Cardinal Energy Ltd. ("Cardinal" or the "Company") (TSX:CJ) is pleased to announce its operating and financial results for the quarter and year ended December 31, 2016 as well as its 2016 year end reserves
2016 Financial and Operating Highlights
Cardinal achieved exit fourth quarter 2016 record production of just over 15,000 boe/d. Q4 production was 23% higher in 2016 versus 2015 despite lost production time due to TCPL shutdowns and delays in new drill additions due to scheduled fracs being delayed by frac providers.
Cardinal's fourth quarter capital program included 3 wells which were drilled in Q4 2016 but are not expected to contribute to production and adjusted funds flow until Q1 and Q2 2017. Adjusted for these wells, Cardinal's total payout ratio was less than 100%.
2016 was a transitional year for Cardinal as we recovered from low commodity prices. We are set to benefit from the rebound in commodity prices with increased spending for 2017. Cardinal will drill a record number of wells this year targeting multiple plays across our asset base. We have aggressively started 2017 with the drilling of 3 (1.9 net) successful full length horizontal wells at Mitsue and 5 horizontal wells at Bantry. This has been Cardinal's most active Q1 drilling program since the Company's inception and we look forward to reporting drill results in the future.
Acquisitions are a core part of Cardinal's business strategy and although 2016 was a quiet year on the M&A front, we closed an acquisition in Wainwright in late Q4 for $32 million. The acquisition added low decline medium oil production to our production base. We expect to achieve operational synergies on the acquisition throughout 2017 as we are able to shut in an oil battery offsetting the acquired lands and process our oil at the newly acquired facility.
Cardinal's balance sheet remains strong and allows us to execute an active capital program and selectively acquire assets. After accounting for the Wainwright acquisition, Cardinal ended 2016 with $70 million in net bank debt less our convertible debentures outstanding, approximately $26 million lower than at year end 2105. Our bank credit facility is set at $150 million.
Cardinal pays a monthly dividend which is an important component of our business strategy and how we deliver value to our shareholders. We believe that we have created a sustainable business model that is able to fund its dividend through payment in cash. By suspending our dividend Reinvestment Plan ("DRIP") and our Stock Dividend Program ("SDP") we will be able to further maximize shareholder value by eliminating the dilution that the DRIP and SDP had on our per share performance. Eliminations of both programs will apply to our May 15, 2017 dividend payment to shareholder of record on April 28, 2017. Shareholders that were in the program will now automatically receive their dividend payment in cash.
Cardinal's 2016 year end reserves evaluation confirms the low risk characteristics of our assets. Despite a quiet year operationally, (only 9 wells were drilled in Bantry) we managed to replace our production by 250% on a proved plus probable ("2P") basis. Our total proved ("1P") and 2P reserves increased on a per share basis again in 2016. Proved plus probable producing reserves make up 86% of our reserves.
Despite a 14% decrease in forecast reserve prices from 2015 to 2016, the value of Cardinal's 2P reserves increased slightly on NPV10, before tax basis to $860 million.
Cardinal increased its undeveloped reserves this year by adding an additional ten 2P undeveloped locations to its reserves booking. Future Development Capital ("FDC") increased to $64.9 million in 2016 which is designed to be approximately 1 year spending capabilities (adjusted funds flow less dividends).
Cardinal added 10.6 Mmboe of reserves in 2016 through drilling and positive technical reserve additions.
2016 Reserve Highlights
Cardinal's Liability Management Rating ("LMR") continues to be reduced on a monthly basis. We expect that our LMR will exceed 2 in the second quarter of 2017 and that we will be able to maintain a continually improving ratio above 2 on a go forward basis.
Cardinal intends to continue to maintain a prudent approach to capital management while focusing on balance sheet strength and maintaining a significant and sustainable dividend all within adjusted funds flow. Cardinal remains constructive on a crude oil price recovery through-out 2017 and has started executing a budget that focuses on development of all three of our core areas and expects an average annual production increase between 15% and 18% over 2016. We expect this approach to deliver strong returns to shareholders in 2017 and beyond.
The low decline nature of our base production requires a limited number of wells each year to replace production. Our 2017 capital program is broader than in previous years and has drilling in all three of our core areas. The major components of the 2017 capital budget are $16 million for facilities and pipelines, $32.7 million for the drilling of 18 wells as well as to spend $4 million on environmental and reclamation initiatives. We will continue to evaluate acquisition opportunities through the year with the goal of increasing our light oil weighting and drilling inventory.
Cardinal maintains a conservative borrowing policy. At year end we had approximately $70 million drawn on our $150 million credit facility. Our borrowing base is currently set by our lenders at $250 million and Cardinal chooses to maintain a smaller credit facility.
Cardinal also announces the filing of its Audited Financial Statements for the year ended December 31, 2016 and related Management's Discussion and Analysis with the Canadian securities regulatory authorities on the System for Electronic Analysis and Retrieval ("SEDAR"). In addition, Cardinal expects to file its Annual Information Form for the year ended December 31, 2016 on SEDAR on or prior to March 30, 2017. Electronic copies may be obtained on Cardinal's website at www.cardinalenergy.ca and on Cardinal's SEDAR profile at www.sedar.com.
Cardinal confirms that a dividend of $0.035 per common share will be paid on April 18, 2017 to shareholders of record on March 31, 2017. The Board of Directors of Cardinal has declared the dividend payable in the form 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.
About Cardinal Energy Ltd.
Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal's operations are focused in all season access areas in Alberta.
SOURCE: Cardinal Energy Ltd.
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