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Yangarra Announces Third Quarter 2019 Financial and Operating Results


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).



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