Perpetual Energy has a strong quarter
On March5,2015 Perpetual Energy released it's fourth quarter and annual report.Perpetual produces mostly natural gas and natural gas liquids but also has some heavy oil production.Quarterly average production was 23,685 barrels of oil equivalent per day.This is a 21% increase over Q3 production and 28% increase over Q4 2013.In fact, it had exit production of 24,150 for the quarter.Production seems to be trending upwards every month. It's capital expenditures were $26 million;it was spent mostly on the West Edson and East Edson areas.Some was also spent on waterflooding it's Mannville heavy oil deposit.Two wells were drilled at West Edson and 9 at East Edson while construction continues on it's East Edson gas plant.Also Perpetual disposed of non-core assets for $21 million in proceeds.This property was producing 400 boe/day or $53,000 per barrel but some undeveloped land was sold with the package.
Natural Gas
Perpetual had natural gas production of 122 MMcf/day which was 36% higher than Q4 2013.This reflects production increases from both West Edson and East Edson.Also West Edson production kept the gas plant at full capacity (60MMcf/day).Whereas drilling at East Edson increased production to fully utilize the compression and processing facilities of 30MMcf/day plus 15 to 20 barrels of liquids per MMcf of natural gas.Oil and natural gas liquids' production was down 7% due to natural declines from the wells.
Q4 Financial Highlights
Perpetual doesn't offer adjusted EBITDA figures.But it had
funds flow of $17 million up 33% from Q4 2013 due to increased production and the increase in natural gas prices obtained.Perpetual got higher gas prices because it has an active and accurate hedging program.It sells on the forward market on a quarterly basis getting higher prices for markets further in the future.Perpetual also explains that it was hurt by the drop in the West Texas Intermediate (WTI) price but this was offset by the tightening of the differential between the WTI price and the Western Canadian Select Price. The foreign exchange differential also helped.
Perpetual redeemed $25 million of it's 7.00%convertible debentures and has $35 million remaining.It was also able to increase it's borrowing base by $105 million because of reserve additions at East Edson.
Annual Highlights
It had exploration and development expenditures of $116 million for 2014 which included $81 million for the Edson area and $25 million for Mannville deposits and $10 million for shallow gas optimization.Their drilling included 11 operated wells and 2 non operated wells in West Edson;15 wells in East Edson and 20 horizontal wells in the Mannville area.Money was also spent on expanding their West Edson plant and initial construction of the East Edson plant.They disposed of land for proceeds of $70 million and bought land worth $1 million in the Edson area.
Annual Production
Production increased by 10% to 20,554 boe/day whereas natural gas production increased to 103MMcf/day for a 16% increase.The natural gas production increases were due to increases at West Edson and East Edson.Perpetual also announced that Mannville heavy oil production was now 14% of the total.This is important because the netback on oil is greater than for natural gas.This increased production has resulted in revenues of $262 million,an increase of 31%, over 2013.Part of the increase in revenues was because of the higher prices obtained by using forward contracts.Higher prices were obtained for natural gas and natural gas liquids from using these derivatives.Operating costs decreased by another 6% chiefly because of infrastructure enhancements at West Edson and lower processing costs from their Rosavear plant and for third party facilities.Again there are no EBITDA figures given but funds flow increased by 40% to $81 million.In addition, debt decreased by 12% to $331 million.
Conclusion
Perpetual Energy is a low cost producer and is taking measures to reduce costs further.In the future it must eliminate all third party costs.However it has effectively utilized forward pricing contracts to increase revenues.This has and will continue to benefit Perpetual in 2015.It should see steady if not dramatic increases in it's share price throughout 2015 as it's production has risen every quarter.But it will take a move like the sale of it's West Edson property to cause a big jump in it's price.There have been rumours about this sale but so far unsubstantiated.On a different note this blog would like to hear that it's pipeline connecting to the Alliance Pipeline has been upsized.Perpetual Energy definitely has "a few irons in the fire" right now.
Natural Gas
Perpetual had natural gas production of 122 MMcf/day which was 36% higher than Q4 2013.This reflects production increases from both West Edson and East Edson.Also West Edson production kept the gas plant at full capacity (60MMcf/day).Whereas drilling at East Edson increased production to fully utilize the compression and processing facilities of 30MMcf/day plus 15 to 20 barrels of liquids per MMcf of natural gas.Oil and natural gas liquids' production was down 7% due to natural declines from the wells.
Q4 Financial Highlights
Perpetual doesn't offer adjusted EBITDA figures.But it had
funds flow of $17 million up 33% from Q4 2013 due to increased production and the increase in natural gas prices obtained.Perpetual got higher gas prices because it has an active and accurate hedging program.It sells on the forward market on a quarterly basis getting higher prices for markets further in the future.Perpetual also explains that it was hurt by the drop in the West Texas Intermediate (WTI) price but this was offset by the tightening of the differential between the WTI price and the Western Canadian Select Price. The foreign exchange differential also helped.
Perpetual redeemed $25 million of it's 7.00%convertible debentures and has $35 million remaining.It was also able to increase it's borrowing base by $105 million because of reserve additions at East Edson.
Annual Highlights
It had exploration and development expenditures of $116 million for 2014 which included $81 million for the Edson area and $25 million for Mannville deposits and $10 million for shallow gas optimization.Their drilling included 11 operated wells and 2 non operated wells in West Edson;15 wells in East Edson and 20 horizontal wells in the Mannville area.Money was also spent on expanding their West Edson plant and initial construction of the East Edson plant.They disposed of land for proceeds of $70 million and bought land worth $1 million in the Edson area.
Annual Production
Production increased by 10% to 20,554 boe/day whereas natural gas production increased to 103MMcf/day for a 16% increase.The natural gas production increases were due to increases at West Edson and East Edson.Perpetual also announced that Mannville heavy oil production was now 14% of the total.This is important because the netback on oil is greater than for natural gas.This increased production has resulted in revenues of $262 million,an increase of 31%, over 2013.Part of the increase in revenues was because of the higher prices obtained by using forward contracts.Higher prices were obtained for natural gas and natural gas liquids from using these derivatives.Operating costs decreased by another 6% chiefly because of infrastructure enhancements at West Edson and lower processing costs from their Rosavear plant and for third party facilities.Again there are no EBITDA figures given but funds flow increased by 40% to $81 million.In addition, debt decreased by 12% to $331 million.
Conclusion
Perpetual Energy is a low cost producer and is taking measures to reduce costs further.In the future it must eliminate all third party costs.However it has effectively utilized forward pricing contracts to increase revenues.This has and will continue to benefit Perpetual in 2015.It should see steady if not dramatic increases in it's share price throughout 2015 as it's production has risen every quarter.But it will take a move like the sale of it's West Edson property to cause a big jump in it's price.There have been rumours about this sale but so far unsubstantiated.On a different note this blog would like to hear that it's pipeline connecting to the Alliance Pipeline has been upsized.Perpetual Energy definitely has "a few irons in the fire" right now.
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