CALGARY, ALBERTA--(Marketwire - May 24, 2012) - 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).
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.
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.
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® Company in 2012. TSX Venture 50 is a trade-mark of TSX Inc. and is used under license.
- Before royalties
- 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.
- Basic per share information is calculated on the basis of the weighted average number of Class A shares outstanding in the period.
- 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.
- Including decommissioning expenditures and share-based payments.