CALGARY, Alberta, Aug. 12, 2019 (GLOBE NEWSWIRE) — GRANITE OIL CORP. (âGraniteâ or the âCompanyâ) (TSX:GXO)(OTCQX:GXOCF) is pleased to report its operating and unaudited financial results for the three and six months ended June 30, 2019.
Second Quarter Highlights and Operations Update
During the first six months of 2019, Granite has reduced its net debt by over 10%, exiting the second quarter with net debt of approximately $42.8 million, down approximately $4.9 million from year-end 2018. Granite paid down approximately $0.8 million in net debt during the second quarter while increasing production by approximately 7% as compared to the first quarter. The Company generated funds from operations of approximately $4.2 million in the second quarter, with capital expenditures of approximately $3.3 million, and one-time severance and corporate cash costs of approximately $0.4 million.
During the second quarter, Granite drilled and completed its first development well since June, 2018. This well averaged approximately 260 bbl/d of oil over the first 90 days of production, exceeding type curve estimates and continuing the trend of strong drilling results achieved in 2018. This is the fourth consecutive well in which the Company tested higher frac intensity, with results to-date demonstrating strong performance benefits of this optimized completions strategy and further substantiating the production potential of the Companyâs drilling inventory.
Production during the second quarter averaged approximately 1,696 boe/d (99.6% oil), representing a 7% increase over the first quarter of 2019. Granite had six wells shut-in for the duration of the second quarter as part of its rotational re-pressurization program and EOR optimization strategy, and has yet to re-initiate production on these wells due to strong field performance through the start of the year and continuing into the third quarter. This strategy provides the Company with the opportunity to further repressure these shut-in areas and also evaluate a potential recompletion strategy for historically under-stimulated wells.
FINANCIAL AND OPERATING HIGHLIGHTS
|Three Months Ended June 30,||Six Months Ended June 30,|
|(000s, except per share amounts)||($)||($)|
|Oil and natural gas revenues||11,505||20,801|
|Funds from operations (1)||4,463||8,765|
|Per share â basic||0.12||0.23|
|Per share â diluted (2)||0.11||0.23|
|Per share â basic||0.07||0.02|
|Per share â diluted (2)||0.07||0.02|
|Capital expenditures (3)||3,341||4,060|
|Net debt (4)||42,832||42,832|
|Weighted average â basic||38,572||38,388|
|Weighted average â diluted||38,851||38,666|
|Natural gas (mcf/d)||44||116|
|Crude oil (bbls/d)||1,689||1,622|
|Average wellhead prices|
|Natural gas ($/mcf)||1.40||4.18|
|Crude oil and NGLs ($/bbl)||74.81||70.57|
|Combined average ($/boe) (6)||74.53||70.04|
|Operating netback ($/boe) (7)||39.10||40.16|
|Gross (net) wells drilled|
|Oil (#)||1 (1.0)||1 (1.0)|
|Total (#)||1 (1.0)||1 (1.0)|
|Average working interest (%)||100||100|
- Funds from operations and funds from operations per share are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary in âReader Advisoriesâ under âNon-GAAP Measurementsâ for further discussion.
- 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.
- Total capital expenditures, excluding acquisitions and excluding non-cash transactions. Refer to commentary in the Management Discussion and Analysis under âCapital Expendituresâ for further information.
- 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 âReader Advisoriesâ under âNon-GAAP Measurementsâ for further discussion.
- For a description of the boe conversion ratio, refer to the commentary in the âReader Advisoriesâ under âBOE Presentationâ.
- Combined average realized prices includes all oil, gas and NGL sales revenue, excluding other income.
- 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 âReader Advisoriesâ under âNon-GAAP Measurementsâ for further discussion.
Granite continues to deliver on its business plan, being focused on debt repayment and prudent capital management. The Company has reduced its net debt by over 10% relative to year-end 2018, increased production quarter-over-quarter by approximately 7%, while limiting its capital expenditures to $4.1 million over the first half of 2019. With its 2019 capital program heavily weighted to the second quarter, Granite will continue to reduce its net debt through the remainder of 2019 and is on-track to exit the year with net debt between $37 and $39 million, depending upon prevailing commodity prices.
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-âlooking statements or information (collectively, âforward-looking statementsâ or âstatementsâ). These âstatements relate to future events or Graniteâs future performance. All statements other than statements of âhistorical fact may be forward-looking statements. Forward-looking statements are often, but not always, âidentified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, ââ”will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and âsimilar expressions. These statements involve known and unknown risks, uncertainties and other factors that âmay cause actual results or events to differ materially from those anticipated in such forward-looking âstatements. In particular, this news release contains forward-looking statements, pertaining to the following: âforecasted capital expenditures and plans, drilling and development plans, Graniteâs financial strength, âanticipated production rates, projections of market prices and costs, supply and demand for oil and natural âgas, the quantity of reserves, the success of the enhanced oil recovery scheme, the success of the rotational âre-pressurization process, expectations regarding Graniteâs credit facility, treatment under governmental âregulatory and taxation regimes and expectations regarding Graniteâs ability to raise capital and to continually âadd to reserves through acquisitions and development. â
Granite believes the expectations reflected in such forward-looking statements and the assumptions upon âwhich such forward-looking statements are based, to be reasonable, but no assurance can be given that these âexpectations will prove to be correct and such forward-looking statements included in this news release âshould not be unduly relied upon by investors. These statements speak only as of the date of this news release âand are expressly qualified, in their entirety, by this cautionary statement. Graniteâs actual results could differ âmaterially from those anticipated in these forward-looking statements as a result of risk factors that may âinclude, but are not limited to: volatility in the market prices for oil and natural gas; general economic âconditions, stock market volatility and ability to access sufficient capital from internal and external sources, âuncertainties associated with estimating reserves; uncertainties associated with Graniteâs ability to obtain âadditional financing on satisfactory terms; geological, technical, drilling and processing problems; liabilities âand risks, including environmental liabilities and risks, inherent in oil and natural gas operations; incorrect âassessments of the value of acquisitions; competition for, among other things, capital, acquisitions of âreserves, undeveloped lands and skilled personnel. Readers are cautioned that the foregoing list of factors is ânot exhaustive. Management has included the above summary of assumptions and risks related to forward-âlooking information provided in this news release in order to provide security holders with a more complete âperspective on Graniteâs future operations and such information may not be appropriate for other purposes. âAdditional information on these and other factors that could affect Granite’s operations and financial results âare included in reports on file with Canadian securities regulatory authorities and may be accessed through âthe SEDAR website (www.sedar.com).â
With respect to forward-looking statements contained in this news release, Granite has made assumptions âregarding, among other things: prevailing commodity prices, exchange rates, interest rates, applicable royalty ârates and tax laws; the legislative and regulatory environments of the jurisdictions where Granite carries on âbusiness or has operations; future production rates and estimates of operating costs; performance of existing âand future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the âsuccess obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned âactivities; the timing, location and extent of future drilling operations; the state of the economy and the âexploration and production business; results of operations; performance; business prospects and âopportunities; the availability and cost of financing, labour and services; the impact of increasing competition; âability to market oil and natural gas successfully and Graniteâs ability to obtain additional financing on âsatisfactory terms. â
The forward-looking statements represent Graniteâs views as of the date of this document and such âinformation should not be relied upon as representing its views as of any date subsequent to the date of this âdocument. Granite has attempted to identify important factors that could cause actual results, performance âor achievements to vary from those current expectations or estimates expressed or implied by the forward-âlooking information. However, there may be other factors that cause results, performance or achievements ânot to be as expected or estimated and that could cause actual results, performance or achievements to differ âmaterially from current expectations. There can be no assurance that forward-looking statements will prove âto be accurate, as results and future events could differ materially from those expected or estimated in such âstatements. Accordingly, readers should not place undue reliance on forward-looking information. Except as ârequired by law, the Company undertakes no obligation to publicly update or revise any forward-looking âstatements.â
This news release contains future-oriented financial information and financial outlook information (collectively, “FOFI”) about Graniteâs 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 six months ended June 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 âthe ratio of six thousand cubic feet (Mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if âused in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily âapplicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that âthe value ratio based on the current price of crude oil as compared to natural gas is significantly different from âthe energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.â