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Year-Over-Year Improvement in Financial Metrics and Continued Deleveraging
CALGARY, ALBERTA – November 10, 2022 – Pieridae Energy Limited (“Pieridae” or the “Company”) (PEA.TO) announces the release of its third quarter 2022 financial and operating results, highlighted by year-over-year improvement in financial metrics such as Revenue, Net Operating Income and Adjusted Funds Flow and continued debt reduction. A full version of Pieridae’s management’s discussion and analysis (“MD&A”) and unaudited interim condensed consolidated financial statements and notes thereto for the fiscal period ended September 30, 2022 are available at www.pieridaeenergy.com and on SEDAR at www.sedar.com.
During Q3 2022 Pieridae:
“During the third quarter we generated strong cash flow despite volatile commodity prices and the decision to curtail production for a short time in August. We also reduced our debt by $15 million during the quarter,” said Pieridae’s Chief Executive Officer Alfred Sorensen. “Additionally, we are pleased to report that subsequent to the end of the third quarter, the Company commenced its previously announced Fall drilling program in the Brown Creek / Stolberg area.”
Commodity Pricing and Hedge Position
Commencing the third week of August 2022, daily AECO spot prices dropped significantly as a result of pipeline maintenance on TC Energy’s Nova Gas Transmission Line (“NGTL”) and Enbridge’s Transportation South (“T-South”) systems, an unplanned compressor failure in Alberta and restrictions to gas storage injections. These pipelines connect most of the natural gas production in Western Canada to domestic and export markets, and the pipeline downtime created negative AECO spot prices as volumes were unable to be transported to local and international terminals. Subsequently, current AECO prices have rebounded, however, AECO prices have remained volatile through September and October as further maintenance on the NGTL system was completed.
Notwithstanding the fluctuation in the daily spot AECO pricing during the quarter, the AECO monthly natural gas price index increased 19% in the third quarter of 2022 compared to 2021. Average North American crude oil prices increased 30% in the third quarter of 2022 compared to the third quarter of 2021 based on persistent supply constraints and market uncertainty due to ongoing geopolitical events.
Pieridae’s realized prices reflect the mix of spot sales and physical forward sales contracts consistent with the Company’s hedging policy. In the nine months ended September 30, 2022, volumes sold under physical forward sales contracts represented 61% of total production and 43% of total revenue.
Pieridae will continue to hedge in order to mitigate commodity price volatility and protect the cash flow required to fund the Company’s facility maintenance capital requirements, debt service obligations and capital development program while allowing the Company to participate in future commodity price upside.
Production in the third quarter of 2022 averaged 35,959 boe/d, a 5% decrease from 38,595 boe/d in Q3 2021, due to re-injection of ethane volumes into the gas stream and temporary shut-in of production due to AECO spot price volatility.
Pieridae had approximately 54% of its natural gas production hedged during the month of August. However, Pieridae determined it was prudent to temporarily shut-in certain gas wells during this period of extremely low spot AECO prices. As a result, the Company shut-in unhedged gas volumes (750 boe/d) for several days in our Lynx, Palliser, Moose and Tay areas.
As previously mentioned, Pieridae has re-injected liquid ethane (“C2”) back into the natural gas sales stream at two gas processing facilities during the quarter forgoing C2 production of approximately 1,800 – 2,300 boe/d but increasing the heat content and value of the gas stream, resulting in no material impact to revenue. Pieridae expects to continue re-injecting liquid ethane into the gas stream for the remainder of the year and into 2023.
Foothills Drilling Program
Subsequent to quarter end, the Company commenced its three well drilling program at Brown Creek and Stolberg in our Central Alberta Foothills area. The project will incur gross development capital costs during Q4 2022 and Q1 2023 of approximately $27 million. Successful wells in these reservoirs provide significant upside potential of up to 39 additional drilling opportunities in the Central AB Foothills core area.
Pieridae’s priority is on improving financial flexibility by strengthening the balance sheet while sustaining production, implementing cost control initiatives, optimizing infrastructure logistics and executing non-core asset dispositions.
The Company’s 2022 development capital program guidance range has been decreased and narrowed to $20 – 25 million reflecting small reductions in scope of optimization work and rescheduling of costs related to the Fall drilling program into the first quarter of 2023.
Conference Call Details
A conference call to discuss the results will be held for the investment community on Thursday November 10, 2022 at 8.30 a.m. MDT/10.30 a.m. EDT. To participate in the conference webcast or call, you are asked to register using one of the links provided below. Details regarding the webcast or call will be provided to you upon registration.
Webcast participants registration URL:
Live call participants registration URL: https://register.vevent.com/register/BI2beb5d0ec7e844ceb99e6b15fcb3c019
For further information please contact:
Alfred Sorensen, Chief Executive Officer
Telephone: (403) 261‐5900
Adam Gray, Chief Financial Officer
Telephone: (403) 261‐5900
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