Strong 2nd Qtr Operational Performance and Continued Debt and Cost Reduction
posted on Aug 05, 2016 02:54PM
Edit this title from the Fast Facts Section
CALGARY, ALBERTA--(Marketwired - Aug 4, 2016) - Pengrowth Energy Corporation (PGF.TO) (PGH)
Pengrowth's continued focus on all cost structures was clearly demonstrated with the second quarter results, where operating costs are now expected to come in approximately $65 million below guidance, year to date general and administrative (G&A) costs dropped by approximately $9.0 million year over year and transportation costs were also reduced. The impact of cost reduction efforts is evident in the successful reduction of approximately $225 million of outstanding debt since the end of 2015 and having $54.1 million of cash on hand at the end of the quarter. With the expected benefits from Pengrowth's risk management program, the Company expects to have approximately $150 to $200 million of cash on hand by the end of the year, which could be used to partially retire debt maturing in 2017.
The Company delivered second quarter 2016 average daily production of 56,735 barrels of oil equivalent (boe) per day, which was essentially unchanged from the first quarter after accounting for the impact of divested properties and scheduled turnaround activity, demonstrating the ongoing focus on production optimization and the low decline nature of Pengrowth's asset base.
Pengrowth continues to see strong evidence of improving capital efficiencies on both the conventional and thermal sides of its business. Montney productivity continues to improve with associated declining capital costs. The thermal business continues to indicate strong capital cost reductions with Phase two cost estimates for Lindbergh down by an estimated 20 percent on a year over year basis.
"In the last 18 months, our relentless focus on both our cost structures and asset performance has delivered significant and sustainable improvements." said Derek Evans, President and Chief Executive Officer of Pengrowth. "We are pleased with the excellent results in terms of decreased cost structures and production optimization of our assets, as well as the resulting positive impact that this work has had on our debt reduction efforts."
Financial and Operating Highlights:
Year to date, Pengrowth's focus on cost management and debt reduction has resulted in the Company successfully reducing its outstanding debt by approximately $225 million to $1.63 billion from $1.86 billion at December 31, 2015, through a combination of cash repayments and the impact of favourable foreign exchange movements in respect of US dollar denominated term debt. The Company also had $54.1 million of cash on hand at the end of the quarter and maintains a $1.0 billion committed, revolving credit facility which was undrawn at the end of the quarter.
Cost reduction efforts across the organization remain a priority and these efforts have translated into significant savings in both operating and G&A expenses. Year to date, operating expenses to June 30, 2016 of $136.8 million were approximately $63 million lower compared to the same period in 2015 while cash G&A expenses of $37.8 million were approximately $9.0 million lower compared to the same period in 2015. Operating expenses declined $3.4 million in the second quarter to $66.7 million compared to $70.1 million in the first quarter of 2016. This continued improvement in operating expenses has resulted in year to date per unit operating cost of $12.65 per boe, which is trending well below previous corporate guidance of $15.25 to $16.25 per boe. As a result of the lower operating expenses realized thus far in 2016, Pengrowth is revising its full year operating expense estimate down by approximately $65 million resulting in a new per boe guidance range of $13.50 to $14.25 per boe. This represents a decline of approximately 12 percent using the mid-point of production guidance.
Over the quarter, Pengrowth continued to benefit from the stabilization in operating funds flow provided by the Company's risk management strategy, as commodity prices remained at challenging levels. In total, realized hedging gains in the quarter were $77.1 million ($14.93 per boe) and on a year to date basis, the Company has realized hedging gains in excess of $200 million ($18.88 per boe). For the remainder of the year, Pengrowth has hedged approximately 82 percent of oil production at a price of Cdn $83.44 per bbl and approximately 96 percent of natural gas production at an average price of Cdn $3.26 per Mcf (with percentages based on mid-point of production guidance).