CALGARY, ALBERTA–(Marketwired – March 2, 2016) – Peyto Exploration & Development Corp. (“Peyto” or the “Company”) (TSX:PEY) is pleased to report operating and financial results for the fourth quarter and 2015 fiscal year. Peyto profitably grew both production and reserves per share in the year while delivering a 79% operating margin(1) and a 20% profit margin(2). An 8% return on capital employed and a 9% return on equity were achieved despite the challenging commodity price environment in 2015. Highlights for the fourth quarter and full year 2015 included:
- Production exits above 100,000 boe/d – Average annual production increased 12%, or 9% per share, to 514 MMCFe/d (85,674 boe/d) in 2015 up from 458 MMCFe/d (76,372 boe/d) in 2014. Q4 2015 production was up 17%, or 13% per share, from Q4 2014 to 582 MMCFe/d (97,028 boe/d), with exit production of 102,000 boe/d.
- Reserves per share up 11% – Producing reserves increased 15% to 1.4 TCFe (229 mmboes), up 11% per share, while total P+P reserves increased 11% to 3.5 TCFe (590 mmboes), up 7% per share.
- Cash costs down 25% – Royalties, operating costs, transportation, G&A and interest expense totaled $0.81/MCFe ($4.87/boe) in 2015 down 25% from $1.08/MCFe in 2014. Total cash costs in 2015 were the lowest in the Company’s 17 year history. Fourth quarter 2015 cash costs were further reduced to $0.75/MCFe ($4.54/boe).
- Funds from operations per share of $3.59 – Annual Funds from Operations (“FFO”) of $565 million, or $3.59/share, were down 15% from $663 million in 2014 as a result of a 24% reduction in realized commodity prices offset by a 12% increase in production and a 25% decrease in cash costs. Q4 2015 FFO was $151 million or $0.95/share compared to $173 million, or $1.13/share, in Q4 2014.
- Capital investments of $594 million – A total of $594 million was invested in the drilling of 140 gross (132 net) wells that contributed 51,000 boe/d of incremental production at year end for a cost of $11,600/boe/d. This was the largest amount of incremental production at the lowest total cost in the Company’s history.
- PDP FD&A half of field netback – All in cost to develop new producing reserves was $1.64/MCFe ($9.83/boe), down 27% from 2014, while the field netback for 2015 averaged $3.24/MCFe ($19.43/boe) resulting in a recycle ratio of 2.0 times. The Company replaced 193% of production with new producing reserves at this ratio.
- Earnings per share of $0.87 – Annual earnings of $138 million were generated in 2015 despite lower commodity prices and increased provincial corporate tax rates. Fourth quarter 2015 earnings of $43 million ($0.27/share) represented a profit margin(2) of 23% of revenue. Annual dividends of $208 million, or $1.32/share, were paid to shareholders in 2015.
2015 in Review
The year 2015 was both a challenging and rewarding one for Peyto. Realized unhedged natural gas prices were down 38% from the previous year while realized liquids prices were down 43%. As well, take-away restrictions on Trans Canada’s intra-Alberta pipeline system reduced annual production by over 4,500 boe/d. Despite these challenges, Peyto was able to reduce both PDP FD&A and cash costs by 27% and 25% respectively, which helped preserve operating and profit margins. Peyto’s Wilrich play in the Brazeau River area yielded some of the best well results of the year and helped propel total exit production beyond 102,000 boe/d. In total 140 gross wells were drilled and put on production, while at the same time 171 new locations were added and recognized in Peyto’s reserve books. Owned and operated infrastructure was also expanded in the year with over 100 MMcf/d of total processing capacity added at several of Peyto’s gas plants. The Company’s strict focus on bringing down costs ensured that capital investments for the year continued to deliver solid returns.
(1) Operating Margin is defined as Funds from Operations divided by Revenue before Royalties but including realized hedging gains (losses).
(2) Profit Margin is defined as Net Earnings for the year divided by Revenue before Royalties but including realized hedging gains (losses).
Natural gas volumes recorded in thousand cubic feet (Mcf) are converted to barrels of oil equivalent (boe) using the ratio of six (6) thousand cubic feet to one (1) barrel of oil (bbl). Natural gas liquids and oil volumes in barrel of oil (bbl) are converted to thousand cubic feet equivalent (Mcfe) using a ratio of one (1) barrel of oil to six (6) thousand cubic feet. This could be misleading if used in isolation as it is based on an energy equivalency conversion method primarily applied at the burner tip and does not represent a value equivalency at the wellhead.
