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PrairieSky Announces First Quarter 2015 Results

PrairieSky Royalty Ltd. (“PrairieSky” or the “Company“) (TSX:PSK) is pleased to announce its first quarter operating and financial results for the period ended March 31, 2015.

Highlights:

  • Funds from Operations of $37.7 Million during the first quarter
  • Leased land for new and existing plays, collecting a record $6.0 Million in lease issuance bonus consideration and recorded $4.0 Million in compliance recoveries
  • Average first quarter production of 18,051 boe/d
  • Maintained a strong balance sheet with $56.9 Million of positive working capital and nil debt as of March 31, 2015
  • Executed a $21 Million acquisition in April 2015, adding 206,712 net acres of Fee mineral title lands
  • DRIP participation of 15% during the first month

PRESIDENT’S MESSAGE

During the first quarter of 2015, PrairieSky remained focused on its core strategy of attracting industry to over 10 million acres of leasable lands, proactively ensuring timely and accurate royalty payments, and selectively pursuing business development opportunities which add near and long term value to shareholders. While the downturn in commodity prices has presented challenges for industry generally, our large undeveloped land position, low cost structure and high margin royalty production continues to deliver strong funds flow and growth opportunities with no capital requirements.

During the quarter PrairieSky was active leasing lands for new and existing plays, collecting a record $6.0 million in lease issue bonus consideration. In addition, our compliance team continued to identify historical royalty compliance issues, collecting $4.0 million for the quarter. Compliance recoveries will fluctuate but our continued focus on ensuring accurate and timely royalty payments is expected to result in incremental collections during the balance of 2015.

We maintained a strong balance sheet with $56.9 million of positive working capital, and no debt, as of March 31, 2015. PrairieSky implemented a Dividend Reinvestment Plan (“DRIP“) in March 2015 with a 1% discount. Interest in the DRIP was strong with a 15% participation rate during the first month.

Weaker commodity prices during the quarter presented unique opportunities for PrairieSky and we continue to take a selective and disciplined approach to evaluating potential transactions. Subsequent to the end of the first quarter, we completed a $21 Million acquisition, adding 206,712 acres of fee simple lands, 115 boe/d of royalty production (93% natural gas), a 75% seismic ownership interest in over 1,000 square kilometres of 3D seismic and 4,000 kilometres of 2D seismic. The acquired fee lands are complementary to PrairieSky’s existing land position in Central Alberta. PrairieSky has identified numerous natural gas and oil opportunities across the acreage.

FINANCIAL AND OPERATIONAL INFORMATION

The following table summarizes selected operational and financial information of the Company for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted.

A full version of PrairieSky’s Management’s Discussion and Analysis (“MD&A“) Unaudited Interim Condensed Financial Statements and Notes thereto for the fiscal period ended March 31, 2015 is available on SEDAR at www.sedar.com and PrairieSky’s website at www.prairiesky.com.

FINANCIAL RESULTS

($ millions, unless otherwise noted) Q2 2014 Q3 2014 Q4 2014 Q1 2015
FINANCIAL
Revenues $ 37.7 $ 91.4 $ 69.6 $ 54.4
Funds from Operations(1) 31.0 68.7 59.0 37.7
Per Share – basic and diluted(2) 0.66 0.53 0.44 0.25
Net Earnings and Comprehensive Income 24.4 61.2 50.7 16.8
Per Share – basic and diluted(2) 0.52 0.47 0.38 0.11
Dividends declared(3) 13.8 41.3 43.2 48.5
Per Share 0.1058 0.3174 0.3174 0.3250
Acquisitions including non-cash consideration 11.5 631.6 4.5
Working Capital (1) 57.5 75.2 71.4 56.9
Shares Outstanding
Weighted average – basic 47.1 130.0 132.5 149.3
Weighted average – diluted 47.3 130.1 132.6 149.3
OPERATIONAL
Production Volumes
Natural Gas (MMcf/d) 42.9 44.1 58.6 62.5
Crude Oil (bbls/d) 6,931 6,599 6,069 5,968
NGL (bbls/d) 1,582 1,493 1,444 1,666
Total (BOE/d)(4) 15,664 15,448 17,280 18,051
Realized Pricing
Natural Gas ($/Mcf) $ 4.51 $ 4.94 $ 3.68 $ 2.96
Crude Oil ($/bbl) 98.50 88.58 67.41 43.34
NGL ($/bbl) 63.55 70.94 36.70 24.26
Total ($/BOE)(4) $ 62.35 $ 58.80 $ 39.24 $ 26.83
Operating Cash Flow Netback(1) $ 55.42 $ 52.47 $ 33.69 $ 20.85
Funds from Operations per BOE(1) $ 56.61 $ 48.37 $ 37.04 $ 23.20
Natural Gas Price Benchmarks
AECO ($/Mcf) $ 4.68 $ 4.22 $ 4.01 $ 2.95
Oil Price Benchmarks
West Texas Intermediate (WTI) (US$/bbl) 102.98 97.44 73.39 48.40
Edmonton Light Sweet ($/bbl) 104.53 98.11 75.23 51.09
(1) A Non-GAAP measure, which is defined under the Non-GAAP Measures section in the MD&A.
(2) Net Earnings and Comprehensive Income and Funds from Operations per common share are calculated using the weighted average number of Common Shares outstanding.
(3) A dividend of $0.10833 per Common Share was declared on March 17, 2015. The dividend was paid on April 15, 2015 to shareholders of record as at March 31, 2015.
(4) See “Conversions of Natural Gas to BOE”.

CHIEF FINANCIAL OFFICER APPOINTMENT

Effective June 1, 2015, Ms. Pam Kazeil will join PrairieSky’s executive leadership team as Vice President, Finance and Chief Financial Officer. Ms. Kazeil brings extensive executive leadership experience to PrairieSky, including proven ability as a successful CFO in the oil and gas industry. Ms. Kazeil will have overall responsibility for the financial management of PrairieSky. For further details please refer to PrairieSky’s April 22, 2015 press release which is available on SEDAR at www.sedar.com and PrairieSky’s website at www.prairiesky.com.

CONFERENCE CALL DETAILS

A conference call to discuss the results will be held for the investment community on Tuesday, April 28, 2015 beginning at 6:30 a.m. MT (8:30 a.m. ET). To participate in the conference call, approximately 10 minutes prior to the conference call, please dial:

(877) 291-4570 (toll-free in North America)

(647) 788-4919 (Toronto & International)

FORWARD-LOOKING STATEMENTS

This press release includes certain statements regarding PrairieSky’s future plans and operations and contains forward-looking statements that we believe allow readers to better understand our business and prospects. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “strategy” and similar expressions are intended to identify forward-looking information or statements. Forward-looking statements contained in this press release include our expectations with respect to PrairieSky’s business and growth strategy, additional land leasing activities, potential business development opportunities, the prospectively of acquired lands, and expected incremental collection of royalty compliance items in 2015.

With respect to forward-looking statements contained in this press release, we have made several assumptions including those described in detail in our MD&A and Annual Information Form for the period ended December 31, 2014. Readers and investors are cautioned that the assumptions used in the preparation of such forward-looking information and statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them.

By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, lack of pipeline capacity, currency fluctuations, imprecision of reserve estimates, royalties, environmental risks, taxation, regulation, changes in tax or other legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility, and our ability to access sufficient capital from internal and external sources. In addition, PrairieSky is subject to numerous risks and uncertainties in relation to the acquisitions. These risks and uncertainties include risks relating to the potential for disputes to arise with counterparties, and limited ability to recover indemnification under certain agreements. The foregoing and other risks are described in more detail in PrairieSky’s MD&A and Annual Information Form for the period ended December 31, 2014 under the heading “Risk Management” and “Risk Factors”, respectively, each of which is available at www.sedar.com.

Further, any forward-looking statement is made only as of the date of this press release, and PrairieSky undertakes no obligation to update or revise any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws. New factors emerge from time to time, and it is not possible for PrairieSky to predict all of these factors or to assess in advance the impact of each such factor on PrairieSky’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The forward-looking information contained in this document is expressly qualified by this cautionary statement.

CONVERSIONS OF NATURAL GAS TO BOE

To provide a single unit of production for analytical purposes, natural gas production and reserves volumes are converted mathematically to equivalent barrels of oil (BOE). We use the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 BOE ratio is based on an energy equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the BOE ratio is useful for comparative measures and observing trends, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.

ABOUT PRAIRIESKY ROYALTY LTD.

PrairieSky is a royalty-focused company, generating royalty revenues as petroleum and natural gas are produced from its properties. PrairieSky has a diverse portfolio of properties that have a long history of generating stable free cash flow and that represent one of the largest and most concentrated independently-owned fee simple mineral title positions in Canada. PrairieSky common shares trade on the Toronto Stock Exchange under the symbol PSK.