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TORC Oil & Gas Ltd. Announces First Quarter 2019 Financial & Operating Results; Increase to 2019 Production Guidance and Increase to the Dividend


CALGARYMay 7, 2019 /CNW/ – TORC Oil & Gas Ltd. (“TORC” or the “Company”) (TSX: TOG) is pleased to announce its financial and operating results for the three months ended March 31, 2019.  The associated management’s discussion and analysis (“MD&A”) and unaudited interim financial statements as at and for the quarter ended March 31, 2019 can be found at www.sedar.com and www.torcoil.com.

Highlights

Three months ended

(in thousands, except per share data)

March 31

2019

December 31

2018

March 31

2018

Financial

Adjusted funds flow, excluding transaction costs (1), (2)

$76,067

$54,389

$64,012

Per share basic

$0.35

$0.25

$0.33

Per share diluted

$0.34

$0.25

$0.32

Net cash from operating activities

$53,930

$73,653

$58,294

Net income (loss)

$6,335

($24,398)

$5,224

Per share basic

$0.03

($0.11)

$0.03

Per share diluted

$0.03

($0.11)

$0.03

Exploration and development expenditures (1)

$54,109

$54,155

$41,670

Property acquisitions, net of dispositions (1)     

$146

$4,020

$2,694

Net debt (1)

$396,038

$405,293

$269,521

Cash dividends declared (3)

$9,761

$9,648

$7,908

Dividends declared per common share

$0.066

$0.066

$0.060

Common shares

Shares outstanding, end of period

217,676

216,637

196,658

Weighted average shares (basic)

217,140

216,191

196,350

Weighted average shares (diluted)

220,530

218,399

198,835

Operations

Production

Crude oil (Bbls per day)

23,700

23,546

18,827

NGL (Bbls per day)

1,459

1,554

1,160

Natural gas (Mcf per day)

18,646

18,380

17,441

Barrels of oil equivalent (Boepd, 6:1)

28,267

28,163

22,894

Average realized price

Crude oil ($ per Bbl)

$64.85

$52.34

$67.46

NGL ($ per Bbl)

$20.32

$28.76

$26.60

Natural gas ($ per Mcf)

$2.18

$1.40

$1.72

Barrels of oil equivalent ($ per Boe, 6:1)

$56.86

$46.26

$58.13

Operating netback per Boe (6:1)

Operating netback (1)

$32.64

$23.63

$33.64

Operating netback (prior to hedging) (1)

$32.64

$23.88

$33.69

Adjusted funds flow netback per Boe (6:1)

Excluding transaction related costs (1)

$29.90

$20.99

$31.07

Wells drilled:

Gross

34

16

26

Net

27.9

15.3

18.6

Success (%)

100

100

100

 

(1)

Management uses these non-GAAP financial measures to analyze operating performance, leverage and investing activity.  These measures do not have a standardized meaning under GAAP and therefore may not be comparable with the calculation of similar measures for other companies.  See Non-GAAP Measurements within this document for additional information. 

(2)

For ease of readability, in this press release, adjusted funds flow, excluding transaction related costs will be referred to as “cash flow”.

(3)

Cash dividends declared are net of the share dividend program participation.

PRESIDENT’S MESSAGE

TORC’s operational momentum from 2018 was maintained into the first quarter of 2019 with a continuing focus on the Company’s long term objectives of delivering disciplined growth in combination with preserving financial flexibility and providing a sustainable dividend.

TORC’s active and successful drilling program was focused in both southeast Saskatchewan and Cardium core areas where the Company’s quarterly objectives were to maintain 2018 year-end exit volumes while solidifying a higher base level of production to continue building future value.

TORC’s disciplined approach and strong underlying asset base continues to position the Company for strategic, disciplined, long term growth.

The Company’s key achievements in the first quarter of 2019 included the following:

  • Achieved record quarterly production of 28,267 boepd, up from 28,163 boepd in the fourth quarter of 2018 and 22,894 boepd in the first quarter of 2018;
  • Generated cash flow of $76.1 million relative to $54.4 million in the fourth quarter of 2018 and $64.0 millionin the first quarter of 2018;
  • Generated cash flow per share of $0.35 per share as compared to $0.25 in the fourth quarter of 2018 and $0.33 per share in the first quarter of 2018;
  • Successfully drilled 34 (27.9 net) wells spending $54.1 million;
  • During the first quarter, TORC declared dividends of $14.3 million of which $4.6 million was settled under the share dividend program;
  • Achieved a payout ratio in the quarter of 84% while continuing to organically grow production; and
  • At quarter end, the Company’s net debt was $396.0 million with $351.7 million drawn on the credit facility. Subsequent to quarter end, TORC’s credit facility was reconfirmed at $500 million, providing the Company with significant financial flexibility and liquidity.

OPERATIONAL UPDATE

TORC’s first quarter production averaged 28,267 boepd (89% light oil and NGLs).  Strong new well results and solid performance of the Company’s existing low decline production base contributed to the continued quarter over quarter growth of the Company’s production. TORC’s disciplined approach provides a solid foundation for future sustainable growth.

During the first quarter, TORC executed a development program, drilling 34 (27.9 net) wells focused on the conventional and unconventional assets in southeast Saskatchewan and the Cardium in central Alberta.  TORC spent $54.1 million in the first quarter representing 30% of the Company’s 2019 $180 million capital budget.

SOUTHEAST SASKATCHEWAN 

TORC drilled 18 (14.5 net) southeast Saskatchewan conventional wells in the first quarter.  TORC’s southeast Saskatchewan conventional assets are characterized by their lower risk nature and high rates of return driven by low capital costs, high netbacks and the favorable royalty regime in the province. With a long term decline profile of less than 20% and strong operating netbacks, the southeast Saskatchewan assets yield significant free cash flow to support TORC’s business model.

TORC has identified more than 400 net undrilled conventional light oil locations in southeast Saskatchewanproviding years of high quality drilling inventory.  In 2019, TORC plans to drill a total of 45 (33.7 net) conventional wells.  The focus in TORC’s southeast Saskatchewan conventional properties is to maintain a stable production profile and maximize free cash flow from the assets.

On the Company’s unconventional asset base in southeast Saskatchewan, TORC drilled 5 (4.5 net) wells during the first quarter in the Torquay/Three Forks geological zone.  With continued strong drilling and production results the Company deferred completion of the Torquay/Three Forks program wells until the second and third quarters.  In 2019, TORC plans to drill a total of 16 (12.5 net) wells continuing to drive growth in this light oil, high netback resource play.  TORC has identified over 150 net development locations in the Torquay/Three Forks play providing multiple years of drilling inventory.

TORC drilled 7 (5.6 net) wells in the unconventional Midale light oil play during the first quarter.  The Company continues to be encouraged with the results from this play and plans to drill a total of 18 gross (14.9 net) wells spread across the Company’s land position for both the development and further delineation in 2019.  TORC has identified more than 175 net future undrilled development locations across the Company’s asset base for unconventional Midale production.

CARDIUM

TORC drilled 4 (3.3 net) Cardium development wells in the first quarter.  For 2019, the Company has budgeted to drill a total of 9 (8.2 net) Cardium wells representing less than 5% of TORC’s identified undrilled inventory.

TORC has identified more than 290 net undrilled Cardium locations for future development.  With a decline profile below 25% and a deep inventory of high quality development locations, the Cardium continues to contribute meaningfully to the Company’s free cash flow growth strategy.

CAPITAL PROGRAM

TORC’s 2019 $180 million capital program is concentrated on the Company’s primary core areas in southeast Saskatchewan, focused on both conventional opportunities and the unconventional plays, and the Cardium play in central Alberta.  TORC continues to focus on operational efficiencies with a goal of achieving results that exceed budget expectations.

The capital program maintains TORC’s balanced approach as the Company continues to focus on achieving long term sustainable growth, protecting the Company’s strong financial position and maintaining a consistent decline profile to preserve repeatability of the business model.

Based on current commodity prices and budgeted cost structure, the Company expects to achieve significant free cash flow in 2019 above the current capital program and dividend.  This free cash flow will continue to position the Company to enhance the growth, sustainability and repeatability of the Company’s business model.  The Company maintains the flexibility to increase capital expenditures during the second half of 2019.

INCREASED PRODUCTION GUIDANCE

Based on the strength of the underlying production base and the continued success of the Company’s drilling program TORC is increasing 2019 average production guidance to 28,300 boepd from 28,000 boepd previously, and 2019 exit production guidance to 28,300 boepd from 28,000 boepd previously, with no corresponding change in the capital program.

INCREASED DIVIDEND

TORC’s dividend is reviewed regularly with the Board of Directors and is an important component of TORC’s overall strategy.  During the first quarter, TORC declared dividends of $14.3 million of which $4.6 million was settled under the share dividend plan.

With continued production and cash flow per share growth, the Board of Directors have approved a 14% increase to the Company’s annual dividend.  Accordingly, TORC’s annual dividend will increase to $0.30 per share ($0.025 per month) from $0.264 per share ($0.022 per month) effective for the May 2019 dividend payable in June.

The Company is committed to maintaining a disciplined approach.  TORC’s priorities are to act prudently to protect TORC’s financial flexibility while positioning the Company to continue to achieve per share growth over the long term while paying out a sustainable and growing dividend.

DIRECTOR RETIREMENT

Mr. Raymond Chan is retiring from the Board of Directors of TORC and will not be standing for re-election at the Company’s 2019 Annual General Meeting of Shareholders to be held on May 8, 2019.   Mr. Chan was a founding Board member of TORC and was Chairman of the Audit Committee since inception.  The Board of Directors and Management of TORC would like to thank Mr. Chan for his valuable contribution, guidance and dedication and wish him the best in his retirement.

OUTLOOK

TORC has built a sustainable growth platform of light oil focused assets and continues to enhance this platform. The stability of the high quality, low decline, light oil assets in southeast Saskatchewan and the low risk Cardium development inventory in central Alberta, combined with exposure to unconventional light oil resource plays in southeast Saskatchewan, positions TORC to provide value creation through a disciplined long term focused growth strategy with a sustainable dividend.

TORC has the following key operational and financial attributes:

High Netback Production (1)

2019E Average: 28,300 boepd

2019E Exit: 28,300 boepd

Total Proved plus Probable Reserves (2)

Greater than 138 mmboe (~84% light oil & liquids)

Southeast Saskatchewan Light Oil
Development Inventory

Greater than 400 net undrilled conventional locations

Greater than 150 net undrilled Torquay/Three Forks locations

Greater than 175 net undrilled unconventional Midale locations

Cardium Light Oil Development Inventory

Greater than 290 net undrilled locations

Sustainability Assumptions (3)

Corporate decline ~23%

Capital Efficiency ~$28,000 per boepd (IP 365)

2019 Capital Program

$180 million

Monthly Dividend

$0.022 per share (current)

$0.025 per share (effective in May; payable in June)

Net Debt as at March 31, 2019 (4)

$396 million; $352 million drawn on a bank line $500 million

Shares Outstanding

217 million (basic)

Tax Pools

Approximately $1.9 billion

Notes:

(1)

~88% light oil & NGLs.

(2)

All reserves information in this press release are gross reserves. The reserve information for TORC in the foregoing table is derived from the independent engineering report effective December 31, 2018 prepared by Sproule & Associates Limited (“Sproule”) evaluating the oil, NGL and natural gas reserves attributable to all of our properties (the “TORC Reserve Report”).

(3)

Refers to full cycle capital efficiency which is the all-in corporate capital budget divided by the IP365 of the associated wells. Corporate decline refers to TORC’s estimated oil and gas production decline rate in the normal life cycle of a well.

(4)

See “Non-GAAP Measures”.

An updated corporate presentation can be found at www.torcoil.com.



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