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Yangarra Announces Second Quarter 2019 Financial and Operating Results


CALGARYAug. 8, 2019 /CNW/ – Yangarra Resources Ltd. (“Yangarra” or the “Company“) (TSX:YGR) announces its financial and operating results for the three and six months ended June 30, 2019.

Second Quarter Highlights

  • Average production of 13,032 boe/d (47% liquids) during the quarter, an increase of 9% from the first quarter of 2019 and a 72% increase from the same period in 2018.
  • Oil and gas sales were $36.5 million, an increase of 22% from the same period in 2018.
  • Funds flow from operations of $24.4 million ($0.29 per share – basic), an increase of 44% from the same period in 2018.
  • Adjusted EBITDA (which excludes changes in derivative financial instruments) was $25.2 million ($0.30 per share – basic).
  • Net income of $18.2 million ($0.21 per share – basic, $13.4 million before tax), an increase of 1,007% from the same period in 2018 and represents the 10th consecutive quarter of net income.
  • Operating costs were $6.29/boe (including $0.79/boe of transportation costs).
  • Field netbacks were $22.11/boe.
  • Operating netbacks, which include the impact of commodity contracts, were $22.33/boe.
  • Operating margins were 73% and cash flow margins were 66%.
  • G&A costs of $0.50/boe.
  • Royalties were 8% of oil and gas revenue.
  • Total capital expenditures (including E&E) were $13.8 million.
  • Adjusted net debt (which excludes current derivative financial instruments) was $178 million, a reduction of $10 million from the first quarter of 2019.
  • Adjusted net debt to annualized second quarter funds flow from operations was 1.8 : 1.
  • Retained earnings of $90.3 million as at June 30, 2019.
  • Corporate LMR is 13.99 with decommissioning liabilities of $14.1 million (discounted).

Operations Update

The Company drilled 4 wells and completed 3 wells during the quarter, which leaves 4 wells drilled but not completed at the end of the second quarter. Due to the wet spring, drilling and completion operations were delayed until late July. Yangarra expects to drill 5-6 wells and complete 4-5 wells during the third quarter. Guidance for the year remains unchanged.

Environment, Social, Governance (“ESG”) strategy

Yangarra focuses on creating long-term shareholder value through financial discipline while minimizing Yangarra’s environmental footprint and by operating in a safe manner with a diverse culture. While Canadian oil & gas ESG standards have not been formalized or adopted, Yangarra is moving forward on ESG initiatives with the following:

  • Methane baseline study is complete and on track for a 55% reduction.
  • Recently implemented revised completion procedures which will reduce flaring by 90% and reduce completion costs by 10%.
  • Implement a strategy of recycling 90% of all water generated from completions and production operations via reuse in new fracture stimulations.
  • Yangarra has drilled over 300 wells since inception, 120 of these have produced to their economic limit and were abandoned, resulting in a low standing well count and minimal asset retirement obligations.
  • Recently adopted a formal diversity policy to acknowledge important diversity considerations such as gender, age and ethnicity with a view to ensuring that the Company benefits from a broader range of perspectives and relevant experiences.

Share buybacks

Yangarra continues to make capital allocation decisions using a full cycle return model, which includes the decision on whether to buyback the Company’s shares. Using the second quarter production of 13,032 boe/d the and the current enterprise value (Market capitalization + Net Debt) the Company’s shares have traded as low as $23,500 on a per flowing boe basis. The Company’s cashflow and debt levels would allow for buybacks, however based on full-cycle capital efficiencies comparisons, the Company has made the decision to allocate capital to land purchases, new drilling and debt reduction versus share buybacks at this time.

Financial Summary

2019

2018

Six months ended

Q2

Q1

Q2

2019

2018

Statements of Comprehensive Income

Petroleum & natural gas sales

$

36,473

$

39,907

$

29,922

$

76,380

$

59,672

Net income (before tax)

$

13,433

$

16,386

$

2,605

$

29,819

$

10,651

Net income

$

18,219

$

11,514

$

1,646

$

29,733

$

7,305

Net income per share – basic

$

0.21

$

0.13

$

0.02

$

0.35

$

0.09

Net income per share – diluted

$

0.21

$

0.13

$

0.02

$

0.34

$

0.08

Statements of Cash Flow

Funds flow from operations

$

24,445

$

27,731

$

17,005

$

52,176

$

35,643

Funds flow from operations per share – basic

$

0.29

$

0.32

$

0.20

$

0.61

$

0.42

Funds flow from operations per share – diluted

$

0.28

$

0.32

$

0.19

$

0.60

$

0.41

Cash from operating activities

$

22,005

$

22,963

$

16,288

$

44,968

$

31,277

Statements of Financial Position

Property and equipment

$

515,730

$

511,113

$

387,734

$

515,730

$

387,734

Total assets

$

561,986

$

566,081

$

430,520

$

561,986

$

430,520

Working capital deficit

$

6,672

$

18,699

$

18,600

$

6,672

$

18,600

Net Debt (which excludes current derivative financial instruments)

$

177,821

$

188,063

$

115,119

$

177,821

$

115,119

Non-Current Liabilities, excluding bank debt

$

66,518

$

70,229

$

51,547

$

66,518

$

51,547

Shareholders equity

$

288,027

$

268,584

$

224,991

$

288,027

$

224,991

Weighted average number of shares – basic

85,363

85,359

85,020

85,361

83,959

Weighted average number of shares – diluted

86,680

86,772

87,783

86,728

86,406

Company Netbacks ($/boe)

2019

2018

Six months ended

Q2

Q1

Q2

2019

2018

Sales price

$

30.76

$

37.09

$

43.43

$

33.77

$

43.73

   Royalty expense

(2.35)

(2.79)

(3.90)

(2.56)

(4.02)

   Production costs

(5.50)

(5.87)

(6.40)

(5.68)

(6.40)

   Transportation costs

(0.79)

(0.96)

(1.31)

(0.87)

(1.48)

Field operating netback

22.12

27.46

31.82

24.66

31.83

  Realized gain (loss) on commodity contract settlement

0.22

0.16

(5.18)

0.19

(3.73)

Operating netback

22.34

27.62

26.64

24.85

28.10

   G&A

(0.50)

(0.32)

(0.56)

(0.41)

(0.56)

   Finance expenses

(1.49)

(1.97)

(1.39)

(1.72)

(1.34)

Funds flow netback

20.35

25.33

24.69

22.71

26.19

   Depletion and depreciation

(8.53)

(8.48)

(10.00)

(8.51)

(10.04)

   Accretion

(0.05)

(0.06)

(0.08)

(0.05)

(0.07)

   Stock-based compensation

(0.75)

(1.18)

(1.95)

(0.96)

(1.59)

   Unrealized gain (loss) on financial instruments

0.32

(0.39)

(8.87)

(0.02)

(6.69)

   Deferred income tax

4.04

(4.53)

(1.39)

(0.04)

(2.45)

Net Income netback

$

15.38

$

10.70

$

2.39

$

13.14

$

5.35

Business Environment

2019

2018

Six months ended

Q2

Q1

Q2

2019

2018

Realized Pricing (Including realized commodity contracts)

   Oil ($/bbl)

$

73.77

$

66.00

$

71.34

$

69.81

$

69.89

   NGL ($/bbl)

$

24.20

$

38.21

$

31.71

$

30.80

$

35.56

   Gas ($/mcf)

$

1.24

$

2.56

$

1.16

$

1.84

$

1.69

Realized Pricing (Excluding commodity contracts)

   Oil ($/bbl)

$

73.77

$

66.00

$

80.03

$

69.81

$

75.95

   NGL ($/bbl)

$

22.80

$

37.18

$

40.38

$

29.57

$

42.51

   Gas ($/mcf)

$

1.24

$

2.56

$

1.16

$

1.84

$

1.69

Oil Price Benchmarks

   West Texas Intermediate (“WTI”) (US$/bbl)

$

59.56

$

54.90

$

67.88

$

57.05

$

65.37

   Edmonton Par (C$/bbl)

$

73.73

$

66.48

$

80.54

$

70.13

$

76.25

   Edmonton Par to WTI differential (US$/bbl)

$

(4.44)

$

(4.91)

$

(5.46)

$

(4.42)

$

(5.67)

Natural Gas Price Benchmarks

   AECO gas (Cdn$/mcf)

$

1.04

$

1.94

$

1.03

$

1.83

$

1.44

Foreign Exchange

   U.S./Canadian Dollar Exchange

0.75

0.75

0.78

0.75

0.78

Operations Summary

Net petroleum and natural gas production, pricing and revenue are summarized below:

2019

2018

Six months ended

Q2

Q1

Q2

2019

2018

Daily production volumes

   Natural gas (mcf/d)

41,304

34,707

18,336

38,024

18,436

   Oil (bbl/d)

4,116

4,343

3,162

4,223

3,252

   NGL’s (bbl/d)

2,032

1,829

1,353

1,937

1,214

   Combined (boe/d 6:1)

13,032

11,956

7,570

12,497

7,539

Revenue

Petroleum & natural gas sales – Gross

$

36,473

$

39,907

$

29,922

$

76,380

$

59,672

Realized gain (loss) on commodity contract settlement

260

170

(3,569)

430

(5,091)

Total sales

36,733

40,077

26,353

76,810

54,581

Royalty expense

(2,785)

(3,003)

(2,684)

(5,788)

(5,486)

Total Revenue – Net of royalties

$

33,948

$

37,074

$

23,669

$

71,022

$

49,095

Working Capital Summary

The following table summarizes the change in working capital during the six months ended June 30, 2019 and the year ended December 31, 2018: 

Six months ended

Year ended

June 30, 2019

December 31, 2018

Net Debt – beginning of period

$

(155,882)

$

(93,533)

 Funds flow from operations

52,176

82,334

 Additions to property and equipment

(70,800)

(141,060)

 Decommissioning costs incurred

(578)

(333)

 Additions to E&E Assets

(2,063)

(9,773)

 Issuance of shares

31

6,776

 Other

(705)

(293)

 Net Debt – end of period 

$

(177,821)

$

(155,882)

Credit facility limit

$

225,000

$

175,000

Capital Spending

Capital spending is summarized as follows:

2019

2018

Six months ended

Cash additions

Q2

Q1

Q2

2019

2018

Land, acquisitions and lease rentals

$

98

$

38

$

92

$

136

$

149

Drilling and completion

8,960

38,908

19,520

47,870

46,291

Geological and geophysical

209

237

200

446

339

Equipment

3,346

18,320

6,113

21,667

10,454

Other asset additions

182

500

86

682

89

$

12,794

$

58,004

$

26,010

$

70,800

$

57,322

Exploration & evaluation assets

$

1,019

$

1,044

$

1,472

$

2,063

$

6,520



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