In The NewsMedia Coverage of Q4 2019 & Year-End Results

April 16, 2020

COVID-19 Delays FID on Pieridae’s LNG Project Beyond September
Daily Oil Bulletin Thursday, April 16, 2020, 7:22 AM MDT

As a result of a depressed market and COVID-19 impacts, a final investment decision (FID) for Pieridae Energy Limited’s Goldboro LNG project will be delayed beyond Sept. 30, 2020.

A further announcement will be made once COVID-19 conditions improve and markets stabilize.

The Goldboro LNG facility has progressed to the open book estimate stage (OBE) and Kellogg, Brown and Root Limited (KBR) has been engaged to review the previously completed front end engineering and design (FEED) study and provide a fixed price contract to construct the gas liquefaction facility.

Under the FEED study, Air Products and Chemicals, Inc. will develop, design and deliver a two-train (each train producing 4.8 million metric tons per annum of LNG) facility. It is expected to take 56 months to build a two-train project. Much of the construction should involve assembling modules built in offshore yards while employing approximately 4,500 local workers during peak construction.

These employees will be housed at a temporary camp, which will be built on or nearby the existing decommissioned Sable Island sour gas plant site. Site preparation, site drainage, highway reconstruction and marine facilities are some of the major projects that must be assembled in tandem with, or prior to, the LNG liquefaction facility construction.

Following the FEED verification, KBR will proceed to the OBE stage where they will begin contacting numerous contractors in order to set a fixed price to build Goldboro LNG and ensure it is operational. The fixed price and terms and conditions of the EPC contract will be negotiated following the agreement of detailed scope and timeline.

Operations performance

Production for the three months ended Dec. 31, 2019 increased 241 per cent to an average of 42,137 boe/d compared to 17,509 boe/d for the same quarter of 2018. Natural gas was the largest component at 34,044 boe/d, representing approximately 81 per cent of total production. NGL output was 5,190 bbl/day (12 per cent) and condensate was 2,923 bbl/day (seven per cent). For the year ended Dec. 31, 2019, average production increased 28 per cent to 22,397 boe/d in 2019 from 17,509 boe/d for the same period of 2018.

The Company has a hedging program in place to insulate itself from deteriorating prices, resulting in approximately 60 per cent of our boe output being hedged as at Dec. 31, 2019. This program has proven successful at providing a degree of pricing certainty and revenue stability during these volatile times.

The acquired Foothills assets produce approximately 29,000 boe/d consisting of approximately 125 mcf/day of natural gas, 5,400 bbl/day of NGLs and 3,100 bbl/day of condensate and light oil. The acquired three deep cut sour gas processing plants (Jumping Pound, Caroline and Waterton) have a combined capacity of approximately 750 mmcf/day and operate with approximately 420 mmcf/day of spare capacity as at Dec. 31, 2019. On a combined basis, Pieridae averaged 42,137 boe/day in the quarter ended Dec. 31, 2019.

Regarding the Shell Canada Energy Foothills acquisition, Pieridae said that the company also gained an extensive drilling inventory including multiple dry gas and liquids-rich gas reservoirs in the Foothills, and is now in an ideal position to leverage the US$1.5 billion of anticipated German government-backed loan guarantees for conventional gas supply development.

The process of the transfer of licenses from Shell to Pieridae continues. “We expect an update from the Alberta Energy Regulator near the end of April 2020,” the company said.

Financial review

Total revenue for 2019 was $114.4 million. Breaking that down, petroleum and natural gas revenue increased $102.5 million, or 4347 per cent to $104.9 million during the year ended Dec. 31, 2019 as compared to the year ended Dec. 31, 2018. This increase was largely attributable to the year over year increase in sales volumes, as the average price per boe only increased by 2.4 per cent, as a result of a more favourable product mix and successful hedge program. This large year-over-year increase in sales volumes is directly attributable to the two transformational transactions Pieridae completed in 2018 and 2019.

Pieridae has dramatically improved its working capital (WC) from a deficit of $76 million in 2018 to a surplus of $19.1 million 2019. This dramatic improvement in WC is primarily due to repayment of the $50 million term debt which was classified as a current liability at Dec. 31, 2018, and the acquisition of $23.5 million of inventory as part of the Shell Foothills assets acquisition, as well as the accretive cash flows generated by the assets acquired from Shell.

In 2019, as a result of the acquisition mentioned above, the company re-evaluated its licenses in Québec, which are recorded as exploration and evaluation (E&E) assets. Pieridae concluded these properties no longer met its internal investment thresholds for future development. Consequently, the remaining carrying value of these properties was written off resulting in a $19.7 million impairment charge. This write-off, combined with a previous $7.9 million charge, brought the total impairment for 2019 to $27.6 million. All remaining E&E assets are associated with exploration work ongoing in Western Canada.

Nova Scotia LNG project decision delayed due to market conditions, COVID-19
The Canadian Press April 16, 2020 08:12 AM Dan Healing

CALGARY — Pieridae Energy Ltd., the company planning to build a $10-billion LNG export facility in Nova Scotia, says it will delay making a final investment decision expected this fall because of depressed global LNG markets and the COVID-19 pandemic.

Meanwhile, CEO Alfred Sorensen said the company is continuing to lobby the federal and provincial governments for financial help to build Goldboro LNG, which would produce about 10 million tonnes of super-cooled liquefied natural gas per year.

"There is no doubt there is a significant oversupply of LNG in the marketplace today, but our primary customer, Uniper, remains very committed to our project," Sorensen told a conference call Thursday, referring to Germany's largest utility company which has contracted to buy about five million tonnes of LNG per year from the project.

"We are building for the future, not for the current economic situation."

He said the recent cancellation or delay of several LNG projects around the world will mean less competition when Goldboro LNG starts operation in late 2024 or early 2025.

Pieridae announced last July it would delay until the end of September this year a decision on proceeding with the project. It said Thursday it is now in negotiations with Uniper to extend the investment decision deadline to June 2021.

On the call, Sorensen compared Goldboro LNG's short-term financial needs with TC Energy Corp.'s Keystone XL pipeline, which was approved to be built last month after the Alberta government agreed to inject $1.5 billion in equity and provide a loan guarantee.

"When we look at what Alberta just did with Keystone, we face a lot of similar issues," he said, adding Pieridae needs a much smaller injection of about $1 billion to ensure the project is built.

He said he wouldn't sell the project to government.

"We're looking for a hand up, not a hand out," he said.

In a report, analyst Darrell Bishop of Haywood Securities said the LNG delay was expected, adding Pieridae's current stock price doesn't include any value for the proposed project. "News of the delay should not come as a huge surprise in light of global events, and the current glut of global LNG (and hence low prices)," he said.

At mid-afternoon, the stock was down about 8.8 per cent at 36 cents a share.

Canada's LNG industry has had a difficult time getting off the ground.

The $40-billion Royal Dutch Shell-led LNG Canada project on the West Coast is the only one in full construction mode — although it has reduced the size of its construction workforce at Kitimat, B.C., by more than half to help local communities deal with COVID-19.

In March, Woodfibre LNG developer Pacific Oil & Gas Ltd. said it would delay construction expected this summer on the much smaller project southwest of Squamish, B.C., for a year due in part to the COVID-19 pandemic.

Pieridae reported a net loss attributable to equity holders of $25.9 million or 18 cents per share in the fourth quarter of 2019, compared with a net loss of $8.8 million or 17 cents in the same period of 2018.

Revenue net of royalties jumped to $60 million from $2.4 million as it added 29,000 barrels of oil equivalent per day through its $190-million purchase in October of southern Alberta natural gas assets from Royal Dutch Shell.

The purchase has been panned by landowners and environmentalists who fear Pieridae doesn't have the financial strength to safely operate and reclaim the almost 300 sour gas wells, dozens of pipelines and three gas processing plants it bought.

But Sorenson said he's confident the transfer of licences from Shell will be approved by the Alberta Energy Regulator in the few weeks, adding Pieridae has already agreed to a well abandonment program.

He said the regulator may require a joint cash deposit by Shell and Pieridae, which his company is prepared to pay.

Pieridae delays Nova Scotia LNG export plant decision due to coronavirus
Scott DiSavino Reuters April 16, 2020

(Reuters) - Pieridae Energy Ltd (PEA.V) said on Thursday it delayed a decision to build the Goldboro liquefied natural gas export plant in Nova Scotia until after Sept. 30 as efforts to curb the coronavirus outbreak cut global economic growth and energy demand.

The Canadian energy firm previously said it expected to make a final investment decision (FID) to build the $10 billion project in the third quarter of 2020, which would allow it to start producing LNG between November 2024 and May 2025.

“Market conditions and the global fallout from COVID-19 have impacted our ability to make a final investment decision (FID) this fall, but we are confident it will happen once conditions improve and we can better analyze the landscape,” Pieridae Chief Executive Officer Alfred Sorensen said in the company’s fourth-quarter earnings release.

Goldboro will have two liquefaction trains capable of producing a total of almost 10 million tonnes per annum (MTPA) of LNG, or about 1.3 billion cubic feet per day (bcfd) of natural gas.

One billion cubic feet of gas is enough to supply about 5 million U.S. homes.

Pieridae has a 20-year agreement to sell all of the LNG from the first liquefaction train at Goldboro - about 5 MTPA - to German utility Uniper SE (UN01.DE) starting between Nov. 30, 2024 and May 31, 2025.

Pieridae said it is negotiating with Uniper to extend the FID deadline to June 2021 and believes it will obtain this extension.

Pieridae said it expects construction to take about 56 months and plans to employ about 4,500 workers to build the project.

Pieridae is one of several companies developing North American LNG export plants that have delayed projects as global gas prices dropped to their lowest in years in an oversupplied market in 2019, and plunged to record lows in 2020 as the coronavirus outbreak caused demand to collapse.

In mid-2019, a dozen North American developers, including Pieridae, said they planned to make FIDs by the end of the year. But none of those projects are under construction. All of those FIDs were delayed until 2020 or later.

At the start of 2020, another dozen developers - some from 2019 - said they planned to make FIDs by the end of this year. Currently, however, that total is down to just half a dozen, and analysts said they expect only one or two of those projects to actually go forward this year.

Nova Scotia’s Goldboro LNG Delayed on Covid-19 Fallout
Natural Gas Intelligence Gordon Jaremko April 16, 2020

The Covid-19 virus pandemic has inflicted delay on a planned liquefied natural gas (LNG) export project on Canada’s Atlantic Coast, Goldboro LNG, project sponsor Pieridae Energy Ltd. said Thursday.

“Market conditions and the global fallout from Covid-19 have impacted our ability to make a final investment decision this fall,” said Pieridae CEO Alfred Sorenson in the firm’s 2019 year-end results.

“A further announcement will be made once Covid-19 conditions improve and markets stabilize,” management said.

No target date was set for a decision to start building Goldboro at an industrial site on the Nova Scotia coast near the provincial capital, Halifax.

However, Pieridae said negotiations are underway with the project’s prime customer, German utility Uniper SE, on extending the construction decision deadline to June 2021 from the current agreed drop-dead date of Sept. 30.

The first half of the proposed Goldboro project, as designed, would export 5 million metric tons/year, or 650 MMcf/d. The project would use Alberta gas because Canada’s maritime provinces ban onshore drilling.

Pieridae, which reports in Canadian dollars, posted a net loss of $25.9 million (minus 18 cents/share) in the fourth quarter, versus a loss of $8.85 million (minus 17 cents/share) in 4Q2018.

Year-end Pieridae gas production, including additions from a mid-2019 purchase of Shell Canada Ltd.'s southern Alberta assets, was 204 MMcf/d.

Government Infrastructure Funding Eyed by Pieridae For Goldboro LNG Project
Daily Oil Bulletin Elsie Ross Friday, April 17, 2020, 6:20 AM MDT

Pieridae Energy Limited is in discussions with different levels of government on how its proposed Goldboro LNG project could benefit from infrastructure funding that might become available with the restart to the economy, says its chief executive officer.

“We believe our project fits very well with the criteria the government has put in place as our project affects multiple provinces … it’s an opportunity for government to have a win-win for them,” Alfred Sorensen said Thursday in a conference call to discuss 2019 fourth quarter and year results. “We get Canada into a new industry and at the same time we bring work back to parts of the country that have suffered because of the [COVID-19] virus shutting down the majority of the economy.”

He said that since the federal election in October 2019 “there has been a significant change in the view” of the federal government towards the Goldboro project. “We are now at the highest levels of government on the federal side and at the ministerial level here in Alberta.”

The company, he said, never thought that it could do the project on its own and that it would need some type of partners and “we have been very clearly telling that to government.” The project could help restart the economies of both Alberta and Nova Scotia while pipeline work in Canada could also provide opportunities in Ontario and Quebec, Sorensen suggested.

He noted that over the past few weeks, LNG projects in Australia, Africa and the United States Gulf Coast have been either cancelled or delayed indefinitely. “We believe this is an opportunity for Canada to enter into this industry at a time when others are exiting.”

Six months ago, it appeared that Pieridae would have been competing with significant new capacity coming on simultaneously, said Sorensen. “What we see now is a much more clear runway where I believe we have been able to find the right partners, whether in government or industry, that we have a very small window of opportunity to see this project reach FID sooner than later.”

Pieridae would need help to get it through the difficult pre-construction period and the package it would be looking at would be similar — but on a much smaller scale — to the assistance the Alberta government provided to TC Energy Corporation to ensure the construction of Keystone XL, he said. “That package would fit us very nicely but probably more towards $1 billion.” Alberta’s total commitment was $7.5 billion, including $1.5 billion in equity and backstopping a $6 billion loan.

The company also is negotiating with Uniper, Germany’s largest utility, to extend the deadline for a final investment decision (FID) on the project to June 2021 from Sept. 30, 2019 and it believes it will be successful, said Sorensen. The 20-year agreement with Uniper is for all of the LNG from Train 1 at Goldboro, or five million tonnes per annum of LNG. Under the agreement, commercial deliveries are to start between Nov. 30, 2024 and May 31, 2025.

“There is no doubt that there is a significant over-supply of LNG in the marketplace today but our primary customer, Uniper, remains very committed to our project,” he said. “The underlying reason for Uniper to diversify their risk away from Russia, remains and has not gone away and that is the principal reason they remain interested in the project.”

One of the reasons for the extension is that the COVID lockdown has delayed work by KBR on the open book estimate (OBE), necessary for entering into a lump sum engineering, procurement and construction contract, according to Sorensen. Parts of the world such as China and Spain where the modular units might be sourced have been closed for last five to six weeks and work on the estimate can’t resume until the facilities reopen. Pieridae is working with KBR on a replacement date for the finalization of the work but a lot will depend on how the world reopens over the next few months, he said.

Pieridae also continues to spend considerable time on the financing for Goldboro, said Sorensen. “There is no doubt that at $10 billion that this is a very large project for a relatively small company and we try and continue to maintain the advantages we have created, the first one being our access to low cost of capital.”

Being able to take advantage of the negative interest rates in Germany or the European Union, he said, would give Pieridae a long term advantage in cost of capital and one reason it is not stopping the project is that it believes it still has good access to low cost capital.

In the meantime, Pieridae will work on certain items it believes will keep the facility on track and ahead of competing projects. It has split up its contract with KBR into three distinct pieces, with Pieridae supervising front-end site preparation and marine works and KBR responsible for construction of the liquefaction facility. A primary project this year will be site preparation to make sure the project stays reasonably close to the proposed 2024 or early 2025 timeframes.

It also is working on benefits agreement with Micmac First Nation in Nova Scotia and there are many opportunities in the near term to ensure they have some true economic benefit from the project, said Sorensen.

Last fall, Pieridae closed the acquisition of all of Shell Canada Energy’s midstream and upstream assets in the southern Alberta Foothills for $190 million but the Alberta Energy Regulator (AER) has not yet approved their transfer. Sorensen said the Alberta government has been talking to Shell and he expects that in a few weeks it will have word on how that will work. “It is our belief that it is going to be a shared deposit of some sort that is going to be asked for by the government and we are prepared to meet our share of that.”

Pieridae Delays Goldboro Decision
AllNovaScotia April 17, 2020 Geoff Bird

Pieridae Energy Inc. is again putting off a final investment decision on its $8-billion Goldboro LNG project amid a backdrop of extreme uncertainty stirred up by the coronavirus.

Pieridae has delayed the decision to June 2021 from the fall of this year, telling investors Thursday the move is a result of "depressed market conditions and COVID-19 impacts."

The deadline has been a moving target since CEO Alfred Sorensen unveiled the project in late 2012 after signing an agreement with German utility Uniper to supply it with half the terminal's output for two decades.

The agreement with Uniper calls for Pieridae to make a final investment decision by Sept. 30, although the company says it's confident the utility will agree to extend it to June 2021.

But in the midst of the upheaval, Pieridae also sees opportunity.

In its fourth-quarter earnings released Thursday, Pieridae said COVID-19 and the Russia-Saudi Arabia price war have "decimated" the valuations and prospects of many companies in Alberta, where it already has a critical mass of natural gas properties to supply the Goldboro terminal.

"For some companies, it could present an opportunity to access additional reserves, as companies shed properties to avoid liquidation," Pieridae said.

"The advancement of the Goldboro LNG Project is one advantage unique to Pieridae, and it could help facilitate additional acquisitions for the company."

In the quarter ended Dec. 31, Pieridae got a significant cash injection thanks to its $190-million acquisition of Shell Canada's midstream and upstream assets in the Alberta foothills in October.

Net operating income swung to a profit of $24.42 million in the fourth quarter, up from a loss of $2.7 million in the same period a year prior.

Revenue increased nearly five-fold to $60.45 million and Pieridae dramatically improved its working capital from a deficit of $76 million in 2018 to a surplus of $19.1 million 2019 after repaying debt.

Pieridae shares were down 3.5 cents to 36 cents (52-week high/low: $1.90/12 cents).

Pieridae to delay Nova Scotia LNG export plant decision
Seeking Alpha April 16, 2020 1:10 PM ET Carl Surran, SA News Editor

Pieridae Energy (OTC:PTOAF) says it is delaying a decision to build a $10B liquefied natural gas export plant in Nova Scotia because of depressed global LNG markets and the coronavirus.

The company previously said it expected to make a final investment decision to build the Goldboro LNG project in Q3 2020, which would allow it to start producing LNG by late 2024 or early 2025.

Pieridae, which has a 20-year agreement to sell all of the LNG from the plant's first liquefaction train to Uniper (OTC:UNPRF), says it is negotiating with the German utility to extend the FID deadline to June 2021.

Goldboro LNG would include two liquefaction trains capable of producing a total of nearly 10M metric tons/year of LNG, or ~1.3B cf/day of natural gas.

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