PrairieSky Royalty Ltd. (ticker: PSK) released its first quarter operating and financial results for 2017. The company is the largest fee simple mineral title land owner in western Canada, including approximately 7.8 million acres of fee simple mineral title lands with petroleum and/or natural gas rights. The rights are held in perpetuity.
PSK 2017 First Quarter Highlights
- Average royalty production of 26,812 BOE per day, 49% liquids
- Funds from operations of $67.3 million or $0.28 per share, basic and diluted
- Revenues of $80.3 million including $73.5 million of royalty revenue
- Leased land for new and existing plays, collecting $3.0 million in lease issuance bonus consideration
- Completed acquisition of 4% gross overriding royalty on current and future phases of the Lindbergh SAGD thermal oil project
- Maintained a strong balance sheet with $97.6 million of positive working capital, including $92.4 million of cash on hand and nil debt as of March 31, 2017
Update from PSK CEO Andrew Phillips
Q1 Drilling focused on the Viking, Mannville
It was an active first quarter for industry and across PrairieSky’s land base with over 185 wells spud on our lands.
Drilling activity was primarily focused on the Viking light oil play in Western Saskatchewan, the multi-zone Deep Basin fairway of Alberta and British Columbia and light oil plays across Central Alberta including the Mannville and Viking plays. Leasing interest remained high during the quarter with PrairieSky entering into 36 new leasing arrangements with 33 different producers on our fee lands.
PrairieSky completed its previously announced acquisition of a 4% gross overriding royalty on current and future phases of Pengrowth Energy Corporation’s Lindbergh SAGD thermal oil project as well as seismic over certain lands in British Columbia and Alberta for total cash consideration of $250 million, before customary closing adjustments.
In addition, PrairieSky completed $4.6 million of complementary acquisitions during the quarter, adding additional fee title lands and gross overriding royalty interests to its portfolio, including an overriding royalty on 29,440 acres of land in the Monias area of Northeast British Columbia which is prospective for future Montney development. PrairieSky continues to be selective and disciplined in our evaluation of new royalty opportunities.
PrairieSky’s 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 declared dividends of $43.2 million.
PrairieSky increased its annual dividend to $0.75 per share per annum effective for the March 2017 dividend which was paid on April 17, 2017. PrairieSky acquired and cancelled 335,200 common shares for $10.1 million under its normal course issuer bid (“NCIB”) during the first quarter of 2017. In addition to paying the dividend and cancelling shares through the NCIB, PrairieSky continued to add internally generated cash to its balance sheet. At March 31, 2017, PrairieSky had $97.6 million of positive working capital and no debt.
PrairieSky will apply to the Toronto Stock Exchange (“TSX”) to renew its NCIB for an additional one year period. Subject to regulatory approval, PrairieSky currently intends to allocate up to $44 million over the next 12 months (approximately $3.7 million per month), net of regular monthly dividend payments, to repurchase common shares. PrairieSky intends to purchase from time to time, as it considers advisable, up to 1,600,000 of its currently issued and outstanding common shares (representing approximately 1% of the public float of common shares issued and outstanding as of April 24, 2017) over a period of twelve months. Any common shares that are purchased under the NCIB will be cancelled upon their purchase by PrairieSky. Management believes a normal course issuer bid provides an opportunity to use excess cash resources to reduce PrairieSky’s share count over time, representing an investment in PrairieSky’s high quality asset base and enhancing value for remaining shareholders. To date, PrairieSky has purchased and cancelled an aggregate of 1,356,700 common shares at a weighted average price per share of $27.91 under a normal course issuer bid that commenced on May 2, 2016 and runs to May 1, 2017.
PrairieSky has scheduled an investor day on May 24, 2017 in Toronto, Ontario, where members of PrairieSky’s management and technical team will present details on the Company’s oil and gas plays.
Read the press release here.
