Operating Cost Improvements & Growth in Strategic Third Party Processing Business Highlight a Solid Quarter
CALGARY, Alberta, May 08, 2024 (GLOBE NEWSWIRE) — Pieridae Energy Limited (“Pieridae” or the “Company”) (TSX: PEA) announces the release of its first quarter 2024 financial and operating results. Pieridae generated Net Operating Income (“NOI”)1 of $23 million during the first quarter of 2024, reflecting aggressive operating cost and fuel gas reductions, and $9 million in hedging gains. Pieridae’s management’s discussion and analysis (“MD&A”) and unaudited interim consolidated financial statements and notes for the quarter ended March 31, 2024 are available at www.pieridaeenergy.com and on SEDAR at www.sedarplus.ca.
“Pieridae is delivering on its strategic plan to reduce operating costs, decrease fuel gas consumption and emissions, and grow our midstream gathering and processing business,” said Pieridae’s President and Chief Executive Officer, Darcy Reding. “We have put up a solid quarter from a cash flow perspective thanks to both our relentless focus on improving cost structure and our hedging program, despite very low AECO gas prices and lower than anticipated March production from an unplanned outage at our Jumping Pound gas plant. We expect to see growth in our midstream revenue as we continue to attract new raw gas volumes from third party producers actively drilling in the vicinity of our Caroline gas gathering system and deep cut gas plant.”
HIGHLIGHTS
- Generated NOI1Â of $23.4 million ($0.15 per basic and fully diluted share).
- Reduced Operating Costs by 23% year over year to $51.5 million ($16.35/boe) due, in part, to successful cost reduction initiatives in our field operations and processing facilities.
- Incurred Capital Expenditures of $8.9 million focused primarily on winter season well abandonment and closure operations in Northeast BC, along with well and facility optimization and facility maintenance.
- Generated Funds Flow from Operations1Â of $12.0 million ($0.08 per basic and fully diluted share).
- Produced 34,620 boe/d (84% natural gas) which includes the impact of an unplanned outage at the Jumping Pound plant in late March 2024.
- Our forecasted 2024 PDP base decline rate of 5.4% which can be further enhanced by our available inventory of capital efficient well and facility optimization opportunities as natural gas economics improve.
- Tied-in new third-party production to our Caroline gas gathering system, delivering long-term incremental processing and marketing revenue from a producer actively drilling within the capture area of the Caroline facility.
- Initiated a disposition marketing process for non-core Northern AB and Northeast BC properties in order to focus resources and operations on assets where Pieridae owns and controls the gathering and processing infrastructure.
SELECTED QUARTERLY OPERATIONAL & FINANCIAL RESULTS
| 2024 | 2023 | 2022 | |||||||||||||||
| ($ 000s unless otherwise noted) | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | |||||||||
| Production | |||||||||||||||||
| Natural gas (mcf/d) | 175,356 | 174,211 | 155,763 | 159,427 | 186,156 | 179,143 | 181,030 | 178,918 | |||||||||
| Condensate (bbl/d) | 2,781 | 2,384 | 2,020 | 2,300 | 2,657 | 2,469 | 2,911 | 2,864 | |||||||||
| NGLs (bbl/d) | 2,613 | 1,921 | 2,273 | 2,216 | 2,784 | 2,389 | 2,876 | 3,695 | |||||||||
| Sulphur (tonne/d) | 1,491 | 1,284 | 1,124 | 1,362 | 1,457 | 1,348 | 1,312 | 1,555 | |||||||||
| Total production (boe/d)Â (1) | 34,620 | 33,340 | 30,253 | 31,087 | 36,467 | 34,715 | 35,959 | 36,378 | |||||||||
| Third-party raw volumes processed (mcf/d)Â (2) | 58,212 | 70,060 | 61,093 | 55,750 | 63,396 | 49,304 | 66,224 | 61,231 | |||||||||
| Financial | |||||||||||||||||
| Natural gas price ($/mcf) | |||||||||||||||||
| Realized before Risk Management Contracts (3) | 2.53 | 2.32 | 2.65 | 2.39 | 3.24 | 5.08 | 4.38 | 7.13 | |||||||||
| Realized after Risk Management Contracts (3) | 3.21 | 3.12 | 3.25 | 3.03 | 5.12 | 5.24 | 3.62 | 4.67 | |||||||||
| Benchmark natural gas price | 2.48 | 2.29 | 2.59 | 2.40 | 3.25 | 5.20 | 4.28 | 7.22 | |||||||||
| Condensate price ($/bbl) | |||||||||||||||||
| Realized before Risk Management Contracts (3) | 91.73 | 97.15 | 97.47 | 84.81 | 107.22 | 110.24 | 103.71 | 132.60 | |||||||||
| Realized after Risk Management Contracts (3) | 85.00 | 86.34 | 80.49 | 105.84 | 106.70 | 117.67 | 105.82 | 116.61 | |||||||||
| Benchmark condensate price ($/bbl) | 98.43 | 104.30 | 106.30 | 93.25 | 107.05 | 115.24 | 115.66 | 132.49 | |||||||||
| Processing and marketing revenue | 5,072 | 11,919 | 6,603 | 5,410 | 6,401 | 9,310 | 7,650 | 7,471 | |||||||||
| Net income (loss) | (6,284 | ) | 7,414 | (16,254 | ) | 4,182 | 13,639 | 114,662 | (1,573 | ) | 22,982 | ||||||
| Net income (loss) $ per share, basic | (0.04 | ) | 0.05 | (0.11 | ) | 0.03 | 0.09 | 0.72 | (0.01 | ) | 0.15 | ||||||
| Net income (loss) $ per share, diluted | (0.04 | ) | 0.03 | (0.11 | ) | 0.03 | 0.08 | 0.70 | (0.01 | ) | 0.14 | ||||||
| Net operating income (4) | 23,418 | 25,441 | 11,650 | 43,843 | 49,995 | 67,711 | 30,014 | 55,969 | |||||||||
| Cashflow provided by operating activities | 7,019 | 31,983 | 7,577 | 27,533 | 37,109 | 40,134 | 9,899 | 34,922 | |||||||||
| Funds flow from operations (4) | 12,044 | 14,269 | (1,422 | ) | 35,432 | 37,413 | 57,641 | 17,721 | 43,462 | ||||||||
| Total assets | 590,531 | 638,541 | 564,921 | 575,849 | 587,641 | 615,477 | 473,642 | 499,580 | |||||||||
| Adjusted working capital deficit (5) | (31,671 | ) | (31,830 | ) | (21,454 | ) | (6,258 | ) | (22,275 | ) | (11,249 | ) | (46,419 | ) | (28,892 | ) | |
| Net debt (4) | (209,964 | ) | (204,046 | ) | (205,536 | ) | (181,670 | ) | (202,180 | ) | (214,503 | ) | (254,489 | ) | (248,967 | ) | |
| Capital expenditures (6) | 4,897 | 9,306 | 16,363 | 9,384 | 20,486 | 19,037 | 7,216 | 9,739 | |||||||||
(1) Total production excludes sulphur.
(2) Third-party volumes processed are by activity month, which do not include accounting accruals.
(3) Includes physical commodity and financial risk management contracts inclusive of cash flow hedges, together (“Risk Management Contracts”).
(4) Refer to the “Net Operation Income”, “Capital Resources” and “non-GAAP measures” sections of the Company’s MD&A for reference to non-GAAP measures.
(5) Adjusted working capital is a non-GAAP measure and is calculated as accounts payable and accrued liabilities, less cash and cash equivalents, restricted cash, accounts receivable, prepaids and deposits.
(6) Excludes reclamation and abandonment activities.
OUTLOOK
Pieridae’s priorities for 2024 remain:
- Maximize processing facility reliability to meet production targets and maximize third party processing revenue by leveraging our available excess deep cut natural gas processing capacity.
- Reduce operating expenses to improve corporate netback.
- Optimize fuel gas consumption to reduce raw gas shrinkage, lower GHG emissions and costs, and increase sales revenue.
- Reduce long-term debt to deleverage the balance sheet.
Pieridae made the decision to shut down the Jumping Pound gas plant in mid-March after experiencing a mechanical failure in the Superclaus unit’s sulphur condenser vessel. Although the gas plant was capable of continued operations at the time, a proactive shut down and repair was deemed necessary to restore normal sulphur recovery operations. In anticipation of conducting this repair work at the scheduled 2025 maintenance turnaround, the Company had previously procured a full set of spare condenser tubes and the vessel is currently undergoing a full tube replacement. The capital cost of this repair is estimated to be approximately $3.7 million, and the facility is expected to be back on production in May 2024. Annualized production impact of this unplanned outage is approximately 1,190 boe/d and NOI2 impact is approximately $7.1 million reflecting downtime impact on both commodity sales and third-party processing revenue.
Forward natural gas prices have continued to weaken, particularly over the recent months, as global demand stagnated through a warmer-than-normal winter season, resulting in expected record storage levels and oversupply. Pieridae’s robust hedge position will continue to partially mitigate the anticipated lower natural gas prices through 2024.
Production in the Clearwater gas field of Central Alberta was shut in during 2023 due to low natural gas prices and a high proportion of variable operating costs, reducing 2024 average sales volumes by approximately 500 boe/d. Although our guidance originally anticipated stronger winter gas pricing would re-establish economic production from this field, it will remain shut-in until there is a recovery of gas prices. The Company is currently evaluating additional shut-ins in low netback areas where summer gas prices are unable to cover variable production costs.
Pieridae has hedged approximately 74% of its expected 2024 natural gas production at approximately CAD$3.50/Mcf, and approximately 70% of its expected 2024 condensate production is hedged utilizing WTI swaps with a weighted average price of CAD$101.78 and a CAD$80.00 x $90.75 collar. The discounted unrealized gain on the Company’s natural gas and C5 hedge positions at March 31, 2024 was approximately $34.8 million using the March 31, 2024 forward strip.
Pieridae’s 2024 capital budget is highlighted by low-cost well and facility optimization projects and the second and final phase of the maintenance turnaround at the Waterton deep-cut, sour gas processing facility (the “Waterton Turnaround”), which is currently scheduled for the third quarter. The capital program has been adjusted to incorporate the capital cost to repair the Jumping Pound gas plant during the second quarter. Pieridae owns and operates three major sour gas processing facilities which each require periodic maintenance turnarounds on a five-to-six-year cycle.
The scope and timing of all capital projects continues to be scrutinized in the context of low natural gas prices. Pieridae does not intend to resume its foothills development drilling program until the natural gas price outlook improves.
The Company’s revised 2024 guidance, incorporating the above commodity price, production, and capital expenditure impacts is as follows:
| Revised 2024 Guidance | Previous 2024 Guidance | |||
| ($ 000s unless otherwise noted) | Low | High | Low | High |
| Total production (boe/d)Â (1) | 31,500 | 33,000 | 33,000 | 34,500 |
| Net operating income (2)(3)(5) | 65,000 | 85,000 | 80,000 | 100,000 |
| Operating Netback ($/boe)Â (3)(4)(5) | 6.00 | 7.00 | 6.50 | 8.00 |
| Capital expenditures | 30,000 | 35,000 | 28,000 | 33,000 |
(1) 2024 production guidance includes the impact of the phase 2 Waterton Turnaround and the unplanned outage at Jumping Pound.
(2) Refer to the NOI section of the Company’s MD&A for reference to non-GAAP measures.
(3) Refer to Operating Netback section of the Company’s MD&A for reference to non-GAAP measures.
(4) Assumes unhedged average 2024 AECO price of $1.95/GJ and average 2024 WTI price of $80/bbl.
(5) Accounts for impact of hedge contracts in place at May 8, 2024.
While debt reduction remains a top priority for 2024, the ability to repay revolving debt in 2024 is impacted by low natural gas prices and non-discretionary maintenance capital projects. Pieridae expects to draw down the final US$10 million delayed-draw tranche of the senior secured term loan during 2024 (undrawn to date) to support the final phase of the Waterton Turnaround in the third quarter of this year. The Company’s available liquidity was $45 million at March 31, 2024 including US$12 million remaining undrawn capacity on the revolving loan, the US$10 million undrawn delayed draw term loan, and $15 million in cash and equivalents.
Pieridae’s previously announced Goldboro sale process is ongoing and, if successful, cash proceeds will be applied against the company’s $23 million (principal plus accrued interest) convertible bridge term loan which matures on December 13, 2024. The Goldboro sale process is expected to conclude in the second quarter of 2024 and, once complete, will mark the conclusion of Pieridae’s strategic pivot away from east coast LNG and toward an Alberta-focused natural gas production and processing business. The Company will make an announcement upon the conclusion of this process.
HEDGE POSITION
Pieridae hedges to mitigate commodity price, interest rate and foreign exchange volatility to protect the cash flow required to fund the Company’s operations, capital requirements and debt service obligations, while allowing the Company to participate in future commodity price upside. Pieridae continues to execute its risk management program governed by its hedge policy and in compliance with the thresholds required by the senior loan facilities. As of March 31, 2024, the Company is hedged in accordance with the requirements of the senior loan agreement.
The tables below summarize Pieridae’s hedge portfolio for natural gas, C5 and power:
| 2024-2025 Hedge Portfolio(1) | Q124 | Q224 | Q324 | Q424 | 2024(2) | Q125 | Q225 | Q325 | Q425 | 2025 | ||||||||||
| AECO Natural Gas Sales | ||||||||||||||||||||
| Total Hedged (GJ/d) | 125,000 | 112,500 | 112,500 | 110,842 | 115,191 | 110,000 | 110,000 | 110,000 | 110,000 | 110,000 | ||||||||||
| Avg Hedge Price (C$/GJ) | $3.34 | $3.33 | $3.33 | $3.32 | $3.33 | $3.32 | $3.32 | $3.32 | $3.32 | $3.32 | ||||||||||
| WTI / C5 Sales | ||||||||||||||||||||
| Total Hedged (bbl/d) | 1,547 | 1,794 | 1,766 | 1,739 | 1,712 | 1,721 | 1,692 | 1,663 | 1,641 | 1,679 | ||||||||||
| Avg Collar Cap Price (C$/bbl) | $91.73 | $92.98 | $93.02 | $93.05 | $92.73 | $92.73 | $92.44 | $92.03 | $92.05 | $92.32 | ||||||||||
| Avg Collar Floor Price (C$/bbl) | $81.67 | $84.48 | $84.55 | $84.62 | $83.90 | $84.14 | $84.25 | $84.61 | $84.67 | $84.42 | ||||||||||
| Power Purchases | ||||||||||||||||||||
| Total Hedged (MW) | 55 | 55 | 55 | 55 | 55 | 55 | 55 | 55 | 55 | 55 | ||||||||||
| Avg Hedge Price (C$/MWh) | $68.41 | $68.51 | $68.49 | $68.14 | $68.39 | $79.22 | $79.10 | $79.07 | $79.08 | $79.12 | ||||||||||
| 2026-2027 Hedge Portfolio (1) | Q126 | Q226 | Q326 | Q426 | 2026 | Q127 | Q227 | Q327 | Q427 | 2027 | ||||||||||
| AECO Natural Gas Sales | ||||||||||||||||||||
| Total Hedged (GJ/d) | 110,000 | 95,165 | 65,000 | 61,685 | 92,279 | 76,200 | 40,220 | – | – | 28,816 | ||||||||||
| Avg Hedge Price (C$/GJ) | $3.32 | $3.42 | $3.77 | $3.76 | $3.55 | $3.77 | $3.81 | – | – | $3.78 | ||||||||||
| WTI / C5 Sales | ||||||||||||||||||||
| Total Hedged (bbl/d) | 1,622 | 1,518 | 1,184 | 1,170 | 1,372 | 1,171 | 1,141 | 785 | 785 | 969 | ||||||||||
| Avg Collar Cap Price (C$/bbl) | $91.69 | $90.82 | $91.36 | $91.37 | $91.31 | $91.40 | $88.68 | $90.40 | $90.40 | $90.19 | ||||||||||
| Avg Collar Floor Price (C$/bbl) | $84.09 | $83.71 | $84.42 | $84.48 | $84.14 | $84.37 | $84.02 | $90.40 | $90.40 | $86.73 | ||||||||||
| Power Purchases | ||||||||||||||||||||
| Total Hedged (MW) | 45 | 45 | 45 | 45 | 45 | 25 | 25 | 25 | 25 | 46 | ||||||||||
| Avg Hedge Price (C$/MWh) | $75.87 | $75.88 | $75.88 | $75.88 | $75.88 | $70.19 | $70.19 | $70.19 | $70.19 | $73.61 | ||||||||||
| 2028 Hedge Portfolio(1) | Q128 | Q228 | Q328 | Q428 | 2028 | |||||||||||||||
| AECO Natural Gas Sales | ||||||||||||||||||||
| Total Hedged (GJ/d) | – | – | – | – | – | |||||||||||||||
| Avg Hedge Price (C$/GJ) | – | – | – | – | – | |||||||||||||||
| WTI / C5 Sales | ||||||||||||||||||||
| Total Hedged (bbl/d) | 785 | – | – | – | 195 | |||||||||||||||
| Avg Collar Cap Price (C$/bbl) | $90.40 | – | – | – | $90.40 | |||||||||||||||
| Avg Collar Floor Price (C$/bbl) | $90.40 | – | – | – | $90.40 | |||||||||||||||
| Power Purchases | ||||||||||||||||||||
| Total Hedged (MW) | – | – | – | – | – | |||||||||||||||
| Avg Hedge Price (C$/MWh) | – | – | – | – | – | |||||||||||||||
| (1) Includes forward physical sales contracts and financial derivative contracts as of May 8, 2024. | ||||||||||||||||||||
| (2) Includes YTD actual and balance of year hedges. | ||||||||||||||||||||
CONFERENCE CALL DETAILS
A conference call and webcast to discuss the results will be held on Thursday, May 9, 2024, at 1:30 p.m. MDT / 3:30 p.m. EDT, following the formal business conducted at the Annual General Meeting. To participate in the webcast or conference call, you are asked to register using one of the links provided below.
To register to participate via webcast please follow this link:
https://edge.media-server.com/mmc/jn6fms8a
Alternatively, to register to participate by telephone please follow this link:
https://register.vevent.com/register/BIbd2622c203f841ebaee44545116969a3
A replay of the webcast will be available two hours after the conclusion of the event and may be accessed using the webcast link above.
ABOUT PIERIDAE
Pieridae is a Canadian energy company headquartered in Calgary, Alberta. The Company is a significant upstream producer and midstream custom processor of natural gas, NGLs, condensate, and sulphur from the Canadian Foothills and adjacent areas in Alberta and in northeast British Columbia. Pieridae’s vision is to provide responsible, affordable natural gas and derived products to meet society’s energy security needs. Pieridae’s common shares trade on the TSX under the symbol “PEA”.
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