BlackPearl Resources Inc.

BlackPearl Resources Inc.

November 10, 2010 17:30 ET

BlackPearl Announces Third Quarter 2010 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - Nov. 10, 2010) - 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 nine months ended September 30, 2010.

Third quarter highlights include:

  • Oil and gas production averaged 6,646 boe/day, a 31% increase over Q3 2009 production volumes;

  • Revenues increased 39% to $33.4 million compared to Q3 in 2009;

  • Cash flow from operations increased 73% to $14.2 million compared with $8.2 million in Q3 2009; for the 9 months ended September 30, 2010 cash flow from operations increased 301% from 2009;

  • Maintained a strong balance sheet with working capital of $92 million and no debt;

  • Received regulatory approval to proceed with development of our projects at Blackrod and Mooney.

John Festival, President of BlackPearl, commenting on Q3 2010 activities indicated that, "Q3 was another strong quarter financially for us. However, one of the most important events for us was receiving regulatory approval for our projects at Blackrod and Mooney. These approvals are an important milestone for the Company which will allow us to move to the next stage of development that will include construction of a SAGD pilot at Blackrod and a commercial polymer flood at Mooney. Our near term production and cash flow growth will come from continued development drilling at Onion Lake. We have established our plans for 2011 and it will be a very active year for us. Our capital program should see us exit 2011 producing in excess of 11,000 barrels of oil per day."

Property Review

Blackrod SAGD Project

BlackPearl owns 100% of the Blackrod property as a result of acquiring, earlier this year, the 20% working interest held by Serrano Energy Ltd. We recently received approvals from the Energy Resources Conservation Board ("ERCB") and Alberta Environment to construct and operate a single well pair SAGD pilot on the property. Field construction of the steam and water handling facilities will begin shortly and we expect to drill the horizontal well pair and monitoring wells during the fourth quarter. Water source and water disposal wells were drilled earlier this year. We expect to begin steam injection in March 2011 and we anticipate it will take 12 to 18 months of steaming before we will be able to properly evaluate the production performance from the well. The information gathered from the pilot will allow us to build a commercial development plan for Blackrod.

Onion Lake

During the third quarter of 2010 BlackPearl drilled nine development wells at Onion Lake. These wells will be completed and put on production in the fourth quarter. Due to surface access restrictions BlackPearl got a late start on its fall drilling program. As a result, we anticipate we will drill 30 to 35 of our planned 70 well program before year-end. In order to "catch-up" the remaining wells from our fall drilling program will be drilled during the first quarter of 2011. Over the next three to five years we plan to drill over 200 wells and then convert a portion of the Onion Lake field to thermal (SAGD) recovery.


At Mooney, we received ERCB approval to proceed with phase one of our commercial polymer flood. Field construction of the chemical and water handling facilities will commence immediately. Twenty two of the existing wells will be shut-in near year-end and converted to polymer injectors. Upgrades to the existing Mooney battery facility to handle the polymer/oil mix will occur in 2011. We expect to begin polymer injection near the end of the first quarter of 2011, and response from the flood is expected to take 6 to 12 months.

BlackPearl has also received Alberta Department of Energy approval for enhanced oil recovery status for a portion of the field, which will initially reduce the royalty burden on Mooney production volumes as a result of the flood. Initial royalty rates are expected to be approximately 10%.

Three additional horizontal wells were drilled at Mooney in the third quarter and will be put on production in the fourth quarter.


Oil and gas production for the three months ended September 30, 2010 was 6,646 boe/day, a 31% increase compared to the same period in 2009. Third quarter production was down 7% from the second quarter due primarily to the sale of properties producing 350 boe per day late in the second quarter and temporarily shutting-in production at some Onion Lake multi-well pad sites to facilitate drilling new wells.

As a result of not being able to complete all of our planned Onion Lake drilling program this fall we expect our year-end production exit rate will be near the lower end of our guidance range, or 8,000 barrels per day. Additional production is expected when we complete the Onion Lake drilling program during the first quarter of 2011.

  Three months ended September 30, Nine months ended September 30,
(boe/day) 2010 2009 2010 2009
Onion Lake 5,157 2,342 4,855 2,192
Mooney 890 1,252 1,004 1,459
Ear Lake - 428 156 441
Salt Lake 274 375 271 389
Long Coulee/Little Bow 223 369 331 420
Other 102 325 214 336
  6,646 5,091 6,831 5,237

Financial Results

Oil and gas revenues increased 39% in the third quarter 2010 to $33.4 million compared with $24.1 million in Q3 2009. The increase is attributable to higher oil production volumes partially offset by slightly lower oil prices. Although WTI oil prices were stronger in Q3 2010 than in 2009 (US$76.08/bbl vs US$68.30/bbl) wider heavy oil differentials (US$15.66/bbl in Q3 2010 compared with US$11.16/bbl in 2009) and a stronger Canadian dollar compared to the US dollar (1.039 in Q3 2010 compared with 1.097 in Q3 2009) offset the increase in WTI oil prices. The wider heavy oil differentials were due to pipeline disruptions moving heavy crude oil from Alberta to the US. These pipeline disruptions have now been resolved.

Operating costs, transportation expense and royalties were all higher in Q3 2010 than in 2009 due to higher production volumes; however, on a boe basis, Q3 2010 costs were comparable to the same period in 2009.

Cash flow from operations (before working capital adjustments) increased 73% in Q3 to $14.2 million compared to $8.2 million for the same period in 2009.

Financial and Operating Highlights

    Three months ended September 30 Nine months ended September 30
    2010 2009 2010 2009
Daily production / sales volumes (1)        
  Oil (bbl/d) 6,166 4,247 6,208 4,263
  Natural gas (mcf/d) 2,881 5,065 3,738 5,846
  Combined (Boe/d) 6,646 5,091 6,831 5,237
Product pricing ($)        
  Crude oil - per bbl 57.17 58.38 58.51 47.76
  Natural gas - per mcf 3.52 3.05 4.26 3.96
  Combined - per Boe 54.66 51.94 55.83 43.34
($000's, except per share and Boe amounts)      
Oil and gas revenue - gross 33,421 24,065 104,124 61,964
Royalties ($/Boe) 14.61 14.25 14.56 10.16
Transportation costs ($/Boe) 1.42 1.58 1.10 1.90
Operating costs ($/Boe) 13.57 13.32 15.10 15.53
Net income (loss) for the period (9,042) (12,013) (27,371) (43,418)
  Per share, basic and diluted (0.03) (0.05) (0.10) (0.18)
Cash flow from operating activities, before working capital adjustments 14,218 8,221 43,171 14,328
Capital expenditures 19,926 6,240 57,796 10,319
Working Capital, end of period 92,006 59,875 92,006 59,875
Long term debt - - - -
Shares outstanding, end of period 272,900,553 261,684,050 272,900,553 261,684,050
(1) Boe amounts are based on a conversion ratio of 6 mcf of gas to 1 barrel of oil. BOEs may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 mcf: 1 barrel 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 2010 third quarter report to shareholders, including the financial statements, management's discussion and analysis and notes to the financial statements are available on the Company's website ( or SEDAR (

2011 Outlook

BlackPearl's Board of Directors have approved a 2011 budget which will see the Company spending between $130 and $150 million on its capital expenditure program, the majority of which will be on the Company's three core areas. The program will be funded from working capital and anticipated cash flow. The Company expects this program will result in 2011 year-end production reaching 11,000 to 13,000 barrels of oil per day. This production target is dependent on, among other things, the timing of the response from the implementation of the polymer flood at Mooney.

Forward-Looking Statements

Certain of the statements made and information contained herein is forward-looking statements and forward looking information (collectively referred to as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", "predict", "targeting", "seek", "intend", "could", "potential" or similar words. In particular, this document contains forward-looking statements pertaining to the Company's 2011 capital expenditure program, funding for the capital program, estimated production levels, development plans at Onion Lake, Blackrod and Mooney and future drilling locations at Onion Lake.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will in fact be realized. Actual results will differ, and the difference may be material and adverse to the Corporation and its shareholders. The Company believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company's Annual Information Form, 2009 year-end Management Discussion and Analysis and other documents filed with securities regulatory authorities describes the risks, assumptions and other factors that could influence actual results and which are incorporated herein by reference. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Corporation 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.

BlackPearl's Certified Advisor on First North is E. Öhman J:or Fondkommission AB.

Company Registration Number: 409596-1

Contact Information

  • BlackPearl Resources Inc.
    John Festival
    President and Chief Executive Officer
    (403) 215-8313
    BlackPearl Resources Inc.
    Don Cook
    Chief Financial Officer
    (403) 215-8313
    (403) 265-8324 (FAX)