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Cardinal Energy Ltd. announces first quarter 2020 financial results

CALGARY, Alberta – Cardinal Energy Ltd. (“Cardinal” or the “Company“) (TSX: CJ) is pleased to announce its operating and financial results for the first quarter ended March 31, 2020.

Selected financial and operating information is shown below and should be read in conjunction with Cardinal’s unaudited condensed interim financial statements and related Management’s Discussion and Analysis for the three months ended March 31, 2020 which are available at and on our website at

Financial and Operating Highlights
($ 000’s except shares, per share and operating amounts) Three months ended March 31,
2020 2019 % Change
Petroleum and natural gas revenue 63,473 94,050 (33)
Cash flow from operating activities 22,041 27,506 (20)
Adjusted funds flow(1) 14,948 29,639 (50)
basic and diluted per share $ 0.13 $ 0.25 (48)
Loss (450,944) (16,506) n/m
basic and diluted per share $ (3.98) $ (0.14) n/m
Development capital expenditures (1) 21,782 11,152 95
Other capital expenditures 359 432 (17)
Total capital expenditures 22,141 11,584 91
Common shares, net of treasury shares 113,354 116,617 (3)
Dividends declared 3,511 3,619 (3)
Per share $ 0.03 $ 0.03
Net debt (1) 273,805 257,880 6
Net debt to adjusted funds flow ratio (1) 2.6 2.9 (10)


Financial and Operating Highlights
($ 000’s except shares, per share and operating amounts) Three months ended March 31,
2020 2019 % Change
Average daily production  
Light oil (bbl/d) 7,792 8,246 (6)
Medium/heavy oil (bbl/d) 9,301 8,542 9
NGL (bbl/d) 836 964 (13)
Natural gas (mcf/d) 14,368 15,930 (10)
Total (boe/d) 20,323 20,407
Petroleum and natural gas revenue $ 34.32 $ 51.21 (33)
Royalties (5.56) (7.37) (25)
Net operating expenses (20.58) (22.63) (9)
Transportation (0.31) (0.19) 63
Netback 7.87 $ 21.02 (63)
Realized gain (loss) on commodity contracts 4.44 (0.79) n/m
Netback after risk management (1) 12.31 $ 20.23 (39)
Interest and other (1.59) (1.83) (13)
G&A (2.64) (2.26) 17
Adjusted funds flow netback (1) 8.09 $ 16.14 (50)
(1) See non-GAAP measures


Cardinal’s first quarter 2020 was focused on drilling seven (7.0 net) horizontal wells earning additional undeveloped land in our Southern Alberta business unit.  Six (6.0 net) of these wells were completed during the first quarter and we also completed three (3.0 net) wells that were drilled in 2019.  These well results, which were above expectations, along with the continued low decline performance of our asset base, led the Company to achieve daily production levels over 21,500 boe/d midway through the first quarter ahead of our initial forecast.  In March, as world oil prices rapidly dropped due to supply disagreements between Russia and Saudi Arabia combined with the demand destruction caused by the COVID-19 pandemic, Cardinal reacted swiftly shutting in these wells along with other uneconomic production to preserve the long-term value of our reserves. We expect the success of our first quarter drilling program will allow us to return to 2019 average production levels without any additional drilling when oil prices recover.

First quarter net income was negatively impacted as forward oil price forecasts were slashed by reserve evaluators impacting the estimated future recoverable value of the Company’s reserves.  During the first quarter of 2020, Cardinal took a non-cash accounting impairment charge of $343 million on our property plant and equipment net book value of $1.0 billion.  In addition, Cardinal’s deferred tax asset was derecognized as there is not sufficient certainty the tax asset can be utilized given the current environment resulting in a deferred tax expense of $102.9 million.  The Company’s tax pools are unaffected by the derecognition of the asset.

Cardinal’s response to the current low oil pricing environment has been swift.  A summary of our immediate initiatives is as follows:

  • Reduced our 2020 annual capital budget by 54% to $31 million of which $22 million was spent in the first quarter;
  • Suspended our dividend effective March 2020 saving the Company approximately $1.8 million per month;
  • Shut-in approximately 20% to 25% of our higher operating cost production allowing Cardinal to retain the long-term value of our reserves;
  • Reduced our Board, Executive, office and field staff salaries and retainers by 20%;
  • Ceased our corporate bonus program;
  • Applied for the Canada Emergency Wage Subsidy;
  • Reduced our corporate savings plan contributions;
  • Negotiated various cost reductions with key service providers;
  • Submitted over 1,000 applications for projects eligible to access Phase 1 funding associated with the recently announced Alberta Site Rehabilitation program.

The corporate compensation reduction and elimination of our dividend are estimated to save the Company approximately $3.4 million per month or $40 million annually which materially reduces Cardinal’s cost structure during these uncertain times.

The Company has started its annual renewal process with our syndicate of banks.  The reduction in commodity pricing has impacted our projected future cash flows and together with market conditions could impact our borrowing base.  Cardinal believes it is eligible for announced government liquidity support programs should the need arise.  At March 31, 2020 Cardinal had a working capital deficiency of $35.9 million and unused capacity of $130.4 million on our bank facility, after taking into effect outstanding letters of credit.


Cardinal’s focus through this pandemic and economic crisis are the health and safety of our employees and service providers, and maintaining our liquidity through disciplined efficient management of our assets, production and costs.  During these unprecedented times, we are proud of our staff who have safely worked hard to manage our assets through this crisis.  Cardinal is taking this pandemic seriously and have implemented social distancing and preventative procedures to ensure we don’t compromise the health and safety of our employees as shown by no known Cardinal office staff, field employees or contract operators have tested positive COVID-19.

As a result of the uncertain market conditions, Cardinal is withdrawing its 2020 corporate guidance originally announced on December 9, 2019 and updated on March 17, 2020.  Cardinal continues to manage its assets with a view to long-term sustainability and will shut-in uneconomic production when it is safe and rational to do so.  The Company has a limited capital budget for the remainder of 2020 and does not have any immediate plans to drill any more wells in the year.  Cardinal’s top tier low decline rate will support the Company’s oil production and we can rapidly bring back on shut-in wells with limited additional costs when the price recovery occurs.

We will continue to navigate through these challenging times by acting quickly to implement change and reduce costs.  We thank our shareholders and stakeholders for their perseverance and look forward to coming out of this crisis with a stronger sustainable Company.

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