/NOT FOR DISTRIBUTION IN THE UNITED
STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES/
CALGARY,
April 29, 2014 /CNW/
- Palliser Oil & Gas Corporation ("Palliser"
or the "Company") (TSXV: PXL) wishes to report
financial and operating results for the three months and year ended
December 31, 2013. Certain selected
financial and operational information is set out below and should
be read in conjunction with Palliser's financial statements
complete with the notes to the financial statements and related
MD&A which is expected to be available at www.sedar.com and the
Company's website at www.palliserogc.com on Wednesday, April 30, 2014. In addition, the
Company's Annual Information Form is expected to be available on
www.sedar.com and the Company's website at www.palliserogc.com on
Wednesday, April 30, 2014.
Operating & Financial Highlights - Three months and year
ended December 31, 2013 and
2012
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Three months
ended
December 31
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Year ended
December 31
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2013
|
2012
|
% Change
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2013
|
2012
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% Change
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Operating
|
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Wells drilled,
re-entered or reactivated (net)
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Oil
|
|
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3.6
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6.0
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-40%
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18.6
|
18.0
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3%
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Salt water
disposal
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-
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-
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0%
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2.0
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3.0
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-33%
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Total
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3.6
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6.0
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-40%
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20.6
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21.0
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-2%
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Success
(%)
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75%
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83%
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-10%
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81%
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90%
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-10%
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Undeveloped land
Greater Lloydminster (net acres)
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37,144
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32,542
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14%
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37,144
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32,542
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14%
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Undeveloped land
Medicine Hat (net acres)
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10,996
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31,602
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-65%
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10,996
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31,602
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-65%
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Total undeveloped
land (net acres)
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48,140
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64,144
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-25%
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48,140
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64,144
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-25%
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Average daily
production
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Crude oil (bbl per
day)
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2,018
|
2,450
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-18%
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2,304
|
2,065
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12%
|
Natural gas (Mcf per
day)
|
|
|
116
|
293
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-60%
|
|
221
|
351
|
-37%
|
Barrels of oil
equivalent (boe per day, 6:1)
|
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2,037
|
2,498
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-18%
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2,340
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2,124
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10%
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Crude oil production
(%)
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99%
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98%
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1%
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98%
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97%
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1%
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Average sales
prices
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Crude oil ($ per
bbl)
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$
62.48
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$58.96
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6%
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$
68.18
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$62.51
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9%
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Natural gas ($ per
Mcf)
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$
3.64
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$
3.11
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17%
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$
3.06
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$
2.26
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35%
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Barrels of oil
equivalent ($ per boe, 6:1)
|
|
$
62.10
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$58.18
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7%
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$
67.41
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$61.18
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10%
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Operating netback ($
per boe)
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Petroleum and natural
gas sales
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$
62.10
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$58.18
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7%
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$
67.41
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$61.18
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10%
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Realized gain (loss)
on financial derivatives
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$
(3.82)
|
$
8.10
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-147%
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$
(1.61)
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$
4.81
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-133%
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Royalties
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$
16.17
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$13.13
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23%
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$
16.79
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$14.26
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18%
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Production &
operating expenses
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$
37.30
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$22.98
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62%
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$
28.64
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$23.04
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24%
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Operating netback
(1)
|
|
|
$
4.81
|
$30.17
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-84%
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$
20.37
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$28.69
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-29%
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Financial ($000's
except per share amounts)
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Three months
ended
December 31
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Year ended
December 31
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2013
|
2012
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% Change
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2013
|
2012
|
% Change
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Oil and natural gas
sales
|
$
11,637
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$
13,373
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-13%
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$
57,580
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$
47,547
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21%
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Funds flow
from
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operating activities
(2)
|
$
(63)
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$
5,405
|
-101%
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$
11,813
|
$
16,873
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-30%
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Per share - basic and
diluted
|
$
-
|
$
0.09
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-101%
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$
0.19
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$
0.31
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-39%
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Income (loss)
and
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comprehensive income
(loss)
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$
(7,138)
|
$
(513)
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1291%
|
|
$
(13,680)
|
$
1,538
|
-989%
|
Per share - basic and
diluted
|
$
(0.11)
|
$
(0.01)
|
1000%
|
|
$
(0.22)
|
$
0.03
|
-833%
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Weighted
average
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shares
outstanding
|
63,915,979
|
57,739,515
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11%
|
|
63,491,321
|
55,182,838
|
15%
|
Shares
outstanding
|
63,915,979
|
58,915,979
|
8%
|
|
63,915,979
|
58,915,979
|
8%
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Capital expenditures
(3)
|
$
5,580
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$
7,975
|
-30%
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|
$
24,423
|
$
36,446
|
-33%
|
Working capital (net
debt) (4)
|
$
(47,365)
|
$
(37,345)
|
27%
|
|
$
(47,365)
|
$
(37,345)
|
27%
|
Shareholders'
equity
|
$
35,344
|
$
45,448
|
-22%
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|
$
35,344
|
$
45,448
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-22%
|
(1)
Operating netback is a non-IFRS measure and is the net of petroleum
and natural gas sales, realized gain or loss on financial
derivatives, royalties and production & operating
expenses.
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(2)
Funds flow from operating activities is a non-IFRS measure that
represents cash flow from operations less decommissioning
expenditures and changes in non-cash working capital related to
operating activities. Funds flow per share amounts are calculated
using weighted average shares outstanding consistent with the
calculation of net income per share. Funds flow from operating
activities is a key measure as it demonstrates the Company's
ability to generate the funds necessary to achieve future growth
through capital investment. This table also contains other industry
benchmarks and terms, such as working capital (calculated as
current assets less current liabilities) and operating netbacks
(calculated on a per unit basis as production sales less royalties,
transportation and operating costs), which are not recognized
measures under IFRS. Management believes these are useful
supplemental measures of, firstly, the total net position of
current assets and current liabilities of the Company and secondly,
the profitability relative to commodity prices. Other
entities may calculate these figures differently than
Palliser.
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(3)
Capital expenditures exclude decommissioning liability costs and
capitalized share-based compensation.
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(4)
Working capital (net debt) is a non-IFRS measure representing the
total bank loan, accounts payable and accrued liabilities, less
accounts receivable, deposits and prepaid expenses. This excludes
financial derivative assets and/or liabilities.
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2013 Highlights
- Increased total proved plus probable reserves. Total
proved reserves decreased 2% to 5.49 million boe and proved plus
probable reserves increased 19% to 9.41 million boe with the proved
plus probable reserve life index increasing to 12.6 years (based on
average Q4 2013 production, annualized).
- Achieved proved plus probable finding, development and
acquisition costs (including future development capital) of
$24.90/boe in 2013 and a four year
average of $18.80/boe;
- Increased net asset value per share 10%. Net asset value
(debt adjusted, fully diluted, discounted at 10% before tax) was
$1.83 per share compared with
$1.66 in 2012;
- Decreased production per weighted average share 4%.
Yearly production averaged 2,340 boe/d, up 10% from the prior year,
and fourth quarter 2013 production averaged 2,037 boe/d, down 18%
from fourth quarter 2012;
- Increased operating costs 24%. Production and operating
expenses averaged $28.64/boe in 2013,
24% higher than 2012;
- Decreased operating netbacks 29%. Operating netbacks
averaged $20.37/boe, 29% lower than
in the prior year;
- Decreased funds flow from operating activities per share
39%. Funds flow from operating activities was $11.8 million ($0.19/share), 30% lower than $16.9 million ($0.31/share) in 2012;
- Executed a $24.4 million
capital program. The 2013 capital program included 18.6 net
wells completed for heavy oil production, expansion of the
Company's salt water disposal infrastructure, and a key strategic
property acquisition which added 140 bbl/d of heavy oil production
and 2 salt water disposal wells and associated facilities;
- Increased undeveloped heavy oil land position. The
Company's undeveloped heavy oil land position at year-end 2013 was
37,144 net acres, a 14% increase from 2012;
- Maintained a significant prospect inventory. The
Company's heavy oil prospect inventory stands at 169 locations, 83
of which are included in the 2013 independent reserves report; and
86 locations that are not included in the reserves report; and
- Increased rail shipments to 60% of production and the
capability to ship production by rail to 75% in the fourth quarter,
with the commissioning of the Edam
oil treating facility.
Operations
Average production for the year was 2,340 boe/d,
representing a 10% increase over 2012. Palliser previously
provided operational updates which noted that water breakthrough
has been experienced in a number of CHOPS wells in Manitou. The new Manitou salt water disposal facility was
commissioned in late November, with high volume lift ramp up of
these wells commencing in December. The forecasted recovery of oil
production from the affected wells at Manitou was not achieved in 2013, as it
appears that some of the producing wells are not seeing adequate
pressure support from the reservoir. The Company is
considering the merits of implementing a pressure maintenance
scheme at Manitou. In addition to natural declines, the
Company has also experienced higher water cuts in a select number
of high oil rate producers which have recovered a significant
percentage of the original oil in place, resulting in production
losses of approximately 500 barrels per day as compared to
production of 2,800 boe/d in the second quarter of 2013. The
Company reacted to this development by expanding its salt water
disposal take away capacity in order to produce those specific
wells at higher total fluid rates and by recompleting new uphole
zones in two wells to replace production from the depleted zones in
these wells. The Company has successfully stabilized production in
the range of 1,800 – 1,900 boe/d.
Operating costs for the fourth quarter were
higher on a per unit basis due to lower production volumes and
increased propane costs. Over the winter months, propane unit
prices increased nearly three-fold. Propane is used to heat
production tanks and power wellhead equipment, with the majority of
the propane being consumed at Edam. When combined with the
wider heavy oil differential and hedging losses, the Company
realized negative funds flow from operating activities of
$63 thousand for the fourth quarter
of 2013 and positive funds flow of $11.8
million for the full year, down 30% as compared to 2012.
Capital expenditures for the full year 2013 were limited to
$24.4 million, resulting in year-end
net debt of $47.3 million.
Palliser maintained almost entirely a 100%
working interest in the 2013 capital program, which included 21
wells. The capital program resulted in 21 wells being drilled,
re-entered or reactivated for heavy oil production and two salt
water disposal wells, with an 81% success rate. In the fourth
quarter, the Company farmed out 160 acres of land to an industry
partner, which resulted in one (0.575 net) oil well being drilled
and completed on the property at no cost to Palliser. The Company
incurred 57.5% of the costs to equip the well for production.
Palliser operates the property and the partner has a one year
option to drill three more wells on the same terms.
Reserves
The 2013 year end independent reserves evaluation
was completed by Sproule Unconventional Ltd. ("Sproule"). Proved
developed producing reserves are 1.83 million boe, total proved
reserves are 5.49 million boe, and total proved plus probable
reserves increased 113% to 9.41 million boe.
Proved plus probable reserves additions
(including revisions) totalled 2.34 million boe in 2013 and 10.35
million boe per year for the four year period from 2010 to 2013.
Finding and development costs including future development capital
were $24.90 per boe in 2013 and
$18.80 per boe for the four year
period ended December 31, 2013. These
metrics resulted in recycle ratios of 0.8 times in 2013 and a four
year average of 1.2 times.
Palliser's December 31,
2013 total proved plus probable reserves were valued at
$153.3 million, resulting in a net
asset value (debt adjusted, fully diluted, discounted at 10% before
tax) of $1.83 per share. The
Company's reserve life index based on annualized fourth quarter
2013 average production was 7.4 years for total proved reserves and
12.6 years for total proved plus probable reserves.
Financial & Outlook
Production and operating expenses averaged
$28.64/boe in 2013 and operating
netbacks averaged $20.37/boe. The
resultant decrease in funds flow from operating activities to
$11.8 million required the Company to
trim capital expenditures, such that new projects to add production
and reduce operating costs have been deferred until funds are
available.
In the first quarter of 2014, the Company
successfully drilled one (0.575 net) well at Manitou and re-entered two (2.0 net) wells at
Edam. The activities at Edam
were required in order to preserve expiring lands. At
Manitou, one well was pipeline connected to an existing salt water
disposal facility to reduce operating costs and allow the well to
be produced on an uninterrupted basis over spring break up with
reduced operating costs.
In 2013, Palliser added 14% to our undeveloped
land total in the Lloydminster
area (to 37,144 net acres), while increasing the heavy oil prospect
inventory to 169 locations. Approximately half of these
future locations (83 of 169) are reflected in the reserves report
as proved Developed Non-Producing, Proved Undeveloped and Probable
Reserves, while the balance are not reflected in the
report. The Company's undeveloped land base and
extensive prospect inventory provides significant upside potential
for future growth, once funding is available to mount a meaningful
capital expenditure program.
At Edam as funds
become available, Palliser is planning to connect the field
facilities to the Transgas natural gas distribution system in order
to eliminate propane usage. This $1.3
million project is forecasted to result in reduced corporate
operating costs by $3.00 to $4.00 per
boe.
The Company exited 2013 with net debt of
$47.4 million relative to a current
total credit facility of $52.0
million. As at December 31,
2013, the Company had a credit facility with a Canadian
chartered bank in the amount of $52.0million. The credit facility is
composed of a $42.0 million demand
revolving operating credit facility and a $10.0 million acquisition and development demand
loan. As at December 31, 2013,
authorized and drawn borrowings on the acquisition and development
demand loan amounted to $2.25
million, resulting in total available borrowing capacity of
$44.25 million. The facility is
a borrowing base facility that is determined based on, among other
things, the Company's current reserve report, results of
operations, current and forecasted commodity prices and the current
economic environment. The credit facility is secured by a
general security agreement and floating charge debenture covering
all assets of the Company. The Company's bank indebtedness
does not have a specific maturity date as it is a demand
facility. This means that the lender has the ability to
demand repayment of all outstanding indebtedness or a portion
thereof at any time. If that were to occur the Company would
be required to source alternate credit facilities, sell assets or
issue new shares to repay the indebtedness. The Company is
required to maintain a current ratio (current assets adjusted to
include the undrawn credit facility balance) of not less than
1.0:1.0. As at December 31,
2013 the Company was not in compliance with the current
ratio banking covenant.
In light of financial constraints facing the
Company, the board of directors of Palliser is conducting a
strategic review of the Company's business plan to identify
appropriate actions for the Company. The strategic review is
examining and considering the alternatives available to the Company
with a view to enhancing shareholder value. The alternatives
being considered include but are not limited to the sale of assets
or the entire Company, joint ventures and the refinancing of some
or all of Palliser's debt. Management and the Board are
committed to acting in the best interests of the Company and its
shareholders.
About Palliser
Palliser is a Calgary-based junior oil and gas company
focused on high netback heavy oil production in the greater
Lloydminster area of Alberta and Saskatchewan.
Forward-Looking Statements
Statements in this document may contain
forward-looking information including matters related to the
strategic review. The reader is cautioned that assumptions used in
the preparation of such information may prove to be incorrect.
Events or circumstances may cause actual results to differ
materially from those predicted, as a result of numerous known and
unknown risks, uncertainties, and other factors, many of which are
beyond the control of the Company. These risks include, but are not
limited to: the risks associated with the oil and gas industry;
commodity prices, and; exchange rate changes. Industry related
risks could include, but are not limited to: operational risks in
exploration; proposed dispositions not being completed or if
completed, not providing the benefits expected; development and
production; delays or changes in plans; risks associated to the
uncertainty of reserve estimates; health and safety risks, and; the
uncertainty of estimates and projections of production, costs and
expenses. In addition, forward-looking statements or information
are based on a number of factors and assumptions which have been
used to develop such statements and information but which may prove
to be incorrect. Although the Company believes that the
expectations reflected in such forward-looking statements or
information are reasonable, undue reliance should not be placed on
forward-looking statements because the Company can give no
assurance that such expectations will prove to be correct. In
addition to other factors and assumptions which may be identified
herein, assumptions have been made regarding, among other things:
the ability of the Company to obtain financing on acceptable terms;
the impact of increasing competition; the general stability of the
economic and political environment in which the Company operates;
the timely receipt of any required regulatory approvals; the
ability of the Company to obtain qualified staff, equipment and
services in a timely and cost efficient manner; drilling results;
the ability of the operator of the projects which the Company has
an interest in to operate the field in a safe, efficient and
effective manner; field production rates and decline rates; the
ability to replace and expand reserves through acquisition,
development and exploration; the timing and costs of pipeline,
storage and facility construction and expansion and the ability of
the Company to secure adequate product transportation; future
commodity prices; currency, exchange and interest rates; the
regulatory framework regarding royalties, taxes and environmental
matters in the jurisdictions in which the Company operates; and the
ability of the Company to successfully market its oil and natural
gas products. Readers are cautioned that the foregoing lists of
factors and assumptions are not exhaustive. Additional information
on these and other factors that could affect the Company's
operations and financial results are included in reports on file
with Canadian securities regulatory authorities and may be accessed
through the SEDAR website (www.sedar.com), at the
Company's website (www.palliserogc.com). Furthermore,
the forward-looking statements contained in this news release are
made as at the date of this news release and the Company does not
undertake any obligation to update publicly or to revise any of the
included forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required
by applicable securities laws.
Conversion
The Company has adopted the industry standard
of 6:1 Mcf to Bbl when converting natural gas to barrels of oil
equivalent. Disclosure provided herein in respect of Boes may
be misleading, particularly if used in isolation. A Boe
conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. Given that
the value ratio based on the current price of crude oil as compared
to natural gas is significantly different from the energy
equivalency of 6 Mcf:1 Bbl, utilizing a conversion ratio of 6:1 may
be misleading as an indication of value.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this Press release.
SOURCE Palliser Oil & Gas Corporation