Petrus Resources announces first quarter 2023 financial and operating results

CALGARY, Alberta – Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is pleased to report financial and operating results as at and for the three months ended March 31, 2023.

Q1 2023 HIGHLIGHTS:

• Higher production – Production was up 54% from 7,379 boe/d⁽¹⁾ in the first quarter of 2022 to 11,385 boe/d in the first quarter of 2023. The increase was primarily due to a full quarter of production realized from the wells drilled in the fourth quarter of 2022 as well as one month of production from the 3 (3.0 net) new wells brought on stream this quarter. Production was up 25% quarter over quarter from 9,113 boe/d during the fourth quarter of 2022.
• Funds flow increased 58% – Generated funds flow⁽²⁾ of $26.2 million ($0.21 per share⁽³⁾) for the first quarter of 2023, 58% higher than funds flow of $16.6 million ($0.17 per share) in the first quarter of 2022, despite the realized price per boe being 23% lower.
• Net income increased 58% – Petrus reported net income of $17.3 million ($0.14 per share) during the first quarter, up 58% from the first quarter of 2022 ($10.9 million; $0.11 per share).
• Increased capital activity – Petrus invested $29.8 million of capital during the first quarter of 2023, a 484% increase from the first quarter of 2022. The majority of capital was allocated towards the drilling of 7 (7.0 net) new wells, of which 3 (3.0 net) were completed and brought on stream during the quarter.
• Net debt to funds flow improvement – The net debt⁽²⁾ to annualized funds flow ratio⁽³⁾ was 0.51 at March 31, 2023 in comparison to 0.75 at March 31, 2022, despite higher capital spending in the current quarter. The Company will continue to strengthen its balance sheet by further reducing net debt and maintaining a net debt to funds flow ratio of under 1x.

2023 CAPITAL BUDGET AND GUIDANCE⁽⁴⁾

The current price environment and outlook for the remainder of the year is materially lower than the assumptions used to develop the 2023 capital budget. As a result, the Company is re-evaluating the budget and has already deferred some of the planned capital spending. Completion activities for the four wells drilled near the end of the first quarter will be delayed until there is a more constructive price environment, possibly until the winter gas season. Petrus has elected not to provide updated guidance during this reporting cycle, but would like to reiterate that it remains committed to keeping capital spending within cash flow and only investing capital where it will generate exceptional returns. We look forward to providing further updates with second quarter results, if not sooner.

⁽¹⁾Disclosure of production on a per boe basis consists of the constituent product types and their respective quantities. Refer to “BOE Presentation” for further details.
⁽²⁾Non-GAAP measure. Refer to “Non-GAAP and Other Financial Measures”.
⁽³⁾Non-GAAP ratio. Refer to “Non-GAAP and Other Financial Measures”.
⁽⁴⁾Refer to “Advisories – Forward-Looking Statements”.

SELECTED FINANCIAL INFORMATION

⁽¹⁾Disclosure of production on a per boe basis consists of the constituent product types and their respective quantities. Refer to “BOE Presentation” for further details.

⁽²⁾Non-GAAP ratio or non-GAAP measure. Refer to “Non-GAAP and Other Financial Measures”.

OPERATIONS UPDATE

First quarter average production by area was as follows:

First quarter average production was 11,385 boe/d in 2023 compared to 7,379 boe/d in 2022. The increase in production was mainly a result of Petrus’ capital program during 2022 and 3 (3.0 net) new 2023 drilled wells brought on stream in late February and early March.

ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held at 240FOURTH (previously BP Centre) 240, 4th Ave SW Calgary, Alberta, on Monday, June 26, 2023 at 1:30 p.m. (Calgary time). The Company does not plan to have a formal presentation at the conclusion of the meeting. Shareholders and guests can listen to the meeting via teleconference at 1‐888‐433‐2192 (participant code 9350829); however, shareholders and proxyholders will not be able to vote their shares via teleconference. We encourage all shareholders to submit their proxies in advance of the meeting.

An updated corporate presentation can be found on the Company’s website at www.petrusresources.com.

For further information, please contact:

Ken Gray, P.Eng.
President and Chief Executive Officer
T: (403) 930-0889
E: [email protected]

NON-GAAP AND OTHER FINANCIAL MEASURES

This press release makes reference to the terms “operating netback” (on an absolute and $/boe basis), “corporate netback” (on an absolute and $/boe basis), “funds flow” (on an absolute, per share (basic and fully diluted) and $/boe basis), “net debt” and “net debt to annualized funds flow ratio”. These non-GAAP and other financial measures are not recognized measures under GAAP (IFRS) and do not have a standardized meaning prescribed by GAAP (IFRS). Accordingly, the Company’s use of these terms may not be comparable to similarly defined measures presented by other companies. These non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS as indicators of our performance. Management uses these non-GAAP and other financial measures for the reasons set forth below.

Operating Netback
Operating netback is a common non-GAAP financial measure used in the oil and natural gas industry which is a useful supplemental measure to evaluate the specific operating performance by product type at the oil and natural gas lease level. The most directly comparable GAAP measure to operating netback is oil and natural gas revenue. Operating netback is calculated as oil and natural gas revenue less royalty expenses, operating expenses, transportation expenses and gain (loss) on risk management activities. See below for a reconciliation of operating netback to oil and natural gas revenue.

Operating netback ($/boe) is a non-GAAP ratio used in the oil and natural gas industry which is a useful supplemental measure to evaluate the specific operating performance by product type at the oil and natural gas lease level. It is calculated as operating netbacks divided by weighted average daily production on a per boe basis. See below.

Corporate Netback and Funds Flow
Corporate netback or funds flow is a common non-GAAP financial measure used in the oil and natural gas industry which evaluates the Company’s profitability at the corporate level. Corporate netback and funds flow are used interchangeably. Petrus analyzes these measures on an absolute value and on a per unit (boe) and per share (basic and fully diluted) basis as non-GAAP ratios. Management believes that funds flow and corporate netback provide information to assist a reader in understanding the Company’s profitability relative to current commodity prices. They are calculated as the operating netback less general and administrative expense, cash finance expense, decommissioning expenditures, plus other income (cash) and the realized gain (loss) on financial derivatives. See below for a reconciliation of funds flow and corporate netback to oil and natural gas revenue.

Corporate netback ($/boe) or funds flow ($/boe) is a non-GAAP ratio used in the oil and natural gas industry which evaluates the Company’s profitability at the corporate level. Management believes that funds flow ($/boe) or corporate netback ($/boe) provide information to assist a reader in understanding the Company’s profitability relative to current commodity prices. It is calculated as corporate netbacks or funds flow divided by weighted average daily production on a per boe basis. See below.

Funds flow per share (basic and fully diluted) is comprised of funds flow divided by basic or fully diluted weighted average common shares outstanding.

⁽¹⁾Excludes non-cash government grant related to decommissioning expenditures.

Net Debt
Net debt is a non-GAAP financial measure and is calculated as the sum of long term debt and working capital (current assets and current liabilities), excluding the current financial derivative contracts and current portion of the lease obligation. Petrus uses net debt as a key indicator of its leverage and strength of its balance sheet. Net debt is reconciled, in the table below, to long-term debt which is the most directly comparable GAAP measure.

Net debt to annualized funds flow ratio is a non-GAAP ratio used as a key indicator of our leverage and strength of our balance sheet. It is calculated as net debt divided by funds flow for the relevant period.