CALGARY, ALBERTA--(Marketwire - May 8, 2012) - NAL Energy Corporation ("NAL" or the "Corporation") (TSX:NAE) today announced its financial and operational results for the first quarter of 2012. All amounts are in Canadian dollars unless otherwise stated.
| FIRST QUARTER ACTIVITY SUMMARY |
- The Corporation drilled 45 (23.7 net) wells of which 25 were in SE Saskatchewan, 19 were in Alberta and one was a Montney well at Fireweed in NE British Columbia. Total capital expenditures were $89 million, of which $79 million was directed to drilling, completion and tie-in activity;
- Production of 28,043 boe per day in the quarter was up marginally on a year over year basis;
- The oil and liquids weighting increased to 50 percent of total volumes versus 47 percent in the same period a year ago due, in part, to a 904 bbl per day increase in oil volumes in the first quarter of 2012;
- NAL generated Funds From Operations of $60 million, which is up six percent year over year; and
- The Corporation issued $150 million principal amount of 6.25 percent convertible unsecured subordinated debentures, at a price of $1,000 per debenture, with a conversion price of $9.90 per common share and maturity of March 31, 2017.
|
STRATEGIC BUSINESS COMBINATION
|
- On March 22, 2012 NAL and Pengrowth Energy Corporation ("Pengrowth") entered into an arrangement agreement that provides for the strategic combination of NAL and Pengrowth by plan of arrangement under the Business Corporations Act (Alberta) ("ABCA");
- Pursuant to the plan of arrangement, NAL shareholders will receive 0.86 of a Pengrowth share in exchange for each NAL share held;
- Both NAL and Pengrowth expect the combined entity, after completion of the arrangement, to offer the following benefits for shareholders:
-
Scale and Scope - a substantially larger and more diversified portfolio of oil and natural gas assets at various stages of development;
-
Expanded Asset Base - an expanded asset base of high quality conventional and unconventional opportunities, with over 100,000 boe per day of current production and 434 million boe of proved plus probable reserves using year-end 2011 reserves;
-
Enhanced Exposure to Light Oil Plays - exposure to leading western Canadian light oil plays, with an inventory of over 730 locations across the Swan Hills Trend, the central Alberta Cardium and southeast Saskatchewan; and
-
Increased Access to Capital - a strong liquidity position and access to capital, including approximately $1.0 billion of committed covenant-based credit facilities, of which less than $200 million is estimated to be drawn at the closing of the arrangement;
- The board of directors of NAL unanimously recommends that NAL Shareholders vote in favour of the arrangement at the annual and special meeting of the Corporation to be held on May 23, 2012.
|
FINANCIAL AND OPERATING HIGHLIGHTS
|
| Three months ended |
| (thousands of dollars, except per share, payout ratio and boe data) |
| (unaudited) |
| |
| |
March 31, 2012
|
|
March 31, 2011 |
|
December 31, 2011 |
|
| FINANCIAL |
|
|
|
|
|
|
| Revenue(1) |
$121,154
|
|
$121,752 |
|
$144,767 |
|
| Cash flow from operating activities |
86,066
|
|
60,983 |
|
67,818 |
|
| Cash flow per share - basic |
0.57
|
|
0.41 |
|
0.45 |
|
| Cash flow per share - diluted |
0.48
|
|
0.38 |
|
0.42 |
|
| Funds from operations |
60,153
|
|
56,626 |
|
68,393 |
|
| Funds from operations per share - basic |
0.40
|
|
0.38 |
|
0.45 |
|
| Funds from operations per share - diluted |
0.36
|
|
0.37 |
|
0.44 |
|
| Net income (loss) |
1,207
|
|
(1,510 |
) |
(53,886 |
) |
| Dividends declared |
22,765
|
|
31,001 |
|
31,629 |
|
| Dividends per share |
0.15
|
|
0.21 |
|
0.21 |
|
| Basic payout ratio: |
|
|
|
|
|
|
| |
based on cash flow from operating activities |
26
|
%
|
51 |
% |
47 |
% |
| |
based on funds from operations |
38
|
%
|
55 |
% |
46 |
% |
| Basic payout ratio including capital expenditures: |
|
|
|
|
|
|
| |
based on cash flow from operating activities |
130
|
%
|
186 |
% |
106 |
% |
| |
based on funds from operations |
186
|
%
|
201 |
% |
105 |
% |
| Basic payout ratio including capital expenditures and proceeds from disposition: |
|
|
|
|
|
|
| |
based on cash flow from operating activities |
122
|
%
|
142 |
% |
102 |
% |
| |
based on funds from operations |
174
|
%
|
153 |
% |
101 |
% |
| Shares outstanding (000's) |
|
|
|
|
|
|
| |
Period end |
152,290
|
|
147,781 |
|
151,107 |
|
| |
Weighted average |
151,641
|
|
147,534 |
|
150,393 |
|
| Capital expenditures(2) |
89,244
|
|
82,587 |
|
40,287 |
|
| Property acquisitions (dispositions), net(3) |
(5,896
|
)
|
(26,107 |
) |
181 |
|
| Net debt, excluding convertible debentures(4) |
256,301
|
|
334,003 |
|
363,380 |
|
| Convertible debentures (at face value) |
344,744
|
|
194,744 |
|
194,744 |
|
| |
|
|
|
|
|
|
| OPERATING |
|
|
|
|
|
|
| Daily production(5) |
|
|
|
|
|
|
| |
Crude oil (bbl/d) |
11,315
|
|
10,411 |
|
11,755 |
|
| |
Natural gas (Mcf/d) |
84,285
|
|
89,581 |
|
91,340 |
|
| |
Natural gas liquids (bbl/d) |
2,680
|
|
2,683 |
|
2,817 |
|
| |
Oil equivalent (boe/d) |
28,043
|
|
28,024 |
|
29,795 |
|
| |
|
|
|
|
|
|
|
OPERATING NETBACK ($/
boe
)
|
|
|
|
|
|
|
| |
Revenue before hedging gains (losses) |
47.48
|
|
48.27 |
|
52.81 |
|
| |
Royalties |
(8.39
|
)
|
(7.85 |
) |
(8.74 |
) |
| |
Operating costs |
(12.69
|
)
|
(10.81 |
) |
(13.76 |
) |
| |
Other income |
0.05
|
|
0.11 |
|
0.10 |
|
| |
Operating netback before hedging |
26.45
|
|
29.72 |
|
30.41 |
|
| |
Hedging gains (losses) |
3.85
|
|
(0.34 |
) |
(0.29 |
) |
| |
Operating netback |
30.30
|
|
29.38 |
|
30.12 |
|
|
(1)
|
Oil, natural gas and natural gas liquid sales less transportation costs and prior to royalties and hedging.
|
|
(2)
|
Excludes property and corporate acquisitions, and is net of drilling incentive credits of $nil for the quarter ended March 31, 2012 (March 31, 2011 - $2.7 million)
|
| (3) |
Represents costs to acquire properties less proceeds from dispositions.
|
| (4) |
Bank debt plus working capital and other liabilities, excluding derivative contracts, and deferred income tax balances.
|
|
(5)
|
Includes royalty interest volumes.
|
ARRANGEMENT AGREEMENT WITH PENGROWTH ENERGY CORPORATION
On March 22, 2012, the Corporation and Pengrowth entered into an arrangement agreement (the "Arrangement Agreement") providing for the acquisition of all of the issued and outstanding common shares of NAL by Pengrowth pursuant to a plan of arrangement to be implemented under the Business Corporations Act (Alberta) ("ABCA"). Under the terms of the Arrangement Agreement, NAL shareholders will receive 0.86 of a Pengrowth common share for each NAL common share held. Based on the March 22, 2012 closing prices on the Toronto Stock Exchange (TSX) of Pengrowth and NAL, the exchange ratio reflects a premium of 9.7 percent for NAL shareholders. Based on the 20-day volume-weighted average prices on the TSX of Pengrowth and NAL, the exchange ratio represents a premium of 10.8 percent for NAL shareholders. Based upon Pengrowth's closing price of $9.95 per share on March 22, 2012, the enterprise value of NAL is approximately $1.9 billion. Upon completion of the Arrangement, former NAL shareholders will own approximately 26 percent of Pengrowth.
The Annual and Special Meeting of the Corporation will be held Wednesday, May 23, 2012 in the Devonian Room at the Calgary Petroleum Club, 319 - 5th Avenue S.W., Calgary, Alberta at 3:00 p.m. MDT. Closing of the transaction is anticipated to occur on May 31, 2012. For further details regarding the Agreement, please see the Information Circular, which may be found on SEDAR at www.sedar.com or on NAL's website at www.nalenergy.com.
NAL's complete unaudited consolidated financial statements for the quarter ended March 31, 2012 and related Management's Discussion and Analysis may be found by following the link below:
Download NAL's Q1 MD&A and Financials from NAL's website.
NON-IFRS FINANCIAL MEASURES
Throughout this press release, Management uses the terms "funds from operations", "funds from operations per share", "payout ratio", "cash flow from operations per share", "net debt to trailing 12 month cash flow", "operating netback" and "cash flow netback". These are considered useful supplemental measures as they provide an indication of the results generated by the Corporation's principal business activities. Management uses the terms to facilitate the understanding of the results of its operations. However, these terms do not have any standardized meaning as prescribed by IFRS. Investors should be cautioned that these measures should not be construed as an alternative to net income determined in accordance with IFRS as an indication of NAL's performance. NAL's method of calculating these measures may differ from other issuers and, accordingly, they may not be comparable to measures used by other issuers.
Funds from operations is calculated as cash flow from operating activities before changes in non-cash working capital. Funds from operations does not represent operating cash flows or operating profits for the period and should not be viewed as an alternative to cash flow from operating activities calculated in accordance with IFRS. Funds from operations is considered by Management to be a more meaningful key performance indicator of NAL's ability to generate cash to finance operations and to pay monthly dividends. Funds from operations per share and cash flow from operations per share are calculated using the weighted average shares outstanding for the period.
Payout ratio is calculated as dividends declared for a period as a percentage of either cash flow from operating activities or funds from operations; both measures are stated.
Net debt to trailing 12 months cash flow is calculated as net debt as a proportion of funds from operations for the previous 12 months. Net debt is defined as bank debt, plus convertible debentures at face value, plus working capital and other liabilities, excluding derivative contracts.
ADVISORY REGARDING PRODUCTION INFORMATION
When converting natural gas to barrels of oil equivalent (boe) within this press release, NAL uses the widely recognized standard of six thousand cubic feet (Mcf) to one barrel of oil. However, boes may be misleading, particularly if used in isolation. A conversion ratio of 6 Mcf:1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
FORWARD-LOOKING INFORMATION
This press release contains forward-looking information as to the Corporation's internal projections, expectations and beliefs relating to future events or future performance. Forward looking information is typically identified by words such as "anticipate", "continue", "estimate", "expect", "forecast", "may", "will", "could", "plan", "intend", "should", "believe", "outlook", "project", "potential", "target", and similar words suggesting future events or future performance. In addition, statements relating to "reserves" are forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described exist in the quantities estimated and can be profitably produced in the future.
In particular, this press release contains forward-looking information pertaining to the following, without limitation: the amount and timing of cash flows and dividends to shareholders; reserves and reserves values; 2012 production; the future tax treatment of the Corporation; the Corporation's tax pools; future oil and gas prices; operating, drilling and completion costs; the amount of future asset retirement obligations; future liquidity and future financial capacity; future results from operations; payout ratios; cost estimates and royalty rates; drilling plans; tie-in of wells; future acquisition, development and exploration expenditures; rates of return; and the combination of the Corporation and Pengrowth Energy Corporation ("Pengrowth") described below and the anticipated benefits of such combination to NAL and its securityholders.
With respect to forward-looking statements contained in this press release, assumptions have been made regarding, among other things: future oil and natural gas prices; future capital expenditure levels; future oil and natural gas production levels; future exchange rates; the amount of future cash dividends that NAL intends to pay; the cost of expanding the Corporation's property holdings; the Corporation's ability to obtain equipment in a timely manner to carry out exploration and development activities; the Corporation's ability to market its oil and natural gas successfully to current and new customers; the impact of increasing competition; NAL's ability to obtain financing on acceptable terms; NAL's ability to add production and reserves through its development and exploitation activities; and the ability of NAL and Pengrowth to receive, in a timely manner, the necessary regulatory, court securityholder and other third party approvals, or to otherwise satisfy the conditions of the arrangement.
Although NAL believes that the expectations reflected in the forward-looking information contained in the press release, and the assumptions on which such forward-looking information are made, are reasonable, readers are cautioned not to place undue reliance on such forward looking statements as there can be no assurance that the plans, intentions or expectations upon which the forward-looking information are based will occur. Such information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated and which may cause NAL's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance. These risks and uncertainties include, without limitation: changes in commodity prices; unanticipated operating results or production declines; the impact of weather conditions on seasonal demand and NAL's ability to execute its capital program; risks inherent in oil and gas operations; the imprecision of reserve estimates; limited, unfavorable or no access to capital or credit markets; the impact of competitors; the lack of availability of qualified operating or management personnel; the inability to obtain industry partner and other third party consents and approvals, when required; failure to realize the anticipated benefits of acquisitions; general economic conditions in Canada, the United States and globally; fluctuations in foreign exchange or interest rates; changes in government regulation of the oil and gas industry, including environmental regulation; changes in royalty rates; changes in tax laws; stock market volatility and market valuations; OPEC's ability to control production and balance global supply and demand for crude oil at desired price levels; political uncertainty, including the risk of hostilities in the petroleum producing regions of the world; the failure of NAL or Pengrowth to obtain necessary securityholder, regulatory, court and other third party approvals, or to otherwise satisfy the conditions to the arrangement, in a timely manner or at all, and other risk factors discussed in other public filings of the Corporation including the Corporation's current Annual Information Form.
NAL cautions that the foregoing list of factors that may affect future results is not exhaustive. The forward-looking information contained in this press release is made as of the date of this press release. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.
ABOUT NAL
NAL Energy Corporation generates returns for its shareholders by pursuing a strategy of acquiring, producing and selling crude oil, natural gas and natural gas liquids from assets based in southeastern Saskatchewan, central Alberta, and northeastern British Columbia.