Pieridae Energy Limited (“Pieridae” or the “Company”) (PEA.TO) announces the release of its fourth quarter and full year 2022 financial and operating results and year end 2022 reserves. Pieridae generated Net Operating Income (“NOI”)1 of $201 million and made term debt principal repayments totalling $48 million during 2022.
In addition, the Company filed its Annual Information Form ("AIF") for the year ended December 31, 2022 containing Pieridae's 2022 independent oil and natural reserves evaluation as required under National Instrument 51-101 Standards of Disclosure of Oil and Gas Activities (“NI51-101”). Pieridae’s 2022 NI51-101 reserve report is highlighted by an 89% increase in Proved Developed Producing (“PDP”) PV10 value to $807 million and 52% increase in Total Proved plus Probable (“TPP”) PV10 value to $1,526 million.
Pieridae’s AIF, management’s discussion and analysis (“MD&A”) and audited consolidated financial statements and notes for the year ended December 31, 2022 are available at www.pieridaeenergy.com and on SEDAR at www.sedar.com.
HIGHLIGHTS
Q4 2022
• Generated record quarterly NOI1 of $67.7 million ($0.43 per basic and $0.42 per fully diluted share) up 120% from $30.8 million ($0.20 per basic and fully diluted share) in Q4 2021, as a result of strong natural gas and natural gas liquids (“NGL”) prices;
• Generated Funds Flow from Operations1 of $57.6 million ($0.36 per basic and $0.35 per fully diluted share), up 365% from $12.4 million ($0.08 per basic and fully diluted share) in Q4 2021;
• Generated Net income of $114.7 million ($0.72 per basic and $0.70 per fully diluted share), compared to $4.7 million ($0.03 per basic and fully diluted share) in Q4 2021;
• Produced 34,715 boe/d (86% natural gas) down 16% from 41,304 boe/d in 2021, due primarily to the previously discussed re-injection of ethane volumes into the natural gas sales stream and an unplanned outage at the Caroline gas plant in Central Alberta, which has subsequently been repaired;
• Repaid $10.7 million of the senior secured term loan (including the net impact of interest paid in kind “PIK”), reducing the amount due at maturity to $217.1 million2 at year end; and
• Commenced winter drilling program in October, spudding the Company’s first Foothills well (02/6-35-44-18W5, “6-35”) targeting the Ostracod formation in the Brown Creek area of Central Alberta.
Full Year 2022
• Generated Record annual NOI1 of $201.0 million ($1.27 per basic and $1.25 per fully diluted share) up 139% from $84.1 million ($0.53 per basic and fully diluted share) in 2021, primarily as a result of strong natural gas and NGL prices;
• Generated Funds Flow from Operations1 of $153.7 million ($0.97 per basic and $0.95 per fully diluted share), up 658% from $20.3 million ($0.13 per basic and fully diluted share) in 2021;
• Generated Net income of $146.7 million ($0.93 per basic and $0.91 per fully diluted share), compared to a net loss of $39.8 million (-$0.25 per basic and fully diluted share) in 2021;
• Produced 36,868 boe/d (82% natural gas) down 9% from 40,562 boe/d in 2021, due to the previously discussed re-injection of ethane volumes into the natural gas sales stream and natural production declines;
• Reduced term debt principal by $48.3 million (including the net impact of PIK) during 2022 and reduced the adjusted working capital deficit3 by $50.3 million during 2022, primarily through reduction in accounts payable which totaled $22.6 million at year end 2022 compared to $74.7 million at year end 2021;
• Recorded 2022 NI51-101 PDP reserves of 126.8 MMboe, down 3% from 131.3 MMboe at year end 2021 with year over year increase of 89% in PDP PV10 reserve value to $807 million at January 1, 2023 evaluator consensus (“IC4”) pricing; and
• Recorded 2022 NI51-101 TPP reserves of 289.1 MMboe, up 7% from 269.2 MMboe at year end 2021 with year over year increase of 52% in TPP PV10 reserve value to $1,526 million at January 1, 2023 IC4 pricing.
Subsequent to Year End
• Repaid an additional $27 million of term debt.
• Completed drilling our first Brown Creek well (6-35) in Central Alberta in February 2023. The well was completed and temporarily tied-in to existing production infrastructure in March 2023 and is currently being flow-tested with production sold into the TC Energy (NGTL) sales gas system. After flowing continuously for 90.5 hours on test, this 100% working interest well was producing sweet natural gas through 60.3mm production tubing at a downhole-choked flow rate of 6.8 MMcf/d and a restricted flowing wellhead tubing pressure of 11.1 MPa (corresponding shut-in casing pressure of 17.1 MPa). At the conclusion of the anticipated 7-day flow test, 6-35 will be shut-in for an extended pressure build-up, during which the well will be permanently tied-in to the existing on-lease gas gathering system.
• Drilling also commenced on a second Brown Creek well in February 2023, with completion expected by April 2023; and
• Terminated the previously announced NE BC disposition transaction as the purchaser failed to meet the required closing conditions, following multiple extensions. The Company has retained a non-refundable deposit and will continue to market the NE BC property.
“Pieridae put up a very good result in the fourth quarter, punctuating a transformational year for the Company,” said Pieridae’s Chief Executive Officer, Alfred Sorensen. “Strong gas and liquids pricing drove record funds flow in Q4, offsetting lower production, due in part, to an unplanned outage at our Caroline plant which the team has since repaired. 2022 saw the Company commence drilling our extensive inventory of high-impact Foothills development locations and make progress on our path to de-levering the balance sheet, all while operating our assets in a safe, responsible and effective manner. Our disciplined hedging strategy continues to mitigate commodity price volatility and is offsetting the impact of lower AECO gas prices through the first quarter of 2023. I’d like to thank all Pieridae shareholders, lenders, employees and the communities in which we operate, for their ongoing interest and support.”
Production in the fourth quarter of 2022 decreased 16% compared to Q4 2021 due in part to a December unplanned shut-in required to complete sulphur condenser repairs at the Company’s Caroline gas processing facility which suffered an upset in its sulphur recovery unit (2,500 boe/d). Other factors impacting fourth quarter production included pipeline inspections (680 boe/d), unseasonably cold weather which caused freeze-ups and run time restrictions at gas plants (1,500 boe/d) and ongoing ethane reinjection into the natural gas sales stream (1,900 boe/d). During 2022, average production decreased 9% compared to 2021 as a result of ethane reinjection and natural production declines.
2022 RESERVES
Deloitte Touche Tohmatsu Limited (“Deloitte”), Pieridae’s independent, qualified reserves evaluator, performed reserves evaluations of the Company’s assets as at December 31, 2022, and December 31, 2021. The following table summarizes Pieridae’s reserves based on the Deloitte NI51-101 reserve report using the January 1, 2023 IC4 price forecast:
HEDGE POSITION
The Company continues to execute a commodity price risk management program governed by its hedge policy.
The Company had the following fixed price physical commodity sales contracts and power purchase contracts in place at December 31, 2022:
2023 OUTLOOK AND REVISED GUIDANCE
North American natural gas prices have sharply fallen off during the first quarter of 2023 as a result of the warmer than expected winter, high storage levels and constrained North American natural gas export capacity. AECO prices have averaged $3.13/GJ year to date in 2023, compared to $4.93/GJ in the fourth quarter of 2022. This price shock is largely mitigated during the first quarter by the Company’s natural gas hedges (129,767 GJ/d protected at $5.78/GJ). However, if depressed AECO prices continue or fall further as we enter the summer, 2023 NOI and funds flow from operations will be materially impacted.
As a result, management has revised annual NOI and netback guidance to reflect a lower commodity price forecast for the remainder of the year and is planning to defer certain expenditures into 2024, including investigating deferral of the maintenance turnaround at Waterton, which has been reflected in this revised guidance.
Pieridae’s priority remains improving financial flexibility by strengthening the balance sheet while sustaining production, implementing cost control initiatives, optimizing infrastructure logistics and executing non-core asset dispositions.
