Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX
VENTURE:PPY.A) is pleased to report its financial and operating results for the
first quarter of 2012. Highlights include:
-- drilled 10 (7.9 net) wells; of which 6 (5.7 net) targeted oil and 4 (2.2
net) targeted gas;
-- grew production to average 6,993 boe/d (weighted 77% gas and 23% oil and
liquids), an increase of 74% over the first quarter of 2011;
-- generated funds flow from operations of $10.8 million, $0.15 per basic
and diluted share;
-- exited the quarter with a positive working capital position of $42.7
million and no debt;
-- increased the demand credit facility to $100 million in May 2012, which
facility remains undrawn; and
-- completed drilling operations on the Company's first Viking exploratory
well, which is targeting a new light oil project in central Alberta.
LIGHT OIL OPERATIONS
During the quarter, the Company completed drilling operations on its first well
in a new light oil exploration project located near Wimborne, Alberta.
Completion and testing of this 100% working interest well is scheduled to
commence immediately following spring break-up. Upon completion, the well will
satisfy the first obligation under a rolling farm-in option on 10 sections of
land considered prospective for the Viking formation (please refer to the
Company's press release dated February 15, 2012). Additionally, the Company is
pleased to announce that it has signed a second major farm-in agreement for
Viking oil potential in the Wimborne area. This second farm-in provides Painted
Pony with access to an additional 11 sections of land. Painted Pony plans to
commence drilling this second well in June 2012. In aggregate, the Company now
has secured access to approximately 39 net sections of Viking mineral rights in
the Wimborne area.
In Saskatchewan, Painted Pony drilled 5 (4.7 net) wells during the first
quarter. The Company continued to leverage off of previous successes in the
Bakken oil play at Flat Lake, drilling and completing 3 (2.7 net) wells on this
property. The latest well in the Flat Lake program was completed with a new
limited-entry style multi-frac system. During its initial production test, this
well demonstrated strong flowback performance, which exceeded the reservoir
engineering type curve for the Bakken zone in this area. In addition to its Flat
Lake program, the Company drilled and completed 2 (2.0 net) wells in the Midale
area.
NORTHEAST BC MONTNEY GAS OPERATIONS
As previously announced, Painted Pony has elected to reduce the pace of its
exploration and development capital program on the Company's Montney gas project
in northeast British Columbia. This reduction in activity represents a response
to the recent decline in natural gas commodity prices. By March 5, 2012, Painted
Pony had drilled 3 (1.2 net) Montney wells in the Blair-Cameron project area,
plus one (1.0 net) well on an exploratory prospect at West Blair, located
approximately ten kilometers west of the Company's nearest existing Montney
production. This 100% working interest well was drilled as part of a mineral
tenure requirement and will expand Painted Pony's Montney gas resource
assessment following successful production testing. The Company plans to
complete these four wells in the second half of 2012.
During the first quarter, Painted Pony completed testing and placed onto
production two 100% W.I. Montney wells located on the Blair 08-F pad. These
wells were drilled in tandem with the interim expansion of the Blair processing
facility. In February 2012, Painted Pony commissioned a new Company-operated gas
processing facility on the Daiber 44-C pad, located at the north end of the
Cameron block. As part of this project, the Company tied-in and commenced
production from its lower Montney gas well which initially tested at rates of up
to 24.5 million cubic feet per day (please refer to the Company's press release
dated September 28, 2011).
Painted Pony continues to explore opportunities to enhance the long-term
development of this high quality Montney gas asset. In April 2012, the Company
entered into an agreement to purchase an additional 11,800 net acres of Montney
rights in the Company's Cypress area from an industry partner. On May 23, 2012,
the Company closed the acquisition of approximately 70% of these lands, with the
remaining acreage subject to third party rights of first refusal until late
June. Assuming completion of the entire acquisition, the Company will hold over
28,000 net acres (44 net sections) with Montney potential in the Cypress area,
bringing the Company's total Montney rights holdings to 104,000 net acres (162
net sections).
PRODUCTION
During the first quarter, Painted Pony's production averaged 6,993 boe/d
(weighted 77% gas and 23% oil and liquids), representing an increase of 74% over
first quarter 2011 volumes and a 35% increase from the fourth quarter of 2011.
Sales from Saskatchewan operations averaged 1,627 boe/d in the quarter (94% oil
and liquids), while sales from northeast British Columbia averaged 5,366 boe/d
(98% gas). To date, during the second quarter of 2012, field estimated sales
have averaged approximately 6,000 boe/d, as a result of scheduled gas plant
turnarounds and shut in gas production.
FINANCIAL RESOURCES
Over the quarter, Painted Pony achieved funds flow from operations of $10.8
million equating to $0.15 per basic and diluted share. The Company remains
strong financially, exiting the first quarter of 2012 with a positive working
capital position of $42.7 million, combined with an increased and undrawn demand
credit facility of $100 million.
OUTLOOK
Painted Pony's current capital budget for the remaining three quarters of 2012
is focused on the exploration and development of high netback, light oil
opportunities in Alberta and Saskatchewan. We look forward to the completion
results from our first Alberta Viking test well.
Painted Pony is a founding member of the Douglas Channel BC LNG project. The BC
LNG Co-op project, to be located in Kitimat, British Columbia, has received its
necessary export permits and is slated to commence LNG exports in the first half
of 2014. As a member of the BC LNG Co-op, Painted Pony is entitled to bid
long-term agreements to supply BC LNG volumes. The Company is actively pursuing
this option.
The oil and gas industry in western Canada has entered a period where prolonged
low gas prices may force some of our competitors to seek business alternatives
or pursue major asset dispositions. Painted Pony has, and continues to maintain,
a flexible capital structure which places us in an ideal position to act on
attractive opportunities which fit with our business plan.
An updated presentation incorporating the Company's first quarter 2012 financial
results will be available on the Company's website. Painted Pony Class A Shares
trade on the TSX Venture Exchange under the symbol "PPY.A".
For more information please visit www.paintedpony.ca.
Painted Pony Petroleum Ltd. was recognized as a TSX Venture 50(R) Company in
2012. TSX Venture 50 is a trade-mark of TSX Inc. and is used under license.
Financial and Operational Highlights
(unaudited)
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Three months ended March 31, 2012 2011
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Financial (000's, except per share)
Petroleum and natural gas revenue(1) $ 19,514 $ 19,315
Funds flow from operations(2) $ 10,791 $ 12,098
Per share - basic(3) $ 0.15 $ 0.22
Per share - diluted(4) $ 0.15 $ 0.21
Cash flow from operating activities $ 11,847 $ 11,555
Net income (loss) $ (1,325) $ 2,144
Per share - basic(3) $ (0.02) $ 0.04
Per share - diluted(4) $ (0.02) $ 0.04
Capital expenditures(5) $ 37,547 $ 25,085
Working capital $ 42,667 $ 64,100
Total assets $ 468,693 $ 330,156
Shares outstanding
Class A 69,743,027 59,186,073
Class B - 1,173,600
Diluted weighted-average shares 69,740,829 56,927,128
Operational
Daily sales volumes
Oil (bbls per day) 1,413 1,811
Condensate (bbls per day) 61 54
NGL's (bbls per day) 137 141
Gas (mcf per day) 32,294 12,126
Total (boe per day) 6,993 4,027
Realized prices
Oil (per bbl) $ 90.59 $ 87.08
Gas (per mcf) $ 2.29 $ 3.77
Field operating netbacks
British Columbia (per boe) $ 7.86 $ 14.25
Saskatchewan (per boe) $ 55.04 $ 56.22
Company combined (per boe) $ 18.83 $ 35.95
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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, and after the deemed conversion of the Class B
shares to Class A shares for 2011, consistent with the calculations of
earnings per share.
3. Basic per share information is calculated on the basis of the weighted
average number of Class A shares outstanding in the period.
4. Diluted per share information reflects the potential dilution effect of
options and, for 2011, the convertible Class B shares, each of which may
be anti-dilutive. Comprehensive income is adjusted for the amount of
finance expense applicable to the Class B shares for the period. The
conversion of Class B shares into Class A shares, if dilutive, is
computed by dividing $10 by the greater of $1.00 and the Current Trading
Price, defined as the weighted average trading price of the Class A
shares for the last 30 consecutive trading days.
5. Including decommissioning expenditures and share-based payments.
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; and (iv) cash flow 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 2012; (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)
production rates by the end 2012 are expected to show growth from the first
quarter of 2012; (v) Painted Pony will have sufficient financial resources with
which to conduct the capital program; and (vi) the current tax and regulatory
regime will remain substantially unchanged. 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 document, 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 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 reports on file with
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 Reserves or Resources
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.
Painted Pony Petroleum Ltd., Class A (TSXV:PPY.A)
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