CALGARY - Pieridae Energy Limited ('Pieridae' or the 'Company') (PEA.TO) released its Q1 2021 financial and operating results today, highlighted by strong overall production, with Pieridae producing the highest-ever recorded volume of natural gas in a quarter.
The Company battled through the ongoing headwinds of COVID, recording year-over-year increases in cash flow from operations, NOI and AFFO.
'I am very pleased with the volume of gas we were able to produce in the first three months of 2021. It was no small feat to deliver the highest quarterly production of natural gas in the Company's history and all should be commended,' said Pieridae's Chief Executive Officer Alfred Sorensen. 'We did see year-over-year growth in our main financial metrics and I am looking forward to Pieridae delivering its inaugural ESG Report that supports our commitment in helping to build a better energy future.
'As we continue to make tangible progress with our Goldboro LNG Project, ours is beginning to look like 'the last one standing' with others in North America either being delayed or cancelled outright. The Governments of Canada, Alberta and Nova Scotia will continue to look for ways to expand Canadian global markets for natural gas in order to reap the long-term benefits of our Project to support Indigenous Peoples reconciliation, create good paying middle-class jobs and play a supportive role in the global transition to a lower carbon economy,' concluded Sorensen.
Q1 2021 Financial & Operations Highlights
Pieridae's assets maintained strong production in the first quarter of 2021, averaging 43,997 boe/day, a 7% increase from the comparative quarter in 2020. This was significant on a number of fronts considering the Company invested minimal capital during the last 12 months. Of significant importance, natural gas production of 215 mmcf/day set a record for the highest quarterly production in the Company's history.
The production increase was primarily due to reduced unplanned outages from cold weather in the current quarter, and improved natural gas liquids recovery at the Waterton gas processing facility as a result of the straddle plant installed in the third quarter of 2020. Also contributing to increased volumes was the impact of minor uplift projects coupled with the successful acquisition of additional minor working interests in existing production finalized in the fourth quarter of 2020.
Commodity prices also continued to strengthen, with Pieridae recording a realized natural gas price of $2.63/mcf in the first quarter, compared to the AECO benchmark of $3.16/mcf.
In the first quarter of 2021, Pieridae generated cashflow from operating activities of $11.0 million, NOI increased by 9% compared to Q1 2020 to $20.9 million and AFFO was $14.9 million, an increase of $0.9 million or 7% compared to the same period in 2020. Higher per-boe operating costs (due to increased third-party processing fees, higher power costs and increases in the per-tonne Alberta carbon tax) and royalties partially offset the strength in revenues. Additionally, net income was impacted by Pieridae's continued investment in the Goldboro LNG Project, expenditures from which must be expensed until the Company reaches a successful final investment decision ('FID').
Petroleum and natural gas revenue in the first quarter of 2021 was $81.9 million, an increase of $17.1 million or 26% compared to the same quarter in 2020. The increase was primarily due to additional production, and an increase in the realized price for natural gas and NGLs, partially offset by a corresponding decrease in the realized price of condensate.
Pieridae continues to leverage its hedging program to insulate it from volatile commodity prices. The program has proven successful at providing a degree of price certainty and revenue stability during these uncertain and challenging times due to COVID and other factors that have impacted the energy industry over the past year. Pieridae's senior secured lender has temporarily amended its requirement to have 60% of production hedged on an 18-month rolling basis to allow the Company to take advantage of strengthening crude and natural gas markets. As of March 31, 2021, 139,500 GJ/d of fixed price physical sales contracts of natural gas were in place at a weighted-average price of $2.41/GJ, and 1,700 bbl/day of 2021 condensate production was hedged at a weighted average price of $55.59/bbl.
Pieridae remains committed to the health and safety of its employees as they continue to do a remarkable job operating our assets safely and reliably. We are following Alberta Health protocols and guidance as the province grapples with continued high case loads and increasing amounts of variant positive tests. The Company supports health officials in urging all those who are able to get vaccinated.
It remains unclear when restrictions may ease so working remotely is the norm for the majority of office employees. We continue to urge staff to keep a safe distance from others, wash hands regularly and wear masks in all public spaces.
As a result of the ongoing vigilance by our employees and continued updates to work-safe protocols, Pieridae has not suffered any significant loss of productivity related to the pandemic during the quarter.
Environmental, Social & Governance ('ESG')
The philosophy of ESG has long been part of the Pieridae culture. We believe a commitment to ESG through the development of strategy can help companies understand the positive impacts moving down this path and also manage the risks a firm's operations may have on the environment and a wide range of stakeholders.
The Company has partnered with a global leader in ESG strategy development within the energy sector to offer guidance during the development of both our ESG strategy and Pieridae's inaugural ESG Report. A robust and committed report supported by a strong, longer-term ESG strategy will help position the Company as we pursue FID and financing of our Goldboro LNG Project.
Pieridae targets releasing an inaugural ESG Report in the second quarter of this year.
Pieridae remains focused on two main areas to continue to advance the LNG Project. First, the Company has moved a number of contracts forward for tender to complete the extensive preparation work needed at the LNG site. Second, based on Bechtel's Class 3 cost estimate work on its Engineering, Procurement, Construction and Commissioning ('EPCC') contract, we are working with them to define the lump sum turn-key cost by the agreed-upon deadline of the end of May 2021 to construct the Goldboro LNG Facility.
Pieridae has sole responsibility to contract the site preparation, marine works and Lukowinuo'kuom workforce lodge. These contracts, as well as the EPCC contract, will be financed concurrently with a positive FID decision.
Our plan is to design and deliver a 2-Train Facility (each 5.2 million tonnes per annum 'MMTPA') that would employ approximately 3,500 workers during the peak construction phase. These employees will be housed at the workforce lodge to be built on or nearby the existing decommissioned Sable Island sour gas plant site. The Nova Scotia Mi'kmaq and Black Diamond Group will build and operate the lodge. Site preparation, site drainage, highway realignment and marine facilities are some of the major projects that must be built in tandem with, or prior to, the LNG Facility construction.
We are committed to making Goldboro LNG a net zero emissions Project by 2050. Vancouver-based Navius Research Inc. provided research that outlines pathways to achieve net zero emissions. The Project is a critically important part of Canada supporting the global transition to a lower carbon economy.
Founded in 2011, Pieridae, a majority Canadian owned corporation based in Calgary, is focused on the development of integrated energy-related activities, from the exploration and extraction of natural gas to the development, construction and operation of the Goldboro LNG facility and the production of LNG for sale to Europe and other markets. Pieridae is on the leading edge of the re-integration of the LNG value chain in North America. After completion of all the transactions disclosed in this news release, Pieridae has 157,641,871 common shares issued and outstanding which trade on the TSX ('PEA.TO').
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Certain statements contained herein may constitute 'forward-looking statements' or 'forward-looking information' within the meaning of applicable securities laws (collectively 'forward-looking statements'). Words such as 'may', 'will', 'should', 'could', 'anticipate', 'believe', 'expect', 'intend', 'plan', 'potential', 'continue', 'shall', 'estimate', 'expect', 'propose', 'might', 'project', 'predict', 'forecast' and similar expressions may be used to identify these forward-looking statements.
Forward-looking statements involve significant risk and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including, but not limited to, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, currency fluctuations, imprecision of resources estimates, environmental risks, competition from other producers, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits or synergies from acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources and the risk factors outlined under 'Risk Factors' and elsewhere herein. The recovery and resources estimate of Pieridae's reserves provided herein are estimates only and there is no guarantee that the estimated resources will be recovered. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements.
Forward-looking statements are based on a number of factors and assumptions which have been used to develop such forward-looking statements, but which may prove to be incorrect. Although Pieridae believes that the expectations reflected in such forward-looking statements are reasonable, undue reliance should not be placed on forward-looking statements because Pieridae can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this document, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which Pieridae operates; the timely receipt of any required regulatory approvals; the ability of Pieridae to obtain qualified staff, equipment and services in a timely and cost efficient manner; the ability of the operator of the projects which Pieridae has an interest in, to operate the field in a safe, efficient and effective manner; the ability of Pieridae to obtain financing on acceptable terms; the ability to replace and expand oil and natural gas resources through acquisition, development and exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of Pieridae to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Pieridae operates; timing and amount of capital expenditures, future sources of funding, production levels, weather conditions, success of exploration and development activities, access to gathering, processing and pipeline systems, advancing technologies, and the ability of Pieridae to successfully market its oil and natural gas products.