PrairieSky Royalty Ltd.
TSX : PSK

PrairieSky Royalty Ltd.

July 25, 2016 16:01 ET

PrairieSky Announces Second Quarter 2016 Results

CALGARY, ALBERTA--(Marketwired - July 25, 2016) - PrairieSky Royalty Ltd. ("PrairieSky" or the "Company") (TSK:PSK) is pleased to announce its second quarter operating and financial results for the period ended June 30, 2016.

2016 Second Quarter Highlights:

  • Average production of 23,158 BOE per day, 46% liquids
  • Product revenues of $43.2 million
  • Funds from Operations of $42.8 million or $0.19 per share, basic and diluted
  • Actively leased land for new and existing plays, collecting $2.6 million in lease issuance bonus consideration
  • Cash administrative expenses of $5.8 million and $2.75 per BOE, down 26% from Q2 2015
  • Acquired approximately 400 BOE per day of royalty production, approximately 80% natural gas, and approximately 300,000 royalty acres (approximately 100,000 acres of fee mineral title) for cash consideration of $25 million, before closing adjustments.
  • Maintained a strong balance sheet with $171.1 million of positive working capital and nil debt as of June 30, 2016

PRESIDENT'S MESSAGE

At PrairieSky's inception, we set out our strategic objectives of pursuing organic growth opportunities by leasing our extensive land base, adding to our high quality portfolio of royalty assets in a selective and disciplined manner and reducing costs. PrairieSky continues to work towards these objectives and despite challenging commodity pricing and spring breakup, operators continued to be active on PrairieSky lands with approximately 80 wells spud in the quarter. In addition, PrairieSky entered into numerous leasing arrangements with 24 different counterparties on plays across our extensive land base.

During the quarter, PrairieSky added approximately 300,000 royalty acres of land and approximately 400 BOE per day of royalty production for cash consideration of $25 million, before closing adjustments. This acquisition brings PrairieSky's total acreage to 14.9 million acres, almost triple the 5.2 million acres held at the time of the initial public offering just two years ago. During this same period, PrairieSky has continued to focus on cost controls and has reduced cash G&A expenses to $2.75 per BOE in the quarter.

PrairieSky maintains a strong balance sheet with $171.1 million of positive working capital, including $149.7 million of cash on hand. In April 2016, PrairieSky announced a Normal Course Issuer Bid under which it would repurchase up to $40 million of PrairieSky common shares over the next 12 months. At June 30, 2016, PrairieSky had repurchased and cancelled 242,500 common shares for cash of $6.0 million.

Andrew Phillips, President & CEO

FINANCIAL AND OPERATIONAL INFORMATION

The following table summarizes selected operational and financial information of the Company for the periods noted. All dollar amounts are stated in Canadian dollars unless otherwise noted.

A full version of PrairieSky's Management's Discussion and Analysis ("MD&A") and unaudited interim condensed financial statements and notes thereto for the fiscal period ended June 30, 2016 is available on SEDAR at www.sedar.com and PrairieSky's website at www.prairiesky.com.

FINANCIAL RESULTS

($ Millions, unless otherwise noted) Q2 2016 Q2 2015 YTD 2016 YTD 2015
FINANCIAL
Revenues $ 48.1 $ 71.8 $ 97.0 $ 126.2
Funds from Operations(1) 42.8 43.6 84.2 81.3
Per Share - basic and diluted (2) 0.19 0.29 0.37 0.54
Net Earnings (Loss) and Comprehensive Income (Loss) (5.7 ) 24.1 (4.0 ) 40.9
Per Share - basic and diluted(2) (0.02 ) 0.16 (0.02 ) 0.27
Dividends declared(3) 41.2 48.6 104.5 97.1
Per Share 0.1800 0.3250 0.4567 0.6500
Acquisitions including non-cash consideration 24.9 52.2 27.6 56.7
Working Capital 171.1 22.6 171.1 22.6
Shares Outstanding 228.8 149.6 228.8 149.6
Weighted average - basic 228.9 149.5 228.8 149.4
Weighted average - diluted 229.1 150.0 229.0 149.8
OPERATIONAL
Production Volumes
Natural Gas (MMcf/d) 75.3 59.5 73.0 61.0
Crude Oil (bbls/d) 8,213 5,751 8,480 5,859
NGL (bbls/d) 2,395 1,537 2,473 1,601
Total (BOE/d)(4) 23,158 17,205 23,120 17,627
Realized Pricing
Natural Gas ($/Mcf) $ 0.67 $ 2.53 $ 1.22 $ 2.75
Crude Oil ($/bbl) 45.01 53.54 39.41 48.38
NGL ($/bbl) 22.79 20.31 20.88 22.35
Total ($/BOE)(4) $ 20.50 $ 28.42 $ 20.53 $ 27.61
Operating Cash Flow Netback(1) $ 17.18 $ 21.84 $ 16.41 $ 21.34
Funds from Operations per BOE(1) $ 20.31 $ 27.85 $ 20.01 $ 25.48
Natural Gas Price Benchmarks
AECO ($/Mcf) $ 1.25 $ 2.67 $ 1.67 $ 2.81
Oil Price Benchmarks
West Texas Intermediate (WTI) (US$/bbl) $ 45.64 $ 57.41 $ 38.99 $ 52.91
Edmonton Light Sweet ($/bbl) $ 55.00 $ 66.69 $ 48.59 $ 58.89

(1) A Non-GAAP measure which is defined under the Non-GAAP Measures section in the MD&A.

(2) Net Earnings (Loss) and Comprehensive Income (Loss) and Funds from Operations per Common Share are calculated using the weighted average number of Common Shares outstanding.

(3) A dividend of $0.06 per Common Share was declared on June 15, 2016. The dividend was paid on July 15, 2016 to shareholders of record as at June 30, 2016.

(4) See "Conversions of Natural Gas to BOE".

CONFERENCE CALL DETAILS

A conference call to discuss the results will be held for the investment community on Tuesday, July 26, 2016 beginning at 6:30 a.m. MT (8:30 a.m. ET). To participate in the conference call, approximately 10 minutes prior to the conference call, please dial:

(877) 291-4570 (toll-free in North America)

(647) 788-4919 (Toronto & International)

FORWARD-LOOKING STATEMENTS

This press release includes certain statements regarding PrairieSky's future plans and operations and contains forward-looking statements that we believe allow readers to better understand our business and prospects. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information or statements. Forward-looking statements contained in this press release include our expectations with respect to PrairieSky's business and growth strategy, additional land leasing activities, and potential business development and acquisition opportunities.

With respect to forward-looking statements contained in this press release, we have made several assumptions including those described in detail in our MD&A and the Annual Information Form for the period ended December 31, 2015. Readers and investors are cautioned that the assumptions used in the preparation of such forward-looking information and statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them.

By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, lack of pipeline capacity, currency fluctuations, imprecision of reserve estimates, royalties, environmental risks, taxation, regulation, changes in tax or other legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility, and our ability to access sufficient capital from internal and external sources. In addition, PrairieSky is subject to numerous risks and uncertainties in relation to acquisitions. These risks and uncertainties include risks relating to the potential for disputes to arise with counterparties, and limited ability to recover indemnification under certain agreements. The foregoing and other risks are described in more detail in PrairieSky's MD&A, and the Annual Information Form for the period ended December 31, 2015 under the headings "Risk Management" and "Risk Factors", respectively, each of which is available at www.sedar.com.

Further, any forward-looking statement is made only as of the date of this press release, and PrairieSky undertakes no obligation to update or revise any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws. New factors emerge from time to time, and it is not possible for PrairieSky to predict all of these factors or to assess in advance the impact of each such factor on PrairieSky's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The forward-looking information contained in this document is expressly qualified by this cautionary statement.

CONVERSIONS OF NATURAL GAS TO BOE

To provide a single unit of production for analytical purposes, natural gas production and reserves volumes are converted mathematically to equivalent barrels of oil (BOE). PrairieSky uses the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 BOE ratio is based on an energy equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the BOE ratio is useful for comparative measures and observing trends, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.

ABOUT PRAIRIESKY ROYALTY LTD.

PrairieSky is a royalty-focused company, generating royalty revenues as petroleum and natural gas are produced from its properties. PrairieSky has a diverse portfolio of properties that have a long history of generating free cash flow and that represent the largest and most concentrated independently-owned fee simple mineral title position in Canada. PrairieSky's common shares trade on the Toronto Stock Exchange under the symbol PSK.

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