Cardinal Energy Ltd. Announces Third Quarter Results
CALGARY, ALBERTA--(Marketwired - Nov 3, 2015) - Cardinal Energy Ltd. ("Cardinal" or the "Company") (CJ.TO) is pleased to announce its operating and financial results for the three and nine months ended September 30, 2015. The Company also announces that its unaudited financial statements and management's discussion and analysis for the quarter ended September 30, 2015, are available on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and on Cardinal's website at www.cardinalenergy.ca.
Financial and Operating Highlights
Production for the third quarter increased by 48% to 11,220 boe/d compared to the third quarter of 2014.
Cash flow from operations for the third quarter of 2015 was $24.8 million with a total payout ratio of 96%.
Operating expenses decreased by 13% in the quarter to $20.60 per boe as compared to the third quarter of 2014 and decreased by 6% from the second quarter of 2015.
General and administrative expenses per boe decreased by 18% compared to the third quarter of 2014 to $2.53/boe and decreased 10% per boe from the second quarter of 2015.
Cardinal exited the third quarter with net debt of $71.4 million and a net debt to cash flow from operations ratio of 0.7.
Cardinal drilled a total of 2 gross wells (1.75 net) in the third quarter in the Bantry area of Alberta. The wells in the third quarter of 2015 have an average IP 30 daily production rate of 495 boe/d as of October 30, 2015. All wells drilled by Cardinal in 2015 in Bantry (6 gross, 5.75 net), have an average IP 30 daily production rate of 340 boe/d.
Subsequent to the end of the quarter, Cardinal closed the acquisition of 3,300 boe/d of predominately light oil in the Mitsue area of Alberta, establishing a new core operating area for the Company.
Cardinal also closed a bought deal financing of common shares which raised a total of $55 million of gross proceeds to Cardinal. In addition Cardinal issued $50 million in convertible debentures.
Cardinal has continued to maintain its dividend at $0.07/share per month and is committed to sustaining its dividend throughout the current commodity price cycle.
FINANCIAL AND OPERATING HIGHLIGHTS
(000's except shares, per share and per boe amounts) | Three months ended | Nine months ended | |||||||||||||||
2015 | 2014 | % | 2015 | 2014 | % | ||||||||||||
Financial | |||||||||||||||||
Petroleum and natural gas revenue | 42,949 | 54,045 | (21 | ) | 134,800 | 143,526 | (6 | ) | |||||||||
Cash flow from operations | 24,810 | 25,858 | (4 | ) | 76,691 | 68,609 | 12 | ||||||||||
basic per share | $ | 0.43 | $ | 0.60 | (28 | ) | $ | 1.33 | $ | 1.75 | (24 | ) | |||||
fully diluted per share | $ | 0.43 | $ | 0.58 | (26 | ) | $ | 1.33 | $ | 1.70 | (22 | ) | |||||
Net earnings (loss) | (105,674 | ) | 22,250 | n/m | (96,836 | ) | 26,927 | n/m | |||||||||
basic per share | (1.83 | ) | $ | 0.52 | n/m | (1.69 | ) | $ | 0.69 | n/m | |||||||
fully diluted per share | (1.83 | ) | $ | 0.50 | n/m | (1.69 | ) | $ | 0.67 | n/m | |||||||
Dividends declared | 12,150 | 8,541 | 42 | 36,248 | 20,667 | 75 | |||||||||||
per share | $ | 0.21 | $ | 0.18 | 17 | $ | 0.63 | $ | 0.50 | 26 | |||||||
Net debt | 71,397 | 60,202 | 19 | 71,397 | 60,202 | 19 | |||||||||||
Net debt to cash flow from operations | 0.7 | 0.6 | 24 | 0.7 | 0.6 | 24 | |||||||||||
Development capital expenditures | 11,707 | 9,156 | 28 | 25,516 | 27,831 | (8 | ) | ||||||||||
Weighted average shares outstanding | |||||||||||||||||
basic | 57,760 | 42,997 | 34 | 57,469 | 39,101 | 47 | |||||||||||
fully diluted | 57,760 | 44,425 | 30 | 57,469 | 40,383 | 42 | |||||||||||
Operating | |||||||||||||||||
Average daily production | |||||||||||||||||
Crude oil and NGL (bbl/d) | 10,321 | 6,849 | 51 | 10,326 | 6,059 | 70 | |||||||||||
Natural gas (mcf/d) | 5,390 | 4,424 | 22 | 5,120 | 4,321 | 18 | |||||||||||
Total (boe/d) | 11,220 | 7,587 | 48 | 11,179 | 6,779 | 65 | |||||||||||
Netback | |||||||||||||||||
Petroleum and natural gas revenue | $ | 41.61 | $ | 77.43 | (46 | ) | $ | 44.17 | $ | 77.55 | (43 | ) | |||||
Royalties | 5.45 | 10.52 | (48 | ) | 5.61 | 10.02 | (44 | ) | |||||||||
Operating expenses | 20.60 | 23.80 | (13 | ) | 21.91 | 23.30 | (6 | ) | |||||||||
Netback | 15.56 | 43.11 | (64 | ) | 16.65 | 44.23 | (62 | ) | |||||||||
Realized gain (loss) on derivatives | 11.53 | (1.22 | ) | n/m | 11.83 | (2.75 | ) | n/m | |||||||||
Netback after risk management | $ | 27.09 | $ | 41.89 | (35 | ) | $ | 28.48 | $ | 41.48 | (31 | ) | |||||
Guidance Confirmation
Cardinal continues to expect $95 million in cash flow from operations for 2015 based on a forecast WTI price of USD $55/barrel, an exchange rate of 0.80 $USD/CAD, a differential to WCS of $15.75 and the effect of our existing 2015 hedges. The 2015 budget achieves a total payout ratio of 82% in this lower commodity price environment. Our exit production for 2015 is now expected to be 14,500 boe/d after giving effect to the Mitsue acquisition.
Cardinal's board of directors has approved a base 2016 capital expenditure budget ("budget") that is anticipated to result in average production of 14,600 boe/d. The budget uses a crude oil price of $50 WTI, Cardinal's current hedge position and the proceeds from the expected sale of a gas plant acquired as part of the Mitsue acquisition for proceeds of approximately $12.75 million.
The budget is summarized as follows:
Budget | ||||
Average production (boe/d) | 14,600 | |||
Percentage oil and NGL's | 87 | % | ||
Cash flow from operations ($ mm) (1) | $ | 92 | ||
- Per share (basic) (1) | $ | 1.41 | ||
Net bank debt | $ | 82 | ||
Convertible debentures | $ | 50 | ||
Dividend annualized ($/share) | $ | 0.84 | ||
Development capital expenditures ($ mm) | $ | 35 | ||
Net debt to cash flow from operations (1)(2) | 1.4 | |||
Simple payout ratio (3) | 55 | % | ||
(1) | 2016 estimated WTI $US 50 per bbl, FX rate of 0.75 $US/$CAD and a differential to WCS of $17.00 CAD, AECO $2.75 CAD, including the then existing hedges. |
(2) | Net debt to cash flow from operations of 0.9 excluding the principal amount of convertible debentures. |
(3) | Net of anticipated dividend re-investment plan and stock dividend program participation. |
Cardinal has the ability to alter its base budget which would allow it to continue to pay its dividend down to $45 WTI, high grade its capital program and have a 100% total payout ratio.
Management believes that with the Company's high quality, low decline reserve base and development inventory, excellent balance sheet and hedging program, Cardinal is well positioned to meet its planned growth and development activities and generate strong operating and financial results for the balance of 2015 and beyond.
About Cardinal Energy Ltd.
Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal's operations are focused in all season access areas in Alberta.
Note Regarding Forward-Looking Statements
This press release contains forward-looking statements and forward-looking information (collectively "forward- looking information") within the meaning of applicable securities laws relating to the Cardinal's plans and other aspects of Cardinal's anticipated future operations, management focus, objectives, strategies, financial, operating and production results. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend", "may", "would", "could" or "will" or similar words suggesting future outcomes, events or performance. The forward-looking statements contained in this press release speak only as of the date thereof and are expressly qualified by this cautionary statement.
Specifically, this press release contains forward-looking statements relating to our dividend policy, future payout ratios, capital expenditure plans including 2015 and 2016 budgets, expected development capital, proceeds from the sales of the gas plant, average and exit production, product mix, cash flow, net bank debt, net debt to cash flow, hedging plans, future acquisitions, drilling, completion and optimization opportunities, commodity prices and differentials, anticipated dividend re-investment plan and stock dividend participation, Cardinal's asset base and future prospects for development and growth therefrom and the expected proceeds from the sale of the gas plant.
Any references in this release to IP rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue to produce and decline thereafter and are not necessarily indicative of long-term performance or ultimate recovery. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. Such rates are based on field estimates and may be based on limited data available at this time.
Forward-looking statements regarding Cardinal are based on certain key expectations and assumptions of Cardinal concerning anticipated financial performance, business prospects, strategies, regulatory developments, current and future commodity prices and exchange rates, applicable royalty rates, tax laws, future well production rates and reserve volumes, future operating costs, the performance of existing and future wells, the success of its exploration and development activities, the sufficiency and timing of budgeted capital expenditures in carrying out planned activities, the availability and cost of labor and services, the impact of increasing competition, conditions in general economic and financial markets, availability of drilling and related equipment, effects of regulation by governmental agencies, the ability to obtain financing on acceptable terms which are subject to change based on commodity prices, market conditions, drilling success and potential timing delays.
These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Cardinal's control. Such risks and uncertainties include, without limitation: the impact of general economic conditions; volatility in market prices for crude oil and natural gas; industry conditions; currency fluctuations; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel, drilling rigs or other services; changes in income tax laws or changes in royalty rates and incentive programs relating to the oil and gas industry; hazards such as fire, explosion, blowouts, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; and ability to access sufficient capital from internal and external sources.
Management has included the forward-looking statements above and a summary of assumptions and risks related to forward-looking statements provided in this press release in order to provide readers with a more complete perspective on Cardinal's future operations and such information may not be appropriate for other purposes. Cardinal's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Cardinal will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this press release and Cardinal disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.
This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about our prospective results of operations, cash flows, payout ratio and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this press release were made as of the date hereof and is provided for the purpose of describing our anticipated future business operations. We disclaim any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein.
Advisory Regarding Oil and Gas Information
Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Utilizing a conversion ratio at 6 Mcf: 1 Bbl may be misleading as an indication of value.
Non-GAAP measures
This press release contains the terms "cash flow from operations", "simple payout ratio", "total payout ratio", "netback", "net bank debt", "net debt" and "net debt to cash flow from operations" which do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or, alternatively, "GAAP") and therefore may not be comparable with the calculation of similar measures by other companies. Cardinal uses cash flow from operations and total payout ratio to analyze operating performance and assess leverage. Cardinal feels these benchmarks are key measures of profitability and overall sustainability for the Company. Cash flow from operations and total payout ratio are not intended to represent operating profits nor should they be viewed as an alternative to cash flow provided by operating activities, net earnings or other measures of performance calculated in accordance with GAAP. Cash flow from operations is calculated as cash flows from operating activities adjusted for changes in non-cash working capital and decommissioning expenditures. "Netback" is calculated on a boe basis and is determined by deducting royalties and operating expenses from petroleum and natural gas revenue. Netback is utilized by Cardinal to better analyze the operating performance of its petroleum and natural gas assets against prior periods. "Simple payout ratio" represents the ratio of the amount of dividends declared, divided by cash flow from operations. "Total payout ratio" represents the ratio of the sum of dividends declared plus development capital expenditures necessary to maintain the Company's base production divided by cash flow from operations. Simple payout ratio and total payout ratio are key measures to assess our ability to finance operating activities, capital expenditures and dividends. The term "net bank debt" is not recognized under GAAP and is calculated as bank debt plus working capital deficiency or minus working capital surplus (adjusted for the fair value of financial instruments and the current portion of the decommissioning obligation). The term "net debt" is not recognized under GAAP and is calculated as bank debt plus working capital deficiency or minus working capital surplus (adjusted for the fair value of financial instruments and the current portion of the decommissioning obligation) plus the principal amount of convertible debentures. "Net debt" is used by management to analyze the financial position, liquidity and leverage of Cardinal. "Net debt to cash flow from operations" is calculated as net debt divided by cash flow from operations for the most recent quarter, annualized. The ratio of net debt to cash flow from operations is used to measure the Company's overall debt position and to measure the strength of the Company's balance sheet. Cardinal monitors this ratio and uses this as a key measure in making decisions regarding financing, capital expenditures and dividend levels.
