2013 Capital Budget
The Board of Directors of Pinecrest has approved a 2013 capital budget of $136MM, focused on drilling, completion, equipping, tie-in and waterflooding the Slave Point light oil resource play in the Company’s greater Red Earth core area.
The capital and operating assumptions used in the $136 million budget are as follows:
The budget is to be financed with a combination of cash flow and the Company’s expanded credit facility, resulting in projected 2013 year end net debt of $136 million and a debt to forward cash flow ratio of approximately 1.0.
Waterfloods
The positive results of Pinecrest’s joint waterflood and the historical waterfloods in the great Red Earth area provided the Company with sufficient confirmatory data to proceed with several waterflood schemes. In an effort to accelerate the Company’s ability to implement fully developed horizontal well waterflood schemes in 2013, Pinecrest elected to drill 12 gross (12.0 net) infill horizontal wells in the third and fourth quarters of 2012. These wells were drilled on three sections of land at eight horizontal wells per section with 1,400m laterals.
Evi-Project #2
Initial results from the Company’s first 100% operated waterflood scheme (“Evi-Project #2”) have been very encouraging and in accordance with Company expectations. Uninterrupted water injection commenced on December 20, 2012 and early results have seen oil production from the offset wells increase from 95 barrels per day to 280 barrels per day.
Pinecrest has received ERCB approval for four additional 100% operated waterfloods (Loon-Project #1, Red Earth-Project #1, Evi-Project #3, Otter-Project #1). Loon-Project#1 is scheduled for injection mid-February 2013, and the other three through Q2 and Q3 2013. An additional two schemes have been applied for with approvals anticipated to be obtained within the next four to five weeks after which all of these projects are scheduled to be phased in throughout the second and third quarters of 2013. The locations of the seven waterflood schemes are dispersed throughout the Greater Red Earth area, encompassing the Evi, Otter, Loon and Red Earth fields. All of the proposed waterflood schemes will utilize existing wells and similar capital costs resulting in the same or better capital efficiencies as the initial Evi Project #1 waterflood.
Credit Facility
Pinecrest has received an increase to its credit facility from its Canadian chartered bank. With the recent drilling success and corresponding increase in production, the facility has been increased to $155 million from the previous $125 million . This increase reflects the nature of the Company’s high quality, long-life Slave Point light oil assets and its extensive opportunity base.
Hedging
Cash flow management is an integral part of the Company’s overall business strategy. The risk exposure inherent in fluctuations in the price of crude oil and natural gas, the US/Cdn dollar exchange rate and interest rates are monitored by the Company’s management and its Board of Directors. A hedging policy has been established to mitigate these risks. At present, the Company has the following hedges in place:
| Duration | Type | Quantity (bbls/d) | Price/bbl (Cdn$) | ||||||||||
| Calendar 2013 Feb.- Dec. 2013 Feb.- Dec. 2013 |
Fixed Price Cdn WTI Fixed Price Edm Light Fixed Price Edm Light |
750 500 500 |
$90.00 $85.75 $84.00 |
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Looking forward, the Company will continue to monitor prices and strategically hedge up to 50 percent of its volumes (after royalties) at prices above long term commodity and budget levels.
Management Change
Effective February 6, 2013 , Bill Turko , V.P. Engineering has stepped down for personal reasons. Pinecrest would like to thank Mr. Turko for his many contributions to Pinecrest since inception.
Effective immediately, Darrin Drall has been appointed to the position of V.P. Engineering. Mr. Drall comes to Pinecrest with 30 years of experience with 12 years in senior management positions in junior and intermediate oil and gas companies. Mr. Drall will be a strong addition to the Pinecrest management team.
Advisory
The information in this press release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe”, “would” and similar expressions. In particular, forward looking statements in this press release includes, but is not limited to: Pinecrest’s capital program and 2013 business objectives, Pinecrest’s 2013 budget, oil recovery rates, royalty rates, operating costs, cash flows, the effects of waterfloods on recovery factors, decline rates and type curves for wells, production rates, exit rates for production and bank debt, downspacing opportunities, the quantity of reserves, and projections of market prices and costs. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Pinecrest’s control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves. Pinecrest’s actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Pinecrest will derive from them. Except as required by law, Pinecrest undertakes no obligation to publicly update or revise any forward-looking statements.
Statements relating to “reserves” or “resources” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources or reserves described can be profitably produced in the future.
Any references in this news release to initial production (IP) rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.