Perpetual Energy Inc. (TSX:PMT) announced its year-end 2017 production exit rate attaining year-over-year exit rate growth of 54 percent. The Company invested $19.0 million in exploration and development activities during the fourth quarter of 2017 and grew production 14 percent quarter-over-quarter.
As quoted in the press release:
Production and operating costs continued the positive trend established through 2017, averaging $3.45/boe for the fourth quarter and $4.52/boe for 2017, down 33% from full year 2016.
In 2017, Perpetual focused investment in its core producing assets at East Edson and Mannville, adding proved plus probable reserves to replace 248% of annual production and grow the value of proved plus probable reserves year-over-year, as reported by the independent engineering firm McDaniel and Associates Consultants Ltd. (“McDaniel”). The quality of Perpetual’s assets and positive momentum to drive operational and execution excellence in its core operating areas are demonstrated by the highlights below:
- Total proved plus probable reserves grew by 9% to 66.6 MMboe, up 5.3 MMboe after 2017 production of 3.6 MMboe. Importantly, the Company grew total proved reserves by 22% to 42.8 MMboe (64% of total proved plus probable reserves) and doubled its proved developed producing reserves to 15.9 MMboe. Proved plus probable developed producing reserves were 20.5 MMboe at December 31, 2017, 44% higher than year-end 2016.
- Proved plus probable developed producing reserves were 20.5 MMboe at December 31, 2017, 44% higher than year-end 2016.
- Exploration and development capital spending of $73.0 million in 2017 resulted in finding and development (“F&D”) costs of $6.16/boe on a proved plus probable basis, and finding, development and acquisition costs (“FD&A”) of $5.98/boe, both including changes in future development capital (“FDC”). Combining with a 2017 operating netback of $14.35/boe, the Company achieved a proved plus probable FD&A recycle ratio of 2.4:1.
- The net present value (“NPV”) of Perpetual’s total proved plus probable reserves (discounted at 10%) before income tax, grew by 8% to $409.9 million (2016 – $380.7 million), despite a decrease in McDaniel’s forecast for both oil and natural gas prices at year-end 2017.
- Based on McDaniel’s commodity price forecasts, Perpetual’s reserve-based net asset value (“NAV”) (discounted at 10%) at year-end 2017 is estimated at $336.5 million ($5.68 per share).
Finally, in active management of the recent decline in the forward market for near-term AECO natural gas prices, Perpetual today announces several important steps taken to maximize profitability, preserve the value of its reserves and manage risk:
- Perpetual reduced its exposure to AECO natural gas prices through the market diversification contracts entered into during the third quarter of 2017 and has now secured fixed price forward sales contracts on its remaining expected 2018 AECO natural gas sales volumes, net of royalties.
- Further, Perpetual’s Board of Directors have approved a revised 2018 capital plan totaling $23 to $27 million, a 30% reduction to capital spending from the plan announced on November 10, 2017. The revised plan is designed to prudently defer development of the Company’s East Edson natural gas asset to ensure maximum returns from development of the reserves and re-allocate capital to heavy oil prospects in its diversified portfolio of opportunities. At the current forward commodity price market, the revised capital spending plan is expected to result in 2018 adjusted funds flow in excess of capital spending and obligations, allowing for debt repayment and other opportunities.