Petrus Resources Q2 2024 Earnings Report

Petrus Resources EPS Results

• Actual EPS: C$0.02
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Petrus Resources Revenue Results

• Actual Revenue: $23.15 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Petrus Resources Announcement Details

• Quarter: Q2 2024
• Date: 8/7/2024
• Time: N/A
• Conference Call Date: Thursday, August 8, 2024
• Conference Call Time: 11:00AM ET

Petrus Resources (TSE:PRQ) Ltd is a company that is engaged in the acquisition, development, exploration, and exploitation of energy business assets. The company receives maximum revenue from oil and natural gas. The company's core operating areas are Ferrier, Central Alberta, and the Rocky Mountain foothills.

Petrus Resources Q2 2024 Earnings Call Transcript

Key Takeaways

• Maintained production at 9,471 BOE/d in Q2—flat year-over-year—and reached just over 10,000 BOE/d after bringing on January-drilled wells in July.
• Reduced cash costs by 17% from Q1 to $4.96/BOE, aided by new gathering and processing fees from the North Farrier pipeline.
• Lowered corporate decline rate from about 30% to just over 20%, meaning less capital is needed to sustain production levels.
• Plan to resume drilling in September with a flexible capital program—capex now expected at or below $40 million—while maintaining dividends and current debt levels.
• Generated $10.6 million in Q2 cash flow, deploying $3.7 million for dividends and $6.9 million on capex, with surplus cash earmarked for debt reduction or future drilling.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Petrus Resources Second Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Ken. Please go ahead.

[Ken Gray, CEO at Petrus Resources]

Welcome to Petrus Resources' 2024 Q2 earnings call. My name is Ken Gray, and I am the CEO of Petrus. I'm joined here by our executive team of Mathew Wong, our CFO, Matt Skanderup, COO, and Lindsay Hatcher, VP Commercial and Corporate Development. The most notable thing to me in our Q2 results is the fact that we have held production relatively flat for the past 12 months, despite reducing our capital program in response to low gas prices. Production in Q2 averaged 9,471 BOE per day. It included production added from 2.3 net wells drilled in Q1 and brought on right at the end of that quarter. We did shut in about 200 BOE per day of production for economic reasons and had some turnarounds and maintenance in June, which negatively impacted production.

[Ken Gray, CEO at Petrus Resources]

Also of note, in Q2, cash costs were down 17% from Q1. Some of this is due to increased gathering and processing fees from third parties generated by the North Ferrier pipeline we completed in late 2023. Cash flow came in at CAD 10.6 million for the quarter. We distributed CAD 3.7 million of it in dividends to our shareholders and spent CAD 6.9 million in capital, primarily on completing the three operated wells we drilled back in January. Those wells were brought on production in late July, and current production is a little north of 10,000 BOE per day. We continue to prudently manage our cash flow to ensure we can comfortably pay out our dividend to our shareholders. Our current plan now is to resume drilling in September with a limited program and to maintain our debt at current levels.

[Ken Gray, CEO at Petrus Resources]

With that, I'll open the floor to questions.

[Operator]

Thank you. As a reminder, if you'd like to ask a question, please press star one one on your telephone. We ask as well that you wait for your name and company to be announced before you proceed with your question. One moment. Our first question today comes from Josef Schachter of Schachter Energy Research Services. Your line is open.

[Josef Schachter, President at Schachter Energy Research Services]

Good morning, Ken. Good morning, team. A couple questions. First, on production, you mentioned that it, production now is 10,000. You know, for the first half, we're looking at you know, a number, you know, as you, I think you said 9,700 for the first half. Why aren't you tightening your average annual production from that 9,100 to you know, 9,400, 9,800? You know, is there any reason why you're keeping that wide number?

[Ken Gray, CEO at Petrus Resources]

Sorry, could you repeat that, Josef?

[Josef Schachter, President at Schachter Energy Research Services]

Sure, my pleasure. The production, as you mentioned just in your commentary, was 10,000 BOE a day when you brought on those additional wells in July. You still got a pretty wide number for the year of 9,000-10,000 BOE a day. I'm just wondering why you wouldn't have tightened that up. You know, that's my first question. Thank you.

[Ken Gray, CEO at Petrus Resources]

Well, again, you know, I think when we put that guidance out there, you know, it's hard. We've put a pretty wide range on it. You're right. You know, and I think that's reflective of the fact that you know, we have a fairly volatile business here, you know, with respect to pricing. So, we kind of didn't want to promise more than we could deliver necessarily. We wanted to sort of let people know that this is where we're gonna end up, and I think it is where we're gonna end up. We're definitely gonna end the year in that range, but it gave us plenty of room to sort of manage our capital, no matter what might have come about.

[Ken Gray, CEO at Petrus Resources]

You know, we've averaged 9,600, just a little more, for the first half of the year, as we noted. We're sitting a little over 10,000 right now, so you're right about that. Where we finish the year, you know, depends on a lot of things. We don't have a lot of capital planned for the rest of the year, so, you know, we're not gonna be bringing on a whole lot more production. At least that's the plan right now. But, so, you know, we expect maybe things to drop a little bit, sort of towards Q4. But again, that's—it's price dependent, cash flow dependent, you know, we, we try to be very flexible with our capital program, you know, and we, we have the ability to be very flexible.

[Ken Gray, CEO at Petrus Resources]

We don't have any, you know, firm commitments with regards to capital, so we can manage that depending on economic conditions. And so and that's what we're doing. So, you know, we have a very low kind of gas price right now. Doesn't make a lot of sense to drill a whole bunch of wells right now. We've got a couple more here that we plan to do in the second half, and beyond that, you know, we're just gonna kind of see where we go. So, you know, I think, I think the guidance is still valid. You know, we're gonna end up in that 9,000-10,000 or yeah, 9,000-10,000 range.

[Ken Gray, CEO at Petrus Resources]

But we're a little bit ahead of, even where we thought we'd be right now, given the, the cuts in capital. So who knows? I'm hoping we sort of end up at the high end of that range.

[Josef Schachter, President at Schachter Energy Research Services]

Okay. Next question from me. CapEx so far was CAD 19 million. You have a range of CAD 40 million-CAD 50 million. Should we be thinking more at the lower end of that, given your commentary about not spending very much in the second half?

[Ken Gray, CEO at Petrus Resources]

Yeah. We're gonna be, you know, our current plans are we're gonna be below that 40, you know, if things sort of continue the way we've got them modeled out right now. So, yeah, we're at the low range or even below what we're doing there. We're just trying to be very prudent, managing our cash flow. You know, we're gonna keep our spending within cash flow. We're gonna pay our dividend, keep our debt levels reasonable. So, that's kind of the plan going forward. Yeah, so we will be on that low end if things sort of continue the way we're projecting right now.

[Josef Schachter, President at Schachter Energy Research Services]

Super. And then the last one then for me. If you are spending at the lower end, and there's cash flow, free funds flow after the dividend and CapEx, would you use that to knock down the debt level?

[Ken Gray, CEO at Petrus Resources]

It will be used to bring down debt, you know, unless we start to see an improvement in gas prices and an improvement in economic conditions. And in that case, we could put it into more drilling. We certainly have, you know, a number of wells and projects in the inventory that are just ready to go. So, you know, that again is just a kind of a strategic decision, depending on, you know, what we see going forward and what we think are good investments. But for now, I would say, you know, safe to say that we would be using any additional cash flow to bring down debt.

[Josef Schachter, President at Schachter Energy Research Services]

Super. That's it for me. Thank you for taking my questions.

[Ken Gray, CEO at Petrus Resources]

Thanks, Joseph.

[Operator]

Thank you. If you would like to ask a question, please press star one one on your telephone. At this time, there are no more questions in the queue. I'll turn the call back over to Ken for closing remarks. Please go ahead.

[Ken Gray, CEO at Petrus Resources]

Well, thanks, thanks everybody for tuning in. You know, I'd just like to emphasize a couple things here, before we end the call. Like we talked about, we do have a very flexible capital program and approach. I think in this volatile business, with gas prices, you know, as up and down as they are, you need to be flexible, and we've stressed that. So I think it's important to note that we don't have a lot of capital commitments, that we can manage our, our capital spend within cash flow, continue to pay our dividend, and we think that's the right approach, and, and that's what we're gonna continue doing. The flexibility, I think, is a real, advantage that we have.

[Ken Gray, CEO at Petrus Resources]

I think, it's not every company is as flexible as we are and as willing to adjust their capital to you know current market conditions. So we think that's a strength that we have. Another thing I'd like to just point out quickly is that our corporate decline has actually come down somewhat. And that lower decline rate means that we need less capital to sort of maintain our production, which I think is an important thing to note. We did a lot of drilling in 2022, 2023, invested a lot of money. You know, that production came on, we had quite a bit of production growth.

[Ken Gray, CEO at Petrus Resources]

That production is now maturing somewhat, and the declines have come down on that, so that our corporate decline has dropped from about 30% to, you know, just over 20% right now. And what that means is we just need less capital to maintain production, to replace that production that goes down from decline, natural decline rates. So, you know, I think that's important to note as well. It just requires less capital, and so that's what we're seeing here. We're investing less capital, but we're able to maintain our production, and continue to pay that dividend even in this low, low gas price environment. So I think that's kind of important to note.

[Ken Gray, CEO at Petrus Resources]

The other thing that I mentioned earlier, and that, you know, we wanna sort of emphasize again, is, we put a lot of money into building a pipeline to North Ferrier, which we brought into operation the end of 2023. This was a large investment that allowed us to begin development of our lands north of the river, but it was also an infrastructure asset that is starting to generate significant fees for us as partners and third-party producers pay us to use that line to access processing at our 2-25 gas plant. Those transportation and processing fees are included in operating expenses and were a significant factor in bringing down our operating expenses to a low CAD 4.96 per BOE this past quarter, which was 20% lower than we saw in Q1.

[Ken Gray, CEO at Petrus Resources]

Low operating costs are very important, especially in this low price environment, and we have one of the lowest cost structures out there, and we're continuously working to bring down our costs and keep our costs down. So this is just an example of that, and how that pipeline is contributing to those lower operating costs. So, just wanted to point that out as well. Thank you, everybody, for tuning in, and we'll talk to you next quarter.

[Operator]

Thank you all for joining today's conference call. This does conclude the meeting. You may all disconnect.

Participants

Executives

• Ken Gray, CEO

Analysts

• Josef Schachter, President at Schachter Energy Research Services