Pieridae Energy Limited (“Pieridae” or the “Company”) announces the release of its second quarter 2024 financial and operating results. Pieridae produced 30,861 boe/d and generated Net Operating Income (“NOI”) [1] of $7.7 million during the second quarter of 2024. Pieridae’s management’s discussion and analysis (“MD&A”) and unaudited interim consolidated financial statements and notes for the quarter ended June 30, 2024 are available at www.pieridaeenergy.com and on SEDAR at www.sedarplus.ca.
Darcy Reding, President and CEO stated “Pieridae’s robust commodity hedge portfolio resulted in $19.8 million of gains, offsetting the significant challenge created by extremely low AECO natural gas prices during the second quarter. Management has also shut-in approximately 25% of the Company’s production to protect cash flow and preserve reserve value for our shareholders, until we see gas prices recover in a meaningful way. We successfully increased our third-party volumes at our Caroline gas plant by 40% in the second quarter, reflecting the growing area demand for third party processing. As a result, we are undertaking a low-cost debottlenecking initiative that will significantly enhance our processing capacity at this plant as area development continues to ramp up. We are thrilled with the successful conclusion of the legacy Goldboro asset sale and repayment of the bridge loan in the third quarter, which were important strategic milestones and improve our financial flexibility moving forward.”
Q2 HIGHLIGHTS
Produced 30,861 boe/d (85% natural gas).
Grew third-party processing volumes at the Caroline facility to 37.1 MMcf/d (gross raw), up 40% from Q1 2024.
Continued to reduce field and facility operating cost structure, reflecting successful optimization initiatives, power and fuel gas reduction programs, and labour efficiency improvement efforts.
Generated NOI of $7.7 million ($0.05 per basic and fully diluted share and $2.74/boe) reflecting historically low natural gas prices and the impact of the unplanned shut-in of the Jumping Pound Facility from mid-March to mid-May but assisted by a $19.8 million realized commodity hedge gain ($0.12 per basic and fully diluted share and $7.06/boe).
Incurred capital expenditures of $5.0 million focused primarily on the sulphur condenser repairs at Jumping Pound, along with certain well and facility optimization initiatives.
The Company’s discounted unrealized gain on its natural gas and C5 hedge positions at June 30, 2024 was approximately $59.2 million using the June 30, 2024 forward strip.
SUBSEQUENT TO Q2
Divested legacy Goldboro assets for $12.0 million, completing the Company’s strategic pivot to focus on operating and growing the Company’s upstream and midstream processing businesses.
Completed a non-brokered private placement of 12.8 million common shares for gross proceeds of $4.5 million with an existing institutional shareholder.
Settled the Company’s 18% convertible bridge loan in full for $24.0 million, including outstanding principal and accrued interest.
Completed the shut-in of approximately 6,250 boe/d operated and 995 boe/d non-operated uneconomic production in Central Alberta that flows to a third-party facility due to low AECO gas prices and high processing costs. This shut-in brings the aggregate voluntary economic shut-in production to approximately 9,370 boe/day, preserving reserve value during a period of unprecedented low natural gas prices.
OUTLOOK
Pieridae’s priorities for 2024 remain:
Maximize operated processing facility reliability to maximize sales revenue from infrastructure where the majority of costs are fixed, and to maximize third party processing revenue by leveraging our available deep cut natural gas processing capacity.
Reduce operating expenses to improve corporate netback.
Optimize fuel gas consumption to reduce raw gas shrinkage, increase sales revenue, and lower carbon emission compliance costs.
Reduce long-term debt to deleverage the balance sheet.
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, scheduled for September and October. Pieridae owns and operates three major sour gas processing facilities that each require periodic maintenance turnarounds on a five-to-six-year cycle.
The Company is also undertaking a low-cost de-bottlenecking project at the Caroline gas plant in the third quarter, which is necessary to increase effective throughput capacity and is driven by ongoing demand for increased third-party gas processing volumes. This facility optimization project includes a production outage of approximately 2 weeks and is expected to cost approximately $0.5 million. Subsequent to the debottlenecking, the facility will be capable of processing significantly higher third-party raw gas volumes expected to materialize through the second half of 2024 and into 2025.
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.
Pieridae continually evaluates the economic performance of its producing assets to optimize NOI during periods of sustained low commodity prices.
As a result of these uneconomic shut-ins and the uncertainty on the duration of low AECO natural gas prices, Pieridae does not expect to achieve its previous production guidance and is temporarily withdrawing its 2024 production guidance, which will be revisited later this year. NOI1 and Operating Netback1 projections have each been negatively revised to reflect the decrease in the 2024 average projected AECO basis price.
Reactivating shut-in production when pricing returns to economic levels is not expected to take longer than one to two weeks. However, doing so will only be done when natural gas prices recover to levels that support sustainable production from these high-cost, dry gas assets.
HEDGE POSITION
Pieridae hedges to mitigate commodity price, power cost, 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. The discounted unrealized gain on the Company’s natural gas and C5 hedge positions at June 30, 2024 was approximately $59.2 million using the June 30, 2024 forward strip.
CONFERENCE CALL DETAILS
A conference call and webcast to discuss the results will be held on Wednesday, August 14, 2024, at 8:30 a.m. MDT / 10:30 a.m. EDT. To register to participate via webcast please follow this link:
https://edge.media-server.com/mmc/p/pjxnzwq5
Alternatively, to register to participate by telephone please follow this link:
https://register.vevent.com/register/BIa68e134a86c9428bb7606c153eb0ce70
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.
