CALGARY , May 13, 2013 /CNW/ – Pinecrest Energy Inc. (“Pinecrest” or the “Company”) is pleased to announce that it has filed on SEDAR its unaudited financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three month period ending March 31 , 2013. The statements will be available for review at www.sedar.com orwww.pinecrestenergy.com.
First Quarter 2013 Achievements
Pinecrest is pleased to provide the following update on our achievements during the three months ended March 31, 2013:
- Achieved record average production of 4,315 boe per day (99% light oil) an increase of 28% from 3,358 boe per day for the three months ended March 31 , 2012. Average production for the first quarter 2013 increased by 23% compared to Q4 2012 (3,510 boe per day);
- Achieved 100% drilling success, with a total of 12 (11.3 net) oil wells drilled compared to 9 (8.8 net) oil wells drilled during the quarter ended March 31, 2012 ;
- Increased funds from operations by 6% to $21.5 million ( $0.10 per basic and $0.09 per diluted shares outstanding) compared to $20.3 million ( $0.10 per basic and $0.09 per diluted shares outstanding) for the quarter ended March 31 , 2012. Funds from operations increased by 4% compared to $20.7 million ( $0.10 per basic and $0.09 per diluted weighted average shares outstanding) during Q4 2012;
- Continued to generate a top decile operating netback of $60.60 per boe for the quarter ended March 31 , 2013. Increased production costs consisting of increased emulsion hauling from wells not yet tied in, advanced expenditures on propane and chemical supplies and a number of non-recurring well workovers resulted in a lower netback compared to $69.51 per boe for the quarter ended March 31, 2012 and compared to $65.71 per boe for Q4 2012;
- Completed conversion of its third (Loon Project #1) waterflood project and started injecting water in the latter part of March 2013 ;
- Increased bank line to $155 million during the quarter. Subsequent to the end of the quarter, the Company’s credit line has been increased to $165 million .
FINANCIAL AND OPERATIONAL HIGHLIGHTS
|March 31||Three months ended|
|Petroleum and natural gas sales||33,829||28,191||20|
|Funds flow from operations||21,461||20,275||6|
|Per share – basic||$0.10||$0.10||–|
|Per share – diluted||$0.09||$0.09||–|
|Per share – basic||$0.02||$0.03||(33)|
|Per share – diluted||$0.02||$0.03||(33)|
|Net debt and working capital deficit (1)||(135,783)||(18,563)||631|
|Common Shares Outstanding|
|Weighted average – basic||214,311||199,086||8|
|Weighted average – diluted||233,947||231,203||1|
|Number of days||90||91|
|Crude oil (bbls/d)||4,246||3,346||27|
|Natural gas (mcf/d)||274||36||661|
|Barrels of oil equivalent (boe/d – 6:1)||4,315||3,358||28|
|Average realized price|
|Crude oil ($/bbl)||88.12||92.42||(5)|
|Natural gas ($/mcf)||2.52||2.05||23|
|Barrels of oil equivalent ($/boe – 6:1)||87.12||92.26||(6)|
|Netback per boe ($)|
|Petroleum and natural gas sales||87.12||92.26||(6)|
|Realized loss on derivative financial instruments||(1.44)||(2.09)||(31)|
|Transportation and production expenses||(18.88)||(13.82)||37|
|Success rate (%)||100||100||–|
|(1)||Includes $4.2 million (2012 – $2.6 million ) unrealized loss on derivative financial instruments.|
Pinecrest completed its first quarter capital program in mid-March, having drilled and completed 12 wells (11.3 net ). Subsequent to the quarter end, the Company was successful in bringing on stream all of the wells drilled in the first quarter. Pinecrest continues to refine its well design and as a result has seen its most recent well costs decrease to below $3.8 million , representing a savings of over $1.2 million (24%) per well as compared to the same period in 2012.
The continued drilling success in the Red Earth area of Alberta has seen Pinecrest’s first quarter production increase by approximately 23% compared to the quarter ended December 31 , 2012. Currently, there is no capital spending occurring on Company lands. The Company anticipates resuming its post break-up drilling capital program in July.
The focus of the Company is firmly fixed on the implementation of its seven operated 2013 waterflood schemes. Results to date from the Company’s first two waterflood projects have been positive with offset wells experiencing an increase in oil rates and reservoir pressures. To be prudent during the evaluation phase of the waterfloods, Pinecrest has chosen to truck the injection water to each new scheme. Consequently, these additional water hauling costs have contributed to higher operating costs during the first quarter. The responses experienced to date are similar to other analogous waterfloods in the greater Red Earth area and provides additional support for the upside potential associated with waterflooding.
In late March, the Company began injection on its third waterflood project. The results of this project will be provided in the following quarterly reporting periods. Temporary increased regulatory approval times have caused minor delays in the implementation of the remaining projects. Two additional projects are now ready to be implemented, and injection on these two schemes will begin in the third quarter. Water injection on the final three projects located in the Evi field is scheduled to commence during the fourth quarter of 2013.
Current production levels have been affected by normal seasonal access limitations to wellsites as a result of spring break-up. This affects wells where produced fluids are trucked and also wells that require repairs and maintenance. Consequently, we have experienced a seasonably-normal 10-12% production down time.
OUTLOOK – GREATER RED EARTH AREA, ALBERTA
Since inception, Pinecrest has established itself as one of the dominant interest holders in the high quality Slave Point light oil resource play in the greater Red Earth area. The Company has over 400 net risked drilling locations on its lands which contain an estimated 580 million barrels of Discovered Oil Initially In Place (1)(2) as of January 31, 2012 with very low recovery to date. Sproule & Associates Ltd. conducted an assessment effective as of January 31, 2012 (the “Assessment”) of Pinecrest’s Contingent Slave Point Oil Resources(3) and has assigned the Company a contingent resource Best Estimate(4) of 67.5 million barrels using, a 13% recovery factor and based on a drilling density of 4 wells per section. The Company believes that significant upside potential, over and above the contingent resource assignment, can be achieved through further infill drilling and water flooding. The Assessment was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and NI 51-101(5).
This resource capture is consistent with the Company’s stated strategy of focusing its capital and resources on large light oil accumulations with high netback production, long term upside and the ability to increase recovery factors through the application of horizontal infill wells, multi-stage fracture stimulations and implementing waterflood recovery schemes. Analogous Slave Point waterfloods in the immediate area have proven to be very effective and have been assigned incremental recovery factors ranging between 50 and 100 percent over primary recovery.
For the balance of 2013, Pinecrest will execute an integrated capital program that will include drilling wells for primary production (5 wells per section) and initial injection on an additional 5 operated waterflood schemes.
|(1)||“Discovered Oil Initially In Place” or “DOIIP” means that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations prior to production. The recoverable portion of discovered petroleum initially in place includes production, reserves and contingent resources. There is no certainty that it will be commercially viable to produce any portion of these resources.|
|(2)||All DOIIP other than cumulative production, reserves and contingent resources have been categorized as unrecoverable. Pursuant to the Assessment, as at January 31, 2012 , 9.1 mmbbl of oil was classified as cumulative production and proved plus probable reserves.|
|(3)||“Contingent Oil Resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as distance from existing production, economic, legal, environmental, political, and regulatory matters or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage.|
|(4)||“Best Estimate” is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.|
|(5)||Please refer to the Company’s March 22, 2012 press release for additional details in respect of the Assessment.|
ANNUAL GENERAL AND SPECIAL MEETING
Pinecrest’s Annual General and Special Meeting is scheduled for 10:00 am on June 5, 2013 at the Bow Valley Conference Center, Angus/Northcote Room, located at 300, 205 – 5th Avenue S.W., Calgary . Alberta, T2P 2V7.
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, 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; regulatory approvals and permits; 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.
The Corporation uses the following terms for measurement within this press release that do not have a standardized prescribed meaning under GAAP and these measurements may differ from other companies and accordingly may not be comparable to measures used by other companies. The terms “funds from operations” and “operating netback” are not recognized measures under the applicable GAAP. Management of the Corporation believes that these terms are useful, in addition to profit and loss and cash flow from operating activities as defined by GAAP, for evaluating the Corporation’s operating performance and leverage. Funds from operations is expressed as cash flow from operating activities before changes in non-cash working capital and asset retirement expenditures. Operating netback is a measure of operating margin used in capital allocation decisions. Pinecrest defines operating netback as average realized price per BOE, less royalties per BOE, less operating and transportation expenses per BOE, plus any realized gain or loss per BOE on financial instruments.
Certain information provided in this press release in relation to the results of waterflooding Slave Point reservoirs on lands in close proximity to the land in which the Company has an interest, is considered analogous information under National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities. Such information is based on publicly available information from governmental agencies and other industry producers and has been provided to give an indication of possible incremental recovery factors in the specified area. Other than comparing such information to the Company’s own limited results in the specified area, the Company has not independently confirmed the accuracy of this information. There is no certainty that such incremental recovery factors will be obtained of even if so obtained, whether such factors can be achieved on an economic basis.
Barrels of Oil Equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of 6MCF:1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1,utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
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.
SOURCE: Pinecrest Energy Inc.
Pinecrest Energy Inc.
Suite 500, 255 – 5th Avenue S.W.
Calgary, Alberta T2P 3G6
Wade Becker, President and CEO
Dan Toews, V.P. Finance & CFO
Tel: (403) 817-2550 or
Fax: (403) 817-2599