Quarterly / Earnings Reports | Third Quarter (3Q) Update

Pine Cliff Talks Q3 2019 Results, Lowers Debt

Share Print Bookmark    |    Tuesday,November 05,2019

Pine Cliff Energy Ltd. reported its Q3 2019 results.

The third quarter of 2019 was a difficult quarter for natural gas producers with AECO 5A natural gas pricing averaged $0.90 per Mcf, the lowest quarterly average in decades. Even with Pine Cliff’s low cost structure and access to diverse natural gas markets, the Company was unable to avoid negative adjusted funds flow. Highlights from Pine Cliff’s third quarter ending September 30, 2019:

• realized a gas price of $1.55 per Mcf, 172% of the AECO 5A benchmark of $0.90 per Mcf;
• realized a gas price of $2.02 per Mcf for the nine months ended September 30, 2019, 133% of the AECO 5A benchmark of $1.52 per Mcf;
• exited with $3.9 million of cash in the bank; and
• subsequent to the third quarter, Pine Cliff entered into a credit agreement with AIMCo which extended the maturity dates of its $30 million in promissory notes from September 30, 2020 to December 31, 2024 and extended the term of its debt to insiders amounting to $12 million from September 30, 2020 to December 31, 2024.

Operations Update

In the fourth quarter of 2018, Pine Cliff drilled its first Pekisko oil well in Central Alberta. To date, this well continues to exceed expectations, averaging 280 Boe/d (56% oil and natural gas liquids) and generating $2.1 million of adjusted funds flow in the first 290 days of production.

That means over 70% of the $3 million cost of this well has been recovered.

Following up on that success, Pine Cliff plans to drill two Pekisko oil wells in the fourth quarter of 2019 starting in mid-November. Pine Cliff is expected to have one of these wells completed and on production by the end of the year and the other well will be completed and on production in the first quarter of 2020. Both well locations are on lands that were part of the strategic acquisition earlier this year. Pine Cliff currently has 30 gross (29 net) Pekisko oil locations in its inventory.

Nova Gas Transmission System (“NGTL”) Update

The Canadian Energy Regulator approved TC Energy’s Temporary Service Protocol (“TSP”) application in late September. The TSP was enacted with the goal of providing TC Energy more flexibility in how they deal with curtailments on the NGTL during times of maintenance. The TSP was only in effect in October of this year, but will be in place again from April to October 2020. To date, the TSP seemed to have had the desired impact of reducing volatility of AECO prices in October. From Pine Cliff’s perspective, any steps to lower the volatility in natural gas prices the Company has been dealing with in the past two years is welcomed and the Company applaud’ s this decision and TC Energy’s and the Alberta Government’s leadership in this matter.

Transformation of Debt on Our Balance Sheet

Pine Cliff’s reported debt was at its peak level of $156 million on December 31, 2015 after its largest asset acquisition in the fall of 2015. At that time, the Company had a $185 million credit facility with a syndicate of five Canadian financial institutions. Despite the low natural gas prices since that time, the Pine Cliff management team has lowered the Company’s net debt to $63.7 million at the end of the third quarter and converted all of the bank debt to term debt. All of the Company’s debt is now held by three of its biggest shareholders.

Financial and Operating Results

¹ Includes results for acquisitions from the closing dates.
²This is a non-GAAP measure, see NON-GAAP Measures for additional information.