Painted Pony Petroleum Ltd.
TSX VENTURE : PPY.A
TSX VENTURE : PPY.B

Painted Pony Petroleum Ltd.

November 26, 2008 19:09 ET

Painted Pony Announces Q3, 2008 Financial Results

CALGARY, ALBERTA--(Marketwire - Nov. 26, 2008) - Painted Pony Petroleum Ltd. (TSX VENTURE:PPY.A) (TSX VENTURE:PPY.B) ("Painted Pony" or the "Company") is pleased to report the financial and operational accomplishments since the end of the second quarter of 2008. The Company has:

- Attained the 1,000 boe/d production milestone with September 2008 production averaging 1,060 boe/d,

- Exited the 3rd quarter with positive working capital of $21.3 million and no debt,

- Increased the bank credit facilities to $22.0 million, undrawn to date,

- Accumulated in Saskatchewan 43,880 net acres of developed and undeveloped land plus have access to 52,000 net acres of option lands and 88,700 net acres of developed and undeveloped land in BC; and

- Enjoyed third quarter 2008 field netbacks of $87.82/bbl for SE Saskatchewan oil.

Growing Production

The Company grew production 17% compared to the second quarter to average 925 boe/d in the third quarter, made up of 52% oil and liquids and 48% natural gas. The increase in sales was primarily the result of additional volumes from the Company's drilling program in SE Saskatchewan. In September 2008, sales averaged 1,060 boe/d, with light oil sales from Saskatchewan averaging 580 bbls/d and NE BC contributing 480 boe/d (95% gas and 5% NGL's).

Exploring for Light Oil in the Bakken Formation

Painted Pony carried out a very active third quarter exploration and development program with the drilling of 15 (7.8 net) wells, bringing total Company activity in the first nine months of 2008 to 37 (17.1 net) wells at a 91% net success rate. During the first nine months, the Company focused on delineating the Bakken formation, drilling 32 (13.1 net) Bakken horizontal wells.

Painted Pony's team has extended the prospective Bakken trend fifteen miles west to the Weyburn area through the drilling of exploration wells and has on production 6 (4.1 net) Bakken wells. Painted Pony now owns 29.7 net sections of land and has another 13.6 net sections under option in this area.

Exploring for Gas in the Montney, Bluesky/Gething and Shale Gas Formations

In the Cameron area in NE BC, Painted Pony has drilled 2 (1.0 net) wells at the end of the third quarter and early into the fourth quarter targeting the Bluesky/Gething zones. Both wells were successfully completed and are expected to be on production early in 2009.

Painted Pony has entered into a farm-out agreement on Company-owned lands in the Cypress, BC area to evaluate the Montney formation. The Company expects the first well will be drilled in the first quarter of 2009. Negotiations are on-going for an additional multi-well farm-out in the Cameron area to also evaluate the Montney formation. In the Blair area of NE BC, the Company and its partner continue to evaluate a shallow (400 to 1,200 meter) shale gas play.

Adding to Land Inventory

The Company continues to build its significant land position through farm-ins, freehold leasing and purchases at crown land sales. At September 30, 2008, the Company had 132,580 net acres of developed and undeveloped land, of which 85% were undeveloped, plus access to approximately 52,000 net acres of option lands in SE Saskatchewan. Additional land was purchased at the October 2008 crown land sale, bringing total undeveloped lands in Saskatchewan to 51,200 net acres. In NE BC, the Company has 88,700 net acres of developed and undeveloped land. These lands represent a multi-year drilling inventory for the Company of potential well locations in both Saskatchewan and BC.

Financial Resources

At the end of September 2008, Painted Pony had a positive working capital position of $21.3 million. This, in conjunction with the undrawn $22.0 million in credit facilities, and cash from operations will allow the Company to conduct ongoing exploration and development activities. With the significant recent developments in credit markets, capital markets and the decline in the price of oil, the Company will adjust its capital program as necessary to continue its conservative financial management. Planned capital expenditures in the last quarter of 2008 have been reduced as a result of weaker commodity prices. Painted Pony currently expects to participate in approximately 4.2 net wells during the fourth quarter of 2008 and 2.7 net wells in the first quarter of 2009.

Appreciation

The Company would like to acknowledge the support of the many stake holders: shareholders, government and regulatory staff, management, employees, directors, consultants and industry and business partners for their continued dedication in these challenging times. We believe the shareholders will be rewarded in the long term, as the resources contained within the Bakken and resource-style gas plays in BC are developed.

Readers are invited to visit the Company's updated presentation dated Nov 27, 2008 on our website at www.paintedpony.ca.



Financial and Operational Summary
(unaudited)
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Three months ended Nine months ended
Sept 30, 2008 Sept 30, 2008
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FINANCIAL
Revenue (before transportation,
interest and other) $ 7,188,501 $14,979,157
Funds flow from operations (1) $ 4,845,733 $ 9,866,416
Per share - basic and diluted(2) $0.16 $0.38
Net earnings $328,233 $5,199,328
Per share - basic and diluted(2) $0.01 $0.20
Capital expenditures $16,997,381 $60,176,319
Net working capital $21,336,077 $21,336,077
Total assets $100,933,521 $100,933,521
Shares outstanding
Class A 28,222,700 28,222,700
Class B 1,173,600 1,173,600
OPERATIONAL
Daily Sales Volumes
Oil sales (bbls/d) 457 308
Natural gas liquids (bbls/d) 24 15
Natural gas (Mmcf/d) 2.7 1.8
Total (boe/d) 925 622
Realized Prices
Oil ($/bbl) $118.34 $117.83
Gas ($/mcf) $8.11 $9.38
Field Operating Netbacks
Oil - SE Saskatchewan operations ($/bbl) $87.82 $86.06
Gas & liquids - NE BC operations ($/boe) $24.68 $30.33
Net Developed & Undeveloped Land
SE Saskatchewan (acres) 43,880 43,880
NE BC (acres) 88,700 88,700
Total (acres) 132,580 132,580
Wells Drilled(3)
Gross 15 37
Net 7.8 17.1
Net success rate 87% 91%
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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 Canadian
generally accepted accounting principles ("GAAP") as an indicator of the
Company's performance. Therefore reference to funds flow from operations
or funds flow from operations per share (basic and diluted) 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 funds 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 after the deemed conversion of
the Class B shares to Class A shares.

2. Class B shares are converted into Class A shares at $10 divided by the
greater of $1.00 and the Current Trading Price, defined as being the
weighted average trading price per share of Class A shares for the last
30 consecutive trading days.

3. "Gross and net wells drilled" excludes a salt water disposal well, and
includes a stratigraphic well. "Net wells drilled" refers to net revenue
interest. "Net success rate" excludes a stratigraphic well.


Advisory

This news release contains certain forward-looking statements, which include assumptions with respect to (I) drilling success (ii) production; (iii) future capital expenditures; and (iv) cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect.

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 plan 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, the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, environmental risks, competition, the lack of availability of qualified personnel or management, 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, stock market volatility, 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, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. 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 Corporation will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Corporation 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.

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.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Painted Pony Petroleum Ltd.
    Patrick R. Ward
    President & CEO
    (403) 475-0440
    (403) 238-1487 (FAX)
    or
    Painted Pony Petroleum Ltd.
    Joan E. Dunne
    Vice President, Finance & CFO
    (403) 475-0440
    (403) 238-1487 (FAX)
    or
    Painted Pony Petroleum Ltd.
    300, 602 - 12 Ave SW
    Calgary, AB T2R 1J3
    Website: www.paintedpony.ca