PENGROWTH ENERGY CORPORATION | |||||
November 8, 2018 | By: | /s/ Christopher G. Webster | |||
Name: | Christopher G. Webster | ||||
Title: | Chief Financial Officer |
Exhibit No. | |||
99.1 | Interim Financial Statements for the period ended September 30, 2018 | ||
99.2 | Management's Discussion & Analysis for the period ended September 30, 2018 | ||
99.3 | Certification of Interim Filings - CEO | ||
99.4 | Certification of Interim Filings - CFO |
As at | As at | |||||||
Note | September 30, 2018 | December 31, 2017 | ||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $— | $1.1 | ||||||
Accounts receivable | 74.0 | 105.7 | ||||||
Other assets | 29.3 | 24.0 | ||||||
103.3 | 130.8 | |||||||
Fair value of risk management contracts | 12 | 1.4 | 1.9 | |||||
Other assets | 83.2 | 99.8 | ||||||
Property, plant and equipment | 3 | 1,066.7 | 1,104.2 | |||||
Exploration and evaluation assets | 232.1 | 232.0 | ||||||
Deferred income taxes | 6 | 355.4 | 342.2 | |||||
TOTAL ASSETS | $1,842.1 | $1,910.9 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $87.1 | $136.2 | ||||||
Fair value of risk management contracts | 12 | 26.4 | 40.0 | |||||
Current portion of long term debt | 4 | 158.5 | — | |||||
Current portion of provisions and other liabilities | 5 | 47.5 | 35.2 | |||||
319.5 | 211.4 | |||||||
Fair value of risk management contracts | 12 | 12.3 | 18.6 | |||||
Long term debt | 4 | 513.7 | 610.5 | |||||
Provisions and other liabilities | 5 | 243.4 | 264.2 | |||||
1,088.9 | 1,104.7 | |||||||
Shareholders' Equity | ||||||||
Shareholders' capital | 7 | 4,838.1 | 4,829.7 | |||||
Contributed surplus | 8.2 | 13.3 | ||||||
Deficit | (4,093.1 | ) | (4,036.8 | ) | ||||
753.2 | 806.2 | |||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $1,842.1 | $1,910.9 |
PENGROWTH Third Quarter 2018 Financial Results | 1 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
Note | 2018 | 2017 | 2018 | 2017 | ||||||||||
As adjusted * | As adjusted * | |||||||||||||
REVENUES | ||||||||||||||
Oil and gas sales | 2, 9 | $147.9 | $125.1 | $419.5 | $542.9 | |||||||||
Royalties, net of incentives | (7.4 | ) | (6.1 | ) | (20.5 | ) | (37.8 | ) | ||||||
140.5 | 119.0 | 399.0 | 505.1 | |||||||||||
Commodity risk management gains (losses) | ||||||||||||||
Realized gain (loss) on commodity risk management | 12 | (22.9 | ) | 3.7 | (57.1 | ) | (13.2 | ) | ||||||
Change in fair value of commodity risk management contracts | 12 | 21.7 | (8.7 | ) | 13.4 | 47.5 | ||||||||
139.3 | 114.0 | 355.3 | 539.4 | |||||||||||
EXPENSES | ||||||||||||||
Operating | 2 | 22.1 | 51.6 | 62.1 | 187.4 | |||||||||
Diluent and other purchases | 2, 9 | 52.8 | 28.9 | 165.1 | 120.8 | |||||||||
Transportation | 5.7 | 5.6 | 16.0 | 21.7 | ||||||||||
General and administrative | 9.7 | 12.5 | 28.8 | 50.2 | ||||||||||
Depletion, depreciation and amortization | 3 | 33.0 | 39.8 | 98.1 | 175.7 | |||||||||
Impairment | — | 127.1 | — | 504.4 | ||||||||||
123.3 | 265.5 | 370.1 | 1,060.2 | |||||||||||
OPERATING INCOME (LOSS) | 16.0 | (151.5 | ) | (14.8 | ) | (520.8 | ) | |||||||
Other (income) expense items | ||||||||||||||
(Gain) loss on disposition of properties | 0.5 | 21.9 | 1.2 | 46.9 | ||||||||||
Unrealized foreign exchange (gain) loss | 13 | (3.0 | ) | (10.0 | ) | 6.1 | (20.4 | ) | ||||||
Realized foreign exchange (gain) loss | 13 | 0.1 | 2.3 | (0.4 | ) | 4.0 | ||||||||
Interest and financing charges | 12.3 | 14.7 | 36.0 | 58.3 | ||||||||||
Restructuring costs | 0.5 | 17.2 | 0.3 | 17.2 | ||||||||||
Loss on extinguishment of debt | — | — | — | 7.5 | ||||||||||
Accretion | 5 | 1.8 | 2.6 | 5.2 | 10.1 | |||||||||
Other (income) expense | 6.5 | 1.5 | 6.3 | (4.8 | ) | |||||||||
INCOME (LOSS) BEFORE TAXES | (2.7 | ) | (201.7 | ) | (69.5 | ) | (639.6 | ) | ||||||
Deferred income tax (recovery) expense | 6 | (1.1 | ) | (57.0 | ) | (13.2 | ) | (166.2 | ) | |||||
NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) | ($1.6 | ) | ($144.7 | ) | ($56.3 | ) | ($473.4 | ) | ||||||
NET INCOME (LOSS) PER SHARE | 11 | |||||||||||||
Basic | $— | ($0.26 | ) | ($0.10 | ) | ($0.86 | ) | |||||||
Diluted | $— | ($0.26 | ) | ($0.10 | ) | ($0.86 | ) |
PENGROWTH Third Quarter 2018 Financial Results | 2 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
Note | 2018 | 2017 | 2018 | 2017 | ||||||||||
CASH PROVIDED BY (USED FOR): | ||||||||||||||
OPERATING | ||||||||||||||
Net income (loss) and comprehensive income (loss) | ($1.6 | ) | ($144.7 | ) | ($56.3 | ) | ($473.4 | ) | ||||||
Non-cash items | ||||||||||||||
Depletion, depreciation, amortization and accretion | 3, 5 | 34.8 | 42.4 | 103.3 | 185.8 | |||||||||
Impairment | — | 127.1 | — | 504.4 | ||||||||||
Deferred income tax (recovery) expense | 6 | (1.1 | ) | (57.0 | ) | (13.2 | ) | (166.2 | ) | |||||
Unrealized foreign exchange (gain) loss | 13 | (3.0 | ) | (10.0 | ) | 6.1 | (20.4 | ) | ||||||
Change in fair value of commodity risk management contracts | 12 | (21.7 | ) | 8.7 | (13.4 | ) | (47.5 | ) | ||||||
Share based compensation | 8 | 1.7 | 1.3 | 3.1 | 6.2 | |||||||||
(Gain) loss on disposition of properties | 0.5 | 21.9 | 1.2 | 46.9 | ||||||||||
Onerous lease contracts | 5.3 | 8.0 | 3.6 | 8.0 | ||||||||||
Other items | 2.0 | 2.0 | 2.8 | 1.8 | ||||||||||
Onerous office lease payments | (1.3 | ) | — | (4.3 | ) | — | ||||||||
Loss on extinguishment of debt | — | — | — | 7.5 | ||||||||||
Foreign exchange derivative settlements | — | — | — | 2.8 | ||||||||||
Interest and financing charges | 12.3 | 14.7 | 36.0 | 58.3 | ||||||||||
Expenditures on remediation | 5 | (3.8 | ) | (4.6 | ) | (14.1 | ) | (13.1 | ) | |||||
Change in non-cash operating working capital | 10 | (2.3 | ) | 2.0 | (32.5 | ) | 12.9 | |||||||
Cash flow from operating activities | 21.8 | 11.8 | 22.3 | 114.0 | ||||||||||
FINANCING | ||||||||||||||
Bank indebtedness (repayment) | 4 | — | (29.8 | ) | — | — | ||||||||
Long term debt (repayment) | 4 | (20.5 | ) | (40.0 | ) | 49.5 | (542.5 | ) | ||||||
Convertible debentures repayment | — | — | — | (126.6 | ) | |||||||||
Foreign exchange derivative settlements | — | — | — | (2.8 | ) | |||||||||
Interest and financing charges paid | (6.0 | ) | (15.6 | ) | (32.5 | ) | (78.3 | ) | ||||||
Cash flow from financing activities | (26.5 | ) | (85.4 | ) | 17.0 | (750.2 | ) | |||||||
INVESTING | ||||||||||||||
Capital expenditures | (6.8 | ) | (33.6 | ) | (56.3 | ) | (89.7 | ) | ||||||
Proceeds on property dispositions | 9.6 | 449.8 | 17.5 | 791.8 | ||||||||||
Withdrawals from/(contributions to) remediation trust fund | 3.9 | (0.2 | ) | 9.6 | (6.5 | ) | ||||||||
Change in non-cash investing working capital | 10 | (2.0 | ) | (3.2 | ) | (11.2 | ) | (6.9 | ) | |||||
Cash flow from investing activities | 4.7 | 412.8 | (40.4 | ) | 688.7 | |||||||||
CHANGE IN CASH AND CASH EQUIVALENTS | — | 339.2 | (1.1 | ) | 52.5 | |||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | — | — | 1.1 | 286.7 | ||||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $— | $339.2 | $— | $339.2 |
PENGROWTH Third Quarter 2018 Financial Results | 3 |
Three months ended September 30 | Nine months ended September 30 | |||||||||||||
Note | 2018 | 2017 | 2018 | 2017 | ||||||||||
SHAREHOLDERS' CAPITAL | 7 | |||||||||||||
Balance, beginning of period | $4,838.1 | $4,829.7 | $4,829.7 | $4,815.1 | ||||||||||
Share based compensation | — | — | 8.4 | 14.6 | ||||||||||
Balance, end of period | 4,838.1 | 4,829.7 | 4,838.1 | 4,829.7 | ||||||||||
CONTRIBUTED SURPLUS | ||||||||||||||
Balance, beginning of period | 6.4 | 13.4 | 13.3 | 22.9 | ||||||||||
Share based compensation | 8 | 1.8 | 1.3 | 3.3 | 6.4 | |||||||||
Exercise of share based compensation awards | — | — | (8.4 | ) | (14.6 | ) | ||||||||
Balance, end of period | 8.2 | 14.7 | 8.2 | 14.7 | ||||||||||
DEFICIT | ||||||||||||||
Balance, beginning of period | (4,091.5 | ) | (3,681.7 | ) | (4,036.8 | ) | (3,353.0 | ) | ||||||
Net income (loss) | (1.6 | ) | (144.7 | ) | (56.3 | ) | (473.4 | ) | ||||||
Balance, end of period | (4,093.1 | ) | (3,826.4 | ) | (4,093.1 | ) | (3,826.4 | ) | ||||||
TOTAL SHAREHOLDERS' EQUITY | $753.2 | $1,018.0 | $753.2 | $1,018.0 |
PENGROWTH Third Quarter 2018 Financial Results | 4 |
1. | BUSINESS OF THE CORPORATION |
2. | SIGNIFICANT ACCOUNTING POLICIES |
PENGROWTH Third Quarter 2018 Financial Results | 5 |
2017 | ||||||
Q1 | Q2 | Q3 | ||||
Oil and gas sales as previously reported | 166.5 | 147.2 | 91.5 | |||
Diluent and other sales | 46.7 | 45.2 | 28.9 | |||
Processing income | 6.7 | 5.5 | 4.7 | |||
Adjusted Oil and gas sales | 219.9 | 197.9 | 125.1 | |||
Diluent and other purchases as previously reported | — | — | — | |||
Cost of diluent and other purchases | 46.7 | 45.2 | 28.9 | |||
Adjusted Diluent and other purchases | 46.7 | 45.2 | 28.9 | |||
Operating expenses as previously reported | 60.6 | 63.0 | 46.9 | |||
Processing income | 6.7 | 5.5 | 4.7 | |||
Adjusted operating expenses | 67.3 | 68.5 | 51.6 |
PENGROWTH Third Quarter 2018 Financial Results | 6 |
3. | PROPERTY, PLANT AND EQUIPMENT ("PP&E") |
Cost or deemed cost | Oil and natural gas assets | Other equipment | Total | ||||||
Balance, December 31, 2016 | $6,838.8 | $90.8 | $6,929.6 | ||||||
Additions to PP&E | 120.7 | 0.8 | 121.5 | ||||||
Property acquisitions | 0.1 | — | 0.1 | ||||||
Change in asset retirement obligations | 9.3 | — | 9.3 | ||||||
Divestitures | (3,151.2 | ) | (3.7 | ) | (3,154.9 | ) | |||
Balance, December 31, 2017 | $3,817.7 | $87.9 | $3,905.6 | ||||||
Additions to PP&E | 59.1 | 0.2 | 59.3 | ||||||
Change in asset retirement obligations | 1.3 | — | 1.3 | ||||||
Balance, September 30, 2018 | $3,878.1 | $88.1 | $3,966.2 | ||||||
Accumulated depletion, amortization and impairment losses | Oil and natural gas assets | Other equipment | Total | ||||||
Balance, December 31, 2016 | $3,882.7 | $80.4 | $3,963.1 | ||||||
Depletion and amortization for the period | 204.4 | 3.2 | 207.6 | ||||||
Impairment | 504.4 | — | 504.4 | ||||||
Divestitures | (1,871.2 | ) | (2.5 | ) | (1,873.7 | ) | |||
Balance, December 31, 2017 | $2,720.3 | $81.1 | $2,801.4 | ||||||
Depletion and amortization for the period | 96.7 | 1.4 | 98.1 | ||||||
Balance, September 30, 2018 | $2,817.0 | $82.5 | $2,899.5 | ||||||
Net book value | Oil and natural gas assets | Other equipment | Total | ||||||
As at September 30, 2018 | $1,061.1 | $5.6 | $1,066.7 | ||||||
As at December 31, 2017 | $1,097.4 | $6.8 | $1,104.2 |
PENGROWTH Third Quarter 2018 Financial Results | 7 |
4. | LONG TERM DEBT AND FINANCIAL COVENANTS |
As at | ||||||
September 30, 2018 | December 31, 2017 | |||||
U.S. dollar denominated term notes: | ||||||
28.1 million at 5.49 percent due October 18, 2019 | $36.3 | $35.3 | ||||
94.1 million at 7.98 percent due May 11, 2020 | 121.5 | 118.3 | ||||
85.2 million at 6.07 percent due October 18, 2022 | 110.0 | 107.1 | ||||
158.9 million at 6.17 percent due October 18, 2024 | 205.0 | 199.7 | ||||
$472.8 | $460.4 | |||||
U.K. pound sterling denominated term notes: | ||||||
12.1 million at 5.45 percent due October 18, 2019 | $20.4 | $20.6 | ||||
Canadian dollar term notes: | ||||||
20.5 million at 6.74 percent due October 18, 2022 | $20.5 | $20.5 | ||||
Canadian dollar term Credit Facility borrowings | $158.5 | $109.0 | ||||
Total long term debt | $672.2 | $610.5 | ||||
Current portion of long term debt | $158.5 | $— | ||||
Non-current portion of long term debt | $513.7 | $610.5 |
PENGROWTH Third Quarter 2018 Financial Results | 8 |
5. | PROVISIONS AND OTHER LIABILITIES |
Asset retirement obligations | Finance leases | Onerous lease contracts | Other liabilities | Total | |||||||||||
Balance, December 31, 2016 | $652.3 | $37.9 | $— | $4.4 | $694.6 | ||||||||||
Incurred during the period | 5.4 | — | 26.5 | (1.5 | ) | 30.4 | |||||||||
Property dispositions | (420.4 | ) | (2.0 | ) | — | — | (422.4 | ) | |||||||
Expenditures on remediation/provisions settled | (15.9 | ) | (1.7 | ) | (0.3 | ) | (0.6 | ) | (18.5 | ) | |||||
Other revisions | 3.9 | — | — | — | 3.9 | ||||||||||
Accretion (amortization) | 11.4 | — | — | — | 11.4 | ||||||||||
Balance, December 31, 2017 | $236.7 | $34.2 | $26.2 | $2.3 | $299.4 | ||||||||||
Incurred during the period | 1.3 | — | 6.8 | 1.4 | 9.5 | ||||||||||
Property dispositions | (0.5 | ) | — | — | — | (0.5 | ) | ||||||||
Expenditures on remediation/provisions settled | (14.1 | ) | (0.7 | ) | (4.6 | ) | (0.1 | ) | (19.5 | ) | |||||
Other revisions | — | — | (3.2 | ) | — | (3.2 | ) | ||||||||
Accretion (amortization) | 4.0 | — | 1.2 | — | 5.2 | ||||||||||
Balance, September 30, 2018 | $227.4 | $33.5 | $26.4 | $3.6 | $290.9 |
As at September 30, 2018 | Asset retirement obligations | Finance leases | Onerous lease contracts | Other liabilities | Total | ||||||||||
Current | $42.0 | $0.7 | $4.5 | $0.3 | $47.5 | ||||||||||
Long term | 185.4 | 32.8 | 21.9 | 3.3 | 243.4 | ||||||||||
$227.4 | $33.5 | $26.4 | $3.6 | $290.9 | |||||||||||
As at December 31, 2017 | |||||||||||||||
Current | $29.9 | $0.9 | $4.4 | $— | $35.2 | ||||||||||
Long term | 206.8 | 33.3 | 21.8 | 2.3 | 264.2 | ||||||||||
$236.7 | $34.2 | $26.2 | $2.3 | $299.4 |
As at | ||||||
September 30, 2018 | December 31, 2017 | |||||
Total escalated future costs | $407.8 | $420.2 | ||||
Discount rate, per annum | 2.3 | % | 2.3 | % | ||
Inflation rate, per annum | 1.5 | % | 1.5 | % |
PENGROWTH Third Quarter 2018 Financial Results | 9 |
6. | DEFERRED INCOME TAXES |
Nine months ended | ||||||
September 30, 2018 | September 30, 2017 | |||||
Income (loss) before taxes | ($69.5 | ) | ($639.6 | ) | ||
Combined federal and provincial tax rate | 27.08 | % | 27.09 | % | ||
Expected income tax expense (recovery) | ($18.8 | ) | ($173.3 | ) | ||
Change in unrecognized deferred tax asset | 3.9 | 7.6 | ||||
Foreign exchange (gain) loss (1) | 0.8 | (2.4 | ) | |||
Other including share based compensation | 0.9 | 1.9 | ||||
Deferred income tax expense (recovery) | ($13.2 | ) | ($166.2 | ) |
7. | SHAREHOLDERS’ CAPITAL |
Nine months ended | Year ended | |||||||||
September 30, 2018 | December 31, 2017 | |||||||||
(Common shares in 000's) | Number of common shares | Amount | Number of common shares | Amount | ||||||
Balance, beginning of period | 552,246 | $4,829.7 | 547,709 | $4,815.1 | ||||||
Share based compensation (non-cash exercised) | 3,871 | 8.4 | 4,537 | 14.6 | ||||||
Balance, end of period | 556,117 | $4,838.1 | 552,246 | $4,829.7 |
8. | LONG TERM INCENTIVE PLANS ("LTIP") |
PENGROWTH Third Quarter 2018 Financial Results | 10 |
(number of share units - 000's) | PSUs | RSUs | ||
Outstanding, December 31, 2016 | 6,238 | 8,436 | ||
Granted | 2,124 | 4,578 | ||
Forfeited | (486 | ) | (2,195 | ) |
Exercised | (1,104 | ) | (3,436 | ) |
Performance adjustment | (1,738 | ) | — | |
Outstanding, December 31, 2017 | 5,034 | 7,383 | ||
Granted | — | 2,954 | ||
Forfeited | (1,449 | ) | (2,023 | ) |
Exercised | (826 | ) | (3,044 | ) |
Performance adjustment | (138 | ) | — | |
Outstanding, September 30, 2018 | 2,621 | 5,270 |
2018 | 2017 | |||||||||||
(number of option units - 000's) | Number outstanding | Weighted average price | Number outstanding | Weighted average price | ||||||||
Outstanding, beginning of period | — | $— | — | $— | ||||||||
Granted | 9,468 | $0.87 | — | $— | ||||||||
Forfeited | (73 | ) | $0.87 | — | $— | |||||||
Exercised | — | $— | — | $— | ||||||||
Outstanding, end of period | 9,395 | $0.87 | — | $— |
Range of exercise prices | Number outstanding (thousands) | Weighted average remaining contractual life (years) | Weighted average exercise price | Number exercisable (thousands) | Weighted average exercise price | ||||||
$0.87 - $1.05 | 9,395 | 6.74 | $0.87 | — | $— |
PENGROWTH Third Quarter 2018 Financial Results | 11 |
Fair value per option | $0.46 | ||
Risk free interest rate | 1.93 | % | |
Expected volatility (1) | 65.86 | % | |
Expected life (years) | 4.4 | ||
Expected forfeiture rate | 15.0 | % |
(number of share units - 000's) | Cash-settled RSUs | Phantom DSUs | ||
Outstanding, December 31, 2016 | 4,229 | 1,346 | ||
Granted | 3,163 | 492 | ||
Forfeited | (3,148 | ) | — | |
Exercised | (1,341 | ) | (462 | ) |
Outstanding, December 31, 2017 | 2,903 | 1,376 | ||
Granted | — | 773 | ||
Forfeited | (1,233 | ) | — | |
Exercised | (887 | ) | — | |
Outstanding, September 30, 2018 | 783 | 2,149 |
PENGROWTH Third Quarter 2018 Financial Results | 12 |
Nine months ended | ||||||
September 30, 2018 | September 30, 2017 | |||||
Non-cash PSU and RSU expense | $2.5 | $6.4 | ||||
Non-cash stock options expense | 0.8 | — | ||||
Amounts capitalized in the period | (0.2 | ) | (0.2 | ) | ||
Non-cash share based compensation expense | $3.1 | $6.2 | ||||
Cash-settled RSUs (reduction) expense | ($0.2 | ) | $0.1 | |||
Cash-settled Phantom DSUs (reduction) expense | $1.0 | ($0.2 | ) | |||
Total share based compensation expense | $3.9 | $6.1 |
9. | REVENUE |
Three months ended | Nine months ended | |||||||||||
September 30 | September 30 | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
As adjusted | As adjusted | |||||||||||
Bitumen | $85.5 | $35.1 | $218.9 | $126.8 | ||||||||
Natural gas | 4.1 | 18.0 | 16.6 | 86.3 | ||||||||
Light oil | 4.4 | 26.8 | 13.7 | 137.5 | ||||||||
Natural gas liquids | 0.5 | 10.7 | 3.2 | 51.4 | ||||||||
Produced petroleum revenue | $94.5 | $90.6 | $252.4 | $402.0 | ||||||||
Diluent sold | 52.8 | 26.1 | 163.9 | 105.8 | ||||||||
Processing income | 0.6 | 4.7 | 1.5 | 16.9 | ||||||||
Other revenue | — | 3.7 | 1.7 | 18.2 | ||||||||
Total oil and gas sales | $147.9 | $125.1 | $419.5 | $542.9 |
PENGROWTH Third Quarter 2018 Financial Results | 13 |
10. | OTHER CASH FLOW DISCLOSURES |
Three months ended | Nine months ended | |||||||||||
September 30 | September 30 | |||||||||||
Cash provided by (used for): | 2018 | 2017 | 2018 | 2017 | ||||||||
Accounts receivable | $6.8 | $9.9 | $12.6 | $38.4 | ||||||||
Accounts payable | (9.1 | ) | (9.5 | ) | (45.1 | ) | (25.5 | ) | ||||
Prepaid tax assessment | — | 1.6 | — | — | ||||||||
($2.3 | ) | $2.0 | ($32.5 | ) | $12.9 |
Three months ended | Nine months ended | |||||||||||
September 30 | September 30 | |||||||||||
Cash used for: | 2018 | 2017 | 2018 | 2017 | ||||||||
Accounts payable, including capital accruals | ($2.0 | ) | ($3.2 | ) | ($11.2 | ) | ($6.9 | ) |
11. | AMOUNTS PER SHARE |
Three months ended | Nine months ended | |||||||
September 30 | September 30 | |||||||
(000's) | 2018 | 2017 | 2018 | 2017 | ||||
Weighted average number of shares - basic and diluted | 556,117 | 552,246 | 554,997 | 550,839 |
PENGROWTH Third Quarter 2018 Financial Results | 14 |
12. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
Financial Crude Oil Contracts: | |||||
Swaps | |||||
Reference point | Remaining term | Volume (bbl/d) | Price per bbl (U.S.$) | ||
WTI | Oct. 1, 2018 - Dec. 31, 2018 | 8,000 | 49.97 |
Collars | Price per bbl (U.S.$) | ||||||
Reference point | Remaining term | Volume (bbl/d) | Bought Puts | Sold Calls | |||
WTI | Oct. 1, 2018 - Dec. 31, 2018 | 2,000 | 48.00 | 53.48 |
Crude oil swaps and collars | Cdn$1/bbl increase in future oil prices | Cdn$1/bbl decrease in future oil prices | ||||
Increase (decrease) to fair value of oil risk management contracts | ($0.9 | ) | $0.9 |
Reference point | Volume of dilbit (bbl/d) | Remaining term | Price per bbl (U.S.$) | |
Western Canada Select | 12,000 | Oct. 1, 2018 - Dec. 31, 2018 | WTI less $16.95 | |
Western Canada Select | 5,000 | Oct. 1, 2018 - Dec. 31, 2018 | WTI less $16.50 - $19.25 | |
Western Canada Select | 2,500 | Jan. 1, 2019 - Dec. 31, 2019 | WTI less $17.95 | |
Western Canada Select | 2,500 | Jan. 1, 2019 - Dec. 31, 2019 | WTI less $23.60 - $26.35 | |
Western Canada Select | 5,000 | Jan. 1, 2019 - Dec. 31, 2019 | WTI less $17.70 - $20.45 |
Principal amount (U.K. pound sterling millions) | Swapped amount (U.K. pound sterling millions) | % of principal swapped (1) | Fixed rate (Cdn$1 = U.K. pound sterling) | ||||
12.1 | 15.0 | 124 | % | 0.63 |
(1) | Exceeds 100 percent as swaps were not liquidated when a portion of the principal amount of term note was early repaid in 2017. |
Principal amount (U.S.$ millions) | Swapped amount (U.S.$ millions) | % of principal swapped | Average fixed rate (Cdn$1 = U.S.$) | ||||
366.3 | 255.0 | 70 | % | 0.75 |
PENGROWTH Third Quarter 2018 Financial Results | 15 |
Cdn$0.01 Exchange rate change | ||||||
Foreign exchange sensitivity as at September 30, 2018 | Cdn - U.S. | Cdn - U.K. | ||||
Unrealized foreign exchange gain or loss on foreign denominated debt | $3.7 | $0.1 | ||||
Unrealized foreign exchange risk management gain or loss | 2.6 | 0.1 | ||||
Net pre-tax impact on Consolidated Statements of Income (Loss) | $1.1 | $— |
As at and for the nine month period ended September 30, 2018 | Commodity contracts (1) | Foreign exchange contracts (2) | Total | ||||||
Non-current portion of risk management assets | $— | $1.4 | $1.4 | ||||||
Current portion of risk management liabilities | (26.4 | ) | — | (26.4 | ) | ||||
Non-current portion of risk management liabilities | — | (12.3 | ) | (12.3 | ) | ||||
Risk management assets (liabilities), end of period | ($26.4 | ) | ($10.9 | ) | ($37.3 | ) | |||
Less: Risk management assets (liabilities) at beginning of period | (39.8 | ) | (16.9 | ) | (56.7 | ) | |||
Unrealized gain (loss) on risk management contracts for the period | $13.4 | $6.0 | $19.4 | ||||||
Realized gain (loss) on risk management contracts for the period | (57.1 | ) | — | (57.1 | ) | ||||
Total unrealized and realized gain (loss) on risk management contracts for the period | ($43.7 | ) | $6.0 | ($37.7 | ) | ||||
As at and for the nine month period ended September 30, 2017 | Commodity contracts (1) | Foreign exchange contracts (2) | Total | ||||||
Non-current portion of risk management assets | $— | $1.5 | $1.5 | ||||||
Current portion of risk management liabilities | (5.4 | ) | (35.4 | ) | (40.8 | ) | |||
Non-current portion of risk management liabilities | (1.1 | ) | (19.2 | ) | (20.3 | ) | |||
Risk management assets (liabilities), end of period | ($6.5 | ) | ($53.1 | ) | ($59.6 | ) | |||
Less: Risk management assets (liabilities) at beginning of period | (54.0 | ) | (2.7 | ) | (56.7 | ) | |||
Unrealized gain (loss) on risk management contracts for the period | $47.5 | ($50.4 | ) | ($2.9 | ) | ||||
Realized gain (loss) on risk management contracts for the period | (13.2 | ) | (2.8 | ) | (16.0 | ) | |||
Total unrealized and realized gain (loss) on risk management contracts for the period | $34.3 | ($53.2 | ) | ($18.9 | ) |
(1) | Unrealized and realized gains and losses are presented as separate line items in the Consolidated Statements of Income (Loss). |
(2) | Unrealized and realized gains and losses are included under Foreign exchange (gain) loss in the Consolidated Statements of Income (Loss). See Note 13. |
PENGROWTH Third Quarter 2018 Financial Results | 16 |
Fair value measurements using: | |||||||||||||||
As at September 30, 2018 | Carrying amount | Fair value | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||
Financial Assets | |||||||||||||||
Remediation trust fund | $100.3 | $100.3 | $100.3 | $— | $— | ||||||||||
Fair value of risk management contracts | 1.4 | 1.4 | — | 1.4 | — | ||||||||||
Financial Liabilities | |||||||||||||||
U.S. dollar denominated term notes | 472.8 | 499.3 | — | 499.3 | — | ||||||||||
Cdn dollar term notes | 20.5 | 22.0 | — | 22.0 | — | ||||||||||
U.K. pound sterling denominated term notes | 20.4 | 20.8 | — | 20.8 | — | ||||||||||
Fair value of risk management contracts | 38.7 | 38.7 | — | 38.7 | — | ||||||||||
Fair value measurements using: | |||||||||||||||
As at December 31, 2017 | Carrying amount | Fair value | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||
Financial Assets | |||||||||||||||
Remediation trust fund | $111.6 | $111.6 | $111.6 | $— | $— | ||||||||||
Fair value of risk management contracts | 1.9 | 1.9 | — | 1.9 | — | ||||||||||
Financial Liabilities | |||||||||||||||
U.S. dollar denominated term notes | 460.4 | 509.5 | — | 509.5 | — | ||||||||||
Cdn dollar term notes | 20.5 | 22.8 | — | 22.8 | — | ||||||||||
U.K. pound sterling denominated term notes | 20.6 | 21.7 | — | 21.7 | — | ||||||||||
Fair value of risk management contracts | 58.6 | 58.6 | — | 58.6 | — |
PENGROWTH Third Quarter 2018 Financial Results | 17 |
13. | FOREIGN EXCHANGE (GAIN) LOSS |
Three months ended | Nine months ended | |||||||||||
September 30 | September 30 | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Currency exchange rate (Cdn$1 = U.S.$) at beginning of period | $0.76 | $0.77 | $0.80 | $0.74 | ||||||||
Currency exchange rate (Cdn$1 = U.S.$) at period end | $0.77 | $0.80 | $0.77 | $0.80 | ||||||||
Unrealized foreign exchange (gain) loss from translation of foreign denominated debt | ($9.1 | ) | ($35.4 | ) | $12.1 | ($70.8 | ) | |||||
Unrealized (gain) loss on foreign exchange risk management contracts | 6.1 | 25.4 | (6.0 | ) | 50.4 | |||||||
Net unrealized foreign exchange (gain) loss | ($3.0 | ) | ($10.0 | ) | $6.1 | ($20.4 | ) | |||||
Net realized foreign exchange (gain) loss | $0.1 | $2.3 | ($0.4 | ) | $4.0 |
PENGROWTH Third Quarter 2018 Financial Results | 18 |
"bbl" | barrel | "ARO" | asset retirement obligations |
"bbl/d" | barrels per day | "G&A" | general and administrative expenses |
"Mbbl" | thousand barrels | "DD&A" | depletion, depreciation and amortization |
"MMbbls" | million barrels | "IFRS" | International Financial Reporting Standards |
"boe" | barrel of oil equivalent (1) | "AIF" | Annual Information Form |
"boe/d" | barrels of oil equivalent per day (1) | "WTI" | West Texas Intermediate crude oil price |
"Mboe" | thousand boe (1) | "WCS" | Western Canadian Select crude oil price |
"MMboe" | million boe (1) | "AECO" | Alberta natural gas price point |
"Mcf" | thousand cubic feet | "NYMEX" | New York Mercantile Exchange |
"Mcf/d" | thousand cubic feet per day | "SOEP" | Sable Offshore Energy Project |
"MMcf" | million cubic feet | "GCA" | Gas Cost Allowance |
"MMcf/d" | million cubic feet per day | "NCG" | Non-Condensable Gas |
"Bcf" | billion cubic feet | "NGTL" | Nova Gas Transmission Limited |
"EPEA" | Environmental Protection and Enhancement Act | ||
"CO2" | carbon dioxide which is a gas at room temperature and pressure | ||
"SAGD" | steam assisted gravity drainage | ||
"diluent" | hydrocarbon based diluting agent required to facilitate the transportation of bitumen | ||
"dilbit" or "diluted bitumen" | bitumen blended with diluent | ||
"SOR" | steam oil ratio | ||
"CSOR" | cumulative steam oil ratio |
(1) | Disclosure provided herein in respect of a boe may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf of natural gas to one barrel of crude oil equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 1 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 2 |
– | trailing twelve months earnings before interest, taxes, DD&A, accretion, impairment, gain (loss) on disposition of properties, change in fair value of commodity risk management contracts, unrealized foreign exchange gain (loss), non-cash share based compensation expense, loss on extinguishment of debt, foreign exchange derivative settlements, restructuring costs and EBITDA related to material dispositions ("Adjusted EBITDA"); |
– | trailing twelve months interest expense excluding interest expense related to debt repaid with proceeds from divestments ("Adjusted Interest Expense"); |
– | Adjusted EBITDA to Adjusted Interest Expense ratio (the "Interest Coverage" ratio); |
– | Total debt before working capital to the trailing twelve months Adjusted EBITDA; and |
– | Total debt before working capital as a percentage of total book capitalization ("Debt to Book Capitalization"). |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 3 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 4 |
Actual Year to date Sept 30, 2018 | Full year 2018 Guidance (1) | |||
Average production (boe/d) | 21,324 | 22,500 - 23,500 | ||
Capital expenditures ($ millions) | 56.3 | 65 | ||
Royalty expenses (% of produced petroleum revenue) (2) (3) | 8.1 | 8.5 (4) | ||
Adjusted operating expenses ($/boe) (2) | 10.41 | 10.50 - 11.50 | ||
Cash G&A expenses ($/boe) (2) | 4.41 | 3.50 - 3.85 (4) |
(1) | Per boe estimates based on high and low ends of production Guidance. |
(2) | See definition under section "Non-GAAP Financial Measures". |
(3) | Excludes financial commodity risk management activities. |
(4) | Guidance revised in the second quarter of 2018. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 5 |
2019 Guidance (1) | ||
Average production (boe/d) | 22,500 - 23,500 | |
Capital expenditures ($ millions) | 45 | |
Royalty expenses (% of produced petroleum revenue) (2) (3) | 7.0 - 8.0 | |
Adjusted operating expenses ($/boe) (2) | 9.25 - 10.00 | |
Cash G&A expenses ($/boe) (2) | 2.50 - 2.75 |
(1) | Per boe estimates based on high and low ends of production Guidance. |
(2) | See definition under section "Non-GAAP Financial Measures". |
(3) | Excludes financial commodity risk management activities. |
Three months ended | Nine months ended | |||||
($ millions except per boe and per share amounts) | Sept 30, 2018 | Sept 30, 2017 | % Change (1) | Sept 30, 2018 | Sept 30, 2017 | % Change |
As adjusted (2) | As adjusted (2) | |||||
PRODUCTION | ||||||
Average daily production (boe/d) | 21,807 | 35,072 | (38) | 21,324 | 45,727 | (53) |
FINANCIAL | ||||||
Oil and gas sales (2) | 147.9 | 125.1 | 18 | 419.5 | 542.9 | (23) |
Capital expenditures | 6.8 | 33.6 | (80) | 56.3 | 89.7 | (37) |
Cash proceeds from dispositions | 9.6 | 449.8 | (98) | 17.5 | 791.8 | (98) |
Interest and financing charges | 12.3 | 14.7 | (16) | 36.0 | 58.3 | (38) |
Adjusted funds flow (3) | 15.6 | (0.3) | 32.9 | 55.9 | (41) | |
Weighted average number of shares outstanding (000's) | 556,117 | 552,246 | 1 | 554,997 | 550,839 | 1 |
Adjusted funds flow per share (3) | 0.03 | — | 0.06 | 0.10 | (40) | |
OPERATIONAL | ||||||
Produced petroleum revenue per boe (3) | 47.10 | 28.08 | 68 | 43.36 | 32.20 | 35 |
Operating expenses per boe (2) | 11.02 | 15.99 | (31) | 10.67 | 15.01 | (29) |
Adjusted operating expenses per boe (3) | 10.72 | 14.54 | (26) | 10.41 | 13.66 | (24) |
Royalty expenses per boe | 3.69 | 1.89 | 95 | 3.52 | 3.03 | 16 |
Operating netback before realized commodity risk management per boe (3) | 29.85 | 9.91 | 201 | 26.68 | 13.77 | 94 |
Cash G&A expenses per boe (3) | 3.99 | 3.47 | 15 | 4.41 | 3.52 | 25 |
STATEMENT OF INCOME (LOSS) | ||||||
Net income (loss) | (1.6) | (144.7) | (99) | (56.3) | (473.4) | (88) |
Net income (loss) per share | — | (0.26) | (100) | (0.10) | (0.86) | (88) |
DEBT | ||||||
Total debt before working capital (4) | 672.2 | 956.0 | (30) |
(1) | Percentage changes in excess of 500 are excluded. |
(2) | IFRS 15 was early adopted in the fourth quarter of 2017 effective January 1, 2017 using cumulative effect approach without restating prior period comparatives. See Note 2 to the December 31, 2017 audited Consolidated Financial Statements. |
(3) | See definition under section "Non-GAAP Financial Measures". |
(4) | Includes Credit Facility, current and long term portions of term notes, as applicable, and bank indebtedness. Excludes letters of credit and finance leases. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 6 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Drilling, completions and facilities | ||||||||
Lindbergh | 6.0 | 24.3 | 31.9 | 67.4 | ||||
Groundbirch and conventional assets | 0.4 | 5.1 | 19.9 | 6.6 | ||||
Maintenance and other development capital | 0.5 | 3.9 | 4.4 | 15.1 | ||||
Development capital | 6.9 | 33.3 | 56.2 | 89.1 | ||||
Other capital (1) | (0.1 | ) | 0.3 | 0.1 | 0.6 | |||
Capital expenditures | 6.8 | 33.6 | 56.3 | 89.7 |
(1) | Third quarter and year to date 2018 include onerous lease payments of $0.4 million. |
Three months ended | Nine months ended | |||||||||||
Daily production | Sept 30, 2018 | % of total | Sept 30, 2017 | % of total | Sept 30, 2018 | % of total | Sept 30, 2017 | % of total | ||||
Bitumen (bbl/d) | 16,408 | 75 | 12,086 | 34 | 15,805 | 74 | 13,526 | 30 | ||||
Natural gas (Mcf/d) | 27,604 | 21 | 83,979 | 40 | 27,264 | 21 | 107,919 | 39 | ||||
Light oil (bbl/d) | 663 | 3 | 5,472 | 16 | 743 | 4 | 8,482 | 19 | ||||
Natural gas liquids (NGL) (bbl/d) | 135 | 1 | 3,517 | 10 | 232 | 1 | 5,732 | 12 | ||||
Total boe/d | 21,807 | 35,072 | 21,324 | 45,727 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 7 |
Three months ended | Nine months ended | |||||||
($ millions except per boe amounts) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Production (boe/d) | 21,807 | 35,072 | 21,324 | 45,727 | ||||
Capital expenditures | 6.8 | 33.6 | 56.3 | 89.7 | ||||
Cash flow from operating activities | 21.8 | 11.8 | 22.3 | 114.0 | ||||
Adjusted funds flow (1) | 15.6 | (0.3 | ) | 32.9 | 55.9 | |||
Operating netback before realized commodity risk management ($/boe) (1) | 29.85 | 9.91 | 26.68 | 13.77 | ||||
Adjusted net income (loss) (1) | (20.4 | ) | (148.3 | ) | (60.0 | ) | (528.4 | ) |
Net income (loss) | (1.6 | ) | (144.7 | ) | (56.3 | ) | (473.4 | ) |
Total debt before working capital (2) | 672.2 | 956.0 | 672.2 | 956.0 |
(1) | See definition under section "Non-GAAP Financial Measures". |
(2) | Includes Credit Facility, current and long term portions of term notes, as applicable, and bank indebtedness. Excludes letters of credit and finance leases. |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Cash flow from operating activities | 21.8 | 11.8 | 22.3 | 114.0 | ||||
Add (deduct): | ||||||||
Interest and financing charges | (12.3 | ) | (14.7 | ) | (36.0 | ) | (58.3 | ) |
Expenditures on remediation | 3.8 | 4.6 | 14.1 | 13.1 | ||||
Change in non-cash operating working capital | 2.3 | (2.0 | ) | 32.5 | (12.9 | ) | ||
Total | (6.2 | ) | (12.1 | ) | 10.6 | (58.1 | ) | |
Adjusted funds flow (1) | 15.6 | (0.3 | ) | 32.9 | 55.9 |
(1) | See definition under section "Non-GAAP Financial Measures". |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 8 |
($ millions) | Q3/17 vs. Q3/18 | YTD 2017 vs. 2018 | |||||
Adjusted funds flow for comparative period (1) | Q3/17 | (0.3 | ) | YTD 2017 | 55.9 | ||
Increase (decrease) due to: | |||||||
Volumes | (33.4 | ) | (217.9 | ) | |||
Prices including differentials | 37.3 | 68.3 | |||||
Realized commodity risk management | (26.6 | ) | (43.9 | ) | |||
Royalties | (1.3 | ) | 17.3 | ||||
Expenses: | |||||||
Adjusted operating (1) | 25.4 | 109.9 | |||||
Cash G&A (1) | 3.2 | 18.3 | |||||
Interest & financing | 2.4 | 22.3 | |||||
Onerous office lease payments | (1.3 | ) | (4.3 | ) | |||
Restructuring costs - severance | 8.7 | 7.2 | |||||
Other - including transportation | 1.5 | (0.2 | ) | ||||
Net change | 15.9 | (23.0 | ) | ||||
Adjusted funds flow (1) | Q3/18 | 15.6 | YTD 2018 | 32.9 |
(1) | See definition under section "Non-GAAP Financial Measures". |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 9 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Net income (loss) | (1.6 | ) | (144.7 | ) | (56.3 | ) | (473.4 | ) |
Exclude non-cash items from net income (loss): | ||||||||
Change in fair value of commodity risk management contracts | 21.7 | (8.7 | ) | 13.4 | 47.5 | |||
Unrealized foreign exchange gain (loss) (1) | 3.0 | 10.0 | (6.1 | ) | 20.4 | |||
Tax effect on non-cash items above | (5.9 | ) | 2.3 | (3.6 | ) | (12.9 | ) | |
Total excluded | 18.8 | 3.6 | 3.7 | 55.0 | ||||
Adjusted net income (loss) (2) | (20.4 | ) | (148.3 | ) | (60.0 | ) | (528.4 | ) |
(1) | Relates to the foreign denominated debt net of associated foreign exchange risk management contracts. |
(2) | See definition under section "Non-GAAP Financial Measures". |
The following table represents a continuity of adjusted net income (loss): | |||||||
($ millions) | Q3/17 vs. Q3/18 | YTD 2017 vs. 2018 | |||||
Adjusted net income (loss) for comparative period (1) | Q3/17 | (148.3 | ) | YTD 2017 | (528.4 | ) | |
Adjusted funds flow increase (decrease) | 15.9 | (23.0 | ) | ||||
DD&A and accretion expense (increase) decrease | 7.6 | 82.5 | |||||
Impairment charges (increase) decrease | 127.1 | 504.4 | |||||
Realized foreign exchange gain (loss) on derivative settlements | — | 2.8 | |||||
Loss on property dispositions (increase) decrease | 21.4 | 45.7 | |||||
Onerous lease contracts | 2.7 | 4.4 | |||||
Onerous office lease payments | 1.3 | 4.3 | |||||
Loss on extinguishment of debt | — | 7.5 | |||||
Other | (0.4 | ) | 2.1 | ||||
Estimated tax on above | (47.7 | ) | (162.3 | ) | |||
Net change | 127.9 | 468.4 | |||||
Adjusted net income (loss) (1) | Q3/18 | (20.4 | ) | YTD 2018 | (60.0 | ) |
(1) | See definition under section "Non-GAAP Financial Measures". |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 10 |
Estimated Impact on 12 Month Adjusted Funds Flow | |||||||||
COMMODITY PRICE ENVIRONMENT (1) | Assumption | Change | (Cdn$ millions) | ||||||
West Texas Intermediate Oil (2) | U.S.$/bbl | $71.12 | $1.00 | ||||||
Bitumen | 8.3 | ||||||||
Oil risk management (3) | (1.2 | ) | |||||||
Light oil and NGLs | 0.3 | ||||||||
Net impact of U.S.$1/bbl increase in WTI | 7.4 | ||||||||
Oil differentials (2) | |||||||||
Bitumen | U.S.$/bbl | $25.72 | $1.00 | (8.3 | ) | ||||
Light oil | U.S.$/bbl | $17.59 | $1.00 | (0.3 | ) | ||||
Physical oil differential risk management (4) | 5.6 | ||||||||
Net impact of U.S.$1/bbl increase in differentials | (3.0 | ) | |||||||
AECO Natural Gas (2) | Cdn$/Mcf | $1.80 | $0.10 | ||||||
Natural gas | 1.1 | ||||||||
Net impact of Cdn$0.10/Mcf increase in AECO | 1.1 |
(1) | Calculations are performed independently and are not indicative of actual results when multiple variables change at the same time. The exchange rate of Cdn$1 = U.S.$0.77 was used for the 12 month period. |
(2) | Commodity price is based on an estimation of the 12 month forward price curve at October 15, 2018 and does not include the impact of commodity risk management contracts. |
(3) | Includes commodity risk management contracts as at September 30, 2018. |
(4) | Reflects 2018 physical delivery contracts for 17,000 bbl/d of dilbit at a fixed price differential of approximately U.S.$16.82/bbl and 2019 physical delivery contracts for 10,000 bbl/d of dilbit at a fixed price differential of approximately U.S.$19.24/bbl. See Commodity Prices section of this MD&A for more information. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 11 |
Three months ended | Nine months ended | |||||||
Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | |||||
Average Commodity Prices | ||||||||
Crude Oil: | ||||||||
WTI oil (U.S.$/bbl) | 69.50 | 48.19 | 66.75 | 49.43 | ||||
WTI oil (Cdn$/bbl) | 90.26 | 60.38 | 85.58 | 64.62 | ||||
WCS differential to WTI (U.S.$/bbl) | (22.25 | ) | (9.94 | ) | (21.93 | ) | (11.86 | ) |
WCS oil (U.S.$/bbl) | 47.25 | 38.25 | 44.82 | 37.57 | ||||
WCS oil (Cdn$/bbl) | 61.36 | 47.92 | 57.46 | 49.08 | ||||
Edmonton Condensate: | ||||||||
Condensate at Edmonton (Cdn$/bbl) | 87.35 | 59.01 | 85.24 | 64.10 | ||||
WCS differential to Condensate (Cdn$/bbl) | (25.99 | ) | (11.09 | ) | (27.78 | ) | (15.02 | ) |
Natural Gas: | ||||||||
AECO monthly gas (Cdn$/MMBtu) | 1.35 | 2.04 | 1.41 | 2.58 | ||||
Average Exchange Rate | ||||||||
Cdn$1=U.S.$ | 0.77 | 0.80 | 0.78 | 0.77 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 12 |
Three months ended | Nine months ended | |||||||
(Cdn$) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Average Sales Price (1) | ||||||||
Bitumen (Cdn$/bbl) (2) (3) | 56.64 | 31.57 | 50.73 | 34.34 | ||||
Natural gas (Cdn$/Mcf) (4) | 1.61 | 2.33 | 2.23 | 2.93 | ||||
Natural gas liquids (Cdn$/bbl) | 40.26 | 33.07 | 50.52 | 32.85 | ||||
Light oil (Cdn$/bbl) | 72.14 | 53.24 | 67.54 | 59.38 |
(1) | Excluding realized financial risk management contracts. |
(2) | During the third quarter 2018 Pengrowth managed WCS differential with fixed price differential physical delivery contracts of 17,000 bbl/d at approximately U.S.$16.82/bbl of diluted bitumen. Third quarter 2018 and year to date 2018 bitumen average sale prices were higher, as compared to index prices, by approximately Cdn$6.62/bbl and Cdn$6.95/bbl, respectively, resulting from the impact of these fixed price differential physical delivery contracts. |
(3) | Calculated based on bitumen sales volumes and excludes diluent. |
(4) | Average sales prices are recorded in Mcf to reflect the volumetric reporting standard for Pengrowth's natural gas. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 13 |
Three months ended | Nine months ended | |||||||
(Cdn$/boe) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Produced petroleum revenue (1) | 47.10 | 28.08 | 43.36 | 32.20 | ||||
Realized commodity risk management gain (loss) | (11.41 | ) | 1.15 | (9.81 | ) | (1.06 | ) | |
Total including realized commodity risk management | 35.69 | 29.23 | 33.55 | 31.14 |
(1) | See definition under section "Non-GAAP Financial Measures". |
Three months ended | Nine months ended | |||||||
($ millions except per unit amounts) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Oil risk management gain (loss) | (22.9 | ) | — | (57.1 | ) | (16.8 | ) | |
$/bbl (1) | (14.58 | ) | — | (12.64 | ) | (2.80 | ) | |
Natural gas risk management gain (loss) | — | 3.7 | — | 3.6 | ||||
$/Mcf | — | 0.48 | — | 0.12 | ||||
Total realized commodity risk management gain (loss) | (22.9 | ) | 3.7 | (57.1 | ) | (13.2 | ) | |
$/boe | (11.41 | ) | 1.15 | (9.81 | ) | (1.06 | ) |
(1) | Includes light oil and bitumen. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 14 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Fair value of commodity risk management assets (liabilities) at period end | (26.4 | ) | (6.5 | ) | (26.4 | ) | (6.5 | ) |
Less: Fair value of commodity risk management assets (liabilities) at beginning of period | (48.1 | ) | 2.2 | (39.8 | ) | (54.0 | ) | |
Change in fair value of commodity risk management contracts for the period | 21.7 | (8.7 | ) | 13.4 | 47.5 |
Crude Oil | |||
Financial Swap Contracts | |||
Reference point | Remaining term | Volume (bbl/d) | Price/bbl (U.S.$) |
WTI | Oct. 1, 2018 to Dec. 31, 2018 | 8,000 | 49.97 |
Collars | Price/bbl (U.S.$) | |||
Reference point | Remaining term | Volume (bbl/d) | Bought Puts | Sold Calls |
WTI | Oct. 1, 2018 to Dec. 31, 2018 | 2,000 | 48.00 | 53.48 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 15 |
WCS Differentials | |||
Physical Delivery Contracts | |||
Reference point | Remaining term | Volume of dilbit (bbl/d) | Price/bbl (U.S.$) |
Western Canada Select | Oct. 1, 2018 to Dec. 31, 2018 | 12,000 | WTI less $16.95 |
Western Canada Select | Oct. 1, 2018 to Dec. 31, 2018 | 5,000 | WTI less $16.50 - $19.25 |
Western Canada Select | Jan. 1, 2019 to Dec. 31, 2019 | 2,500 | WTI less $17.95 |
Western Canada Select | Jan. 1, 2019 to Dec. 31, 2019 | 2,500 | WTI less $23.60 - $26.35 |
Western Canada Select | Jan. 1, 2019 to Dec. 31, 2019 | 5,000 | WTI less $17.70 - $20.45 |
($ millions) | ||||
Crude oil swaps and collars | Cdn$1/bbl increase in future oil prices | Cdn$1/bbl decrease in future oil prices | ||
Increase (decrease) to fair value of oil risk management contracts | (0.9 | ) | 0.9 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 16 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
As adjusted (1) | As adjusted (1) | |||||||
Bitumen | 85.5 | 35.1 | 218.9 | 126.8 | ||||
Natural gas | 4.1 | 18.0 | 16.6 | 86.3 | ||||
Light oil | 4.4 | 26.8 | 13.7 | 137.5 | ||||
Natural gas liquids | 0.5 | 10.7 | 3.2 | 51.4 | ||||
Produced petroleum revenue (2) | 94.5 | 90.6 | 252.4 | 402.0 | ||||
Diluent and other revenue | 53.4 | 34.5 | 167.1 | 140.9 | ||||
Oil and gas sales (1) (3) | 147.9 | 125.1 | 419.5 | 542.9 |
(1) | IFRS 15 was early adopted in the fourth quarter of 2017 effective January 1, 2017 using cumulative effect approach without restating prior period comparatives. See Note 2 to the December 31, 2017 audited Consolidated Financial Statements. |
(2) | See definition under section "Non-GAAP Financial Measures". |
(3) | Excludes realized commodity risk management from financial contracts. |
($ millions) | Bitumen | Natural gas | Light oil | NGLs | Produced petroleum revenue (2) | |||||
Quarter ended September 30, 2017 (1) | 35.1 | 18.0 | 26.8 | 10.7 | 90.6 | |||||
Effect of change in product prices and differentials | 37.8 | (1.8 | ) | 1.2 | 0.1 | 37.3 | ||||
Effect of change in sales volumes | 12.6 | (12.1 | ) | (23.6 | ) | (10.3 | ) | (33.4 | ) | |
Quarter ended September 30, 2018 (1) | 85.5 | 4.1 | 4.4 | 0.5 | 94.5 |
(1) | Excludes realized commodity risk management from financial contracts. |
(2) | See definition under section "Non-GAAP Financial Measures". |
($ millions) | Bitumen | Natural gas | Light oil | NGLs | Produced petroleum revenue (2) | |||||
Nine months ended September 30, 2017 (1) | 126.8 | 86.3 | 137.5 | 51.4 | 402.0 | |||||
Effect of change in product prices and differentials | 70.7 | (5.2 | ) | 1.7 | 1.1 | 68.3 | ||||
Effect of change in sales volumes | 21.4 | (64.5 | ) | (125.5 | ) | (49.3 | ) | (217.9 | ) | |
Nine months ended September 30, 2018 (1) | 218.9 | 16.6 | 13.7 | 3.2 | 252.4 |
(1) | Excludes realized commodity risk management from financial contracts. |
(2) | See definition under section "Non-GAAP Financial Measures". |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 17 |
($ millions except per boe amounts and percentages) | Three months ended | Nine months ended | ||||||
Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | |||||
Royalties, net of incentives | 7.4 | 6.1 | 20.5 | 37.8 | ||||
$/boe | 3.69 | 1.89 | 3.52 | 3.03 | ||||
Royalties as a percent of produced petroleum revenue (%) (1) (2) | 7.8 | 6.7 | 8.1 | 9.4 |
(1) | Excludes realized commodity risk management from financial contracts. |
(2) | See definition under section "Non-GAAP Financial Measures". |
($ millions except per boe amounts) | Three months ended | Nine months ended | ||||||
Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | |||||
As adjusted (1) | As adjusted (1) | |||||||
Operating expenses (1) | 22.1 | 51.6 | 62.1 | 187.4 | ||||
Less: Processing income | 0.6 | 4.7 | 1.5 | 16.9 | ||||
Adjusted operating expenses (2) | 21.5 | 46.9 | 60.6 | 170.5 | ||||
$/boe | 10.72 | 14.54 | 10.41 | 13.66 |
(1) | IFRS 15 was early adopted in the fourth quarter of 2017 effective January 1, 2017 using cumulative effect approach without restating prior period comparatives. See Note 2 to the December 31, 2017 audited Consolidated Financial Statements. |
(2) | See definition under section "Non-GAAP Financial Measures". |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 18 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
As adjusted (1) | As adjusted (1) | |||||||
Diluent purchases | 52.8 | 26.1 | 163.9 | 105.8 | ||||
Other product purchases | — | 2.8 | 1.2 | 15.0 | ||||
Diluent and other purchases (1) | 52.8 | 28.9 | 165.1 | 120.8 |
(1) | IFRS 15 was early adopted in the fourth quarter of 2017 effective January 1, 2017 using cumulative effect approach without restating prior period comparatives. See Note 2 to the December 31, 2017 audited Consolidated Financial Statements. |
($ millions except per boe amounts) | Three months ended | Nine months ended | ||||||
Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | |||||
Transportation expenses | 5.7 | 5.6 | 16.0 | 21.7 | ||||
$/boe | 2.84 | 1.74 | 2.75 | 1.74 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 19 |
Three months ended | Nine months ended | |||||||
Operating Netbacks ($/boe) (1) (2) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Produced petroleum revenue (1) | 47.10 | 28.08 | 43.36 | 32.20 | ||||
Royalties | (3.69 | ) | (1.89 | ) | (3.52 | ) | (3.03 | ) |
Adjusted operating expenses (1) | (10.72 | ) | (14.54 | ) | (10.41 | ) | (13.66 | ) |
Transportation expenses | (2.84 | ) | (1.74 | ) | (2.75 | ) | (1.74 | ) |
Operating netbacks before realized commodity risk management | 29.85 | 9.91 | 26.68 | 13.77 | ||||
Realized commodity risk management | (11.41 | ) | 1.15 | (9.81 | ) | (1.06 | ) | |
Operating netbacks ($/boe) | 18.44 | 11.06 | 16.87 | 12.71 |
(1) | See definition under section "Non-GAAP Financial Measures". |
(2) | Prior year comparative figures changed to conform to presentation in the current year. |
Three months ended | Nine months ended | |||||||
($ millions except per boe amounts) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Cash G&A expenses (1) (2) | 8.0 | 11.2 | 25.7 | 44.0 | ||||
$/boe | 3.99 | 3.47 | 4.41 | 3.52 | ||||
Non-cash G&A expenses (1) | 1.7 | 1.3 | 3.1 | 6.2 | ||||
$/boe | 0.84 | 0.40 | 0.54 | 0.50 | ||||
Total G&A (1) | 9.7 | 12.5 | 28.8 | 50.2 | ||||
$/boe | 4.83 | 3.87 | 4.95 | 4.02 |
(1) | Net of recoveries and capitalization, as applicable. |
(2) | See definition under section "Non-GAAP Financial Measures". |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 20 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Severance costs | 0.5 | 9.2 | 2.0 | 9.2 | ||||
Onerous office lease contracts | — | 8.0 | (1.7 | ) | 8.0 | |||
Total restructuring costs | 0.5 | 17.2 | 0.3 | 17.2 |
Three months ended | Nine months ended | |||||||
($ millions except per boe amounts) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Depletion, depreciation and amortization | 33.0 | 39.8 | 98.1 | 175.7 | ||||
$/boe | 16.45 | 12.33 | 16.85 | 14.07 | ||||
Accretion | 1.8 | 2.6 | 5.2 | 10.1 | ||||
$/boe | 0.90 | 0.81 | 0.89 | 0.81 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Interest and financing charges | 12.3 | 15.7 | 38.4 | 61.0 | ||||
Capitalized interest | — | (1.0 | ) | (2.4 | ) | (2.7 | ) | |
Total interest and financing charges | 12.3 | 14.7 | 36.0 | 58.3 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 21 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Currency exchange rate (Cdn$1 = U.S.$) at beginning of period | 0.76 | 0.77 | 0.80 | 0.74 | ||||
Currency exchange rate (Cdn$1 = U.S.$) at period end | 0.77 | 0.80 | 0.77 | 0.80 | ||||
Unrealized foreign exchange gain (loss) from translation of foreign denominated debt | 9.1 | 35.4 | (12.1 | ) | 70.8 | |||
Unrealized gain (loss) on foreign exchange risk management contracts | (6.1 | ) | (25.4 | ) | 6.0 | (50.4 | ) | |
Net unrealized foreign exchange gain (loss) | 3.0 | 10.0 | (6.1 | ) | 20.4 | |||
Net realized foreign exchange gain (loss) | (0.1 | ) | (2.3 | ) | 0.4 | (4.0 | ) |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 22 |
Principal amount (U.S.$ millions) | Swapped amount (U.S.$ millions) | % of principal swapped | Average fixed rate (Cdn$1 = U.S.$) | ||||
366.3 | 255.0 | 70 | % | 0.75 |
Principal amount (U.K. pound sterling millions) | Swapped amount (U.K. pound sterling millions) | % of principal swapped (1) | Fixed rate (Cdn$1 = U.K. pound sterling) | ||||
12.1 | 15.0 | 124 | % | 0.63 |
(1) | Exceeds 100 percent as swaps were not liquidated when a portion of the principal amount of term note was early repaid in the fourth quarter of 2017. |
Cdn$0.01 Exchange rate change | ||||
Foreign exchange sensitivity as at September 30, 2018 ($ millions) | Cdn - U.S. | Cdn - U.K. | ||
Unrealized foreign exchange gain or loss on foreign denominated debt | 3.7 | 0.1 | ||
Unrealized foreign exchange risk management gain or loss | 2.6 | 0.1 | ||
Net pre-tax impact on Consolidated Statements of Income (Loss) | 1.1 | — |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 23 |
Three months ended | Nine months ended | |||||||
($ millions) | Sept 30, 2018 | Sept 30, 2017 | Sept 30, 2018 | Sept 30, 2017 | ||||
Proceeds from property dispositions (1) | 9.6 | 449.8 | 17.5 | 791.8 |
(1) | Proceeds are net of transaction costs, closing adjustments and, where applicable, deferred proceeds. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 24 |
• | The Debt to Adjusted EBITDA ratio covenant and the Debt to Book Capitalization ratio covenants do not apply. |
• | The trailing 12 month Adjusted EBITDA to Adjusted Interest Expense minimum ratio covenant is revised as follows: |
Year | Q1 | Q2 | Q3 | Q4 |
2018 | — | — | 1.03 times | 1.01 times |
2019 | 1.13 times | 1.19 times | 1.23 times | 4.0 times |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 25 |
Twelve month trailing actual covenant (1): | ||
Interest Coverage ratio at September 30, 2018 | 1.9 | |
Minimum Interest Coverage compliance ratio required at September 30, 2018 | 1.03 | |
Twelve month trailing Adjusted Interest Expense ($ millions): | Sept 30, 2018 | |
Interest and financing charges | 48.4 | |
Less fees and interest on debt repaid with asset divestment proceeds (1) | (2.0 | ) |
Adjusted Interest Expense | 46.4 | |
Twelve month trailing Adjusted EBITDA ($ millions): | ||
Net income (loss) | (266.7 | ) |
Add (deduct): | ||
Interest and financing charges | 48.4 | |
Deferred income tax expense (recovery) | (70.8 | ) |
Depletion, depreciation, amortization and accretion | 136.5 | |
Impairment | 130.0 | |
(Gain) loss on disposition of properties | 16.9 | |
Change in fair value of commodity risk management contracts | 19.9 | |
Unrealized foreign exchange (gain) loss | (24.9 | ) |
Non-cash share based compensation expense | 1.8 | |
Loss on extinguishment of debt | 49.2 | |
Foreign exchange derivative settlements | 34.8 | |
Restructuring costs | 20.1 | |
EBITDA related to material dispositions (1) | (4.9 | ) |
Adjusted EBITDA | 90.3 |
(1) | Calculation of the financial covenant is based on specific definitions within the agreements and contains adjustments, pursuant to the agreements, some of which cannot be readily replicated by referring to Pengrowth's Consolidated Financial Statements. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 26 |
2018 | 2017 | 2016 | ||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |||||||||
Oil and gas sales ($ millions) (1) | 147.9 | 146.4 | 125.2 | 130.5 | 125.1 | 197.9 | 219.9 | 169.2 | ||||||||
Net income (loss) ($ millions) | (1.6 | ) | (27.5 | ) | (27.2 | ) | (210.4 | ) | (144.7 | ) | (242.4 | ) | (86.3 | ) | (92.4 | ) |
Net income (loss) per share ($) | — | (0.05 | ) | (0.05 | ) | (0.38 | ) | (0.26 | ) | (0.44 | ) | (0.16 | ) | (0.17 | ) | |
Net income (loss) per share - diluted ($) | — | (0.05 | ) | (0.05 | ) | (0.38 | ) | (0.26 | ) | (0.44 | ) | (0.16 | ) | (0.17 | ) | |
Adjusted funds flow ($ millions) (2) (3) (4) (5) | 15.6 | 10.1 | 7.2 | 13.5 | (0.3 | ) | 29.3 | 26.9 | 111.7 | |||||||
Daily production (boe/d) | 21,807 | 22,600 | 19,541 | 24,702 | 35,072 | 49,349 | 52,957 | 54,354 | ||||||||
Produced petroleum revenue ($/boe) (1) (5) | 47.10 | 42.59 | 39.97 | 37.14 | 28.08 | 32.56 | 34.66 | 33.62 | ||||||||
Operating netback ($/boe) (5) (6) | 18.44 | 16.00 | 16.08 | 16.06 | 11.06 | 13.16 | 13.43 | 30.60 |
(1) | Excludes realized commodity risk management from financial contracts. IFRS 15 was early adopted in the fourth quarter of 2017 effective January 1, 2017 using cumulative effect approach without restating prior period comparatives. See Note 2 to the December 31, 2017 audited Consolidated Financial Statements. |
(2) | Fourth quarter of 2017 adjusted funds flow excludes $34.8 million loss related to the settlement of foreign exchange swap contracts as this was considered a financing activity. |
(3) | First quarter of 2017 adjusted funds flow includes a $12.7 million loss related to the early settlement of commodity risk management contracts. |
(4) | Fourth quarter of 2016 adjusted funds flow includes $35.6 million of gains related to the early settlement of commodity risk management contracts and excludes $47.0 million related to the settlement of foreign exchange swap contracts as this was considered a financing activity. |
(5) | See definition under section "Non-GAAP Financial Measures". |
(6) | Includes realized commodity risk management. |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 27 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 28 |
PENGROWTH Third Quarter 2018 Management's Discussion and Analysis | 29 |
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Pengrowth Energy Corporation (the “issuer”) for the interim period ended September 30, 2018. |
2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
a. | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
i. | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
ii. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
b. | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). |
5.2 | N/A |
5.3 | N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2018 and ended on September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
/s/ Peter D. Sametz |
Peter D. Sametz |
President and Chief Executive Officer |
1. | Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Pengrowth Energy Corporation (the “issuer”) for the interim period ended September 30, 2018. |
2. | No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings. |
3. | Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings. |
4. | Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer. |
5. | Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings |
a. | designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that |
i. | material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and |
ii. | information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and |
b. | designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP. |
5.1 | Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). |
5.2 | N/A |
5.3 | N/A |
6. | Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2018 and ended on September 30, 2018 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
/s/ Christopher G. Webster |
Christopher G. Webster |
Chief Financial Officer |