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TORC Oil & Gas Ltd. Announces 2020 Capital Budget and Production Guidance; Confirms December Dividend and Appoints New Member to the Board Of Directors


CALGARY – TORC Oil & Gas Ltd. (“TORC” or the “Company”) (TSX: TOG) is pleased to announce the Company’s Board of Directors has approved an initial 2020 capital budget of $190 million. TORC’s strategic objectives associated with the 2020 capital budget are consistent with the Company’s long term objectives of achieving disciplined per share growth in combination with maintaining financial flexibility while paying a sustainable dividend.

TORC’s 2020 capital budget exhibits a measured approach and reflects a balance between managing long term objectives, protecting the Company’s strong financial position and sustaining the dividend.

TORC’s 2020 capital budget is specifically focused on:

  • Investing in higher rate of return, lower risk light oil opportunities across the Company’s extensive development drilling inventory;
  • Maintaining production levels and maximizing cash flow through an efficient capital program;
  • Efficiently executing a high graded development drilling program while continuing to organically expand the Company’s inventory through select delineation opportunities;
  • Maintaining the Company’s decline profile;
  • Strategically investing in infrastructure projects that achieve both economic returns and environmental benefits;
  • Maintaining a payout ratio of less than 100%;
  • Directing the pace of the capital program to maintain spending flexibility throughout the year;
  • Maintaining operational flexibility to effectively respond to a changing commodity price environment; and
  • Maintaining TORC’s strong financial position and flexibility to take advantage of additional growth opportunities as they arise.

TORC’s capital program in 2020 is focused on light oil development projects, with the majority of the capital directed to drilling, completions and tie-ins (approximately 70%). The drilling program is concentrated on the Company’s primary core areas in southeast Saskatchewan, focused on both conventional and unconventional opportunities, along with the Cardium play in central Alberta. The balance of 2020 capital spending will be allocated to operational and facilities optimization, expansion of infrastructure, gas conservation projects and inactive well retirements.

2020 BUDGET HIGHLIGHTS

SOUTHEAST SASKATCHEWAN

TORC’s asset base in southeast Saskatchewan is comprised of both conventional assets and unconventional light oil resource plays. TORC’s primary focus on the conventional asset base is to maintain production and maximize free cash flow through the efficient exploitation of identified conventional light oil pools. TORC’s unconventional light oil resource plays provide current and future organic growth opportunities for the Company.

In 2020, TORC plans to drill 44 gross (34.2 net) conventional wells. With more than 400 net undrilled conventional locations identified, the 2020 budget represents less than 9% of TORC’s conventional development locations. Conventional development locations are characterized by their lower risk nature and high rates of return driven by their lower capital costs, high netbacks and the attractive royalty regime in SaskatchewanSoutheast Saskatchewan conventional activity will comprise approximately 32% of the Company’s 2020 drilling, completion and tie-in capital budget.

On the Company’s unconventional asset base in southeast Saskatchewan, TORC continues to be active on the Torquay/Three Forks light oil resource play with plans to drill 13 gross (12.0 net) wells during 2020. This program represents less than 9% of the 150 net identified Torquay/Three Forks development locations on the Company’s land base. The Torquay/Three Forks activity in southeast Saskatchewan will comprise approximately 28% of the 2020 drilling, completion and tie-in capital budget.

In 2020, TORC plans to expand the gathering system in the Torquay/Three Forks oil resource play to continue to enhance the benefits of the Company’s centralized facility, which was completed in 2018. With continued expansion to the gathering system, TORC will increasingly realize benefits through reduced trucking of fluids, reduced requirements for single well batteries, and the ability to use produced water for frac operations, providing economic gains along with environmental and community benefits.

TORC has been active in a number of areas prospective for unconventional Midale exploitation. Given the continued success the Company has achieved in this play, the Company plans to increase capital allocated to the Midale light oil resource play in 2020 with plans to drill 17 gross (14.8 net) wells spread across the Company’s land position. This program represents less than 9% of the 175 net identified Midale development locations on the Company’s land base. The Midale activity in southeast Saskatchewan will comprise approximately 23% of the 2020 drilling, completion and tie-in capital budget.

Together, the conventional and unconventional southeast Saskatchewan capital allocation represents approximately 83% of the overall drilling, completion and tie-in capital budget during 2020.

CARDIUM

In 2020, TORC plans to drill 8 gross (6.7 net) wells across the Company’s land position in the Cardium to maintain production. With a decline profile of approximately 20%, the Cardium play generates free cash flow in the current commodity price environment supporting the sustainability and repeatability of the Company’s business objectives.

TORC’s development plans for the Cardium in 2020 represents approximately 17% of the Company’s drilling, completion and tie-in activity.

PRODUCTION GUIDANCE

TORC anticipates that the $190 million 2020 capital budget will maintain 2019 exit production levels resulting in 2020 average and exit production of 28,300 boepd (~88% light oil & liquids) while continuing to maintain a decline profile of approximately 23%.

DIVIDEND CONFIRMATION

TORC’s dividend is reviewed regularly with the Board of Directors and is an important component of TORC’s overall strategy. TORC is well positioned to sustain a current dividend of $0.025 per share per month and will continue to monitor and review realized commodity prices, capital efficiencies and cash costs on a timely basis to maintain financial flexibility and long term sustainability.

TORC is pleased to confirm that the December 2019 dividend of $0.025 per common share will be paid on January 15, 2020 to common shareholders of record on December 31, 2019, with payment to be made in cash or common shares at the election of the shareholder.

The Board of Directors has approved the indefinite suspension of the Share Dividend Plan (“SDP”) effective for the January 2020 dividend, payable on February 18, 2020. Shareholders enrolled in the SDP will automatically receive dividend payments in the form of cash.

DISCIPLINED BUDGET

TORC’s priorities are to act prudently to protect the financial flexibility of the Corporation while positioning the Company to continue to achieve per share growth over the long term while paying out a sustainable dividend.

TORC continues to diligently focus on capital efficiency improvements through the combination of operational improvements and capital cost reductions of the Company’s drilling, completion and tie-in activities. TORC’s $190 million 2020 capital budget is based on current capital cost realizations.

TORC is also prudently allocating capital in the 2020 budget to infrastructure projects that provide both near term and ongoing economic benefits as well as provide positive environmental impacts.

TORC continues to focus on maintaining a payout ratio of less than 100% in 2020. Under current 2020 crude oil strip pricing and incorporating TORC’s current dividend, 2020 capital budget and the suspension of the SDP, TORC’s payout ratio remains well below 100%. At September 30, 2019, TORC’s net debt was $370 million with approximately $295 million drawn on a bank line of $500 million, positioning TORC with financial flexibility and a strong balance sheet.

BOARD APPOINTMENT

TORC is pleased to announce the appointment of Catharine M. de Lacy to the Company’s Board effective December 11, 2019.

Ms. de Lacy is an independent businessperson and strategic advisor with more than 30 years of prior executive experience globally across a variety of industrial sectors: oil and gas; mining and refining; chemicals and specialty materials; manufacturing; and private label and branded consumer products. She has previously been elected as a Corporate Officer of three Fortune 500 corporations; and has served on executive management and Global Business Unit leadership teams in the energy, chemicals, metals, and aerospace sectors. Her depth of experience and leadership capabilities spans such areas as: Government and Public Affairs; Corporate Communications and Investor Relations; Sustainability and Corporate Social Responsibility; Corporate Governance; Corporate Philanthropy; Environment Health and Safety (“EHS”); Product Stewardship; and Corporate Quality. She has served as a Board member at multiple national and international trade associations; is a recognized thought leader and frequently sought after speaker on such topics as: Environment, Social Responsibility and Governance, Corporate Sustainability, and Corporate EHS Program Leadership; and is a Six Sigma Black Belt.

Ms. de Lacy is a member of the Environmental Law Institute’s Leadership Council, a strategic advisor to the National Association of Environmental and Sustainability Managers, and is a member of the Executive Advisory Council of the Responsible Battery Coalition. Ms. de Lacy is a graduate of Merrimack College and Tufts University.

OUTLOOK

TORC has built a sustainable growth platform of light oil focused assets. The stability of the high quality, low decline, conventional light oil assets in southeast Saskatchewan and the low risk Cardium development inventory in central Alberta combined with exposure to the 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

2020E Average: 28,300 boepd

2020E 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 ~$29,000 per boepd (IP 365)

2020 Capital Program

$190 million

Monthly Dividend

$0.025 per share

Net Debt as at Sept 30, 2019 (4)

$370 million; $295 million drawn

Shares Outstanding

221 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 in the foregoing outlook 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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