Painted Pony Announces Its 2014 Capital Expenditure Program and Provides a Production Update

CALGARY, ALBERTA–(Marketwired – Dec. 10, 2013) – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Company”) (TSX:PPY) is pleased to announce its 2014 capital budget and provide a production update. Highlights include:

• an approved 2014 capital expenditure budget of $149 million;
• 92% of the budget will be directed towards the continued development of the Company’s Montney natural gas project in northeast British Columbia, with the remainder to be used for further development of the Company’s oil properties in southeast Saskatchewan and for general corporate expenses;
• the 2014 capital budget incorporates the drilling of 21 (18.6 net) wells, including 18 (17.0 net) horizontal wells targeting the Montney, and 3 (1.6 net) wells directed at light oil projects in Saskatchewan;
• based on field estimates to date, Painted Pony anticipates that sales volumes for the fourth quarter of 2013 will average approximately 9,100 barrels of oil equivalent per day (“boe/d”), weighted 84% towards natural gas, with November & December volumes expected to average approximately 9,800 boe/d, weighted 84% towards natural gas; and
• current shut-in volumes are estimated to total approximately 3,000 boe/d.

2014 CAPITAL BUDGET

Painted Pony’s Board of Directors has approved the Company’s 2014 capital budget of $149 million. This budget also contemplates a facility disposition of approximately $11 million by the end of the second quarter of 2014, for net capital expenditures of $138 million.

Painted Pony intends to drill 18 (17.0 net) horizontal Montney natural gas wells, predominantly on the high working interest Blair and Townsend land blocks. The majority of these wells will be drilled on existing pads and will utilize existing infrastructure as the Company continues to grow its premiere British Columbia Montney assets. During 2014, Painted Pony intends to drill 8 (8.0 net) Montney horizontal wells at Blair, 2 (2.0 net) Montney horizontal wells at West Blair, and 2 (1.0 net) Montney horizontal wells at Daiber. In addition, the Company will build on its highly successful 2013 activities on the liquids-rich Townsend block, by drilling a total of 6 (6.0 net) Montney horizontal wells at the 56-H and 11-J pads.

As a result of the robust liquids yields realized at the Townsend and Daiber areas, Painted Pony is directing capital in 2014 towards facilities infrastructure in order to realize full value from the Company’s development activities. At Townsend, high liquids content (condensate and natural gas liquids) is limiting Painted Pony’s ability to place wells on production. To address this issue, the Company is constructing a 100% working interest, 25 million cubic feet per day (“MMcf/d”) gas dehydration and condensate stabilization facility. This facility is expected to be completed before the end of the first quarter of 2014. In addition, high initial production rates associated with recently completed wells at the 44-C/94-B-16 pad require Painted Pony to expand the previously constructed compression and dehydration facility. The facility has a current capacity of 25 MMcf/d, and will be expanded to 50 MMcf/d in the second quarter of 2014.

PRODUCTION

Painted Pony is also pleased to announce that it anticipates sales volumes for the fourth quarter of 2013 to average approximately 9,100 boe/d, weighted approximately 84% to natural gas. Field estimated sales volumes for the months of November and December are expected to average 9,800 boe/d, weighted approximately 84% towards natural gas. At present, Painted Pony is experiencing significant shut-in volumes in the Townsend and Daiber areas due to infrastructure constraints. The Company estimates that these shut-in volumes total approximately 3,000 boe/d, and will come on-stream in the first half 2014 as facilities construction is completed.

Painted Pony is a Canadian oil and natural gas exploration company that trades on the Toronto Stock Exchange under the symbol “PPY”.

For more information please visit www.paintedpony.ca.

Advisory

Special Note Regarding Forward-Looking Statements

This news release contains industry benchmarks and terms, such as working capital (calculated as current assets less current liabilities), funds flow from operations (calculated by adding to cash flows from operating activities the changes in non-cash working capital and decommissioning expenditures) and field operating netbacks (calculated on a per unit basis as oil, gas and natural gas liquids revenues less royalties and transportation and operating costs), which are not recognized measures under IFRS. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Painted Pony’s method of calculating field operating netbacks may not be comparable to that used by other companies. Field operating netbacks should not be viewed as an alternative to cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Per unit field operating netbacks reflect revenues less royalties, transportation and operating costs divided by production for the period.

This news release contains certain forward-looking statements and forward-looking information (collectively “forward-looking statements”), which are based on numerous assumptions including but not limited to: (i) drilling success; (ii) production; (iii) future capital expenditures; (iv) cash flowsfromoperating activities; (v) successful completion of facilities expansion; and (vi) the ability of the Company to complete the proposed facility disposition at a price that is acceptable to Painted Pony. In addition, and without limiting the generality of the foregoing, the key assumptions underlying the forward-looking statements contained herein include the following: (i) commodity prices will be volatile, and natural gas prices will remain low, throughout 2014; (ii) capital, undeveloped lands and skilled personnel will continue to be available at the level Painted Pony has enjoyed to date; (iii) Painted Pony will be able to obtain equipment in a timely manner to carry out exploration, development, construction and exploitation activities; (iv) production rates in 2014 are expected to show growth from 2013 and 2012; (v) Painted Pony will have sufficient financial resources with which to conduct the proposed capital program; (vi) Painted Pony’s timing estimates for completion and bringing wells onto production will prove correct; (vii) the current tax and regulatory regime will remain substantially unchanged; and (viii) the Company will be able to find potential buyers in connection with Painted Pony’s proposed facility disposition. The reader is cautioned that certain or all of the forgoing assumptions may prove to be incorrect.

Certain information regarding Painted Pony set forth in this news release, including its future plans and operations, anticipated well results, and the planning and development of certain prospects, may constitute forward-looking statements under applicable securities laws and necessarily involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Painted Pony’s control, including without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, environmental risks, inability to obtain drilling rigs or other services, capital expenditure costs, including drilling, completion and facility costs, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, 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, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, and stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof. Readers are cautioned that the foregoing list of factors is not exhaustive. Painted Pony’s actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive therefrom. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.

Additional information on these and other factors that could affect Painted Pony’s operations and financial results are included in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2012, and the Company’s Annual Information Form for the year ended December 31, 2012 and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or Painted Pony’s website (www.paintedpony.ca).

The forward-looking statements contained in this document are made as at the date of this news release and Painted Pony does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Barrels of oil equivalent (“boe”) may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of gas (“mcf”) to one barrel of oil (“bbl”) (6 mcf:1 bbl) is used as an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived by converting natural gas to oil in the ratio of six mcf of gas to one barrel of oil. 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 ratio of 6:1 may be misleading as an indication of value. The well test results disclosed in this news release represent short-term results, which may not necessarily be indicative of long-term well performance or ultimate hydrocarbon recovery therefrom.