BlackPearl Resources Inc.

BlackPearl Resources Inc.

February 27, 2012 16:30 ET

BlackPearl Announces 2011 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - Feb. 27, 2012) - BlackPearl Resources Inc. ("BlackPearl" or the "Company") (TSX:PXX)(FIRST NORTH:PXXS) is pleased to announce its financial and operating results for the three and twelve months ended December 31, 2011.

Highlights and accomplishments in 2011 included:

  • Oil and gas production increased 10% in 2011 to 7,620 boe/day; Q4 2011 production was 8,734 boe/day, up 20% from the prior year; This growth was achieved during a period when we sold properties that were producing over 1,000 boe/day;
  • Oil and gas revenues increased 26% in 2011 to $179 million and cash flow from operations increased 22% to $77 million. Q4 2011 revenues were up 50% to $58 million compared to Q4 2010 and cash flow from operations in the fourth quarter was $27.2 million, an increase of 40% from 2010;
  • Net income increased to $18.9 million in 2011 compared with a net loss of $0.1MM in 2010;
  • Maintained a strong balance sheet with year-end working capital of $38 million and no debt;
  • As previously reported, oil and gas reserves increased 44% in 2011 to 35.8 million barrels of oil equivalent and best estimate contingent resource increased to 752 million barrels of oil equivalent;
  • At Blackrod, we successfully completed construction of the SAGD pilot facilities and commenced steam injection in June 2011. Following a warm up period, the production well was put on pump in September. Oil production from the pilot well is now over 300 barrels per day with an instantaneous steam oil ratio under 3, both of which are exceeding our model expectations. We anticipate the well should reach its ultimate productive potential of 500 to 800 barrels per day in the next six to twelve months. The 80,000 barrel per day commercial development application is nearing completion and will be submitted to regulatory bodies in the second quarter of 2012, with the first phase of the project designed for 20,000 barrels per day;
  • At Mooney, construction of our ASP (Alkali Surfactant Polymer) injection facility was completed and ASP injection commenced in August 2011. We have indications that the reservoir is being re-pressurized and we anticipate increased oil production by the end of 2012. In addition, we successfully drilled nine horizontal wells in 2011 on future development lands at Mooney. Further drilling on these lands is planned in 2012. These wells will be produced conventionally and then added to the ASP flood in the future;
  • At Onion Lake, in 2011 we drilled 83 vertical wells as part of our continuing primary development program. In addition to increasing our production, this program has identified further locations that we can add to our development drilling inventory. We will continue with our primary development program with over 40 wells planned in 2012. Concurrently with our primary development, we continue to advance our Onion Lake thermal development and in 2011 we filed a 12,000 barrel per day SAGD development application with regulatory authorities.

John Festival, President of BlackPearl, commenting on 2011 activities indicated that "we are very pleased that we were able to achieve a number of key milestones in 2011 - we initiated the SAGD pilot at Blackrod, we constructed and implemented the first phase of our ASP flood at Mooney and we continued primary development of our Onion Lake assets as well as filed a SAGD development application for the area. All of these are important steps in the development of our assets and ultimately enhancing their value.

Looking forward, we have a number of important milestones we hope to achieve in 2012. Reaching peak production rates from our SAGD pilot at Blackrod and filing a commercial development application will be a major step in de-risking the project and it will allow us to recognize a significant amount of reserves on the property. Later in the year we expect a meaningful production response from our Mooney ASP flood that we believe will eventually peak at 3,000 to 4,000 barrels of oil per day and will lead to expansion phases of the flood. We also anticipate receiving regulatory approval for our 12,000 barrel per day SAGD project at Onion Lake. In addition to these operational objectives we expect to make some financing decisions in 2012 to fund the development of our SAGD projects.

Financially, improved oil prices combined with strong production growth lead to significant increases in revenues, cash flows and earnings in 2011 and this allowed us to maintain a strong balance sheet and provides us with a solid base to start 2012."

Financial and Operating Highlights
Three months ended
December 31,
Twelve months ended
December 31,
2011 2010 2011 2010
Daily sales volumes (1)
Oil (bbls/d) 8,682 6,871 7,460 6,375
Natural gas (mcf/d) 317 2,614 960 3,455
Combined (boe/d) 8,734 7,307 7,620 6,951
($000s, except where noted)
Oil and natural gas revenue - gross 58,160 38,743 179,443 142,867
Net income (loss) for the period 15,504 (4,832) 18,911 (86)
Per share, basic ($) 0.05 (0.02) 0.07 0.00
Per share, diluted ($) 0.05 (0.02) 0.06 0.00
Cash flow from operating activities, before working capital adjustments 27,165 19,435 76,681 62,606
Capital expenditures 56,974 38,033 192,634 95,829
Property dispositions (3,500) (22,315) (6,100) (41,969)
Working capital, end of period 37,825 144,032 37,825 144,032
Long term debt - - - -
Shares outstanding, end of period(000s) 284,802 283,215 284,802 283,215

(1) Boe is based on a conversion ratio of 6 mcf of natural gas to 1 bbl of oil. Boe 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 is not intended to represent a value equivalency at the wellhead.


Production revenues were $58.2 million in the fourth quarter of 2011 compared to $38.7 million in the same quarter of 2010. The increase in revenues was due to a significant increase in both oil production and wellhead prices. BlackPearl sold an average of 8,734 boe per day during the fourth quarter of 2011, an increase of 20 percent over the same quarter of 2010. The increased sales volumes are attributable to continued development drilling at Onion Lake, as well as production from new wells brought online at Mooney and John Lake in December.

Crude oil prices increased 10 percent in the fourth quarter of 2011 from the same quarter of 2010, with WTI oil averaging US$94.03 per barrel. The increase in commodity prices is generally attributable to an increase in world crude oil demand as markets started to recover from the recent worldwide economic downturn. The heavy oil price differential between Western Canadian Select and WTI averaged US$10.47 per barrel in the fourth quarter of 2011 compared to US$18.19 per barrel in the fourth quarter of 2010. The narrow differential in Q4 2011 was due to increased demand for heavy oil. The general increase in oil prices compounded by a narrower heavy differential resulted in an increase in BlackPearl's average wellhead price from $57.63 per boe in the fourth quarter of 2010 to $73.88 per boe in the fourth quarter of 2011.

Royalty rates were consistent quarter over quarter at 25 percent. Operating costs increased in the fourth quarter of 2011, both on an absolute and per boe basis, due to increased sales volumes, as well as higher workover and well servicing costs in some of our more mature operating areas. Transportation costs decreased slightly from quarter to quarter as a result of less clean oil trucking due to the large number of new wells being drilled and brought online in 2011. G&A decreased in the fourth quarter of 2011 compared to 2010. The decrease was due to higher consulting fees in 2010 related to the preparation of the contingent resource studies. On a per-unit-of-production basis, G&A declined substantially quarter over quarter as a result of higher volumes in Q4 2011.

Cash flow from operations and net income in the fourth quarter of 2011 were $27.2 million and $15.5 million, respectively, compared to $19.4 million and a loss of $4.8 million, respectively in the fourth quarter of 2010. The increased cash flow was due to the increase in production and heavy oil prices. The increase in net income in the fourth quarter of 2011 also reflects the recognition of a deferred tax recovery of $5.3 million during the quarter.

Capital expenditures in the fourth quarter of 2011 were $57.0 million, 50 percent higher than in the fourth quarter of 2010 and 41 percent higher than in the third quarter of 2011. The increase is a result of new drilling during the fourth quarter of 2011 at Onion Lake, Mooney and John Lake, as well as, continued construction of the Mooney ASP flood facilities, the Blackrod SAGD pilot project and costs related to the Blackrod commercial development application.

Three months ended
December 31,
Twelve months ended
December 31,
(boe/day) 2011 2010 2011 2010
Onion Lake 6,805 5,586 6,272 5,039
ASP flood area 260 858 316 912
Non-flood areas 842 160 472 96
John Lake 413 187 343 78
Blackrod SAGD Pilot 178 - 57 -
Other 236 516 160 826
8,734 7,307 7,620 6,951
Operating Statistics
Three months ended
December 31,
Twelve months ended
December 31,
2011 2010 2011 2010
($ per boe)
Oil and natural gas revenue 73.88 57.63 65.00 56.31
Royalties 18.13 14.35 16.49 14.50
Transportation costs 0.60 1.03 0.52 1.08
Operating costs 17.80 12.90 17.80 14.51
Netback 37.35 29.35 30.19 26.22

2012 Guidance

Our plans and outlook for 2012 are outlined below. Typically these plans will be modified throughout the year as new events occur and circumstances change.

2012 Guidance
Production (boe/d)
Annual average 10,000
Exit 11,000 - 12,000
Net earnings ($millions) 3-5
Cash flow from operations ($millions) 85 - 90
Capital expenditures ($millions) 125 - 135
Year-end debt -
Year-end working capital ($millions) (in addition to the Company's unutilized credit facilities) 5
Pricing Assumptions (annual average)
Crude oil - WTI US$85
Light/heavy differential US$15
Foreign Exchange (Cdn$ to US$) 0.98
BlackPearl wellhead price Cdn$60

In 2012, we expect capital spending to be between $125 and $135 million. We will continue with our conventional development program at Onion Lake with over 40 wells planned. We also plan to drill 10 to 20 horizontal wells on non-ASP flooded lands at Mooney, as well as complete construction of a heavy oil battery for the area. At Blackrod, we are pleased with the pilot's performance as it continues to increase towards its ultimate production potential of 500 to 800 barrels of oil per day. In 2012, we will begin the detailed engineering work for the first commercial development phase of our SAGD project, as well as drill 10 additional delineation wells to support the commercial application and act as future observation wells. We are also adding a second horizontal well pair to our existing SAGD pilot at Blackrod. This well pair will provide us with additional completion and start-up information that will further enhance the design of our commercial operations. We will also continue developing some of our non-core assets, particularly at John Lake and Salt Lake.

It is expected that this capital program will be funded from existing working capital and anticipated cash flow from operations. We also have an unutilized $25 million line of credit that is available, which we are looking to expand to between $100 and $150 million in order to provide additional flexibility in our capital program.

We expect to exit 2012 with oil and gas production ranging between 11,000 and 12,000 boe per day. The most significant increase in production is expected to come from the response of phase one of the ASP flood and the drilling of additional primary wells at Mooney and Onion Lake.

The Company's financial statements, notes to the financial statements, management's discussion and analysis and Annual Information Form have been filed on SEDAR ( and are available on the Company's website ( The Annual Information Form includes the Company's reserves and resource data for the period ended December 31, 2011 as evaluated by Sproule Unconventional Limited and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. BlackPearl's annual general meeting of shareholders will be held on May 10, 2012 in Calgary Alberta.

Forward-Looking Statements

This news release contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements typically contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "scheduled", "should", 'predict", "targeting", "seek", "intend", "could", "potential", "outlook" or similar words suggesting future outcomes. In particular, but without limiting the foregoing, this news release contains forward-looking statements pertaining to our business plans and strategies; capital expenditure and drilling programs; timing for receipt of regulatory approvals for our Onion Lake thermal project and submission of our commercial development application at Blackrod, timing to finance our capital expenditure programs; anticipated oil and gas production levels; future oil and gas prices and their impact on BlackPearl; future costs including operating and administrative costs and royalty rates; future cash flows and net income; the potential to expand our credit facilities; and corporate guidance for 2012 included in the "2012 Guidance" section of this release.

In addition, statements relating to "reserves" or "resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

The forward-looking statements in this news release reflect certain assumptions and expectations by management. The key assumptions that have been made in connection with these forward-looking statements include the continuation of current or, where applicable, assumed industry conditions, the continuation of existing tax, royalty and regulatory regimes, commodity price and cost assumptions, the continued availability of cash flow or financing on acceptable terms to fund the Company's capital programs, the accuracy of the estimate of the Company's reserves and resource volumes and that BlackPearl will conduct its operations in a manner consistent with past operations. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those contained in forward-looking statements. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent; general economic, market and business conditions; substantial capital requirements; uncertainties inherent in estimating quantities of reserves and resources; extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time; the need to obtain regulatory approvals on projects before development commences; environmental risks and hazards and the cost of compliance with environmental regulations; aboriginal claims; inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions; potential cost overruns; variations in foreign exchange rates; diluent supply shortages; competition for capital, equipment, new leases, pipeline capacity and skilled personnel; uncertainties inherent in the SAGD bitumen and Alkali Surfactant Polymer recovery processes; credit risks associated with counterparties; the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, leases and permits; reliance on third parties for pipelines and other infrastructure; changes in royalty regimes; failure to accurately estimate abandonment and reclamation costs; inaccurate estimates and assumptions by management; effectiveness of internal controls; the potential lack of available drilling equipment and other restrictions; failure to obtain or keep key personnel; title deficiencies with the Company's assets; geo-political risks; risks that the Company does not have adequate insurance coverage; risk of litigation and risks arising from future acquisition activities. Further information regarding these risk factors and others may be found under "Risk Factors" in the Annual Information Form.

Undue reliance should not be placed on these forward-looking statements. Readers are cautioned that the actual results achieved will vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of assumptions, risks and factors is not exhaustive. Consequently, there is no assurance by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

BlackPearl's Certified Advisor on First North is Pareto Öhman AB.

Company Registration Number: 409596-1

The report for the three months ending March 31, 2012 will be published on or before May 15, 2012.

Contact Information

  • BlackPearl Resources Inc.
    John Festival
    President and Chief Executive Officer

    BlackPearl Resources Inc.
    Don Cook
    Chief Financial Officer