Paramount wary of COVID-19 on energy demand

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Paramount Resources Ltd. [POU-TSX] reported its 2019 annual results Wednesday and said its capital budget for this year is expected to range between $350-$450 million, excluding land acquisitions, abandonment and reclamation activities.

The forecast assumes an average benchmark price of US$55/bbl West Texas Intermediate and $1.80 /GJ for AECO natural gas, plus a $0.76 CDN/US exchange rate.

“Recently, world oil prices have been adversely affected by uncertainty surrounding the economic impact of the COVID-19 (Coronavirus) outbreak,” Paramount said in a press release. “The company is committed to prudently managing its capital resources and may adjust its capital plans depending on commodity prices and other factors.”

Paramount is a liquids-focused Canadian energy company that explores for and develops both conventional and unconventional petroleum and natural gas reserves.  The company’s operations are located in the Peach River Arch area of Alberta, which is focused on Montney developments at Karr and Wapiti. In the Kaybob Region of west-central Alberta, the focus is on Montney and Duvernay developments at Kaybob, Smoky River, Pine Creek and Ante Creek. The company’s portfolio also includes Duvernay development plays in central Alberta at Willesden Green and East Shale Basin, lands and production in British Columbia and approximately 180,000 acres of fee simple land and various associated royalty interest.

Paramount reported a net loss of $31.1 million or 24 cents a share in the three months ended December 31, 2019. That compared to a year earlier loss of $170.5 million or $1.31 per share.

In 2019, the company said its annual sales volumes averaged 82,394 boe/d (39% liquids). Fourth quarter 2019 sales volumes averaged 85,411 boe/d (42% liquids). Sales volumes in 2020 are expected to average between 75,000 boe/d and 80,000 boe/d (43% liquids).

On Wednesday, the company said its 2020 program is largely focused on the ongoing development of Karr and Wapiti, where the company plans to continue to grow its Montney production, resulting in higher liquids contribution and per-unit netbacks.

Paramount said it completed the construction of a crude oil terminal in the Kaybob Region in the fourth quarter of 2019. This terminal is pipeline connected and has been commissioned and placed into service. It will provide Paramount with the opportunity to increase netbacks for its Kaybob area crude and condensate volumes (including volumes which were until recently being trucked to third-party terminals) and capture incremental value in price differentials.

Total capital expenditures associated with this project were $13 million, the company said.

On Wednesday, Paramount shares eased 7.0% or 29 cents to $3.82 on volume of 530,239. The shares are currently trading in a 52-week range of $3.99 and $9.53.

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