CDN NEWS | 
US NEWS 
CALGARY, Aug. 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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