CALGARY, ALBERTA--(Marketwired - Aug. 11, 2016) - GRANITE OIL CORP. ("Granite" or the "Company") (TSX:GXO)(OTCQX:GXOCF) is pleased to announce results for the second quarter of 2016.
Granite will continue to maintain its monthly dividend while advancing its gas flood EOR scheme during this continuing period of commodity price volatility. Granite's current monthly dividend of $0.035 equates to an annual yield of 5.75%.
Throughout the first half of 2016 Granite has maintained a long term outlook, focusing its activity on expanding and optimizing its gas injection EOR scheme with the goal of maximizing both ultimate oil recoveries and returns on its large 100%‐owned Bakken oil pool. The Company took advantage of lower gas prices in the first half of 2016 using seven injectors to significantly increase gas injection to approximately 10 mmscf/d, achieving voidage replacement ratios of up to 115%. In addition, the Company continued with its optimization program, taking old producing wells drilled high in the reservoir offline. As a result, the Company has successfully re‐pressured the center of the pool ahead of schedule, helping to offset declines and providing a significant inventory of new drilling opportunities lower in the reservoir, optimizing long‐term drainage. The Company has since reduced its gas injection in the center of the pool to a 100% voidage replacement ratio. The Company will convert three more injectors in the pool through the second half of 2016 with a continued focus on expanding the influence of its EOR scheme, including an injection well which will target Crown lands located in the western portion of the core pool.
In addition to expanding the EOR scheme, Granite has reduced capital costs on new wells, improving capital efficiencies and allowing Granite to pay a sustainable dividend despite volatility in commodity prices.
The Company has the financial resources to continue with its business plan. At the end of the second quarter Granite had $24.0 million drawn on its $60 million credit facility and net debt of approximately $25.7 million, equating to an annualized net debt to cash flow ratio of approximately 1.1 times.
Granite continues to build its oil hedge book with hedges currently in place for 1,000 bbl/d hedged at $44.00 US WTI and 500 bbl/d at $79.00 CAD WTI for the second half of 2016, 750 bbl/d hedged at $47.00 US WTI in for the first half of 2017 and 250 bbl/d hedged at $53.00 US WTI in the last half of 2017.
Granite's executive management has taken a further reduction in salaries, with overall cash compensation dropping by 10%.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Financial and operational highlights for the three and six month periods ended June 30, 2016 are set out below and should be read in conjunction with the financial statements and related management's discussion and analysis available for review at www.granite.ca and www.sedar.com. This is the fourth interim period completed by Granite following its disposition of certain oil and gas properties pursuant to its May 2015 corporate reorganization. Prior period information is not presented in the following table due to its limited comparability resulting from these dispositions.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||
| 2016 (5) | 2016 (5) | ||||
| (000s, except per share amounts) | ($) | ($) | |||
| FINANCIAL | |||||
| Oil and natural gas revenues | 11,837 | 19,854 | |||
| Funds from operations (1) | 6,014 | 11,972 | |||
| Per share - basic | 0.19 | 0.38 | |||
| Per share - diluted (6) | 0.19 | 0.38 | |||
| Cash flow from operating activities | 5,172 | 11,286 | |||
| Net income (loss) | (5,010 | ) | (7,268 | ) | |
| Per share - basic | (0.16 | ) | (0.23 | ) | |
| Per share - diluted (6) | (0.16 | ) | (0.23 | ) | |
| Capital expenditures (2) | 5,731 | 10,053 | |||
| Net debt (3) | 25,697 | 25,697 | |||
| Shareholders' equity | 219,592 | 219,592 | |||
| (000s) | (#) | (#) | |||
| SHARE DATA | |||||
| At period-end | 33,588 | 33,588 | |||
| Weighted average - basic | 31,846 | 31,095 | |||
| Weighted average - diluted | 32,120 | 31,376 | |||
| OPERATING (4) | |||||
| Production | |||||
| Natural gas (mcf/d)(8) | - | 146 | |||
| Crude oil (bbls/d) | 2,858 | 2,843 | |||
| NGLs (bbls/d) | - | - | |||
| Total (boe/d) | 2,858 | 2,867 | |||
| Average wellhead prices | |||||
| Natural gas ($/mcf) | - | 1.08 | |||
| Crude oil and NGLs ($/bbl) | 45.58 | 38.14 | |||
| Combined average ($/boe) | 45.58 | 37.87 | |||
| Netbacks | |||||
| Operating netback ($/boe) | 27.80 | 27.27 | |||
| Gross (net) wells drilled | |||||
| Oil (#) | 3 (3.0 | ) | 4 (4.0 | ) | |
| Total (#) | 3 (3.0 | ) | 4 (4.0 | ) | |
| Average working interest (%) | 100 | 100 | |||
| (1) | Funds from operations and funds from operations per share are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary in the Management's Discussion and Analysis under "Non-GAAP Measurements" for further discussion. |
| (2) | Total capital expenditures, including acquisitions and excluding non-cash transactions. Refer to commentary in the Management's Discussion and Analysis under "Capital Expenditures and Acquisitions" for further information. |
| (3) | Net debt, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary under "Non-GAAP Measurements" for further discussion. |
| (4) | Operating netback, which is calculated by deducting royalties, operating expenses and transportation expenses from oil and gas revenue and adjusting for any realized hedging on financial instruments, is not a recognized measure under IFRS. Pleas e refer to the commentary under "Non-GAAP Measurements" for further discussion. |
| (5) | For a description of the boe conversion ratio, refer to the commentary in the Management's Discussion and Analysis under "Other Measurements". |
| (6) | Refer to the description of the comparability of prior period information in the Management's Discussion and Analysis under "About Granite Oil Corp." and "Corporate Reorganization". |
| (7) | The Company uses the weighted average common shares (basic) when there is a net loss for the period to calculate net income (loss) per share diluted. The Company uses the weighted average common shares (diluted) to calculate the funds from operations diluted. |
| (8) | Commencing in March 2016, the Company began injecting 100 percent of its natural gas production into the Alberta Bakken property pursuant to the EOR scheme. |
- Operational activity included the drilling of three 100% working interest oil wells with costs as low as $1.2 million and trending lower. Granite continues to work to maximizing capital efficiencies with shorter lateral lengths and improvements in both drilling and completion processes and associated costs.
- Capital spending of $5.7 million included $1.0 million on one‐time facility expansions and the acquisition of additional land.
- Activity included a facility turnaround completed in conjunction with the Bakken EOR scheme expansion.
- Granite has continued to expand gas injection rates under its EOR scheme, with overall voidage replacement reaching above 100%.
- Granite closed a $16.5 million equity financing ($15.4 million net of share issue costs) via the issuance of 2.3 million shares at $7.10 per share, providing the Company with additional financial capacity.
OUTLOOK
Granite maintains a high degree of operational and financial flexibility. With its low cost structure, deep drilling inventory, strong balance sheet and top tier LMR ("liability management rating") of 8.1x the Company will continue to maintain its dividend while advancing its EOR project and match operational tempo with commodity pricing. With the continued volatility and recent further decline in crude oil prices, Granite will provide an operational update within the next month.
AUGUST DIVIDEND
Granite is pleased to announce that a dividend of $0.035 per common share will be paid in cash on September 15, 2016, to shareholders of record on August 31, 2016, with an ex‐dividend date of August 29, 2016. This dividend has been designated as an "eligible dividend" for Canadian income tax purposes.
Reader Advisory
Forward‐Looking Statements. Certain statements contained in this news release may constitute forward‐looking statements. These statements relate to future events or Granite's future performance. All statements other than statements of historical fact may be forward‐looking statements. Forward‐looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward‐looking statements. Granite believes that the expectations reflected in those forward‐looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward‐looking statements included in this news release should not be unduly relied upon by investors. These statements speak only as of the date of this news release and are expressly qualified, in their entirety, by this cautionary statement.
In addition, and without limiting the generality of the foregoing, this news release contains forward‐ looking statements pertaining to the following: drilling and development plans, Granite's financial strength, supply and demand for oil and natural gas, the success of the enhanced oil recovery scheme, expectations regarding Granite's credit facility, treatment under governmental regulatory and taxation regimes and expectations regarding Granite's ability to raise capital and to continually add to reserves through acquisitions and development.
With respect to forward‐looking statements contained in this news release related to Granite's business and operations, Granite has made assumptions regarding, among other things: prevailing commodity prices, exchange rates, estimates of cost, including drilling and operating costs, the sufficiency of budgeted capital expenditures in carrying out planned activities; the state of the economy and the exploration and production business; the legislative and regulatory environments of the jurisdictions where Granite carries on business or has operations, the impact of increasing competition, and Granite's ability to obtain additional financing on satisfactory terms.
Granite's actual results could differ materially from those anticipated in these forward‐looking statements as a result of risk factors that may include, but are not limited to: volatility in the market prices for oil and natural gas; uncertainties associated with estimating reserves; uncertainties associated with Granite's ability to obtain additional financing on satisfactory terms; geological, technical, drilling and processing problems; liabilities and risks, including environmental liabilities and risks, inherent in oil and natural gas operations; incorrect assessments of the value of acquisitions; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel.
This forward‐looking information represents Granite's views as of the date of this document and such information should not be relied upon as representing its views as of any date subsequent to the date of this document. Granite has attempted to identify important factors that could cause actual results, performance or achievements to vary from those current expectations or estimates expressed or implied by the forward‐looking information. However, there may be other factors that cause results, performance or achievements not to be as expected or estimated and that could cause actual results, performance or achievements to differ materially from current expectations. There can be no assurance that forward‐looking information will prove to be accurate, as results and future events could differ materially from those expected or estimated in such statements. Accordingly, readers should not place undue reliance on forward‐looking information. . Except as required by law, the Company undertakes no obligation to publicly update or revise any forward‐looking statements.
Non‐GAAP Measurements. This news release includes non‐GAAP measures as further described herein. These non‐GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS or, alternatively, "GAAP") and therefore may not be comparable with the calculation of similar measures by other companies.
This news release contains the terms "funds from operations" and "funds from operations per share", which should not be considered an alternative to or more meaningful than cash flow from (used in) operating activities as determined in accordance with IFRS. These terms do not have any standardized meaning under IFRS. Granite's determination of funds from operations and funds from operations per share may not be comparable to that reported by other companies. Management uses funds from operations to analyze operating performance and leverage, and considers funds from operations to be a key measure as it demonstrates the Company's ability to generate cash necessary to fund future capital investments and to repay debt, if applicable. Funds from operations is calculated using cash flow from operating activities as presented in the statement of cash flows, before changes in non‐ cash working capital. Granite presents funds from operations per share whereby per share amounts are calculated using weighted‐average shares outstanding, consistent with the calculation of earnings per share.
Operating netbacks are per boe measures used in operational and capital allocation decisions. Management believes that the Company's operating netback is the most useful supplemental measure as compared to other netback measures presented by the Company in previous MD&A's as it assists in analyzing the Company's operating performance. Operating netbacks are determined by deducting royalties, operating expenses and transportation expenses from oil and gas revenue and adjusted for any realized hedging gain (loss) on financial instruments.
Net debt, which represents current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), are used to assess efficiency, liquidity and the Company's general financial strength. No IFRS measure is reasonably comparable to net debt.
BOE Presentation. References herein to "boe" mean barrels of oil equivalent derived by converting gas to oil in the ratio of six thousand cubic feet (Mcf) of gas to one barrel (bbl) of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf: 1 bbl is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In addition, given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Contact Information:
Michael Kabanuk
President & CEO
(587) 349- 9123
Granite Oil Corp.
Jonathan Fleming
E.V.P.
(587) 349-9118