The following is a transcription of the above video, and The Market Online has edited it for clarity.
Prospera Energy Inc. (TSXV:PEI) is a Western Canadian resource company specializing in development and production of crude oil and natural gas. Prospera is primarily focused on optimizing hydrocarbon recovery from legacy fields and reducing its environmental footprint.
Joining us today in studio is CEO Samuel David.
TMO: Let’s get started with the latest news. Prospera announced an over 500 per cent increase in the 2023 proven developed reserve valuation by a third party. For those uncertain, what does that increase mean for investors?
David: First of all, Prospera Energy is pleased to announce such a significant appreciation in proven developed reserves. This company, prior to restructuring the proven developed reserve value was zero. And since the restructure, the Prospera team have executed a lot of the technical methods, and the third party assessed those methods and the results.
And that is reflected in such significant appreciation: The proven value, which is actually $32 million from zero in three years, and when you subtract the liability the net value is $27 million.
TMO: You announced the company’s 2P reserve blue increase by $60 million. How did Prospera increase that reserve and why is that important to investors as well?
David: It is a very significant reflector in the reserves. It’s the 2P reserves. The company 2P reserves have gone up from negative $3 million prior to restructuring to (the) current $133 million in total value. (A) major portion of that is the 2P reserves, which is proven and probable. And that is the reflection of the reserves and the production we have provided up adjacent to existing wells. That’s a reflection of the substantial significant oil in place that Prospera has, which is about 400 million barrels of oil in place.
TMO: It sounds like a bit of a confidence booster for investors as well.
David: Correct. It’s substantiating our initial technical assessment of oil in place. Now we’re proving it through horizontal wells and other methods.
TMO: Now, how is your current production performing?
David: I will answer that. (But) prior to that, that $133 million is not reflective of actually the potential appreciation of the 2P reserves or the total reserve value because that appreciation, $60 million appreciation is only the initial exploitation results of just one core property.
It does not include the exploitation of the oil in place in one of our major properties that has 290 million barrels in place, and that is to commence this year. This $133 million does not include the potentiality of the remaining reserves and appreciation NPV that can be attained. Now, back to your question.
TMO: What is your current production level at?
David: First of all, in Saskatchewan, for those people who are not familiar with the weather conditions, in December, January and February, we experienced some very drastic extreme cold weather conditions. For example, in January we were experiencing minus 62 Celsius with wind chill factor. Everything stops moving.
We have noticed during those quarters or during those fourth quarter and the first quarter, we noticed there’s always a reduction in the runtime reflecting in the production anywhere from 25 to 40 per cent of the production. That did happen last year, and we had to shut down all our production.
We learned a little bit from that, and we optimized our infrastructure. This year we experienced the same thing, but we were able to resume. We didn’t have to shut down fairly quickly. So current production is, we peaked around 1,800 BOEs last December and it went down to a thousand BOEs. Now we’re back up to 1,400 BOEs and we’re on our way to reach our peak rates and the capacity of anywhere from 1,800 to 2,200 BOEs per day.
TMO: What is Prospera’s 2024 development plan in terms of production and M&A?
David: Prospera has very ambitious goals for this year, and we performed, initiated our development plan last year in the latter part of the year. It took a little more time than we expected in preparation of that development plan.
This year we are a little bit ahead of the game, and we are expecting to commence our development as soon after the breakup in the warmer weather condition. The yearly average we expect to increase, and we have ambitious plans. We have a development plan, especially in Brooks, medium-light oil, where we attain some incredible initial rates. We were anticipating a hundred barrels a day, and our wells came on at 500 barrels a day and stabilized around 300 barrels a day.
So we’re going to focus in that area, light oil area initially, and we’re planning to do anywhere from five to 10 wells. And then we’re going to continue our development in our core properties, but this time not just one core property, we are going to commence in the other properties like we explained.
The development barrels, we expect to add another 1,500 barrels taking us to 3,000 or 3,500 barrels a day. We also have some M&A transactions or strategic acquisitions that are in play, and as a matter of fact, one of them is expected complete in May or June and those strategic transactions that diversify the product mix could take us to 5,000 barrels a day.
TMO: How do you plan to fund all of this?
David: That’s always a good question. Where’s the money coming from? Fortunately, we estimated it’s going to take about $40 million to spend over this year and the cashflow that we’re receiving from our production combined with some funding, about $15 million, could fund these programs.
So it’s a $40 million expenditure, but we only will be looking for or in the process of securing funding about $15 million. But those funding is not an equity dilution, it’s a non-dilutive credit facilities because our proven producing value is about $27 million.
TMO: What is the result on the financials?
David: With the appreciation of production that we are anticipating, it’ll have substantial impact on the financials. We’re anticipating at a price of US$75 WTI we expect unrisked $70 million in revenue, maybe EBITDA $40 million profit risk, maybe … 70 per cent of that, we’re looking at $63 million revenue and about $35 million in EBITDA.
TMO: What can you add in regards to Prospera’s ESG efforts and does this detract or add to your bottom line?
David: Yes, it does. Prospera has been focused on production because of its financial state initially. But at the same time, we never took our eyes off in reducing our environmental footprint.
The horizontal transformation that we’ve been executing eliminates numerous vertical locations along the path of the lateral and we have retired mini wells. We also look at emissions and vegetation.
But overall we find that reducing the environmental footprint, which means reducing the number of leases that’s out there, it enhances our bottom line because the property taxes are less, operating costs are less and etc., etc. But it takes time for that to reflect on the financials (in a) couple of years.
TMO: What are your immediate next steps and what is your forecast for 2024?
David: Immediate next step is to have a cup of coffee after this meeting, but our immediate step is to continue our development and continue our execution. We have a fairly good collaboration with the service providers.
We have steady rigs working for us and continue this development and propel this company into profitability and deliver to the stakeholders, the regulators and everyone that’s involved.
Head over to prosperaenergy.com for more detailed information. You can also find them on the Venture Exchange under the ticker symbol “PEI.”
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