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

TORC Oil & Gas Ltd. announces first quarter 2020 financial & operating results and corporate update


CALGARY – TORC Oil & Gas Ltd. (“TORC” or the “Company”) (TSX: TOG) is pleased to announce financial and operating results for the three months ended March 31, 2020.  The associated Management’s Discussion and Analysis (“MD&A”) and unaudited interim financial statements as at and for the quarter ended March 31, 2020 can be found at www.sedar.com and www.torcoil.com.

Highlights

Three months ended

(in thousands, except per share data)

March 31

2020

December 31

2019

March 31

2019

Financial

Adjusted funds flow, including transaction costs (1)

$47,146

$74,037

$76,067

Per share basic

$0.21

$0.33

$0.35

Per share diluted

$0.21

$0.33

$0.34

Adjusted funds flow, excluding transaction costs (1), (2)

$47,166

$74,037

$76,067

Per share basic

$0.21

$0.33

$0.35

Per share diluted

$0.21

$0.33

$0.34

Net cash from operating activities

$57,955

$67,933

$53,930

Net income (loss)

($879,895)

($60,593)

$6,335

Per share basic

($3.96)

($0.27)

$0.03

Per share diluted

($3.96)

($0.27)

$0.03

Exploration and development expenditures (1)

$64,700

$34,026

$54,109

Property acquisitions, net of dispositions (1)     

$3,891

$6,416

$146

Net debt (1)

$382,696

$349,689

$396,038

Cash dividends declared (3)

$12,222

$11,460

$9,761

Dividends declared per common share

$0.055

$0.075

$0.066

Common shares

Shares outstanding, end of period

222,315

221,812

217,676

Weighted average shares (basic)

222,146

221,080

217,140

Weighted average shares (diluted)

227,093

224,088

220,530

Operations

Production

Crude oil (Bbls per day)

23,672

23,415

23,700

NGL (Bbls per day)

1,582

1,616

1,459

Natural gas (Mcf per day)

19,568

20,079

18,646

Barrels of oil equivalent (Boepd, 6:1)

28,515

28,378

28,267

Average realized price

Crude oil ($ per Bbl)

$47.87

$63.05

$64.85

NGL ($ per Bbl)

$9.66

$12.71

$20.32

Natural gas ($ per Mcf)

$1.60

$2.07

$2.18

Barrels of oil equivalent ($ per Boe, 6:1)

$41.37

$54.22

$56.86

Operating netback per Boe (6:1)

Operating netback (1)

$20.75

$30.86

$32.64

Operating netback (prior to hedging) (1)

$20.00

$30.86

$32.64

Adjusted funds flow netback per Boe (6:1)

Including transaction related costs (1)

$18.17

$28.36

$29.90

Excluding transaction related costs (1)

$18.18

$28.36

$29.90

Wells drilled:

Gross

33

14

34

Net

28.2

11.7

27.9

Success (%)

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. The share dividend program was indefinitely suspended, effective for the January 2020 dividend, paid in February 2020.

PRESIDENT’S MESSAGE

The first quarter of 2020 was a continuation of TORC’s operational momentum from 2019 with a consistent focus on the Company’s long-term objectives of delivering disciplined growth in combination with providing a dividend, while preserving financial flexibility.

TORC’s active first quarter drilling program was concentrated in southeast Saskatchewan and the Cardium core areas where the Company continued to achieve strong results.

TORC’s disciplined approach and strong underlying assets continue to position the Company for long-term strategic growth.

Highlights in the first quarter of 2020 included the following:

  • Achieved record quarterly production of 28,515 boepd, up from 28,378 boepd in the fourth quarter of 2019 and 28,267 boepd in the first quarter of 2019;
  • Generated cash flow of $47.2 million relative to $74.0 million in the fourth quarter of 2019 and $76.1 million in the first quarter of 2019;
  • Generated cash flow per share of $0.21 as compared to $0.33 in the fourth quarter of 2019 and $0.35 per share in the first quarter of 2019;
  • Successfully drilled 33 (28.2 net) wells spending $65 million;
  • During the first quarter, TORC paid dividends of $16.7 million of which $1.7 million was paid under the share dividend program. The share dividend program was indefinitely suspended following the January dividend;
  • Successfully closed a $3 million tuck-in acquisition in the Company’s southeast Saskatchewan core area at quarter-end adding over 200 boepd (greater than 90% light oil), of high netback, low decline assets with a high quality light oil drilling inventory;
  • Net income for the first quarter was negatively impacted by the severe economic dislocation that has led to a significant decrease to current and forecasted crude oil prices. This resulted in a non-cash accounting charge of $853 million to net book value. Revisions to forecasted crude oil prices could result in reversals or additional impairment charges impacting net income;
  • At quarter end, the Company’s net debt was $382.7 million with $309.3 million drawn on the Company’s $500 million credit facility; and
  • In March 2020, the World Health Organization declared COVID-19 to be a global pandemic. Global responses to combat the spread of COVID-19 have resulted in a sudden decline in economic activity and a significant decrease in global crude oil demand. In addition, global crude oil supply increased significantly due to a geopolitically driven crude oil price war. These events have resulted in an unprecedented decline in crude oil prices, creating an uncertain and volatile economic environment, adversely affecting the Company’s operating results and financial position.

 

TORC’S RESPONSE TO COVID-19

TORC’s top priority is the health and safety of the Company’s employees, contractors, partners, service providers and the communities in which TORC operates.  During the first quarter, the Company introduced measures to protect the well-being of all stakeholders and follow the guidance of public health officials, while maintaining safe operations and business continuity.

With the continued volatility in commodity prices and TORC’s focus on effective and efficient operations, the Company has identified and implemented various cost cutting measures, as detailed below, including the reduction in the capital program, the suspension of the dividend, along with implementing savings in operating and general and administrative costs, including company-wide compensation reductions.

TORC is committed to taking the necessary steps to preserve shareholder value and financial flexibility to maintain a position of strength in the current environment.

OPERATIONAL UPDATE

TORC’s first quarter production averaged 28,515 boepd (83% light oil; 6% NGLs).  Strong new well results and continued solid performance of the Company’s existing low decline production base across TORC’s core areas contributed to the continued growth of the Company’s production.

TORC spent a total of $65 million during the first quarter drilling 33 (28.2 net) wells on a development program focused on the conventional and unconventional assets in southeast Saskatchewan and the Cardium in central Alberta.

SOUTHEAST SASKATCHEWAN 

TORC drilled 19 (15.5 net) southeast Saskatchewan conventional wells in the first quarter.  The southeast Saskatchewan conventional assets are characterized by their low capital costs, higher capital efficiencies, favorable royalty regime and decline profile of less than 20%.  TORC has identified more than 400 net undrilled conventional light oil locations in southeast Saskatchewan providing years of high quality drilling inventory.

On the Company’s unconventional asset base in southeast Saskatchewan, TORC drilled 5 (4.0 net) wells during the first quarter in the Torquay/Three Forks geological zone.  With the continued strong drilling and production results, the Company deferred completion of the Torquay/Three Forks program wells.  TORC has identified over 150 net development locations in the Torquay/Three Forks play providing multiple years of drilling inventory.

TORC drilled 6 (5.7 net) wells in the unconventional Midale light oil play during the first quarter.  The Company continues to be encouraged with the results from this play.  TORC has identified more than 175 net future undrilled development locations across the Company’s asset base for unconventional Midale production.

CARDIUM

TORC drilled 3 (3.0 net) Cardium development wells in the first quarter.  The Cardium program included two wells that were completed with higher intensity fracs.  The Company is encouraged with the initial results and continued strong production profiles from both of these wells.

TORC has identified more than 290 net undrilled Cardium locations for future development.  With a decline profile below 25% and a deep inventory of high quality development locations, the Cardium continues to support the Company’s long-term strategy.

CAPITAL PROGRAM

In the first quarter of 2020, TORC’s capital spending was $65 million.  On March 16, 2020, the Company announced the undertaking of a thorough review of the remaining 2020 capital program due to the collapse of oil prices.  With ongoing uncertainty related to economic circumstances, TORC has elected to significantly reduce 2020 capital spending to $75 million from the original budget of $190 million, in order to maintain financial flexibility.

TORC’s 2020 $75 million capital budget exhibits a measured approach to the current uncertainty in world oil prices and reflects a balance between managing long-term organic growth and protecting the Company’s strong financial position.

TORC continues to focus on initiatives to preserve financial flexibility and improve capital efficiencies and operating costs.

TORC’s asset base has the following characteristics to provide operational versatility to maintain financial flexibility: greater than 90% operated capital program to dictate capital spending, low decline rate, year-round access, low capital costs per well, no drilling commitments, limited take-or-pay contracts, and no land expiry concerns.

PRODUCTION GUIDANCE

Due to the continued weakness in oil prices, TORC has curtailed approximately 4,000 boepd (88% light oil; 4% NGLs) of the Company’s current production.  TORC maintains the flexibility to reduce production volumes, which could be material, if economics warrant such action.

To maintain production flexibility related to shut-in decisions, TORC is suspending 2020 corporate production guidance.

TORC will be responsive to changes in commodity prices, and has the ability to shut-in and restore production volumes to pre-shut-in levels when economically viable.  TORC expects that any curtailed production can be restored quickly and without a negative impact to the associated reservoirs.

TORC will examine on a continuous basis the ability to reasonably estimate and provide future production guidance.

MONTHLY DIVIDEND SUSPENSION

TORC’s dividend is reviewed regularly with the Board of Directors and is an important component of TORC’s overall long-term strategy.  The crude oil market has experienced a significant and rapid decline in world prices resulting from severe dynamics coinciding to significantly impact both supply and demand uncertainty.  Due to this significant uncertainty and volatility, TORC has elected to temporarily suspend the monthly dividend.

TORC will continue assessing the free cash flow profile and dividend policy of the Company following an increase in economic activity and stability of oil market dynamics.

The previously announced April dividend of $0.005 per share will be paid on May 15, 2020 to shareholders of record on April 30, 2020.

Consistent with TORC’s focus on protecting the Company’s balance sheet, it is prudent to continue to move quickly to remain well positioned to ensure sustainability of the business model and maintaining a disciplined approach.  TORC’s priorities are to 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 dividend.

CREDIT FACILITY

As at March 31, TORC was drawn $309 million on the Company’s $500 million credit facility.  On April 27, 2020, TORC received approval to extend the revolving period under the credit facility agreement from April 30, 2020 to May 29, 2020 with respect to determining the borrowing base available under the credit facility.  The purpose of the extension is to permit TORC’s banking syndicate time to further assess market dynamics, including the proposed Export Development Canada and Business Development Bank programs, and develop a renewal that provides TORC with maximum flexibility through the current environment.

OUTLOOK

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 unconventional light oil resource plays in southeast Saskatchewan, positions TORC to provide value creation through a disciplined long term focused growth plus dividend strategy.

TORC has developed significant trust and credibility as a corporate citizen, which provides a solid foundation for the long-term success of the business. Sustainability of the business includes focusing on overall social responsibility to support strong values and relationships in the workplace and communities where TORC operates.

TORC has the following key operational and financial attributes:

Total Proved plus Probable Reserves (1)

Greater than 139 mmboe (78% light oil; 6% NGLs)

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

2020 Capital Program

$75 million

Monthly Dividend

Suspended

Net Debt as at March 31, 2020 (2)

$382.7 million; $309.3 million drawn on a bank line of $500 million

Shares Outstanding

222 million (basic)

Tax Pools

Approximately $1.8 billion

 

Notes:

(1)

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, 2019 prepared by Sproule & Associates Limited (“Sproule”) evaluating the oil, NGL and natural gas reserves attributable to all of our properties (the “TORC Reserve Report”).

(2)

See “Non-GAAP Measures”.



Share This:



More News Articles


New SHOWCASE Directory Companies

 

Challenger Geomatics
CDN Controls
Caliper Inspection
Environmental Mats
Gemini Fabrication
Canline Pipeline Solutions
DyCat Solutions