PrairieSky Announces Second Quarter 2015 Results
PrairieSky Royalty Ltd. (“PrairieSky” or the “Company”) (TSK:PSK) is pleased to announce its second quarter operating and financial results for the period ended June 30, 2015.
2015 Second Quarter Highlights:
- Revenues of $71.8 Million
- Funds from Operations of $43.6 Million or $0.29 per share, basic and diluted
- Average production of 17,205 BOE per day
- Actively leased land for new and existing plays, collecting a record $24.8 Million in lease issuance bonus consideration
- Maintained a strong balance sheet with $22.6 Million of positive working capital and nil debt as of June 30, 2015, net of $38.0 Million cash spent on acquisitions during the quarter
- Subsequent to June 30, 2015 completed a bought deal prospectus offering of common shares for gross proceeds of $198 Million, and net proceeds, after underwriter fees, of approximately $190 Million, to fund future acquisition opportunities
PRESIDENT’S MESSAGE
PrairieSky marked its one year anniversary during the second quarter of 2015. Since inception, our key objectives have not changed. We remain committed to pursuing organic growth opportunities by leasing our extensive land base, ensuring accurate and timely collection of royalties, and adding to our high quality portfolio of royalty assets in a selective and disciplined manner.
Despite the challenging commodity price environment, PrairieSky continues to see strong demand for new leases and associated drilling commitments across a variety of new and existing plays. PrairieSky collected a record $24.8 million in lease issuance bonus consideration in the second quarter, significantly exceeding the previous quarterly high of $6.0 million in Q1 2015.
Our compliance team continued to identify and collect historical royalty compliance issues, recovering $2.1 million in the second quarter and $6.1 million during the first half of 2015. Compliance recoveries will fluctuate but our continued focus in this area is expected to result in incremental collections in the second half of 2015.
The current commodity price environment continues to present unique opportunities to selectively add royalty assets that are not only near-term accretive but also enhance the medium and long term value of the Company. During the second quarter, we completed $38.0 million in cash acquisitions and an additional $14.2 million of non-cash acquisitions. On July 7, 2015, PrairieSky announced the completion of a bought deal prospectus offering of common shares for gross proceeds of $198 million, and net proceeds, after underwriter fees, of approximately $190 million, to help fund future acquisition opportunities.
FINANCIAL AND OPERATIONAL INFORMATION
The following table summarizes selected operational and financial information of the Company for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted.
A full version of PrairieSky’s Management’s Discussion and Analysis (“MD&A“) and unaudited interim condensed financial statements and notes thereto for the fiscal period ended June 30, 2015 is available on SEDAR at www.sedar.com and PrairieSky’s website at www.prairiesky.com.
| FINANCIAL RESULTS | ||||
| ($ Millions, unless otherwise noted) | Q2 2015 | Q1 2015 | Q4 2014 | |
| FINANCIAL | ||||
| Revenues | $ 71.8 | $ 54.4 | $ 69.6 | |
| Funds from Operations(1) | 43.6 | 37.7 | 59.0 | |
| Per Share – basic and diluted (2) | 0.29 | 0.25 | 0.44 | |
| Net Earnings and Comprehensive Income | 24.1 | 16.8 | 50.7 | |
| Per Share – basic and diluted(2) | 0.16 | 0.11 | 0.38 | |
| Dividends declared(3) | 48.6 | 48.5 | 43.2 | |
| Per Share | 0.3250 | 0.3250 | 0.3174 | |
| Acquisitions including non-cash consideration | 52.2 | 4.5 | 631.6 | |
| Working Capital | 22.6 | 56.9 | 71.4 | |
| Shares Outstanding | ||||
| Weighted average – basic | 149.5 | 149.3 | 132.5 | |
| Weighted average – diluted | 150.0 | 149.3 | 132.6 | |
| OPERATIONAL | ||||
| Production Volumes | ||||
| Natural Gas (MMcf/d) | 59.5 | 62.5 | 58.6 | |
| Crude Oil (bbls/d) | 5,751 | 5,968 | 6,069 | |
| NGL (bbls/d) | 1,537 | 1,666 | 1,444 | |
| Total (BOE/d)(4) | 17,205 | 18,051 | 17,280 | |
| Realized Pricing | ||||
| Natural Gas ($/Mcf) | $ 2.53 | $ 2.96 | $ 3.68 | |
| Crude Oil ($/bbl) | 53.54 | 43.34 | 67.41 | |
| NGL ($/bbl) | 20.31 | 24.26 | 36.70 | |
| Total ($/BOE)(4) | $ 28.42 | $ 26.83 | $ 39.24 | |
| Operating Cash Flow Netback(1) | $ 21.84 | $ 20.85 | $ 33.69 | |
| Funds from Operations per BOE(1) | $ 27.85 | $ 23.20 | $ 37.04 | |
| Natural Gas Price Benchmarks | ||||
| AECO ($/Mcf) | $ 2.67 | $ 2.95 | $ 4.01 | |
| Oil Price Benchmarks | ||||
| West Texas Intermediate (WTI) (US$/bbl) | $ 57.41 | $ 48.40 | $ 73.39 | |
| Edmonton Light Sweet ($/bbl) | $ 66.69 | $ 51.09 | $ 75.23 | |
| (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 June 16, 2015. The dividend was paid on July 15, 2015 to shareholders of record as at June 30, 2015. |
| (4) | See “Conversions of Natural Gas to BOE”. |
CONFERENCE CALL DETAILS
A conference call to discuss the results will be held for the investment community on Tuesday, July 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 and acquisition opportunities, the expected incremental collection of royalty compliance revenues in 2015, and the use of proceeds of PrairieSky’s $198 million bought deal prospectus offering of common shares completed in July 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, the Annual Information Form for the period ended December 31, 2014 and PrairieSky’s short form prospectus dated June 26, 2015. 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, the Annual Information Form for the period ended December 31, 2014, and PrairieSky’s short form prospectus dated June 26, 2015 under the headings “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 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.
