CALGARY, Alberta, July 30, 2020 (GLOBE NEWSWIRE) — Cardinal Energy Ltd. (“Cardinal” or the “Company“) (TSX: CJ) is pleased to announce its operating and financial results for the second quarter ended June 30, 2020.
Selected financial and operating information is shown below and should be read in conjunction with Cardinal’s unaudited condensed interim financial statements and related Management’s Discussion and Analysis for the three months ended June 30, 2020 which are available at www.sedar.com and on our website at www.cardinalenergy.ca.FINANCIAL HIGHLIGHTS FROM THE SECOND QUARTER OF 2020Cardinal had second quarter positive free cash flow(1) due to reduced capital expenditures and cost saving initiatives leading to a $7.1 million reduction in net debt(1) over the prior quarter;Reduced our net operating costs(1) to $14.81/boe which was a $15 million decrease or 39% over the prior quarter due to reduced compensation costs, lower power costs and reduced well reactivation activity;Reduced our general and administrative costs (“G&A”) by 40% over the prior quarter resulting in G&A costs of $1.87/boe ; andFavorable risk management program hedging over 60% of our remaining anticipated 2020 oil production at attractive prices.
SECOND QUARTER OVERVIEWCardinal’s second quarter 2020 was focused on financial sustainability as we weathered one of the most challenging periods in the oil and gas industry’s history. The effect of the COVID-19 pandemic was far reaching across all industries globally. In response to the crisis, Cardinal immediately ceased all non-essential capital activity late in the first quarter resulting in the Company spending $1.1 million of capital expenditures in the second quarter. We began to systematically shut-in approximately 25% of our production to minimize losses from the severe drop in oil pricing. As oil prices stabilized in June, we began to restart shut-in production. Currently, approximately 10% to 15% of our production remains shut-in awaiting higher oil prices. A disciplined capital program combined with substantial cost reduction initiatives and an oil price recovery in June allowed the Company to be free cash flow positive in the second quarter, and when combined with a foreign exchange adjustment, we decreased our net debt by $7.1 million over the first quarter 2020 to $222.2 million. The majority of Cardinal’s second quarter 2020 capital program was focused on our enhanced oil recovery process at Midale, Saskatchewan with our CO2 injection program.In response to the low oil prices caused by the pandemic, Cardinal reduced our non-essential well servicing and labour costs which resulted in a 28% decrease in our field operating costs per bbl compared to the first quarter in 2020. Our power generation initiatives which were completed throughout 2019 and early 2020 assisted in reducing our corporate power costs by $2.7 million ($0.66/boe) over the same period in 2019. The result of these proactive initiatives resulted in Cardinal reducing our total net operating costs by 39% or $15 million over the first quarter of 2020.Corporately, during the second quarter of 2020, Cardinal reduced our Board, executive and employee salaries by 20%, ceased our bonus program and reduced our employee savings plan contributions which, combined with the Canadian Emergency Wage Subsidy (“CEWS”) program and other initiatives, resulted in a 40% reduction in our corporate G&A costs compared to the first quarter of 2020. Cardinal has been proactively taking advantage of available government subsidy programs with our service company partners. On our behalf, service companies have submitted a significant number of applications for abandonment and reclamation work on Cardinal’s wells and leases in the Period 1 of the Alberta Site Rehabilitation Program (“SRP”) and Phase 1 of the Saskatchewan Accelerated Site Closure Program (“ASCP”). Some of this work has been approved to date and work in the field has been initiated. Further approvals are expected in the near term, as are further applications in future program periods and phases. Cardinal will continue to be an active participant in the government programs.From a risk management perspective, for the remainder of 2020, Cardinal has hedged an average of 9,083 bbl/d of West Texas Intermediate (“WTI”) oil at an approximate average price of CAD$52/bbl. In addition, we have WTI collars locking in a floor of CAD$50/bbl on 1,000 bbl/d for the remainder of 2020. We have started our 2021 hedging program with an average 1,833 bbl/d of WTI hedged for the year at an average minimum price of CAD$55/bbl.Cardinal continues to work through its credit facility renewal process with our syndicate of banks. The reduction in commodity prices has impacted our projected future cash flows and has re-emphasized our goals of reducing our overall debt levels. We have received approval from the syndicate to further extend the revolving period and re-determination date to August 5, 2020 for the lenders to attain required internal approvals. We continue to work through applications for federal liquidity support programs. Currently, Cardinal is drawn approximately $204 million on its credit facility and with the low decline nature of our asset base we expect our future adjusted funds flow will be sufficient to support our capital program and continue with our debt reduction strategy.OUTLOOKThe COVID-19 pandemic is unprecedented in how it has affected the global economy. The Canadian oil and gas industry has faced numerous challenges over the past number of years however we believe the past few months have negatively impacted our industry more than any other. Cardinal’s focus through this pandemic and economic crisis remains the health and safety of our employees and service providers, and managing our liquidity through disciplined efficient operation of our assets, production and costs. This has been evidenced in the second quarter of 2020 in which we had positive free cash flow and reduced net debt levels over the prior quarter. Our focus for the second half of 2020 will be on retaining our long term stability. The fluctuations in commodity prices this year, from a high of over WTI US$60/bbl to a low that saw negative prices have reinforced some key business tenets. Increased stability through longer term product hedging and reduced financial dependence on our credit facility are and will be the core focus for the future. Cardinal is fortunate to have a low decline sustainable production base that can withstand the short-term pricing shocks without materially impacting our reserve base. Our capital program for the last half of 2020 has been reduced to $8.5 million. With a large percentage of our production hedged for the remainder of the year, we expect to make significant reductions in our overall net debt levels in 2020.Cardinal will continue to manage our assets with a long-term sustainability view and continue to look for ways to reduce our costs without sacrificing the safety of our employees or the integrity of our asset base and infrastructure. Cardinal’s top tier low decline rate will support the Company’s oil production and we will bring back on production of shut-in wells when the re-activation economics justify it. We are seeing positive signs as oil prices have stabilized and we continue to lock-in prices that support longer term production initiatives. We will continue to navigate through these challenging times by acting quickly to implement change and reduce costs. We thank our Board for their continued guidance, our employees for their dedication and hard work and our shareholders and stakeholders for their perseverance and support during this challenging time.Note Regarding Forward-Looking Statements
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