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Yangarra Announces 2019 Year End Financial and Operating Results


CALGARY – Yangarra Resources Ltd. (“Yangarra” or the “Company“) (TSX:YGR) announces its financial and operating results for the year ended December 31, 2019.

2019 Highlights

  • Average Production of 12,572 boe/d (47% liquids) an increase of 33% from 2018
  • Oil and gas sales were $145 million with funds flow from operations of $92 million ($1.08 per share – basic)
  • Adjusted EBITDA (which excludes changes in derivative financial instruments) was $95 million ($1.12 per share – basic), with adjusted EBITDA margins of 66%
  • Net income of $43 million ($0.51 per share – basic) or $48 million before tax, resulting in a net income margin of 30%
  • Return on capital employed (“ROCE”) of 10%
  • Return on equity (“ROE”) of 14%
  • Operating costs were $6.85/boe (including $1.08/boe of transportation costs)
  • Operating netbacks, which include the impact of commodity contracts, were $22.43 per boe
  • Operating margins were 71% and funds flow margins were 64%
  • G&A costs of $0.65/boe
  • Royalties were 7% of oil and gas revenue
  • Capital expenditures (including $6 million of land) were $120 million
  • Net debt (which excludes the current derivative financial instruments) was $188 million
  • Net Debt to funds flow from operations was 2.0 : 1
  • Retained earnings of $104 million
  • Corporate LMR is 11.92 with decommissioning liabilities of $15 million (discounted)
  • Proved Developed Producing (“PDP”) reserves increased by 9%, F&D costs were $18.10/boe, the PDP recycle ratio was 1.2x and additions replaced 146% of 2019 production
  • Total Proved reserves increased by 13%, F&D costs were $10.74/boe, the Total Proved recycle ratio was 2.1x and additions replaced 320% of 2019 production
  • Proved plus Probable (“P+P”) reserves increased by 15%, F&D costs were $6.86/boe, the P+P recycle ratio was 3.3x and additions replaced 522% of 2019 production.

Fourth Quarter Highlights

  • Average production of 12,568 boe/d (45% liquids) during the quarter, a decrease of 1% from the third quarter of 2019 and a 2% increase from the same period in 2018
  • Oil and gas sales were $36 million, an increase of 19% from the same period in 2018
  • Funds flow from operations of $21 million ($0.25 per share – basic), an increase of 22% from the same period in 2018
  • Adjusted EBITDA (which excludes changes in derivative financial instruments) was $21 million ($0.25 per share – basic)
  • Net income of $7 million ($0.09 per share – basic, $9 million before tax), a decrease of 47% from the same period in 2018 and represents the 12th consecutive quarter of net income
  • Operating costs were $7.30/boe (including $1.11/boe of transportation costs)
  • Field operating netbacks were $21.34/boe
  • Operating netbacks, which include the impact of commodity contracts, were $21.59/boe
  • Operating margins were 69% and funds flow from operations margins were 58%
  • G&A costs of $1.17/boe
  • Royalties were 8% of oil and gas revenue
  • Capital expenditures (including $0.5 million on land) were $21 million
  • Net Debt to fourth quarter annualized funds flow from operations was 2.2 : 1

Operations Update

Yangarra has drilled six wells and completed five wells in the first quarter of 2020 leaving four wells drilled and uncompleted at the end of the quarter. Yangarra elected to reduce first quarter activity as per the Company’s strategy of reducing capital spending when commodity pricing falls below internal thresholds for rates of return.

Yangarra’s drilling in the first quarter was focused on Chedderville, as that area currently generates the best rates of return and scale in the Company’s portfolio. In addition, the Company has unused processing capacity along with several years of future drilling locations.

The Company continues to refine drilling and completion techniques to optimize best practices and returns as affirmed by the improvements in the latest well results.

ESG Update

Yangarra has partnered with CleaResult within the Energy Efficiency Alberta program to find opportunities to increase energy efficiency while reducing greenhouse gas emissions. Carbon dioxide equivalent emissions were estimated to be 98,629 tonnes in 2019 and a plan has been formulated to significantly reduce the methane portion of these emissions over the next 3 years.

2020 Capital Budget & Guidance

The capital budget and guidance have not formally changed. However, first quarter capital spending and production will be lower than originally forecast due to Yangarra’s response to lower commodity pricing.  As demonstrated in the last three quarters, the Company remains committed to being cash flow neutral therefore 2020 capital spending will be dependent upon commodity prices.

The Company’s producing portfolio consists of 12 legacy vertical wells, and 143 horizontal wells.  One of the advantages of this portfolio composition, when combined with less than 40 suspended wells, is a low Asset Retirement Obligation (“ARO”). However the Company’s high-rate horizontal  production rates can dramatically affect quarterly and annual production rates depending on the timing of when new wells are brought on production. This increases forecasting risk when combined with the Company’s extensive partially developed pad inventory where existing wells are shut in to accommodate new wells on a pad.

The Company’s strategy of living within funds flow, which limit’s spending during depressed commodity prices and accelerates spending in higher commodity pricing causes short-term production numbers to be volatile. Yangarra’s focus on full cycle rates of returns ensures the Company will not destroy capital returns to chase short-term growth.

Normal-Course Issuer Bid (“NCIB”)

No purchases of stock under the NCIB plan have occurred to date and any future purchases made under the NCIB will continue to be evaluated in the context of Yangarra’s full-cycle rate of return focus.

Financial Summary

2019

2018

Year Ended

Q4

Q3

Q4

2019

2018

Statements of Comprehensive Income

Petroleum & natural gas sales

$

35,990

$

31,606

$

30,174

$

143,976

$

134,978

Net income (before tax)

$

9,405

$

8,754

$

18,842

$

47,978

$

47,795

Net income

$

7,020

$

6,560

$

13,315

$

43,313

$

33,566

Net income per share – basic

$

0.08

$

0.08

$

0.16

$

0.51

$

0.40

Net income per share – diluted

$

0.08

$

0.08

$

0.15

$

0.51

$

0.39

Statements of Cash Flow

Funds flow from operations

$

21,005

$

19,055

$

17,167

$

92,236

$

82,335

Funds flow from operations per share – basic

$

0.25

$

0.22

$

0.20

$

1.08

$

0.97

Funds flow from operations per share – diluted

$

0.25

$

0.22

$

0.20

$

1.08

$

0.95

Cash from operating activities

$

25,469

$

10,768

$

25,952

$

81,205

$

83,768

Statements of Financial Position

Property and equipment

$

541,799

$

530,389

$

454,772

$

541,799

$

454,772

Total assets

$

592,195

$

581,426

$

501,974

$

592,195

$

501,974

Working capital deficit (surplus)

$

(906)

$

(2,947)

$

20,775

$

(906)

$

20,775

Adjusted Net Debt

$

187,712

$

185,752

$

155,882

$

187,712

$

155,882

Shareholders equity

$

303,643

$

295,645

$

255,336

$

303,643

$

255,336

Weighted average number of shares – basic

85,370

85,363

85,340

85,364

84,653

Weighted average number of shares – diluted

85,708

85,936

86,981

85,701

86,860

Company Netbacks ($/boe)

2019

2018

Year Ended

Q4

Q3

Q4

2019

2018

Sales price

$

31.13

$

27.00

$

26.80

$

31.37

$

39.24

Royalty expense

(2.49)

(1.79)

(3.34)

(2.34)

(3.90)

Production costs

(6.19)

(5.51)

(5.57)

(5.76)

(5.82)

Transportation costs

(1.11)

(1.46)

(1.31)

(1.08)

(1.31)

Field operating netback

21.34

18.24

16.58

22.19

28.21

Realized gain (loss) on commodity contract settlement

0.25

0.34

0.98

0.24

(2.17)

Operating netback

21.59

18.58

17.56

22.43

26.04

G&A

(1.17)

(0.59)

(1.01)

(0.65)

(0.72)

Finance expenses

(1.53)

(1.75)

(1.72)

(1.68)

(1.45)

Depletion and depreciation

(8.33)

(8.15)

(7.61)

(8.37)

(9.26)

Asset Impairment

(0.23)

Accretion

(0.04)

(0.04)

(0.06)

(0.05)

(0.07)

Abandonment Expenses

(0.75)

(0.19)

Provision for Credit Losses

(0.57)

(0.14)

Stock-based compensation

(0.61)

(0.66)

(1.37)

(0.79)

(1.52)

Unrealized gain (loss) on financial instruments

(0.44)

0.08

10.94

(0.10)

1.10

Deferred income tax

(2.06)

(1.87)

(4.91)

(1.02)

(4.14)

Net Income netback

$

6.09

$

5.60

$

11.82

$

9.44

$

9.76

Business Environment

2019

2018

Year Ended

Q4

Q3

Q4

2019

2018

Realized Pricing (Including realized commodity contracts)

Oil ($/bbl)

$

67.06

$

69.83

$

44.46

$

69.46

$

63.42

NGL ($/bbl)

$

19.65

$

22.78

$

30.91

$

25.83

$

35.03

Gas ($/mcf)

$

2.48

$

1.06

$

1.64

$

1.80

$

1.59

Realized Pricing (Excluding commodity contracts)

Oil ($/bbl)

$

67.06

$

69.83

$

42.58

$

69.46

$

67.48

NGL ($/bbl)

$

18.03

$

20.85

$

29.73

$

24.31

$

37.87

Gas ($/mcf)

$

2.48

$

1.06

$

1.64

$

1.80

$

1.57

Oil Price Benchmarks

West Texas Intermediate (“WTI”) (US$/bbl)

$

56.95

$

56.43

$

61.05

$

57.03

$

64.98

Edmonton Par (C$/bbl)

$

68.05

$

69.48

$

42.71

$

69.16

$

69.35

Edmonton Par to WTI differential (US$/bbl)

$

(5.40)

$

(3.63)

$

(28.77)

$

(4.90)

$

(11.48)

Natural Gas Price Benchmarks

AECO gas (Cdn$/mcf)

$

2.48

$

0.90

$

1.59

$

1.71

$

1.51

Foreign Exchange

U.S./Canadian Dollar Exchange

0.76

0.76

0.76

0.75

0.77

Operations Summary

Net petroleum and natural gas production, pricing and revenue are summarized below:

2019

2018

Year Ended

Q4

Q3

Q4

2019

2018

Daily production volumes

Natural gas (mcf/d)

41,483

41,068

30,573

39,663

22,993

Oil (bbl/d)

3,712

3,627

5,111

3,941

4,120

NGL’s (bbl/d)

1,942

2,253

2,032

2,020

1,473

Combined (boe/d 6:1)

12,568

12,724

12,238

12,572

9,425

Revenue

Petroleum & natural gas sales – Gross

$

35,990

$

31,606

$

30,174

$

143,976

$

134,978

Realized gain (loss) on commodity contract settlement

290

402

1,104

1,122

(7,449)

Total sales

36,280

32,008

31,278

145,098

127,529

Royalty expense

(2,879)

(2,093)

(3,763)

(10,760)

(13,405)

Total Revenue – Net of royalties

$

33,401

$

29,915

$

27,515

$

134,338

$

114,124

Working Capital Summary

The following table summarizes the change in working capital during the year ended December 31, 2019 and December 31, 2018: 

Year ended

Year ended

December 31, 2019

December 31, 2018

Adjusted Net Debt – beginning of period

$

(155,882)

$

(93,533)

 Funds flow from operations

92,236

82,334

 Additions to property and equipment

(115,276)

(141,060)

 Decommissioning costs incurred

(966)

(333)

 Additions to E&E Assets

(5,723)

(9,773)

 Issuance of shares

41

6,776

 Other

(2,141)

(293)

 Adjusted Net Debt – end of period 

$

(187,712)

$

(155,882)

Credit facility limit

$

225,000

$

175,000

Capital Spending

Capital spending is summarized as follows:

2019

2018

Year Ended

Cash additions

Q4

Q3

Q4

2019

2018

Land, acquisitions and lease rentals

$

38

$

170

$

340

$

344

$

569

Drilling and completion

16,997

18,194

22,299

83,060

106,855

Geological and geophysical

447

148

412

1,041

913

Equipment

2,503

4,807

11,991

28,977

32,337

Other asset additions

193

104

214

979

385

$

20,178

$

23,423

$

35,256

$

114,401

$

141,060

Exploration & evaluation assets

$

480

$

3,180

$

1,690

$

5,723

$

9,773

Annual General Meeting of Shareholders

The Company’s Annual General Meeting of Shareholders is scheduled for 10:00 AM on Thursday April 30, 2020 in the Tillyard Management Conference Centre, Main Floor, 715 5th Avenue SW, Calgary, AB.

Year End Disclosure

The Company’s financial statements, notes to the financial statements, management’s discussion and analysis and annual information form will be filed on SEDAR (www.sedar.com) and are available on the Company’s website (www.yangarra.ca).



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