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Cardinal Energy Ltd. Announces First Quarter 2019 Results


CALGARY, Alberta, May 07, 2019 (GLOBE NEWSWIRE) — Cardinal Energy Ltd. (“Cardinal” or the “Company”) (TSX: CJ) is pleased to announce its operating and financial results for the quarter ended March 31, 2019. The Company also announces that its unaudited financial statements and management’s discussion and analysis for the quarter ended March 31, 2019, will be available on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on Cardinal’s website at www.cardinalenergy.ca.

Highlights from the first quarter of 2019:

  • Adjusted funds flow increased by 16% and adjusted funds flow per share increased 9% over the same period in 2018.
  • As compared to the fourth quarter of 2018, adjusted funds flow increased by $24.1 million to $29.6 million.
  • General and administration (“G&A”) costs per boe decreased 14% over the same period in 2018 as the Company reduced cash compensation costs in a volatile commodity price environment.
  • Continued with the Company’s debt reduction strategy by decreasing net debt by $11.8 million or 4% over debt levels as at December 31, 2018.
  • Bought back and cancelled the maximum allowable of 10% of outstanding debentures pursuant to the normal course issuer bid announced in December 2018.
  • Total payout ratio decreased to 50% while the simple payout ratio decreased to 12% highlighting Cardinal’s focus on strengthening our balance sheet.
Financial and Operating Highlights
   
($ 000’s except shares, per share and operating amounts) Three months ended March 31,
2019 2018 % Change
Financial
Petroleum and natural gas revenue 94,050 94,779 (1 )
Cash flow from operating activities 27,506 31,802 (14 )
Adjusted funds flow(1) 29,639 25,551 16
basic and diluted per share $   0.25 $ 0.23 9
Loss (16,506 ) (13,314 ) 24
basic and diluted per share $ (0.14 ) $ (0.12 ) 17
Dividends declared 3,619 12,281 (71 )
per share $   0.03 $ 0.105 (71 )
Net debt (1) 257,880 263,341 (2 )
Exploration and development capital 11,152 12,800 (13 )
Acquisitions, net (5,028 )
Total capital expenditures 11,584 8,280 40
Weighted average shares outstanding  
basic (000s) 116,981 113,397 3
diluted (000s) 116,981 113,397 3
 
Operating  
Average daily production  
Light oil (bbl/d) 8,246 9,031 (9 )
Medium/heavy oil (bbl/d) 8,542 8,801 (3 )
NGL (bbl/d) 964 660 46
Natural gas (mcf/d) 15,930 16,505 (3 )
Total (boe/d) 20,407 21,243 (4 )
Netback(1)  
Petroleum and natural gas revenue $   51.21 $ 49.57 3
Royalties (7.37 ) (8.44 ) (13 )
Net operating expenses (22.63 ) (20.71 ) 9
Transportation (0.19 ) (0.22 ) (14 )
Netback $   21.02 $ 20.20 4
Realized loss on commodity contracts (0.79 ) (2.63 ) (70 )
Netback after risk management (1) $     20.23 $ 17.57 15
Interest and other (1.83 ) (1.58 ) 16
G&A (2.26 ) (2.63 ) (14 )
Adjusted funds flow netback (1) $     16.14 $ 13.36 21
(1) See non-GAAP measures

Q1 Overview

During the first quarter of 2019, Cardinal recovered from the low oil prices and record wide Canadian oil pricing differentials that industry experienced in the fourth quarter of 2018 and reactivated the production that was voluntarily shut-in during late 2018.  While the Company’s first quarter oil production was restricted by the Alberta Government’s mandatory curtailment program, Cardinal managed to maintain volumes at our budgeted production levels.  There were no new production volumes added through drilling in the quarter as our low production decline allowed us to maintain our production at mandated levels.  Although we do not believe this program is a long-term solution, restricted production levels led to Canadian oil pricing differentials significantly narrowing in the first quarter of 2019 and adjusted funds flow increasing to $29.6 million or $0.25 per share which compared to $5.5 million ($0.05 per share) of adjusted funds flow in the fourth quarter of 2018.

Stronger West Texas Intermediate (“WTI”) oil prices combined with narrow Canadian oil differentials led to a 62% increase in corporate pricing over the fourth quarter of 2018 and a 3% increase over the same period in 2018.  The increased pricing combined with decreased hedging losses and lower G&A costs increased the adjusted funds flow netback by 21% over the same period in 2018.

Due to higher regulatory and electricity costs combined with one-time well reactivation costs, operating costs increased 9% to $22.63 per boe in the first quarter of 2019 compared to the same period in 2018.  As our operating cost reduction initiatives are implemented throughout 2019, we expect to see quarterly reductions in our costs and costs per boe.  Electricity costs make up approximately 25% of our total operating costs; therefore, we have begun a program to reduce our dependence on the power grid and are developing projects in all of our operating areas to produce our own power through company owned generation facilities.

Our first quarter 2019 development capital expenditures of $11.1 million were allocated to the drilling of one oil well and one stratigraphic test well in Bantry, Alberta and ongoing pipeline, infrastructure, operating cost reduction initiatives and enhanced oil recovery projects throughout all of our operating areas.

The increase in adjusted funds flow combined with Cardinal’s disciplined capital program allowed the Company to reduce net debt by $11.8 million or 4% during the first quarter.  Pursuant to the normal course issuer bid announced in December 2018, during the first quarter of 2019, we bought back and cancelled the maximum allowable amount of convertible debentures below par at a price of 96.9314 for a gain of $0.2 million and reduced future interest costs by approximately $0.1 million.  Our reduced net debt and increased adjusted funds flow reduced the Company’s run rate net debt to adjusted funds flow ratio to 2.2x while our total payout ratio decreased to 50%.

The positive Canadian commodity pricing increases have allowed Cardinal to be opportunistic in locking in future value with our risk management program. Approximately 71% of the Company’s WCS differential pricing has been locked in with either WTI-WCS pricing differential hedges or wellhead CAD$ WCS pricing. The Company has also protected the downside with pricing floors averaging over CAD$69/bbl but retained upside on WTI pricing by locking in 58% of our light oil with an average ceiling price of over CAD$85/bbl or with no ceiling at all through various puts. This risk management program has given Cardinal the ability to achieve its budgeted capital expenditures and asset retirement obligations and continue with its dividend program while providing the upside of paying down debt.

Outlook

The combination of improved realized pricing, a strong risk management program, our disciplined capital expenditure program and forecasted reduction in future operating costs is expected to result in significant increases in our free adjusted funds flow throughout the year.  Cardinal plans to use its adjusted funds flow in excess of its dividend and capital program to continue to reduce debt and solidify our balance sheet.

In the first quarter of 2019, we exceeded our budget and given where current oil prices and differentials are, we expect the second quarter to continue in the same direction.  We will continue to look for ways to reduce our controllable costs in a responsible manner while also ensuring we continue to reduce our environmental impact.

Cardinal also announces that in conjunction with annual board committee review, it has reconstituted its board committees. The Company’s current committees and its members are now as follows: Audit (Greg Tisdale (chair), David Johnson and Stephanie Sterling), Reserves (David Johnson (chair), Stephanie Sterling and Scott Ratushny), Environmental, Social and Corporate Governance (John Brussa (chair), David Johnson and Stephanie Sterling).

We would like to thank our employees and Board of Directors for their contributions and our shareholders for their continuing confidence in Cardinal.

May Dividend

Cardinal confirms that a dividend of $0.01 per common share will be paid on June 17, 2019 to shareholders of record on May 31, 2019. The Board of Directors of Cardinal has declared the dividend payable in cash. This dividend has been designated as an “eligible dividend” for Canadian income tax purposes.

About Cardinal Energy Ltd.

Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal operates low decline oil properties in Alberta and Saskatchewan.



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