CALGARY, Alberta, Nov. 06, 2019 (GLOBE NEWSWIRE) -- GRANITE OIL CORP. (“Granite” or the “Company”) (TSX:GXO)(OTCQX:GXOCF) is pleased to report its operating and unaudited financial results for the three and nine months ended September 30, 2019.
FINANCIAL AND OPERATING HIGHLIGHTS
|Three Months Ended|
|Nine Months Ended |
|(000’s, except per share amounts)||($)||($)||($)||($)|
|Oil and natural gas revenues||9,543||12,724||30,344||37,493|
|Cash flow from operations||4,333||3,223||10,416||10,971|
|Funds from operations (1)||3,198||3,071||11,963||9,871|
|Per share basic||0.08||0.09||0.31||0.29|
|Per share diluted (2)||0.08||0.09||0.31||0.28|
|Net income (loss)||889||637||1,682||(3,077||)|
|Per share basic||0.02||0.02||0.04||(0.09||)|
|Per share diluted (2)||0.02||0.02||0.04||(0.09||)|
|Capital expenditures (3)||1,540||703||5,601||10,005|
|Crude oil (bbls/d)||1,511||1,951||1,584||2,100|
|Natural gas (mcf/d)||22||-||84||137|
|Average wellhead prices|
|Crude oil ($/bbl)||68.65||70.90||69.95||65.26|
|Natural gas ($/mcf)||0.96||-||3.89||1.73|
|Combined average ($/boe) (6)||68.50||70.90||69.55||64.69|
|Operating netback ($/boe)(7)||34.73||26.38||38.43||25.09|
|Gross (net) oil wells drilled (#)||- (-)||- (-)||1 (1.0)||3 (3.0)|
|Average working interest (%)||N/A||N/A||100||100|
|At period end||38,776||34,191||38,776||34,191|
|Weighted average common shares (basic)||38,776||34,191||38,098||34,191|
|Weighted average common shares (diluted) (2)||39,104||35,166||38,437||35,185|
(1) Funds from operations and funds from operations per share are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary in “Reader Advisories” under “Non-GAAP Measurements” for further discussion.
(2) The Company uses the weighted average common shares (basic) when there is a net loss for the period to calculate net income (loss) per share diluted. The Company uses the weighted average common shares (diluted) to calculate the funds from operations diluted.
(3) Total capital expenditures, excluding acquisitions and excluding non-cash transactions. Refer to commentary in the Management Discussion and Analysis under “Capital Expenditures” for further information.
(4) Net debt, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary in “Reader Advisories” under “Non-GAAP Measurements” for further discussion.
(5) For a description of the boe conversion ratio, refer to the commentary in the “Reader Advisories” under “Other Measurements”.
(6) Combined average realized prices includes all oil, gas and NGL sales revenue, excluding other income.
(7) Operating netback, which is calculated by deducting royalties, operating expenses and transportation expenses from oil and gas revenue and adjusting for any realized hedging on financial instruments is not a recognized measure under IFRS. Please refer to the commentary in “Reader Advisories” under “Non-GAAP Measurements” for further discussion.
Highlights from Granite’s News Release dated October 17, 2019, are reiterated below. For additional details, readers are encouraged to reference that News Release, which is available on the Company’s website.
Granite continued its focus on debt reduction during the third quarter of 2019, further decreasing net debt by $1.7 million to $41.1 million at the end of the quarter. The Company has successfully reduced net debt by approximately 14% over the first nine months of 2019, and is on-track to reduce it by a further ~4% by year end.
Capital expenditures for the quarter were $1.5 million, which funded the recompletion test described below, well workovers, and facility projects designed to reduce future operating costs. Estimated production was approximately 1,575 boe/d, which is principally the result of the Company electing to keep over 250 bbl/d of oil production from five re-pressurized wells originally slated to be brought on-stream during the quarter shut-in for a future recompletion program. Severe weather in Southern Alberta at the end of September prevented the Company from shipping its oil inventory for the final three days of the quarter. This impacted oil sales, which averaged approximately 1,511 bbl/d, and associated revenue for the quarter. Accordingly, these sales volumes and revenues were realized in October and reflected in the Company’s fourth-quarter results.
Granite continues to test new ways to improve both the efficiency at which it adds oil production and the ultimate, long-term oil recovery of its large, 100%-owned, early-life-cycle Bakken oil pool through its gas injection enhanced recovery scheme (‘EOR’) and other complementary strategies.
During the third quarter, Granite tested a recompletion program on a producing well originally completed in 2015 with average frac interval spacing of approximately 80 meters. The initial test was conducted on a well in the gas flood area which was under pressured, allowing for more accurate quantification of results, and has increased production by approximately three-times relative to the pre-frac production rate over an extended testing period.
The Company has identified 15 additional wells as recompletion candidates, with up to 12,000 meters of potential unstimulated lateral to be fracked. Of significant, compounding benefit is the Company’s ability to utilize its gas injection EOR scheme to increase reservoir pressure prior to future operations in order to enhance production rates following the recompletions. Accordingly, in anticipation of the test results, the Company elected to keep five wells shut-in in a re-pressurized area during the third quarter for a future recompletions program.
The Company will remain focused on its debt-reduction and efficiency goals through the remainder of 2019 and will commence a recompletion program in the first quarter of 2020. Granite is encouraged by the potential of future recompletions to accelerate its plans by strengthening the Company’s ability to add producing barrels through this relatively low-risk capital operation. With over 80 potential infill drilling locations that will serve as the backbone of future development of its Bakken pool, the recompletion strategy provides an additional mechanism by which Granite can increase shareholder value in the current energy environment.
Granite continues to strengthen its balance sheet while successfully navigating a volatile and challenging market. As the Company continues to pay down debt, it is increasing its inventory of highly economic capital projects, reducing its already limited abandonment liability, and improving corporate and operational efficiencies. Granite has consistently proven its free-cash-flow-generating capability and the efficiency at which it adds producing barrels. At its current debt repayment rate, Granite is rapidly positioning itself to increasingly deploy a larger component of its free cash flow to growth projects and other available avenues to increase shareholder value.
For further information, please contact Michael Kabanuk, President & CEO, by telephone at (587) 349-9123, or Devon Griffiths, COO, by telephone at (587) 349-9120.
Forward-Looking Statements. Certain statements contained in this news release may constitute forward-looking statements or information (collectively, “forward-looking statements” or “statements”). These statements relate to future events or Granite’s future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. In particular, this news release contains forward-looking statements, pertaining to the following: forecasted capital expenditures and plans; recompletion, drilling and development plans; Granite’s financial strength; anticipated production rates; projections of market prices and costs; supply and demand for oil and natural gas; the quantity of reserves; the success of the enhanced oil recovery scheme and the recompletion program; expectations regarding Granite’s credit facility; treatment under governmental regulatory and taxation regimes; and expectations regarding Granite’s ability to raise capital and to continually add to reserves through acquisitions and development.
Granite believes the expectations reflected in such forward-looking statements and the assumptions upon which such forward-looking statements are based, to be reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon by investors. These statements speak only as of the date of this news release and are expressly qualified, in their entirety, by this cautionary statement. Granite’s actual results could differ materially from those anticipated in these forward-looking statements as a result of risk factors that may include, but are not limited to: volatility in the market prices for oil and natural gas; general economic conditions; stock market volatility and the ability to access sufficient capital from internal and external sources; uncertainties associated with estimating reserves; uncertainties associated with Granite’s ability to obtain additional financing on satisfactory terms; geological, technical, drilling and processing problems; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; incorrect assessments of the value of acquisitions; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel. Readers are cautioned that the foregoing list of factors is not exhaustive. Management has included the above summary of assumptions and risks related to forward-looking information provided in this news release in order to provide security holders with a more complete perspective on Granite’s future operations and such information may not be appropriate for other purposes. Additional information on these and other factors that could affect Granite's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).
With respect to forward-looking statements contained in this news release, Granite has made assumptions regarding, among other things: prevailing commodity prices, exchange rates, interest rates, applicable royalty rates and tax laws; the legislative and regulatory environments of the jurisdictions where Granite carries on business or has operations; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells and recompleting existing wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; ability to market oil and natural gas successfully and Granite’s ability to obtain additional financing on satisfactory terms.
The forward-looking statements represent Granite’s views as of the date of this document and such information should not be relied upon as representing its views as of any date subsequent to the date of this document. Granite has attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimates expressed or implied by the forward-looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward-looking statements will prove to be accurate, as results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements.
This news release contains or refers to future-oriented financial information and financial outlook information (collectively, "FOFI") about Granite’s prospective results of operations, funds from operations, netbacks, net debt, operating costs and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this news release was made as of the date of this news release and was provided for the purpose of providing further information about Granite's anticipated future business operations. Granite disclaims any intention or obligation to update or revise any FOFI contained in this news release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this news release should not be used for purposes other than for which it is disclosed herein.
Non-GAAP Measurements. This news release contains the terms "funds from operations" and "funds from operations per share", which should not be considered an alternative to or more meaningful than cash flow from (used in) operating activities as determined in accordance with IFRS. These terms do not have any standardized meaning under IFRS. Granite's determination of funds from operations and funds from operations per share may not be comparable to that reported by other companies. Management uses funds from operations to analyze operating performance and leverage, and considers funds from operations to be a key measure as it demonstrates the Company's ability to generate cash necessary to fund future capital investments and to repay debt, if applicable. Funds from operations is calculated using cash flow from operating activities as presented in the statement of cash flows, before changes in noncash working capital. Granite presents funds from operations per share whereby per share amounts are calculated using weighted-average shares outstanding, consistent with the calculation of earnings per share.
Net debt, which represent current assets less current liabilities, excluding current derivative financial instruments, is used to assess efficiency, liquidity and the Company's general financial strength. No IFRS measure is reasonably comparable to working capital deficit.
The Company considers corporate netbacks to be a key measure as they demonstrate Granite's profitability relative to current commodity prices. Corporate netbacks are comprised of operating and funds flow netbacks. Operating netback is calculated as the average sales price of the Company's commodities, less royalties, operating costs and transportation expenses. Funds flow netback starts with the operating netback and further deducts general and administrative costs, finance expense and unrealized gains on financial instruments, and then adds any finance income and realized gains on financial instruments, if applicable. No IFRS measure is reasonably comparable to netbacks. See "Netbacks (per unit)" in the Company's management's discussion and analysis for the three and nine months ended September 30, 2019 filed on www.sedar.com for the netback calculations.
BOE Presentation. References herein to "boe" mean barrels of oil equivalent derived by converting gas to oil in the ratio of six thousand cubic feet (Mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.