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March 14, 2011
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Petrobank Reports Year-End 2010 Financial and Operating Results
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CALGARY, ALBERTA--(Marketwire - March 14, 2011) - Petrobank Energy and Resources Ltd. ("Petrobank" or the "Company") (TSX:PBG) is pleased to announce 2010 fourth quarter and year-end financial and operating results highlighted by funds flow from continuing operations of $1.46 per diluted share in the fourth quarter of 2010.
Petrobank's results include the financial and operating results of PetroBakken Energy Ltd. ("PetroBakken") (TSX:PBN), 59% owned by Petrobank at December 31, 2010. PetroBakken announced fourth quarter and 2010 year-end financial and operating results on March 8, 2011.
The results of Petrominerales Ltd. ("Petrominerales") (TSX:PMG), previously majority owned by Petrobank, have been separately disclosed as discontinued operations up until December 31, 2010, the date this business unit was spun off to Petrobank shareholders. Petrominerales fourth quarter and 2010 year-end financial and operating results are set forth in the press release dated March 3, 2011, which can be found at www.petrominerales.com.
All references to $ are Canadian dollars unless otherwise noted.
HIGHLIGHTS FROM CONTINUING OPERATIONS
Q4 2010 Highlights and Significant Transactions
-- On December 31, 2010, Petrobank and Petrominerales completed a corporate
reorganization which resulted in Petrobank shareholders receiving
Petrobank's proportionate interest in Petrominerales Ltd. Pursuant to
this spin-off, a new Alberta corporation was formed ("New
Petrominerales") which acquired all the outstanding shares of
Petrominerales Ltd. Petrobank shareholders received 0.6142 shares of New
Petrominerales and one replacement common share of Petrobank for each
Petrobank common share held. There was no change in the total number of
shares outstanding for either Petrobank or Petrominerales.
-- On October 8, 2010, Petrobank acquired the remaining 50 percent interest
in the Dawson heavy oil project from Shell Canada Ltd. The Company
received $2.8 million cash in January, 2011 upon regulatory approval of
the project.PetroBakken
-- Fourth quarter production decreased slightly to 41,333 barrels of oil
equivalent per day ("boepd") compared to 45,621 boepd in the fourth
quarter of 2009, primarily due to natural production declines which more
than offset production additions as weather related delays restricted
PetroBakken's ability to access leases and bring on additional
production.
-- Operating netbacks (excluding hedging activity) averaged $48.19 per boe
in the fourth quarter of 2010, an increase of three percent compared to
the fourth quarter of 2009, primarily due to higher benchmark oil
prices.
-- PetroBakken drilled 77.4 net wells in the quarter, the majority of which
were drilled in southeast Saskatchewan, particularly the Bakken play,
however activity levels increased in the Cardium play in the fourth
quarter as lease conditions improved.2010 Highlights and Significant Transactions
-- On September 30, 2010, Petrobank completed the acquisition of Baytex
Energy Ltd.'s 50 percent interest in the Kerrobert heavy oil project for
cash consideration of $18.1 million.
-- On January 8, 2010, Petrobank completed an early conversion offering
which resulted in US$250.7 million principal amount of 5.125%
convertible debentures due July 10, 2015 being exercised prior to
maturity. Upon the conversion, a total of 7,452,099 Petrobank common
shares were issued. On April 23, 2010, the remaining US$149.3 million
principal amount of Petrobank's 5.125% convertible debentures was early
converted. An aggregate of US$27.4 million was paid and 3,920,446 common
shares were issued. On May 10, 2010, the remaining US$5.1 million
principal amount of Petrobank's 3% convertible debentures was early
converted into 179,009 common shares. As a result of these three events,
there are no longer any Petrobank convertible debentures outstanding.
-- Funds flow from continuing operations increased 68 percent to $636.8
million in 2010, primarily as a result of PetroBakken's increased
production and higher operating netbacks. On a per basic and diluted
share basis, funds flow from operations increased 42 percent and 51
percent, respectively.
-- Net income from continuing operations decreased by 69 percent to $21.3
million in 2010. The decrease is due mainly to the inclusion of a
foreign exchange gain of $57.8 million in 2009, which resulted from the
translation of Petrobank's U.S. dollar convertible debentures.
-- Net income attributable to Petrobank shareholders decreased by 20
percent to $115.8 million in 2010. The decrease is due mainly to the
recognition of a $70.1 million accumulated other comprehensive loss
resulting from the historic translations of Petrominerales U.S. dollar
amounts in the consolidated financial statements, recorded in net income
upon the spin-off of Petrominerales.PetroBakken
-- Production increased 58 percent to 41,688 boepd in 2010 from 26,333
boepd in 2009 primarily due to the acquisition of TriStar Oil and Gas
Ltd. on October 1, 2009.
-- On January 25, 2010, PetroBakken issued US$750 million of convertible
debentures. The debentures are convertible into common shares of
PetroBakken at a conversion price that is adjusted for dividends paid.
Based on dividends declared to February 2011, the conversion price was
$37.74 per share. The convertible debentures have an annual coupon rate
of 3.125 percent and mature in February 2016.
-- On February 25, 2010, PetroBakken acquired all of the issued and
outstanding shares of Berens Energy Ltd. for cash consideration of
$252.8 million and the assumption of bank indebtedness of approximately
$74.9 million. There was a working capital deficiency of $16.6 million
at the acquisition date.
-- On March 12, 2010, PetroBakken acquired all of the issued and
outstanding shares of Rondo Petroleum Inc. for cash consideration of
approximately $88.7 million, assumption of bank indebtedness of
approximately $16.0 million and the issuance of approximately 5.5
million PetroBakken common shares. There was a working capital
deficiency of $22.2 million at the acquisition date.
-- On April 1, 2010, PetroBakken acquired all of the issued and outstanding
shares of Result Energy Inc. for cash consideration (net of cash
acquired) of $141.2 million and the issuance of approximately 11.2
million PetroBakken common shares. There was working capital of $2.7
million at the acquisition date.
-- During the year ended December 31, 2010, PetroBakken closed divestitures
representing approximately 3,800 boepd of production (50 percent natural
gas) in Alberta for net proceeds of $133.6 million. Of this amount, $5.2
million was closed during the fourth quarter less $1.6 million of post
closing adjustments related to prior period dispositions.
-- On May 17, 2010, PetroBakken commenced a normal course issuer bid
("NCIB") pursuant to which PetroBakken is authorized to purchase up to
9,431,255 common shares. The NCIB will end on May 18, 2011 or an earlier
time if the NCIB is completed or terminated at PetroBakken's election.
As of March 7, 2011, 1,680,400 common shares have been repurchased under
the NCIB for $36.4 million.Subsequent Events
-- On January 4, 2011, Petrobank entered into a new three year $200 million
credit agreement with a syndicate of lenders.SUMMARY OF FINANCIAL AND OPERATING RESULTS
The following table provides a summary of Petrobank's financial and operating results for the three and twelve month periods ended December 31, 2010 and 2009. Consolidated financial statements with Management's Discussion and Analysis ("MD&A") will be available on the Company's website at www.petrobank.com and on the SEDAR website at www.sedar.com.
Three months ended December 31, Years ended December 31,
Q4 2010 Q4 2009 % change 2010 2009 % change
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Financial (1)
($000s,
except where
noted)
Oil and
natural gas
revenue from
continuing
operations 258,359 276,334 (7) 1,008,556 575,588 75
Funds flow
from
continuing
operations
(2) 155,344 166,833 (7) 636,754 380,016 68
Per share
- basic ($) 1.46 1.80 (19) 6.10 4.29 42
- diluted
($) 1.46 1.59 (8) 5.96 3.94 51
Net income
from
continuing
operations 1,315 20,740 (94) 21,308 68,559 (69)
Per share
- basic ($) 0.01 0.22 (95) 0.20 0.77 (74)
- diluted ($) 0.01 0.22 (95) 0.20 0.73 (73)
Net income
(loss)
attributable
to Petrobank
shareholders
(3) (35,612) 57,108 - 115,785 145,079 (20)
Per share
- basic ($) (0.34) 0.61 - 1.11 1.64 (32)
- diluted ($) (0.34) 0.56 - 1.03 1.52 (32)
Capital
expenditures
PetroBakken 262,758 177,278 48 811,871 394,023 106
HBU 37,521 15,554 141 121,492 76,019 60
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Total capital
expenditures
from
continuing
operations 300,279 192,832 56 933,363 470,042 99
Total assets 6,402,586 5,766,568 11 6,402,586 5,766,568 11
Common shares
outstanding,
end of
period
(000s)
Basic 106,236 93,617 13 106,236 93,617 13
Diluted (4) 110,046 108,596 1 110,046 108,596 1
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Operations
PetroBakken
operating
netback
($/boe
except where
noted) (2)(5)
Oil and NGL
revenue
($/bbl) (6) 75.19 71.63 5 72.77 64.27 13
Natural gas
revenue
($/Mcf) (6) 3.96 4.61 (14) 4.22 4.40 (4)
Oil and
natural gas
revenue (6) 67.00 65.05 3 65.28 58.97 11
Royalties 9.84 10.14 (3) 9.34 8.55 9
Production
expenses 8.97 8.23 9 8.18 7.38 11
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Operating
netback (2)
(5) (7) 48.19 46.68 3 47.76 43.04 11
Average daily
production
PetroBakken
- oil and
NGL (bbls) 34,754 38,796 (10) 35,109 22,648 55
PetroBakken
- natural
gas (Mcf) 39,474 40,951 (4) 39,473 22,110 79
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Total
conventional
(boe) (5)(8) 41,333 45,621 (9) 41,688 26,333 58
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(1) Petrominerales has been accounted for as discontinued operations for the
years ended December 31, 2010 and 2009 as this business unit was spun
off to Petrobank shareholders at December 31, 2010.
(2) Non-GAAP measure. See "Non-GAAP Measures" section within this press
release.
(3) Includes the operating results of Petrominerales until the business
unit was spun-off on December 31, 2010, and a $70.1 million accumulated
other comprehensive loss resulting from the historic translations of
Petrominerales U.S. dollar amounts recorded in net income upon the
spin-off of Petrominerales.
(4) Consists of common shares, stock options, directors deferred common
shares, deferred common shares, and incentive shares as at the period
end date.
(5) Six Mcf of natural gas is equivalent to one barrel of oil equivalent
("boe").
(6) Net of transportation expenses.
(7) Excludes hedging activities.
(8) HBU bitumen volumes are excluded from average daily production as
Conklin and Kerrobert operations are considered to be in the
pre-operating stage and accordingly are capitalized.PETROBANK'S LIQUIDITY AND CAPITAL RESOURCES
Petrobank and PetroBakken manage their capital structure independently and generate their own cash flows, and have the ability to fund their operations through the issuance of secured and unsecured debt as well as equity financing. Petrobank's capital resources are focused on funding corporate and Heavy Oil Business Unit expenditures. At December 31, 2010, independent of PetroBakken, Petrobank on a standalone basis had no bank debt outstanding and a working capital surplus of $1.9 million.
Based on Petrobank's current ownership and PetroBakken's intentions of paying an annual dividend of $0.96 per PetroBakken share, Petrobank expects to receive $105 million of dividends annually from PetroBakken, paid monthly. Petrobank can also raise funds by selling a portion of our ownership in PetroBakken or by issuing additional debt secured by this interest.
Petrobank expects to sufficiently fund our HBU capital expenditure program with existing cash, available credit, cash from operations and dividends received from PetroBakken.
HEAVY OIL BUSINESS UNIT OPERATIONAL UPDATE
Conklin Pilot Project
As an update to our March 10, 2011 press release, we have now decided to permanently abandon P2B due to down-hole problems associated with the instrument and long-strings. At the same time, we intend to use the service rig to abandon P1, which was previously suspended. These wells were originally drilled using an earlier well configuration which we do not intend to use in the future.
INVESTOR CONFERENCE CALL
Management of Petrobank will be holding a conference call for investors, financial analysts, media and any interested persons on Wednesday, March 16, 2011 at 8:00 a.m. (Mountain time) (10:00 a.m. Eastern Time) to discuss Petrobank's 2010 year-end financial and operating results. The investor conference call details are as follows:
Live call dial-in numbers: 416-340-8527 / 877-440-9795
Replay dial-in numbers: 905-694-9451 / 800-408-3053
Replay pass code: 7468252
The live audio webcast link is: http://events.digitalmedia.telus.com/petrobank/031611/index.php. and is also available on our website at: http://www.petrobank.com/investors/.
Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas exploration and production company with operations in western Canada. The Company operates high-impact projects through two business units and a technology subsidiary. Petrobank's 59% owned TSX-listed subsidiary, PetroBakken Energy Ltd. (TSX:PBN), is a premier light oil production company combining, high growth, long-life Bakken reserves and production with legacy conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken is applying leading edge technology to a multi-year inventory of Bakken and Cardium light oil development locations, along with a significant inventory of opportunities in the Horn River and Montney gas resource plays in northeast BC. PetroBakken's strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield. Whitesands Insitu Partnership, a partnership between Petrobank and our wholly-owned subsidiary Whitesands Insitu Inc., owns 104 sections of heavy oil and oil sands leases in Alberta, 43.5 sections of petroleum and natural gas rights and oil sands licenses in Saskatchewan, and operates the Kerrobert and Conklin projects which are field-demonstrating Petrobank's patented THAI(R) heavy oil recovery process. THAI(R) is an evolutionary in-situ combustion technology for the recovery of bitumen and heavy oil that integrates existing proven technologies and provides the opportunity to create a step change in the development of heavy oil resources globally. THAI(R) and CAPRI(R) are registered trademarks of Archon Technologies Ltd., a wholly-owned subsidiary of Petrobank Energy and Resources Ltd., for specialized methods for recovery of oil from subterranean formations through in-situ combustion techniques and methodologies with or without upgrading catalysts. Used under license by Petrobank Energy and Resources Ltd.
Non-GAAP Measures: This press release contains financial terms that are not considered measures under Canadian generally accepted accounting principles ("GAAP"), such as funds flow from continuing operations, funds flow per share and operating netback. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Specifically, funds flow from continuing operations and funds flow per share reflect cash generated from operating activities before changes in non-cash working capital. Management considers funds flow from operations and funds flow per share important as they help evaluate performance and demonstrate the Company's ability to generate sufficient cash to fund future growth opportunities and repay debt or financing obligations. Profitability relative to commodity prices per unit of production is demonstrated by an operating netback. Funds flow from continuing operations, funds flow per share and operating netbacks may not be comparable to those reported by other companies nor should they be viewed as an alternative to net income or other measures of financial performance calculated in accordance with GAAP.
The following table shows the reconciliation of funds flow from continuing operations to cash flow from operating activities from continuing operations for the periods noted (in $000s):
Three months ended Years ended
December 31, December 31,
2010 2009 2010 2009
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Funds flow from continuing
operations: Non-GAAP 155,344 166,833 636,754 380,016
Changes in non-cash working
capital 10,386 36,939 (80,775) 23,909
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Net cash provided by operating
activities from continuing
operations: GAAP 165,730 203,772 555,979 403,925
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----------------------------------------------------------------------------Forward-Looking Statements: Certain information provided in this press release constitutes forward-looking statements. Specifically, this press release contains forward-looking statements relating to anticipated sources of funding for the HBU and operations at our Conklin project. These forward-looking statements are based on certain assumptions, including assumptions related to PetroBakken cash flows and dividend payments, results from operations, availability of equipment and personnel, and availability of capital and credit. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability, outcome of exploration contract negotiations; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrobank that actual results achieved during the forecast period will be the same in whole or in part as those forecasted. Except as may be required by applicable securities laws, Petrobank assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.
Natural gas volumes have been converted to barrels of oil equivalent ("boe"). Six thousand cubic feet ("Mcf") of natural gas is equal to one barrel of oil equivalent based on an energy equivalency conversion method primarily attributable at the burner tip and does not represent a value equivalency at the wellhead. Boes may be misleading, especially if used in isolation.
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CONTACT INFORMATION:
Petrobank Energy and Resources Ltd.
John D. Wright
President and Chief Executive Officer
403.750.4400
or
Petrobank Energy and Resources Ltd.
Chris J. Bloomer
Senior Vice President and Chief Operating Officer, Heavy Oil
403.750.4400
or
Petrobank Energy and Resources Ltd.
Peter Cheung
Vice President Finance and Chief Financial Officer
403.750.4400
ir@petrobank.com
www.petrobank.com
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INDUSTRY: Energy and Utilities - Oil and Gas
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