NEWS
RELEASE
Perpetual Energy inc. RELEASES
FIRST
QUARTER 2013 FINANCIAL AND
OPERATING RESULTS
Calgary, Alberta – May 13, 2013 (TSX:PMT) - Perpetual
Energy Inc. (“Perpetual” or the “Corporation”) is pleased to
release its financial and operating results for the three months
ended March 31, 2013.
Perpetual is focused on five key strategic priorities in
2013:
1.
Maximize
value of Mannville heavy oil;
2.
Position
for growth of Edson liquids-rich gas;
3.
Manage
downside risk and reduce debt;
4.
Advance
and broaden the portfolio of high impact opportunities with
risk-managed investment; and
5.
Prepare to
maximize value from shallow gas base assets in gas price
recovery.
Significant progress was made with
respect to these priorities during the first quarter of 2013 as
highlighted below.
Perpetual’s unaudited interim
consolidated financial statements and related notes and
management’s discussion and analysis for the three months ended
March 31, 2013 and 2012 can be obtained through the Corporation’s
website at www.perpetualenergyinc.com
and SEDAR
at www.sedar.com.
FIRST QUARTER SUMMARY
Financial and operating
highlights
·
Perpetual executed a $39.5 million
capital program in the first quarter of 2013 primarily directed to
the development of oil and liquids-rich gas
assets.
·
Total actual and deemed production
of 22,403 boe/d was virtually flat as compared to 22,433 boe/d
recorded in the fourth quarter of 2012, as production declines for
gas and liquids were offset by the start-up of production from new
wells drilled in the fourth quarter of 2012. Total actual and
deemed production decreased 17 percent from 27,045 boe/d in the
first quarter of 2012, due primarily to non-core asset dispositions
with production of 2,944 boe/d combined with natural declines,
partially offset by increased production in the Mannville and Edson
areas.
·
Perpetual’s gas price, before derivatives, increased 27 percent to
$3.18 per Mcf from $2.50 per Mcf in the first quarter of 2012 due
to improved AECO prices. Natural gas prices also improved relative
to the fourth quarter of 2012, increasing six percent from $2.99
per Mcf. Perpetual’s realized natural gas price, including
derivatives, increased five percent from the first quarter of 2012
to $3.28 per Mcf.
·
Perpetual’s average oil and NGL price, before derivatives, was
$54.74 per bbl, down 21 percent from $69.72 per bbl for the same
period in 2012 and 12 percent from $62.02 per bbl in the fourth
quarter of 2012, due to a wider West Texas Intermediate (“WTI”) to
Western Canadian Select (“WCS”) differential and lower WTI prices
in the 2013 quarter. The average realized oil and NGL price,
including derivatives, decreased to $56.82 per bbl, down 15 percent
from the first quarter of 2012 and 20 percent compared to the
fourth quarter of 2012.
·
Funds flow was $9.5 million ($0.06
per common share) for the first quarter of 2013.
·
Net earnings of $32.3 million or
$0.22 per basic common share were recorded for the first quarter of
2013, an improvement primarily related to a $51.8 million gain on
the disposition of the Elmworth property in the West Central
district.
Maximize value of Mannville heavy
oil
·
In the Southern
district 27 (25.7 net) heavy oil wells were drilled in the
Mannville area during the first quarter. Production commenced from
26 (24.7 net) of the new wells in late March and April with one
(1.0 net) well waiting on facilities.
·
Heavy oil production increased 15
percent relative to the first quarter of 2012 to 2,786 bbl/d as a
result of the preferential concentration of capital allocated to
heavy oil projects during 2012. This increase was despite the sale
of 167 bbl/d of heavy oil production related to the strategic
partnering in one Mannville heavy oil pool to advance enhanced oil
recovery plans. Current heavy oil production is approximately 3,775
bbl/d, reflecting the start-up of wells drilled during the winter
capital program.
Position for growth of Edson liquids-rich gas
·
West Central first quarter 2013
activity was focused on the completion and tie-in of the fourth
quarter 2012 drilling program at West Edson. Perpetual and its
partner continued to grow the production capability of the West
Edson area with the expansion of the West Edson compressor station
to 30 MMcf/d from 10 MMcf/d of gross capacity (50 percent net to
Perpetual).
·
In early March 2013, Perpetual
entered into rich gas premium agreements with Aux Sable Canada and
an interconnection agreement with Alliance Canada to allow access
to a premium market in the mid-west United
States.
·
To fulfill these arrangements,
Perpetual and its partner are further enhancing the West Edson
compressor station with the installation of refrigeration and other
related components to produce sales quality gas and constructing a
sales pipeline to tie-in to the Alliance pipeline system. Start-up
of the gas plant and sales pipeline is expected to commence in the
third quarter of 2013.
Manage downside risk and reduce debt
·
Perpetual closed the sale of its
non-producing Elmworth Montney assets in the first quarter with net
proceeds of $76.8 million. Proceeds from the Elmworth disposition
were used to strengthen Perpetual’s balance
sheet.
·
Net debt decreased by $135.4 million to $351.2 million at March 31,
2012, a decline of 28 percent from the quarter end one year ago and
11 percent from $396.6 million at December 31 2012, due to
successful execution of the planned asset disposition program.
Current net bank debt is approximately $45 million.
·
In April 2013 Perpetual’s bank syndicate completed its borrowing
base review establishing total availability under the credit
facility at $125 million, down from $127.5 million. A further
revision to $110 million is scheduled to occur on July 31, 2013.
Both reductions reflect dispositions and lower natural gas price
forecasts used in lender evaluations, offset by increased lending
values attributable to higher oil and NGL reserves.
·
To manage downside risk, following the end of the first quarter,
Perpetual increased natural gas hedges to 44 percent of budgeted
actual and deemed production for the remainder of 2013 as forward
prices strengthened with lower volumes of natural gas in storage
relative to 2012 and historical average levels. Perpetual has an
average of 52,500 Gj/d of natural gas production hedged at an
average price of $3.65 per Gj to bring certainty to a portion of
funds flow for the remainder of 2013 to support the planned capital
program.
·
To reduce exposure to fluctuations in the WTI index, Perpetual has
oil sales arrangements for 2,250 bbl/d for the remainder of 2013,
protecting an average floor price of $88.22 per bbl with an average
ceiling price of $101.18 per bbl. The Corporation has also entered
into financial contracts for 2,250 bbl/d to fix the basis
differential between the WTI and WCS trading hubs for 2,250 bbl/d
at an average of $US 22.79 per bbl.
Advance and broaden the portfolio of high impact opportunities with
risk-managed investment
·
Funding approval through the
Government of Alberta’s Innovative Energy Technology Program
(“IETP”) was received for Perpetual’s Low-Pressure
Electro-Thermally Assisted Drive (“LEAD”) project to develop
bitumen in the Bluesky reservoir in the Panny area of northeast
Alberta. Total capital and operating costs for the pilot project
are estimated at $18.2 million. Approved funding through the IETP
allowance is 30 percent of actual eligible costs to a maximum of
$5.5 million.
·
On April 25, 2013, Perpetual
exercised the Warwick Gas Storage call option to buy back an
additional 20 percent interest in the Warwick Gas Storage Limited
Partnership, increasing its total interest in the gas storage
facility to 30 percent. This transaction is expected to close in
late May.
Prepare to maximize value from shallow gas base assets in gas price
recovery
·
Optimization of facilities and gathering systems,
field office consolidation and streamlining of metering and other
operations resulted in lower operating expenses related to
Perpetual’s shallow gas assets. Operating costs related to shallow
gas production decreased 17 percent ($2.3 million) relative to the first quarter of 2012 to
$11.8 million.
·
Total production-related operating
costs decreased 10 percent to $18.2 million for the first quarter
as compared to $20.1 million for the same period in 2012. The
reduction was primarily due to lower labour and field gathering and
processing costs partially offset by higher operating costs related
to increased heavy oil production.
2013 Outlook
The Corporation’s Board of
Directors has approved a capital budget of $75 million for 2013,
highly focused on its commodity diversification strategy. This
capital spending plan allows flexibility to direct capital to
either Mannville heavy oil or liquids-rich gas drilling, depending
on commodity prices in the second half of the
year.
Perpetual will continue its
drilling and development program in the Mannville area with up to
13 (12.3 net) additional Mannville heavy oil wells planned for the
remainder of 2013. Depending on commodity prices and construction
timelines for the West Edson plant and sales gas pipeline,
Perpetual plans to drill two to six (1.0 to 3.5 net) additional
wells in the deep basin prior to year end.
Perpetual will continue to pursue
dispositions and proceeds from any potential divestitures will be
utilized to strengthen the balance sheet and to enhance the
Corporation’s ability to pursue further investment
opportunities.
Perpetual estimates that 2013 funds
flow will average $55 to $70 million based on current forward
commodity prices, with production averaging 3,900 to 4,200 bbl/d
for oil and liquids and 85 to 90 MMcf/d for natural gas depending
on the allocation of capital for the remainder of the
year.
Additional
Information
Perpetual’s Annual General and Special Meeting of Shareholders will
be held on May 22, 2013 at the Calgary Petroleum Club, 319 - 5
Avenue S.W., Calgary, Alberta beginning at 9:00 a.m. (MDT).
Following the business portion of the meeting, a corporate update
will be provided by management. To
participate in the live webcast of Perpetual’s corporate
presentation please use the following URL:
http://event.on24.com/r.htm?e=568876&s=1&k=3699EBA6EC3FD73445A3B0CAAECCD4A3
or
visit
www.perpetualenergyinc.com.
FINANCIAL AND OPERATING HIGHLIGHTS
|
Three Months Ended March
31
|
($Cdn thousands except volume and
per share amounts)
|
2013
|
2012
|
% Change
|
Financial
|
|
|
|
Revenue
(1)
|
43,967
|
56,728
|
(22)
|
Funds flow
(2)
|
9,534
|
14,501
|
(34)
|
Per share - basic
(3)
|
0.06
|
0.10
|
(40)
|
Net earnings
(loss)
|
32,332
|
(13,040)
|
348
|
Per share - basic
(3)
|
0.22
|
(0.09)
|
344
|
Per share - diluted
(3)
|
0.21
|
(0.09)
|
333
|
Total assets
|
745,658
|
940,390
|
(21)
|
Net bank debt outstanding
(2)
|
41,261
|
98,707
|
(58)
|
Senior notes, at principal
amount
|
150,000
|
150,000
|
-
|
Convertible debentures, at
principal amount
|
159,972
|
234,897
|
(32)
|
Total net debt
(2)
|
351,233
|
483,604
|
(27)
|
Shareholders’
equity
|
69,048
|
65,563
|
5
|
Capital
expenditures
|
|
|
|
Exploration,
development
|
39,456
|
31,011
|
27
|
Gas storage
|
-
|
51
|
-
|
Dispositions
|
(77,930)
|
(63,390)
|
22
|
Acquisitions
|
1,752
|
698
|
151
|
Other
|
51
|
139
|
(63)
|
Net capital
expenditures
|
(36,671)
|
(31,491)
|
16
|
Common
Shares outstanding (thousands)
|
|
|
|
End of period
|
147,704
|
146,996
|
-
|
Weighted average - Basic
|
147,672
|
146,977
|
-
|
Weighted average - Diluted
|
171,667
|
146,977
|
17
|
Shares outstanding at May 13,
2013
|
147,973
|
-
|
-
|
Operating
|
|
|
|
Daily average
production
|
|
|
|
Natural gas (MMcf/d)
(5)
|
88.6
|
113.7
|
(22)
|
Oil and NGL (bbl/d)
(5)
|
3,483
|
3,474
|
-
|
Total (boe/d)
(5)
|
18,244
|
22,428
|
(19)
|
Gas over bitumen deemed production
(MMcf/d) (4)
|
25.0
|
27.7
|
(10)
|
Average daily (actual and deemed -
boe/d) (4,5)
|
22,403
|
27,045
|
(17)
|
Per common share (boe/d/share) (3)
|
0.15
|
0.18
|
(17)
|
Average prices
|
|
|
|
Natural gas, before derivatives
($/Mcf)
|
3.18
|
2.50
|
27
|
Natural gas, including derivatives
($/Mcf)
|
3.28
|
3.13
|
5
|
Oil and NGL, before derivatives
($/bbl)
|
54.74
|
69.70
|
(21)
|
Oil and NGL, including derivatives
($/bbl)
|
56.82
|
66.60
|
(15)
|
Barrel of oil equivalent, including
derivatives ($/boe)
|
26.80
|
26.22
|
2
|
Land
(thousands
of net acres)
|
|
|
|
Undeveloped land
holdings
|
1,577
|
1,812
|
(13)
|
Drilling
(wells
drilled gross/net)
|
|
|
|
Gas
|
-/-
|
4/3.5
|
-/-
|
Oil
|
27/25.7
|
16/15.3
|
69/68
|
Total
|
27/25.7
|
20/18.8
|
35/37
|
Success rate (%)
|
100/100
|
100/100
|
-/-
|
(1)
Revenue includes realized gains
(losses) on derivatives.
(2)
These are non-GAAP measures. Please
refer to “Non-GAAP Measures” included in management’s discussion
and analysis.
(3)
Based on weighted average basic or
diluted Common Shares outstanding for the period.
(4)
The deemed production volume describes
all gas shut-in or denied production pursuant to a decision report,
corresponding order or general bulletin of the Alberta Energy and
Utilities Board (“AEUB”), or through correspondence in relation to
an AEUB ID 99-1 application. This deemed production volume is not
actual gas sales but represents shut-in gas that is the basis of
the gas over bitumen financial solution which is received monthly
from the Alberta Crown as a reduction against other royalties
payable.
(5)
Production amounts are based on the
Corporation’s interest before royalty expense.
Forward-Looking
Information
Certain information regarding
Perpetual in this news release including management's assessment of
future plans and operations and including the information contained
under the heading “2013 Outlook” above may constitute
forward-looking statements under applicable securities laws. The
forward-looking information includes, without limitation,
statements regarding expected access to capital markets;
prospective drilling activities; forecast production, production
type, operations, funds flows, and timing thereof; forecast and
realized commodity prices; expected funding, allocation and timing
of capital expenditures; projected use of funds flow; planned
drilling and development and the results thereof; expected
dispositions and the use of proceeds therefrom; commodity prices;
and estimated funds flow sensitivity. Various assumptions were used
in drawing the conclusions or making the forecasts and projections
contained in the forward-looking information contained in this
press release, which assumptions are based on management analysis
of historical trends, experience, current conditions, and expected
future developments pertaining to Perpetual and the industry in
which it operates as well as certain assumptions regarding the
matters outlined above. Forward-looking information is based on
current expectations, estimates and projections that involve a
number of risks, which could cause actual results to vary and in
some instances to differ materially from those anticipated by
Perpetual and described in the forward looking information
contained in this press release. Undue reliance should not be
placed on forward-looking information, which is not a guarantee of
performance and is subject to a number of risks or uncertainties,
including without limitation those described under “Risk Factors”
in Perpetual’s MD&A for the year ended December 31, 2012 and
those included in reports on file with Canadian securities
regulatory authorities which may be accessed through the SEDAR
website (www.sedar.com)
and at Perpetual's website (www.perpetualenergyinc.com).
Readers are cautioned that the foregoing list of risk factors is
not exhaustive. Forward-looking information is based on the
estimates and opinions of Perpetual’s management at the time the
information is released and Perpetual disclaims any intent or
obligation to update publicly any such forward-looking information,
whether as a result of new information, future events or otherwise,
other than as expressly required by applicable securities
laws.
Non-GAAP
Measures
This news release contains
financial measures that may not be calculated in accordance with
generally accepted accounting principles in Canada (“GAAP”).
Readers are referred to advisories and further discussion on
non-GAAP measures contained in the “Significant Accounting Policies
and non-GAAP Measures” section of management’s discussion and
analysis.
Perpetual Energy Inc. is a natural
gas-focused Canadian energy company with a growing base of oil and
NGL assets. Perpetual’s shares and convertible debentures are
listed on the Toronto Stock Exchange under the symbol “PMT”,
“PMT.DB.D” and “PMT.DB.E”, respectively. Further information with
respect to Perpetual can be found at its website at
www.perpetualenergyinc.com.
The Toronto Stock Exchange has
neither approved nor disapproved the information contained
herein.
For additional information, please
contact:
Perpetual Energy
Inc.
Suite
3200, 605 - 5 Avenue SW Calgary, Alberta, Canada T2P
3H5
Telephone: 403 269-4400 Fax:
403 269-4444
Email:
info@perpetualenergyinc.com
|
Susan
L. Riddell Rose
President and Chief Executive Officer
Cameron R. Sebastian
Vice President, Finance and Chief Financial
Officer
|
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