Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX
VENTURE:PPY.A) (TSX VENTURE:PPY.B) is pleased to report the
financial results for the three months ended September 30, 2011 and
to provide an operational update. Highlights include:
-- Production averaged 4,064 boe per day (weighted 65% gas and 35% oil and
liquids), an increase of 32% from the third quarter of 2010;
-- Painted Pony drilled a total of 18 (13.2 net) wells during the quarter,
including 13 (10.3 net) in Saskatchewan and 5 (2.9 net) wells in British
Columbia. To date in 2011, the Company has drilled a total of 39 (27.3
net) wells;
-- In northeast British Columbia, operating and transportation costs
declined by 32% to $7.66 per boe in the third quarter of 2011 as
compared to the same period in 2010;
-- The Company completed and tested a 50% working interest lower Montney
horizontal well at d-44-C/94-B-16 which tested in excess of 24 mmcf per
day at 2,700 psi;
-- Two (0.4 net) non-operated Montney wells at Cameron/Kobes were completed
in the third quarter and tested at rates of 10.9 mmcf per day and 10.8
mmcf per day;
-- Subsequent to quarter-end, the Company commenced production testing on
the 100% working interest Blair a-41-F/94-B-16 pad. The upper Montney
well on this pad produced at an average of 10.5 mmcf per day at over 700
psi for the first seven days on production;
-- The Company has negotiated an expansion to the Blair Creek gas plant,
which will increase gross processing capacity from 24 mmcf per day to 70
mmcf per day. Painted Pony's firm share of this capacity will increase
to 32 mmcf per day. This expansion, which will be fully funded by the
midstream operator, is expected to be completed by the end of the second
quarter of 2012. Additionally, the Company is constructing a new
production facility at its d-44-C/94-B-16 pad, which will deliver
production from the northern Cameron area directly into the Spectra
Energy Transmission sales system; and
-- Painted Pony exited the quarter with a positive working capital position
of $6.7 million and an $80 million undrawn credit facility. Subsequent
to quarter-end, the Company closed a bought deal financing for total
proceeds of $103.8 million before costs.
PRODUCTION
Painted Pony's sales volumes averaged 4,064 boe per day during
the three months ended September 30, 2011, an increase of 32%
compared to the third quarter of 2010 and a 13% increase over the
second quarter of 2011. Volumes were weighted 65% towards gas,
compared to 43% in the comparable 2010 period.
In Saskatchewan, oilfield operations have gradually resumed as
the wet surface conditions which have impeded industry activity
since spring 2011 have begun to subside. Third quarter sales
volumes averaged 1,365 boe per day compared to 1,422 boe per day in
the second quarter of 2011. Solution gas and associated liquids
sales from the Midale/Huntoon area resumed in late September after
repairs were completed at a midstream gas processing facility.
Sales volumes in northeast British Columbia averaged 2,699 boe
per day during the third quarter of 2011, compared to 2,171 boe per
day in the second quarter of 2011. This represents an increase of
24% from the second to the third quarter of 2011 and a 99% increase
from the third quarter of 2010.
BRITISH COLUMBIA ACTIVITY
Painted Pony continues to delineate and develop its Montney gas
assets in northeast British Columbia. During the third quarter of
2011, the Company participated in the drilling of 4 (1.9 net)
horizontal Montney wells and increased its total land position to
135,115 net acres (211 net sections). The Company currently has
85,200 net acres (133 net sections) of Montney rights.
On the Cameron/Kobes block, 3 (0.9 net) Lower Montney wells were
drilled and completed. The 50% working interest well at
d-44-C/94-B-16 tested at a stabilized rate of 24.5 mmcf per day,
and at the c-A58-J/94-B-9 and a-C10-J/94-B-9 wells (both 20%
working interest), initial production rates were 10.9 mmcf per day
and 10.8 mmcf per day respectively. Two new production facilities
(one operated and one non-operated) are presently under
construction on the Cameron/Kobes block. Both are expected to be on
stream by year end 2011, adding approximately 50 mmcf per day gross
additional gas processing capacity to the area.
At Blair/Town, Painted Pony drilled one (1.0 net) well in the
third quarter of 2011 at a-41-F/94-B-16. A second (1.0 net) well on
this pad has been subsequently rig-released since the end of the
third quarter. Initial combined production rates from this pad were
approximately 13.5 mmcf per day. This includes 10.5 mmcf per day
from the upper Montney well plus 3.0 mmcf per day from the lower
Montney well. Production rates from the lower Montney well on this
pad have been constrained by wellbore operational problems which
arose during completion operations. The Company is investigating
alternatives for remedial operations. The existing Blair Creek
midstream gas processing facility is being expanded from 24 mmcf
per day to a total capacity of 70 mmcf per day, of which Painted
Pony's firm share will increase to 32 mmcf per day. The expansion
is scheduled to be completed by the end of the second quarter of
2012.
SASKATCHEWAN ACTIVITY
In Saskatchewan, the Company drilled a total of 13 (10.3 net)
wells, 11 (8.3 net) Bakken wells and 2 (2.0 net) Mississippian
wells, during the third quarter of 2011. Sales of solution gas and
associated liquids from the Midale-Huntoon area resumed late in the
third quarter after repairs at a non-operated midstream facility
were completed. In the Midale area, the gathering system was
expanded and seven single well batteries were tied-in to the
Company's existing facility. This expansion eliminates the need for
the Company to truck produced volumes from individual well sites.
In addition to the gathering system expansion, the Midale battery
was connected to a third party oil sales line. These facility
upgrades are expected to help lower area operating costs during the
fourth quarter of 2011.
FINANCIAL RESOURCES
Subsequent to quarter-end, the Company closed a bought deal
financing for total proceeds of $103.8 million before costs. The
Company has also announced the conversion of its Class B shares to
Class A shares, subject to necessary regulatory approvals,
effective on December 1, 2011. On the effective date, the holders
of the 1,173,600 outstanding Class B shares will receive 0.8250 of
a Class A share in exchange for each one (1) Class B share held,
resulting in an aggregate of up to 968,220 Class A shares being
issued, subject to rounding adjustments.
OUTLOOK
Painted Pony's development of the Montney asset continues. At
Blair/Town, the corporate focus has shifted to developing the 100%
working interest lands, and initial results have been encouraging.
The Company intends to drill 4 (3.5 net) Montney wells in British
Columbia and 9 (4.4 net) wells in Saskatchewan during the fourth
quarter of 2011. For 2012, Painted Pony currently plans to spend
approximately $200 million on capital projects, to drill 25 (19.8
net) wells in British Columbia and 27 (18.0 net) wells in
Saskatchewan.
INVESTOR RELATIONS
Interested parties are invited to visit the Company's website to
view an updated presentation. Painted Pony's Class A Shares and
Class B Shares trade on the TSX Venture Exchange under the symbols
"PPY.A" and "PPY.B", respectively.
Financial and Operational Highlights
(unaudited)
----------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2011 2010 2011 2010
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Financial (000s, except per
share)
Petroleum and natural gas
revenue (before royalties) $ 16,647 $ 14,764 $ 53,408 $ 41,662
Funds flow from
operations(1) $ 9,159 $ 9,123 $ 31,633 $ 25,983
Per share - basic(2) $ 0.15 $ 0.19 $ 0.55 $ 0.58
Per share - diluted(3) $ 0.15 $ 0.19 $ 0.53 $ 0.57
Cash flow from operating
activities $ 8,586 $ 7,699 $ 31,995 $ 25,275
Net income $ 4,765 $ 2,258 $ 5,085 $ 4,709
Per share - basic(2) $ 0.08 $ 0.05 $ 0.09 $ 0.10
Per share - diluted(3) $ 0.08 $ 0.05 $ 0.09 $ 0.10
Capital expenditures(4) $ 45,924 $ 20,670 $ 108,416 $ 88,175
Working capital $ 6,709 $ 22,454 $ 6,709 $ 22,454
Total assets $ 360,227 $ 223,347 $ 360,227 $ 223,347
Shares outstanding
Class A 59,633,673 50,975,700 59,633,673 50,975,700
Class B 1,173,600 1,173,600 1,173,600 1,173,600
Diluted weighted-average
shares 61,334,305 47,384,870 59,299,501 45,746,842
Operational
Daily sales volumes
Oil (bbls per day) 1,312 1,687 1,464 1,643
Condensate (bbls per day) 41 28 51 26
NGL's (bbls per day) 50 38 94 26
Gas (mcf per day) 15,965 7,961 13,715 5,720
Total (boe per day) 4,064 3,080 3,895 2,648
Realized prices
Oil (per bbl) $ 89.48 $ 75.94 $ 92.16 $ 76.92
Gas (per mcf) $ 3.60 $ 3.65 $ 3.76 $ 4.09
Field operating netbacks
British Columbia (per boe) $ 14.18 $ 10.74 $ 14.67 $ 11.63
Saskatchewan (per boe) $ 51.56 $ 54.01 $ 57.90 $ 54.85
Company combined (per boe) $ 26.73 $ 34.97 $ 32.66 $ 38.90
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1. This table contains the term "funds flow from operations", which should
not be considered an alternative to, or more meaningful than "cash flow
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 flow 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, consistent with the calculations of earnings
per share.
2. Basic per share information is calculated on the basis of the weighted
average number of Class A shares outstanding in the period.
3. Diluted per share information reflects the potential dilution effect of
options and the convertible Class B shares, each of which may be anti-
dilutive. Net 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.
4. Including cash expenditures and non-cash decommissioning obligations and
share-based payments.
Advisory
This news release contains certain forward-looking information
(collectively referred to herein as "forward looking statements")
within the meaning of applicable Canadian securities laws.
Forward-looking statements are often, but not always, identified by
the use of words such as "anticipate", "believe", "plan",
"potential", "intend", "objective", "continuous", "ongoing",
"encouraging", "estimate", "expect", "may", "will", "project",
"should", or similar words suggesting future outcomes. These
forward-looking statements 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.
Forward-looking statements are based upon the opinions and
expectations of management of the Company as at the effective date
of such statements and, in some cases, information supplied by
third parties. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon
reasonable assumptions and that information received from third
parties is reliable, it can give no assurance that those
expectations will prove to have been correct. Forward-looking
statements are subject to certain risks and uncertainties that
could cause actual events or outcomes to differ materially from
those anticipated or implied by such forward-looking
statements.
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) Painted Pony will
have sufficient financial resources with which to conduct the
capital program; (v) the accuracy of geological and geophysical
data and Painted Pony's interpretation of that data; (vi)
production rates in 2011 and 2012 are expected to show growth from
2010 and from the third quarter of 2011; (vii) that production from
new wells will be substantially similar to production rates
associated with existing wells in the vicinity of the Company's
properties; (viii) the continued ability of the Company to generate
internal cash flow and the availability of capital on acceptable
terms; and (ix) 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 management's assessment of Painted Pony's
future plans and operations, number, type and timing of wells to be
drilled, the planning and development of certain prospects,
production estimates, and expected production growth 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
and forgoing 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 Production Estimates
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.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this news release.
Contacts: Painted Pony Petroleum Ltd. Patrick R. Ward President
& CEO (403) 475-0440 (403) 238-1487 (FAX) Painted Pony
Petroleum Ltd. Joan E. Dunne Vice President, Finance & CFO
(403) 475-0440 (403) 238-1487 (FAX) Painted Pony Petroleum Ltd.
300, 602 - 12 Ave SW Calgary, AB T2R 1J3www.paintedpony.ca
Painted Pony Petroleum Ltd., Class A (TSXV:PPY.A)
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