Yangarra announces 2022 first quarter financial and operating results

During the first quarter of 2022, Yangarra generated funds flow from operations of $39.8 million ($0.46 per basic share), while generating net income of $22.7 million ($0.26 per basic share). By maintaining a disciplined capital program and only spending $21.3 million, the Company was able to reduce adjusted net debt by $18.3 million. The Company generated $20.20/boe of free funds flow. Yangarra expects to maintain its previously guided capital budget for the remainder of the year and at prevailing commodity prices, adjusted net debt should continue to improve on a quarterly basis.

First Quarter Highlights

• Funds flow from operations of $39.8 million ($0.46 per share – basic), an increase of 133% from the same period in 2021
• $18.3 million of adjusted net debt was repaid during first quarter
• Oil and gas sales were $51.4 million, an increase of 81% from the same period in 2021
• Adjusted EBITDA (which excludes changes in derivative financial instruments) was $42.0 million ($0.48 per share – basic)
• Net income of $22.7 million ($0.26 per share – basic, $29.6 million before tax), an increase of 149% from the same period in 2021
• Average production of 10,044 boe/d (44% liquids) during the quarter, a 15% increase from the same period in 2021
• Operating costs were $6.39/boe (including $1.24/boe of transportation costs)
• Field operating netbacks were $47.62/boe
• Operating netbacks, which include the impact of commodity contracts, were $47.63/boe
• Operating margins were 84% and funds flow from operations margins were 77%
• G&A costs of $1.00/boe
• Royalties were 5% of oil and gas revenue
• All in cash costs were $12.58/boe
• Capital expenditures were $21.3 million
• Adjusted net debt (which excludes the current derivative financial instruments) was $178.5 million
• Adjusted net debt to first quarter annualized funds flow from operations was 1.1 : 1
• Retained earnings of $181.4 million
• Decommissioning liabilities of $13.5 million (discounted)

Operations Update

The Company has kept one rig drilling since commodity prices rebounded, drilling 350 days during 2021 and all of Q1 2022.   This continuous drilling program provides maximum efficiency and allows for significant cost reductions. In addition, drilling on multi-well pad sites will typically allow the Company to drill right through breakup.

The production declines that were experienced during COVID have now been reversed, cashflow exceeds capital spending and the Company is now positioned to reduce debt and ultimately return capital to shareholders.

Yangarra drilled 7 (6.5 net) wells and completed 10 (7.0 net) wells during the first quarter of 2022.  The Company performed an optimization program in 2021, replacing pump-jacks with cheaper and more efficient plunger lifts and performed chemical stimulations. The optimization program resulted in higher production from existing wells, lower decline profiles and reduced operating costs.  Yangarra is now expanding the optimization program to all existing wells.  This program is expected to substantially reduce declines on legacy wells during 2022.

Production for the first quarter 2022 was negatively impacted by a force majeure outage at a third-party gas processing plant.  The third-party outage resulted in production being reduced by approximately 1,500 boe/d in March or by approximately 500 boe/d for the quarter.  This production was back online as of April 1, 2022.

As activity increases in Western Canada, cost inflation on services and materials is becoming more prevalent. The internal OFS group has helped mitigate the impact of these inflationary pressures. The Company’s established, long-term relationships with drilling and completions partners and continuous operations has limited the impact of service price increases.

Staffing Update

Gurdeep Gill has been appointed President of the Company; Jim Evaskevich will retain the title of Chief Executive Officer. The management committee structure remains in place and the title changes reflect the evolution of duties within the organization.

ESG

Yangarra continues to reduce the impact of non-producing wells on the overall valuation of the Company and has $1.1 million of expenditures remaining to completely abandon and reclaim all standing wells in the Company. As at March 31, 2022, Yangarra had 210 net producing wells and 16 net non-producing wells.

Yangarra is targeting a 40% reduction in methane emissions and a 20% reduction in C02e in emissions for 2022 over levels measured in 2020. Yangarra has enacted several programs to reduce pneumatic devices, convert high-bleed pneumatics to low-bleed pneumatics, install vapour recovery units on large emulsion facility tank farms, install instrument air where electrical power is available and install incinerators for tank vents where vapour recovery units are not economical.

The Company continues to reduce flaring by moving to pad-drilling and pre-building pipeline to pad sites. A direct benefit of this process is Yangarra can now use company-produced natural gas to power the drilling rig and frack spread via bi-fuel. This will allow for lower overall emissions by reducing the use of diesel fuel.

Annual General Meeting of Shareholders

The Company’s Annual General Meeting of Shareholders is scheduled for 10:00 AM on Thursday April 28, 2022 in the Tillyard Management Conference Centre, Main Floor, 715 5th Avenue SW, Calgary, AB.

Financial Summary

Company Netbacks ($/boe)

Business Environment

Operations Summary

Net petroleum and natural gas production, pricing and revenue are summarized below:

Working Capital Summary