Painted Pony Petroleum Ltd.

Painted Pony Petroleum Ltd.

August 26, 2010 19:15 ET

Painted Pony Announces Second Quarter 2010 Financial Results

CALGARY, ALBERTA--(Marketwire - Aug. 26, 2010) - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX VENTURE:PPY.A) (TSX VENTURE:PPY.B) is pleased to announce its second quarter 2010 financial results.


During the second quarter of 2010, Painted Pony continued to enjoy success both operationally and financially, with quarterly results and ongoing operational highlights including:

    generating funds flow from operations in the first half of 2010 of $16.8 million ($0.36 per diluted share), up 200% over first half 2009 on a per share basis;
    growing daily production to average 2,532 boe/d (weighted 62% oil and liquids and 38% gas) for the quarter, up 93% over the second quarter of 2009, and 9% over the first quarter of 2010; and
    realizing second quarter 2010 field netbacks of $52.24 per bbl for oil, on sales prices averaging $75.04 per bbl.

Subsequent to the second quarter, the Company has:

    increased production during the first three weeks of August 2010 to average 3,010 boe/d (weighted 58% oil and liquids and 42% gas) based on field estimates, an increase of 19% over the second quarter of 2010; and
    one (0.35 net) well currently drilling under a farm-in agreement in the Flat Lake area on 27 (9.4 net after earning) contiguous sections of land with Bakken rights.



Saskatchewan continues to be the engine that drives growth for Painted Pony. The second quarter of 2010 was unusually wet in southeast Saskatchewan, and like all other operators in the area, Painted Pony experienced several operational delays as a result. In spite of these challenges, the Company has continued to deliver steady production growth with strong well results. Daily oil production for the quarter increased 180% over the second quarter of 2009.

During the second quarter of 2010, Painted Pony drilled four (3.1 net) successful horizontal Bakken oil wells, which have all been put on production. To date in the third quarter, Painted Pony has drilled eight (7.2 net) horizontal Bakken wells in the Huntoon and Midale areas, which are in various stages of completion. During the remainder of 2010, the Company plans to drill an additional 15 (10.2 net) wells in Saskatchewan.

In the Huntoon area, solution gas and liquids conservation commenced late August with the battery being tied into an existing third-party gas plant; the balance of the wells in the area are expected to be tied-in during the fourth quarter.

Painted Pony has executed a farm-in agreement in the Flat Lake area on a 50% interest in approximately 17,100 (6,000 net after earning) acres of land targeting Bakken oil; one (0.35 net) well is currently being drilled. Several prolific Bakken wells have been drilled in the Flat Lake area to-date by competitors; this farm-in arrangement gives Painted Pony a material land base in a new area with significant growth potential.

In addition to ongoing development drilling in core areas, the Company has drilled and cased one (0.75 net) vertical exploration well targeting light oil at Wapella. Completion is expected later this quarter. A minimum of one additional well is planned for the area during the balance of the year. The Company has aggregated over 25,000 net acres of land in the area, and has access to an additional 11,300 (8,500 net after earning) acres secured under the terms of a rolling farm-in agreement.



Painted Pony has continued to achieve strong results in the Montney play in the first half of 2010. As previously announced on July 26, 2010, two (0.4 net) horizontal wells were successfully drilled and completed in the lower Montney at test rates of 8.7 mmcf/d and 7.9 mmcf/d. One well was placed on production in the third quarter of 2010, with the other well expected to be on production once construction of additional facilities is completed. These two wells are located within the Cameron/Kobes block, where the Company holds 19,700 net acres (approximately 31 net sections) with Montney rights.

Immediately north on the Blair/Town block, Painted Pony's first three operated Montney wells were brought on stream in the second quarter of this year. The Company is in the process of licensing a number of Montney locations for the fourth quarter of 2010 and 2011. The Company intends to drill three (1.8 net) additional Montney wells by the end of this year.

Painted Pony's Montney assets have become an important part of the Company's future. Given an advantageous location with access to existing gas transmission and processing, a favourable royalty regime, all-season access and lower operating cost sweet gas, the economics of this development are believed to be compelling.


The Company is planning to drill two (1.0 net) Buckinghorse shale wells in the third quarter of 2010 in the Blair/Town area.


Daily production grew to average 2,532 boe/d (weighted 62% oil and liquids and 38% gas) for the second quarter, up 93% over the second quarter of 2009, and 9% over the first quarter of 2010. During the first three weeks of August 2010, production averaged approximately 3,010 boe/d (weighted 58% oil and liquids and 42% gas) based on field estimates, an increase of 19% over the second quarter of 2010.


Through technical excellence, financial discipline and excellent assets in both oil and gas, Painted Pony has continued to execute a steady growth plan. In the fourth quarter of 2010, the Company will continue to pursue light oil operations in Saskatchewan and will drill for Montney gas in British Columbia. With the $44.1 million (before costs) raised in the equity financing on August 25, 2010, Painted Pony will focus on executing its drilling program while maintaining financial flexibility. Painted Pony has exposure to several of the most economic resource plays in North America; light oil exploration and development areas in Saskatchewan and significant gas development potential in the Montney in British Columbia.


Interested parties are invited to visit the Company's website on Friday, August 27, 2010 to view an updated presentation dated August 26, 2010. Painted Pony 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


  Three months ended     Six months ended  
   June 30,     June 30,  
  2010     2009     2010     2009  
Financial (000's except per share)                              
Petroleum and natural gas revenue (before royalties) $ 12,752     $ 4,889     $ 26,898     $ 9,449  
Funds flow from operations(1) $ 7,647     $ 1,826     $ 16,813     $ 3,716  
  Per share – basic(2) $ 0.17     $ 0.06     $ 0.37     $ 0.12  
  Per share – diluted(2) $ 0.16     $ 0.06     $ 0.36     $ 0.12  
Cash flow from operating activities $ 8,298     $ 531     $ 17,529     $ 2,030  
Net earnings (loss) $ 350     $ (1,965 )   $ 1,031     $ (3,563 )
  Per share – basic and diluted(2) $ 0.01     $ (0.06 )   $ 0.02     $ (0.11 )
Capital expenditures(3) $ 32,148     $ 4,892     $ 67,391     $ 12,422  
Net working capital $ (8,592 )   $ 22,290     $ (8,592 )   $ 22,290  
Total assets $ 173,995     $ 108,308     $ 173,995     $ 108,308  
Shares outstanding                              
  Class A   44,136,700       35,222,700       44,136,700       35,222,700  
  Class B   1,173,600       1,173,600       1,173,600       1,173,600  
Daily sales volumes                                
  Oil (bbls/d)   1,518       543       1,620       563  
  Condensate (bbls/d)   23       23       25       25  
  NGL's (bbls/d)   20       15       19       13  
  Gas (mcf/d)   5,826       4,395       4,581       4,015  
  Total (boe/d)   2,532       1,313       2,428       1,270  
Realized prices                                
  Oil (/bbl) $ 75.04     $ 66.85     $ 77.44     $ 58.95  
  Gas (/mcf) $ 4.07     $ 3.58     $ 4.48     $ 4.35  
Field operating netbacks                                
  Oil (/bbl) $ 52.24     $ 42.84     $ 55.66     $ 37.31  
  Gas & NGL's (/boe) $ 12.59     $ 4.08     $ 12.91     $ 7.77  
  Company combined (/boe) $ 36.36     $ 20.10     $ 41.43     $ 20.86  
Wells drilled(4)                                
  Gross     4       2       19       5  
  Net     3.1       2.0       15.7       4.5  
  Net success rate     100 %     100 %     94 %     100 %

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. Funds flow from operations and funds flow from operations per share (basic and diluted) do not have any standardized meaning prescribed by GAAP 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 and to repay debt. The reconciliation between funds flow from operations and cash flow from operating activities can be found in the Company's "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. 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 the weighted average trading price of the Class A shares for the last 30 consecutive trading days.

3. Including Asset Retirement Costs and capitalized Stock-Based Compensation.

4. Does not include wells drilled under farmout agreements.

The information contained herein is for information purposes only and is not an invitation to purchase securities listed on TSX Venture Exchange and/or Toronto Stock Exchange. TMX Group Inc. and its affiliates do not endorse or recommend any securities referenced. Neither TMX Group Inc. nor its affiliated companies represents, warrants or guarantees the accuracy or the completeness of the information. You should not rely on the information contained herein for any trading, business or financial purposes. TMX Group Inc. and its affiliates assume no liability for any errors or inaccuracies herein or any use or reliance upon this information.

Painted Pony Petroleum Ltd. was recognized as a TSX Venture 50® company in 2010. TSX Venture 50 is a trade-mark of TSX Inc. and is used under license.


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 2010; (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 the second half of 2010 are expected to show growth from the first half of 2010; (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 foregoing 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 our 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 ( or Painted Pony's website (

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.

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.

Contact Information

  • 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 1J3
    (403) 475-0440
    (403) 238-1487 (FAX)