Enercapita is pleased to provide an update on 2016 highlights and to provide an overview of how the Company is positioned for 2017.
Enercapita had an outstanding year as we executed on our business plan of acquiring low decline, predictable, low cost and predominantly operated oil and natural gas production. Our focus in 2016 was on acquisitions given the low commodity price cycle along with the timing of when we started our company. As a company, we were fortunate to be well capitalized throughout 2016 and successfully acquired very high quality assets at historically low valuations given the depressed commodity prices in 2016. We also consciously shifted our production weighting to predominantly oil from natural gas in 2016 which provides higher gross margin or netback per barrel.
In addition to the acquisitions completed in the year we also successfully formalized our team with Craig Hruska as Chairman, Greg Tisdale as CEO, Duane Masse as COO, Trevor Duncan as VP Business Development and Shawn Tomlinson as VP Finance. In addition to the executive team we added a number of professionals and support members to ensure Enercapita is well positioned to succeed as we enter 2017.
A summary of the Company’s key highlights in 2016 include:
- Grew production by 333% from approximately 900 boe/d (30% oil weighting) to over 3,000 boe/d (60% oil weighting)
- Established a low risk production profile with a low 10% decline which backstops a strong free cash flow base
- Have identified significant production additions from the acquired assets through optimizations, recompletions and low risk drilling
- Completed 8 acquisitions in 2016 for cash consideration of $ 62 million
- Reduced operating costs by approximately 20% to $15.50 / boe through a combination of cost reductions and certain capital projects completed in 2016
- Strong equity support with approximately $73 million of equity raised in 2016
- Remained financially disciplined with approximately $13 million of cash at year end 2016 and an undrawn $25 million bank line
Since the close of our last significant acquisition in September 2016 our focus has been evaluating our existing assets and the organic upside opportunities available. Based on this review we have decided to cap the capital raise for the Company at $150 million in aggregate providing Enercapita approximately $30 million available for capital expenditures and strategic tuck in acquisition in 2017. Based on our preliminary budget we plan on investing $15 million on organic capital projects and the remaining $15 million available for strategic acquisitions.
Based on this capital profile Enercapita is positioned to exit 2017 at more than 4,500 boe/d. With the recent announcements from OPEC regarding the decision to reduce supply the price of oil has responded favourably with Calendar 2017 West Texas Intermediate at $55 US. Enercapita continues to benefit from this increase in commodity prices given the low entry point of our acquisitions in 2016. Based on our preliminary budget forecasts and $55 US West Texas Intermediate our 2017 net operating income is forecasted to be $24.0 million providing a highly resilient 2.1 x preferred unit interest coverage.
From a hedging perspective, the Company’s cash flows remain well protected and are structured
to provide further cash flow upside through costless collars and participating floor products. Currently Enercapita is 58% hedged for 2017 at an average floor hedge price of $C 67.94/bbl and
$C 3.09 / GJ. In addition, we are hedged 41% in 2018 and 34% in 2019.
Our approach at Enercapita is unchanged. We remain fiscally disciplined. We steadfastly protect our balance sheet and we focus on our mandate of maximizing free cash and shareholder value.
Enercapita is an energy fund focused on the growth of long life, low decline, low cost, low risk energy assets through the exploitation and optimization of existing production. The fund is an RRSP eligible investment vehicle that streams the cash flow from its production directly to its investors on a priority basis.
Forward Looking Information
This news release may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words “anticipate,” “expect,” “may” “should” “estimate,” “project,” “outlook,” “forecast” or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Enercapita, if any, reflect Enercapita’s beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of businesses, including fluctuations in interest rates; general economic conditions; supply and demand for businesses; competition for available businesses; changes in legislation and the regulatory environment; and international trade and global political conditions. Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release (if any), which is given as of the date it is expressed herein. Enercapita undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.