Yangarra Resources Ltd. (“Yangarra” or the “Company“) (TSX:YGR) announces its financial and operating results for the three and nine months ended September 30, 2019.
Third Quarter Highlights
- Average production of 12,724 boe/d (54% liquids) during the quarter, a decrease of 2% from the second quarter of 2019 and a 23% increase from the same period in 2018.
- Oil and gas sales were $31.6 million, a decrease of 30% from the same period in 2018, due to a 43% reduction in the sales price.
- Funds flow from operations of $19.1 million ($0.22 per share – basic), a decrease of 35% from the same period in 2018.
- Adjusted EBITDA was $20.4 million ($0.24 per share – basic).
- Net income of $6.6 million ($0.08 per share – basic, $8.8 million before tax), a decrease of 49% from the same period in 2018 and represents the 11th consecutive quarter of net income.
- Return on capital employed (“ROCE”) (12 months trailing) of 13%.
- Return on equity (“ROE”) (12 months trailing) of 17%.
- Operating costs were $6.97/boe (including $1.46/boe of transportation costs).
- Field operating netbacks were $18.24/boe.
- Operating netbacks, which include the impact of commodity contracts, were $18.58/boe.
- Operating margins were 69% and funds flow from operations margins were 60%.
- G&A costs of $0.59/boe.
- Royalties were 7% of oil and gas revenue.
- Capital expenditures (including $3.2 million of land) were $26.6 million.
- Adjusted net debt was $185.8 million.
- Adjusted net debt to annualized current quarter funds flow from operations was 2.4 : 1.
- Subsequent to September 30, 2019, the borrowing base review was completed and remains at $225 million.
- Retained earnings of $96.8 million as at September 30, 2019.
- Corporate LMR is 13.17 with decommissioning liabilities of $14.6 million (discounted).
Operations Update
The Company drilled 3 wells and completed 5 wells during the quarter, with 2 wells drilled but not completed at the end of the third quarter. As a result of issues with a third-party contractor, production adds in the third quarter were delayed and capital costs were higher than expected.
The Board of Directors has approved an increase in the capital budget by $10 million ($110 million total for 2019). The additional spending will be used to drill 2 wells and complete 4 wells in the fourth quarter.
The Company completed a statistical analysis of its bioturbated Cardium wells drilled to date to determine the impact of a variety of factors. Completion programs have been altered on the last 5 wells based on the analysis with positive results observed.
Yangarra has continued to take advantage of lower industry capital programs to consolidate working interest ownerships and acquire additional Crown land at compelling valuations.
2020 Capital Budget & Guidance
The Company’s Board of Directors has approved a capital budget of $120 million for 2020 predicated on an average price of CDN$66.50/bbl for Edmonton par and of CDN$2.00/GJ for AECO natural gas. The budget is expected to increase the Company’s annual 2020 production to 14,000 – 15,000 boe/d and be cash flow neutral.
Normal-Course Issuer Bid (“NCIB”)
The Board of Directors have approved the implementation of a NCIB to opportunistically repurchase shares of the Company if the sell-off in energy stocks continues, to enhance Yangarra’s per share metrics. Any purchases made under the NCIB will be completed in the context of Yangarra’s full-cycle rate of return focus.
Financial Summary
2019 |
2018 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2019 |
2018 |
|||||||
Statements of Comprehensive Income |
|||||||||||
Petroleum & natural gas sales |
$ |
31,606 |
$ |
36,473 |
$ |
45,132 |
$ |
107,986 |
$ |
104,804 |
|
Net income (before tax) |
$ |
8,754 |
$ |
13,433 |
$ |
18,302 |
$ |
38,573 |
$ |
28,953 |
|
Net income |
$ |
6,560 |
$ |
18,219 |
$ |
12,947 |
$ |
36,293 |
$ |
20,251 |
|
Net income per share – basic |
$ |
0.08 |
$ |
0.21 |
$ |
0.15 |
$ |
0.43 |
$ |
0.24 |
|
Net income per share – diluted |
$ |
0.08 |
$ |
0.21 |
$ |
0.15 |
$ |
0.42 |
$ |
0.23 |
|
Statements of Cash Flow |
|||||||||||
Funds flow from operations |
$ |
19,055 |
$ |
24,445 |
$ |
29,524 |
$ |
71,231 |
$ |
65,167 |
|
Funds flow from operations per share – basic |
$ |
0.22 |
$ |
0.29 |
$ |
0.35 |
$ |
0.83 |
$ |
0.77 |
|
Funds flow from operations per share – diluted |
$ |
0.22 |
$ |
0.28 |
$ |
0.34 |
$ |
0.82 |
$ |
0.75 |
|
Cash from operating activities |
$ |
10,768 |
$ |
22,005 |
$ |
26,539 |
$ |
55,736 |
$ |
57,816 |
|
Statements of Financial Position |
|||||||||||
Property and equipment |
$ |
530,389 |
$ |
515,730 |
$ |
426,745 |
$ |
530,389 |
$ |
426,745 |
|
Total assets |
$ |
581,426 |
$ |
561,986 |
$ |
479,397 |
$ |
581,426 |
$ |
479,397 |
|
Working capital deficit (surplus) |
$ |
(2,947) |
$ |
6,672 |
$ |
23,528 |
$ |
(2,947) |
$ |
23,529 |
|
Adjusted Net Debt |
$ |
185,752 |
$ |
177,821 |
$ |
135,712 |
$ |
185,752 |
$ |
135,712 |
|
Shareholders equity |
$ |
295,645 |
$ |
288,027 |
$ |
239,946 |
$ |
295,645 |
$ |
239,946 |
|
Weighted average number of shares – basic |
85,363 |
85,363 |
85,331 |
85,362 |
84,421 |
||||||
Weighted average number of shares – diluted |
85,936 |
86,680 |
87,614 |
86,518 |
86,783 |
||||||
Company Netbacks ($/boe)
2019 |
2018 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2019 |
2018 |
|||||||
Sales price |
$ |
27.00 |
$ |
30.76 |
$ |
47.52 |
$ |
31.46 |
$ |
45.29 |
|
Royalty expense |
(1.79) |
(2.35) |
(4.38) |
(2.30) |
(4.17) |
||||||
Production costs |
(5.51) |
(5.50) |
(5.28) |
(5.62) |
(5.94) |
||||||
Transportation costs |
(1.46) |
(0.79) |
(1.07) |
(1.07) |
(1.31) |
||||||
Field operating netback |
18.24 |
22.12 |
36.79 |
22.47 |
33.87 |
||||||
Realized gain (loss) on commodity contract settlement |
0.34 |
0.22 |
(3.65) |
0.24 |
(3.70) |
||||||
Operating netback |
18.58 |
22.34 |
33.15 |
22.71 |
30.17 |
||||||
G&A |
(0.59) |
(0.50) |
(0.61) |
(0.47) |
(0.58) |
||||||
Finance expenses |
(1.75) |
(1.49) |
(1.30) |
(1.73) |
(1.32) |
||||||
Depletion and depreciation |
(8.15) |
(8.53) |
(10.09) |
(8.39) |
(10.06) |
||||||
Asset Impairment |
– |
– |
(0.85) |
– |
(0.35) |
||||||
Accretion |
(0.04) |
(0.05) |
(0.06) |
(0.05) |
(0.07) |
||||||
Stock-based compensation |
(0.66) |
(0.75) |
(1.59) |
(0.85) |
(1.59) |
||||||
Unrealized gain (loss) on financial instruments |
0.08 |
0.32 |
0.62 |
0.02 |
(3.69) |
||||||
Deferred income tax |
(1.87) |
4.04 |
(5.64) |
(0.66) |
(3.76) |
||||||
Net Income netback |
$ |
5.60 |
$ |
15.38 |
$ |
13.63 |
$ |
10.57 |
$ |
8.75 |
Business Environment
2019 |
2018 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2019 |
2018 |
|||||||
Realized Pricing (Including realized commodity contracts) |
|||||||||||
Oil ($/bbl) |
$ |
69.83 |
$ |
73.77 |
$ |
74.84 |
$ |
69.81 |
$ |
72.02 |
|
NGL ($/bbl) |
$ |
22.78 |
$ |
24.20 |
$ |
40.05 |
$ |
27.82 |
$ |
37.23 |
|
Gas ($/mcf) |
$ |
1.06 |
$ |
1.24 |
$ |
1.38 |
$ |
1.56 |
$ |
1.56 |
|
Realized Pricing (Excluding commodity contracts) |
|||||||||||
Oil ($/bbl) |
$ |
69.83 |
$ |
73.77 |
$ |
82.54 |
$ |
69.81 |
$ |
78.79 |
|
NGL ($/bbl) |
$ |
20.85 |
$ |
22.80 |
$ |
41.76 |
$ |
26.33 |
$ |
42.23 |
|
Gas ($/mcf) |
$ |
1.06 |
$ |
1.24 |
$ |
1.30 |
$ |
1.56 |
$ |
1.53 |
|
Oil Price Benchmarks |
|||||||||||
West Texas Intermediate (“WTI”) (US$/bbl) |
$ |
56.43 |
$ |
59.56 |
$ |
69.50 |
$ |
56.99 |
$ |
66.75 |
|
Edmonton Par (C$/bbl) |
$ |
69.48 |
$ |
73.73 |
$ |
81.92 |
$ |
70.31 |
$ |
78.19 |
|
Edmonton Par to WTI differential (US$/bbl) |
$ |
(3.63) |
$ |
(4.44) |
$ |
(6.83) |
$ |
(4.26) |
$ |
(6.00) |
|
Natural Gas Price Benchmarks |
|||||||||||
AECO gas (Cdn$/mcf) |
$ |
0.90 |
$ |
1.04 |
$ |
1.19 |
$ |
1.55 |
$ |
1.48 |
|
Foreign Exchange |
|||||||||||
U.S./Canadian Dollar Exchange |
0.76 |
0.75 |
0.77 |
0.75 |
0.78 |
Operations Summary
Net petroleum and natural gas production, pricing and revenue are summarized below:
2019 |
2018 |
Nine months ended |
|||||||||
Q3 |
Q2 |
Q3 |
2019 |
2018 |
|||||||
Daily production volumes |
|||||||||||
Natural gas (mcf/d) |
41,068 |
41,304 |
24,378 |
39,049 |
20,439 |
||||||
Oil (bbl/d) |
3,627 |
4,116 |
4,853 |
4,020 |
3,789 |
||||||
NGL’s (bbl/d) |
2,253 |
2,032 |
1,406 |
2,045 |
1,282 |
||||||
Combined (boe/d 6:1) |
12,724 |
13,032 |
10,323 |
12,574 |
8,477 |
||||||
Revenue |
|||||||||||
Petroleum & natural gas sales – Gross |
$ |
31,606 |
$ |
36,473 |
$ |
45,132 |
$ |
107,986 |
$ |
104,804 |
|
Realized gain (loss) on commodity contract settlement |
402 |
260 |
(3,462) |
832 |
(8,553) |
||||||
Total sales |
32,008 |
36,733 |
41,670 |
108,818 |
96,251 |
||||||
Royalty expense |
(2,093) |
(2,785) |
(4,157) |
(7,881) |
(9,642) |
||||||
Total Revenue – Net of royalties |
$ |
29,915 |
$ |
33,948 |
$ |
37,513 |
$ |
100,937 |
$ |
86,609 |
Working Capital Summary
The following table summarizes the change in working capital during the nine months ended September 30, 2019 and the year ended December 31, 2018:
Nine months ended |
Year ended |
|||
September 30, 2019 |
December 31, 2018 |
|||
Adjusted Net Debt – beginning of period |
$ |
(155,882) |
$ |
(93,533) |
Funds flow from operations |
71,231 |
82,334 |
||
Additions to property and equipment |
(94,223) |
(141,060) |
||
Decommissioning costs incurred |
(578) |
(333) |
||
Additions to E&E Assets |
(5,243) |
(9,773) |
||
Issuance of shares |
31 |
6,776 |
||
Other |
(1,088) |
(293) |
||
Adjusted Net Debt – end of period |
$ |
(185,752) |
$ |
(155,882) |
Credit facility limit |
$ |
225,000 |
$ |
175,000 |
Capital Spending
Capital spending is summarized as follows: |
|||||||||||
2019 |
2018 |
Nine months ended |
|||||||||
Cash additions |
Q3 |
Q2 |
Q3 |
2019 |
2018 |
||||||
Land, acquisitions and lease rentals |
$ |
170 |
$ |
98 |
$ |
79 |
$ |
306 |
$ |
229 |
|
Drilling and completion |
18,194 |
8,960 |
38,265 |
66,063 |
84,556 |
||||||
Geological and geophysical |
148 |
209 |
163 |
594 |
502 |
||||||
Equipment |
4,807 |
3,346 |
9,893 |
26,474 |
20,346 |
||||||
Other asset additions |
104 |
182 |
82 |
786 |
171 |
||||||
$ |
23,423 |
$ |
12,794 |
$ |
48,482 |
$ |
94,223 |
$ |
105,804 |
||
Exploration & evaluation assets |
$ |
3,180 |
$ |
1,019 |
$ |
1,563 |
$ |
5,243 |
$ |
8,083 |
Quarter End Disclosure
The Company’s financial statements, notes to the financial statements and management’s discussion and analysis for the year ended December 31, 2018 and three and nine months ended September 30, 2019 have been filed on SEDAR (www.sedar.com) and are available on the Company’s website (www.yangarra.ca).
Share This:
COMMENTARY: Activists Suddenly Care About LNG Investors