PetroBakken Energy Ltd.
TSX : PBN

PetroBakken Energy Ltd.

November 10, 2009 01:08 ET

PetroBakken Announces Third Quarter Results and Current Production of 44,500 boepd

CALGARY, ALBERTA--(Marketwire - Nov. 10, 2009) - PetroBakken Energy Ltd. ("PetroBakken") (TSX:PBN) is pleased to announce our third quarter 2009 financial and operating results, highlighted by the successful completion of the strategic transaction between Petrobank Energy and Resources Ltd. ("Petrobank") and TriStar Oil & Gas Ltd. ("TriStar") that resulted in the creation of PetroBakken. The transaction involved the spin out of Petrobank's Canadian Business Unit ("CBU") and the subsequent combination with TriStar to create a premier Southeast Saskatchewan light oil producer that began trading on the Toronto Stock Exchange on October 6, 2009.

As part of the strategic business combination and subsequent rationalization of assets, PetroBakken has initiated a divestiture process to sell the majority of our Alberta producing assets to further focus on high netback light oil and high impact resource plays. Upon successful completion of the asset disposition, PetroBakken will have operations focused primarily in Southeast Saskatchewan and Northeast British Columbia.

HIGHLIGHTS

(Third quarter results, unless otherwise specified, are for the pro forma PetroBakken entity, including the acquisition of TriStar.)

- PetroBakken's production averaged 41,526 boepd in the third quarter of 2009.

- Non-Alberta production averaged 32,448 boepd in the third quarter, 94% weighted to light oil.

- Current production is approximately 44,500 boepd, of which 35,500 boepd is non-Alberta production.

- Strong non-Alberta operating netbacks (excluding hedging gains) of $46.55/boe with operating costs of $7.60/boe.

- Total Company operating netbacks (excluding hedging gains) of $40.52/boe with operating costs of $8.81/boe.

- PetroBakken drilled 89 (67.3 net) wells in the third quarter; including 71 (51.4 net) in the Bakken.

- PetroBakken's forecast 2009 exit production, excluding the anticipated Alberta asset sales, is expected to be above 37,000 boepd (more than 95% light oil).



THIRD QUARTER PRO FORMA FINANCIAL & OPERATING HIGHLIGHTS (unaudited)

PBN Pro forma(1)
--- ------------
Operations
----------
Average daily production
Non-Alberta - oil and NGL (bbls) 14,684 30,442
Non-Alberta - natural gas (mcf) 8,352 12,030
----- ------
Total Non-Alberta (boe) 16,076 32,448

Alberta - oil and NGL (bbls) 501 4,063
Alberta - natural gas (mcf) 7,825 30,089
----- ------
Total Alberta (boe) 1,805 9,078
Total Company (boe) 17,881 41,526
Financial
---------
($000's, except where noted)
Net debt (7) 9,772 1,035,715
Shares outstanding (000's) 109,800 171,856
Capital expenditures 107,820 190,250

Non-Alberta operating netback (2)(3)
Oil and NGL revenue ($/bbl) (4) 67.90 67.46
Natural gas revenue (3)(4) 3.12 2.92
Oil, NGL and natural gas revenue (3)(4) 63.65 64.37
Royalties (5) 10.30 10.22
Production expenses 6.04 7.60
---- ----
Operating netback (6) 47.31 46.55
Royalties as a % of revenue 16% 16%

Alberta operating netback (2)(3)
Oil and NGL revenue ($/bbl) (4) 59.95 54.51
Natural gas revenue (3)(4) 4.01 3.51
Oil, NGL and natural gas revenue (3)(4) 34.04 36.03
Royalties (5) 3.57 4.47
Production expenses 13.86 13.27
----- -----
Operating netback (6) 16.61 18.29
Royalties as a % of revenue 10% 12%

Total Company operating netback (2)(3)
Oil and NGL revenue ($/bbl) (4) 67.65 65.93
Natural gas revenue (3)(4) 3.55 3.34
Oil, NGL and natural gas revenue (3)(4) 60.66 58.30
Royalties (5) 9.62 8.97
Production expenses 6.83 8.81
---- ----
Operating netback (6) 44.21 40.52
Royalties as a % of revenue 16% 15%

(1) Combines the third quarter results of PetroBakken (Petrobank's Canadian
Business Unit) and TriStar Oil & Gas Ltd.
(2) Non-GAAP measure. See "Non-GAAP Measures" in this press release.
(3) Six mcf of natural gas is equivalent to one barrel of oil equivalent
("boe").
(4) Net of transportation expenses.
(5) Includes Saskatchewan Resource Surcharge.
(6) Excludes hedging activities.
(7) Pro forma net debt includes PetroBakken and TriStar net debt at
September 30, 2009, plus cash consideration paid to TriStar shareholders
and transaction costs associated with the TriStar acquisition.


PetroBakken's third quarter financial statements and management's discussion and analysis ("MD&A") are available on www.sedar.com and www.petrobakken.com. These third quarter financial statements only include the results of Petrobank's CBU and exclude any assets, liabilities or operational results of TriStar. The acquisition of TriStar will first be reflected in PetroBakken's December 31, 2009 consolidated financial statements and MD&A.

This press release provides an operational update for the pro forma results of PetroBakken for the three month period ending September 30, 2009, by combining the third quarter results of PetroBakken (Petrobank's CBU) and the results of TriStar.

OPERATIONAL UPDATE

PetroBakken's production totalled 41,526 boepd in the third quarter. We continue to add production from both the Bakken and Mississippian reservoirs in southeast Saskatchewan through horizontal drilling. We are now producing approximately 44,500 boepd. During the third quarter, 89 (67.3 net) wells were drilled, including 71 (51.4 net) Bakken development wells. The result of the expanded drilling program was an increase in production from our non-Alberta assets to 32,448 boepd, and currently these assets are producing approximately 35,500 boepd. Our non-Albertan production is expected to continue to increase through the fourth quarter with 13 rigs now working in southeast Saskatchewan, compared to only five rigs in June 2009. Activity and production growth through the balance of 2009 is expected to remain strong as we complete the inventory of wells awaiting completion and maintain our new drilling pace on our Bakken and conventional Mississippian pools. We are well positioned to exceed our exit 2009 production guidance of 37,000 boepd (after anticipated Alberta asset sales).

Each new Bakken and Mississippian well contributes to a growing base of stable long term production with an initial phase of higher rate productivity. We had a very active drilling program through 2008 which was reduced dramatically in the first half of 2009 in response to lower world oil prices. Production from all PetroBakken's non-Alberta wells brought on-line before the end of 2008 are now past their initial high decline production phase and are exhibiting more modest declines of approximately 26% per annum.

PetroBakken delivers high operating netbacks, a direct result of focusing on light oil particularly in the Bakken formation of Southeast Saskatchewan that combines high realized oil prices, low royalties and low production expenses. Our third quarter operating netback in our core non-Alberta operating areas was $46.55/boe with production expenses of $7.60/boe.

SASKATCHEWAN

Through our experience with various drilling and completion strategies we made the clear observation that more fracture stimulations results in increased oil production and ultimate recoveries. The most cost effective way to maximize the fracture stimulations within a section of land is using a strategy of drilling two parallel horizontal legs from a single vertical well bore (bilateral horizontal) and applying high intensity fracture stimulations along each leg. A single leg, 1,400 metre-long horizontal well costs $1.7 million to drill, complete and put on production, whereas the same costs for a 1,400 metre long bilateral horizontal well are only $2.3 million. This doubles our fracture stimulation intensity for minimal additional cost. Our Bakken drilling program has shifted to drilling primarily bilateral horizontal wells with 15 stage fracture stimulations per horizontal leg, for a total of 30 stimulations in each well. With 30 fracture stimulations per well, more time is required to completely recover the load fluid from the fracture stimulations which creates a situation where oil rates increase as the load fluid is recovered. Recently 10 bilateral wells were put on production at initial rates between 250 and 300 bopd with relatively flat to increasing production rates. Through the application of leading edge technology to over 1,300 identified Bakken drilling locations, the Bakken is expected to provide strong organic growth for years to come.

PetroBakken is also strongly positioned in various Southeast Saskatchewan conventional oil plays in the Midale, Frobisher, Alida and Tilston formations. Current production of approximately 10,000 boepd from these Mississippian aged reservoirs provides a stable platform of low decline production. Our more than 500,000 net undeveloped acres of land in the area provides a low risk development inventory of over 350 locations and the opportunity for seismically-driven step-out and exploration drilling.

BEYOND THE BAKKEN

Additional long-term growth is expected to come from PetroBakken's large land position in Northeast British Columbia within the Montney and Horn River natural gas resource plays. We have 17 sections of land (100% working interest) with Montney potential in the Monias area of northeast British Columbia, with a further 97 (84 net) sections north of Fort Nelson in the Horn River Basin. PetroBakken is well positioned to develop these massive unconventional resource plays given the experience of our technical team, having successfully drilled and operated over 450 horizontal wells with multi-stage fracture stimulations.

At Monias, our first Montney horizontal well was drilled in the fourth quarter of 2008, adjacent to our 5.0 mmcfpd gas plant. Based on the success we had with that well, a second well was drilled during the third quarter of 2009 and is currently being completed. The new well is a dual-leg horizontal well with high density fracture stimulation designed to further increase production rates and expected ultimate gas recoveries.

Our first horizontal well in the Horn River Basin was drilled in the first quarter of 2009 in an area that offers multi-season access due to our proximity to roads. Based on the successful results obtained from that well, we plan to tie the well in this winter. We also plan to drill a second well in the area later this year. The activity in this area will enable us to expand our knowledge in the area and to test additional geological concepts.

Our immediate operational goal for both of these prolific resource plays is to identify optimal technology applications that lower the gas price required to provide a competitive rate of return that will ultimately allow us to initiate major full-scale developments.

ALBERTA ASSET DISPOSITION PROCESS UPDATE

Production from our Alberta assets averaged 9,078 boepd in the third quarter. We plan to sell the majority of our Alberta production to focus on high netback light oil and high impact resource plays, such as the Bakken play in Southeast Saskatchewan and Montney and Horn River plays in Northeast British Columbia. Proceeds from the contemplated disposition will be used to further solidify our strong balance sheet. The sale process is underway with data rooms open enabling interested parties the opportunity to review the assets. Results of the process are expected to be known later this year.

CAPITALIZATION

PetroBakken has a $1.05 billion borrowing base credit facility that is comprised of a $900 million oil and gas reserve-based revolver, and a six-month $150 million short-term non-revolving credit facility. Upon completion of the TriStar acquisition, PetroBakken had approximately $925 million drawn on the credit facility.

As mentioned, PetroBakken has commenced a disposition process for the majority of its Alberta assets. Any proceeds received from these sales are to be used to repay the $150 million non-revolving credit facility. Following the sale of the Alberta assets, the ratio of debt to run-rate cash flow is expected to be below one times, providing excellent financial flexibility.

Following the acquisition of TriStar on October 1, 2009, PetroBakken has 171,856,298 common shares outstanding. 4,037,500 stock options, 2,008,360 incentive shares and 2,022 deferred common shares have been granted to directors, officers and employees.

DIRECTOR AND OFFICER CHANGES

We are pleased to announce that PetroBakken has added to its senior management team with the appointment of Mary Bulmer as Vice President, Human Resources and William (Bill) A. Kanters as Vice President, Business Development and Corporate Planning.

Mary Bulmer has worked in Human Resources in the energy sector for over 19 years, most recently as VP HR & Corporate Services at OPTI Canada Inc. Mary has a Bachelor of Arts from the University of Western Ontario and a Masters of Science from the University of Calgary.

Bill Kanters most recently worked as Managing Director, Investment Banking for Haywood Securities Inc. in their oil & gas group where he was involved in public and private company financings and corporate finance advisory work. Bill holds an MBA, an MSc in Geological Sciences, and a BSc in Earth Science (Geophysics).

We announce that Brett Herman has resigned from the Board of Directors effective November 9, 2009 to focus on his new business endeavours. Brett provided strong leadership to the TriStar team and we wish him continued success.

INVESTOR CONFERENCE CALL

Management of both PetroBakken and Petrobank will be holding a conference call for investors, financial analysts, media and any interested persons on Thursday, November 12, 2009 at 9:00 a.m. (Mountain Time) to discuss PetroBakken and Petrobank's third quarter 2009 financial and operating results.



The investor conference call details are as follows:

Live audio
webcast: http://events.digitalmedia.telus.com/petrobank/111209/index.php
Live call
dial-in
numbers: 416-340-2216 / 866-226-1792

Replay
dial-in
numbers: 416-695-5800 / 800-408-3053
Replay
pass code: 5271156


PetroBakken Energy Ltd. is a premier light oil production company combining high growth, long-life Bakken reserves and production with legacy conventional light oil assets, delivering industry leading operating netbacks, strong cash flows and production growth. PetroBakken has a multi-year inventory of Bakken and light oil development locations, along with significant future development opportunities in the Horn River and Montney gas resource plays in northeast BC. Our strategy is to deliver accretive production and reserves growth, along with an attractive dividend yield.

Non-GAAP Measures. This press release contains financial terms that are not considered measures under Canadian generally accepted accounting principles ("GAAP"), such as net debt and operating netback. These measures are commonly utilized in the oil and gas industry and are considered informative for management and shareholders. Specifically, net debt is used to evaluate financial leverage and includes bank debt plus and accounts payable and accrued liabilities, less current assets. Management considers operating netback important as it is a measure of profitability per barrel of production. Net debt and operating netbacks may not be comparable to those reported by other companies nor should they be viewed as an alternative to net income or other measures of financial performance calculated in accordance with GAAP.

Forward Looking Statements. Certain information provided in this press release constitutes forward-looking statements. The words "anticipate", "expect", "project", "estimate", "forecast" and similar expressions are intended to identify such forward-looking statements. Specifically, this press release contains forward-looking statements relating to financial results, results from operations and the timing of certain projects. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. You can find a discussion of those risks and uncertainties in our Canadian securities filings. Such factors include, but are not limited to: general economic, market and business conditions; fluctuations in oil prices; the results of exploration and development drilling, recompletions and related activities; timing and rig availability, outcome of exploration contract negotiations; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by PetroBakken that actual results achieved during the forecast period will be the same in whole or in part as those forecast. Except as may be required by applicable securities laws, PetroBakken assumes no obligation to publicly update or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

Contact Information

  • PetroBakken Energy Ltd.
    John D. Wright, Chairman of the Board of Directors
    and Chief Executive Officer
    (403) 750 4400
    or
    PetroBakken Energy Ltd.
    R. Gregg Smith
    President and Chief Operating Officer
    (403) 750 4400
    or
    PetroBakken Energy Ltd.
    Corey C. Ruttan, Executive Vice President,
    Chief Financial Officer and Director
    (403) 750 4400
    or
    PetroBakken Energy Ltd.
    Bill A. Kanters
    Vice President Business Development and Corporate Planning
    (403) 750 4400
    (403) 266 5794 (FAX)
    ir@petrobakken.com
    www.petrobakken.com