensate to gas ratio (ʺCGRʺ) of 264 Bbl/MMcf.(1)
  • Facilities enhancements and trucking facility expansions were completed at Karr, increasing raw liquids handling capacity to approximately 15,000 Bbl/d. Fourth quarter sales volumes at Karr averaged 26,282 Boe/d (53 percent liquids).
  • At Wapiti, 11 (11.0 net) wells on the 9-3 pad have been drilled and completed, and are awaiting the start-up of a new third-party processing facility, scheduled to be onstream in mid-2019.
  • Paramount’s natural gas diversification strategy includes approximately 122,000 GJ/d of sales under long-term contracts priced at the Dawn, US Midwest and Malin markets. The Company’s average realized natural gas sales price for the fourth quarter of 2018 was $2.73/Mcf compared to average AECO prices of $1.64/GJ.
  • Paramount has 14,000 Bbl/d of liquids hedged for fiscal 2019 at an average price of C$77.05/Bbl.
  • In the fourth quarter of 2018, Paramount expanded its covenant-based revolving bank credit facility from $1.2 billion to $1.5 billion and extended the maturity date to November 2022. At December 31, 2018$815.0 million was drawn on the facility.
  • Paramount shut-in the dry-gas Hawkeye field in central Alberta and has decided to cease production operations in the Zama field in northern Alberta. Total sales volumes for these fields averaged approximately 1,500 Boe/d. Paramount is moving forward with area-based closure programs for both of these fields.

_______________________________

(1)

Production measured at the wellhead. Natural gas sales volumes are approximately five percent lower and liquids sales volumes are approximately 12 percent lower due to shrinkage. The production rates and volumes stated are over a short period of time and, therefore, are not necessarily indicative of average daily production, long-term performance or of ultimate recovery from the wells.

2019 GUIDANCE

  • Paramount is focused on maintaining capital discipline and is prioritizing lower-risk, liquids-rich Montney resource plays that generate immediate cash flows. Discretionary spending on longer-term projects is being limited in order to preserve financial flexibility and balance sheet strength.
  • Paramount’s 2019 annual sales volumes are expected to average between 81,000 Boe/d and 85,000 Boe/d.
    • Sales volumes are anticipated to average between 80,000 Boe/d and 81,000 Boe/d in the first half of 2019, as the majority of new 2019 wells are scheduled to be brought on later in the year.
    • Paramount expects production to increase in the second half of the year as production at Wapiti ramps up, with fourth quarter sales volumes forecast to average between 85,000 Boe/d and 90,000 Boe/d.
  • The Company’s base capital budget for 2019 is $350 million, excluding land acquisitions and abandonment and reclamation activities. The 2019 program is largely focused on growing Montney production at Wapiti and Karr, increasing liquids sales and per-unit netbacks.
  • Capital expenditures required in 2019 to advance the further expansion of the Karr 6-18 facility for a 2020 startup are estimated at $145 million and are not included in the $350 million base capital budget. Spending on the expansion is heavily weighted to the second half of the year, providing the Company flexibility to evaluate funding alternatives.
  • The Company’s 2019 capital plan remains flexible and may be adjusted depending on commodity prices and other factors.
  • The Company has budgeted $32 million for abandonment and reclamation activities in 2019, including those at Hawkeye and Zama.

RESERVES

  • Paramount’s proved plus probable reserves (ʺP+Pʺ) increased seven percent to 634 MMBoe in 2018 compared to 594 MMBoe in 2017. Proved reserves increased four percent to 391 MMBoe in 2018 compared to 376 MMBoe in 2017.
  • The Company’s reserves replacement ratio was 2.5 times for P+P reserves and 1.7 times for proved reserves.
  • Total developed reserves (P+P) were 178 MMBoe in 2018, with estimated future net revenue of $1.2 billion(discounted at 10 percent, before tax).
  • P+P reserves for the Karr and Wapiti Montney plays in the Grande Prairie Region increased 29 percent to 356 MMBoe in 2018 compared to 277 MMBoe in 2017.
  • P+P finding, development and acquisition costs for the Grande Prairie region were $10.61 per Boe in 2018.
  • Estimated future net revenue at December 31, 2018 totalled $2.1 billion for proved reserves and $4.1 billion for P+P reserves (discounted at 10 percent, before tax).

CORPORATE

  • In early 2019, the Company entered into interest rate swaps to fix interest rates on a portion of its debt; $250 million notional amount for four years and an additional $250 million notional amount for seven years.
  • The Company purchased a total of 4.2 million common shares for cancellation under its 2018 normal course issuer bid program at a total cost of $66.4 million. In January 2019, Paramount implemented a normal course issuer bid program under which the Company may purchase up to 7.1 million common shares for cancellation.

OPERATING AND FINANCIAL RESULTS (1)

($ millions, except as noted)

Three months ended December 31

Twelve months ended December 31

2018

2017

2018

2017

Sales volumes (Boe/d)

Grande Prairie

26,976

31,791

26,059

21,480

Kaybob

37,262

41,531

39,004

14,073

Central Alberta and Other

20,257

22,090

20,878

9,417

Total

84,495

95,412

85,941

44,970

% liquids

38%

37%

37%

40%

Netback

    $/Boe (3)

     $/Boe (3)

       $/Boe (3)

      $/Boe (3)

Natural gas revenue

79.2

2.73

69.9

2.11

267.1

2.25

132.8

2.26

Condensate and oil revenue

104.3

45.54

161.2

66.65

599.9

67.81

313.4

61.52

Other NGLs revenue (2)

20.4

31.39

25.4

30.15

82.7

30.67

40.5

26.80

Royalty and sulphur revenue

3.5

2.4

15.8

4.7

Petroleum and natural gas sales

207.4

26.68

258.9

29.49

965.5

30.78

491.4

29.94

Royalties

(8.0)

(1.03)

(16.8)

(1.92)

(69.2)

(2.21)

(24.6)

(1.50)

Operating expense

(103.2)

(13.28)

(86.1)

(9.81)

(381.0)

(12.15)

(165.9)

(10.11)

Transportation and NGLs processing (4)

(24.2)

(3.11)

(24.3)

(2.77)

(93.0)

(2.96)

(51.0)

(3.11)

Netback

72.0

9.26

131.7

14.99

422.3

13.46

249.9

15.22

Exploration and development capital (5)

Grande Prairie

72.0

97.0

301.6

369.6

Kaybob

35.6

39.3

215.7

106.5

Central Alberta and Other

16.3

14.1

40.9

51.5

Total

123.9

150.4

558.2

527.6

Net income (loss) (6)

(170.5)

(103.2)

(367.2)

336.9

per share – diluted ($/share)

(1.31)

(0.76)

(2.78)

2.91

Adjusted funds flow

45.5

110.1

263.9

218.7

per share – diluted ($/share)

0.35

0.82

2.00

1.89

Total assets (6)

4,118.1

4,480.6

Net debt

896.0

636.2

Common shares outstanding (thousands)

130,899

135,059

(1)

Readers are referred to the advisories concerning Non-GAAP Measures and Oil and Gas Measures and Definitions in the Advisories section of this document. 

(2)

Other NGLs means ethane, propane and butane.

(3)

Natural gas revenue shown per Mcf.

(4)

Includes downstream transportation costs and NGLs fractionation costs.

(5)

Excludes land and property acquisitions and spending related to corporate assets.

(6)

Net income (loss) for the three and twelve months ended December 31, 2017 and total assets as at December 31, 2017 have been restated, refer to the Company’s consolidated financial statements.

RESERVES (1)(2)

Proved

Proved plus Probable

2018

2017

% Change

2018

2017

% Change

Natural gas (Bcf)

1,366.6

1,398.7

(2)

2,169.2

2,171.3

NGLs (MBbl) (3) 

146,791

119,134

23

238,325

196,883

21

Crude oil (MBbl)

16,130

23,570

(32)

34,550

34,714

 Total (MBoe)

390,688

375,824

4

634,403

593,473

7

Future Net Revenue NPV10 ($ millions)

2,136

2,464

(13)

4,134

4,353

(5)

(1)

Readers are referred to the advisories concerning Oil and Gas Measures and Definitions in the Advisories section of this document.

(2)

Reserves evaluated by McDaniel & Associates Consultants Ltd. (“McDaniel”) as of December 31, 2018 and December 31, 2017 in accordance with National Instrument 51-101 definitions, standards and procedures. Reserves are gross reserves representing working interest before royalties. Net present values of future net revenue were determined using forecast prices and costs and do not represent fair market value.

(3)

Includes ethane, propane, butane and condensate.

ABOUT PARAMOUNT

Paramount is an independent, publicly traded, liquids-focused Canadian energy company that explores for and develops both conventional and unconventional petroleum and natural gas resources, including long-term strategic exploration and pre-development plays, and holds a portfolio of investments in other entities. The Company’s principal properties are located in Alberta and British Columbia. Paramount’s Class A common shares are listed on the Toronto Stock Exchange under the symbol “POU”.

Paramount’s 2018 annual results, including Management’s Discussion and Analysis and the Company’s Consolidated Financial Statements can be obtained at: http://files.newswire.ca/1509/PRLQ4.pdf

This information will also be made available through Paramount’s website at www.paramountres.com and on SEDAR at www.sedar.com.



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