CALGARY, ALBERTA–(Marketwired – March 18, 2014) – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Company”) (TSX:PPY) is pleased to announce its 2013 financial and operating results and provide an operations update. Highlights include:
2013 FINANCIAL AND OPERATING RESULTS
Annual average production in 2013 increased by 32% from 2012 to 8,693 boe/d (82% natural gas), while annual production per share increased by 6%. Included in the production increases in 2013, were natural gas production increases of 42% to 42.9 MMcf/d and natural gas liquids production increases of 118% to 449 bbls/d. Fourth quarter 2013 production averaged 9,312 boe/d (84% natural gas), representing an increase of 28% over fourth quarter 2012 production. Also, on a quarter over quarter basis, natural gas production increased by 40% to average 46.8 MMcf/d and NGL production increased by 120% to average 537 bbls/d. Field estimated production for January and February of 2014 was approximately 9,800 boe/d, weighted 84% towards natural gas.
Funds flow from operations in 2013 increased by 30% to $51.2 million over 2012 funds flow from operations of $39.3 million, due to production increases and the rebound in natural gas prices in 2013. Throughout 2013, Painted Pony realized an average natural gas price of $3.45/Mcf, representing a premium of 8% over the average AECO spot price of $3.18/Mcf, which had rebounded by 33% over the 2012 average of $2.39/Mcf.
With increased production and higher realized prices, Painted Pony achieved a 2013 corporate netback of $18.88/boe, approximately 3% higher than netbacks in 2012. Additionally, Painted Pony increased its proved plus probable reserves by 52% to 290.3 million barrels of oil equivalent (“MMboe”), representing a 51% increase in reserves per share. As previously announced on March 4, 2014, on a P+P basis, the Company achieved a recycle ratio of 2.0 times, with an associated finding, development and acquisition cost of $9.55/boe (see Company press release dated March 4, 2014 for further disclosures).
Capital expenditures in 2013 totaled $146.6 million and included expenditures for drilling and completions of $90.7 million, facilities and equipment of $28.3 million, and Crown land acquisitions of $13.8 million. Painted Pony drilled a total of 18 (13.0 net) wells, including 13 (9.6 net) wells targeting natural gas in the Montney formation in British Columbia. In 2013, Painted Pony increased its $100 million demand credit facility to syndicated credit facilities of $125 million, backed by three Canadian chartered banks and exited 2013 with bank debt of $28.6 million. Additionally, Painted Pony initiated its risk management program by hedging up to 19.0 MMcf/d of natural gas production through the first quarter of 2015 with quarterly average fixed AECO prices ranging from $3.99/Mcf to $4.18/Mcf, all of which are above the Company’s budgeted price of $3.71/Mcf.
MONTNEY NATURAL GAS OPERATIONS
Construction of the Townsend 25 MMcf/d gas processing and condensate stabilization facility has been completed and the facility is currently undergoing commissioning operations. Once the facility has been fully commissioned, 3 (3.0 net) wells at the 56-H pad, and 2 (2.0 net) wells at the 11-J pad, including the previously shut in a-B11-J well, will begin flowing to the facility. Following operations start-up, Painted Pony anticipates Company production volumes to exceed 11,500 boe/d including increased liquids realization. In addition to the construction of the facility, Painted Pony continues to evaluate the engineering requirements for a proposed 190 MMcf/d, shallow-cut, gas refrigeration and processing plant at Townsend, which is currently planned for 2015.
To date in 2014, Painted Pony has completed 2 (2.0 net) Montney wells located on the Townsend 56-H pad, while 2 (2.0 net) wells on the Blair 41-F pad are currently undergoing frac operations, all using open hole ball-drop technology. Both wells at the 56-H pad have been shut-in, and are awaiting full commissioning of the Townsend facility for clean-up and testing operations. Painted Pony remains encouraged by the results of open hole ball-drop technology and will continue to utilize it to complete all of its wells in 2014, as cost savings remain in excess of $0.7 million per well relative to the previously deployed perf-and-plug system.
Currently, at the Company’s Blair property, Painted Pony is drilling a second 100% working interest Montney well on the 11-F pad and the first of 2 (2.0 net) wells on the 91-F pad. Upon drilling the Upper and Lower Montney wells on the 91-F pad, the Company anticipates drilling a second 100% working interest delineation well at the West Blair property on the 26-L pad. Further to continued delineation at West Blair, Painted Pony has commenced an engineering study for a proposed 25 MMcf/d lean-gas processing facility to tie-in additional volumes from the area.
SOUTHEAST SASKATCHEWAN OPERATIONS
Painted Pony continues to identify light oil opportunities on its southeast Saskatchewan properties. Prior to the end of the second quarter of 2014, the Company will drill the first of 2 (2.0 net) appraisal wells in the Ralph area to further delineate a new light oil discovery pool. Additionally, and on trend with a recent surge in drilling activity, Painted Pony intends to drill its first 30% working interest Torquay exploration well on the Company’s Flat Lake property, where the Company has over 11,300 net acres (17 net sections) of rights.
Painted Pony is a Canadian oil and gas exploration company that trades on the Toronto Stock Exchange under the symbol “PPY”.
For more information please visit www.paintedpony.ca.
Financial and Operating Highlights
| 3 months ended Dec. 31, | Year ended Dec. 31, | ||||
| 2013 | 2012 | 2013 | 2012 | ||
| Financial ($ millions, except per share and shares outstanding) | |||||
| Petroleum and natural gas revenue(1) | 27.5 | 22.9 | 103.1 | 74.8 | |
| Funds flow from operations(2) | 12.3 | 12.4 | 51.2 | 39.3 | |
| Per share – basic(3) | 0.14 | 0.17 | 0.58 | 0.56 | |
| Per share – diluted(4) | 0.14 | 0.17 | 0.58 | 0.55 | |
| Net comprehensive loss | (4.4) | (40.7) | (5.7) | (48.1) | |
| Per share – basic(3) and diluted(4) | (0.05) | (0.56) | (0.06) | (0.68) | |
| Capital expenditures(5) | 39.7 | 156.8 | 146.6 | 241.3 | |
| Working capital (deficiency)(6) | (16.3) | 45.2 | (16.3) | 45.2 | |
| Bank Debt | 28.6 | – | 28.6 | – | |
| Total assets | 635.1 | 612.2 | 635.1 | 612.2 | |
| Shares outstanding (000s) | 88,457 | 88,052 | 88,457 | 88,052 | |
| Basic weighted-average shares (000s) | 88,457 | 73,041 | 88,420 | 70,825 | |
| Fully diluted weighted-average shares (000s) | 88,457 | 73,586 | 88,488 | 70,995 | |
| Operational | |||||
| Daily production volumes | |||||
| Natural gas (Mcf per day) | 46,841 | 33,430 | 42,853 | 30,248 | |
| Crude oil and natural gas liquids (bbls per day) | 1,505 | 1,717 | 1,551 | 1,548 | |
| Total (boe per day) | 9,312 | 7,289 | 8,693 | 6,589 | |
| Realized prices | |||||
| Natural gas ($ per Mcf) | 3.76 | 3.31 | 3.45 | 2.54 | |
| Crude oil ($ per bbl) | 86.88 | 83.49 | 93.02 | 85.67 | |
| Natural gas liquids ($ per bbl) | 63.47 | 56.02 | 62.54 | 54.75 | |
| Field operating netbacks(7)($ per boe) | |||||
| British Columbia | 15.22 | 13.46 | 13.96 | 9.21 | |
| Saskatchewan | 41.66 | 46.82 | 48.72 | 48.00 | |
| Company combined | 18.28 | 21.14 | 18.88 | 18.40 | |
| 1. | Before royalties | ||||
| 2. | This table contains the term “funds flow from operations”, which should not be considered an alternative to, or more meaningful than “cash flows from operating activities” as determined in accordance with International Financial Reporting Standards (“IFRS”) as an indicator of the Company’s performance. Funds flow from operations and funds flow from operations per share (basic and diluted) does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management uses funds flow from operations to analyze operating performance and leverage and considers funds flow from operations to be a key measure as it demonstrates the Company’s ability to generate the cash necessary to fund future capital investment. The reconciliation between funds flow from operations and cash flows from operating activities can be found in “Management’s Discussion and Analysis”. Funds flow from operations per share is calculated using the basic and diluted weighted average number of shares for the period, consistent with the calculations of earnings per share. | ||||
| 3. | Basic per share information is calculated on the basis of the weighted average number of shares outstanding in the period. | ||||
| 4. | Diluted per share information reflects the potential dilutive effect of options. | ||||
| 5. | Including acquisitions, decommissioning obligations, and capitalized share-based payments. | ||||
| 6. | This table contains the term “working capital (deficiency)”. Working capital (deficiency) does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management calculates working capital (deficiency) as current assets less current liabilities and uses this ratio to analyze operating performance and leverage. | ||||
| 7. | This table contains the term “field operating netbacks”. Field operating netback does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management calculates field operating netback on a per unit basis as crude oil, natural gas, natural gas liquids revenues and other income less royalties, operating and transportation costs. | ||||
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this news release.
[expand title=”Advisories & Contact”]Advisory
Special Note Regarding Forward-Looking Information
This news release contains certain forward-looking statements, which are based on numerous assumptions including but not limited to (i) drilling success; (ii) production; (iii) future capital expenditures;(iv)accuracy of FD&A and FDC estimates; (v) accuracy of reserves and resources estimates; and (vi) cash flows from operating activities. 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) the effect of hedges on risk management programs; (iv) Painted Pony will be able to obtain equipment in a timely manner to carry out exploration, development and exploitation activities; (v) production rates in 2014 are expected to show growth from the fourth quarter of 2013; (vi) Painted Pony will have sufficient financial resources with which to conduct the capital program; and (vii) the current tax and regulatory regime will remain substantially unchanged The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect.
This news release contains information, including in respect of Painted Pony’s capital program, which may constitute future oriented financial information or a financial outlook. Such information was approved by management of Painted Pony on March 4, 2014, and such information is included herein to provide readers with an understanding of the Company’s anticipated capital expenditures. Readers are cautioned that the information may not be appropriate for other purposes.
Certain information regarding Painted Pony set forth in this document, including estimates of the Company’s reserves and resources, estimates of future net revenue from the Company’s reserves and resources, pricing, inflation and exchange rates, FD&A and FDC and future development costs 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 achievement 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, including the amount of proceeds, 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.
This news release contains other industry benchmarks and terms, such as field operating netbacks (calculated on a per unit basis as oil, gas and natural gas liquids revenues less royalties and transportation and operating costs) and finding, development and acquisition costs (calculated by dividing the capital costs for the period, including the change in undiscounted future development capital, by the change in the reserves, incorporating revisions and production, for the same period), which are not recognized measures under International Financial Reporting Standards. 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 and FD&A costs may not be comparable to that used by other companies. Field operating netbacks should not be viewed as an alternative to cash flow from operations 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. Painted Pony’s method of calculating field operating netbacks may not be comparable to the method used by other companies.
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, 2013, and the Company’s Annual Information Form for the year ended December 31, 2013 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.
Special Note Regarding Disclosure of Finding and Development Costs
The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year.
The FD&A costs presented in this news release are used as a measure of capital efficiency and are calculated by dividing the capital costs for the period, including the change in undiscounted future development capital, by the change in the reserves, incorporating revisions and production, for the same period (eg. Total P+P (143+835)/102.4).
In calculating the amounts of finding and development and/or acquisition costs for a year, the changes during the year in estimated FDC and in estimated reserves and resources are based upon the evaluations of Painted Pony’s reserves and resources prepared by GLJ and Sproule effective December 31 of such year. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated FDC generally will not reflect total FD&A related to reserve and resource additions for that year.
BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl 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 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 Mcf: 1 bbl, utilizing a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value.
Estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties due to the effects of aggregation.
Painted Pony Petroleum Ltd.
Patrick R. Ward
President & CEO
(403) 475-0440
(403) 238-1487 (FAX)
Painted Pony Petroleum Ltd.
John H. Van de Pol
Vice President, Finance & CFO
(403) 475-0440
(403) 238-1487 (FAX)
www.paintedpony.ca
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