Progress Energy Resources Corp. announced results for the third quarter of 2012. Development of Progress’ leading land base continued on pace during the Quarter with capital investment of $73.7 million, net to Progress, or $167.8 million, gross including the North Montney Joint Venture. In the Quarter, capital expenditures were prioritized to the NMJV, and the Company’s proprietary North Montney properties in British Columbia.
Agreement for Purchase by PETRONAS
On June 27, 2012 Progress entered into an arrangement agreement with PETRONAS International Corporation and PETRONAS Carigali Canada for the purchase by PETRONAS Canada of all of Progress’ outstanding common shares and the purchase by Progress of its outstanding convertible unsecured debentures, by way of an arrangement under the Business Corporations Act (Alberta).
The completion of the arrangement remains subject to the satisfaction or waiver of applicable conditions with the sole remaining condition being receipt of a notice from the Minister of Industry under the Investment Canada Act that the acquisition of Progress by PETRONAS Canada is likely to be of net benefit to Canada.
On October 19, 2012 the Minister advised PETRONAS Canada that the Minister was not satisfied that the proposed investment was likely to be of net benefit to Canada. PETRONAS Canada has up to 30 days, or longer as mutually agreed to, to make any additional representations and submit any further undertakings.
PETRONAS Canada and Progress have agreed to work together to ensure that the Minister has the necessary information to determine that the proposed acquisition of Progress is likely to be of net benefit to Canada. On October 27, PETRONAS Canada exercised its right under the arrangement agreement to extend the “Outside Date” under the agreement to November 30, 2012.
Highlights
North Montney Joint Venture
Progress, along with its joint venture partner PETRONAS Canada, has begun aggressively developing the NMJV properties at Altares, Lily and Kahta. Gross capital spending on the NMJV in the Quarter was $107.5 million ($13.4 net to Progress) comprised principally of drilling and completions and facilities expenditures. Eight horizontal Montney wells (4.0 net) were drilled in the Quarter, with three horizontals at Altares (two lower, one upper), two at Lily (one lower and one upper) and three targeting the lower Montney at Kahta. There are currently seven rigs running on the NMJV, with a new 50 mmcf per day gas plant set to begin operation early in the fourth quarter at Altares.
As part of the total consideration of $1.07 billion that PETRONAS Canada paid to acquire a 50 percent working interest in the Altares, Lily and Kahta properties, $802.5 million will be paid in the form of a capital carry over the next three to five years. At the end of the Quarter, the remaining capital carry balance was approximately $678 million.
Financial Strength
Cash flow for the Quarter was $22.7 million or $0.10 per share, diluted. Capital investment was $167.8 million gross ($73.7 million net). As at September 30, 2012, the Company had drawn $75 million on its $650 million revolving credit facility. Debt-to-total capitalization as at September 30, 2012 was nine percent.
Progress’ average realized natural gas price in the Quarter was $2.27 per thousand cubic feet, excluding the impact of the Company’s hedging program. Royalty rates averaged 7.0 percent in the Quarter as a result of lower natural gas prices. Progress expects royalties to average seven percent in 2012 based on current commodity prices. Operating costs averaged $6.03 per boe in the Quarter reflecting the Company’s continued focus on operational efficiencies and maximization of volumes through existing facilities.
[mappress] LNG World News Staff, November 07, 2012; Image: Progress Energy