Calgary – TORC Oil & Gas Ltd. says that with continued success of its 2018 capital program and the company's solid underlying production profile, it achieved record production of 28,163 boepd during the fourth quarter of 2018, a 29 per cent increase from the comparable period in 2017.
Average production increased to 25,339 barrels of oil equivalent per day (boepd) in 2018, up from 20,871 boepd in 2017.
The company spent a total of $185 million of exploration and development capital last year, including drilling 86 (71.7 net) wells.
“Through the execution of a $185 million capital expenditure program in 2018, TORC successfully achieved several strategic operational objectives, including maximizing free cash flow from the company's conventional southeast Saskatchewan assets while growing and further delineating the company's unconventional assets in southeast Saskatchewan,” the company said in its fourth quarter and full-year 2018 results, released on Feb. 26.
“In central Alberta, the company continued developing and delineating the Cardium play which remains a core asset built to generate free cash flow.”
TORC said its focus on high quality, light oil-weighted assets combined with disciplined financial management continued to be rewarded in 2018. During the year, free cash flow generated from the company's core business was used to execute on two larger acquisitions along with several tuck-in acquisitions to further enhance its asset base.
“The two accretive strategic acquisitions included approximately 4,200 boepd (greater than 90 per cent light oil) of operated, low decline, high netback light oil producing assets, adding to the company's significant position in southeast Saskatchewan,” TORC said.
“The identified locations from these strategic acquisitions more than replaced the capital program of wells drilled by the company in 2018. In aggregate, these strategic transactions were both value and business accretive improving the company's decline profile, strengthening TORC's operating netback and adding high quality light oil drilling inventory.”
TORC said its $180 million capital expenditure budget for 2019 is consistent with the company's long term strategic objectives of delivering disciplined per share growth in combination with maintaining financial flexibility while providing a sustainable dividend.
“The company continues to diligently focus on capital efficiency improvements through the combination of operational improvements and capital cost reductions. TORC's $180 million 2019 capital budget is based on current capital cost realizations,” the company said.
“TORC continues to focus on maintaining a payout ratio of less than 100 per cent in 2019 providing flexibility to take advantage of opportunities (both organic and acquisition related) as they arise.”
The company booked a Q4 2018 net loss of $24.4 million compared to a loss of $9.43 million for the three months ended Dec. 31, 2017. TORC reported 2018 net income of $16.9 million versus a loss of $10.5 million a year earlier.
Adjusted funds flow for Q4 fell to $54.39 million from $60.59 million the previous year.
TORC paid dividends of $0.254 per share in 2018 up from $0.24 in 2017, of which $0.066 was paid in the fourth quarter of 2018.
During 2018, the company declared dividends of $53.1 million of which $17 million was paid under the share dividend program.
The board of directors has confirmed a dividend of $0.022 per common share will be paid on March 15, 2019 to shareholders of record on Feb. 28, 2019.
Strong reserves growth achieved
TORC said its integrated approach of organic growth complemented by strategic lower decline acquisitions drove the company's growth in reserves.
Proved developed producing reserves increased to 55.2 million boe at year-end 2018 up from 46 million boe at year-end 2017, representing growth of 20 per cent.
Proved reserves increased to 90.3 million boe at year-end 2018 up from 74 million boe at year-end 2017, representing growth of 22 per cent.
Proved plus probable reserves increased to 138.6 million boe at year-end 2018 up from 114.1 million boe at year-end 2017, representing 21 per cent growth.
The company’s proved plus probable reserve life index was 13.5 years at year-end 2018;
TORC generated a proved plus probable reserve replacement ratio on production of approximately 153 per cent, excluding the effects of acquisitions.
Proved plus probable F&D (including future development costs) was $15.95/boe resulting in a recycle ratio of 2.1 times (2018 operating netback).
Proved plus probable FD&A (including future development costs) of $19.42/boe resulted in a recycle ratio of 1.8 times (2018 operating netback).
The company’s 2018 year-end reserves information was evaluated by Sproule Associates Limited.