CALGARY, ALBERTA--(Marketwire - March 7, 2012) - NAL Energy Corporation (TSX:NAE) ("NAL" or the "Corporation") today announced its financial and operational results for the fourth quarter and year ended December 31, 2011 as well as 2011 year-end reserves. All amounts are in Canadian dollars unless otherwise stated.
SUMMARY
NAL's fourth quarter performance exceeded internal expectations from a production volumes and cash flow perspective. In addition, the Corporation continued to grow the oil and liquids side of the business which has contributed to the increased cash flow.
FOURTH QUARTER ACTIVITY
- Average production of 29,795 boe per day was above plan with a higher liquids weighting (49 percent vs. 47 percent in the third quarter) driven by a recovery in Saskatchewan oil volumes and the tie-in of new production from NAL's successful Lochend Cardium oil program;
- Funds from operations in the quarter of $68.4 million were up 12 percent over the same period in 2010; and
- Operating netback before hedging of $30.41 per boe was up 11 percent year-over-year.
2011 FULL YEAR ACTIVITY
- NAL had an active second half of 2011 with a drilling and completions program that saw average production volumes increase from a low of 26,758 boe per day in the second quarter (impacted by severe wet weather conditions in Alberta and Saskatchewan) to 29,795 boe per day in the fourth quarter - an increase of 11 percent;
- Full year average production of 28,338 boe per day was consistent with forecasts;
- Operating netback before hedging of $30.26 per boe was 11 percent higher year-over-year;
- NAL added over 25,000 (12,500 net) acres of land in the greater Hoffer area in southeast Saskatchewan which is prospective for Mississippian light oil through two farm-in arrangements; and
- NAL currently has more than five years of drilling locations in inventory which is predominantly oil and liquids focused.
2011 RESERVES AND FINDING & DEVELOPMENT ("F&D") HIGHLIGHTS
- Year-end 2011 proved plus probable ("P+P") reserves of 103.8 million boe after asset sales were essentially unchanged from the 103.9 million boe reported at the end of 2010;
- The liquids weighting of NAL's reserves has increased in 2011, with approximately 51 percent of the P+P reserves being comprised of oil and natural gas liquids versus 50 percent at year-end 2010;
- NAL replaced approximately 127 percent of its 2011 production through P+P reserves additions before asset dispositions and replaced approximately 100 percent of production after asset sales;
- The Corporation's P+P reserve life index ("RLI") now stands at 10.0 years, an increase from 9.4 years at the end of 2010 and 9.2 years at the end of 2009;
- NAL's total proved reserves represent approximately 64 percent of total proved plus probable reserves. Proved producing reserves represent approximately 88 percent of the total proved category; and
- Three-year average P+P F&D and FD&A metrics of $21.99 per boe and $23.59 per boe are competitive given NAL's strong focus on higher cost/higher return oil development. NAL believes that three year average figures are a more meaningful measure of performance than one year metrics, as full-cycle development programs often span multiple years.
2012 YEAR-TO-DATE ACTIVITY
- In January, NAL finalized a new four-year arrangement that grants the Corporation access to 280 (182 net) sections of Cardium acreage directly offsetting existing Garrington/Westward Ho lands. NAL's net commitment is $6 million per year under the new agreement and adds up to 50 new drillable Cardium locations plus future upside potential;
- In February, the Corporation completed a $150 million convertible unsecured subordinated debenture financing. A portion of the proceeds will be used to retire $80 million of convertible debentures maturing in August 2012 with the remaining proceeds being applied against the Corporation's existing credit lines. Accounting for the recent financing, the Corporation currently has over $365 million in available capacity on existing bank lines of $550 million; and
- NAL exercised its option for a three year extension to the existing joint venture agreement with a senior industry partner in the Corporation's Lochend Cardium light oil region. In connection with the extension, NAL has a commitment to spend an additional $30 - 35 million by August 31, 2015.
2012 GUIDANCE & OUTLOOK
| |
2012 Guidance |
| Production (boe/d) |
28,000 - 29,000 |
| Operating Costs ($/boe) |
11.50 - 12.00 |
| Net Capital Expenditures ($ MM) |
200 |
- NAL's 2012 capital program has been targeted to grow oil and liquids volumes in 2012;
- NAL announced its guidance for 2012 on January 11, 2012 - details may be found on the Corporation's website (www.nalenergy.com ) or by clicking HERE;
- Commodity prices in the 2012 guidance have moved higher for oil from the $95 US WTI assumption and lower for gas compared to NAL's $3.00 outlook;
- The Corporation is currently executing an active first quarter capital program with up to 10 operating drilling rigs;
- As in every year, NAL will reassess its capital plans at the end of Q1 based upon performance, commodity prices and market conditions. The Corporation operates almost all its capital program and maintains flexibility to defer or accelerate programs for the second half of 2012, which will be all oil focused opportunities; and
- Non-core asset dispositions of properties are expected to generate net proceeds of approximately $10 - 15 million during 2012.
NAL's complete unaudited consolidated financial statements for the year-ended 2011 and related Management Discussion and Analysis may be found by following the links below, and have been filed on SEDAR at www.sedar.com.
Download NAL's Year-end 2011 MD&A and Financials from NAL's website.
RESERVES AND CAPITAL EFFICIENCY SUMMARY(1)
| |
2011 |
|
2010 |
|
| Reserves (MMboe) |
|
|
|
|
| Proved |
66.2 |
|
71.0 |
|
| Proved + Probable ("P+P") |
103.8 |
|
103.9 |
|
| |
|
|
|
|
| P+P Reserves per unit (boe per share) |
0.69 |
|
0.71 |
|
| |
|
|
|
|
| Reserve Life Index (years) |
|
|
|
|
| P+P |
10.0 |
|
9.4 |
|
| |
|
|
|
|
| Reserves Replacement Ratio |
|
|
|
|
| P+P (excluding acquisitions and dispositions ("A&D")) |
127 |
% |
90 |
% |
| P+P (including A&D) |
99 |
% |
109 |
% |
| |
|
|
|
|
Three Year Weighted Average |
| Including Changes in Future Development Capital |
2011 |
2010 |
|
2009 |
2009 - 2011 |
| |
|
|
|
|
|
| Finding & Development Costs ($/boe) |
|
|
|
|
|
| Proved |
27.09 |
21.41 |
|
18.52 |
21.99 |
| P+P |
24.86 |
22.60 |
|
17.86 |
21.99 |
| |
|
|
|
|
|
| F&D Recycle Ratio(2) |
|
|
|
|
|
| Proved |
1.1 |
1.4 |
|
1.7 |
1.4 |
| P+P |
1.2 |
1.3 |
|
1.8 |
1.4 |
| |
|
|
|
|
|
| Finding, Development & Acquisition Costs ($/boe) |
|
|
|
|
|
| Proved |
33.16 |
22.37 |
|
27.87 |
27.23 |
| P+P |
29.23 |
22.85 |
|
22.33 |
23.59 |
| |
|
|
|
|
|
| |
|
|
|
|
Three Year Weighted Average |
| Excluding Changes in Future Development Capital |
2011 |
2010 |
|
2009 |
2009 - 2011 |
| |
|
|
|
|
|
| Finding & Development Costs ($/boe) |
|
|
|
|
|
| Proved |
30.67 |
23.73 |
|
13.06 |
21.73 |
| P+P |
18.07 |
20.92 |
|
12.34 |
17.09 |
| |
|
|
|
|
|
| F&D Recycle Ratio(2) |
|
|
|
|
|
| Proved |
1.0 |
1.3 |
|
2.4 |
1.4 |
| P+P |
1.7 |
1.4 |
|
2.6 |
1.8 |
| |
|
|
|
|
|
| Finding, Development & Acquisition Costs ($/boe) |
|
|
|
|
|
| Proved |
38.26 |
24.28 |
|
22.24 |
24.73 |
| P+P |
20.47 |
21.46 |
|
15.95 |
17.77 |
| |
|
|
|
|
|
| Operating Netback Including Hedging ($/boe) |
29.90 |
29.74(3 |
) |
31.91 |
30.43 |
(1) All reserves volumes exclude royalty interest volumes.
(2) Recycle ratio is defined as operating netback divided by F&D costs, including changes in future development capital ("FDC"). Calculations excluding changes in FDC are provided for comparison purposes.
(3) Operating netback for 2010 has been restated to be consistent with the adoption of IFRS.
FINANCIAL AND OPERATING HIGHLIGHTS
(thousands of dollars, except per share and boe data)
(unaudited)
| |
Three months ended Dec 31 |
|
Years ended Dec 31 |
|
| |
2011 |
|
2010 |
|
2011 |
|
2010 |
|
| FINANCIAL |
|
|
|
|
|
|
|
|
| Revenue(1) |
144,767 |
|
116,888 |
|
526,266 |
|
491,037 |
|
| Cash flow from operating activities |
67,818 |
|
69,401 |
|
258,801 |
|
274,606 |
|
| Cash flow per share - basic |
0.45 |
|
0.47 |
|
1.74 |
|
1.91 |
|
| Cash flow per share - diluted |
0.42 |
|
0.43 |
|
1.60 |
|
1.75 |
|
| Funds from operations |
68,393 |
|
61,311 |
|
250,153 |
|
256,356 |
|
| Funds from operations per share - basic |
0.45 |
|
0.42 |
|
1.68 |
|
1.78 |
|
| Funds from operations per share - diluted |
0.44 |
|
0.40 |
|
1.63 |
|
1.72 |
|
| Net income (loss) |
(53,886 |
) |
(22,017 |
) |
(11,034 |
) |
59,025 |
|
| Dividends declared |
31,629 |
|
39,702 |
|
125,018 |
|
155,777 |
|
| Dividends per share |
0.21 |
|
0.27 |
|
0.84 |
|
1.08 |
|
| Basic payout ratio: |
|
|
|
|
|
|
|
|
| |
based on cash flow from operating activities |
47 |
% |
57 |
% |
48 |
% |
57 |
% |
| |
based on funds from operations |
46 |
% |
65 |
% |
50 |
% |
61 |
% |
| Basic payout ratio including capital expenditures: |
|
|
|
|
|
|
|
|
| |
based on cash flow from operating activities |
106 |
% |
94 |
% |
143 |
% |
130 |
% |
| |
based on funds from operations |
105 |
% |
106 |
% |
148 |
% |
139 |
% |
| Basic payout ratio including capital expenditures and proceeds from disposition: |
|
|
|
|
|
|
|
|
| |
based on cash flow from operating activities |
102 |
% |
83 |
% |
131 |
% |
122 |
% |
| |
based on funds from operations |
101 |
% |
94 |
% |
135 |
% |
131 |
% |
| Shares outstanding (000's) |
|
|
|
|
|
|
|
|
| |
Period end |
151,107 |
|
147,248 |
|
151,107 |
|
147,248 |
|
| |
Weighted average |
150,393 |
|
146,948 |
|
148,709 |
|
143,913 |
|
| Capital expenditures(2) |
40,287 |
|
25,460 |
|
245,903 |
|
201,524 |
|
| Property acquisitions (dispositions), net(3) |
181 |
|
15,963 |
|
(28,983 |
) |
46,429 |
|
| Net debt, excluding convertible debentures(4) |
363,380 |
|
310,302 |
|
363,380 |
|
310,302 |
|
| Convertible debentures (at face value) |
194,744 |
|
194,744 |
|
194,744 |
|
194,744 |
|
| |
|
|
|
|
|
|
|
|
| OPERATING |
|
|
|
|
|
|
|
|
| Daily production(5) |
|
|
|
|
|
|
|
|
| |
Crude oil (bbl/d) |
11,755 |
|
10,575 |
|
10,587 |
|
11,349 |
|
| |
Natural gas (Mcf/d) |
91,340 |
|
92,841 |
|
90,302 |
|
92,403 |
|
| |
Natural gas liquids (bbl/d) |
2,817 |
|
2,548 |
|
2,701 |
|
2,696 |
|
| |
Oil equivalent (boe/d) |
29,795 |
|
28,596 |
|
28,338 |
|
29,446 |
|
| |
|
|
|
|
|
|
|
|
| OPERATING NETBACK ($/boe) |
|
|
|
|
|
|
|
|
| Revenue before hedging gains |
52.81 |
|
44.43 |
|
50.88 |
|
45.69 |
|
| Royalties |
(8.74 |
) |
(7.53 |
) |
(8.69 |
) |
(8.05 |
) |
| Operating costs |
(13.76 |
) |
(9.72 |
) |
(12.01 |
) |
(10.41 |
) |
| Other income |
0.10 |
|
0.20 |
|
0.08 |
|
0.13 |
|
| Operating netback before hedging |
30.41 |
|
27.38 |
|
30.26 |
|
27.36 |
|
| Hedging gains (losses) |
(0.29 |
) |
2.49 |
|
(0.36 |
) |
2.38 |
|
| Operating netback |
30.12 |
|
29.87 |
|
29.90 |
|
29.74 |
|
(1) Oil, natural gas and natural gas liquid sales less transportation costs and prior to royalties and hedging.
(2) Excludes property and corporate acquisitions, and is net of drilling incentive credits of $2.5 million for the year ended December 31, 2011 (2010 - $ 9.9 million).
(3) Represents costs to acquire properties less proceeds from dispositions.
(4) Bank debt plus working capital and other liabilities, excluding derivative contracts and deferred income tax balances.
(5) Includes royalty interest volumes.
NON-IFRS FINANCIAL MEASURES
Throughout this press release, Management uses the terms "funds from operations", "funds from operations per share", "payout ratio", "cash flow from operations per share", "net debt to trailing 12 month cash flow", operating netback and cash flow netback. These are considered useful supplemental measures as they provide an indication of the results generated by the Corporation's principal business activities. Management uses the terms to facilitate the understanding of the results of its operations. However, these terms do not have any standardized meaning as prescribed by IFRS. Investors should be cautioned that these measures should not be construed as an alternative to net income determined in accordance with IFRS as an indication of NAL's performance. NAL's method of calculating these measures may differ from other issuers and, accordingly, they may not be comparable to measures used by other issuers.
Funds from operations is calculated as cash flow from operating activities before changes in non-cash working capital. Funds from operations does not represent operating cash flows or operating profits for the period and should not be viewed as an alternative to cash flow from operating activities calculated in accordance with IFRS. Funds from operations is considered by Management to be a more meaningful key performance indicator of NAL's ability to generate cash to finance operations and to pay monthly dividends. Funds from operations per share and cash flow from operations per share are calculated using the weighted average shares outstanding for the period.
Payout ratio is calculated as dividends declared for a period as a percentage of either cash flow from operating activities or funds from operations; both measures are stated.
ADVISORY REGARDING PRODUCTION INFORMATION
When converting natural gas to barrels of oil equivalent (boe) within this press release, NAL uses the widely recognized standard of six thousand cubic feet (Mcf) to one barrel of oil. However, boes may be misleading, particularly if used in isolation. A conversion ratio of 6 Mcf:1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
FORWARD-LOOKING INFORMATION
This press release contains forward-looking information as to the Corporation's internal projections, expectations and beliefs relating to future events or future performance. Forward looking information is typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "could", "plan", "intend", "should", "believe", "outlook", "project", "potential", "target", and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities estimated and can be profitably produced in the future.
In particular, this press releaese contains forward-looking information pertaining to the following, without limitation: the amount and timing of cash flows and dividends to shareholders; reserves and reserves values; 2011 production; future tax treatment of the Corporation; the Corporation's tax pools; future oil and gas prices; operating, drilling and completion costs; the amount of future asset retirement obligations; future liquidity and future financial capacity; future results from operations; payout ratios; cost estimates and royalty rates; drilling plans; tie-in of wells; future acquisition, development and exploration expenditures; and rates of return.
With respect to forward-looking statements contained in this press release and the press release through which it was disseminated, assumptions have been made regarding, among other things: future oil and natural gas prices; future capital expenditure levels; future oil and natural gas production levels; future exchange rates; the amount of future cash dividends that NAL intends to pay; the cost of expanding the Corporation's property holdings; the Corporation's ability to obtain equipment in a timely manner to carry out exploration and development activities; the Corporation's ability to market its oil and natural gas successfully to current and new customers; the impact of increasing competition; NAL's ability to obtain financing on acceptable terms; and NAL's ability to add production and reserves through its development and exploitation activities.
Although NAL believes that the expectations reflected in the forward-looking information contained in the press release and the press release through which it was disseminated, and the assumptions on which such forward-looking information are made, are reasonable, readers are cautioned not to place undue reliance on such forward looking statements as there can be no assurance that the plans, intentions or expectations upon which the forward-looking information is based will occur. Such information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated and which may cause NAL's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance. These risks and uncertainties include, without limitation: changes in commodity prices; unanticipated operating results or production declines; the impact of weather conditions on seasonal demand and NAL's ability to execute its capital program; risks inherent in oil and gas operations; the imprecision of reserve estimates; limited, unfavorable or no access to capital or credit markets; the impact of competitors; the lack of availability of qualified operating or management personnel; the inability to obtain industry partner and other third party consents and approvals, when required; failure to realize the anticipated benefits of acquisitions; general economic conditions in Canada, the United States and globally; fluctuations in foreign exchange or interest rates; changes in government regulation of the oil and gas industry, including environmental regulation; changes in royalty rates; changes in tax laws; stock market volatility and market valuations; OPEC's ability to control production and balance global supply and demand for crude oil at desired price levels; political uncertainty, including the risk of hostilities in the petroleum producing regions of the world; and other risk factors discussed in other public filings of the Corporation including the Corporation's current Annual Information Form.
NAL cautions that the foregoing list of factors that may affect future results is not exhaustive. The forward-looking information contained in this press release is made as of the date of this press release. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.
ABOUT NAL
NAL Energy Corporation generates returns for its shareholders by pursuing a strategy of acquiring, producing and selling crude oil, natural gas and natural gas liquids from assets based in southeastern Saskatchewan, central Alberta, and northeastern British Columbia.