CALGARY, March 8, 2018 /CNW/ - Yangarra Resources
Ltd. ("Yangarra" or the "Company") (TSX:YGR)
announces its financial and operating results for the year ended
December 31, 2017.
2017 Highlights
- Average production of 5,740 boe/d, an increase of 93% from
2016.
- Oil and gas sales were $77.9
million with funds flow from operations of $52.9 million ($0.66 per share - basic).
- Adjusted EBITDA (which excludes changes in derivative financial
instruments) was $54.5 million
($0.68 per share - basic).
- Net income of $19.5 million
($0.24 per share - basic) or
$27.3 million before tax.
- Operating costs were $7.77/boe
(including $1.03/boe of
transportation costs).
- Operating netbacks, which include the impact of commodity
contracts, were $27.68 per boe.
- Operating margins were 74% and cash flow margins were
69%.
- G&A costs of $0.95/boe.
- Royalties were 8% of oil and gas revenue.
- Total capital expenditures were $83.5
million.
- Net debt (which excludes the current derivative financial
instruments) was $93.5 million.
- Wells drilled in 2017 resulted in a corporate half cycle IRR of
105% and a full cycle IRR of 86%.
- Proved Developed Producing reserves increased by 52%, F&D
costs were $13.36/boe, the recycle
ratio was 2.1 and additions replaced 296% of 2017 production.
- Total Proved reserves increased by 53%, F&D costs were
$10.41/boe, the recycle ratio was 2.7
and additions replaced 1025% of 2017 production.
- Proved plus Probable reserves increased by 45%, F&D costs
were $9.18/boe, the recycle ratio was
3.1 and additions replaced 1398% of 2017 production.
- Corporate LMR is 8.08
Fourth Quarter Highlights
- Production of 6,721 boe/d (58% liquids), an increase of 109%
from the fourth quarter of 2016.
- Oil and gas sales were $25.2
million with funds flow from operations of $17.6 million ($0.22 per share - basic).
- Adjusted EBITDA (which excludes changes in derivative financial
instruments) was $17.5 million
($0.21 per share - basic).
- Net income of $4.7 million
($0.06 per share - basic) or
$6.6 million net income before
tax.
- Operating costs were $7.46/boe
(including $0.97/boe of
transportation costs).
- Operating netbacks, which include the impact of commodity
contracts, were $30.39 per boe.
- Operating margins were 75% and cash flow margins were
70%.
- G&A costs of $1.44/boe, which
includes year-end bonuses.
- Royalties were 9% of oil and gas revenue.
- Total capital expenditures were $31.2
million
- Net Debt to annualized fourth quarter funds flow from
operations was 1.33 : 1
Operations Update
Yangarra has drilled five wells in 2018, two wells are currently
drilling and three additional wells are planned before the end of
March. Total wells expected to be drilled in the first quarter will
be 10 gross (8.2 net) consisting of 5 gross (4.7 net) two-mile
wells and 5 gross (3.5 net) one-mile wells. In addition, the two
wells drilling over year-end 2017 were completed in January 2018. With significant snowfall over
winter it is likely some of the first quarter wells will not be
completed until after breakup.
Drilling and completion costs remain stable compared to Q4 2017
levels, however recent wells are being completed with 80 stages per
mile. The Company will assess optimum frack spacing once results
from the latest wells are analyzed.
The Company continues to test 100m
inter-well spacing and will evaluate offset data from four
horizontal well pairs into break-up. Initial frack data indicates
no communication at 100m inter-well
spacing implying a viable drilling density of 16 wells per section
versus the existing inventory spacing assumption of 8-10 wells per
section.
A second oil battery, including a truck service facility, has
been in service since December 1,
2017; however, production has outgrown both oil batteries so
additional capacity will be added with a third oil facility (which
will include 12.0 mmcf/d of gas compression). A site has been
chosen with target completion scheduled for June 2018.
Yangarra has compared data from the first 10 well bioturbated
Cardium program to the second 10 well bioturbated Cardium program
and observed average IP30 rates that were 12% higher on the second
10 well program. With the two wells currently drilling, the
Company will have drilled 30 wells into the bioturbated
Cardium.
Hedging Program Update
The Company's oil hedge position for 2018 consists of 2,600
bbl/d at an average price of C$71.00/bbl for the first half of the year and
2,000 bbl/d at an average price of C$74.88/bbl for the second half of the
year. The Company has also hedged 200 bbl/d of propane at
US$32.34 for 2018.
Financial Summary
|
2017
|
2016
|
|
Year Ended
|
|
Q4
|
Q3
|
Q4
|
|
2017
|
2016
|
Statements of
Comprehensive Income
|
|
|
|
|
|
|
Petroleum &
natural gas sales
|
$
|
25,172,383
|
$
|
17,663,925
|
$
|
11,128,298
|
|
$
|
77,913,091
|
$
|
29,213,872
|
|
|
|
|
|
|
|
Net income (before
tax)
|
$
|
6,598,112
|
$
|
5,511,977
|
$
|
1,365,339
|
|
$
|
27,345,553
|
$
|
10,184,658
|
|
|
|
|
|
|
|
Net income
|
$
|
4,681,958
|
$
|
3,975,606
|
$
|
(339,197)
|
|
$
|
19,485,327
|
$
|
10,168,751
|
Net income per share
- basic
|
$
|
0.06
|
$
|
0.05
|
$
|
(0.00)
|
|
$
|
0.24
|
$
|
0.14
|
Net income per share
- diluted
|
$
|
0.05
|
$
|
0.05
|
$
|
(0.00)
|
|
$
|
0.23
|
$
|
0.14
|
|
|
|
|
|
|
|
Statements of Cash
Flow
|
|
|
|
|
|
|
Funds flow from
operations
|
$
|
17,563,628
|
$
|
12,948,149
|
$
|
6,781,301
|
|
$
|
52,902,651
|
$
|
16,263,727
|
Funds flow from
operations per share - basic
|
$
|
0.22
|
$
|
0.16
|
$
|
0.09
|
|
$
|
0.66
|
$
|
0.22
|
Funds flow from
operations per share - diluted
|
$
|
0.20
|
$
|
0.15
|
$
|
0.09
|
|
$
|
0.63
|
$
|
0.22
|
Cash from operating
activities
|
$
|
20,541,872
|
$
|
13,381,396
|
$
|
7,382,874
|
|
$
|
51,774,874
|
$
|
16,665,490
|
|
|
|
|
|
|
|
Statements of
Financial Position
|
|
|
|
|
|
|
Property and
equipment
|
$
|
342,099,959
|
$
|
315,064,829
|
$
|
277,693,631
|
|
$
|
342,099,959
|
$
|
277,693,631
|
Total
assets
|
$
|
378,231,413
|
$
|
342,983,774
|
$
|
299,046,067
|
|
$
|
378,231,413
|
$
|
299,046,067
|
Working capital
deficit
|
$
|
11,210,245
|
$
|
79,069,633
|
$
|
66,185,217
|
|
$
|
11,210,245
|
$
|
66,185,217
|
Net Debt (which
excludes current derivative financial instruments)
|
$
|
93,533,252
|
$
|
80,449,394
|
$
|
65,005,805
|
|
$
|
93,533,252
|
$
|
65,005,805
|
Non-Current
Liabilities, excluding bank debt
|
$
|
44,366,746
|
$
|
40,523,942
|
$
|
34,156,921
|
|
$
|
44,366,746
|
$
|
34,156,921
|
Shareholders
equity
|
$
|
207,956,623
|
$
|
202,437,802
|
$
|
184,113,958
|
|
$
|
207,956,623
|
$
|
184,113,958
|
|
|
|
|
|
|
|
Weighted average
number of shares - basic
|
81,301,744
|
81,033,965
|
79,347,205
|
|
80,719,934
|
74,635,948
|
Weighted average
number of shares - diluted
|
85,748,705
|
84,772,793
|
79,347,205
|
|
84,156,682
|
75,123,266
|
Company Netbacks ($/boe)
|
2017
|
2016
|
|
Year Ended
|
|
Q4
|
Q3
|
Q4
|
|
2017
|
2016
|
|
|
|
|
|
|
|
Sales
price
|
$
|
40.71
|
$
|
31.87
|
$
|
37.93
|
|
$
|
37.19
|
$
|
27.00
|
Royalty
expense
|
(3.80)
|
(2.43)
|
(1.21)
|
|
(3.06)
|
(0.90)
|
Production costs
|
(6.49)
|
(5.41)
|
(7.28)
|
|
(6.74)
|
(7.14)
|
Transportation costs
|
(0.97)
|
(1.45)
|
(1.04)
|
|
(1.03)
|
(1.31)
|
Field operating
netback
|
29.45
|
22.58
|
28.47
|
|
26.36
|
17.65
|
Realized gain
on commodity contract settlement
|
0.93
|
2.95
|
0.77
|
|
1.32
|
1.94
|
Operating
netback
|
30.39
|
25.53
|
29.23
|
|
27.68
|
19.59
|
G&A
|
(1.44)
|
(0.74)
|
(2.34)
|
|
(0.95)
|
(1.88)
|
Finance
expenses
|
(0.32)
|
(0.71)
|
(2.76)
|
|
(1.07)
|
(2.22)
|
Funds flow
netback
|
28.63
|
24.07
|
24.13
|
|
25.66
|
15.49
|
Depletion and depreciation
|
(9.63)
|
(10.95)
|
(13.06)
|
|
(10.47)
|
(13.15)
|
E&E
Impairment
|
-
|
-
|
-
|
|
-
|
(0.70)
|
Accretion
|
(0.74)
|
(0.08)
|
(0.14)
|
|
(0.29)
|
(0.17)
|
Stock-based compensation
|
(0.66)
|
(0.71)
|
(0.85)
|
|
(0.72)
|
(0.96)
|
Unrealized gain (loss) on financial instruments
|
(6.92)
|
(2.39)
|
(5.36)
|
|
(1.13)
|
(3.18)
|
Gain on
Settlement of Lawsuit
|
-
|
-
|
-
|
|
-
|
12.09
|
Deferred
income tax
|
(3.10)
|
(2.77)
|
(5.80)
|
|
(3.75)
|
(0.01)
|
Net Income
netback
|
$
|
7.57
|
$
|
7.17
|
$
|
(1.08)
|
|
$
|
9.30
|
$
|
9.40
|
Business Environment
|
2017
|
2016
|
|
Year Ended
|
|
Q4
|
Q3
|
Q4
|
|
2017
|
2016
|
Realized Pricing
(Including realized commodity contracts)
|
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
72.70
|
$
60.41
|
$
64.57
|
|
$
65.61
|
$
58.37
|
|
NGL
($/bbl)
|
$
40.63
|
$
37.52
|
$
30.07
|
|
$
35.15
|
$
27.08
|
|
Gas
($/mcf)
|
$
2.06
|
$
1.88
|
$
3.15
|
|
$
2.46
|
$
2.29
|
|
|
|
|
|
|
|
Realized Pricing
(Excluding commodity contracts)
|
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
72.33
|
$
56.51
|
$
63.39
|
|
$
64.23
|
$
54.35
|
|
NGL
($/bbl)
|
$
40.29
|
$
33.39
|
$
28.31
|
|
$
33.74
|
$
22.51
|
|
Gas
($/mcf)
|
$
1.77
|
$
1.60
|
$
3.15
|
|
$
2.25
|
$
2.29
|
|
|
|
|
|
|
|
Oil Price
Benchmarks
|
|
|
|
|
|
|
|
West Texas
Intermediate ("WTI") (US$/bbl)
|
$
55.40
|
$
48.20
|
$
49.35
|
|
$
50.84
|
$
43.35
|
|
Edmonton Par
(C$/bbl)
|
$
69.30
|
$
57.05
|
$
62.00
|
|
$
63.20
|
$
51.90
|
|
Edmonton Par to WTI
differential (US$/bbl)
|
$
(0.04)
|
$
2.56
|
$
2.85
|
|
$
2.18
|
$
4.43
|
|
|
|
|
|
|
|
Natural Gas Price
Benchmarks
|
|
|
|
|
|
|
|
AECO gas
(Cdn$/mcf)
|
$
1.70
|
$
1.45
|
$
3.10
|
|
$
2.15
|
$
2.15
|
|
|
|
|
|
|
|
Foreign
Exchange
|
|
|
|
|
|
|
|
U.S./Canadian Dollar
Exchange
|
$
0.80
|
$
0.80
|
$
0.75
|
|
$
0.77
|
$
0.75
|
Operations Summary
Net petroleum and natural gas production, pricing and revenue
are summarized below:
|
2017
|
2016
|
|
Year Ended
|
|
Q4
|
Q3
|
Q4
|
|
2017
|
2016
|
|
|
|
|
|
|
|
Daily production
volumes
|
|
|
|
|
|
|
|
Natural gas
(mcf/d)
|
16,782
|
16,142
|
8,342
|
|
14,901
|
9,586
|
|
Oil
(bbl/d)
|
2,687
|
2,380
|
1,248
|
|
2,295
|
856
|
|
NGL's
(bbl/d)
|
1,237
|
955
|
557
|
|
962
|
503
|
|
Combined (boe/d
6:1)
|
6,721
|
6,025
|
3,216
|
|
5,740
|
2,982
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Petroleum &
natural gas sales - Gross
|
$
|
25,172,383
|
$
|
17,663,925
|
$
|
11,149,691
|
|
$
|
77,913,091
|
$
|
29,213,872
|
Realized gain on
commodity contract settlement
|
577,551
|
1,632,783
|
225,697
|
|
2,773,986
|
2,102,795
|
Total
sales
|
25,749,934
|
19,296,708
|
11,375,388
|
|
80,687,077
|
31,316,667
|
Royalty
expense
|
(2,348,635)
|
(1,344,746)
|
(356,186)
|
|
(6,411,927)
|
(979,164)
|
Total Revenue - Net
of royalties
|
$
|
23,401,299
|
$
|
17,951,962
|
$
|
11,019,202
|
|
$
|
74,275,150
|
$
|
30,337,503
|
Working Capital Summary
The following table summarizes the change in working capital
during the year ended December 31,
2017 and December 31,
2016:
|
2017
|
2016
|
Net Debt - beginning
of period
|
$
|
(65,005,805)
|
$
|
(60,886,556)
|
|
|
|
|
Funds flow from
operations
|
52,902,650
|
16,263,727
|
|
Additions to property
and equipment
|
(83,472,094)
|
(27,672,766)
|
|
Property
Acquisition
|
-
|
(3,707,693)
|
|
Decommissioning costs
incurred
|
(95,433)
|
(180,862)
|
|
Issuance of
shares
|
2,179,593
|
11,218,610
|
|
Other Debt
|
(42,163)
|
(40,265)
|
|
Net Debt - end of
period
|
$
|
(93,533,252)
|
$
|
(65,005,805)
|
|
|
|
Credit facility
limit
|
$
|
120,000,000
|
$
|
80,000,000
|
Capital Spending
Capital spending is summarized as follows:
|
|
|
|
|
|
|
|
2017
|
2016
|
|
Year Ended
|
Cash
additions
|
Q4
|
Q3
|
Q4
|
|
2017
|
2016
|
|
|
|
|
|
|
|
Land, acquisitions
and lease rentals
|
$
1,163,261
|
$
3,503,852
|
$
385,257
|
|
$
7,164,597
|
$
2,079,149
|
Cash property
acquisitions
|
-
|
-
|
-
|
|
-
|
1,400,000
|
Drilling and
completion
|
25,406,328
|
14,939,137
|
10,714,791
|
|
64,309,093
|
19,075,429
|
Geological and
geophysical
|
262,675
|
134,283
|
184,458
|
|
824,760
|
913,996
|
Equipment
|
4,311,988
|
2,248,622
|
2,359,067
|
|
10,853,654
|
4,085,067
|
Other asset
additions
|
20,023
|
84,631
|
29,419
|
|
319,990
|
119,125
|
|
$
31,164,275
|
$
20,910,525
|
$
13,672,992
|
|
$
83,472,094
|
$
27,672,766
|
Annual General Meeting of Shareholders
The Company's Annual General Meeting of Shareholders is
scheduled for 10:00 AM on Thursday May 10,
2018 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).
Forward looking information
Certain information regarding Yangarra set forth in this news
release, management's assessment of future plans, operations
and operational results may constitute forward-looking statements
under applicable securities law and necessarily involve risks
associated with oil and gas exploration, production, marketing and
transportation such as loss of market, volatility of prices,
currency fluctuations, imprecision of reserves estimates,
environmental risks, competition from other producers and ability
to access sufficient capital from internal and external
sources. As a consequence, actual results may differ
materially from those anticipated in the forward-looking
statements. Certain of these risks are set out in more detail
in Yangarra's current Annual Information Form, which is available
on Yangarra's SEDAR profile at www.sedar.com.
Forward-looking statements are based on estimates and
opinions of management of Yangarra at the time the statements are
presented. Yangarra may, as considered necessary in the
circumstances, update or revise such forward-looking statements,
whether as a result of new information, future events or otherwise,
but Yangarra undertakes no obligation to update or revise any
forward-looking statements, except as required by applicable
securities laws.
The initial production rates discussed in this press release
are not necessarily indicative of long-term performance or of
ultimate recovery due to high initial decline rates.
Barrels of Oil Equivalent
Natural gas has been converted to a barrel of oil equivalent
(Boe) using 6,000 cubic feet (6 Mcf) of natural gas equal to one
barrel of oil (6:1), unless otherwise stated. The Boe
conversion ratio of 6 Mcf to 1 Bbl is based on an energy
equivalency conversion method and does not represent a value
equivalency; therefore Boe's may be misleading if used in
isolation. References to natural gas liquids ("NGLs") in this news
release include condensate, propane, butane and ethane and one
barrel of NGLs is considered to be equivalent to one barrel of
crude oil equivalent (Boe). One ("BCF") equals one billion
cubic feet of natural gas. One ("Mmcf") equals one million
cubic feet of natural gas. Operating netbacks are calculated
as revenue from all products less operating costs.
Finding and Development Costs ("F&D") and Recycle
Ratios
F&D costs are calculated by dividing the identified
capital expenditures by the applicable reserves additions. F&D
costs can include or exclude changes to future development capital
costs.
Recycle Ratio is calculated as operating netback divided by
F&D costs.
Non-GAAP Financial Measures
This press release contains references to measures used in
the oil and natural gas industry such as "funds flow from
operations", "operating netback", "adjusted working capital
deficit", and "net debt". These measures do not have
standardized meanings prescribed by generally accepted accounting
principles ("GAAP") and, therefore should not be considered
in isolation. These reported amounts and their underlying
calculations are not necessarily comparable or calculated in an
identical manner to a similarly titled measure of other companies
where similar terminology is used. Where these measures are
used they should be given careful consideration by the
reader. These measures have been described and presented in
this press release in order to provide shareholders and potential
investors with additional information regarding the Company's
liquidity and its ability to generate funds to finance its
operations.
Funds flow from operations should not be considered an
alternative to, or more meaningful than, cash provided by
operating, investing and financing activities or net income as
determined in accordance with GAAP, as an indicator of Yangarra's
performance or liquidity. Funds flow from operations is used
by Yangarra to evaluate operating results and Yangarra's ability to
generate cash flow to fund capital expenditures and repay
indebtedness. Funds flow from operations denotes cash flow
from operating activities as it appears on the Company's Statement
of Cash Flows before decommissioning expenditures and changes in
non-cash operating working capital. Funds flow from operations is
also derived from net income (loss) plus non-cash items including
deferred income tax expense, depletion and depreciation expense,
impairment expense, stock-based compensation expense, accretion
expense, unrealized gains or losses on financial instruments and
gains or losses on asset divestitures. Funds from operations
netback is calculated on a per boe basis and funds from operations
per share is calculated as funds from operations divided by the
weighted average number of basic and diluted common shares
outstanding. Operating netback denotes petroleum and natural
gas revenue and realized gains or losses on financial instruments
less royalty expenses, operating expenses and transportation and
marketing expenses calculated on a per boe basis. Adjusted
working capital deficit includes current assets less current
liabilities excluding the current portion of the amount drawn on
the credit facilities, the current portion of the fair value of
financial instruments and the deferred premium on financial
instruments. Yangarra uses net debt as a measure to assess
its financial position. Net debt includes current assets less
current liabilities excluding the current portion of the fair value
of financial instruments and the deferred premium on financial
instruments, plus the long-term financial obligation.
Readers should also note that Adjusted EBITDA is a non-GAAP
financial measures and do not have any standardized meaning under
GAAP and is therefore unlikely to be comparable to similar measures
presented by other companies. Yangarra believes that Adjusted
EBITDA is a useful supplemental measure, which provide an
indication of the results generated by the Yangarra's primary
business activities prior to consideration of how those activities
are financed, amortized or taxed. Readers are cautioned, however,
that Adjusted EBITDA should not be construed as an alternative to
comprehensive income (loss) determined in accordance with GAAP as
an indicator of Yangarra's financial performance.
All reference to $ (funds) are in Canadian dollars.
Neither the TSX nor its Regulation Service Provider (as that
term is defined in the Policies of the TSX) accepts responsibility
for the adequacy and accuracy of this release.
SOURCE Yangarra Resources Ltd.