CALGARY, ALBERTA--(Marketwired - Nov. 4, 2015) - GRANITE OIL CORP. ("Granite" or the "Company") (TSX:GXO)(OTCQX:GXOCF) is pleased to release an operational update and its financial and operational results for the quarter ended September 30, 2015.
- Generated funds from operations of $14.5 million during the quarter which funded capital spending of $6.6 million, dividends of $2.9 million and the repayment of $3.5 million of debt, resulting in a 65% payout ratio. Granite also recorded an adjustment of $1.8 million related to the May 2015 corporate reorganization involving Boulder Energy.
- Granite exited the quarter with $41.5 million of net debt, an 8% reduction relative to second quarter net debt of $45.0 million. Granite's annualized debt to cash flow is 0.7x.
- Increased quarterly oil production by 8% to 3,358 bbls/d (3,644 BOE/d) relative to second quarter oil volumes of 3,120 bbls/d (3,461 BOE/d). Granite's current production is approximately 3,500 bbls/d of oil.
- Capital expenditures during the quarter were limited to $6.6 million, which included the drilling of two, 100% working interest horizontal production wells in the core of the Company's Alberta Bakken Property. The balance of the quarter's capital expenditures were primarily on facilities and exploration activities.
- Horizontal well costs during the quarter were $2.3 million and $2.1 million respectively, materially lower than the $2.8 million included in the Company's initial guidance. Subsequent to the quarter, Granite drilled and brought on-stream a horizontal well in the core of the Bakken pool for $ 1.9 million, 32% below budgeted well costs of $2.8 million.
- Granite's gas injection enhanced oil recovery (EOR) scheme was expanded during the quarter with the addition of a sixth gas injector well. The implementation of the EOR scheme remains ahead of schedule and Granite has now received regulatory approvals for the seventh and eighth injector wells. Granite is currently injecting all of its Bakken solution gas and is anticipating that its remaining non-associated shallow gas will be used to support its EOR scheme with the phasing in of these new injector wells.
- Operating costs during the quarter were $5.98/BOE, 20% lower than guidance of $7.50/BOE. Lower costs reflect efficiencies realized from the accelerated implementation of its full scale EOR scheme and lower operational costs due to market conditions.
- Granite increased its monthly dividend by 8% to $0.0325 ($0.39 per year) effective September 2015. Granite is pleased to announce its intention to increase the dividend by an additional 8% to $0.035 per month ($0.42 per year) payable in December, 2015, matching its production growth.
OPERATIONAL UPDATE
Granite's continued focus is on the efficient recovery of oil from its 100%-owned Alberta Bakken property through its gas injection enhanced oil recovery (EOR) scheme. Oil production decline rates in the core area of Granite's Bakken oil pool have continued to improve with the increase in gas injection rates. With two new injectors anticipated to be operational in the fourth quarter of 2015 and the first quarter of 2016, Granite is well positioned to achieve its goal of accelerating gas injection, increasing voidage replacement and continuing to shallow declines.
Granite's capital cost reductions have resulted primarily from process improvements. Beyond the previously announced cost decreases resulting from monobore drilling, recent optimization of mud and directional drilling systems have resulted in shorter turnaround times and decreased costs. These process-driven cost reductions will carry forward regardless of changes in service costs.
Granite's operating costs have decreased substantially with the expansion of the EOR scheme. With increased natural gas injection rates, Granite has been able to shut-in gas processing infrastructure generating permanent cost savings.
Granite is pleased to announce results from its latest, 100% working interest, horizontal Bakken oil well 103/8-24-3-17W4/00. The well was drilled subsequent to quarter-end, in the core of the pool. The well produced an average of approximately 650 bbls/d of 31 API oil and 240 mscf/d of solution gas over a five day production test. At the conclusion of the test, the well was flowing at approximately 600 bbls/d of 31 API oil and 300 mscf/d of solution gas at a flowing wellhead pressure of 180 psi while restricted with a five-eighth (5/8) inch choke. The well has a total lateral length of 1,200 metres and was completed with 18, eight ton fracs using nitrified water. All-in costs were $1.9 million dollars, making a new low for costs in the pool. The well has been placed on production at a restricted rate of 250 bbls/d in keeping with Granite's focus on managing pool declines.
OUTLOOK
Granite's first standalone quarter of operations was very successful with significant decreases to both operating and capital costs while simultaneously growing production and reducing debt. The EOR scheme continues to demonstrate its efficiency and effectiveness on Granite's 100%-owned-and-operated Alberta Bakken oil pool. Expanding the scheme to 100% voidage replacement will continue to be a focus.
Granite continues to thrive with both operational and financial flexibility supported by an effective EOR scheme, a deep inventory of capital efficient drilling locations and a solid balance sheet.
Granite reaffirms its previously announced guidance for the second half of 2015.
CREDIT FACILITY
The semi-annual review of Granite's credit facility is presently in progress. While early indications suggest that its lenders would approve a borrowing base of up to $110 million. Granite is currently drawn approximately $37 million and intends to reduce its availability under the credit facility to $80 million in order to reduce fees.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Financial and operational highlights for the three month interim period ended September 30, 2015 are set out below and should be read in conjunction with the financial statements and related management's discussion and analysis available for review at www.Granite.ca and www.sedar.com. This is the first full interim period completed by Granite following its disposition of certain oil and gas properties pursuant to its May 2015 corporate reorganization. Prior period information is not presented in the following table due to its limited comparability resulting from these dispositions.
| Three Months Ended September 30, 2015(5) | |
| (000s, except per share amounts) | ($) |
| Financial | |
| Oil and natural gas revenues | 15,195 |
| Funds from operations (1) | 14,510 |
| Per share - basic | 0.48 |
| Per share - diluted | 0.47 |
| Cash flow from operating activities | 1,250 |
| Net income | 6,431 |
| Per share - basic | 0.21 |
| Per share - diluted | 0.21 |
| Capital expenditures (2) | 6,587 |
| Net debt (3) | 41,546 |
| Operating(4) | |
| Production | |
| Natural gas (mcf/d) | 1,674 |
| Crude oil (bbls/d) | 3,358 |
| NGLs (bbls/d) | 7 |
| Total (boe/d) | 3,644 |
| Average wellhead prices | |
| Natural gas ($/mcf) | 2.86 |
| Crude oil and NGLs ($/bbl) | 47.21 |
| Combined average ($/boe) | 45.32 |
| Netbacks (1) | |
| Operating netback ($/boe) | 24.61 |
| Funds flow netback ($/boe) | 43.76 |
| (1) | Funds from operations, funds from operations per share, operating netbacks and funds flow net back are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary below under "Reader Advisory - Non-GAAP Measurements" for further discussion. |
| (2) | Total capital expenditures, including acquisitions and excluding non-cash transactions and capital expenditures incurred subsequent to the completion of the POA (as defined below) related to those properties disposed of pursuant to that transaction. Refer to commentary in the Management's Discussion and Analysis under "Capital Expenditures and Acquisitions" for further information. |
| (3) | 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 this news release under "Reader Advisory - Non-GAAP Measurements" for further discussion. |
| (4) | For a description of the boe conversion ratio, refer to the commentary below under " Reader Advisory - BOE Presentation". |
| (5) | Refer to the description of the Plan of Arrangement ("POA") in the Management's Discussion and Analysis under "About Granite Oil Corp". |
Reader Advisory
Forward-Looking Statements. Certain statements contained in this press release may constitute forward-looking 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. Granite believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon by investors. These statements speak only as of the date of this press release and are expressly qualified, in their entirety, by this cautionary statement.
In particular, this press release contains forward-looking statements, pertaining to the following: pertaining to the following: projections of market prices and costs, supply and demand for oil and natural gas, the quantity of reserves, the effectiveness of the EOR Project, oil and natural gas production levels, capital expenditure programs, treatment under governmental regulatory and taxation regimes, expectations regarding Granite's credit facility and its ability to raise capital and to continually add to reserves through acquisitions and development, and projections of market prices and costs.
With respect to forward-looking statements contained in this press release related to Granite's business and operations, Granite has made assumptions regarding, among other things: the legislative and regulatory environments of the jurisdictions where Granite carries on business or has operations, the impact of increasing competition, and Granite's ability to obtain additional financing on satisfactory terms.
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; 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.
This forward-looking information represents 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 information 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.
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 non-cash 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.
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 year ended December 31, 2014 filed on www.sedar.com for the netback calculations.
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.
Test Rates. Test rates are not necessarily indicative of long-term performance or of ultimate recovery. Neither a pressure transient analysis nor a well-test interpretation has been carried out and the data should be considered to be preliminary until such analysis or interpretation has been done.
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.
Contact Information:
President & CEO
(403) 984-6335
Jonathan Fleming
E.V.P
(403) 984-6328