TSX Venture Exchange: PRY
CALGARY, Nov. 27, 2013 /CNW/ – Pinecrest Energy Inc. (“Pinecrest” or the “Company”) announces that it has filed on SEDAR its unaudited financial statements and related Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2013. The statements will be available for review at www.sedar.com or www.pinecrestenergy.com.
THIRD QUARTER 2013 HIGHLIGHTS
The following update highlights operational matters undertaken by Pinecrest during the three months ended September 30, 2013:
- Completed field operations and injection well conversions on its third (Evi Project #3) and fourth (Red Earth Project #1) operated waterflood schemes, and commenced injection on both these schemes in late July. Subsequent to September 30, the Company initiated injection on three additional waterflood schemes in the Otter area, bringing the active waterflood count to eight, comprising more than one third of total corporate production;
- Drilled 3 gross (3.0 net) wells achieving a 100% success rate:
- Average production of 2,804 boe per day (97% light oil & NGLs). The Company’s production for the quarter was adversely affected by a major facility turnaround (required 17 days of downtime; 307 boe per day lost production over the quarter) and by the conversion of seven producing oil wells to water injection (approximately 260 boe per day lost production over the quarter);
- Top quartile field netback of $60.54 per boe;
- Observed a production response at its Evi Project #3 (November oil production is up approximately 60% over June’s production based upon field estimates); and
- Average cost to drill, complete, and equip a well of $3.4 million. Pinecrest has been continuously refining its well design and has most recently achieved a cost savings of approximately $2.3 million per well as compared to the first half of 2012.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
|September 30||Three months ended||Nine months ended|
|Petroleum and natural gas sales||25,921||21,006||89,323||71,623|
|Funds flow from operations, before realized derivative
financial instrument gains or losses (1)
|Funds flow from operations (1)||9,582||14,975||47,336||51,116|
|Per share – basic||$0.04||$0.07||$0.22||$0.24|
|Per share – diluted||$0.04||$0.06||$0.21||$0.21|
|Net income (loss)||(843)||4,578||7,069||19,602|
|Per share – basic||$0.00||$0.02||$0.03||$0.09|
|Per share – diluted||$0.00||$0.02||$0.03||$0.08|
|Net debt and working capital deficit (2)||(128,617)||(51,489)||(128,617)||(51,489)|
|Common Shares Outstanding|
|Weighted average – basic||217,375||214,289||215,730||209,197|
|Weighted average – diluted||217,375||239,594||228,203||237,984|
|Number of days||92||92||273||274|
|Crude oil (bbls/d)||2,674||2,730||3,457||3,002|
|Natural gas (mcf/d)||463||65||433||51|
|Barrels of oil equivalent (boe/d-6:1)||2,804||2,748||3,572||3,018|
|Average realized price (3)|
|Crude oil ($/bbl)||103.90||83.50||93.66||86.91|
|Natural gas ($/mcf)||2.52||1.98||2.97||1.86|
|Netback per boe ($)(1)|
|Petroleum and natural gas sales||100.46||83.09||91.59||86.61|
|Production and transportation expenses||(29.06)||(15.68)||(22.74)||(14.80)|
|Realized gain (loss) on derivative financial instruments||(15.46)||3.59||(5.88)||0.98|
|Success rate (%)||100||100||100||100|
|(2)||Net debt and working capital if defined as current assets minus current liabilities, plus outstanding debt, excluding derivative financial instruments|
|(3)||Before the effects of derivative financial instruments|
During 2013, the Company has continued to focus its efforts on establishing a sustainable and predictable low decline light oil production base through the implementation of seven operated waterflood projects. During the quarter, seven wells producing approximately 260 barrels per day of oil were shut in and converted to water injectors for the Otter Projects #1, #2 and #3. These three projects are more than double the size of the initial four schemes and are forecast to provide a meaningful impact to the Company’s production profile. Production response on these new projects is anticipated in Q1 2014. Pinecrest currently has over one third of its production being pressure maintained by waterflooding and as reservoir pressures rise and volumes increase as projected, this production base is expected to grow to approximately fifty percent of corporate production by early Q2 2014.
The Company continues to see encouraging results from the four previously announced operated waterflood schemes, Evi Project #2 (December 2012), Loon Project #1 (March 2013), Evi Project #3 (July 2013) and Red Earth Project #1 (July 2013). Response times and production increases for these schemes are within Company expectations. Wells in areas downspaced to eight wells per section have been the first to experience the effect of re-pressurization, resulting in quicker production increases than those spaced at four wells per section. The Company anticipates further gains in production rates from these and future Pinecrest operated schemes in the Greater Red Earth area. Pinecrest’s active waterflood count is now comprised of eight projects and the Company has applied for an additional four schemes for implementation in 2014.
All schemes have been on continuous injection since start-up with voidage replacement ratios (VRR) monitored and adjusted continuously as fluid production from the schemes steadily increases. Excluding the August battery turnaround, offsetting producing wells in all schemes have been on continuous production with the exception of Evi Project #2, in which a routine bottomhole pump failure occurred during breakup causing the offsetting producing well to be down for 27 days which also necessitated an injection rate reduction.
The following chart shows the shallowing impact of pressure maintenance on the Company’s waterflood production profile for the period September 2012 to October 2013. Additionally, the Company anticipates this production to increase as the balance of the 2013 waterfloods respond.
Wet weather delayed the implementation of the Company’s third quarter capital program and caused an increase in unscheduled downtime due to difficult field conditions. During the third quarter, the Company drilled three wells and completed two of these wells. The average cost to drill, complete and equip the wells drilled in the quarter was $3.4 million per well, a $2.3 million per well savings as compared to the first half of 2012.
Operating costs were also negatively impacted by the operating conditions (lease repair and road maintenance). Additionally, the initial start-up phase of the waterflood schemes caused an increase in operating costs. Initially, water and power for the injection facilities is supplied via temporary means. Water is trucked to each site and power is supplied using rental generators and diesel fuel. Pinecrest has completed the field electrification at the Red Earth and Loon fields which will reduce costs. Injection water is now being delivered by pipeline to all but one of the Company’s injection schemes, eliminating significant trucking costs. In addition, costs associated with emulsion trucking have been reduced as the majority of the wells have now been tied into central production facilities.
The Company expects that these initiatives and others currently being implemented will have a positive impact on lowering the Company’s overall operating costs.
For the balance of 2013, Pinecrest is targeting total operatingexpenses (production