A correction is being issued with respect to the Painted Pony Petroleum Ltd.
release that was disseminated July 27, 2011 at 17:54 ET. The last column of the
Summary of Company Reserves table read, "As at December 31, 2011" but should
have read, "As at December 31, 2010." The correct version follows:
Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX
VENTURE:PPY.A) (TSX VENTURE:PPY.B) is pleased to announce a mid-year reserves
update and an updated Montney resource assessment, following a successful
drilling program in the first half of 2011. GLJ Petroleum Consultants Ltd.
("GLJ") and Sproule Associates Limited ("Sproule") were engaged to prepare
independent evaluation reports of the reserves and contingent resources on the
Company's British Columbia ("BC") properties and the reserves on the Company's
Saskatchewan ("SK") properties, respectively. Both reports are dated effective
June 30, 2011 and were prepared in accordance with National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities ("NI 51-101").
HIGHLIGHTS
-- Best estimate contingent resources for the Company's Montney asset
increased to 2.1 trillion cubic feet of gas equivalent ("tcfge"),
equating to 358.2 million boe ("mmboe"), including 40.2 mmboe of
liquids, with a net present value, using a 10% discount rate ("NPV10")
of $2.1 billion.
-- Proved plus probable reserves totaled 85.6 mmboe, an increase of 163%
since December 31, 2010. The NPV10 of the Company's proved plus probable
reserves was $797.9 million, an increase of 126% in the first six months
of 2011.
-- Proved plus probable reserves for BC increased 194% since December 31,
2010 to 476.9 billion cubic feet of gas equivalent ("bcfge"), with a
NPV10 of $621.1 million.
-- Proved plus probable liquids in BC are estimated to be 8.7 million bbls
with a liquids yield for the gas reserves assessed at an average of
approximately 20 bbls/mmcf.
-- Proved plus probable reserves for SK increased to 6.1 million boe (95%
oil and liquids), with a NPV10 of $176.8 million.
CONSOLIDATED COMPANY RESERVES
The consolidated Company proved plus probable reserves in BC and SK were 85.6
mmboe with an associated NPV10 of $797.9 million, while proved reserves totaled
21.8 mmboe with an associated NPV10 of $284.2 million.
Summary of Company Net Present Values of Future Revenue
(1),(2),(3),(4),(5)
Forecast Prices and Costs
Before Income Taxes ($millions)
----------------------------------------------------------------------------
As at December 31,
As at June 30, 2011 2010
0% 5% 10% 0% 10%
----------------------------------------------------------------------------
Proved
Developed producing 213.1 170.6 144.7 144.6 108.1
Developed non-producing 5.2 4.3 3.6 0.4 0.3
Undeveloped 328.6 203.1 135.9 122.8 48.8
----------------------------------------------------------------------------
Total proved 546.9 378.0 284.2 267.8 157.2
Probable 1,768.0 881.9 513.6 484.7 196.5
----------------------------------------------------------------------------
Total proved plus probable 2,314.9 1,259.9 797.9 752.5 353.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest reserves are before royalties
owned by others. The estimated future net revenues are stated before
deducting income taxes and future estimated site restoration costs and
are reduced for estimated future abandonment costs, the Saskatchewan
Capital Tax and estimated capital for future development associated with
the reserves.
2. It should not be assumed that the undiscounted and discounted net
present values represent the fair market value of the reserves.
3. The price deck used for the evaluation as at June 30, 2011 was the GLJ
price deck dated June 30, 2011 for BC assets and the Sproule price deck
dated July 1, 2011 for SK assets.
4. The price deck used for the evaluation as at December 31, 2010 was the
Sproule price deck dated January 1, 2011.
5. Numbers in this table are subject to rounding error.
Summary of Company Reserves (1),(3),(5)
Forecast Prices and Costs
----------------------------------------------------------------------------
As at June 30, 2011 As at
Natural December
Light and Natural Gas 31, 2010
Medium Oil Gas Liquids Total Total
(mbbl) (mmcf)(4) (mbbl) (mboe)(2) (mboe)(2)
----------------------------------------------------------------------------
Proved
Developed producing 2,090.5 23,671 500.1 6,536.2 4,476.6
Developed non-
producing 17.4 1,274 22.0 252.4 48.1
Undeveloped 1,252.0 73,577 1,541.6 15,057.1 6,810.9
----------------------------------------------------------------------------
Total proved 3,359.8 98,523 2,064.7 21,844.6 11,335.5
Probable 2,213.2 327,861 6,893.5 63,749.8 21,203.2
----------------------------------------------------------------------------
Total proved plus
probable 5,573.0 426,383 8,958.2 85,594.4 32,538.7
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest reserves are before royalties
owned by others.
2. Oil equivalent amounts (boe) have been calculated using a conversion
rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
1 bbl).
3. One thousand barrels is equal to 1 mbbl, and one thousand boe is equal
to 1 mboe. One million cubic feet of natural gas is equal to 1 mmcf.
4. Includes non-associated gas, associated gas and solution gas.
5. Numbers in this table are subject to rounding error.
BC RESOURCE AND RESERVES EVALUATION
GLJ was engaged to prepare an independent reserve and contingent resource
evaluation, of the Company's BC properties, using forecast prices and costs,
dated effective June 30, 2011. The most significant positive and negative
factors with respect to the contingent resource estimates relate to the fact
that the field is currently at an evaluation/delineation stage. The Montney
formation is areally extensive in this region, however well control is limited.
Both resource-in-place and productivity may be higher or lower than current
estimates. Additional drilling and testing are required to confirm volumetric
estimates and reservoir productivity for the contingent resources to be
reclassified as reserves.
Summary of Company Montney Contingent Resource Net Present Values of Future
Revenue (1),(2),(3),(4),(5)
Forecast Prices and Costs
Before Income Taxes ($millions)
----------------------------------------------------------------------------
As at June 30, 2011
0% 5% 10% 15% 20%
----------------------------------------------------------------------------
Low Estimate 6,531 2,889 1,411 739 406
Best Estimate 10,650 4,402 2,143 1,160 675
High Estimate 17,124 6,337 2,901 1,516 865
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest contingent resources are before
royalties owned by others. The estimated future net revenues are stated
before deducting income taxes and future estimated site restoration
costs, and are reduced for estimated future abandonment costs and
estimated capital for future development associated with the contingent
resource.
2. It should not be assumed that the undiscounted and discounted net
present values represent the fair market value of the contingent
resource.
3. The estimates of net present values for individual properties may not
reflect the same confidence level as estimates of net present values for
all properties, due to the effects of aggregation.
4. GLJ price deck dated June 30, 201.
5. Numbers in this table are subject to rounding error.
Summary of Company Montney Contingent Resources (1),(2),(3),(4),(5),(6)
Summary of Company Montney Contingent Resources Forecast Prices and Costs
As at June 30, 2011
----------------------------------------------------------------------------
Low Estimate Best Estimate High Estimate
(bcfge) (mmboe) (bcfge) (mmboe) (bcfge) (mmboe)
----------------------------------------------------------------------------
Gas 1,377.3 229.6 1,908.4 318.1 2,778.5 463.1
Liquids 174.0 29.0 241.1 40.2 351.0 58.5
----------------------------------------------------------------------------
Total 1,551.3 258.6 2,149.5 358.2 3,129.5 521.6
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest of the contingent resources are
before royalties owned by others.
2. Oil equivalent amounts (boe) have been calculated using a conversion
rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
1 bbl).
3. Natural gas equivalent amounts (mcfge) have been calculated using a
conversion rate of 1 barrel of oil per six thousand cubic feet of
natural gas (1 bbl: 6 mcf).
4. One million boe is equal to 1 mmboe. One billion cubic feet of gas
equivalent is equal to 1 bcfge.
5. The estimates of resources for individual properties may not reflect the
same confidence level as estimates of resources for all properties, due
to the effects of aggregation.
6. Numbers in this table are subject to rounding error.
Reserves Evaluation:
Building on successful results from the Company's first twenty-one (8.2 net)
Montney wells, the GLJ Report evaluated reserves within three horizons of the
Montney. Approximately 12% of Painted Pony's Montney acreage has now been
assessed proved plus probable reserves in both the upper and lower Montney,
while approximately 3% of the Company's Montney lands has been assessed proved
plus probable reserves in the middle Montney. The GLJ Report shows a 129% and
194% increase in volumes of proved and proved plus probable reserves,
respectively, with an associated 238% and 221% increase in the NPV10 of the
proved and proved plus probable reserves, compared to the Company's British
Columbia reserves as at December 31, 2010.
Summary of Company BC Net Present Values of Future Revenue
(1),(2),(3),(4),(5)
Forecast Prices and Costs
Before Income Taxes ($millions)
----------------------------------------------------------------------------
As at June 30, 2011 As at December 31, 2010
0% 5% 10% 0% 10%
----------------------------------------------------------------------------
Proved
Developed
producing 105.2 77.0 61.4 41.6 27.5
Developed non-
producing 4.6 3.7 3.1 0.3 0.2
Undeveloped 285.7 169.2 108.5 85.1 23.5
----------------------------------------------------------------------------
Total proved 395.5 249.9 173.1 127.0 51.2
Probable 1,653.0 797.5 448.0 391.9 142.5
----------------------------------------------------------------------------
Total proved
plus probable 2,048.5 1,047.4 621.1 518.9 193.7
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest reserves are before royalties
owned by others. The estimated future net revenues are stated before
deducting income taxes and future estimated site restoration costs and
are reduced for estimated future abandonment costs, the Saskatchewan
Capital Tax and estimated capital for future development associated with
the reserves.
2. It should not be assumed that the undiscounted and discounted net
present values represent the fair market value of the reserves.
3. The estimates of net present values for individual properties may not
reflect the same confidence level as estimates of net present values for
all properties, due to the effects of aggregation.
4. GLJ price deck dated June 30, 2011 and Sproule price deck dated December
31, 2010.
5. Numbers in this table are subject to rounding error.
Summary of Company BC Working Interest
Reserves(1),(4),(5),(7)
Forecast Prices and Costs
As at June 30, 2011
----------------------------------------------------------------------------
Natural Gas
Natural Gas Liquids Total Total
(mmcf)(6) (mbbl) (mboe)(2) (mmcfge)(3)
----------------------------------------------------------------------------
Proved
Developed producing 22,881 378 4,192 25,149
Developed non-
producing 1,274 22 235 1,406
Undeveloped 73,250 1,497 13,706 82,232
----------------------------------------------------------------------------
Total proved 97,406 1,898 18,132 108,794
Probable 327,284 6,808 61,355 368,132
----------------------------------------------------------------------------
Total proved plus
probable 424,690 8,706 79,487 476,926
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest reserves are before royalties
owned by others.
2. Oil equivalent amounts (boe) have been calculated using a conversion
rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
1 bbl).
3. Natural gas equivalent amounts (mcfe) have been calculated using a
conversion rate of 1 barrel of oil per six thousand cubic feet of
natural gas (1 bbl: 6 mcf).
4. One thousand barrels is equal to 1 mbbl, and one thousand boe is equal
to 1 mboe. One million cubic feet of natural gas is equal to 1 mmcf and
one million cubic feet of natural gas equivalent is equal to 1 mmcfge.
5. The estimates of reserves for individual properties may not reflect the
same confidence level as estimates of reserves for all properties, due
to the effects of aggregation.
6. Includes non-associated gas, associated gas and solution gas.
7. Numbers in this table are subject to rounding error.
UPDATED COMPANY BC LAND REPORT
Seaton-Jordan & Associates Ltd. has prepared an independent valuation (the
"Seaton-Jordan Report"), dated effective June 30, 2011, of Painted Pony's
undeveloped acreage in BC, which have been ascribed a value of $123.7 million,
representing an increase of $8.3 million over the year-ended December 31, 2010
value of $115.4 million. Undeveloped SK acreage was not included in the
Seaton-Jordan Report and was valued at $52.7 million as at December 31, 2010.
Fair value of undeveloped acreage has been determined in accordance with NI
51-101.
SK RESERVES EVALUATION
Reserves Evaluation:
Sproule was engaged to prepare an independent reserves evaluation of the
Company's SK properties, using forecast prices and costs, dated effective June
30, 2011. Proved reserves were 3.7 mmboe, while proved plus probable reserves
were 6.1 million boe, increases of 285.9 mboe and 642.7 mboe, respectively,
since December 31, 2010. Proved NPV10 was $111.2 million and proved plus
probable NPV10 was $176.8 million, increases of 5% and 11% since December 31,
2010.
Summary of Company SK Net Present Values of Future Revenue
(1),(2),(3),(4),(5),(6)
Forecast Prices and Costs
Before Income Taxes ($millions)
----------------------------------------------------------------------------
As at June 30, 2011 As at December 31, 2010
0% 5% 10% 0% 10%
----------------------------------------------------------------------------
Proved
Developed
producing 107.9 93.6 83.3 103.0 80.7
Developed non-
producing 0.6 0.5 0.5 0.1 0.1
Undeveloped 42.9 34.0 27.4 37.7 25.3
----------------------------------------------------------------------------
Total proved 151.4 128.1 111.2 140.8 106.0
Probable 115.0 84.4 65.6 92.8 54.0
----------------------------------------------------------------------------
Total proved plus
probable 266.4 212.5 176.8 233.7 160.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest reserves are before royalties
owned by others. The estimated future net revenues are stated before
deducting income taxes and future estimated site restoration costs and
are reduced for estimated future abandonment costs, the Saskatchewan
Capital Tax and estimated capital for future development associated with
the reserves.
2. It should not be assumed that the undiscounted and discounted net
present values represent the fair market value of the reserves.
3. The estimates of net present values for individual properties may not
reflect the same confidence level as estimates of net present values for
all properties, due to the effects of aggregation.
4. Sproule price decks dated January 1, 2011 and July 1, 2011.
5. Includes non-associated gas, associated gas and solution gas.
6. Numbers in this table are subject to rounding error.
Summary of Company SK Working Interest
Reserves(1),(3),(4),(5)
Forecast Prices and Costs
As at June 30, 2011
----------------------------------------------------------------------------
Light and Natural Gas
Medium Oil Natural Gas Liquids Total
(mbbl) (mmcf) (mbbl) (mboe)(2)
----------------------------------------------------------------------------
Proved
Developed producing 2,090.5 790 122.1 2,344.2
Developed non-producing 17.4 - - 17.4
Undeveloped 1,252.0 327 44.6 1,351.1
----------------------------------------------------------------------------
Total proved 3,359.8 1,117 166.7 3,712.6
Probable 2,213.2 577 85.5 2,394.8
----------------------------------------------------------------------------
Total proved plus probable 5,573.0 1,693 252.2 6,107.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
1. Painted Pony's total working interest reserves are before royalties
owned by others.
2. Oil equivalent amounts (boe) have been calculated using a conversion
rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
1 bbl).
3. One thousand barrels is equal to 1 mbbl, and one thousand boe is equal
to 1 mboe. One million cubic feet of natural gas is equal to 1 mmcf.
4. The estimates of reserves for individual properties may not reflect the
same confidence level as estimates of reserves for all properties, due
to the effects of aggregation.
5. Numbers in this table are subject to rounding error.
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. The reader is cautioned that assumptions used in the preparation of
such information may prove to be incorrect.
With respect to forward-looking statements contained in this document, Painted
Pony has made a number of assumptions. The key assumptions underlying the
aforementioned forward-looking statements include assumptions that: (i)
commodity prices will be volatile throughout 2011; (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 in 2011 are expected to show growth from the
first quarter of 2011; (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. Certain or all of the
forgoing assumptions may prove to be untrue.
Certain information regarding Painted Pony set forth in this document, including
estimates of the quantities of the Company's proved reserves, probable reserves
and contingent resources, estimates of the net present value of future net
revenue of the estimates of the Company's proved reserves, probable reserves and
contingent resources, and estimates of the value of the Company's undeveloped
acreage 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
"Contingent Resources" is defined in the Canadian Oil and Gas Evaluation
Handbook as those quantities of petroleum estimated, as of a given date, to be
potentially recoverable from known accumulations using established technology or
technology under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies. Contingencies may
include factors such as economic, legal, environmental, political, and
regulatory matters, or a lack of markets. It is also appropriate to classify as
contingent resources the estimated discovered recoverable quantities associated
with a project in the early evaluation stage. Contingent resources are further
classified in accordance with the level of certainty associated with the
estimates and may be subclassified based on project maturity and/or
characterized by their economic status.
The contingent resources estimates, including the corresponding estimates of
before tax present value estimates, are estimates only and the actual results
may be greater than or less than the estimates provided herein. There is no
certainty that it will be commercially viable or technically feasible to produce
any portion of the 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.
Mcfges may be misleading, particularly if used in isolation. A Mcfge conversion
ratio of 1 bbl: 6 Mcf is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
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