PrairieSky Royalty Announces Third Quarter 2014 Results

(All figures are in Canadian dollars)

CALGARY, Nov. 3, 2014 /CNW/ - PrairieSky Royalty Ltd. ("PrairieSky") (TSX:PSK) is pleased to announce its third quarter financial results for the period ended September 30, 2014.

Third Quarter Highlights

• Funds from Operations of $68.7 million or $0.53 Adjusted Funds from Operations Per Share (basic)
• Production averaged 15,448 boe/d (43% crude oil, 10% NGLs and 47% natural gas)
• As at September 30, 2014 working capital was $75.2 million, including $56.9 million of cash and cash equivalents and nil bank debt
• Acquired royalty interests from a third party oil and gas producer effective July 31, 2014 for a cash purchase price of $9.0 million, representing a multiple of approximately 6.0x estimated 2014 annualized cash flow.
• Dividends for the Third Quarter of 2014 totalled $0.32 per share.

PRESIDENT'S MESSAGE

I am pleased to report our first full quarter of operations at PrairieSky. We continue to see increased leasing interest on our land base, which in turn is leading to strong drilling activity.

The efforts of our team in ensuring compliance with historical contracts was particularly successful during the third quarter highlighted by $7.4 million of compliance revenue during the period. Although these revenues will be irregular, the success of our forensic accounting work during the third quarter showcases the benefit from actively monitoring lease terms and contractual provisions.

The recent decline in commodity prices is expected to impact 2015 budgets as producers establish conservative capital programs for at least the first half of the year. We will continue to seek new operators on unleased lands while maintaining our successful compliance efforts.

I want to take this opportunity to thank all the employees at PrairieSky for their continued efforts in successfully implementing our "Open for Business" Strategy.

MANAGEMENT'S DISCUSSION AND ANALYSIS AND FINANCIAL STATEMENTS

PrairieSky has filed its Management's Discussion and Analysis ("MD&A") and Unaudited Interim Condensed Financial Statements and Notes thereto as at and for the quarter ended September 30, 2014 concurrently with this press release.  Additional information about PrairieSky, including PrairieSky's Management's Discussion and Analysis and Unaudited Interim Condensed Financial Statements and Notes thereto, is available on SEDAR at www.sedar.com and PrairieSky's website at www.prairiesky.com.

CONFERENCE CALL DETAILS

A conference call to discuss the September 30, 2014 interim period results will be held for the investment community on Monday, November 3rd, 2014 beginning at 3:00 p.m. MST (5:00 p.m. ET). To participate in the conference call, approximately 10 minutes prior to the conference call, please dial [phone] (toll-free in North America) or [phone] (Toronto & International).

SEPTEMBER 30, 2014 INTERIM PERIOD RESULTS

($ millions, unless otherwise noted)		Three months ended September 30, 2014		For the period  May 27, 2014 to September 30, 2014
Revenues		$	87.7	$	124.9
Funds from Operations(1)		68.7		99.7
	Per Share – basic(2)	0.53		1.68
	Per Share – diluted(2)	0.53		1.67
	Adjusted Per Share – basic and diluted(1)	0.53		0.77
Net Earnings and Comprehensive Income		57.5		81.4
	Per Share – basic and diluted(2)	0.44		1.37
	Adjusted Per Share – basic and diluted(1)	0.44		0.63
Dividends(3)		41.3		55.0
	Per Share	0.3174		0.4232
Working Capital		75.2		75.2
Production Volumes
	Natural Gas (MMcf/d)	44.1		43.8
	Crude Oil (bbls/d)	6,599		6,690
	NGL (bbls/d)	1,493		1,517
Total (BOE/d)(4)		15,448		15,507
Realized Pricing(5)
	Natural Gas ($/Mcf)	$	3.75	$	3.95
	Crude Oil ($/bbl)	88.36		91.30
	NGL ($/bbl)	71.34		69.01
Total ($/BOE)(4)		$	55.67	$	57.55
Natural Gas Price Benchmarks
	AECO ($/Mcf)	$	4.22	$	4.45
Oil Price Benchmarks
	West Texas Intermediate (WTI) (US$/bbl)	97.44		100.21
	Edmonton Light Sweet ($/bbl)	98.11		101.32
(1) A Non-GAAP measure, which is defined under the Non-GAAP Measures section in our MD&A.
(2) Net Earnings and Comprehensive Income and Funds from Operations per common share are calculated using the weighted average number of Common Shares outstanding from January 1, 2014 to September 30, 2014 after giving effect to stock options.
(3) A dividend of $0.1058 per Common Share was declared on September 8, 2014. The dividend was paid on October 15, 2014 to shareholders of record as at September 30, 2014.
(4) See "Conversions of Natural Gas to BOE".
(5) Excludes pricing due to Royalty Compliance Revenue, defined under the Pricing section in our MD&A.

 

FORWARD-LOOKING STATEMENTS

This press release includes certain statements regarding PrairieSky's future plans and operations and contains forward-looking statements that we believe allow readers to better understand our business and prospects. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information or statements. Forward-looking statements contained in this press release include our expectations with respect to PrairieSky's business and growth strategy, the payment of future dividends, and expected cash flows from acquisitons.

With respect to forward-looking statements contained in this press release, we have made several assumptions including those described in detail in our MD&A for the period ended September 30, 2014.  Readers and investors are cautioned that the assumptions used in the preparation of such forward-looking information and statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them.

By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, lack of pipeline capacity, currency fluctuations, imprecision of reserve estimates, royalties, environmental risks, taxation, regulation, changes in tax or other legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility, and our ability to access sufficient capital from internal and external sources. In addition, PrairieSky is subject to numerous risks and uncertainties in relation to the acquisition of the royalty business from Encana. These risks and uncertainties include risks relating to the potential for disputes to arise with Encana, limited ability to recover indemnification from Encana under the Purchase and Sale Agreement and certain other agreements.  The foregoing and other risks are described in more detail in PrairieSky's final prospectus dated May 22, 2014 under "Risk Factors" and in our MD&A for the period ended September 30, 2014 under the heading "Risk Management", each of which is available at www.sedar.com.

Further, any forward-looking statement is made only as of the date of this press release, and PrairieSky undertakes no obligation to update or revise any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable securities laws. New factors emerge from time to time, and it is not possible for PrairieSky to predict all of these factors or to assess in advance the impact of each such factor on PrairieSky's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

The forward-looking information contained in this document is expressly qualified by this cautionary statement.

CONVERSIONS OF NATURAL GAS TO BOE

To provide a single unit of production for analytical purposes, natural gas production and reserves volumes are converted mathematically to equivalent barrels of oil (BOE). We use the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 BOE ratio is based on an energy equivalency conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the BOE ratio is useful for comparative measures and observing trends, it does not accurately reflect individual product values and might be misleading, particularly if used in isolation. As well, given that the value ratio, based on the current price of crude oil to natural gas, is significantly different from the 6:1 energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an indication of value.

SOURCE PrairieSky Royalty Ltd.

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