Great Plains Exploration Inc.
TSX : GPX

Great Plains Exploration Inc.

August 13, 2009 09:00 ET

Great Plains' Quarter-Ended June 30 2009 Reflects Increased Cash Flow and Production Potential

CALGARY, ALBERTA--(Marketwire - Aug. 13, 2009) - Great Plains Exploration Inc. (TSX:GPX) (Great Plains) announces its financial and operational results for the three and six months ended June 30, 2009. The Company increased cash flow by 50% from the prior quarter and reduced its net debt by $3.7 million. In view of the commodity price environment and a stated commitment to conserve cash flow, Great Plains undertook a minimal capital program; however, significant progress has been made on the development of the Company's core projects with a material increase in production capability. Our primary focus for the balance of 2009 and early 2010 will be the tie-in of light oil discoveries at Crossfire and gas discoveries in Northeast British Columbia (NEBC).

The operational and financial highlights for the quarter are as follows:

Operations

- Produced an average of 1,301 BOE/d for the second quarter, which reflected the temporary shut-in of the 9-1 well at Crossfire and the majority of NEBC gas production for three weeks due to planned maintenance at a third party processing plant in Fort Nelson. These shut-ins reduced the quarter's production by an estimated 500 BOE/d. While the 9-1 well awaits regulatory approval to recommence operation, all but approximately 200 BOE/d of the gas production is back on-stream.

- Completed one light oil well at Pembina/Crossfire and one gas well in NEBC. These discoveries in aggregate, along with previous discoveries now represent approximately 1,500 to 1,900 BOE/d (74% oil) of additional productive capacity, the majority of which Great Plains management expects to bring on-stream in 2009 and early 2010.

- Invested a total of $1.4 million (excluding capitalized G&A) on the Company's capital projects, of which $0.6 million was spent on drilling and completion. The balance of expenditures was for equipment and facilities costs including line pipe inventory for future tie-ins.

- Disposed of non-core assets comprising approximately 30 BOE/d of production and 230,000 BOE of reserves for total proceeds of $4.1 million during the quarter.

- Net asset value (NAV) of $1.03 per share based on P+P, year-end PV10 independent reserve report, with land independently valued at $23.3 million, including quarter-end net debt of $22.1 million and excluding 2009 discoveries at Pembina/Crossfire and NEBC.

Financial

- Cash flow of $1.4 million ($0.02 per share) for the quarter, up from $966,000 ($0.01 per share) for the first quarter of 2009.

- Cash flow per BOE increased to $12.19 from $7.18 in the first quarter of 2009 as a result of the reduced royalties and improved oil prices.

- G&A for the second quarter decreased to $777,000 from $896,000 in the first quarter, primarily due to salary reductions voluntarily undertaken by all employees. Second quarter 2009 hedge positions covered 60% of gas production at an average floor price of $7.02 CDN/GJ and 72% of oil production at an average floor price of $67.22 CDN/bbl. Hedge positions for the balance of 2009 include 3,000 GJ/d of gas volumes at an average price of $7.02 CDN/GJ until October 31, 2009 and $6.23 CDN/GJ thereafter and 400 bbls/d of oil volumes at an average floor of $65.41CDN/bbl.

- Bank credit facility secured at $27.0 million of available line with review scheduled for April 2010. Net debt and working capital at June 30, 2009 was $22.1 million, down from $25.8 million at the end of the first quarter.

- Quarter-end tax pools position of $91.0 million.

President's Message

Second Quarter in Review

From an operational point of view, Great Plains had a quiet second quarter followed by some very positive developments at Crossfire and Gunnel with substantial increases in productive capacity. We continued to conserve cash flow to meet our upcoming obligations for Pembina area pipelines as well as facilities requirements in NEBC.

The oil discovery at Pembina/Crossfire 14-33-50-5 W5M (40% working interest) that encountered approximately 12 metres of Nisku oil pay was recently completed, and tested at an average of 1,610 BOE/d with a final rate of 2,222 BOE/d. Initial internal estimates of oil in place are 2.3 million barrels for this 14-33 pool. Relatively low concentrations of sour gas and a low gas oil ratio should result in a more expedited pipeline licensing process then has been the norm in Pembina. The particularly strong results from the 14-33 well combined with previously tested volumes at 11-12-51-5 W5M (1,400 BOE/d) and 15-7-51-6 W5M (728 BOE/d) confirms the economic case for tie-in. In addition to the Great Plains wells, other Nisku players have also reported recent discoveries that support the need for joint infrastructure expansion. Plans for the potential tie-in of our wells in late 2009 and early 2010 are being evaluated with two alternate routes currently being contemplated. In total, the Company now has between 1,200 and 1,600 BOE/d of tested production behind pipe from four wells in Pembina/Crossfire.

At Gunnel, a previously announced Debolt gas discovery (100% working interest) was re-stimulated with test flow rates improving to 1.8 MMcf/d. Great Plains will be drilling a twin location to this well in September which given our all-weather access to this area will allow the well to be tied-in prior to year-end 2009. The Corporation has two additional locations in inventory for winter drilling at Gunnel and has identified a total of 10 firm locations overall in NEBC with 18 additional targets currently being defined. New focus is also being brought to bear on other prospective resource style plays in our operating area. Recent announcements regarding royalty programs in British Columbia provide further economic incentive to move ahead with capital plans for the remainder of 2009 and into 2010. Prior to the announced changes, Great Plains had determined that depending upon prospect risk and proximity to infrastructure, a gas price of $3.50 per Mcf was required to generate an acceptable rate of return. While an expanded capital program is unlikely for this upcoming winter, the Company will continue to focus on strengthening our opportunity base at Gunnel and Kotcho, given the improved economics resulting from these royalty changes.

With the significant decline in gas prices over the past six months, the Company undertook a detailed analysis of all its properties to determine opportunities to preserve value through voluntary production curtailments. It was determined to temporarily shut-in much of the production at Klua, approximately 1.2 MMcf/d, as gain in present value could be obtained by the deferral of production until prices increase, expected later in the year. We have also finalized our program at Klua to undertake a side-track drilling operation to test a Keg River target estimated to be 5 to 20 bcf in size. Success on this year-round access project would allow the resumption of all Klua area production, as the overall economics of our plant operation would improve.

Great Plains has now completed a preliminary evaluation of the unconventional shale gas potential at Klua which is at the southern most extension of the Horn River Basin. Our work to-date has been encouraging and we intend to move ahead with the next phase of our study which will likely include a third party assessment of original gas in place. At this time, based upon internal estimates, it appears that Great Plains lands may contain a shale gas resource that is within the range of expected target sizes and comparable rock quality found in the Horn River Basin. Our current ownership of land and infrastructure, as well as access to well bores for horizontal re-entry mean that an unconventional shale project could be initiated at a much lower capital cost than "green fields" projects further north.

Outlook

In spite of some cautious optimism regarding the beginning of the end of the current economic malaise, Great Plains' capital plans remain tightly focused. Living within cash flow and available bank lines dictates that the tie-in of existing discoveries must remain our main driver. In some cases such as Gunnel in NEBC, this may require the drilling of additional reserves to share in facilities and pipeline costs, however, the risk profile on our drilling locations has improved with prior success and the previously discussed improvements in BC royalties provides added confidence to proceed with the development of our projects.

The Corporation currently has almost $5.0 million of available line for working capital. With this credit availability, minimal capital commitments for the balance of the year, continued positive cashflow being generated and the strength of our hedge positions, Great Plains continues to have sufficient sources of funds available to meet all its operating and capital requirements for the balance of the year.

We are encouraged by the recent drilling and completion successes and note that Great Plains is now capable of more than doubling its current production base by early 2010 for relatively moderate capital costs and with no new drilling required. Opportunities to acquire assets and companies in existing core areas are now resurfacing and we feel optimistic that the previous gaps between buyers and sellers expectations may be narrowing. Even without such transactions, Great Plains remains in a good position to show material production additions over the coming months.

On behalf of the Board of Directors,


Stephen P. Gibson, President and CEO

August 13, 2009



FINANCIAL & OPERATIONAL HIGHLIGHTS

----------------------------------------------------------------------------
Three Three Three
Months Months Months
Ended Ended Ended
June 30 June 30 % Mar 31
($000s except per unit amounts) 2009 2008 Change 2009
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Oil and gas sales 5,367 9,832 (45) 5,823
Cash flow 1,444 4,920 (71) 966
Per share (basic) 0.02 0.07 (71) 0.01
Net loss (2,373) (1,354) 75 (2,579)
Per share (basic and diluted) (0.03) (0.02) (50) (0.03)
Capital expenditures, net of
dispositions (2,264) 3,169 (171) 3,322
Bank debt and working capital deficit 22,123 12,652 75 25,831
Common shares outstand. (000s) basic 91,504 82,748 11 91,504
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Production
Crude oil (bbls/d) 418 546 (23) 465
NGLs (bbls/d) 10 34 (71) 35
Natural gas (Mcf/d) 5,235 5,351 (2) 5,946
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Total (BOE/d) 1,301 1,472 (12) 1,491

Realizations
Crude oil ($/bbl) 67.54 101.29 (33) 63.41
NGLs ($/bbl) 55.17 100.07 (45) 38.38
Natural gas ($/mcf) 5.77 9.30 (38) 5.70
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Average ($/BOE) 43.35 73.41 (41) 43.40

Netbacks ($/BOE)
Oil and gas sales 43.35 73.41 (41) 43.40
Royalties, net of ARTC (1.92) (15.09) (87) (6.42)
Operating and processing costs (18.67) (12.10) 54 (19.14)
Transportation (4.38) (2.67) 64 (4.20)
Asset retirement expenditures (0.36) (0.40) (10) (0.25)
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Operating Netback 20.02 43.15 (54) 13.39
Processing and other income 0.61 1.22 (41) 1.75
General and administrative (6.56) (5.69) 15 (6.68)
Interest (1.84) (1.28) 44 (1.28)
Current taxes recovery (expense) (0.04) (0.08) (50) -
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Cash flow Netback 12.19 36.75 (67) 7.18
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The complete quarterly financial statements and corresponding MD&A documents are available on SEDAR at www.sedar.com and on the Great Plains website at www.greatplainsexp.com.

Investors should note that BOEs may be misleading, particularly if used in isolation. A BOE conversion rate of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Advisory Regarding Forward Looking Statements

This press release contains forward-looking statements which include, but are not limited to: operations plans and outlook, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurance that such expectations will prove to be correct. Results of the Company may be affected by a variety of variables and risks associated with oil and gas exploration, production and transportation, such as loss of market, volatility of oil and gas prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, ability to access sufficient debt and equity capital from internal and external sources, ability to replace and expand oil and gas reserves, ability to generate sufficient cash flow from operations to meet its current and future obligations, and risks associated with existing and potential future lawsuits and regulatory actions made against the Company; as a consequence, actual results could differ materially from those anticipated or implied in the forward-looking statements.

The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement and are made as of the date of this news release. Unless otherwise required by applicable securities laws, the Company does not intend nor does it undertake any obligation to update or review any forward-looking statements to reflect subsequent information, event, results or circumstances or otherwise.

Contact Information

  • Great Plains Exploration Inc.
    Stephen P. Gibson
    President & CEO
    (403) 262-9620
    (403) 262-9622 (FAX)
    or
    Great Plains Exploration Inc.
    Sean Bovingdon
    Vice-President Finance & CFO
    (403) 262-9620
    (403) 262-9622 (FAX)
    Email: info@gpexploration.ca
    Website: www.greatplainsexp.com