Petrus Resources Q4 2023 Earnings Call Transcript

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March 27, 2024

There are 4 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Petrus Resources Year End twenty twenty three Results Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would like now to turn the conference over to Ken Gray, Chief Executive Officer. Please go ahead.

Speaker 1

Hello and welcome to Petrus Resources conference call to discuss our twenty twenty three year end results, give you a quick update on current activities and answer any questions you may have. This is the first time we are doing this, so we appreciate you calling in and hope you find it useful.

Speaker 2

My name is Ken Gray

Speaker 1

and I'm the CEO of Petrus. I'm joined here by our CFO, Matthew Wong COO, Matt Skandrip and VP, Commercial and Corporate Development, Lindsey Hatcher. So let's get right to it. 2023 was a challenging year as oil and natural gas prices retreated from the post COVID and Ukraine war induced highs in 2022. We had ambitious capital plans for 2023 and started drilling right at the start of the year, finishing seven wells by mid March, with three of those completed and put on production in early March.

Speaker 1

In light of the rapidly retreating prices, we elected to suspend our capital program and reevaluate our capital strategy. We quickly pivoted from an aggressive growth strategy to a more future oriented strategy with investments in infrastructure, in particular, our North Farrier pipeline connecting our North Farrier lands to our 100% owned and operated gas plant and drilling some key wells in North Farrier that tied into the pipeline and allowed us to both acquire additional working interest in highly prospective lands and generate gathering and processing revenue from the area. The pipeline was completed in December and the North Farrier wells drilled in the second half of twenty twenty three were put on production right at the end of the year. Highlights for the year include a second year in a row of significant production growth, averaging 10,301 Boe per day, up 35% from the 7,604 Boe per day in 2022. We generated strong cash flow of $78,000,000 which was down only 11% from 2022 despite prices being down almost 40%.

Speaker 1

Increased production plus lower cash costs kept our cash flow strong. Petrus has been building towards a return of capital model, reducing and restructuring our debt in 2022 and growing our cash flow, and we were pleased to be in a position to declare a special dividend of $0.03 per share in Q4 twenty twenty three and then initiate a regular dividend starting in January 2024 of $0.01 per share, which at our current price provides a yield of about 9%. That we were able to introduce a regular dividend at this time is a testament to the strength of our business and ability to generate strong cash flow even at low prices. Looking forward, we announced our 2024 budget guidance in February. The plan is to drill to maintain production and protect our dividend.

Speaker 1

Q1 twenty twenty four is almost in the books. We've drilled 3100% wells and participated in another 2.3 net wells in Q1. None of the wells are on production as of yet. We've deferred the completions on our operated wells until Q2, while the non operated wells are currently being completed. We have additional drilling planned for later in the year with lots of flexibility.

Speaker 1

So we'll continue to monitor market conditions and resume capital spending when it makes sense. There is a lot of optimism with regards to pricing later this year and next year. Oil prices are already ticking up and gas futures are much stronger for next winter in 2025 than where we are today. Petrus is well positioned to take advantage. With that, I'll open the floor to questions.

Speaker 1

Okay. The

Operator

first question comes from Brian Davis. Your line is now open.

Speaker 3

Hi, Brian Davis here.

Speaker 2

Hi, Brian.

Speaker 3

How are we doing?

Speaker 2

Good. How are you?

Speaker 3

Excellent. Hey, I just one of the questions, kind of reviewed everything that you guys sent out last night. And one thing that kind of popped into my head is, it looks a little tight on that dividend. I think you said you're going to have $15,000,000 to $20,000,000 our free cash flow for next year. And you're pretty close at $14,000,000 for the dividend plus your automatic buyback.

Speaker 3

How confident are you guys that you can keep that dividend in place?

Speaker 2

Yes. Thanks, Brian. No, you're right. Current pricing in that is challenging, but we're quite confident that we'll pay the dividend throughout this year and that we can sustain that dividend. We have a lot of flexibility in our capital spending.

Speaker 2

We anticipate $40,000,000 to $50,000,000 of capital spending on drilling this year. And but we can certainly reduce that if we need to and we're prepared to do that if we need to in order to pay the dividend. So, yes, we see no real issues. We've run our budget models at various pricing scenarios and we're quite confident that the dividend is sustainable.

Speaker 3

Okay, good.

Operator

You may now disconnect.

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Earnings Conference Call
Petrus Resources Q4 2023
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