Bonterra Energy Corp. Announces Year End 2014 Results
CALGARY, ALBERTA–(Marketwired – Mar 19, 2015) – Bonterra Energy Corp. (Bonterra or the Company) (BNE.TO) is pleased to announce its operating and financial results for the year ended December 31, 2014. The related financial statements and notes, as well as management’s discussion and analysis (MD&A) for the year ended December 31, 2014, are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com and on Bonterra’s website at www.bonterraenergy.com.
|As at and for the year ended
($ 000s except $ per share)
|Revenue – realized oil and gas sales||339,694||295,675||142,770|
|Funds flow (3)||209,665||181,574||80,429|
|Per share – basic||6.57||6.01||4.07|
|Per share – diluted||6.54||5.99||4.06|
|Cash flow from operations||222,353||173,896||74,325|
|Per share – basic||6.97||5.76||3.75|
|Per share – diluted||6.94||5.74||3.75|
|Cash dividends per share||3.54||3.33||3.12|
|Per share – basic||1.21||2.08||1.68|
|Per share – diluted||1.21||2.07||1.68|
|Capital expenditures and acquisitions, net of dispositions||155,565||109,227(2||)||98,130|
|Working capital deficiency||53,642||35,985||29,876|
|– barrels per day||8,582||7,787||4,035|
|– average price ($ per barrel)||90.61||89.26||82.04|
|– barrels per day||807||744||476|
|– average price ($ per barrel)||52.26||52.41||52.18|
|– MCF per day||22,833||21,954||13,157|
|– average price ($ per MCF)||4.86||3.46||2.60|
|Total barrels of oil equivalent per day (BOE) (4)||13,195||12,190||6,703|
|(1) Annual figures for 2013 include the results of Spartan Oil Corp. (Spartan) for the period of January 25, 2013 to December 31, 2013. Production includes 341 days for Spartan and 365 days for Bonterra.|
|(2) Includes the Spartan acquisition that closed on January 25, 2013 that included $10,000,000 of acquired cash that reduced capital expenditures from $121,641,000 excluding dispositions.|
|(3) Funds flow is not a recognized measure under IFRS. For these purposes, the Company defines funds flow as funds provided by operations including proceeds from sale of investments and investment income received excluding the effects of changes in non-cash working capital items and decommissioning expenditures settled.|
|(4) BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 MCF: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.|
YEAR IN REVIEW
Bonterra is pleased to report its financial and operational results for the year ended December 31, 2014 and to provide information with regard to its recent $172 million acquisition of additional properties in the Pembina Alberta oil field (the largest oil field in Canada).
During 2014, the resource industry realized some of its best times but also some of its toughest challenges. Despite these challenges, the Company continued to execute its strategy and build on the strong foundation and conservative principles that Bonterra has maintained since inception.
- Generated another year of record annual funds flow of $209.7 million ($6.57 per share), a 15 percent increase over the $181.6 million ($6.01 per share) in the same period in 2013;
- Achieved annual average production of 13,195 BOE per day; a volume increase of 8 percent over the same period in 2013 and an increase of 2 percent on a per diluted share basis;
- Continued an active Cardium drilling program including 65 gross (47.5 net) horizontal wells with a 100 percent success rate;
- Paid out $3.54 per share in cash dividends to shareholders in 2014, a 6 percent increase over the $3.33 per share paid in 2013, resulting in a payout ratio of 54 percent of funds flow;
- Corporate netback averaged $45.39 per BOE, an increase of 12 percent from $40.58 per BOE in 2013;
- Increased proved plus probable (P+P) reserves by 7 percent to 80.3 mmboe (71 percent oil and liquids) and proved reserves by 16 percent to 62.8 mmboe (71 percent oil and liquids);
- Reserves per fully diluted share (P+P) increased to 2.50 BOE per share compared to 2.47 BOE per share from 2013;
- Booked reserves represent approximately 30 percent of Bonterra’s current potential inventory of undrilled locations, providing long-term growth opportunities;
- Reserve life index of approximately 17 years on a P+P basis, 13 years on a proved basis, and 7 years on a proved developed producing (PDP) basis based on 2014 average production; and
- An agreement was negotiated with Canada Revenue Agency with regard to tax pools. The agreement resulted in a reduction in certain tax pools and an increase in deferred tax expense in Q4, but resulted in no cash outlay for the years 2009 to 2013. The Company incurred a current tax provision of $10.5 million for the 2014 taxation year. Federal investment tax credit receivable of $6.6 million was used to reduce current taxes payable to $3.9 million.
Through the first three quarters of the year, crude oil and natural gas prices were robust and contributed to Bonterra’s strong cash netback of $49.28 per BOE, one of the highest netbacks in the Company’s history. However, commodity prices declined sharply during the fourth quarter of 2014 and into the first quarter of 2015, severely impacting Bonterra’s netbacks and funds flow. Bonterra’s average cash netback of $34.20 per BOE during the fourth quarter was 31% lower than the first three quarters, and represents one of the lowest netbacks Bonterra has realized during the past five years.
As a result of this significant drop in oil prices, Bonterra had to make some difficult decisions to ensure the Company maintains its financial strength and remains positioned to meet its long-term objectives during this period of extreme market volatility. Subsequent to year end, the monthly dividend was reduced to $0.15 per share and a conservative 2015 capital budget was set to appropriately balance funds flow with capital expenditures, dividends and overall operational activities in light of commodity prices.
Despite the challenging market conditions, Bonterra has continued to advance its strategy of maintaining financial flexibility while positioning the Company to achieve long-term growth in production, reserves and cash flow per share and provide attractive returns to shareholders. On February 19, 2015, Bonterra announced that it had entered into a $172 million agreement to acquire a complementary and attractive package of producing Pembina Cardium assets from a senior oil and gas producer.
The assets are Cardium focused with a production base that is complementary to Bonterra’s current operations, and which provides additional inventory of long-term drilling locations. The purchase price is $172 million prior to normal closing adjustments, and will be financed mainly through bank debt, with an expected closing date of April 15, 2015. This acquisition further strengthens Bonterra’s position as a major owner and operator within Canada’s largest oil field.
Highlights of the acquisition include:
- Approximately 1,800 BOE per day production (based on seller’s average volumes for January 2015);
- 86 percent weighted to oil and natural gas liquids and 14 percent to natural gas;
- 7 percent decline rate;
- 136 net potential undrilled horizontal well locations; and
- 66 gross sections (38 net) of Cardium-prospective acreage.
The future for Bonterra continues to be positive on a long term basis and the Company will continue to manage itself conservatively to withstand challenging commodity price environments. Bonterra holds an enviable amount of light oil properties in the Cardium formation located in the Pembina and Willesden Green fields in west central Alberta. Technical advances will continue to revitalize these fields and over time should enable greater recoveries of the large resource in place. Bonterra and other operators in the area are testing different drilling and completion approaches in order to maximize results, including analyzing and assessing horizontal lateral lengths, optimal well spacing, while testing various completion techniques. Bonterra has many years of undrilled locations for its future inventory, and as technological advances continue, the amount of oil and gas recovered is expected to increase.
Over the short term, however, weak commodity prices are expected to impact funds flow, which will drive capital and operating activities, and dividend levels. As a result of the Pembina acquisition, Bonterra will temporarily carry a higher amount of debt than usual, which will be rectified in the future, and which is justified by the high quality nature of the acquired assets. In light of commodity price movements and changes in production volumes, Bonterra will continue to monitor debt levels, assess annual growth potential and cautiously consider dividend increases. The Company’s priorities remain focused on maintaining financial flexibility while positioning Bonterra to achieve long-term growth in production, reserves and cash flow per share and overall returns to shareholders
Bonterra Energy Corp. is a conventional oil and gas corporation with operations in Alberta, Saskatchewan and British Columbia. The shares are listed on The Toronto Stock Exchange under the symbol “BNE”.
This summarized news release should not be considered a suitable source of information for readers who are unfamiliar with Bonterra Energy Corp. and should not be considered in any way as a substitute for reading the full report.
For the full report, please go to www.bonterraenergy.com
Use of Non-IFRS Financial Measures
Throughout this press release, the Company uses the terms “payout ratio”, “cash netback” and “net debt” to analyze operating performance, which are not standardized measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. These measures are commonly used in the oil and gas industry and are considered informative by management, shareholders and analysts. These measures may differ from those made by other companies and accordingly may not be comparable to such measures as reported by other companies.
The Company calculates payout ratio by dividing cash dividends paid to shareholders by cash flow from operating activities, both of which are measures prescribed by IFRS which appear on our statements of cash flows. We calculate cash netback by dividing various financial statement items as determined by IFRS by total production for the period on a barrel of oil equivalent basis.
Frequently recurring terms
Bonterra uses the following frequently recurring terms in this press release: “bbl” refers to barrel, “NGL” refers to Natural gas liquids, “MCF” refers to thousand cubic feet and “BOE” refers to barrels of oil equivalent. Disclosure provided herein in respect of a BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 MCF: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
The reporting and the functional currency of the Company is the Canadian dollar.
Certain statements contained in this press release include statements which contain words such as “anticipate”, “could”, “should”, “expect”, “seek”, “may”, “intend”, “likely”, “will”, “believe” and similar expressions, relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this press release includes, but is not limited to: expected cash provided by continuing operations; cash dividends; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and gas industry; business strategy and outlook; expansion and growth of our business and operations; and maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; credit risks; and other such matters.
All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control.
Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from. Except as required by law, Bonterra disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
The forward-looking information contained herein is expressly qualified by this cautionary statement.