CALGARY, Alberta, May 12, 2020 (GLOBE NEWSWIRE) — Peyto Exploration & Development Corp. (“Peyto” or the “Company”) (TSX: PEY) herein presents its operating and financial results for the first quarter of the 2020 fiscal year. The unprecedented global pandemic which disrupted world energy demand, in combination with an untimely market share price war amongst certain OPEC+ members, led to severe commodity price volatility in the quarter. Peyto’s industry leading costs structure allowed it to preserve a 55% Operating Margin(1) however both Profit Margin(2), Return on Capital (0%) and Return on Equity (2%) were eroded due to a further 30% drop in realized commodity prices. Highlights for the quarter included:
Funds from operations of $0.33/share. Generated $55 million in Funds from operations (“FFO”) in Q1 2020, down from $103 million in Q1 2019 due to lower commodity prices and lower production levels. Trailing twelve month FFO ($275 million) exceeded both capital expenditures ($213 million) and dividend payments ($40 million) by $22 million resulting in reduced levels of net debt when compared to a year ago.
Liquids yield increased 24%. Condensate and NGL yields increased from 23 bbl/mmcf in Q1 2019 to 29 bbl/mmcf in Q1 2020, resulting from a focus on development of Peyto’s liquids rich Cardium play. Total liquids production of 11,585 bbl/d in Q1 2020 was the highest in Company history comprised of 6,662 bbls/d of Condensate and Pentanes+, and 4,923 bbls/d of Propane and Butane. Natural gas production was down 13% to 402 mmcf/d as Peyto replaced declining dry gas with significantly higher liquids-rich gas. Total Q1 2020 production of 78,514 boe/d was up slightly from the previous quarter production of 77,457 boe/d but down 10% from 87,703 boe/d recorded in Q1 2019.
Total cash costs of $1.03/Mcfe (or $0.91/Mcfe ($5.46/boe) excluding royalties). Industry leading total cash costs, included $0.12/Mcfe royalties, $0.39/Mcfe operating costs, $0.19/Mcfe transportation, $0.04/Mcfe G&A and $0.29/Mcfe interest, combined with a realized price of $2.30/Mcfe, resulted in a $1.27/Mcfe ($7.63/boe) cash netback, down 42% from $2.18/Mcfe ($13.06/boe) in Q1 2019. Operating costs per unit for Q1 2020 were up 15% from Q1 2019 largely due increased power costs, and stockpiling of chemicals and equipment in preparation for anticipated COVID-19 supply chain disruptions.
Capital investment of $69 million. A total of 17 gross wells (14.3 net) were drilled in the first quarter, 19 gross wells (18 net) were completed, and 20 gross wells (18 net) were brought on production. Over the last 12 months the 64 gross (55.9 net) wells brought on production accounted for approximately 18,000 boe/d at the end of the quarter, which, when combined with a trailing twelve month capital investment of $213 million, equates to an annualized capital efficiency of $11,800/boe/d. Peyto anticipates the 2020 full year capital efficiency will be less than $9,500/boe/d.
Dividends of $0.06/share, Loss of $0.41/share. Dividends of $9.9 million were paid to shareholders during the quarter. This is the first quarterly loss posted since Q4 2004 and is largely due to the confluence of global events occurring in the first quarter of the year resulting in a first ever, non-cash impairment of $80 million.First Quarter 2020 in Review
Preparation for and reaction to the sweeping global pandemic dominated the first quarter of 2020. As Peyto and its hydrocarbon production was deemed an essential and critical provincial service during this time, to provide reliable heat and fuel for electrical generation, all attention was turned to the Company’s business continuity plans in order to ensure the safety and security of Peyto’s employees and field contractors. Peyto’s Working Remotely and Working Alone policies ensured production operations continued without interruption, while at the same time, strategic alliances with select service providers ensured drilling, completion and pipeline operations continued safely throughout the quarter. Drilling and completion operations were focused primarily in the Greater Sundance and Brazeau River areas, on both the Cardium and Spirit River formations. Peyto completed the construction of a 17 km pipeline project in the quarter, connecting a new area called Chambers to Peyto’s Brazeau gas plant. This enabled the existing production that was being processed in third party facilities to be redirected into the Company’s operated gas plant, as well as the connection of several new wells that were drilled in the quarter. As Peyto now controls over 33 prospective sections of land in the Chambers area, this pipeline will be a strategic piece of infrastructure for future opportunities. A lack of winter heating demand in North American natural gas markets caused natural gas prices to weaken throughout the quarter, which combined with the rapid drop in oil and natural gas liquid prices resulted in the lowest realized revenue per Mcfe in the Company’s 21 year history and despite Peyto’s low cash costs, still translated into the lowest ever cash netback at $1.27/mcfe ($7.63/boe).1. Operating Margin is defined as funds from operations divided by revenue before royalties but including realized hedging gains/losses.
2. Profit Margin is defined as net earnings for the quarter divided by revenue before royalties but including realized hedging gains/losses.
Natural gas volumes recorded in thousand cubic feet (mcf) are converted to barrels of oil equivalent (boe) using the ratio of six (6) thousand cubic feet to one (1) barrel of oil (bbl). Natural gas liquids and oil volumes in barrel of oil (bbl) are converted to thousand cubic feet equivalent (Mcfe) using a ratio of one (1) barrel of oil to six (6) thousand cubic feet. This could be misleading, particularly if used in isolation as it is based on an energy equivalency conversion method primarily applied at the burner tip and does not represent a value equivalency at the wellhead.
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