CALGARY, March 9, 2017 /CNW/ -
Oil and Gas Operations (1)
- Paramount's fourth quarter 2016 sales volumes averaged 11,901
Boe/d (34 percent liquids), including approximately 5,500 Boe/d (38
percent liquids) from Karr-Gold Creek. The Company's annual sales
volumes were 31,860 Boe/d, including 11,656 Boe/d from Ongoing
Operations and 20,204 Boe/d related to the Musreau Assets.
- Five new wells on the 4-19 and 15-27 pads at Karr-Gold Creek
have produced a total of approximately 250,000 barrels of
condensate since first production in late-December 2016.
- Paramount's sales volumes averaged approximately 16,000 Boe/d
for the month of February 2017 (50
percent liquids).
- Four wells at the new 16-36 pad at Karr-Gold Creek are
scheduled to be brought on production at the end of April.
Karr-Gold Creek production will be constrained until the 40 MMcf/d
6-18 Facility expansion is completed in the second quarter.
- Principal Properties capital expenditures in the fourth quarter
of 2016 totaled $78.2 million, with
the majority of spending directed towards the Company's Karr-Gold
Creek development. Total Principal Properties capital spending for
2016 was $171.0 million, including
$92.5 million at Karr-Gold Creek and
$52.5 million related to the Musreau
Assets.
- In 2016, the Company closed dispositions of non-core properties
for aggregate cash proceeds of approximately $22.5 million.
- Paramount's 2017 capital program is expected to total
approximately $325 million, excluding
land acquisitions, with about $200
million directed towards Karr-Gold Creek.
- Development activities at Karr-Gold Creek are currently focused
on a 27-well horizontal Montney
drilling and completion program (the "Karr Program"). By the end of
2017, the Company expects to have completed up to 22 of the 27
wells, with the remaining wells to be completed in 2018. The Karr
Program wells will be brought on production through 2017 and 2018
to fill the expanded 6-18 Facility.
- Sales volumes in 2017 are projected to average approximately
20,000 Boe/d, despite the scheduled outage of a third-party
processing facility that is expected to shut-in Karr-Gold Creek
production for most of September. Fourth quarter sales volumes are
expected to average over 30,000 Boe/d.
___________________________ (1) In August
2016, the Company sold the majority of its oil and gas properties
in the Musreau/Kakwa area of west central Alberta (the "Musreau
Assets") to Seven Generations Energy Ltd. ("7Gen") for total
consideration of approximately $2.1 billion (the "Musreau
Disposition"). Disclosures of results and changes from prior
periods for "Ongoing Operations" exclude amounts attributable to
the Musreau Assets.
|
RESERVES ─ ONGOING OPERATIONS (2)
- In 2016, proved reserves for Paramount's Ongoing Operations
increased 124 percent to 59.6 MMBoe (replacement ratio of 9 times)
and proved plus probable ("P+P") reserves increased 159 percent to
115.2 MMBoe (replacement ratio of 18 times), after production of
4.3 MMBoe.
- The increase in Ongoing Operations reserves in 2016 was driven
by growth at Karr-Gold Creek, where proved reserves increased 216
percent to 48.8 MMBoe and P+P reserves increased 194 percent to
84.3 MMBoe.
- P+P finding and development ("F&D") costs for Ongoing
Operations in 2016 were $8.29 per Boe
in total and $8.60 per Boe for
Karr-Gold Creek.
- The NPV10 of future net revenue for Ongoing
Operations increased 175 percent to $424
million for proved reserves and 206 percent to $810 million for P+P reserves.
CORPORATE
- The Company exited 2016 with cash and cash equivalents of
$622 million, no indebtedness and an
undrawn $100 million bank credit
facility.
- Paramount realized total proceeds from the sale of its Musreau
natural gas processing plant, the Musreau Assets, the Cavalier
Royalty and non-core property dispositions of $2.75 billion in 2016, recording aggregate
pre-tax gains of $1.5 billion.
- Funds flow from operations totaled $14.3
million in the fourth quarter and $35.7 million for 2016.
- In January 2017, Paramount
distributed its remaining 3.8 million 7Gen common shares, valued at
$119.0 million at December 31, 2016, to shareholders by way of
dividend.
- Paramount has hedged 2,000 Bbl/d of liquids at an average WTI
price of C$70.43/Bbl and 1,000 Bbl/d
of liquids at a WTI price of US$54.50/Bbl for 2017. The Company has also
locked in US$3.4 million of gains on
natural gas hedging contracts that will be received over the
remainder of 2017.
________________________
(2) The estimates of reserves and future net revenue for individual
properties may not reflect the same confidence level as estimates
of reserves and future net revenue for all properties, due to the
effects of aggregation.
|
FINANCIAL AND
OPERATING HIGHLIGHTS (1)
($ millions, except
as noted)
|
|
Three months
ended
December
31
|
Twelve months
ended
December
31
|
|
2016
|
2015
|
%
Change
|
2016
|
2015
|
%
Change
|
Sales
volumes
|
|
|
|
|
|
|
|
Natural gas
(MMcf/d)
|
47.5
|
52.5
|
(10)
|
48.6
|
50.8
|
(4)
|
|
Condensate and oil
(Bbl/d)
|
2,943
|
3,359
|
(12)
|
2,688
|
2,807
|
(4)
|
|
Other NGLs (Bbl/d)
(2)
|
1,046
|
661
|
58
|
875
|
1,047
|
(16)
|
Ongoing Operations
(Boe/d)
|
11,901
|
12,765
|
(7)
|
11,656
|
12,316
|
(5)
|
|
Musreau Assets
(Boe/d)
|
–
|
32,701
|
(100)
|
20,204
|
31,814
|
(36)
|
Total
(Boe/d)
|
11,901
|
45,466
|
(74)
|
31,860
|
44,130
|
(28)
|
|
|
|
|
|
|
|
Petroleum and
natural gas sales
|
32.3
|
91.3
|
(65)
|
248.8
|
376.8
|
(34)
|
|
|
|
|
|
|
|
Netback
|
17.0
|
48.9
|
(65)
|
93.1
|
210.7
|
(56)
|
|
($/Boe)
|
15.53
|
11.70
|
|
7.99
|
13.08
|
|
|
|
|
|
|
|
|
Funds flow from
operations
|
14.3
|
21.0
|
(32)
|
35.7
|
93.2
|
(62)
|
|
per share –
diluted ($/share)
|
0.13
|
0.20
|
|
0.34
|
0.88
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
212.4
|
(599.0)
|
NM
|
1,165.3
|
(901.3)
|
NM
|
|
per share –
diluted ($/share)
|
1.99
|
(5.64)
|
|
10.95
|
(8.52)
|
|
|
|
|
|
|
|
|
Principal
Properties Capital (3)
|
78.2
|
64.7
|
21
|
171.0
|
429.9
|
(60)
|
|
|
|
|
|
Investments in
other entities – market value (4)(5)
|
|
208.7
|
130.8
|
60
|
Total
assets
|
|
|
|
2,059.0
|
2,781.0
|
(26)
|
Net cash
(debt)
|
|
|
|
565.9
|
(1,904.6)
|
NM
|
Common shares
outstanding (thousands)
|
|
|
|
105,787
|
106,234
|
|
(1)
|
Readers are referred
to the advisories concerning Non-GAAP Measures and Oil and Gas
Measures and Definitions in the Advisories section of this
document. This table contains the following Non-GAAP measures:
Netback, Funds flow from operations, Principal Properties Capital,
Investments in other entities – market value and Net cash
(debt).
|
(2)
|
Other NGLs means
ethane, propane and butane.
|
(3)
|
Principal Properties
Capital includes capital expenditures and geological and
geophysical costs related to the Company's Principal Properties,
and excludes land acquisitions and capitalized interest.
|
(4)
|
Based on the
period-end closing prices of publicly-traded investments and the
book value of the remaining investments.
|
(5)
|
Excludes 3.8 million
class A common shares of 7Gen classified as "Investments in
Securities for Distribution" having a carrying value and market
value of $119.0 million as at December 31, 2016. These shares were
distributed to Paramount's shareholders by way of dividend in
January 2017.
|
NM
|
Not
meaningful
|
RESERVES
(1)(2)(3)
|
|
PRINCIPAL
PROPERTIES (4)
|
|
Proved
|
Proved plus
Probable
|
|
2016
|
2015
|
%
Change
|
2016
|
2015
|
%
Change
|
Ongoing
Operations
|
|
|
|
|
|
|
|
Natural gas
(Bcf)
|
238.0
|
99.6
|
139
|
463.3
|
165.8
|
179
|
|
NGLs
(MBbl)
|
19,100
|
9,343
|
104
|
36,736
|
15,847
|
132
|
|
Light and Medium
crude oil (MBbl)
|
882
|
741
|
19
|
1,219
|
1,021
|
19
|
Total Ongoing
Operations (MBoe)
|
59,645
|
26,682
|
124
|
115,173
|
44,509
|
159
|
|
Musreau Assets
(MBoe)
|
–
|
199,658
|
(100)
|
–
|
293,124
|
(100)
|
Total
(MBoe)
|
59,645
|
226,340
|
(74)
|
115,173
|
337,633
|
(66)
|
|
|
|
|
|
|
|
Future Net Revenue
NPV10 ($ millions)
|
|
|
|
|
|
|
|
Ongoing
Operations
|
424
|
154
|
175
|
810
|
265
|
206
|
|
Musreau
Assets
|
–
|
1,454
|
(100)
|
–
|
2,790
|
(100)
|
Total
|
424
|
1,608
|
(74)
|
810
|
3,055
|
(73)
|
|
|
|
|
|
|
|
Principal
Properties
Finding and
Development Costs
|
2016
|
Three-
Year
Average
|
|
2016
|
Three-
Year
Average
|
|
|
Karr-Gold Creek
($/Boe)
|
12.15
|
15.90
|
|
8.60
|
11.34
|
|
|
Ongoing Operations
($/Boe)
|
12.16
|
20.73
|
|
8.29
|
13.40
|
|
(1)
|
Readers are referred
to the advisories concerning Non-GAAP Measures and Oil and Gas
Measures and Definitions in the Advisories section of this
document.
|
(2)
|
Reserves evaluated
and reviewed, as applicable, by the Company's independent reserves
evaluator, McDaniel & Associates Consultants Ltd. ("McDaniel")
as of December 31, 2016 in accordance with National Instrument
51-101 definitions, standards and procedures. Amounts are working
interest reserves before royalty deductions. Net present values of
future net revenue were determined using forecast prices and costs
and do not represent fair market value.
|
(3)
|
Ongoing Operations
excludes amounts attributable to the Musreau Assets. The estimates
of reserves and future net revenue for individual properties may
not reflect the same confidence level as estimates of reserves and
future net revenue for all properties, due to the effects of
aggregation.
|
(4)
|
Excludes 93.5 MMBbl
of probable bitumen oil sands reserves.
|
Paramount is an independent, publicly traded, Canadian energy
company that explores and develops unconventional and conventional
petroleum and natural gas prospects, including long-term
unconventional exploration and pre-development projects, and holds
a portfolio of investments in other entities. The Company's
principal properties are primarily located in Alberta and British
Columbia. Paramount's Class A common shares ("Common
Shares") are listed on the Toronto Stock Exchange under the symbol
"POU".
Paramount's 2016 annual results, including Management's
Discussion and Analysis and the Company's Consolidated Financial
Statements can be obtained at:
http://files.newswire.ca/1509/PRL2016AnnualResults.pdf.
This information will also be made available through Paramount's
website at www.paramountres.com and SEDAR at www.sedar.com.
Advisories
Forward-looking Information
Certain statements in this document constitute forward-looking
information under applicable securities legislation.
Forward-looking information typically contains statements with
words such as "anticipate", "believe", "estimate", "will",
"expect", "plan", "schedule", "intend", "propose", or similar words
suggesting future outcomes or an outlook. Forward-looking
information in this document includes, but is not limited to:
- projected production and sales volumes and the timing
thereof;
- forecast capital expenditures;
- exploration, development, and associated operational plans and
strategies (including planned drilling and completion programs,
well tie-ins, and facility expansions, and the anticipated timing
thereof);
- scheduled outages of third-party processing facilities
including the timing, duration and impact thereof;
- estimated reserves and the discounted present value of future
net revenues therefrom; and
- general business strategies and objectives.
Such forward-looking information is based on a number of
assumptions which may prove to be incorrect. Assumptions have been
made with respect to the following matters, in addition to any
other assumptions identified in this document:
- future natural gas and Liquids prices;
- royalty rates, taxes and capital, operating, general &
administrative and other costs;
- foreign currency exchange rates and interest rates;
- general business, economic and market conditions;
- the ability of Paramount to obtain the required capital to
finance its exploration, development and other operations and meet
its commitments and financial obligations;
- the ability of Paramount to obtain equipment, services,
supplies and personnel in a timely manner and at an acceptable cost
to carry out its activities;
- the ability of Paramount to secure adequate product processing,
transportation, de-ethanization, fractionation, and storage
capacity on acceptable terms;
- the ability of Paramount to market its natural gas and Liquids
successfully to current and new customers;
- the ability of Paramount and its industry partners to obtain
drilling success (including in respect of anticipated production
volumes, reserves additions, Liquids yields and resource
recoveries) and operational improvements, efficiencies and results
consistent with expectations;
- the timely receipt of required governmental and regulatory
approvals; and
- anticipated timelines and budgets being met in respect of
drilling programs and other operations (including well completions
and tie-ins and the construction, commissioning and start-up of new
and expanded facilities).
Although Paramount believes that the expectations reflected in
such forward-looking information are reasonable, undue reliance
should not be placed on them as Paramount can give no assurance
that such expectations will prove to be correct. Forward-looking
information is based on expectations, estimates and projections
that involve a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated by
Paramount and described in the forward-looking information. The
material risks and uncertainties include, but are not limited
to:
- fluctuations in natural gas and Liquids prices;
- changes in foreign currency exchange rates and interest
rates;
- the uncertainty of estimates and projections relating to future
revenue, future production, reserve additions, Liquids yields
(including condensate to natural gas ratios), resource recoveries,
royalty rates, taxes and costs and expenses;
- the ability to secure adequate product processing,
transportation, de-ethanization, fractionation, and storage
capacity on acceptable terms;
- operational risks in exploring for, developing and producing,
natural gas and Liquids;
- the ability to obtain equipment, services, supplies and
personnel in a timely manner and at an acceptable cost;
- potential disruptions, delays or unexpected technical or other
difficulties in designing, developing, expanding or operating new,
expanded or existing facilities (including third-party
facilities);
- processing, pipeline, de-ethanization, and fractionation
infrastructure outages, disruptions and constraints;
- risks and uncertainties involving the geology of oil and gas
deposits;
- the uncertainty of reserves estimates;
- general business, economic and market conditions;
- the ability to generate sufficient cash flow from operations
and obtain financing to fund planned exploration, development and
operational activities and meet current and future commitments and
obligations (including product processing, transportation,
de-ethanization, fractionation and similar commitments and debt
obligations);
- changes in, or in the interpretation of, laws, regulations or
policies (including environmental laws);
- the ability to obtain required governmental or regulatory
approvals in a timely manner, and to enter into and maintain leases
and licenses;
- the effects of weather;
- the timing and cost of future abandonment and reclamation
obligations and potential liabilities for environmental damage and
contamination;
- uncertainties regarding aboriginal claims and in maintaining
relationships with local populations and other stakeholders;
- the outcome of existing and potential lawsuits, regulatory
actions, audits and assessments; and
- other risks and uncertainties described elsewhere in this
document and in Paramount's other filings with Canadian securities
authorities.
The foregoing list of risks is not exhaustive. For more
information relating to risks, see the section titled "RISK
FACTORS" in Paramount's current annual information form. The
forward-looking information contained in this document is made as
of the date hereof and, except as required by applicable securities
law, Paramount undertakes no obligation to update publicly or
revise any forward-looking statements or information, whether as a
result of new information, future events or otherwise.
Non-GAAP Measures
In this document "Funds flow from operations", "Netback", "Net
cash (debt)", "Principal Properties Capital", "Investments in other
entities – market value" and "Finding and development costs",
collectively the "Non-GAAP measures", are used and do not have any
standardized meanings as prescribed by International Financial
Reporting Standards.
Funds flow from operations refers to cash from operating
activities before net changes in operating non-cash working
capital, geological and geophysical expenses and asset retirement
obligation settlements. Funds flow from operations is commonly used
in the oil and gas industry to assist management and investors in
measuring the Company's ability to fund capital programs and meet
financial obligations. Refer to the Consolidated Results and Fourth
Quarter 2016 Results sections of the Company's Management's
Discussion and Analysis for the year ended December 31, 2016 for the calculation of funds
flow from operations. Netback equals petroleum and natural gas
sales less royalties, operating costs and transportation and NGLs
processing costs. Netback is commonly used by management and
investors to compare the results of the Company's oil and gas
operations between periods. Refer to the Principal Properties and
Fourth Quarter 2016 Results sections of the Company's Management's
Discussion and Analysis for the year ended December 31, 2016 for the calculation of netback.
Net cash (debt) is a measure of the Company's overall debt position
after adjusting for certain working capital amounts and is used by
management to assess the Company's overall leverage position. Refer
to the Liquidity and Capital Resources section of the Company's
Management's Discussion and Analysis for the year ended
December 31, 2016 for the calculation
of Net cash (debt). Principal Properties Capital includes capital
expenditures and geological and geophysical costs related to the
Company's Principal Properties business segment, and excludes land
acquisitions and capitalized interest. The Principal Properties
Capital measure provides management and investors with information
regarding the Company's Principal Properties spending on wells and
infrastructure projects separate from land acquisition activity and
capitalized interest. Refer to the Exploration and Capital
Expenditures section of the Company's Management's Discussion and
Analysis for the year ended December 31,
2016. Investments in other entities – market value reflects
the Company's investments in enterprises whose securities trade on
a public stock exchange at their period end closing price (e.g.
Trilogy Energy Corp., MEG Energy Corp., Marquee Energy Ltd., RMP
Energy Inc., Strategic Oil & Gas Ltd. and others), and
investments in all other entities at book value and excludes 3.8
million 7Gen Shares that were distributed to Paramount's
shareholders by way of dividend in January
2017. Paramount provides this information because the market
values of equity-accounted investments, which are significant
assets of the Company, are often materially different than their
carrying values. Refer to the Strategic Investments section of the
Company's Management's Discussion and Analysis for the year ended
December 31, 2016 for information on
carrying and market values. The Finding and development costs
("F&D") measure is commonly used by management and investors to
assess the relationship between capital invested in oil and gas
exploration and development projects and reserve additions
associated with such projects. Refer to Oil and Gas Measures and
definitions below.
Non-GAAP measures should not be considered in isolation or
construed as alternatives to their most directly comparable measure
calculated in accordance with GAAP, or other measures of financial
performance calculated in accordance with GAAP. The Non-GAAP
measures are unlikely to be comparable to similar measures
presented by other issuers.
Oil and Gas Measures and Definitions
Abbreviations
Liquids
|
|
Natural
Gas
|
Bbl
|
Barrels
|
|
Mcf/d
|
Thousands of cubic
feet
|
Bbl/d
|
Barrels per
day
|
|
MMcf/d
|
Millions of cubic
feet per day
|
MBbl
|
Thousands of
barrels
|
|
Bcf
|
Billions of cubic
feet
|
NGLs
|
Natural gas
liquids
|
|
MMcf/d
|
Millions of cubic
feet per day
|
Condensate
|
Pentane and heavier
hydrocarbons
|
|
|
Oil
Equivalent
|
|
|
|
Boe
|
Barrels of oil
equivalent
|
|
MBoe
|
Thousands of barrels
of oil equivalent
|
Boe/d
|
Barrels of oil
equivalent per day
|
|
MMBoe
|
Millions of barrels
of oil equivalent
|
This document contains disclosures expressed as "Boe", "$/Boe",
MBoe, MMBoe and "Boe/d". Natural gas equivalency volumes have been
derived using the ratio of six thousand cubic feet of natural gas
to one barrel of oil. Equivalency measures may be misleading,
particularly if used in isolation. A conversion ratio of six
thousand cubic feet of natural gas to one barrel of oil is based on
an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the well
head. For the year ended December 31,
2016, the value ratio between crude oil and natural gas was
approximately 27:1. This value ratio is significantly different
from the energy equivalency ratio of 6:1. Using a 6:1 ratio would
be misleading as an indication of value. The term "Liquids" is used
to represent oil, condensate and Other NGLs. NGLs consist of
condensate and Other NGLs. The term "Other NGLs" means ethane,
propane and butane.
The reserves replacement disclosure herein was calculated in
respect of Ongoing Operations for each of proved and proved plus
probable reserves as the sum of extensions and discoveries,
technical revisions and economic factors for the year divided by
the sales volumes from Ongoing Operations for 2016.
Principal Properties Finding and Development Costs per Boe are
presented in respect of: (i) Ongoing Operations, which excludes
amounts attributable to the Musreau Assets; and (ii) the Karr-Gold
Creek property. For clarity, this calculation excludes
capital costs and reserves volumes related to oil sands and
exploratory shale gas properties within Paramount's Strategic
Investments business segment. The calculation of the F&D costs
per Boe are set out below:
|
2016
|
Three-
Year
Average(5)
|
|
Capital
(2)
|
Change
in
FDC
(3)
|
Total
F&D
Capital
|
Reserves
Additions
(4)
|
F&D
|
|
($
millions)
|
($
millions)
|
($
millions)
|
(MMBoe)
|
($/Boe)
|
($/Boe)
|
Proved
(1)
|
|
|
|
|
|
|
|
Karr-Gold
Creek
|
91.3
|
334.8
|
426.1
|
35.1
|
12.15
|
15.90
|
|
Principal Properties
- Ongoing Operations
|
118.5
|
340.0
|
458.5
|
37.7
|
12.16
|
20.73
|
|
|
|
|
|
|
|
Proved plus
Probable (1)
|
|
|
|
|
|
|
|
Karr-Gold
Creek
|
91.3
|
401.6
|
492.9
|
57.3
|
8.60
|
11.34
|
|
Principal Properties
- Ongoing Operations
|
118.5
|
507.7
|
626.3
|
75.6
|
8.29
|
13.40
|
(1)
|
F&D costs related
to Ongoing Operations exclude capital costs, future development
capital and reserves attributable to the Musreau Assets.
|
(2)
|
Aggregate Principal
Properties exploration and development costs incurred for the year
ended December 31, 2016.
|
(3)
|
Change in estimated
future development costs from December 31, 2015 to December 31,
2016.
|
(4)
|
Reserves additions
were calculated as the aggregate of extensions & discoveries,
technical revisions and economic factors for the year ended
December 31, 2016. Excludes acquisitions and
dispositions.
|
(5)
|
Three-year average
finding and development ("F&D") costs are calculated using the
aggregate capital costs, changes in future development capital and
reserves additions over the three-year period December 31, 2013 to
December 31, 2016. Amounts for 2014 and 2015 were calculated on the
same basis as for the year ended December 31, 2016.
|
SOURCE Paramount Resources Ltd.