Perpetual Energy Releases Strong Fourth Quarter and Year-End 2017 Results

Perpetual Energy Inc. (TSX:PMT) released its fourth quarter and year-end 2017 financial and operating results, with strategic focus of their asset base, continued diligence to drive down costs, strengthening of their balance sheet and steady execution of our growth-oriented capital program.

Highlights are as follows:

Fourth Quarter 2017

• Adjusted funds flow of $12.5 million ($0.21/share) in the fourth quarter of 2017 was up 277% (250% on a per share basis) over the comparative period in 2016 and 53% over the third quarter of 2017. Cash flow from operations of $11.0 million in the fourth quarter of 2017 ($0.18/share), increased 131% over the prior year period.
• Proactive natural gas price hedging and optimization strategies and the November 1^st commencement of delivery to the Company’s market diversification contracts effectively augmented revenue and insulated Perpetual from the impact of low and volatile natural gas prices in Alberta through much of the fourth quarter. Perpetual’s average realized natural gas price in the fourth quarter of $3.22/Mcf increased 34% from fourth quarter of 2016 compared to a 45% decrease year-over-year in the average AECO Daily Index natural gas price.
• Additional drivers of strong quarterly performance were the combination of production growth of 45% relative to the fourth quarter of 2016, coupled with a 17% reduction in cash costs per boe.
• Fourth quarter production and operating expenses were $3.45/boe, 24% lower than the fourth quarter of 2016 after adjusting for non-recurring items in the prior period.

Annual 2017

• Exploration and development capital investment of $73 million in 2017 replaced production by 248% at a proved plus probable finding and development (“F&D”) cost of $6.16/boe.
• Perpetual developed over 11.3 MMboe of new proved producing reserves (“PDP”) in 2017 at an F&D cost of $6.44/boe, resulting in a 2.2 times PDP recycle ratio relative to operating netback and 1.3 times relative to adjusted funds flow of $8.64/boe.
• Operating netbacks of $14.35/boe in 2017 were 120% higher than in 2016 ($6.53/boe), driven by the establishment of a sustainable cost structure following the strategic disposition of high cost, high liability shallow gas assets in eastern Alberta (the “Shallow Gas Properties”) on October 1, 2016.
• Adjusted funds flow for 2017 grew thirty-fold to $31.1 million ($0.54/share) compared to $0.9 million ($0.02/share) in 2016.
• Improving operational performance led to three borrowing base increases to the Company’s reserve based revolving bank debt in 2017 and the syndicate was expanded to include three banks.  On November 20, 2017, S&P upgraded Perpetual’s credit rating by two rating notches from CCC- to CCC+ with a stable outlook, based on Perpetual’s improved liquidity. The Company’s year-end 2017 net debt to fourth quarter 2017 annualized adjusted funds flow ratio was 2.1 times.

Click here to read the full Perpetual Energy Inc. (TSX:PMT) press release.