Sign Up for FREE Daily Energy News
 
BREAKING NEWS:
WEC - Western Engineered Containment
Hazloc Heaters
Copper Tip Energy Services
WEC - Western Engineered Containment
Hazloc Heaters
Copper Tip Energy

Journey Energy Inc. Reports its Third Quarter 2019 Results and Announces Start of Trading on the OTCQX Market


CALGARYNov. 4, 2019 /CNW/ – Journey Energy Inc. (JOY – TSX) (“Journey” or the “Company“) announces its financial and operating results for the three and nine month periods ending September 30, 2019.  The complete set of financial statements and management discussion and analysis for the periods ended September 30, 2019 and 2018 are posted on www.sedar.com and on the Company’s website www.journeyenergy.ca.

THIRD QUARTER 2019 HIGHLIGHTS

  • Achieved production of 9,445 boe/d in the third quarter, compared to 10,227 boe/d in the third quarter of 2018. Liquids (comprised of oil and natural gas liquids) production of 4,675 bbl/d accounted for 49% of the total boe/d production for the quarter.

  • Generated $6.0 million of funds flow in the third quarter or $0.16 per share.

  • Received a corporate average commodity price of $30.10/boe (before hedging) in the third quarter. Liquids accounted for 92% of total revenues in the quarter.

  • Journey restructured its term debt on September 30, 2019. The maturity of the debt issued in 2016 has now been extended to October 31, 2023.

  • Raised $7.3 million of equity pursuant to a non-brokered flow-through share offering at $2.60 per share representing a 13.5% premium to the Journey share price.

  • The third well on Journey’s Duvernay joint venture was completed and placed on-production by Kiwetinohk Resources Corp. (“Kiwetinohk”) August 27, 2019. There are now four wells producing pursuant to the joint venture.

  • Commenced the fourth quarter drilling program on October 1 wherein 4 (4.0 net) wells will be drilled in Matziwin.

Third Quarter Financial & Operating Highlights

Three months ended

 September 30,

Nine months ended

 September 30,

Financial ($000’s except per share
amounts)

2019

2018

%

change

2019

2018

%

change

Production revenue

26,158

34,032

(23)

82,056

94,651

(13)

Funds flow

6,020

7,890

(24)

20,900

18,335

14

Per basic share

0.16

0.20

(25)

0.53

0.46

15

Per diluted share

0.16

0.20

(25)

0.53

0.46

15

Net income (loss)

(7,055)

201

3,610

(23,701)

(21,267)

11

Per basic share

(0.18)

0.01

(1,900)

(0.60)

(0.53)

13

Per diluted share

(0.18)

0.01

(1,900)

(0.60)

(0.53)

13

Capital additions less disposal

2,427

9,647

(75)

11,200

25,519

(56)

Net debt

118,238

132,851

(11)

118,238

132,851

(11)

Share Capital (000’s)

Basic, weighted average

39,276

38,546

2

39,250

40,080

(2)

Basic, end of period

42,071

38,546

9

42,071

38,546

9

Fully diluted

46,321

42,728

8

46,321

42,728

8

Daily Production

Natural gas volumes (mcf/d)

28,621

32,070

(11)

29,038

32,112

(10)

Crude oil (bbl/d)

4,091

4,357

(6)

3,932

4,099

(4)

Natural gas liquids (bbl/d)

584

525

11

570

676

(16)

Barrels of Oil Equivalent (boe/d)

9,445

10,227

(8)

9,341

10,127

(8)

Average Realized Prices (excluding
hedging)

Natural gas ($/mcf)

0.84

1.61

(48)

1.49

1.54

(3)

Crude Oil ($/bbl)

60.89

68.27

(11)

61.84

65.44

(6)

Natural gas liquids ($/bbl)

19.24

39.41

(51)

25.07

42.96

(42)

Barrels of oil equivalent ($/boe)

30.10

36.17

(17)

32.18

34.24

(6)

Netbacks ($/boe)

Realized prices (excl. hedging)

30.10

36.17

(17)

32.18

34.24

(6)

Royalties

(4.06)

(4.87)

(17)

(3.93)

(4.59)

(14)

Operating expenses

(13.79)

(12.75)

8

(14.12)

(13.65)

3

Transportation expenses

(0.48)

(0.50)

(4)

(0.47)

(0.49)

(4)

Operating netback

11.77

18.05

(35)

13.66

15.51

(12)

Realized hedging loss

(0.14)

(5.21)

(97)

(0.17)

(3.97)

(96)

11.63

12.84

(9)

13.49

11.54

17

Wells drilled

Gross

3

(100)

3

9

(67)

Net

3.0

(100)

3.0

9.0

(67)

Success rate

100

100

100

OPERATIONS

Journey achieved average production of 9,445 Boe/d (49% liquids) during the third quarter of 2019, representing a 2% increase from the second quarter of 2019.  Average daily volumes were down 8% from the previous year, however, the majority of this decrease was from natural gas volumes.  Journey’s primary focus over the past year has been to maintain its oil production while improving financial flexibility, and allowing third party capital to de-risk our world class Duvernay acreage.

On September 30, 2019 Journey closed a flow-through share financing for $7.3 million.  This financing will fund the majority of the currently projected development capital between October 1, 2019 and breakup in 2020.  Journey began drilling a 4 (4.0 net) well program in Matziwin in mid-October.  Journey is currently drilling the fourth well of this program and anticipates beginning the completion operations in November.  It is currently expected that all of these wells will be on-production by the end of the year.  The four Matziwin wells follow up the three successful Matziwin wells drilled in June.  These wells were placed on-production in July at rates well in excess of our type curve projections.  The wells contributed to the uplift in third quarter volumes and continue to produce approximately 700 boe/d (70% oil).  Two of the wells continue to flow at restricted rates with both downhole and surface chokes.  The 2019 program in Matziwin resulted in reduced drilling and service costs.  For the most recent three wells, Journey spent $2.0 million to drill, complete, equip and tie-in each well versus $2.4 million last year.  The new per-well costs included increasing the proppant intensity over the completed length to 0.63 tonnes/m versus 0.44 tonnes/m in 2018.  Journey forecasts similar costs for the current program.

In the first quarter of 2020, Journey has three locations scheduled for its Skiff property.  This is part of our horizontal development program in south Skiff, which follows up three wells drilled in 2018.  During the third quarter, the central well of the three well pattern was converted to a water injection well.

During the third quarter, Journey began work on a 4.5 megawatt power project at our Countess property.  The project is utilizing equipment sourced at competitive prices and is scheduled to be on-stream in the second quarter of 2020, due in large part to the timing of  receiving third party approvals.  Approximately $1.0 million of capital costs associated with this project are forecast for the second half of 2019.

Journey’s third quarter operating costs were impacted by $0.4 million due to turnaround activity. Almost all of Journey’s turnaround operations for 2019 were completed by the end of the third quarter.

Journey continues to monitor the advancement and development of its emerging Duvernay resource play and continues to be encouraged by the activity from industry wells drilled on offsetting acreage, both in terms of initial production rates, and reduced drill, complete, equip and tie-in costs.

Journey issued a press release on July 16 summarizing test results for the latest Duvernay joint venture well at 100/13-02-042-04W5/00.  This well has now been on-production for over two calendar months.  During the first 60 producing days the well has produced approximately 30.0 mbbl of oil; 11.2 mbbl of water; and 60 mmscf of natural gas. The well continues to flow at highly restricted rates with flowing pressures of approximately 7,600 kPa.  Despite being approximately 10 kilometers away from the initial two producing wells, this well’s performance is very similar to those wells.  With four Duvernay joint venture wells now on production, Journey feels that a significant portion of the 105,000 gross acre land block Journey assembled, has been de-risked and is within the sweet spot of the oil window.

The past three months have provided Journey and KRC the opportunity to monitor the performance of the joint-venture wells and the activity of offsetting acreage holders.  All three wells drilled by Journey’s partner have performed at or slightly above initial projections.  Journey anticipates drilling activity to resume within the next three months.  Pursuant to the farmout agreement, KRC is currently in the option period to complete all potential working interest earning, prior to the end of August 2020.  Following this, Journey and KRC will enter into the initial two year early development phase, where up to a maximum of ten wells can be drilled each year, with Journey having the option on a well-by-well basis, to either participate as to its working interest or take a 5% GORR on 100% of the production.

With the continued volatility in commodity prices, Journey reduced its initial 2019 capital program from $30 million to approximately $22 million.  This remains the current guidance, however, Journey now forecasts drilling a fourth Matziwin well in the fourth quarter.  The costs of this well are largely offset by the delay in the power project start up, which is now expected to occur in the second quarter of 2020.  Drilling in Skiff remains on track for early 2020.  The second half 2019 program is heavily weighted to the fourth quarter, resulting in lower annual averages but higher exit rates.  Underspending funds flow will allow Journey to preserve as much flexibility as possible for expenditures in the Duvernay into 2020.

Capital and production guidance for 2020 will be provided early in the new-year after better visibility on commodity prices and fourth quarter drilling results is achieved.

FINANCIAL

Oil prices for Journey were stable during the third quarter wherein the Company achieved a realized price of $60.89/bbl, which was 11% lower than the $68.27/bbl realized in the third quarter of 2018 and 9% lower than the $66.85 realized in the second quarter of this year.  Natural gas and NGL prices continued to be weak. Journey realized $0.84/mcf for natural gas in the third quarter which was 48% lower than the same quarter of 2018 and 25% lower than the second quarter of this year. NGL prices had the same theme as Journey realized $19.24/bbl in the third quarter, which was 51% lower than the same quarter of 2018 and 17% lower than the second quarter of this year. As a result of the low natural gas prices, liquids (oil and NGL) revenues comprised 92% of Journey’s revenues in the third quarter. Average corporate realized commodity prices of $30.10/boe were 17% lower in the third quarter than the third quarter of 2018.  Oil differentials were stable during the third quarter with light sweet differentials averaging $4.03 USD/bbl while WCS differentials averaged $12.26 USD/bbl.  Approximately 40% of Journey’s production is exposed to WCS pricing.

Funds flow during the third quarter was $6.0 million or 24% lower than the $7.9 million realized in the comparable quarter of 2018.  For the nine months year to date, Funds Flow was $20.9 million as compared to $18.3 million in 2018. On a per share basis, Funds Flow was $0.16 for the third quarter and $0.53 for the year to date.  Journey recorded a net loss of $7.1 million, or $0.18 per basic and diluted share in the third quarter of 2019 compared to net income of $0.2 million ($0.01 per basic and diluted share) in the same quarter of 2018.  For the year to date, the net loss was $23.7 million ($0.60 per share) versus $21.3 million ($0.53 per share) in 2018. The largest component of the loss in 2019 was a $10.5 million deferred income tax expense related to corporate income tax rate changes and a further valuation allowance on Journey’s tax pools.

Journey did not drill any wells in the third quarter and all free cash flow was directed towards paying down debt.  The Company returned to its drilling program in early October with a four well program in Matziwin.

The Company spent $2.4 million in capital (net of dispositions) during the third quarter bringing the year to date amount to $11.2 million.  Journey limited its capital in the third quarter to two recompletions, pipeline and facility work.

Journey restructured its existing term debt on September 30 by extending the maturity of the debt issued in 2016 from 2020 to 2023.  As part of the restructuring, Journey repaid $8.0 million of term debt.  In addition, Journey successfully completed a non-brokered flow through share offering for 2,790,700 shares at a price of $2.60 per share.  The issue price was a 13.5% premium to the five day volume weighted average price per share preceding the issuance.  The gross proceeds from the offering of $7.3 million will be used to help finance the fourth quarter 2019 and first quarter 2020 drilling programs.  Journey exited the third quarter with net debt of $118.2 million which was 12% lower than at December 31, 2018.  The Company is currently drawn approximately $72 million on its existing $90 million credit facility.  Journey is currently in the middle of its semi-annual review of its syndicated credit facility and this is expected to be completed by November 30.

Outlook

Journey has made some minor modifications to its annual 2019 guidance as follows:

Item

Current Guidance

Guidance August
6

Reason for change

Average annual
production volumes

9,200-9,400 boe/d
(48% liquids)

9,200-9,400 boe/d
(48% liquids)

No change

Funds Flow

$26-$28 million

$27-$29 million

Small decrease due to price
changes

Funds Flow per
share

$0.65-$0.70

$0.68-$0.75

Change to Funds Flow and shares
outstanding

Capital spending

$22 million

$23 million

No substantive change

Net debt

$121-$123 million

$127-$129 million

Lower due mainly to September
equity issuance of $7.3 million

Corporate annual
decline rate

16%

16%

No change

Journey’s revised 2019 forecasted funds flow is based upon the following annual, average prices: WTI of US$57/bbl; Company differentials of $5.50/bbl USD for oil from Edmonton light sweet prices; realized natural gas price of CDN$1.60/mcf; and a foreign exchange rate of $0.75 US/CDN.

Throughout the last four years Journey management has carefully navigated through periods of poorer than anticipated funds flow and we pride ourselves in patiently stewarding capital to the right opportunities at the right time to create value for our stakeholders over the longer term.  On behalf of Journey’s management team and directors, we would like to thank our shareholders for their continued support through this challenging time.  There are few companies within our peer group that share the same upside leverage to rising commodity prices that Journey does, and we remain steadfast in our goal to provide shareholders with superior returns over the longer term.

OTCQX Listing

Journey also announces that today it begins trading on the OTCQX under the symbol “JRNGF.”  OTCQX is a top tier marketplace for over-the-counter trading of shares. To qualify for the OTCQX market, companies must meet high financial standards, follow best practice corporate governance, demonstrate compliance with the relevant U.S. securities laws, be current in their disclosure, and have a professional third-party sponsor introduction.  Using the OTCQX platform, shares are traded by a network of dealers in the U.S.  Over 10,000 securities trade on the OTCQX.  U.S. investors can find current financial disclosure and Real-Time Level 2 quotes for the company on www.otcmarkets.com.  “On behalf of Journey Energy Inc. we are very happy to be joining the OTCQX Group”, says Alex Verge, President and Chief Executive Officer.  “We are excited to be able to provide more liquidity for our existing and new U.S. shareholders. We look forward to OTCQX facilitating the trading of our shares.”

About the Company

Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey’s strategy is to grow its production base by drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions.  Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.



Share This:



More News Articles


New SHOWCASE Directory Companies

 

Alliance Borealis Canada Corp.
Kicker Video
U of C Executive Education
Millennium Directional
Stress Engineering
RAE Engineering
John Brooks
DRYAIR Manufacturing Corp.