Quarterly / Earnings Reports | Second Quarter (2Q) Update

TORC Oil & Gas Details Q2 Results, Operations

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   |    Wednesday,July 31,2019

TORC Oil & Gas Ltd. reported its Q2 2019 results.

Highlights:

• Achieved record quarterly production of 28,326 boepd, up from 28,267 boepd in the first quarter of 2019 and 23,059 boepd in the second quarter of 2018;
• Generated cash flow of $81.1 million relative to $76.1 million in the first quarter of 2019 and $75.3 million in the second quarter of 2018;
• Generated cash flow per share of $0.37 as compared to $0.35 in the first quarter of 2019 and $0.38 in the second quarter of 2018;
• Successfully drilled 13 (9.8 net) wells spending $34.9 million;
• During the second quarter, TORC declared dividends of $15.7 million of which $4.8 million was paid under the share dividend program;
• Achieved a payout ratio of 56% in the second quarter and 70% for the first half of 2019 while continuing to grow production; and
• Exited the second quarter with net debt of approximately $363.9 million, down from $396.0 at the end of the first quarter, with $300.6 million drawn on the Company’s $500 million credit facility.

Ops Update

TORC’s second quarter production averaged 28,326 boepd. The solid performance of the Company’s existing low decline production base, combined with a successful drilling program, continued to deliver predictable production growth.

TORC spent a total of $34.9 million of exploration and development capital in the second quarter. In the first six months of 2019, the Company executed on a development drilling program of 47 (37.7 net) wells spending $89.0 million, representing 49% of the Company’s $180 million capital program. TORC remains well positioned to achieve 2019 production guidance.

SOUTHEAST SASKATCHEWAN

TORC participated in the drilling of 9 (6.0 net) conventional wells in the second quarter following an active first quarter. In the first half of 2019, the Company drilled 27 (20.5 net) conventional wells. With 45 (33.7 net) wells budgeted to be drilled in 2019, 18 (13.2 net) additional conventional wells are planned to be drilled in the second half of 2019. TORC has identified more than 400 net undrilled conventional light oil locations in southeast Saskatchewan, providing years of high quality drilling inventory. The focus on TORC’s southeast Saskatchewan conventional properties is to maintain a stable production profile and maximize free cash flow from the assets.

As planned, TORC did not drill wells in the Torquay/Three Forks resource play during the second quarter of 2019. During the second quarter, 2 (2.0 net) Torquay/Three Forks wells drilled in the first quarter were completed and brought on production. In the second half of 2019, 11 (8.0 net) Torquay wells are scheduled to be drilled, for a total of 16 (12.5 net) wells in 2019. TORC has identified over 150 net development locations in the Torquay/Three Forks play providing multiple years of drilling inventory.

On the unconventional Midale light oil resource play in southeast Saskatchewan, TORC drilled 4 (3.8 net) wells during the second quarter for a total of 11 (9.4 net) wells in the first half. The Company plans to drill an additional 7 (5.5 net) unconventional Midale wells across the Company’s land position for both the development and further delineation of the play during the second half of 2019. Through the continued consolidation and delineation of this play, TORC has identified 175 net undrilled locations on the Company’s land base.

CARDIUM

In 2019, TORC has budgeted to drill 9 (8.2 net) Cardium wells. As planned, the Company drilled 4 (3.3 net) wells in the first half of 2019, all in the first quarter. TORC’s Cardium program includes drilling an additional 5 (4.9 net) wells. TORC has identified more than 290 net undrilled Cardium locations for future development. With a decline profile below 25% and a deep inventory of high quality development locations, the Cardium continues to contribute to the Company’s free cash flow growth strategy.

Capital Program

TORC’s 2019 $180 million capital program is concentrated on the Company’s primary core areas in southeast Saskatchewan, focused on both conventional opportunities and unconventional plays, and the Cardium play in central Alberta. TORC continues to focus on operational efficiencies with a goal of achieving results that exceed budget expectations.

The capital program maintains TORC’s balanced approach as the Company continues to focus on achieving long term sustainable growth, protecting the Company’s strong financial position, and maintaining a consistent decline profile to preserve repeatability of the business model.

Based on current commodity prices and budgeted cost structure, the Company expects to achieve significant free cash flow in 2019 above the current capital program and dividend. This free cash flow will continue to position the Company to take advantage of opportunities to enhance the growth, sustainability and repeatability of the Company’s business model.

Outlook

TORC has built a sustainable growth platform of light oil focused assets. The stability of the high quality, low decline, light oil assets in southeast Saskatchewan and the low risk Cardium development inventory in central Alberta, combined with exposure to unconventional light oil resource plays in southeast Saskatchewan, positions TORC to provide value creation through a disciplined long term focused growth strategy with a sustainable dividend.