CALGARY, ALBERTA–(Marketwired – July 7, 2014) – Painted Pony Petroleum Ltd. (“Painted Pony” or the “Company”) (TSX:PPY) is pleased to announce that it has entered into a definitive purchase and sale agreement (the “Transaction”) to sell all of the Company’s exploration and production assets in Saskatchewan (the “Assets”). The Assets and Transaction include:
- fully-funded cash purchase price of $100 million, before customary closing adjustments, with an effective date of June 1, 2014 and an expected closing date on or before July 30, 2014;
- field estimated production volumes of 980 barrels of oil equivalent per day (“boe/d”) in the second quarter of 2014 (96% oil and natural gas liquids);
- proved plus probable (“P+P”) reserves of 5.3 million boe (“MMboe”) as determined by Sproule Associates Limited, effective December 31, 2013;
- approximately 34,600 net acres of undeveloped land at June 30, 2014;
- $102,000 per boe/d, based on second quarter of 2014 field estimated production volumes.
Closing of the Transaction is subject to the receipt of all necessary regulatory approvals. Following the close of the Transaction, Painted Pony’s syndicated credit facilities are expected to be adjusted to $150 million from their current level of $175 million. Upon closing of the Transaction, Painted Pony anticipates that the syndicated credit facilities will be undrawn, allowing for further enhancement of the Company’s 2015 capital expenditure program, which contemplates drilling over 40 net Montney wells, approximately double the planned drilling in 2014.
Painted Pony’s continued production growth and expanded development of its Montney project in northeast British Columbia led to the decision to pursue the sale of its interests in Saskatchewan and focus 100% of the Company’s resources and operations on its Montney project. The timing of the sale of the Company’s Saskatchewan properties has been chosen to capture the current window in strengthening global oil markets, combined with an active and robust environment for oil-weighted transactions in western Canada. As a pure-play Montney natural gas and natural gas liquids producer going forward, Painted Pony will be able to redeploy the proceeds from the Transaction towards its high return Montney initiatives and further the Company’s growth profile. In commenting on this disposition, Mr. Patrick Ward, President & C.E.O., said “Our Saskatchewan assets have provided Painted Pony with a solid foundation for the growth and development of the Company since its inception. Through the monetization of these Assets, we are confident that the reallocation of capital to our Montney resource play in northeast British Columbia will result in an accelerated pace of production and reserves growth.” The sale of these Assets represents approximately 2% of the Company’s P+P reserves at December 31, 2013. Cormark Securities Inc. and FirstEnergy Capital Corp. have acted as exclusive financial advisors to Painted Pony in respect of the Transaction.
Painted Pony’s total field estimated production in the second quarter of 2014 was approximately 14,900 boe/d, weighted 86% towards natural gas (including the 980 boe/d of production from the Assets). These strong results are ahead of the Company’s expectations and have been largely achieved through improved optimization, drilling and completion methods utilized in its Montney project, as well as the full commissioning of the Company’s natural gas processing facility at Townsend.
As previously announced, Painted Pony’s 2014 average corporate production was expected to be between 13,000 boe/d and 13,500 boe/d, weighted 86% towards natural gas. After giving effect to the Transaction, considering the performance of recent Montney well completions, and before giving effect to any expansion of the Company’s previously announced 2014 planned capital spending plans, Painted Pony is pleased to reaffirm its 2014 average production estimate of 13,000 boe/d to 13,500 boe/d, weighted 89% towards natural gas. The Company is currently reviewing its Montney focused capital spending plans for the remainder of 2014 and into 2015, with a view to redeploying the proceeds from the Transaction into additional Montney drilling activity and related infrastructure expenditures.
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.
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 reserves and resources estimates; (v) cash flows from operating activities; and (vi)receipt of regulatory approvals. 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 and exploitation activities; (iv) Painted Pony will have sufficient financial resources with which to conduct the capital program; and (v) 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.
Certain information regarding Painted Pony set forth in this document, including statements regarding the anticipated closing date of the Transaction, the anticipated effect of the Transaction on Painted Pony’s credit facilities, Painted Pony’s operational and spending plans, the use of proceeds of the Transaction and Painted Pony’s expected production rates 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.
Additional information on these and other factors that could affect Painted Pony’s operations and financial results are included in its Management’s Discussion and Analysis for the year ended December 31, 2013, and its 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.
Boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural 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.
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.
Painted Pony Petroleum Ltd.
Patrick R. Ward
President & CEOPainted Pony Petroleum Ltd.
John H. Van de Pol
Vice President, Finance & CFO
Painted Pony Petroleum Ltd.
1800, 736 – 6th Avenue SW,
Calgary, AB T2P 3T7
(403) 238-1487 (FAX)