Wow 🤩 divy secure and bright future thanks to hedges Peyto Reports Strong Fourth Quarter and 2023 Annual Results
CALGARY, Alberta, March 07, 2024 (GLOBE NEWSWIRE) -- Peyto Exploration & Development Corp. ("Peyto" or the "Company") is pleased to report operating and financial results for the fourth quarter and 2023 fiscal year.
Full Year and Q4 2023 Highlights:
As previously announced, Peyto closed the acquisition of Repsol Canada Energy Partnership (the "Repsol Acquisition") for cash consideration of $699 million, including post-closing adjustments. The acquisition provided Peyto with over 800 low-risk, high-quality drilling locations1 and synergistic infrastructure to allow for the optimization of production and costs in the Greater Sundance area.
Delivered $200 million in funds from operations2,3 ("FFO"), or $1.05/diluted share, and $85 million of free funds flow4 in the quarter. Annual FFO totaled $670 million or $3.72/diluted share, the third highest FFO/share in Peyto's 25-year history. Free funds flow totaled $258 million in 2023.
The Company's disciplined hedging and diversification program in 2023 protected revenues from the sharp decline in benchmark natural gas prices. The 2023 average daily prices for AECO and Henry Hub decreased 50% and 60%, respectively, from 2022, while Peyto's realized natural gas price, including hedging gains, was only 13% lower. The Company exited 2023 with a strong hedge position, which currently protects approximately 70% and 56% of forecast gas production for 2024 and 2025, respectively. The securing of future revenues supports the sustainability of the Company's dividends and capital program along with debt repayment.
Peyto generated earnings of $88 million, or $0.46/diluted share, in the quarter and $293 million, or $1.62/diluted share, in 2023. Approximately 82% of earnings, or $239 million ($1.32/share) were returned to shareholders as dividends.
As previously announced, Peyto increased reserves by 35%, 41%, and 40% in the Proved Developed Producing ("PDP"), Total Proved ("TP"), and Total Proved plus Probable ("P+P") reserves categories, respectively. Low PDP Finding, Development and Acquisition ("FD&A") costs of $1.21/Mcfe and average field netback of $3.51/Mcfe in 2023 resulted in 2.9 times recycle ratio. Refer to more details in the February 15, 2024 press release.
Fourth quarter production volumes averaged 120,002 boe/d (623.0 MMcf/d of natural gas, 16,175 bbls/d of NGLs), a 14% increase year-over-year as a result of the Repsol Acquisition which was partially offset by lower production additions due to the moderation of Peyto's capital program in response to low commodity prices. Annual production averaged 104,948 during 2023.
Quarterly cash costs5 totaled $1.57/Mcfe, including royalties of $0.30/Mcfe, operating costs of $0.55/Mcfe, transportation of $0.26/Mcfe, G&A of $0.06/Mcfe and interest expense of $0.40/Mcfe. These costs include approximately $0.09/mcfe of non-recurring financing and integration costs associated with the Repsol Acquisition. Peyto's operating costs increased over prior quarters due to the higher cost structure of the Repsol facilities. The Company expects to reduce these costs with continued optimization and increased utilization of the acquired gas processing plants. Despite this increase, Peyto continues to have the lowest cash costs in the Canadian natural gas industry.
Total capital expenditures6 were $115 million in the quarter. Peyto drilled 19 wells (18.4 net), completed 22 wells (20.8 net), and brought 24 wells (22.5 net) on production. The Company spent a total of $413 million on capital expenditures during 2023, $12 million lower than previous guidance.
Peyto delivered a 70% operating margin7 and a 28% profit margin8, resulting in a 9% return on capital employed9 ("ROCE") and a 11% return on equity8 ("ROE"), on a trailing 12-month basis.
1 See "Drilling Locations" in this news release for further information.
2 This press release contains certain non-GAAP and other financial measures to analyze financial performance, financial position, and cash flow including, but not limited to "operating margin", "profit margin", "return on capital", "return on equity", "netback", "funds from operations", "free funds flow", "total cash costs", and "net debt". These non-GAAP and other financial measures do not have any standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other entities. The non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS, such as earnings, cash flow from operating activities, and cash flow used in investing activities, as indicators of Peyto’s performance. See "Non-GAAP and Other Financial Measures" included at the end of this press release and in Peyto's most recently filed MD&A for an explanation of these financial measures and reconciliation to the most directly comparable financial measure under IFRS.
3 Funds from operations is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q4 2023 MD&A.
4 Free funds flow is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q4 2023 MD&A.
5 Cash costs is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release.
6 Total capital expenditures is a non-GAAP financial measure. See "non-GAAP and Other Financial Measures" in this news release and in the Q4 2023 MD&A.
7 Operating Margin is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release.
8 Profit Margin is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release.
9 Return on capital employed and return on equity are non-GAAP financial ratios. See "non-GAAP and Other Financial Measures" in this news release and in 10 the Q4 2023 MD&A.
Finding and development cost is a non-GAAP financial ratio. See "non-GAAP and Other Financial Measures" in this news release.
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