Petroshale continued growth PetroShale talks production, omits P&L from 2016 NR
2017-04-28 09:16 ET - News Release
Mr. Bruce Chernoff reports
PETROSHALE ANNOUNCES FINANCIAL, OPERATING AND RESERVES UPDATE AND YEAR ENDED DECEMBER 31, 2016 RESULTS
PetroShale Inc. has released its financial and operating results for the three- and 12-month periods ended Dec. 31, 2016, along with updated reserves as at Dec. 31, 2016.
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PetroShale will file its audited consolidated financial statements and the corresponding Management's Discussion and Analysis ("MD&A") as at and for the year ended December 31, 2016, as well as its 2016 Annual Information Form including its year end reserves disclosures, on SEDAR at www.sedar.com, on the OTCQX website at www.otcqx.com, and post the information on our website at www.petroshaleinc.com. Copies of the materials can also be obtained upon request without charge by contacting the Company directly.
HIGHLIGHTS:
PetroShale continued to focus on acquiring and developing land in the core of the North Dakota Bakken / Three Forks play. We took the first step in developing our operated drilling unit by drilling and completing a well in the prolific Antelope area, and continued to realize production growth from our non-operated interests where we are partnered with some of the largest and most experienced operators in the basin. Our continued operational success and completion of an equity financing earlier this month have positioned us to be more aggressive in increasing production and drilling inventory targets as we move forward.
The Company's achievements since 2015 include the following:
Successfully drilled and completed the first well on our operated unit (73.4% working interest) in the Antelope area which commenced production on December 31, 2016, and participated in three gross (0.7 net) non-operated wells in December, which have resulted in a substantial increase in current production to approximately 2,800 boe per day.
Achieved a significant increase in oil and natural gas reserves and estimated net present value (discounted at 10% - "NPV10") across all categories at year end 2016 compared to December 31, 2015:
Total proved plus probable ("P+P") reserves increased 23% to 31.5 million boe ("Mmboe"), from 25.5 Mmboe.
NPV10 of the P+P reserves increased 29% to US$399.5 million, compared to US$308.7 million, despite a reduction in estimated future commodity prices.
Generated operating netbacks of $20.14 per boe in 2016 (Company interest, gross of royalty; $25.34 per boe net of royalty), despite an 11% reduction in the benchmark price of crude oil (WTI) to US$43.31, reflecting our high-quality, light oil weighted asset base.
Realized EBITDA of $9.5 million in 2016.
Participated in 64 gross (2.6 net) wells at various stages of completion, for total capital expenditures of $20.9 million, and purchased oil and gas leases within PetroShale's core focus areas which included a total of 351 net acres of land for a total cost of approximately $8.5 million.
Closed, in April 2017, a fully subscribed equity offering (including full exercise of the over-allotment option) that generated net proceeds of $106 million.
Increased the borrowing capacity under our senior credit facility to US$30.9 million, from US$23.7 million, and extended the renewal date to February 28, 2018. The conclusion of the equity offering and the increase in the senior credit facility borrowing base leaves us with approximately US$79 million of undrawn credit capacity under our senior and subordinated credit facilities.
RESULTS OF OIL AND GAS ACTIVITIES Three months ended Twelve months ended Dec. 31, 2016 Dec. 31, 2015 Dec. 31, 2016 Dec. 31, 2015 Sales volumes Crude Oil (Bbl/d) 1,325 1,278 1,221 1,202 Natural gas and NGLs (Mcf/d) 3,218 993 2,458 802 Barrel of oil equivalent (Boe/d) 1,861 1,444 1,631 1,336 Operating Netbacks ($/Boe) (1) Revenue $ 44.67 $ 42.23 $ 38.95 $ 47.11 Royalties (9.39) (9.02) (7.99) (10.34) Operating costs (7.63) (6.22) (7.86) (7.32) Production taxes (3.30) (3.60) (2.96) (3.79) Operating netback 24.35 23.39 20.14 25.66 Operating netback, on a net of royalty basis 30.86 29.69 25.34 32.89
2016 YEAR-END RESERVES
The reserves data in this press release is based upon an evaluation by Netherland, Sewell & Associates, Inc. ("NSAI") with an effective date of December 31, 2016. The reserves data summarizes PetroShale's crude oil and natural gas reserves and the net present value of future net revenue for these reserves using forecast prices and costs. All references to reserves are to gross Company reserves, meaning PetroShale's working interest reserves before consideration of royalty interests. The reserve report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in National Instrument 51-101 ("NI 51-101") and CSA Staff Notice 51-324. No attempt was made to evaluate possible reserves.
Reserves Highlights:
P+P reserves increased 23% to 31,450 Mboe, compared to 25,483 Mboe as at December 31, 2015; Proved developed producing reserves increased by 45% to 5,238 Mboe, and total proved reserves increased by 29% to 25,134 Mboe; Before tax NPV10 of the Company's P+P reserves increased by 29% to US$399.5 million, while the NPV10 of total proved reserves increased 34% to US$333.4 million; P+P finding, development and acquisition costs ("FD&A") were $9.17 per boe for 2016 (year ended December 31, 2015 - $9.69) (including changes in future development capital) reflecting a strong recycle ratio of 2.7 times based on our Q4 2016 operating netback (2.2 times based on 2016 average netback); while total proved FD&A was $10.89 per boe (year ended December 31, 2015 - $9.88) with a recycle ratio of 2.2 times based on our Q4 2016 operating netback (1.9 times based on 2016 average netback); P+P finding and development costs ("F&D") were $16.69 per boe for 2016 (year ended December 31, 2015 - $14.21) (including changes in future development capital) and total proved F&D was $17.37 per boe (year ended December 31, 2015 - $14.94); and P+P Reserve Life Index is 46.3 years, reflecting Q4 2016 average production of 1,861 boe per day.
Gross Company Interest Reserves Reserves Tight Oil Shale Gas (2) BOE Gross Net Gross Net Gross Net Reserves Category (Mbbl) (Mbbl) (Mmcf) (Mmcf) (Mboe) (Mboe) PROVED: Developed Producing 4,143.0 3,284.4 6,570.4 5,188.2 5,238.1 4,149.1 Developed Non-Producing 58.6 46.1 5.5 4.3 59.5 46.8 Undeveloped 16,707.4 13,270.5 18,773.7 14,908.0 19,836.4 15,755.2 TOTAL PROVED 20,909.1 16,601.0 25,349.6 20,100.4 25,134.0 19,951.1 PROBABLE 5,340.6 4,239.2 5,854.4 4,644.2 6,316.3 5,013.2 TOTAL PROVED PLUS PROBABLE 26,249.6 20,840.2 31,204.0 24,744.6 31,450.3 24,964.3
Net Present Value of Future Net Revenue ($ US) Before Income Taxes Discounted at (%/year) 0% 5% 10% 15% 20% Reserves Category ($US 000s) ($US 000s) ($US 000s) ($US 000s) ($US 000s) PROVED: Developed Producing 161,655.6 115,408.1 90,270.2 74,902.9 64,639.1 Developed Non-Producing 1,277.9 972.7 767.7 626.3 525.5 Undeveloped 586,079.5 360,960.0 242,321.5 171,908.4 126,431.7 TOTAL PROVED 749,013.0 477,340.8 333,359.4 247,437.6 191,596.3 PROBABLE 169,611.6 102,436.2 66,163.4 44,665.8 31,012.0 TOTAL PROVED PLUS PROBABLE 918,624.7 579,777.0 399,522.8 292,103.4 222,608.3 Notes: (1) Columns may not add due to rounding
As a reporting issuer in Canada, PetroShale is required to report its reserves and NPV10 using forecast pricing and costs, as stipulated under NI 51-101. The forecast prices reflected in the NPV10 is included in its year end 2016 Annual Information Form filed on SEDAR.
Net Asset Value ("NAV") per Share as at December 31, 2016 Pro-Forma Equity Financing ($ thousands, except share and per share amounts) Proved Plus Probable Reserve Value (NPV10 Before Tax) $ 535,361 $ 535,361 Net Debt (including Decommissioning Obligation) (149,369) (43,169) Total Net Assets $ 385,992 $ 492,192 Estimated Net Asset Value per Diluted Common Share $ 10.01 $ 3.08
MESSAGE FROM THE CEO
2016 represented another year of growth and milestones achieved at PetroShale. We drilled and completed our first well (73% working interest) in the Antelope area which moved PetroShale from a non-operating, working interest owner to an operator in the prolific Williston Basin. Our operated position in this particular drilling unit was built through several transactions over the past few years, and we believe the opportunity exists to consolidate interests to an operated position in other drilling units in our core focus area. Earlier in December, we participated in three non-operated wells in which we have a 24.7% working interest. We are very pleased with and encouraged by the results from our first operated well, as well as the production impact from the three non-operated wells, and believe PetroShale is positioned to achieve significant longer-term increases in production, reserves and revenue growth.
PetroShale's current production is approximately 2,800 boe per day, an increase of 50% from our fourth quarter average.
We further strengthened our financial position with an equity offering of 122,265,000 common shares at $0.90 per share that closed on April 11, 2017, and generated net proceeds of approximately $106 million. As a result of this financing, we currently have approximately US$79 million of undrawn capacity under our credit facilities.
The quality of our asset base and the strength of our strategy is clearly demonstrated by PetroShale's fourth quarter 2016 operating netback of $24.35 per boe ($30.86 per boe on a net of royalty basis), which highlights our ability to generate compelling economics during a period of moderate oil price levels. We expect to see improved differentials between WTI and Bakken crude prices in 2017 due to the commencement of operations of the Dakota Access Pipeline, which significantly enhances takeaway capacity from the Bakken to the Gulf Coast and other markets.
Our year end 2016 reserves evaluation reflected another year of increased reserves volumes and value across all categories as a result of our ongoing active development and acquisition activity. Our P+P reserves increased to 31.5 million boe, from 25.5 million boe at December 31, 2015, representing growth of 23%. The NPV10 of our P+P reserves increased to US$399.5 million, a 29% increase over US$308.7 million last year. We achieved this growth responsibly, with P+P FD&A costs averaging $9.17 per boe (including the change in future development capital), generating an attractive P+P recycle ratio of 2.7 times. These capital efficiencies provide further evidence of the quality of our land base.
PetroShale's enhanced liquidity from the increase and extension of our senior credit facility and completion of the equity offering will enable the Company to carry out our 2017 business plan. We continue to seek opportunities to enhance our high-quality asset base within or adjacent to our core areas and look forward to further results as we continue to drill and develop our operated DSU.
We would like to thank PetroShale's employees, directors and shareholders for your continued support of our strategy and our Company, and we look forward to updating you on our progress and achievements during 2017.