CALGARY, ALBERTA–(Marketwired – Feb. 22, 2018) – BlackPearl Resources Inc. (“we”, “our”, “us”, “BlackPearl” or the “Company”) (TSX:PXX) (OMX:PXXS) is pleased to announce its financial and operating results for the three and twelve months ended December 31, 2017.
Highlights and accomplishments included:
- At Onion Lake, we are nearing completion of the phase 2 thermal expansion and we have initiated steam injection to the first pad of wells. We expect to commence steam injection to the second pad in approximately one month. The expansion is expected to add production of 6,000 bbl/d, bringing name plate design capacity of the entire project to 12,000 bbl/d, which we expect to reach in the next 12 months. The expansion project came in on budget and approximately 4 months ahead of schedule.
- At Blackrod, we continued to operate our successful SAGD pilot. The second well pair has been in production for over 4 years and, in 2017, produced an average of 490 bbl/d. Cumulatively, the second well pair has now produced in excess of 650,000 barrels of oil. The pilot generates positive cash flow and we are still collecting valuable operating data, so we expect to continue running the pilot for the next several years.
- At Mooney, during 2017 we re-initiated a portion of the ASP flood and restarted some of the shut-in primary wells. Production from the re-initiated flood contributed to a 37% increase in production in 2017 to approximately 1,100 bbl/d. We will continue to ramp-up the flood in 2018 and likely expand the flood into other areas of the field in 2019.
- Production averaged 10,600 boe/d in Q4 2017 and 10,199 boe/d for the year. The Onion Lake thermal project averaged 6,204 boe/d in Q4 2017, representing 58% of total production.
- Q4 2017 revenue was $43 million, 23% higher than Q4 2016. For the year, oil and gas revenue was $151 million or 39% higher than 2016. The increase reflects higher oil prices in 2017.
- Thermal operating costs, including energy costs, during the fourth quarter were under $9/bbl and for the full year were $9.88 per barrel. This reflects the positive performance of our Onion Lake thermal project. We expect to see additional cost improvements when production is ramped-up from the second phase of the project.
- We maintained a strong balance sheet with year-end net debt of $117 million, well under our total current borrowing capacity of $195 million. We expect to exit 2018 with debt of $130 – $140 million.
- Total capital costs in 2017 were $170 million, with the majority of costs related to the construction of phase 2 of the Onion Lake thermal project.
- As previously announced, our updated proved plus probable independent reserves evaluation has a net present value, before tax, discounted at 10% of $2 billion, or approximately $6.00 per common share.
- As a result of an expected steady ramp-up in production from our Onion Lake thermal expansion, our 2018 guidance anticipates we will exit 2018 at over 14,000 bbl/d, approximately 40% higher than our current production.
John Festival, President of BlackPearl, commented that “2017 was another successful year for BlackPearl. Our focus was to continue operating phase 1 of Onion Lake thermal at or above design capacity and to build phase 2 on time and within budget. We believe that Onion Lake is a top tier thermal project in Western Canada that provides long life, low decline, low cost production. We see additional expansion opportunities at Onion Lake over the next few years and we have sufficient reserves for 25+ years of activity. We should be able to fund this growth from our cash flows and our existing or expanded credit facilities without any additional dilution to shareholders. Longer-term, development of Onion Lake will put us in a better position to continue our growth with our Blackrod SAGD project.”
Financial and Operating Highlights
|Three months ended
|Daily sales volumes|
|Bitumen (bbl/d) (1)||481||523||490||556|
|Natural gas (mcf/d)||561||620||587||781|
|Combined (boe/d) (2)||10,600||10,479||10,199||10,077|
|Product pricing ($) (before the effects of hedging transactions)|
|Crude oil – per bbl||47.07||38.83||43.00||31.57|
|Natural gas – per mcf||1.45||2.90||2.01||1.95|
|Combined – per boe||46.71||38.61||42.69||31.30|
|Oil and gas sales||46.71||38.61||42.69||31.30|
|Realized gain (loss) on risk management contracts||(1.50)||0.63||0.10||3.10|
|($000’s, except per share amounts)|
|Oil and gas revenue – gross||43,486||35,360||151,286||109,066|
|Net income (loss) for the period||6,472||(2,217)||17,159||(19,928)|
|Per share, basic and diluted||0.02||(0.01)||0.05||(0.06)|
|Adjusted funds flow(4)||18,902||15,798||59,417||44,775|
|Cash flow from operating activities (3)||17,474||15,079||58,115||42,491|
|Working capital deficiency, end of period||23,912||4,591||23,912||4,591|
|Long term debt||92,944||–||92,944||–|
|Net debt (6)||116,856||4,591||116,856||4,591|
|Shares outstanding, end of period||336,267,235||335,948,895||336,267,235||335,948,895|
|(1)||Includes production from the Blackrod SAGD pilot. All sales and expenses from the Blackrod SAGD pilot are being recorded as an adjustment to the capitalized costs of the project until the technical feasibility and commercial viability of the project is established.|
|(2)||Boe is based on a conversion ratio of 6 mcf of natural gas to 1 bbl of oil. Boe 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 is not intended to represent a value equivalency at the wellhead.|
|(3)||Cash flow from operating activities is a GAAP measure and has a standardized meaning prescribed by Canadian GAAP.|
|(4)||Adjusted funds flow is a non-GAAP measure that represents cash flow from operating activities before decommissioning costs incurred and changes in non-cash working capital related to operations. Adjusted funds flow does not have standardized meanings prescribed by Canadian GAAP and therefore may not be comparable to similar measures used by other companies. See non-GAAP measures.|
|(5)||Netback is a non-GAAP measure that does not have a standardized meaning prescribed by Canadian GAAP and therefore may not be comparable to similar measures used by other companies. See non-GAAP measures.|
|(6)||Net debt is a non-GAAP measure. Net debt does not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures used by other companies in the oil and gas industry. See non-GAAP measures.|
FOURTH QUARTER 2017 ACTIVITIES
Oil and natural gas sales increased 23% in the fourth quarter of 2017 to $43.5 million compared with $35.4 million in the same period in 2016. The increase in oil and gas sales is primarily attributable to a 21% increase in average sales price received in the fourth quarter.
Our realized oil price (before the effects of risk management activities) in the fourth quarter of 2017 was $47.07 per barrel compared to $38.83 per barrel for the same period in 2016. The increase in our realized wellhead price reflects higher WTI reference oil prices in Q4 2017 compared with Q3 2016 (US$55.40/bbl vs US$49.29/bbl), tighter heavy oil differentials (US$12.26/bbl vs US$14.34/bbl), partially offset by a stronger Canadian dollar relative to the US dollar ($0.786 vs $0.75).
BlackPearl sold an average of 10,600 boe/day during the fourth quarter of 2017 compared with 10,479 boe/day during the fourth quarter of 2016. During the fourth quarter the Onion Lake thermal project produced 6,204 barrels of oil per day, or 59% of total corporate production.
Production costs were $12.5 million or $13.43 per boe in the fourth quarter of 2017 compared to $11.1 million or $12.11 per boe in the fourth quarter of 2016. The increase from 2016 is mainly attributable to higher conventional production costs related to the restart of the ASP flood and re-activation of certain primary wells at Mooney in 2017. We are continuing to achieve low operating costs at our Onion Lake thermal project. Our thermal production costs in Q4 2017 were $8.17 per barrel. The lower production costs are due, in part, to lower natural gas input costs.
|Three months ended
|Production costs ($000s)||7,834||6,387||32,314||24,696|
|Per boe ($)||21.75||18.59||22.00||16.87|
|Production costs ($000s)||4,664||4,701||20,497||18,638|
|Per boe ($)||8.17||8.35||9.88||9.22|
|Production costs ($000s)||12,498||11,088||52,811||43,334|
|Per boe ($)||13.43||12.11||14.90||12.44|
Net debt was $117 million at the end of 2017.
Adjusted funds flow in the fourth quarter of 2017 was $18.9 million, 20% higher compared with the fourth quarter of 2017. The increase reflects higher revenues in Q4 2017. Net income in Q4 2017 was $6.5 million compared to a loss of $2.2 million in Q4 2016.
Capital expenditures were $44.5 million in Q4 2017 and $170 million for the year. Spending was below our guidance estimates of $200 million. Lower capital expenditures in 2017 was primarily due to certain expenditures related to the expansion of the Onion Lake thermal project that were originally planned for 2017 being incurred in the first quarter of 2018.
Our initial guidance for 2018 was released in November 2017 and as a result of recent volatility in crude oil prices, we have updated our 2018 guidance. We are now assuming a WTI oil price of US $62/bbl and a heavy oil differential of US $21.50/bbl for planning and budget purposes. Capital spending in 2018 is now expected to be between $80 and $85 million, an increase from our original estimate of between $60 and $65 million. The change reflects costs related to Onion Lake thermal expansion that were originally forecast to be spent in 2017 that were not incurred until early in 2018. The focus of our 2018 capital spending continues to be the second phase of the Onion Lake thermal project. Currently, commissioning of the facilities and steam injection at the first well pad has started. For the remainder of 2018, our capital plans remain unchanged with drilling on some of our conventional heavy oil projects, the construction and drilling of a sustaining well pad for the Onion Lake thermal project and undertaking additional delineation drilling on our Blackrod lands.
A significant portion of these capital costs will continue to be funded with our anticipated adjusted funds flow, which is now budgeted to be between $60 and $65 million, an increase from our initial guidance of between $50 million and $55 million as the result of improved crude oil prices. As result of the increase in expected adjusted funds flow, our year-end 2018 debt levels decreased from our initial guidance of between $145 and $155 million to our current budget of between $130 and $140 million.
The average oil and gas production for 2018 remains unchanged and is expected to average between 11,000 and 12,000 boe/d. Exit production levels for 2018 of 14,000 boe/d also remain unchanged.
The Company’s financial statements, notes to the financial statements, management’s discussion and analysis and Annual Information Form have been filed on SEDAR (www.sedar.com) and are also available on the Company’s website (www.blackpearlresources.ca).
BlackPearl’s annual meeting of shareholders will be held on May 3, 2018 in Calgary Alberta.