CALGARY, ALBERTA – BlackPearl Resources Inc. (“BlackPearl” or the “Company”) (TSX: PXX) (NASDAQ Stockholm: PXXS) is pleased to announce the renewal of its credit facilities and provide initial 2016 guidance for the Company.
- Our credit facilities were renewed, with the borrowing base maintained at $150 million;
- The 2016 capital budget was set at $15 million, reflecting the current low oil price environment. Excess cash flow will be used to repay debt. Current debt of $92 million is expected to be reduced to $70-$75 million during 2016;
- Despite the challenging price environment and limited capital investment, average daily oil production is expected to increase over 25% in 2016 compared to 2015.
Renewal of Credit Facilities
BlackPearl’s lenders completed their semi-annual review of our credit facilities and have agreed to maintain the borrowing amount available to the Company at $150 million. The facilities will consist of a $140 million syndicated revolving line of credit and a non-syndicated operating line of credit of $10 million. The previous $15 million supplemental loan facility has been eliminated and the advances under the supplemental facility have been transferred to the revolving line of credit. The next scheduled lenders review of the credit facilities will occur by May 31, 2016. The total amount borrowed under these facilities is currently $92 million, at an average interest rate of 3.3%.
2015 has been a very challenging year for the oil and gas industry and timing for a price recovery is uncertain. For planning purposes, our focus in 2016 will be to maintain a strong balance sheet by using a portion of our cash flow to reduce debt levels, and limiting our capital spending until we see signs of a sustained price recovery. Over the last five years we have demonstrated that we have a great suite of assets that will provide long term value to our shareholders. Our goal is to protect these assets and continue to develop them when oil prices improve.
Our Board of Directors has approved a capital budget of $15 million for 2016. The budget includes preliminary planning for the second 6,000 barrel per day phase at the Onion Lake thermal project, continuing to operate the Blackrod SAGD pilot throughout the year, a small drilling program on our conventional lands and maintenance capital in all of our core areas. We have elected to defer expansion of the Mooney ASP flood until oil prices improve. We continue to have the flexibility to expand or defer our capital spending as economic conditions change. The entire capital program can be funded from cash flow generated from operations.
Although we have elected to limit capital spending in 2016, our oil production will continue to grow during the year, primarily due to the continued ramp-up in production from the first phase of the Onion Lake thermal project, which began producing oil in September. The growth in thermal production will offset expected declines in our conventional production due to limited re-investment in these properties. We expect our overall 2016 production to average between 10,000 and 10,500 barrels of oil per day.
Based on our 2016 average commodity price assumptions (WTI oil price of US$50/bbl, heavy oil differential of US$15/bbl, AECO gas of $2.75/GJ and an exchange rate of C$1=US$0.75), funds flow from operations in 2016 is expected to be between $35 and $40 million. Year-end 2016 debt levels are anticipated to be between $70 and $75 million.
John Festival, President and CEO of BlackPearl commenting on the Company’s 2016 plans indicated that “during this low oil price environment our focus is on financial discipline and managing our balance sheet. We have a significant inventory of projects but we will defer development of many of these until oil prices recover and we can achieve better returns for our shareholders. During this period we will continue to optimize the Onion Lake thermal project as it represents long life, low cost production”.
This release contains certain forward-looking statements and forward-looking information (collectively referred to as “forward-looking statements”) within the meaning of applicable Canadian securities laws. All statements other than statements of historic fact are forward-looking statements. Forward-looking statements are typically identified by such words as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” or similar words suggesting future events or future performance.
In particular, but without limiting the foregoing, this report contains forward-looking statements pertaining to our guidance for 2016, including our capital spending budget of $15 million, estimated average production of 10,000 to 10,500 barrels of oil per day, estimated funds flow from operations of between $35 and $40 million and anticipated year-end 2016 debt of between $70 and $75 million.
The forward-looking statements in this document reflect certain assumptions and expectations by management. The key assumptions that have been made in connection with these forward-looking statements include the continuation of current or, where applicable, assumed industry conditions, the continuation of existing tax, royalty and regulatory regimes, commodity price and cost assumptions, the continued availability of cash flow or financing on acceptable terms to fund the Company’s capital programs, the accuracy of the estimate of the Company’s reserves and resource volumes and that BlackPearl will conduct its operations in a manner consistent with past operations. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
By their very nature, forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those contained in forward-looking statements. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent; risks related to the exploration, development and production of crude oil, natural gas and NGLs reserves; general economic, market and business conditions; substantial capital requirements; uncertainties inherent in estimating quantities of reserves and resources; extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time; the need to obtain regulatory approvals on projects before development commences; environmental risks and hazards and the cost of compliance with environmental regulations; aboriginal claims; inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions; potential cost overruns; variations in foreign exchange rates; diluent supply shortages; competition for capital, equipment, new leases, pipeline capacity and skilled personnel; uncertainties inherent in the SAGD bitumen and ASP recovery processes; credit risks associated with counterparties; the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits; reliance on third parties for pipelines and other infrastructure; changes in royalty regimes; failure to accurately estimate abandonment and reclamation costs; inaccurate estimates and assumptions by management; effectiveness of internal controls; the potential lack of available drilling equipment and other restrictions; failure to obtain or keep key personnel; title deficiencies with the Company’s assets; geo-political risks; risks that the Company does not have adequate insurance coverage; risk of litigation and risks arising from future acquisition activities. Further information regarding these risk factors and others may be found under “Risk Factors” in the Annual Information Form.
Undue reliance should not be placed on these forward-looking statements. Readers are cautioned that the actual results achieved will vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of assumptions, risks and factors is not exhaustive. Consequently, there is no assurance by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this document are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
In this news release, the Company uses the term “funds flow from operations”, which does not have a standardized meaning as prescribed by GAAP and, therefore, may not be comparable with the calculation of similar measures presented by other issuers. “Funds flow from operations” represents cash flow from operating activities (the closest GAAP measure) expressed before decommissioning costs incurred and changes in non-cash working capital. These terms are used by the Company to analyze operating performance, leverage and liquidity and to provide shareholders and investors with additional information to measure the Company’s performance and efficiency and its ability to fund a portion of its future activities and to service any long-term debt.
For further information, please contact:
John Festival – President and Chief Executive Officer
Tel.: (403) 215-8313
Don Cook – Chief Financial Officer
Tel: (403) 215-8313
The information in this release is subject to the disclosure requirements of BlackPearl Resources Inc. under the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. This information was publicly communicated on December 7, 2015 at 12:01 a.m. Mountain Time.