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TORC Oil & Gas Ltd. Announces Third Quarter 2019 Financial & Operational Results


CALGARYNov. 6, 2019 /CNW/ – TORC Oil & Gas Ltd. (“TORC” or the “Company”) (TSX: TOG) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2019.  The associated management’s discussion and analysis (“MD&A”) and unaudited interim financial statements as at and for the three and nine months ended September 30, 2019 can be found at www.sedar.com and www.torcoil.com.

Highlights

Three months ended

Nine months ended

(in thousands, except per share data)

September 30

2019

June 30

2019

September 30

2018

September 30

2019

September 30

2018

Financial

Adjusted funds flow, including

transaction related costs (1)

$73,768

$81,125

$94,036

$230,960

$232,685

Per share basic

$0.34

$0.37

$0.44

$1.06

$1.15

Per share diluted

$0.33

$0.37

$0.44

$1.04

$1.14

Adjusted funds flow, excluding

transaction related costs (1), (2)

$73,768

$81,125

$95,086

$230,960

$234,435

Per share basic

$0.34

$0.37

$0.45

$1.06

$1.16

Per share diluted

$0.33

$0.37

$0.44

$1.04

$1.15

Net cash from operating activities

$62,559

$100,765

$87,364

$217,254

$220,694

Net income

$5,664

$11,464

$22,747

$23,463

$41,292

Per share basic

$0.03

$0.05

$0.11

$0.11

$0.20

Per share diluted

$0.03

$0.05

$0.11

$0.11

$0.20

Exploration and development

Expenditures (1)

$57,006

$34,854

$59,027

$145,967

$130,701

Property acquisitions, net of

Dispositions (1)

($565)

$688

$58,366

$270

$288,274

Net debt (1)

$369,571

$363,895

$391,101

$369,571

$391,101

Cash dividends declared (3)

$11,434

$10,930

$9,434

$32,124

$26,414

Dividends declared per common share

$0.075

$0.072

$0.066

$0.213

$0.190

Common shares

Shares outstanding, end of period

220,338

218,912

215,647

220,338

215,647

Weighted average shares (basic)

219,622

218,279

212,913

218,356

202,289

Weighted average shares (diluted)

221,952

221,752

215,405

221,115

204,740

Operations

Production

Crude oil (Bbls per day)

23,382

23,534

22,480

23,538

20,066

NGL (Bbls per day)

1,587

1,559

1,459

1,536

1,301

Natural gas (Mcf per day)

20,206

19,397

19,327

19,422

18,116

Barrels of oil equivalent (Boepd, 6:1)

28,337

28,326

27,160

28,311

24,386

Average realized price

Crude oil ($ per Bbl)

$64.65

$70.03

$77.88

$66.51

$73.89

NGL ($ per Bbl)

$11.91

$12.28

$31.10

$14.67

$29.79

Natural gas ($ per Mcf)

$0.75

$0.67

$0.98

$1.18

$1.17

Barrels of oil equivalent

($ per Boe, 6:1)

$54.55

$59.32

$66.83

$56.90

$63.26

Operating netback per Boe (6:1)

Operating netback (1)

$30.90

$34.35

$40.71

$32.62

$37.93

Operating netback (prior to hedging) (1)

$30.90

$34.35

$41.34

$32.62

$38.33

Adjusted funds flow netback per Boe (6:1)

Including transaction related costs (1)

$28.30

$31.47

$37.63

$29.88

$34.95

Excluding transaction related costs (1)

$28.30

$31.47

$38.05

$29.88

$35.21

Wells drilled:

Gross

25

13

36

72

70

Net

19.0

9.8

30.8

56.7

56.4

Success (%)

100

100

100

100

100

 

(1)

Management uses these non-GAAP financial measures to analyze operating performance, leverage and investing activity.  These measures do not have a standardized meaning under GAAP and therefore may not be comparable with the calculation of similar measures for other companies.  See Non-GAAP Measurements within this document for additional information

(2)

For ease of readability, in this press release, adjusted funds flow, excluding transaction related costs will be referred to as “cash flow”

(3)

Cash dividends declared are net of the share dividend program participation

PRESIDENT’S MESSAGE

The steady implementation of TORC’s business plan continued during the third quarter of 2019.  TORC continues to focus on the efficient execution of operations while maintaining financial discipline to remain in a position of strength.  The Company’s long-term objective is to achieve disciplined growth while providing a sustainable dividend.

The Company’s key achievements in the third quarter of 2019 included the following:

  • Achieved record quarterly production of 28,337 boepd, up from 28,326 boepd in the second quarter of 2019 and 27,160 boepd in the third quarter of 2018;
  • Generated cash flow of $73.8 million relative to $81.1 million in the second quarter of 2019 and $95.1 million in the third quarter of 2018;
  • Generated cash flow per share of $0.34 compared to $0.37 in the second quarter of 2019 and $0.45 in the third quarter of 2018;
  • Drilled 25 (19.0 net) successful wells;
  • During the quarter, TORC declared dividends of $16.5 million of which $5.1 million was satisfied under the share dividend program;
  • During the first nine months of 2019, the Company generated cash flow of $231.0 million, incurred $146.0 million of capital expenditures, and declared cash dividends of $32.1 million for a payout ratio of 77%; and
  • Exited the quarter with net debt of $369.6 million, down from $405.3 at year-end, with $295.4 million drawn on the Company’s credit facility. Subsequent to the end of the third quarter, TORC’s credit facility was reconfirmed at $500 million as part of the regular semi-annual review process.

OPERATIONAL UPDATE

With continued success of the 2019 capital program and the Company’s solid underlying production profile, TORC achieved record production of 28,337 boepd during the third quarter.

TORC spent a total of $57.0 million of development capital, including drilling 25 (19.0 net) wells.  Total development capital spending for the first nine months of 2019 was $146.0 million representing 81% of the Company’s $180 million capital program.  TORC remains well positioned to achieve 2019 production and capital guidance.

SOUTHEAST SASKATCHEWAN 

During the third quarter, the Company drilled 24 (18.0 net) wells in southeast Saskatchewan including 14 (9.0 net) conventional wells, 4 (4.0 net) Torquay/Three Forks wells and 6 (5.0 net) unconventional Midale wells.

TORC drilled 41 (29.5 net) conventional wells in the first nine months of 2019 consistently achieving production results above type curves, further enhancing the already attractive capital efficiencies and economics.  In addition, the Company has had success exploiting more mature fields through reentry of existing wells and drilling additional horizontal legs.  TORC has identified more than 400 net undrilled conventional locations in southeast Saskatchewan providing years of high quality drilling inventory.

In the first nine months of 2019, TORC drilled 9 (8.5 net) southeast Saskatchewan Torquay/Three Forks wells. TORC has budgeted a total of 16 (12.5 net) Torquay/Three Forks wells in 2019.  With more than 150 net undrilled Torquay/Three Forks locations identified on the southeast Saskatchewan land base, TORC maintains multiple years of drilling inventory on this play.

In the first nine months of 2019, TORC drilled 17 (14.4 net) horizontal unconventional Midale wells. The Company has established prospective land positions in a number of areas that have the potential for unconventional Midale exploitation. TORC has achieved success across the asset base continuing to expand and de-risk the Company’s drilling inventory.  In addition, the Company has had success exploiting more mature fields through fracture stimulation of older unstimulated wells.  This technical success serves to continue to expand and upgrade the Company’s drilling inventory. TORC has identified 175 net undrilled locations on the Company’s land base.

CARDIUM

During the third quarter TORC drilled 1 (1.0 net) Cardium development well. The Company has drilled a total of 5 (4.3 net) wells in the first nine months of 2019 with plans to drill a total of 9 (8.2 net) wells in 2019.

TORC has identified more than 290 net undrilled locations on the Company’s land base representing several years of high quality, lower risk drilling locations on a maturing asset, which continues to support TORC’s disciplined growth plus dividend model.

DIVIDEND

In the third quarter, TORC declared dividends totaling $0.075 per share or $16.5 million of which $5.1 million was issued under the Company’s Stock Dividend Plan (“SDP”).  In the first nine months of 2019, the Company declared dividends totaling $46.6 million, of which $14.4 million was issued under the Company’s SDP.

The Board of Directors has confirmed a dividend of $0.025 per common share to be paid on November 15, 2019 to common shareholders of record on October 31, 2019.

TORC’s dividend policy is reviewed regularly with the Board of Directors and is an important component of TORC’s overall strategy. TORC’s current dividend policy is $0.025 per share per month. TORC’s priorities are to first act prudently to protect TORC’s financial flexibility while positioning the Company to continue to achieve per share growth over the long term while paying out a sustainable dividend.

CAPITAL BUDGET AND PRODUCTION GUIDANCE  

TORC’s 2019 exploration and development capital budget of $180 million maintains a balanced approach where the Company continues to focus on disciplined long-term sustainable growth while protecting the Company’s strong financial position.

TORC spent $146.0 million in the first nine months of 2019. With approximately $34.0 million left to be spent in the fourth quarter of 2019, the Company remains well positioned to achieve the Company’s capital expenditure and production guidance for 2019.

The 2019 capital program remains concentrated on the Company’s primary core areas in southeast Saskatchewan, focused on both conventional and unconventional opportunities, and the Cardium play in central Alberta.

TORC is maintaining guidance to average and exit 2019 at 28,300 boepd (~88% light oil & liquids).

Based on current commodity prices and budgeted cost estimates, TORC expects to achieve free cash flow in the fourth quarter of 2019 after executing the remaining budgeted capital program and paying the dividend.  In the first nine months of 2019, TORC has generated free cash flow with a payout ratio of 77%.  This free cash flow continues to position the Company to take advantage of opportunities as they arise.

TORC anticipates announcing the 2020 capital budget and production guidance in mid-December.

OUTLOOK

TORC has built a sustainable growth platform of light oil focused assets. The stability of the high quality, low decline, light oil assets in southeast Saskatchewan and the low risk Cardium development inventory in central Alberta combined with exposure to the emerging light oil resource plays in the Torquay/Three Forks and unconventional Midale in southeast Saskatchewan, positions TORC to provide a sustainable dividend along with value creation through a disciplined long term focused growth strategy.

TORC has the following key operational and financial attributes:

High Netback Production (1)

2019E Average: 28,300 boepd

2019E Exit: 28,300 boepd

Total Proved plus Probable Reserves (2)

Greater than 138 mmboe (~84% light oil & liquids)

Southeast Saskatchewan Light Oil
Development Inventory

Greater than 400 net undrilled conventional locations

Greater than 150 net undrilled Torquay/Three Forks locations

Greater than 175 net undrilled unconventional Midale locations

Cardium Light Oil Development Inventory

Greater than 290 net undrilled locations

Sustainability Assumptions (3)

Corporate decline ~23%

Current Capital Efficiency ~$28,000 per boepd (IP 365)

2019 Capital Program

$180 million

Monthly Dividend

$0.025 per share

Net Debt as at Sept 30, 2019 (4)

$369.6 million; $295.4 million drawn on a credit facility of $500 million

Shares Outstanding

219.6 million (basic)

Tax Pools

Approximately $1.8 billion

Notes:

(1)

~88% light oil & NGLs

(2)

All reserves information in this press release are gross reserves. The reserve information for TORC in the foregoing table is derived from the independent engineering report effective December 31, 2018 prepared by Sproule & Associates Limited (“Sproule”) evaluating the oil, NGL and natural gas reserves attributable to all of our properties (the “TORC Reserve Report”)

(3)

Refers to full cycle capital efficiency which is the all-in corporate capital budget divided by the IP365 of the associated wells. Corporate decline refers to TORC’s estimated oil and gas production decline rate in the normal life cycle of a well

(4)

See “Non-GAAP Measurements”



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