GRANITE OIL CORP. ("Granite" or the "Company") (TSX:GXO)(OTCQX:GXOCF) is pleased to release its financial and operational results and operational update for the three months ended March 31, 2017.
FINANCIAL AND OPERATING HIGHLIGHTS
(1)Funds from operations and funds from operations per share are not recognized measures under International Financial Reporting Standards (IFRS). Refer to the commentary in the Management's Discussion and Analysis under "Non-GAAP Measurements" for further discussion.
(2) The Company uses the weighted average common shares (basic) when there is a net loss for the period and the weighted average common shares (diluted) when there is net income in the period to calculate net income (loss) per share diluted. The Company uses the weighted average common shares (diluted) to calculate the funds from operations diluted.
(3) Total capital expenditures, excluding acquisitions and excluding non-cash transactions. Refer to commentary in the Management's Discussion and Analysis under "Capital Expenditures and Acquisitions" for further information.
(4) Net debt, which is calculated as current liabilities (excluding derivative financial instruments) and bank debt less current assets (excluding derivative financial instruments), is not a recognized measure under IFRS. Please refer to the commentary under "Non-GAAP Measurements" for further discussion.
(5) For a description of the boe conversion ratio, refer to the commentary in the Management's Discussion and Analysis under "Other Measurements".
(6) Commencing in March 2016, the Company began injecting the majority of its natural gas production into the Alberta Bakken property pursuant to the EOR scheme.
(7) Combined average realized prices includes all oil, gas and NGL sales revenue, excluding other income.
(8) Operating netback, which is calculated by deducting royalties, operating expenses and transportation expenses from oil and gas revenue and adjusting for any realized hedging on financial instruments, is not a recognized measure under IFRS. Please refer to the commentary under "Non-GAAP Measurements" for further discussion.
Message to Shareholders
Granite successfully drilled and completed three horizontal development wells in the first quarter of 2017, with results comparable to the Company's best wells in 2016. Two of these wells tested reduced offset spacing of just over 100 meters as we continue to optimize the long-term development of the pool. The Company continues to monitor the results from these wells and are highly encouraged by the implications the reduced spacing could have on improving long-term ultimate oil recovery from the pool.
Granite continued with its disciplined approach in the quarter, with net capital expenditures of approximately $4.8 million, representing another quarter-over-quarter reduction. The Company achieved this despite delays and general cost increases of 10% from increased demand in the service sector.
The Company can and has responded quickly to this new operating environment, implementing several initiatives in the second quarter which have resulted in further, permanent efficiency gains in its drilling and completions activities. These initiatives have allowed the Company to further reduce its drilling times, resulting in drill-and-case costs of approximately $0.7 million in the second quarter compared to an average of approximately $0.85 million in 2016, a savings of approximately 20%. As well, Granite successfully tested a new hydraulic fracturing method on its first location drilled in the second quarter of 2017, which is expected to reduce all-in completion costs by up to 15% going forward.
Granite has recently completed a facility expansion, installing a second higher pressure inlet that takes advantage of the increased number of flowing wells, significantly minimizing the Company's long term facility requirements and reducing operating costs.
The Company currently has two wells drilled that are awaiting completion and expects to drill and complete an additional six wells during the remainder of 2017 under the current budget. With its facility requirements for the year met and only one well left to convert to gas injection, the Company is in very good shape for 2017.
Granite's annual borrowing base review under its demand credit agreement has been completed and the borrowing base will remain at $60 million with the same syndicate of banks, consisting of a $45 million revolving demand credit facility and a $15 million revolving demand operating facility.
The Company remains on track with its prior guidance. For the duration of 2017, the Company is committed to its long-term model, protecting its dividend, production base and balance sheet through continued uncertainty in commodity pricing. With its low-cost structure, 100% ownership, large inventory of infill drilling opportunities and strong hedge position, the Company remains confident it can execute on this long-term model.
SOURCE: Granite Oil Corp.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.