CALGARY, Aug. 8, 2019 /CNW/ - Yangarra
Resources Ltd. ("Yangarra" or the
"Company") (TSX:YGR) announces its financial and operating
results for the three and six months ended June 30, 2019.
Second Quarter Highlights
- Average production of 13,032 boe/d (47% liquids) during the
quarter, an increase of 9% from the first quarter of 2019 and a 72%
increase from the same period in 2018.
- Oil and gas sales were $36.5
million, an increase of 22% from the same period in
2018.
- Funds flow from operations of $24.4
million ($0.29 per share –
basic), an increase of 44% from the same period in 2018.
- Adjusted EBITDA (which excludes changes in derivative financial
instruments) was $25.2 million
($0.30 per share - basic).
- Net income of $18.2 million
($0.21 per share – basic,
$13.4 million before tax), an
increase of 1,007% from the same period in 2018 and represents the
10th consecutive quarter of net income.
- Operating costs were $6.29/boe
(including $0.79/boe of
transportation costs).
- Field netbacks were $22.11/boe.
- Operating netbacks, which include the impact of commodity
contracts, were $22.33/boe.
- Operating margins were 73% and cash flow margins were
66%.
- G&A costs of $0.50/boe.
- Royalties were 8% of oil and gas revenue.
- Total capital expenditures (including E&E) were
$13.8 million.
- Adjusted net debt (which excludes current derivative financial
instruments) was $178 million, a
reduction of $10 million from the
first quarter of 2019.
- Adjusted net debt to annualized second quarter funds flow from
operations was 1.8 : 1.
- Retained earnings of $90.3
million as at June 30,
2019.
- Corporate LMR is 13.99 with decommissioning liabilities of
$14.1 million (discounted).
Operations Update
The Company drilled 4 wells and completed 3 wells during the
quarter, which leaves 4 wells drilled but not completed at the end
of the second quarter. Due to the wet spring, drilling and
completion operations were delayed until late July. Yangarra
expects to drill 5-6 wells and complete 4-5 wells during the third
quarter. Guidance for the year remains unchanged.
Environment, Social, Governance ("ESG") strategy
Yangarra focuses on creating long-term shareholder value through
financial discipline while minimizing Yangarra's environmental
footprint and by operating in a safe manner with a diverse culture.
While Canadian oil & gas ESG standards have not been formalized
or adopted, Yangarra is moving forward on ESG initiatives with the
following:
- Methane baseline study is complete and on track for a 55%
reduction.
- Recently implemented revised completion procedures which will
reduce flaring by 90% and reduce completion costs by 10%.
- Implement a strategy of recycling 90% of all water generated
from completions and production operations via reuse in new
fracture stimulations.
- Yangarra has drilled over 300 wells since inception, 120 of
these have produced to their economic limit and were abandoned,
resulting in a low standing well count and minimal asset retirement
obligations.
- Recently adopted a formal diversity policy to acknowledge
important diversity considerations such as gender, age and
ethnicity with a view to ensuring that the Company benefits from a
broader range of perspectives and relevant experiences.
Share buybacks
Yangarra continues to make capital allocation decisions using a
full cycle return model, which includes the decision on whether to
buyback the Company's shares. Using the second quarter
production of 13,032 boe/d the and the current enterprise value
(Market capitalization + Net Debt) the Company's shares have traded
as low as $23,500 on a per flowing
boe basis. The Company's cashflow and debt levels would allow
for buybacks, however based on full-cycle capital efficiencies
comparisons, the Company has made the decision to allocate capital
to land purchases, new drilling and debt reduction versus share
buybacks at this time.
Financial Summary
|
|
|
|
|
|
|
|
2019
|
2018
|
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2019
|
2018
|
Statements of
Comprehensive Income
|
|
|
|
|
|
|
Petroleum &
natural gas sales
|
$
|
36,473
|
$
|
39,907
|
$
|
29,922
|
|
$
|
76,380
|
$
|
59,672
|
|
|
|
|
|
|
|
Net income (before
tax)
|
$
|
13,433
|
$
|
16,386
|
$
|
2,605
|
|
$
|
29,819
|
$
|
10,651
|
|
|
|
|
|
|
|
Net income
|
$
|
18,219
|
$
|
11,514
|
$
|
1,646
|
|
$
|
29,733
|
$
|
7,305
|
Net income per share
- basic
|
$
|
0.21
|
$
|
0.13
|
$
|
0.02
|
|
$
|
0.35
|
$
|
0.09
|
Net income per share
- diluted
|
$
|
0.21
|
$
|
0.13
|
$
|
0.02
|
|
$
|
0.34
|
$
|
0.08
|
|
|
|
|
|
|
|
Statements of Cash
Flow
|
|
|
|
|
|
|
Funds flow from
operations
|
$
|
24,445
|
$
|
27,731
|
$
|
17,005
|
|
$
|
52,176
|
$
|
35,643
|
Funds flow from
operations per share - basic
|
$
|
0.29
|
$
|
0.32
|
$
|
0.20
|
|
$
|
0.61
|
$
|
0.42
|
Funds flow from
operations per share - diluted
|
$
|
0.28
|
$
|
0.32
|
$
|
0.19
|
|
$
|
0.60
|
$
|
0.41
|
Cash from operating
activities
|
$
|
22,005
|
$
|
22,963
|
$
|
16,288
|
|
$
|
44,968
|
$
|
31,277
|
|
|
|
|
|
|
|
Statements of
Financial Position
|
|
|
|
|
|
|
Property and
equipment
|
$
|
515,730
|
$
|
511,113
|
$
|
387,734
|
|
$
|
515,730
|
$
|
387,734
|
Total
assets
|
$
|
561,986
|
$
|
566,081
|
$
|
430,520
|
|
$
|
561,986
|
$
|
430,520
|
Working capital
deficit
|
$
|
6,672
|
$
|
18,699
|
$
|
18,600
|
|
$
|
6,672
|
$
|
18,600
|
Net Debt (which
excludes current derivative financial instruments)
|
$
|
177,821
|
$
|
188,063
|
$
|
115,119
|
|
$
|
177,821
|
$
|
115,119
|
Non-Current
Liabilities, excluding bank debt
|
$
|
66,518
|
$
|
70,229
|
$
|
51,547
|
|
$
|
66,518
|
$
|
51,547
|
Shareholders
equity
|
$
|
288,027
|
$
|
268,584
|
$
|
224,991
|
|
$
|
288,027
|
$
|
224,991
|
|
|
|
|
|
|
|
Weighted average
number of shares - basic
|
85,363
|
85,359
|
85,020
|
|
85,361
|
83,959
|
Weighted average
number of shares - diluted
|
86,680
|
86,772
|
87,783
|
|
86,728
|
86,406
|
|
|
|
|
|
|
|
Company Netbacks ($/boe)
|
|
|
|
|
|
|
|
2019
|
2018
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2019
|
2018
|
|
|
|
|
|
|
|
Sales
price
|
$
|
30.76
|
$
|
37.09
|
$
|
43.43
|
|
$
|
33.77
|
$
|
43.73
|
|
|
|
|
|
|
|
Royalty
expense
|
(2.35)
|
(2.79)
|
(3.90)
|
|
(2.56)
|
(4.02)
|
Production costs
|
(5.50)
|
(5.87)
|
(6.40)
|
|
(5.68)
|
(6.40)
|
Transportation costs
|
(0.79)
|
(0.96)
|
(1.31)
|
|
(0.87)
|
(1.48)
|
Field operating
netback
|
22.12
|
27.46
|
31.82
|
|
24.66
|
31.83
|
Realized gain
(loss) on commodity contract settlement
|
0.22
|
0.16
|
(5.18)
|
|
0.19
|
(3.73)
|
Operating
netback
|
22.34
|
27.62
|
26.64
|
|
24.85
|
28.10
|
G&A
|
(0.50)
|
(0.32)
|
(0.56)
|
|
(0.41)
|
(0.56)
|
Finance
expenses
|
(1.49)
|
(1.97)
|
(1.39)
|
|
(1.72)
|
(1.34)
|
Funds flow
netback
|
20.35
|
25.33
|
24.69
|
|
22.71
|
26.19
|
Depletion and depreciation
|
(8.53)
|
(8.48)
|
(10.00)
|
|
(8.51)
|
(10.04)
|
Accretion
|
(0.05)
|
(0.06)
|
(0.08)
|
|
(0.05)
|
(0.07)
|
Stock-based compensation
|
(0.75)
|
(1.18)
|
(1.95)
|
|
(0.96)
|
(1.59)
|
Unrealized gain (loss) on financial instruments
|
0.32
|
(0.39)
|
(8.87)
|
|
(0.02)
|
(6.69)
|
Deferred
income tax
|
4.04
|
(4.53)
|
(1.39)
|
|
(0.04)
|
(2.45)
|
Net Income
netback
|
$
|
15.38
|
$
|
10.70
|
$
|
2.39
|
|
$
|
13.14
|
$
|
5.35
|
Business Environment
|
|
|
|
|
|
|
|
2019
|
2018
|
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2019
|
2018
|
Realized Pricing
(Including realized commodity contracts)
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
73.77
|
$
|
66.00
|
$
|
71.34
|
|
$
|
69.81
|
$
|
69.89
|
NGL
($/bbl)
|
$
|
24.20
|
$
|
38.21
|
$
|
31.71
|
|
$
|
30.80
|
$
|
35.56
|
Gas
($/mcf)
|
$
|
1.24
|
$
|
2.56
|
$
|
1.16
|
|
$
|
1.84
|
$
|
1.69
|
|
|
|
|
|
|
|
Realized Pricing
(Excluding commodity contracts)
|
|
|
|
|
|
|
Oil
($/bbl)
|
$
|
73.77
|
$
|
66.00
|
$
|
80.03
|
|
$
|
69.81
|
$
|
75.95
|
NGL
($/bbl)
|
$
|
22.80
|
$
|
37.18
|
$
|
40.38
|
|
$
|
29.57
|
$
|
42.51
|
Gas
($/mcf)
|
$
|
1.24
|
$
|
2.56
|
$
|
1.16
|
|
$
|
1.84
|
$
|
1.69
|
|
|
|
|
|
|
|
Oil Price
Benchmarks
|
|
|
|
|
|
|
West
Texas Intermediate ("WTI") (US$/bbl)
|
$
|
59.56
|
$
|
54.90
|
$
|
67.88
|
|
$
|
57.05
|
$
|
65.37
|
Edmonton
Par (C$/bbl)
|
$
|
73.73
|
$
|
66.48
|
$
|
80.54
|
|
$
|
70.13
|
$
|
76.25
|
Edmonton
Par to WTI differential (US$/bbl)
|
$
|
(4.44)
|
$
|
(4.91)
|
$
|
(5.46)
|
|
$
|
(4.42)
|
$
|
(5.67)
|
|
|
|
|
|
|
|
Natural Gas Price
Benchmarks
|
|
|
|
|
|
|
AECO gas
(Cdn$/mcf)
|
$
|
1.04
|
$
|
1.94
|
$
|
1.03
|
|
$
|
1.83
|
$
|
1.44
|
|
|
|
|
|
|
|
Foreign
Exchange
|
|
|
|
|
|
|
U.S./Canadian Dollar Exchange
|
0.75
|
0.75
|
0.78
|
|
0.75
|
0.78
|
Operations Summary
Net petroleum and natural gas production, pricing and revenue
are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
|
Six months
ended
|
|
Q2
|
Q1
|
Q2
|
|
2019
|
2018
|
|
|
|
|
|
|
|
Daily production
volumes
|
|
|
|
|
|
|
Natural
gas (mcf/d)
|
41,304
|
34,707
|
18,336
|
|
38,024
|
18,436
|
Oil
(bbl/d)
|
4,116
|
4,343
|
3,162
|
|
4,223
|
3,252
|
NGL's
(bbl/d)
|
2,032
|
1,829
|
1,353
|
|
1,937
|
1,214
|
Combined
(boe/d 6:1)
|
13,032
|
11,956
|
7,570
|
|
12,497
|
7,539
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Petroleum &
natural gas sales - Gross
|
$
|
36,473
|
$
|
39,907
|
$
|
29,922
|
|
$
|
76,380
|
$
|
59,672
|
Realized gain (loss)
on commodity contract settlement
|
260
|
170
|
(3,569)
|
|
430
|
(5,091)
|
Total
sales
|
36,733
|
40,077
|
26,353
|
|
76,810
|
54,581
|
Royalty
expense
|
(2,785)
|
(3,003)
|
(2,684)
|
|
(5,788)
|
(5,486)
|
Total Revenue - Net
of royalties
|
$
|
33,948
|
$
|
37,074
|
$
|
23,669
|
|
$
|
71,022
|
$
|
49,095
|
Working Capital Summary
The following table summarizes the change in working capital
during the six months ended June 30,
2019 and the year ended December 31,
2018:
|
|
|
|
Six months
ended
|
Year ended
|
|
June 30,
2019
|
December 31,
2018
|
Net Debt - beginning
of period
|
$
|
(155,882)
|
$
|
(93,533)
|
|
|
|
Funds flow from
operations
|
52,176
|
82,334
|
Additions to
property and equipment
|
(70,800)
|
(141,060)
|
Decommissioning
costs incurred
|
(578)
|
(333)
|
Additions to
E&E Assets
|
(2,063)
|
(9,773)
|
Issuance of
shares
|
31
|
6,776
|
Other
|
(705)
|
(293)
|
Net Debt - end
of period
|
$
|
(177,821)
|
$
|
(155,882)
|
|
|
|
Credit facility
limit
|
$
|
225,000
|
$
|
175,000
|
Capital Spending
Capital spending is summarized as follows:
|
|
|
|
|
|
|
|
2019
|
2018
|
|
Six months
ended
|
Cash
additions
|
Q2
|
Q1
|
Q2
|
|
2019
|
2018
|
|
|
|
|
|
|
|
Land, acquisitions
and lease rentals
|
$
|
98
|
$
|
38
|
$
|
92
|
|
$
|
136
|
$
|
149
|
Drilling and
completion
|
8,960
|
38,908
|
19,520
|
|
47,870
|
46,291
|
Geological and
geophysical
|
209
|
237
|
200
|
|
446
|
339
|
Equipment
|
3,346
|
18,320
|
6,113
|
|
21,667
|
10,454
|
Other asset
additions
|
182
|
500
|
86
|
|
682
|
89
|
|
$
|
12,794
|
$
|
58,004
|
$
|
26,010
|
|
$
|
70,800
|
$
|
57,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration &
evaluation assets
|
$
|
1,019
|
$
|
1,044
|
$
|
1,472
|
|
$
|
2,063
|
$
|
6,520
|
Quarter End Disclosure
The Company's financial statements, notes to the financial
statements and management's discussion and analysis for the year
ended December 31, 2018 and three and
six months ended June 30, 2019 have
been 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.
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.
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 earnings before
interest, taxes, depletion & depreciation, amortization
("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.