Journey Energy Inc. reports its 2014 financial results

CALGARY, March 16, 2015 /CNW/ - Journey Energy Inc. (JOY – TSX) ("Journey" or the "Company") is pleased to announce its 2014 financial results. The highlights of our fourth quarter and full year results are shown below.

HIGHLIGHTS

In 2014, Journey completed a significant acquisition, increasing production and capital project inventory while reducing our corporate decline rate, and transitioned to a public dividend paying exploration and production company through an initial public offering. Highlights include:

  • Increased cash flow from operations by 98% to $24.6 million in the quarter as compared to the same period in 2013. For the full year, achieved $93.6 million in cash flow from operations, which was 104% higher than 2013.
  • Achieved production of 11,773 BOE/d for the fourth quarter, an increase of 104% from the same period in 2013, and an increase of 11% over the pro forma post IPO production of 10,600 BOE/d.
  • Achieved record liquids production of 6,133 BOE/d for the quarter, a 102% increase over the same period in 2013.
  • Reduced general and administrative costs by 36% to $3.51 per BOE for the year in 2014, from $5.50 per BOE in 2013.
  • Invested $17.7 million in the fourth quarter, bringing the total net investment in 2014 to $260.9 million including $172 million on property acquisitions. Journey's 2014 capital program yielded FD&A costs (including changes in future capital) of $11.79/BOE and a 2P recycle ratio of 2.6:1.
  • Completed an active capital program with a total of 31 (22.8 net) wells for the year, achieving a 98% success rate.
  • Successfully completed our IPO issuing 14.75 million shares for gross proceeds of $178 million in June of 2014.
  • Declared dividends of $0.18 per share in the fourth quarter and $0.36 per share in 2014.

 


Three Months ended

December 31,

Twelve months ended

December 31,

Financial ($000's except per
share amounts)

2014

 

2013

%

change

2014

 

2013

%

change

Production revenue

48,264

26,086

85

209,509

98,814

112

Cash flow from operations

24,557

12,405

98

93,602

45,781

104


Per basic share

0.57

0.47

21

2.65

1.75

51


Per diluted share

0.56

0.42

33

2.56

1.53

67

Net income (loss)

(105,316)

(2,031)

5,085

(90,221)

4,326

(2,186)


Per basic share

(2.44)

(0.08)

2,950

(2.56)

0.17

(1,606)


Per diluted share

(2.44)

(0.08)

2,950

(2.56)

0.15

(1,807)

Capital expenditures, net cash

17,702

17,614

-

260,857

72,043

262

Net debt

100,575

84,119

20

100,575

84,119

20








Share Capital (000's)







Basic, weighted average

43,213

25,844

67

36,578

26,209

40

Basic, end of period

43,304

26,233

65

43,304

26,233

65

Fully diluted

48,130

33,264

45

48,130

33,264

45








Daily Production







Natural gas volumes (mcf/d)

33,846

16,342

107

28,925

14,610

98

Light oil (bbl/d)

5,334

2,494

114

4,787

2,316

107

Natural gas liquids (bbl/d)

799

547

46

738

504

46

Corporate (BOE/d)

11,773

5,765

104

10,346

5,255

97








Average Prices







Natural gas ($/mcf)

3.58

3.58

-

4.40

3.24

36

Light Oil ($/bbl)

67.50

74.66

(10)

83.42

82.73

1

Natural gas liquids ($/bbl)

54.41

70.81

(23)

64.18

63.12

2

Corporate ($/BOE)

44.56

49.18

(9)

55.48

51.52

8








Netbacks ($/BOE)







Realized prices

44.56

49.18

(9)

55.48

51.52

8

Royalty expense

(7.40)

(8.07)

(8)

(9.67)

(7.54)

28

Operating expense

(14.39)

(11.02)

31

(14.53)

(12.62)

15

Transportation expense

(0.86)

(0.74)

16

(0.67)

(0.80)

(16)

Operating netback

21.91

29.35

(25)

30.61

30.56

-








Wells drilled







Gross

4

7

(43)

31

27

15

Net

2.8

4.1

(32)

22.8

17.7

29

Success rate (%)

82

100

(18)

98

100

(2)

 

 

(1)

 The Company considers cash flow from operations (also referred to as "cash flow") a key performance measure as it demonstrates the Company's ability to generate funds necessary to repay debt and to fund future growth through capital investment. Cash flow from operations is calculated as cash from operating activities before changes in non-cash working capital, transaction costs and decommissioning costs incurred. Cash flow from operations per share is calculated as cash flow from operations divided by the weighted-average number of shares outstanding in the period. Journey's determination of cash flow from operations may not be comparable to that reported by other companies. Journey also presents cash flow from operations per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net earnings per share, which per share amount is calculated under IFRS and is more fully described in the notes to the financial statements.

(2)

Net debt represents current assets less current liabilities and bank debt (but excludes the potential future liability (or assets) related to the mark-to-market measurement of derivative contracts). It does not have a standardized meaning prescribed by International Financial Reporting Standards and it is therefore unlikely to be comparable to similar measures presented by other companies.

(3)

 All barrels of oil equivalent conversions use 6 mcf to 1 barrel of oil.

(4)

Operating netback equals total revenue less royalties, transportation and operating costs calculated on a per BOE basis. Cash flow netback equals the operating netback less cash finance costs, general and administrative costs, realized gains and losses on derivative contracts, plus any interest income. Operating netback and funds flow from operations netback do not have a standardized measure prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculations of similar measures for other companies.

 

2014 IN REVIEW

2014 was a transformational year for Journey.  On January 21, 2014, Journey entered into a Purchase and Sale Agreement to acquire a low decline (7%) oil weighted suite of pools in Central and Southern Alberta, from a senior producer.  Journey has already initiated a number of capital projects on the acquired lands, participating in 10 wells to date.  With that said, we have only begun to scratch the surface on an asset base containing over 120 net drilling locations in high working interest, underdeveloped pools.  

The $170 million net purchase price for the assets was funded through an Initial Public Offering ("IPO") on the Toronto Stock Exchange which closed on June 19, 2014 and raised gross proceeds of $178 million through the issuance of 14.75 million treasury shares.  Management and directors invested in excess of $13 million in the IPO creating significant alignment with our new shareholders.  The IPO left Journey with 10,600 BOE/d of pro forma production and the strongest balance sheet in our corporate history.  We exited 2014 with $100.6 million in net debt resulting in a net debt to annualized cash flow ratio of 1.0 times.  The syndicated credit facility is currently authorized at $205 million thereby leaving more than 50% of the total facility available in 2015.

Concurrent with the IPO, Journey completed its transformation to a dividend paying growth company by declaring $0.36/share in dividends for the last half of 2014.  In aggregate, Journey paid out $15.6 million of dividends during 2014 of which $14.1 million was either paid in cash during the year or became payable in January.  The $1.5 million remainder was paid out in the form of Journey shares through our dividend reinvestment and stock dividend plans.

In addition to a successful A&D program, Journey was also very active in the field, implementing the largest exploration and development program in our history wherein we participated in a total of 31 (22.8 net) wells for the year.  Seven of the wells drilled in the last half of the year were on lands acquired in the major acquisition in the first quarter.  In total our $260.9 million capital program profitably replaced our production by 7.5 times resulting in the addition of 28.3 million BOE's on a proved plus probable basis with an all in finding, development and acquisition cost per BOE of $11.79 (after including changes in future capital).  

Daily production was 11,773 BOE/d for the fourth quarter and was 104% higher than the same quarter in 2013.  Full year average daily production was 10,346 BOE/d or 97% higher than 2013.  Average realized commodity prices for 2014 were 8% higher than 2013 at $55.48 and along with production from the new acquisition and our successful drilling, resulted in cash flow of $93.6 million for the year. On a per share basis, cash flow was $2.65 per basic weighted average share and $2.56 per diluted share.

The net earnings in the first three quarters were reversed into a net loss of $105.3 million for the fourth quarter bringing the net loss for the year to $90.2 million.  The largest contributor to this loss was $158.4 million in impairments related to the decline in the value in oil and gas properties in the fourth quarter.  A lower, future, commodity price forecast used in the independent reserve evaluator report as at December 31, 2014 was the primary cause of this decline in value.

On December 21, 2014, and in response to the decline in commodity prices for both oil and natural gas, Journey adjusted its dividend level and capital program with the purpose of maintaining our financial strength in what is proving to be a challenging period for our industry.

DIVIDENDS

Journey confirms that the dividend for March will be $0.025 per common (and restricted voting) share and will be paid on April 15, 2015 to shareholders of record on March 31, 2015 with an ex-dividend date of March 27, 2015. The Board of Directors has declared the dividend payable in either cash or common shares at the election of the shareholder. This dividend has been designated as an "eligible dividend" for Canadian income tax purposes.  Shareholders are reminded that, at their election, they may participate in the dividend reinvestment plan ("DRIP") or the Stock Dividend Plan ("SDP") instead of receiving a cash dividend.

OUTLOOK

Our 2014 activities and results created a solid foundation for Journey's future. The recent decline in oil prices has reinforced our belief that we have built a sustainable corporation that can not only withstand the current commodity price shock, but also take advantage of the opportunities that tumultuous times present. As this period of low commodity prices persists into 2015, our low-risk economically robust prospect inventory; our favorable production decline profile; and our lower than peer group leverage, will allow Journey to continue providing a meaningful dividend, while maintaining our production and debt to cash flow levels.

Our $0.025 per share monthly dividend represents a meaningful 6% yield given our current share price.  The financial cost of this dividend is less than 25% of 2015 forecasted cash flow.  After incorporating our forecasted DRIP and SDP participation rates, the total cash burden is less than 12% of cash flow. 

Journey's updated guidance for 2015 is as follows:



Production

11,000 to 11,200 BOE/d (54% liquids)

Capital program (including acquisitions)

$61 to $63 million

Cash flow

$61 to $63 million

Year end net debt

$108 to $110 million

Cash flow per basic, weighted average share

$1.39 - $1.43

DRIP/SDA rate

46%

 

Journey's 2015 capital program is forecast to yield annual production volumes in the 11,000 to 11,200 BOE/d range.  This represents a 7% growth over our 2014 average production.  The Company has carefully paired back our capital program to $61-$63 million from $70 million.  We have already begun realizing cost savings in our field operations due to reduced activity levels, and we anticipate even greater savings if low commodity prices persist into the second half of 2015.  We have modeled some of these savings into our revised forecast.  This capital program will result in Journey participating in 16-17 net wells and achieving the forecasted production levels throughout 2015.  Journey has re-evaluated all of our capital prospects in the context of the current market and plans to allocate over 85% of 2015 capital to projects that generate rates of return in excess of 30% and have payout periods of less than 2.5 years at the current prices.

Journey is currently forecasting cash flow from operations of $61-$63 million with net debt ending the year at between $108 and $110 million.  Currently, Journey is using 2015 price forecasts of $56.60/bbl USD (WTI); $2.90/mmbtu CAD (AECO); and an FX rate on 0.80 US$/CDN$.  The volatility in commodity prices can result in material variations to the assumptions used in our forecast.  As the Company enters the lower capital portion of the year from April to June, we will re-evaluate our forecast assumptions, with the potential to adjusting our capital spending program for the remainder of 2015, depending on the commodity price outlook.

Journey continues to be focused on protecting its balance sheet in 2015.  If the downturn in commodity prices persists later into 2015, the volatility in the markets can present unique opportunities to companies that maintain financial flexibility.  With less than 50% drawn on our $205 million credit facility, and a supportive major shareholder that has assisted with transformational acquisitions in the past, Journey is well positioned to capitalize on opportunities created by the current environment.

Below is summary financial data from the 2014 financial statements.  Copies of the complete financial statements and management's discussion and analysis in respect thereof will be available through www.sedar.com or by visiting Journey's website at www.journeyenergy.ca.

Journey would like to thank all of our shareholders and employees for their continued support and dedication as we navigate through this industry downturn.

 



JOURNEY ENERGY INC.

Consolidated Statement of Financial Position

(in thousands of Canadian dollars)



December
31, 2014

December
31, 2013


ASSETS





CURRENT






Accounts receivable


24,343

21,293



Derivative contracts


10,837

254



Prepaid expenses and deposits


2,081

1,572




37,261

23,119








Property, plant and equipment


396,668

258,071



Exploration and evaluation assets


19,428

7,132



Deferred tax asset


110,231

82,613




563,588

370,935







LIABILITIES





CURRENT






Bank indebtedness


3,557

2,761



Accounts payable and accrued liabilities


40,352

34,223



Deferred lease obligation


65

-



Derivative contracts


-

1,285



Dividends payable


2,623

-



Decommissioning liabilities


3,515

-




50,112

38,269








Deferred lease obligation


527

-



Bank debt


79,875

70,000



Decommissioning liabilities


158,387

57,164




288,901

165,433







EQUITY






Share capital


374,538

661,878



Contributed surplus


7,225

5,692



Deficit


(107,076)

(462,068)




274,687

205,502




563,588

370,935


 

 



JOURNEY ENERGY INC.

Consolidated Statement of Comprehensive (Loss) Income

For the years ended December 31, 2014 and 2013

(in thousands of Canadian dollars, except per share data)








2014

2013

REVENUE





Petroleum and natural gas sales


209,509

98,814


Royalties


(36,525)

(14,458)



172,984

84,356





EXPENSES





Operating


54,871

24,215


Transportation


2,526

1,521


Loss (gain) on derivative contracts


(10,498)

2,471


General and administrative


13,228

10,552


Share based compensation


4,042

1,509


Exploration and evaluation


581

1,593


Loss (gain) on disposal of assets


(2,168)

(344)


Transaction costs


1,768

-


Depletion and depreciation


55,082

28,192


Exploration and evaluation impairment loss


5,962

763


Property, plant and equipment impairment loss


152,407

3,506


Finance expenses


10,490

3,953



288,291

77,931





NET INCOME (LOSS) BEFORE TAXES


(115,307)

6,425





TAXES





Deferred tax (recovery) expense


(25,086)

2,099









NET INCOME(LOSS) AND COMPREHENSIVE INCOME (LOSS)


(90,221)

4,326









NET INCOME (LOSS)  PER SHARE





Basic


(2.56)

0.17


Diluted


(2.56)

0.15

 

 





JOURNEY ENERGY INC.

Consolidated Statement of Cash Flows

For the years ended December 31,

(in thousands of Canadian dollars)





2014

2013

CASH FLOWS PROVIDED BY (USED IN) THE





FOLLOWING ACTIVITIES:




OPERATING





Net income (loss)


(90,221)

4,326


Adjustments for:






Unrealized loss (gain) on derivative contracts


(11,869)

3,446



Share based compensation


4,042

1,509



Depletion and depreciation


55,082

28,192



Loss (gain) on disposition


(2,168)

(344)



Exploration and evaluation impairment loss


5,962

763



Property, plant and equipment impairment loss


152,407

3,506



Accretion of decommissioning liabilities


3,103

691



Deferred income tax expense (recovery)


(25,086)

2,099



Exploration and evaluation expense


581

1,593



Decommissioning costs incurred


(1,649)

(681)



90,185

45,100


Changes in non-cash working capital


1,467

5,211



91,652

50,311

FINANCING





Proceeds from bank debt


139,875

25,000


Repayment of bank debt


(130,000)

-


Deferred financing charge


125

-


Proceeds from issuance of promissory notes


43,059

-


Repayment of promissory notes


(43,059)

-


Dividends


(11,468)

-


Proceeds from option/warrant exercises


2,013

-


Issuance of flow-through shares


10,000

-


Issuance of share capital, net of costs


156,956

-


Dividend recovery


-

488


Changes in non-cash working capital


-

-



167,501

25,488

INVESTING





Additions to petroleum and natural gas properties


(86,186)

(54,828)


Additions to exploration and evaluation assets


(6,607)

(327)


Additions to administrative assets


(467)

(419)


Acquisition of producing petroleum and natural gas assets and exploration and evaluation assets


(172,120)

(21,556)


Disposition of producing petroleum and natural gas assets and exploration and evaluation assets


4,523

5,087


Changes in non-cash working capital


909

(75)



(259,948)

(72,118)

NET INCREASE IN BANK INDEBTEDNESS


(796)

3,681

BANK INDEBTEDNESS, BEGINNING OF YEAR


(2,761)

(6,442)

BANK INDEBTEDNESS, END OF YEAR


(3,557)

(2,761)

 

ABOUT THE COMPANY

Journey is a Canadian exploration and production company focused on conventional, oil-weighted operations in western Canada. Journey's strategy is to provide investors with growth plus a sustainable yield by focusing on drilling its existing core lands, implementing water flood projects, executing on accretive acquisitions and growing its production base. Journey seeks to optimize its legacy oil pools through the application of best practices in horizontal drilling and, where feasible, with water floods.

ADVISORIES

Information in this press release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws, which involves substantial known and unknown risks and uncertainties, most of which are beyond the control of Journey, including, without limitation, those listed under "Risk Factors" and "Forward Looking Statements" in the final long form prospectus of Journey dated June 12, 2014 (the "Prospectus"). Forward-looking information may relate to our future outlook and anticipated events or results and may include statements regarding the business strategy and plans and objectives. Particularly, forward-looking information in this press release includes, but is not limited to, information concerning Journey's drilling and other operational plans, production rates, dividend policy, long-term objectives and the declaration and payment of dividends. Journey cautions investors in Journey's securities about important factors that could cause Journey's actual results to differ materially from those projected in any forward-looking statements included in this press release. Information in this press release about Journey's prospective cash flows and financial position is based on assumptions about future events, including economic conditions and courses of action, based on management's assessment of the relevant information currently available. Readers are cautioned that information regarding Journey's financial outlook should not be used for purposes other than those disclosed herein. Forward-looking information contained in this press release is based on our current estimates, expectations and projections, which we believe are reasonable as of the current date.  No assurance can be given that the expectations set out in the Prospectus or herein will prove to be correct and accordingly, you should not place undue importance on forward-looking information and should not rely upon this information as of any other date. While we may elect to, we are under no obligation and do not undertake to update this information at any particular time except as required by applicable securities law.

No securities regulatory authority has either approved or disapproved of the contents of this press release.

All reserve references in this press release are "Company Gross Reserves". Company gross reserves are the Company's total working interest share of reserves before deduction of any royalties and excluding any royalty interests of the Company.

All future net revenues are stated prior to provision of general and administrative expenses, interest, but after the deduction of royalties, operating costs and estimated future capital expenditures. Future net revenues have been presented on a before tax basis. Estimated values of future net revenue disclosed herein are not representative of fair market value.

Readers are cautioned that the above list of risks and factors are not intended to be exhaustive. Additional information on these and other factors that could affect our operating and financial results are, or will be, included in reports filed with the applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).

Non-GAAP Measures

This press release includes non-GAAP measures as further described herein. These non-GAAP measures do not have a standardized meaning prescribed by International Financial Reporting Standards and therefore may not be comparable with the calculation of similar measures by other companies.

No securities regulatory authority has either approved or disapproved of the contents of this press release.

"Net debt" is used by management to assess the efficiency, liquidity and general financial strength of Journey. Net debt is calculated as bank debt plus net working capital deficiency or minus the working capital surplus. Working capital deficiency (surplus) is calculated as current assets less current liabilities, but excludes the current portion of derivative contract assets or liabilities.

"Operating netback" is calculated as the average sales price of the Company's commodities less royalties, transportation costs and operating expenses. Operating netbacks is a per-BOE measure used in operational decision making as well as peer analysis.

Barrel of Oil Equivalents

Where amounts are expressed in a barrel of oil equivalent ("BOE"), or barrel of oil equivalent per day ("BOE/d"), natural gas volumes have been converted to barrels of oil equivalent at six (6) thousand cubic feet ("Mcf") to one (1) barrel. Use of the term BOE may be misleading particularly if used in isolation. The BOE conversion ratio of 6 Mcf to 1 barrel ("Bbl") of oil or natural gas liquids is based on an energy equivalency conversion methodology primarily applicable at the burner tip, and does not represent a value equivalency at the wellhead. This conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.

SOURCE Journey Energy Inc.

For further information: Alex G. Verge, President and Chief Executive Officer, 403.303.3232, alex.verge@journeyenergy.ca; Gerry Gilewicz, Chief Financial Officer, 403.303.3238, gerry.gilewicz@journeyenergy.ca


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890