Petrus Resources Announces Strong First Quarter 2022 Financial & Operating Results

CALGARY, Alberta, May 11, 2022 (GLOBE NEWSWIRE) -- Petrus Resources Ltd. (“Petrus” or the “Company”) (TSX: PRQ) is pleased to report financial and operating results as at and for the three months ended March 31, 2022.

Q1 2022 HIGHLIGHTS:

• Production up 25% – Production was up 25% quarter over quarter from 5,880 boe/d in the fourth quarter of 2021 to 7,379 boe/d in the first quarter of 2022 primarily due to the new wells drilled in late 2021. The acquisition (as discussed below) contributed only 90 boe/d to the quarterly average as it closed on March 14, 2022.
  
  
• Funds flow increased 137% – Generated funds flow of $16.6 million ($0.17 per share) for the first three months of 2022, 137% higher than funds flow of $7.0 million in the first quarter of 2021.
  
  
• Operating netback(1) up 75% – Operating netback increased by 75% to $33.78/boe in the first quarter of 2022 up from $19.22/boe in the first quarter of 2021.
  
  
• Commodity price improvement– Realized price per boe increased by 61% in the first quarter of 2022 compared to the first quarter of 2021; from $30.55/boe to $49.31/boe. The realized oil, natural gas and NGL prices increased by 65%, 56% and 63%, respectively.
  
  
• Net debt(2) reduction continues – Net debt was $50.0 million at March 31, 2022, a decrease of $66.6 million since the first quarter of 2021 ($116.6 million) and a decrease of $11.8 million from the fourth quarter of 2021 ($61.8 million). The Company will continue to strengthen its balance sheet by further reducing net debt and maintaining a net debt to funds flow ratio of under 1x.
  
  
• Reduced cash finance expense – Cash finance expense has decreased 33% since the first quarter of 2021, totaling $0.7 million during the first quarter of 2022 in comparison to $1.0 million during the first quarter of 2021 due to the elimination of the term loan in the third quarter of 2021 as well as a reduced first lien loan balance.
  
  
• Acquisition – Completed a strategic acquisition of Cardium assets located in the core Ferrier area, adding an estimated 40 gross drilling locations(3) and stable base production of 425 boe/d.
  
  
• Backstopped rights offering – Petrus announced a $20 million rights offering that was backstopped by the Company's major shareholders. Subsequent to the first quarter of 2022, the rights offering closed and was oversubscribed by 84%.
  

DEBT RESTRUCTURING COMPLETE

Subsequent to March 31, 2022, the Company entered into agreements with new lenders, providing two new credit facilities totaling $55 million. Upon closing, which is expected in late May 2022, the new credit facilities, together with the $20 million rights offering, will be used to repay all amounts owing under Petrus' existing revolving credit facility ("RCF"). The refinancing completes the Company’s debt restructuring. Replacing the existing RCF with the new credit facilities is an opportunity for Petrus to move forward with supportive lenders and benefit from a debt structure with greater liquidity and stability.

2022 OUTLOOK(4)

Market conditions have improved dramatically since the release of our initial 2022 budget in December 2021 with 2022 WTI strip prices increasing by approximately US$25/bbl and 2022 AECO strip prices increasing by over C$2.00/GJ. Despite these increases, the Company recognizes the inherent volatility of commodity prices and remains disciplined and flexible from an operational and financial perspective. The capital budget remains unchanged at this time but is constantly reviewed to incorporate the current outlook for pricing and costs and may be adjusted in the future to reflect changing business dynamics. The Company's 2022 capital program will resume during the second quarter following break-up.

(1)Non-GAAP ratio. Refer to "Non-GAAP and Other Financial Measures".
(2)Non-GAAP measure. Refer to "Non-GAAP and Other Financial Measures".
(3)Refer to "Estimates of Drilling Locations".
(4)Refer to "Advisories - Forward-Looking Statements".

SELECTED FINANCIAL INFORMATION

(1)Non-GAAP ratio or non-GAAP measure. Refer to "Non-GAAP and Other Financial Measures".
(2)Corporate netback is equal to funds flow which is a comparable additional GAAP measure. Petrus analyzes these measures on an absolute value and per unit basis. Refer to "Non-GAAP and Other Financial Measures".

OPERATIONS UPDATE

First quarter average production by area was as follows:

First quarter average production was 7,379 boe/d in 2022 compared to 5,912 boe/d in 2021. The increase in production is due to the capital activity in the second half of 2021 as well as certain wells in the Foothills area brought back on-stream due to improved pricing.

DEBT RESTRUCTURING
Subsequent to March 31, 2022, the Company entered into agreements with new lenders, providing two new credit facilities totaling $55 million. Upon closing, which is expected in late May 2022, the new credit facilities, together with the $20 million rights offering, will be used to repay all amounts owing under Petrus' existing revolving credit facility ("RCF"). The refinancing completes the Company’s debt restructuring. Replacing the existing RCF with the new credit facilities is an opportunity for Petrus to move forward with supportive lenders and benefit from a debt structure with greater liquidity and stability.

ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held at 240FOURTH (previously BP Centre) 240, 4th Ave SW Calgary, Alberta, on Thursday May 12, 2022, at 1:30 p.m. (Calgary time). The Company does not plan to have a formal presentation at the conclusion of the Meeting. We encourage all shareholders and proxyholders not to attend the meeting in person, particularly if they are experiencing any of the described COVID‐19 symptoms. Shareholders and guests can listen to the Meeting via teleconference at 1‐888‐433‐2192 (participant code 9350829) however shareholders and proxyholders will not be able to vote their shares via teleconference. We encourage all shareholders to submit their proxies in advance of the Meeting.

An updated corporate presentation can be found on the Company's website at www.petrusresources.com.

For further information, please contact:

Ken Gray, P.Eng.
President and Chief Executive Officer
T: (403) 930-0889
E: kgray@petrusresources.com

NON-GAAP AND OTHER FINANCIAL MEASURES

This press release makes reference to the terms "operating netback", "corporate netback" and "net debt". These non-GAAP and other financial measures are not recognized measures under GAAP (IFRS) and do not have a standardized meaning prescribed by GAAP (IFRS). Accordingly, the Company's use of these terms may not be comparable to similarly defined measures presented by other companies. These non-GAAP and other financial measures should not be considered to be more meaningful than GAAP measures which are determined in accordance with IFRS as indicators of our performance. Management uses these non-GAAP and other financial measures for the reasons set forth below.

Operating Netback

Operating netback is a common non-GAAP financial measure used in the oil and natural gas industry which is a useful supplemental measure to evaluate the specific operating performance by product type at the oil and natural gas lease level. The most directly comparable GAAP measure to operating netback is oil and natural gas revenue. Operating netback is calculated as oil and natural gas revenue less royalty expenses, operating expenses and transportation expenses. It is presented on an absolute value and on a per unit (boe) basis. See below and under "Summary of Quarterly Results" for a reconciliation of operating netback to oil and natural gas revenue.

Corporate Netback

Corporate netback is a common non-GAAP financial measure used in the oil and natural gas industry which evaluates the Company’s profitability at the corporate level. Corporate netback is equal to funds flow, which is a directly comparable GAAP measure. Petrus analyzes these measures on an absolute value and on a per unit (boe) basis as a non-GAAP ratio. Management believes that funds flow and corporate netback provide information to assist a reader in understanding the Company's profitability relative to current commodity prices. They are calculated as the operating netback less general and administrative expense, finance expense, decommissioning expenditures, plus other income and the net realized gain (loss) on financial derivatives.

Net Debt
Net debt is a non-GAAP financial measure and is calculated as current assets less the current portion of long term debt and accounts payable and accrued liabilities. Petrus uses net debt as a key indicator of its leverage and strength of its balance sheet.

ADVISORIES

Basis of Presentation
Financial data presented above has largely been derived from the Company’s audited financial statements, prepared in accordance with GAAP which require publicly accountable enterprises to prepare their financial statements using IFRS. Accounting policies adopted by the Company are set out in the notes to the consolidated financial statements as at and for the twelve months ended December 31, 2021. The reporting and the measurement currency is the Canadian dollar. All financial information is expressed in Canadian dollars, unless otherwise stated.

Forward-Looking Statements
Certain information regarding Petrus set forth in this press release contains forward-looking statements within the meaning of applicable securities law, that involve substantial known and unknown risks and uncertainties. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “should”, “believe” and similar expressions are intended to identify forward-looking statements. Such statements represent Petrus’ internal projections, estimates, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. These statements are only predictions and actual events or results may differ materially. Although Petrus believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause Petrus’ actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, Petrus.

In particular, forward-looking statements included in this press release include, but are not limited to, statements with respect to: that the Company will continue to strengthen its balance sheet by further reducing net debt and maintaining a debt to funds flow ratio of under 1x; the timing for closing on our new credit facilities, the anticipated material terms of such facilities, and that such facilities and the proceeds of our rights offering will be used to repay all amounts owing under Petrus' RCF; that replacing the existing RCF with the new credit facilities is an opportunity for Petrus to move forward with supportive lenders and benefit from a debt structure with greater liquidity and stability; that we may adjust our capital budget; that our capital program will resume during the second quarter following break-up; the Company's hedging strategy and its ability to provide stability and sustainability to the Company's economic returns, funds flow and capital development plan; the Company's approach to managing liquidity risk; and that management expects to comply with all financial covenants under its RCF during the subsequent 12 month period. In addition, statements relating to “reserves” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

These forward-looking statements are subject to numerous risks and uncertainties, most of which are beyond the Company’s control, including: the impact of general economic conditions; volatility in market prices for crude oil, NGL and natural gas; the ability of the Company to close on its new credit facilities prior to the maturity of the RCF and repay the RCF in full; industry conditions; currency fluctuation; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition; the lack of availability of qualified personnel or management; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; hazards such as fire, explosion, blowouts, cratering, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; stock market volatility; ability to access sufficient capital from internal and external sources; and the other risks and uncertainties described in the AIF. With respect to forward-looking statements contained in this press release, Petrus has made assumptions regarding: future commodity prices (including as disclosed herein) and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; the timing for closing on the Company's new credit facilities and the amount of credit available thereunder; future exchange rates; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment and services; effects of regulation by governmental agencies; the effects of inflation on our profitability; and future operating costs. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide investors with a more complete perspective on Petrus’ future operations and such information may not be appropriate for other purposes. Petrus’ actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive therefrom. Readers are cautioned that the foregoing lists of factors are not exhaustive.

This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Petrus' prospective results of operations including, without limitation, its forecast for net debt levels and net debt to funds flow ratio and ability to repay all amounts owing under Petrus' RCF, which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth above. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on FOFI. Petrus' actual results, performance or achievement could differ materially from those expressed in, or implied by, these FOFI, or if any of them do so, what benefits Petrus will derive therefrom. Petrus has included the FOFI in order to provide readers with a more complete perspective on Petrus' future operations and such information may not be appropriate for other purposes.

These forward-looking statements and FOFI are made as of the date of this press release and the Company disclaims any intent or obligation to update any forward-looking statements and FOFI, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

BOE Presentation
The oil and natural gas industry commonly expresses production volumes and reserves on a barrel of oil equivalent (“boe”) basis whereby natural gas volumes are converted at the ratio of six thousand cubic feet to one barrel of oil. The intention is to sum oil and natural gas measurement units into one basis for improved measurement of results and comparisons with other industry participants. Petrus uses the 6:1 boe measure which is the approximate energy equivalence of the two commodities at the burner tip. Boe’s do not represent an economic value equivalence at the wellhead and therefore may be a misleading measure if used in isolation.

Estimates of Drilling Locations
Unbooked drilling locations are the internal estimates of the Company based on assumptions as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources (including contingent and prospective). Unbooked locations have been identified by Petrus' management as an estimation of the multi-year drilling activities based on evaluation of applicable geologic, seismic, engineering, production and reserves information. There is no certainty that Petrus will drill all unbooked drilling locations and if drilled there is no certainty that such locations will result in additional oil and natural gas reserves, resources or production. The drilling locations on which Petrus will actually drill wells, including the number and timing thereof, is ultimately dependent upon the availability of funding, regulatory approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors.