/NOT FOR DISTRIBUTION IN THE UNITED
STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES/
CALGARY,
May 28, 2014 /CNW/ - Palliser Oil
& Gas Corporation ("Palliser" or the
"Company") (TSX VENTURE:PXL) wishes to report
financial and operating results for the three months ended
March 31, 2014. 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, May 28, 2014.
Operating & Financial Highlights - Three
months ended March 31, 2014 and
2013
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Three months ended
March 31 |
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2014 |
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2013 |
% Change |
Operating |
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Wells drilled, re-entered or reactivated (net) |
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Oil |
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2.6 |
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10.0 |
-74% |
Salt water disposal |
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- |
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1.0 |
-100% |
Total |
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2.6 |
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11.0 |
-76% |
Success (%) |
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100% |
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100% |
0% |
Undeveloped land Greater Lloydminster (net acres) |
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34,042 |
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33,988 |
0% |
Undeveloped land Medicine Hat (net
acres) |
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10,363 |
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25,850 |
-60% |
Total undeveloped land (net acres) |
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44,405 |
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59,838 |
-26% |
Average daily production |
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Crude oil (bbl per day) |
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1,850 |
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2,166 |
-15% |
Natural gas (Mcf per day) |
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145 |
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295 |
-51% |
Barrels of oil equivalent (boe per day, 6:1) |
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1,874 |
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2,215 |
-15% |
Crude oil production (%) |
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99% |
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98% |
1% |
Average sales prices |
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Crude oil ($ per bbl) |
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$ |
76.48 |
$ |
51.76 |
48% |
Natural gas ($ per Mcf) |
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$ |
4.61 |
$ |
2.92 |
58% |
Barrels of oil equivalent ($ per boe,
6:1) |
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$ |
75.85 |
$ |
51.04 |
49% |
Operating netback ($ per boe) |
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Petroleum and natural gas sales |
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$ |
75.85 |
$ |
51.04 |
49% |
Realized gain (loss) on financial derivatives |
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$ |
(12.08) |
$ |
6.13 |
-297% |
Royalties |
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$ |
17.50 |
$ |
11.48 |
52% |
Production, operating & transportation expenses |
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$ |
41.85 |
$ |
29.90 |
40% |
Operating netback (1) |
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$ |
4.42 |
$ |
15.79 |
-72% |
Financial ($000's except per share amounts) |
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Three
months ended
March 31 |
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2014 |
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2013 |
% Change |
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Oil and natural gas sales |
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$ |
12,793 |
$ |
10,175 |
26% |
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Funds flow from |
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operating activities (2) |
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$ |
(702) |
$ |
1,682 |
-142% |
Per share - basic and diluted |
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$ |
(0.01) |
$ |
0.03 |
-133% |
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Income (loss) and |
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comprehensive income (loss) |
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$ |
(5,551) |
$ |
(4,486) |
24% |
Per share - basic and diluted |
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$ |
(0.09) |
$ |
(0.07) |
29% |
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Weighted average |
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shares outstanding |
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63,915,979 |
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62,193,757 |
3% |
Shares outstanding |
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63,915,979 |
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63,915,979 |
0% |
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Capital expenditures (3) |
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$ |
1,485 |
$ |
8,724 |
-83% |
Working capital (net debt) (4) |
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$ |
(49,465) |
$ |
(41,655) |
19% |
Shareholders' equity |
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$ |
29,912 |
$ |
43,993 |
-32% |
(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. |
(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. |
(3) Capital expenditures exclude
decommissioning liability costs and capitalized share-based
compensation. |
(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. |
Operationally, the first quarter of 2014 was a
very quiet period for Palliser, due to the Company's limited
financial flexibility. Palliser is forecasting a return to
positive funds flow for the balance of 2014. The Company
plans to apply all free cash flow to reducing its indebtedness.
Q1 2014 Highlights
- Decrease in average quarterly production. First quarter
2014 production averaged 1,874 boe/d, down 15% from the first
quarter of 2013;
- Increased operating costs. Production and operating
expenses averaged $41.85/boe in the
first quarter of 2014, 40% higher $29.90 in the first quarter of 2013;
- Decreased operating netbacks. Operating netbacks
averaged $4.42/boe, 72% lower than
the prior year comparative quarter;
- Decreased funds flow from operating activities. Funds
flow from operating activities was negative $0.7 million (($0.01)/share), compared to positive funds flow
of $1.7 million ($0.03/share) in the prior year comparative
quarter;
- Executed a $1.5 million
capital program. The first quarter capital program included 2.6
net wells completed for heavy oil production;
- Maintained a significant undeveloped heavy oil land
position. The Company's undeveloped heavy oil land position at
the end of the first quarter was 34,042 net acres; and
- 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.
Operations
In the first quarter of 2014, the Company
successfully drilled one (0.575 net) well at Manitou and re-entered one (1.0 net) well and
reactivated one (1.0 net) well at Edam. 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.
Average production for the quarter was 1,874
boe/d; representing a 15% decrease over the prior year comparative
quarter. Production, operating, and transportation costs for
the first quarter were higher on a per unit basis due to lower
production volumes and significantly 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 hedging losses, the Company realized negative funds
flow from operating activities of $0.7
million for the first quarter of 2014, compared to positive
funds flow of $1.7 million in the
prior year comparative quarter. Subsequent to the first
quarter, propane unit costs and consumption combined with
optimization initiatives is forecast to result in production,
operating, and transportation costs averaging approximately
$30/boe for the remainder of the
year, and the Company is forecast for the remainder of 2014 to be
funds flow positive with limited capital expenditures and a
decreasing net debt balance.
Financial & Outlook
The Company has had stabilized production in the
range of 1,800 - 1,900 boe/d for the past five months.
However, given the limited capital program for 2014, production is
expected to decline until capital can be allocated to growth
projects. The Company will continue to seek out joint venture
opportunities to bring into production the inventory of prospects
on a timely basis.
Palliser has a significant undeveloped land
holding in the Lloydminster area
(34,042 net acres), and has identified a heavy oil prospect
inventory of 169 locations. Approximately half of these
future locations (83 of 169) are reflected in the year end 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.
The Company's net debt was $49.5 million at the end of the first quarter
relative to a current total credit facility of $51.9 million. The credit facility is composed of
a $41.9 million demand revolving
operating credit facility and a $10.0
million acquisition and development demand loan. As at
March 31, 2014, authorized and drawn
borrowings on the acquisition and development demand loan amounted
to $1.9 million, resulting in total
available borrowing capacity of $43.8
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 March 31, 2014 the Company was not
in compliance with the current ratio banking covenant. The credit
facilities were to be reviewed by the lender effective May 1, 2014. The review by the lender has
not been completed.
The previously announced strategic review of
Palliser's business plan to identify appropriate actions for the
Company continues to progress. 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.
Readers are invited to view an updated corporate
presentation available on the Company's website.
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