Journey Energy Inc. Reports its 2016 Financial Results, Announces Strategic Acquisition, and Updates 2017 Guidance

Date : 03/20/2017 @ 10:11PM
Source : PR Newswire (Canada)
Stock : Journey Energy (JOY)
Quote : 1.77  -0.01 (-0.56%) @ 3:31PM
Journey Energy Inc. share price Chart

Journey Energy Inc. Reports its 2016 Financial Results, Announces Strategic Acquisition, and Updates 2017 Guidance

Journey Energy Inc. (TSX:JOY)
Historical Stock Chart

6 Months : From Mar 2017 to Sep 2017

Click Here for more Journey Energy Inc. Charts.

CALGARY, March 20, 2017 /CNW/ - Journey Energy Inc. (JOY – TSX) ("Journey" or the "Company") is pleased to announce its financial results for 2016.  The complete set of financial statements and management discussion and analysis for the year ended December 31, 2016 are posted on www.sedar.com and on the Company's website www.journeyenergy.ca.

HIGHLIGHTS

Strategic Acquisition

Journey is pleased to announce that it has entered into a purchase and sale agreement with a private company to acquire interests in our Central Alberta core for an aggregate purchase price of approximately $35.6 million (the "Acquisition"), comprised of $29.6 million of cash and 2.1 million common shares of Journey. The Acquisition consists of approximately 2,000 boe/d (average for 2017; 28% oil & NGLs) of high value, long reserve life, operated, high working interest (75% average WI) liquids-rich gas production.  This low-decline (16% decline) production base provides a stable estimated funds flow stream of $8-9 million for 2017, on an annualized basis.  Journey will acquire a high working interest in two strategic gas plants and a network of greater than 250 kilometers of pipelines. Journey has identified a number of low-risk, low-cost, near term development opportunities that will allow Journey to maintain production on the assets over the remainder of the year for approximately 30% of forecasted funds flow. 

The Acquisition is consistent with Journey's expansion strategy within its central Alberta core area by increasing Journey's extensive network of strategic infrastructure and further expanding its portfolio of low-risk multi-zone liquids focused horizontal drilling opportunities. Further details on the Acquisition are contained herein.

Highlights for the fourth quarter and the year ended 2016 are as follows:

  • Realized funds flow of $8.4 million in the fourth quarter or $0.19 per basic share. For 2016 funds flow was $27.5 million or $0.63 per basic share.

  • Achieved average production of 8,505 boe/d in the fourth quarter bringing the annual average for the year to 8,712 boe/d.

  • Liquids (oil and natural gas liquids) production accounted for 4,137 boe/d or 49% of total production during the quarter.

  • Received a corporate average commodity price of $33.46/boe in the fourth quarter. For 2016, the corporate average commodity price was $27.36/boe.

  • Drilled 5 (4.1 net) wells in the fourth quarter bringing the year to date drilling activity to 7 (6.1 net) wells.

  • Recompleted in excess of 300 net, existing wellbores in the Countess area resulting in approximately 1,100 boe/d of initial, incremental, CBM production at an aggregate cost of approximately $2.0 million.

  • Closed the purchase of 44 boe/d (100% natural gas) consisting of complimentary working interests in Journey's Countess core area.

  • Closed two asset swaps with aggregate value of approximately $350 thousand. The acquired assets were in the Berrymoor and Westerose areas and are complimentary to existing production and drilling opportunities.

 


Three Months ended

 December 31,

Twelve months ended

 December 31,

Financial ($000's except per share amounts)

 

2016

 

2015

%

change

 

2016

 

2015

%

change

Production revenue

26,181

25,008

5

87,239

119,907

(27)

Funds flow

8,354

9,527

(12)

27,472

49,542

(45)


Per basic share

0.19

0.22

(14)

0.63

1.13

(44)


Per diluted share

0.19

0.21

(10)

0.63

1.10

(43)

Net income (loss)

49,314

38,586

28

52,593

(111,337)

(147)


Per basic share

1.13

0.89

27

1.21

(2.55)

(147)


Per diluted share

1.13

0.86

31

1.21

(2.55)

(147)

Net capital expenditures, cash

9,708

8,554

13

6,962

48,099

(86)

Net debt

86,916

106,534

(18)

86,916

106,534

(18)








Share Capital (000's)







Basic, weighted average

43,680

43,540

-

43,632

43,715

-

Basic, end of period

43,703

43,615

-

43,703

43,615

-

Fully diluted

50,085

49,681

1

50,085

49,681

-








Daily Production







Natural gas volumes (mcf/d)

26,212

25,972

1

24,547

28,677

(14)

Crude oil (bbl/d)

3,786

4,598

(18)

4,110

4,888

(16)

Natural gas liquids (bbl/d)

351

667

(47)

511

642

(20)

Barrels of oil equivalent (boe/d)

8,505

9,593

(11)

8,712

10,309

(15)








Average Prices







Natural gas ($/mcf)

3.00

2.37

27

2.08

2.64

(21)

Crude Oil ($/bbl)

51.87

42.84

23

42.65

48.60

(12)

Natural gas liquids ($/bbl)

31.35

24.06

30

23.75

25.73

(8)

Corporate ($/boe)

33.46

28.33

18

27.36

31.87

(14)








Netbacks ($/boe)







Realized prices

33.46

28.33

18

27.36

31.87

(14)

Royalties

(4.16)

(1.61)

158

(3.11)

(3.72)

(17)

Operating expenses

(12.25)

(12.46)

(2)

(11.64)

(14.00)

(17)

Transportation expense

(0.45)

(0.56)

(20)

(0.40)

(0.83)

(52)

Operating netback

16.60

13.70

21

12.21

13.32

(8)








Wells drilled







Gross

5

5

-

7

16

(56)

Net

4.1

3.1

32

6.1

13.2

(54)

Success rate (%)

100

100


100

100



 

OPERATIONS

Journey achieved production of 8,505 boe/d (49% liquids) in the fourth quarter, representing a 4% decrease from third quarter levels.  During 2016 Journey sold approximately 1,290 boe/d of production and purchased approximately 650 boe/d resulting in net proceeds to the Company of $9.3 million.  The impact of the net dispositions in the year was offset by our very successful coal bed methane ("CBM") project, which commenced in the third quarter.  By the end of the CBM program Journey had recompleted in excess of 300 net, existing wellbores in the Countess area resulting in approximately 1,100 boe/d of initial, incremental, CBM production.  These wells were recompleted at an aggregate cost of approximately $2.0 million to Journey.  The incremental operating costs for these wells is less than $1.00/mcf as all the recompletions were within existing wellbores which are already serviced by existing Journey infrastructure and field operations staff.

Over the course of 2016, Journey participated in 7 (6.1 net) wells as compared to 16 (13.2 net) wells in 2015.  The reduction in drilling activities was reflective of the low commodity prices in 2016, and particularly the first half of the year.  The majority of the wells drilled were in the fourth quarter (5 gross (4.1 net)) to capitalize on positive signs that commodity prices were stabilizing at levels higher than those experienced earlier in the year.  As the majority of our exploration and development capital was spent in the fourth quarter Journey realized only a partial benefit in 2016 from these new wells. 

The low commodity prices in early 2016 forced our entire industry to focus on controllable costs. Journey was successful in reducing its field costs (operating and transportation) by 19% to $12.04/boe in the year from $14.83 in 2015.  A portion of this reduction was attributable to the Company's acquisition and divestiture ("A&D") program.  Certain higher operating cost properties were disposed of and this was offset with the acquisition of a strategic processing facility in the Brooks area.  The $3.3 million Brooks acquisition in June also included 200 boe/d of predominantly light oil production.  In the third quarter, Journey constructed a pipeline connecting two newly drilled oil wells in the area to the acquired facility, thereby eliminating trucking and water disposal costs for this production.

FINANCIAL

Journey realized funds flow of $8.4 million in the fourth quarter of 2016 compared to $9.5 million in the same quarter last year.  Average commodity prices were 18% higher, and production volumes were 11% lower in the fourth quarter compared to 2015.  The combination of net dispositions of producing assets, a significantly reduced drilling program and normal declines during the year caused production to decrease compared to 2015.  Conserving capital and protecting the balance sheet were major initiatives throughout the year.  Journey focused its attention on items that were within its control and in particular concentrated on reducing its operating costs. These initiatives paid off, as operating costs of $14.00/boe in 2015 were reduced to $11.64/boe in 2016.  Funds flow per share was $0.19 (basic and diluted) in the fourth quarter and for the year was $0.63 (basic and diluted). Journey forecasts that these cost reductions will continue to yield benefits in future years.

Journey realized net income of $49.3 million or $1.13 per basic and diluted share in the fourth quarter.  For 2016 the entire years' net income was $52.6 million or $1.21 per basic and diluted share.  The largest items affecting net income were net impairment recoveries.  While Journey recognized $24.0 million in additional asset impairments in respect of two of its operating areas in the fourth quarter, the Company also recorded reversals of previous impairments of $103.4 million in five other areas.  The reversals were directly attributable to Journey's successful efforts in enhancing petroleum and natural gas reserves value even in the face of low commodity prices.  The initiatives we embarked on during the year and that created this value included: operating cost reductions that are expected to continue into the future; lower drilling costs; the successful CBM recompletion program; asset acquisition and divestment activities; and the results of Journey's organic drilling program.  All of these initiatives were factored into the December 31, 2016 reserve report and the impairment reversals were reflective of these value creation strategies.

Journey's production mix moved to a slightly higher natural gas weighting at 51% in the fourth quarter and 47% for the year.  The increase in gas weighting was primarily the result of the successful CBM recompletion program as well as the sale of a higher operating cost oil weighted property in Manola at the end of the second quarter.  Even though the natural gas weighting increased, liquids (oil and NGL's) were the largest contributor to total revenues at 73%.  The efforts taken by Journey to become even more sustainable have paid off in the fourth quarter.  The lower cost structure was a direct contributor to an 18% increase in field netbacks in the fourth quarter to $16.60/boe as compared to the third quarter while average commodity prices increased by only 10% in this same period. 

Commensurate with increasing oil and natural gas prices in the latter part of 2016, royalty costs were up 158% in the fourth quarter to average $4.16/boe as compared to $1.61/boe in the same quarter of 2015.  The average royalty rate (as a percentage of revenue) was up significantly to 12.4% in the fourth quarter of 2016 compared to 5.7% in 2015. Journey considers a royalty rate of 12% to be more representative in the current commodity price environment. Operating costs were down 13% in the fourth quarter of 2016 to $9.6 million compared to $11.0 million in 2015.  On a per boe basis the rate was down 2% to $12.25/boe from $12.46 in the same quarter of 2015.  General and administrative costs continued to improve and were $3.13/boe in the fourth quarter compared to $4.00 in the same quarter of 2015.  Cash interest costs were higher at $1.66/boe compared to $1.07/boe in the fourth quarter of 2015.  Even though borrowings were down in the fourth quarter, higher bank interest rates, and the new term debt interest rate, coupled with lower production levels caused the per boe rate to increase.

Commodity prices had a significant impact on capital spending within our industry in 2016.  AECO natural gas prices sunk to a low of $1.10/mcf in April before reversing course.  It wasn't until the fourth quarter that gas prices showed signs of a rebound, increasing to a high of $3.46/mcf in December.  WTI oil prices hit a low of $30.62/bbl USD in February and stayed in the low to mid-$40 USD range until they increased to $52.17/bbl in December after a new OPEC production agreement was reached.  The low prices realized throughout the first nine months of the year created significant uncertainty, adversely affecting Journey's capital spending plans.  However, the Company took these challenges in stride and capitalized on the opportunities that materialized to make accretive acquisitions that increased reserve value and, in turn, borrowing value from our banking syndicate. 

Journey reduced its bank borrowing throughout the year.  At the start of 2016 Journey had bank debt of $90 million and at the end of the year it was $52.5 million.  The company used the combination of the term debt proceeds of $30 million in October and funds flow in excess of net capital spending of $20.5 million to reduce its bank borrowings.

In the fall, Journey renewed its credit facility at $90 million.  In addition, Journey welcomed a new financing partner, Alberta Investment Management Company ("AIMCo") with a $30 million term debt financing.  The term debt provided Journey ample room on its banking credit facility to pursue additional acquisitions to expand our business plan, ultimately resulting in the acquisition of complementary Crystal interests in the first quarter and the Strategic Acquisition described herein. On March 2, 2017 AIMCo exercised the warrants they received in the term debt placement well in advance of their expiry.  The resultant $13.6 million in proceeds went to reduce outstanding borrowings with the banks.  However, the proceeds will ultimately be used to partially finance the Strategic Asset Acquisition.  The bank facility is currently undergoing its annual review.  We expect this review will be completed by the end of April.

STRATEGIC ACQUISITION

Journey is pleased to announce that it has entered into a purchase and sale agreement with a private company to acquire interests in its Central Alberta core area with a focus on upstream and midstream assets in the greater Gilby area for an aggregate purchase price of approximately $35.6 million (the "Acquisition"), subject to certain closing adjustments.  The assets are largely contiguous with Journey's existing Central core region.  The consideration to be paid is comprised of $29.6 million of cash and 2.1 million common shares of Journey, representing additional consideration of $6.0 million, based upon the Journey share price of $2.89 being the 10-day volume weighted average price preceding the execution of purchase and sale agreement.  The Acquisition is consistent with Journey's expansion strategy within its central Alberta core area by increasing Journey's extensive network of strategic infrastructure and further expanding its portfolio of low-risk multi-zone liquids focused horizontal opportunities.

The cash component of the Acquisition will be funded entirely within Journey's existing credit facility.  In addition to the proceeds of $13.6 million from the AIMCo exercise of 4.95 million share purchase warrants (see the March 3, 2017 press release), Journey is currently evaluating divestment opportunities for certain of its assets deemed to be non-core.

The Effective Date of the Acquisition is March 1, 2017 (the "Effective Date").  The transaction is anticipated to close in early May, and is subject to the successful waiver of rights of first refusals.

Upon closing of the Acquisition, Journey anticipates to be drawn approximately $70 million on its existing $90 million syndicated credit facility.  Journey is anticipating an increase to its credit facility due to the results from its highly successful 2016 operations and due to incremental lending value associated with the Acquisition.  With the implementation of its currently planned $35 million exploration and development capital program, Journey forecasts net debt levels to be approximately $86 million by the end of 2017, including bank debt of less than $50 million.  This debt level is expected to result in a net debt to annualized fourth quarter debt to funds flow ratio of less than 1.5:1.

Asset Description

The Acquisition consists of approximately 2,000 boe/d (28% oil & NGLs) of high value, long reserve life, liquids-rich gas production with an annual decline estimated at 16%.  Consistent with Journey's strategy, the production will be predominantly Journey operated with an average working interest of 75%.  This low-decline production base is expected to provide a stable funds flow stream of approximately $8-9 million for 2017, on an annualized basis.  Journey has identified a number of low-risk, low-cost, near term development opportunities on the acquired assets including, the installation of compression and a pipeline tie in which will allow Journey to maintain production on the assets over the remainder of the year for approximately 30% of forecasted funds flow.  In addition, Journey forecasts operating cost synergies of over $300,000 per year due to the integration of the acquired assets with our existing assets.

The Acquisition includes approximately 161,700 gross (83,700 net) acres of land focused primarily in the Gilby area of central Alberta.  The assets have established multi-zone production and potential focused primarily on the liquids-rich Glauconite in the Hoadley Barrier complex.  The portfolio of projects includes 19 gross (14.4 net) horizontal locations in the Glauconite.  Other established targets in the immediate region are Cardium oil, Belly River oil, and an emerging play in the liquid rich window of the Duvernay shale zone.  The Acquisition also includes a significant proprietary seismic data set consisting of more than 200 square kilometers of 3D seismic and over 400 kilometers of 2D seismic that will allow for further prospective well delineation.

The strategic infrastructure to be acquired pursuant to the Acquisition complements Journey's extensive network of infrastructure within its central core area.  Journey will acquire a high working interest in two strategic gas plants and associated gathering systems and sales lines.  The key infrastructure at Gilby includes a 43.3% non-operated working interest in the 01-04-42-03W5 Tidewater gas plant having 75 mmcf/d of gas processing capability (20% current utilization), superior liquids recovery, and a strategic network of greater than 250 kilometers of pipelines.  The existing ownership structure provides Journey the ability to maintain its low-cost structure.  Additionally, this infrastructure generates annual revenues of approximately $1.0 million from third-party processing fees.  Journey's focus is to continue to grow both Company volumes and third party volumes in the Crystal/Gilby area to effectively utilize its infrastructure and lower the operating cost structure of the Company.

In conjunction with the transaction, Journey has acquired natural gas hedges from the vendor, which represents approximately 50% of the acquired gas production in 2017 at an average price of $3.00/gj; and 40% of production in 2018 at an average price of $2.73/gj.  Journey is not currently anticipating any additional general and administrative expenses associated with the Acquisition.

Strategic Rationale

The Acquisition is consistent with Journey's previously communicated portfolio strategy focused on high quality; predictable, low-decline, oil and liquids focused assets with associated infrastructure capable of delivering strong free funds flow to maintain growth while preserving a healthy balance sheet.  This combination of characteristics provides management the flexibility to deliver efficient growth to shareholders through technical and operational expertise and by taking advantage of synergies associated with having a significant presence in a focused core area.

The key benefits to Journey shareholders, pro forma the Acquisition, are:

  • When viewed in combination with non-core asset sales and the exercise of the AIMCo warrants this transaction is approximately 10% accretive to 2016 fourth quarter funds flow per share.

  • The current production of 2,000 boe/d (28% liquids) for the acquired assets has an annual decline rate of 16%, less than Journey's existing decline rate.

  • The transaction has a balanced revenue stream with 40-45% of funds flow coming from oil and natural gas liquids; 40-45% of funds flow from natural gas; and 10-20% of funds flow from custom processing revenues.

  • The transaction reduces corporate costs and operating costs on a per boe basis.

  • The asset purchase increases the quality of Journey's NGL's and the heating value of Journey's natural gas production.

  • Near term upside, already identified by Journey will allow Journey to reduce operating costs on a per boe basis while maintaining production over the remainder of the year for less than 30% of running funds flow.

  • The strategic infrastructure associated with the asset purchase, including but not limited to a 43.3% working interest in the Tidewater Gilby 75 mmcf/d processing facility, will create future acquisition and consolidation opportunities for Journey in our central core region.

  • The asset purchase results in an anticipated improvement to Journey's corporate LMR ratio to 2.44, due to an LMR ratio of 3.24 for the acquired assets.

Summary of the Acquisition

The Acquisition and the assets to be acquired pursuant thereto have the following characteristics and metrics:

Total purchase price (1)

$35.6 million

Current production (2017 average)

2,000 boe/d (28% light oil and NGLs)

Forecasted annual decline rate

16%

Proved developed producing reserves(2)

5.7 million boe (25% light oil and NGLs)

Proved reserves (2)

8.3 million boe (24% light oil and NGLs)

Proved plus probable reserves (2)

13.0 million boe (23% light oil and NGLs)

RLI (3)

Proved - 11.4 years;

Proved plus Probable – 17.8 years

December 2016 operating netback (4) (5)

$11.80/boe

LMR (March 2017)

3.24

Current Production metric

$17,800/boe/d

December 2016 funds flow multiple (6)

4.1 x

Recycle ratio – proved plus probable (7)

2.0 x



Notes to the table above:


(1) The purchase price will be adjusted for activity that occurred between the Effective Date and the closing date of the Acquisition.


(2) Working interest reserves before the calculation for royalties and before the consideration of royalty interest reserves. Reserve estimates are based on the Company's internal evaluation effective December 31, 2016, and were prepared in accordance with the Canadian Oil and Gas Evaluation Handbook by a staff member at Journey who is a qualified reserves evaluator in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.


(3) The reserve life index ("RLI") is calculated by dividing internally estimated proved and proved plus probable reserves respectively, by 2017 forecast production.


(4) Operating netback does not have any standard meaning prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. Operating netback equals total petroleum and natural gas sales less royalties, operating and transportation costs and calculated on a boe basis.


(5) The operating netback is based on the data and information the Vendor provided as actual results for the period of December 2016.


(6) Funds flow multiple is calculated by dividing the purchase price by the estimate of funds from operations from the acquired asset for December 2016 on an annualized basis.


(7) The recycle ratio was calculated by taking the purchase price for the Acquisition, adding internally estimated future development costs for proved plus probable reserves and dividing this by the internally estimated proved plus probable reserves. The result of $5.76/boe was then divided into the December, 2016 operating netback of $11.80 to arrive at the proved plus probable recycle ratio.

 

REVISED 2017 GUIDANCE

Journey's revised 2017 guidance, which reflects the Acquisition, is as follows:

Annual average production

10,100 – 10,500 boe/d (49% liquids)

Exit 2017 production

10,700 – 11,100 boe/d (49% liquids)

Exploration and development capital

$35 million

Net acquisition and divestiture capital

$35 million

Funds flow

$50 - 54 million

Year-end net debt

$82 – 86 million

Funds flow per basic share (weighted average shares)

$1.01 – 1.09 share

Corporate annual decline rate

17%

 

Journey's revised 2017 forecasted funds flow from operations of $50-54 million is based upon the following average prices: WTI of US$54/bbl; AECO gas of CDN$2.65/mcf; and a foreign exchange rate of $0.75 US$/CDN$.  The Company will operate substantially all of its 2017 capital program with an average working interest in excess of 90%.  Because of this, Journey can remain flexible with its budget by increasing or decreasing its spending levels should commodity prices change materially.  Although Journey has the ability to provide additional growth within funds flow, Journey remains steadfast in its commitment to preserve financial flexibility during volatile times.

In the near term Journey will commence its semi-annual review of its syndicated bank line, which is anticipated to conclude by the end of April.  Journey is anticipating increased credit capacity due to its strong 2016 reserves additions and the lending value of the Acquisition.  Journey projects it has sufficient liquidity for the continued execution of its growth oriented capital program for 2017 and beyond.  With the execution of Journey's 2017 budget, and after giving effect to the funds flow associated with the acquired assets, Journey forecasts the net debt to annualized fourth quarter 2017 funds flow ratio to decrease to less than 1.5 times.  Journey's 2017 funds flow guidance range represents an 85% improvement from 2016.  This increase in funds flow is after taking into account approximately $6.0 million in forecasted hedging losses based on current strip prices.  Further improvement in funds flow for 2018 is anticipated if the current commodity strip prices materialize.

Journey forecasts annual production of between 10,100 and 10,500 boe/d in 2017, with the drilling of 14 gross (13 net) wells.  Capital spending is currently allocated evenly between Journey's Central and South core areas.  Journey intends to prudently expand long lead-time waterflood projects in addition to its drilling program.  Approximately 25% of Journey's 2017 growth capital is directed toward waterflood expansion projects.  These exploitation projects do not provide immediate production uplifts but generate high rates of return as they contribute to the sustainability of Journey's long term business model, which is focused on low cost, low decline, high quality conventional oil pools and liquids projects.

On behalf of Journey's management team and its directors, Journey would like to thank its shareholders for their continued support through this challenging time.  There are few companies within Journey's peer group that share the same upside leverage to rising commodity prices that Journey does.  With only 50.7 million pro forma basic outstanding shares after the Acquisition is closed, a fourth quarter net debt to funds flow ratio of less than 1.5:1, and a development inventory of over twenty years, Journey is poised to provide significant growth in shareholder value over the longer term.

Advisors

Eight Capital acted as exclusive financial advisor to Journey with respect to the Acquisition.

About the Company

Journey is a Canadian exploration and production company focused on conventional oil and liquids-rich natural gas operations in western Canada.  Journey's strategy is to grow its production base by drilling on its existing core lands, implementing water flood projects, executing on accretive acquisitions. Journey seeks to optimize its legacy oil pools on existing lands through the application of best practices in horizontal drilling and, where feasible, with water floods.

FORWARD LOOKING STATEMENTS AND OTHER ADVISORIES

This press release contains forward-looking statements and forward-looking information (collectively "forward looking information") within the meaning of applicable securities laws relating to the Company's plans and other aspects of our anticipated future operations, management focus, strategies, financial, operating and production results, industry conditions, commodity prices and business opportunities. In addition, and without limiting the generality of the foregoing, this press release contains forward-looking information regarding decline rates, anticipated netbacks, drilling inventory, estimated average drill, complete and equip and tie-in costs, anticipated potential of the Assets including, but not limited to, EOR performance and opportunities, capacity of infrastructure, potential reduction in operating costs, production guidance, total payout ratio, capital program and allocation thereof, future production, decline rates, funds flow, net debt, net debt to funds flow, exchange rates, reserve life, development and drilling plans, well economics, future cost reductions, potential growth, and the source of funding our capital spending. Forward-looking information typically uses words such as "anticipate", "believe", "project", "expect", "goal", "plan", "intend" or similar words suggesting future outcomes, statements that actions, events or conditions "may", "would", "could" or "will" be taken or occur in the future.

The forward-looking information is based on certain key expectations and assumptions made by our management, including expectations and assumptions concerning prevailing commodity prices and differentials, exchange rates, interest rates, applicable royalty rates and tax laws; future production rates and estimates of operating costs; performance of existing and future wells; reserve and resource volumes; anticipated timing and results of capital expenditures; the success obtained in drilling new wells; the sufficiency of budgeted capital expenditures in carrying out planned activities; the timing, location and extent of future drilling operations; the state of the economy and the exploration and production business; results of operations; performance; business prospects and opportunities; the availability and cost of financing, labour and services; the impact of increasing competition; the ability to efficiently integrate assets and employees acquired through acquisitions, including the Acquisition, the ability to market oil and natural gas successfully and our ability to access capital. Although we believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information because Journey can give no assurance that they will prove to be correct. Since forward-looking information addresses future events and conditions, by its very nature they involve inherent risks and uncertainties. Our actual results, performance or achievement could differ materially from those expressed in, or implied by, the forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that we will derive therefrom. Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide securityholders with a more complete perspective on our future operations and such information may not be appropriate for other purposes.

Readers are cautioned that the foregoing lists of factors are not exhaustive. Additional information on these and other factors that could affect our operations or financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).These forward looking statements are made as of the date of this press release and we disclaim any intent or obligation to update publicly any forward-looking information, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

This press release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about Journeys prospective results of operations, funds flow, netbacks, debt, payout ratio well economics and components thereof, all of which are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. FOFI contained in this press release was made as of the date of this press release and was provided for the purpose of providing further information about Journey's anticipated future business operations. Journey disclaims any intention or obligation to update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, unless required pursuant to applicable law. Readers are cautioned that the FOFI contained in this press release should not be used for purposes other than for which it is disclosed herein. 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 Annual Information Form filed on www.SEDAR.com on March 31, 2016. 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, and long-term objectives. 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 funds 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.

Non-IFRS Measures

The company uses the following non-IFRS measures in evaluating corporate performance. These terms 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.

(1)

The Company considers "funds flow" as 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. Funds flow is calculated by taking cash from operating activities as reported in the Company's financial statements and adding or deducting the following items: changes in non-cash working capital; transaction costs and decommissioning costs. Journey's determination of funds flow may not be comparable to that reported by other companies. Journey also presents Funds Flow per share whereby per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net income 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 is a non-IFRS measure and represents current assets less: current liabilities, bank debt and the promissory notes outstanding. For purposes of Journey's net calculation, the impact of the potential future liability (or asset) related to the mark-to-market measurement of derivative contracts as well as the provision for decommissioning liabilities have been excluded from the calculation.

(3)

Operating netback is a non-IFRS measure, is calculated on a per boe basis and equals total revenue (excluding hedging gains and losses); minus the aggregate of: royalties, transportation and field operating costs. Journey considers operating netback as an important measure to evaluate its operational performance as it demonstrates its field level profitability relative to current commodity prices.

 

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.

Oil and Gas Measures and Metrics

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, estimated abandonment and reclamation cost for wells with reserves attributed to them; 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.

The Company uses the following metrics in assessing its performance and comparing itself to other companies in the oil and gas industry. These terms do not have a standardized meaning and therefore may not be comparable with the calculation of similar measures.by other companies:

1)

Corporate Decline is the rate at which production from a grouping of assets falls from the beginning of a fiscal year to the end of that year.

2)

IP 365 is the average daily production rate of a well in its first 365 days of production expressed in boe's.

 

Oil and Gas Advisories

The reserves information contained in this press release are based on Journey's internal evaluation and were prepared by a member of Journey's staff who is a qualified reserves evaluator in accordance with National Instrument 51-101 effective December 31, 2016. Such estimates are based on values that Journey's management believes to be reasonable and are subject to the same limitations discussed above under "Forward-Looking Statements and Other Advisories". Listed below are cautionary statements applicable to the reserves information that are specifically required by NI 51-101: (i) individual properties may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation; and (ii) this press release contains estimates of the net present value of the future net revenue from the reserves to be acquired - such amounts do not represent the fair market value of such reserves. EOR is an oil recovery method that reduces residual oil saturated within the reservoir and improves the efficiency of a waterflood. This press release discloses drilling inventory in three categories: (i) proved locations; (ii) probable locations; and (iii) unbooked locations. Proved locations and probable locations are derived from an internal reserves evaluation effective December 31, 2016 and account for drilling locations that have associated proved and/or probable reserves, as applicable. Unbooked locations are internal estimates based on our prospective acreage and an assumption as to the number of wells that can be drilled per section based on industry practice and internal review. Unbooked locations do not have attributed reserves or resources. Of the 14.4 net total drilling locations identified within the assets to be acquired, 8.5 net are proved locations, 5.9 net are probable locations and no locations are unbooked.

Abbreviations

bbl

barrel

bbls

barrels

boe

barrels of oil equivalent

gj

gigajoules

Mbbls

Thousand barrels

MMBtu

Million British thermal units

NGL

Natural gas liquids

Mcf

thousand cubic feet

Mmcf

Million cubic feet

Mmcf/d

Million cubic feet per day

Mboe

Thousand boe

$M

Thousands of dollars

 

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

SOURCE Journey Energy Inc.

Copyright 2017 Canada NewsWire

Latest TSX:JOY Messages

{{bbMessage.M_Alias}} {{bbMessage.MSG_Date}} {{bbMessage.HowLongAgo}} {{bbMessage.MSG_ID}} {{bbMessage.MSG_Subject}}

Loading Messages....


No posts yet, be the first! No {{symbol}} Message Board. Create One! See More Posts on {{symbol}} Message Board See More Message Board Posts
Your Recent History
LSE
GKP
Gulf Keyst..
LSE
QPP
Quindell
FTSE
UKX
FTSE 100
LSE
IOF
Iofina
FX
GBPUSD
UK Sterlin..
Stocks you've viewed will appear in this box, letting you easily return to quotes you've seen previously.

Register now to create your own custom streaming stock watchlist.

NYSE, AMEX, and ASX quotes are delayed by at least 20 minutes.
All other quotes are delayed by at least 15 minutes unless otherwise stated.

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P:42 V:us D:20170920 02:03:09