Painted Pony Petroleum Ltd.
TSX VENTURE : PPY.A
TSX VENTURE : PPY.B

Painted Pony Petroleum Ltd.

July 27, 2011 17:54 ET

Painted Pony Petroleum Announces Significant Increase to Reserves and Montney Resources

CALGARY, ALBERTA--(Marketwire - July 27, 2011) - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX VENTURE:PPY.A) (TSX VENTURE:PPY.B) is pleased to announce a mid-year reserves update and an updated Montney resource assessment, following a successful drilling program in the first half of 2011. GLJ Petroleum Consultants Ltd. ("GLJ") and Sproule Associates Limited ("Sproule") were engaged to prepare independent evaluation reports of the reserves and contingent resources on the Company's British Columbia ("BC") properties and the reserves on the Company's Saskatchewan ("SK") properties, respectively. Both reports are dated effective June 30, 2011 and were prepared in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101").

HIGHLIGHTS


--  Best estimate contingent resources for the Company's Montney asset
    increased to 2.1 trillion cubic feet of gas equivalent ("tcfge"),
    equating to 358.2 million boe ("mmboe"), including 40.2 mmboe of
    liquids, with a net present value, using a 10% discount rate ("NPV10")
    of $2.1 billion. 
--  Proved plus probable reserves totaled 85.6 mmboe, an increase of 163%
    since December 31, 2010. The NPV10 of the Company's proved plus probable
    reserves was $797.9 million, an increase of 126% in the first six months
    of 2011. 
--  Proved plus probable reserves for BC increased 194% since December 31,
    2010 to 476.9 billion cubic feet of gas equivalent ("bcfge"), with a
    NPV10 of $621.1 million. 
--  Proved plus probable liquids in BC are estimated to be 8.7 million bbls
    with a liquids yield for the gas reserves assessed at an average of
    approximately 20 bbls/mmcf. 
--  Proved plus probable reserves for SK increased to 6.1 million boe (95%
    oil and liquids), with a NPV10 of $176.8 million. 

CONSOLIDATED COMPANY RESERVES

The consolidated Company proved plus probable reserves in BC and SK were 85.6 mmboe with an associated NPV10 of $797.9 million, while proved reserves totaled 21.8 mmboe with an associated NPV10 of $284.2 million.


Summary of Company Net Present Values of Future Revenue                     
(1),(2),(3),(4),(5)                                                         
Forecast Prices and Costs                                                   
Before Income Taxes ($millions)                                             
----------------------------------------------------------------------------
                                                          As at December 31,
                                As at June 30, 2011                    2010 
                                  0%       5%    10%               0%    10%
----------------------------------------------------------------------------
Proved                                                                      
 Developed producing          213.1    170.6  144.7            144.6  108.1 
 Developed non-producing        5.2      4.3    3.6              0.4    0.3 
 Undeveloped                  328.6    203.1  135.9            122.8   48.8 
----------------------------------------------------------------------------
Total proved                  546.9    378.0  284.2            267.8  157.2 
Probable                    1,768.0    881.9  513.6            484.7  196.5 
----------------------------------------------------------------------------
Total proved plus probable  2,314.9  1,259.9  797.9            752.5  353.7 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest reserves are before royalties
    owned by others. The estimated future net revenues are stated before
    deducting income taxes and future estimated site restoration costs and
    are reduced for estimated future abandonment costs, the Saskatchewan
    Capital Tax and estimated capital for future development associated with
    the reserves. 
2.  It should not be assumed that the undiscounted and discounted net
    present values represent the fair market value of the reserves. 
3.  The price deck used for the evaluation as at June 30, 2011 was the GLJ
    price deck dated June 30, 2011 for BC assets and the Sproule price deck
    dated July 1, 2011 for SK assets. 
4.  The price deck used for the evaluation as at December 31, 2010 was the
    Sproule price deck dated January 1, 2011. 
5.  Numbers in this table are subject to rounding error. 

Summary of Company Reserves (1),(3),(5)                                     
Forecast Prices and Costs                                                   
----------------------------------------------------------------------------
                                 As at June 30, 2011                  As at 
                                             Natural               December 
                     Light and    Natural        Gas               31, 2011 
                    Medium Oil        Gas    Liquids       Total      Total 
                         (mbbl)  (mmcf)(4)     (mbbl)   (mboe)(2)  (mboe)(2)
----------------------------------------------------------------------------
Proved                                                                      
 Developed producing   2,090.5     23,671      500.1     6,536.2    4,476.6 
 Developed non-                                                             
 producing                17.4      1,274       22.0       252.4       48.1 
 Undeveloped           1,252.0     73,577    1,541.6    15,057.1    6,810.9 
----------------------------------------------------------------------------
Total proved           3,359.8     98,523    2,064.7    21,844.6   11,335.5 
Probable               2,213.2    327,861    6,893.5    63,749.8   21,203.2 
----------------------------------------------------------------------------
Total proved plus                                                           
probable               5,573.0    426,383    8,958.2    85,594.4   32,538.7 
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest reserves are before royalties
    owned by others. 
2.  Oil equivalent amounts (boe) have been calculated using a conversion
    rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
    1 bbl). 
3.  One thousand barrels is equal to 1 mbbl, and one thousand boe is equal
    to 1 mboe. One million cubic feet of natural gas is equal to 1 mmcf. 
4.  Includes non-associated gas, associated gas and solution gas. 
5.  Numbers in this table are subject to rounding error. 

BC RESOURCE AND RESERVES EVALUATION

GLJ was engaged to prepare an independent reserve and contingent resource evaluation, of the Company's BC properties, using forecast prices and costs, dated effective June 30, 2011. The most significant positive and negative factors with respect to the contingent resource estimates relate to the fact that the field is currently at an evaluation/delineation stage. The Montney formation is areally extensive in this region, however well control is limited. Both resource-in-place and productivity may be higher or lower than current estimates. Additional drilling and testing are required to confirm volumetric estimates and reservoir productivity for the contingent resources to be reclassified as reserves.


Summary of Company Montney Contingent Resource Net Present Values of Future 
Revenue (1),(2),(3),(4),(5)                                                 
Forecast Prices and Costs                                                   
Before Income Taxes ($millions)                                             
----------------------------------------------------------------------------
                                       As at June 30, 2011                  
                              0%         5%        10%        15%        20%
----------------------------------------------------------------------------
 Low Estimate             6,531      2,889      1,411        739        406 
 Best Estimate           10,650      4,402      2,143      1,160        675 
 High Estimate           17,124      6,337      2,901      1,516        865 
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest contingent resources are before
    royalties owned by others. The estimated future net revenues are stated
    before deducting income taxes and future estimated site restoration
    costs, and are reduced for estimated future abandonment costs and
    estimated capital for future development associated with the contingent
    resource. 
2.  It should not be assumed that the undiscounted and discounted net
    present values represent the fair market value of the contingent
    resource. 
3.  The estimates of net present values for individual properties may not
    reflect the same confidence level as estimates of net present values for
    all properties, due to the effects of aggregation. 
4.  GLJ price deck dated June 30, 201. 
5.  Numbers in this table are subject to rounding error. 

Summary of Company Montney Contingent Resources (1),(2),(3),(4),(5),(6)     
Summary of Company Montney Contingent Resources Forecast Prices and Costs   
As at June 30, 2011                                                         
----------------------------------------------------------------------------
               Low Estimate         Best Estimate         High Estimate     

              (bcfge)    (mmboe)    (bcfge)    (mmboe)    (bcfge)    (mmboe)
----------------------------------------------------------------------------
Gas          1,377.3      229.6    1,908.4      318.1    2,778.5      463.1 
Liquids        174.0       29.0      241.1       40.2      351.0       58.5 
----------------------------------------------------------------------------
Total        1,551.3      258.6    2,149.5      358.2    3,129.5      521.6 
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest of the contingent resources are
    before royalties owned by others.  
2.  Oil equivalent amounts (boe) have been calculated using a conversion
    rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
    1 bbl). 
3.  Natural gas equivalent amounts (mcfge) have been calculated using a
    conversion rate of 1 barrel of oil per six thousand cubic feet of
    natural gas (1 bbl: 6 mcf). 
4.  One million boe is equal to 1 mmboe. One billion cubic feet of gas
    equivalent is equal to 1 bcfge. 
5.  The estimates of resources for individual properties may not reflect the
    same confidence level as estimates of resources for all properties, due
    to the effects of aggregation. 
6.  Numbers in this table are subject to rounding error. 

Reserves Evaluation:

Building on successful results from the Company's first twenty-one (8.2 net) Montney wells, the GLJ Report evaluated reserves within three horizons of the Montney. Approximately 12% of Painted Pony's Montney acreage has now been assessed proved plus probable reserves in both the upper and lower Montney, while approximately 3% of the Company's Montney lands has been assessed proved plus probable reserves in the middle Montney. The GLJ Report shows a 129% and 194% increase in volumes of proved and proved plus probable reserves, respectively, with an associated 238% and 221% increase in the NPV10 of the proved and proved plus probable reserves, compared to the Company's British Columbia reserves as at December 31, 2010.


Summary of Company BC Net Present Values of Future Revenue                  
(1),(2),(3),(4),(5)                                                         
Forecast Prices and Costs                                                   
Before Income Taxes ($millions)                                             
----------------------------------------------------------------------------
                        As at June 30, 2011         As at December 31, 2010 
                          0%          5%         10%          0%         10%
----------------------------------------------------------------------------
Proved                                                                      
 Developed                                                                  
 producing            105.2        77.0        61.4        41.6        27.5 
 Developed non-                                                             
 producing              4.6         3.7         3.1         0.3         0.2 
 Undeveloped          285.7       169.2       108.5        85.1        23.5 
----------------------------------------------------------------------------
Total proved          395.5       249.9       173.1       127.0        51.2 
Probable            1,653.0       797.5       448.0       391.9       142.5 
----------------------------------------------------------------------------
Total proved                                                                
plus probable       2,048.5     1,047.4       621.1       518.9       193.7 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest reserves are before royalties
    owned by others. The estimated future net revenues are stated before
    deducting income taxes and future estimated site restoration costs and
    are reduced for estimated future abandonment costs, the Saskatchewan
    Capital Tax and estimated capital for future development associated with
    the reserves. 
2.  It should not be assumed that the undiscounted and discounted net
    present values represent the fair market value of the reserves. 
3.  The estimates of net present values for individual properties may not
    reflect the same confidence level as estimates of net present values for
    all properties, due to the effects of aggregation. 
4.  GLJ price deck dated June 30, 2011 and Sproule price deck dated December
    31, 2010. 
5.  Numbers in this table are subject to rounding error. 

Summary of Company BC Working Interest                                      
Reserves(1),(4),(5),(7)                                                     
Forecast Prices and Costs                                                   
As at June 30, 2011                                                         
----------------------------------------------------------------------------
                                     Natural Gas                            
                       Natural Gas       Liquids         Total        Total 
                          (mmcf)(6)        (mbbl)     (mboe)(2)  (mmcfge)(3)
----------------------------------------------------------------------------
Proved                                                                      
 Developed producing        22,881           378         4,192       25,149 
 Developed non-                                                             
 producing                   1,274            22           235        1,406 
 Undeveloped                73,250         1,497        13,706       82,232 
----------------------------------------------------------------------------
Total proved                97,406         1,898        18,132      108,794 
Probable                   327,284         6,808        61,355      368,132 
----------------------------------------------------------------------------
Total proved plus                                                           
probable                   424,690         8,706        79,487      476,926 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest reserves are before royalties
    owned by others. 
2.  Oil equivalent amounts (boe) have been calculated using a conversion
    rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
    1 bbl). 
3.  Natural gas equivalent amounts (mcfe) have been calculated using a
    conversion rate of 1 barrel of oil per six thousand cubic feet of
    natural gas (1 bbl: 6 mcf). 
4.  One thousand barrels is equal to 1 mbbl, and one thousand boe is equal
    to 1 mboe. One million cubic feet of natural gas is equal to 1 mmcf and
    one million cubic feet of natural gas equivalent is equal to 1 mmcfge. 
5.  The estimates of reserves for individual properties may not reflect the
    same confidence level as estimates of reserves for all properties, due
    to the effects of aggregation. 
6.  Includes non-associated gas, associated gas and solution gas. 
7.  Numbers in this table are subject to rounding error. 

UPDATED COMPANY BC LAND REPORT

Seaton-Jordan & Associates Ltd. has prepared an independent valuation (the "Seaton-Jordan Report"), dated effective June 30, 2011, of Painted Pony's undeveloped acreage in BC, which have been ascribed a value of $123.7 million, representing an increase of $8.3 million over the year-ended December 31, 2010 value of $115.4 million. Undeveloped SK acreage was not included in the Seaton-Jordan Report and was valued at $52.7 million as at December 31, 2010. Fair value of undeveloped acreage has been determined in accordance with NI 51-101.

SK RESERVES EVALUATION

Reserves Evaluation:

Sproule was engaged to prepare an independent reserves evaluation of the Company's SK properties, using forecast prices and costs, dated effective June 30, 2011. Proved reserves were 3.7 mmboe, while proved plus probable reserves were 6.1 million boe, increases of 285.9 mboe and 642.7 mboe, respectively, since December 31, 2010. Proved NPV10 was $111.2 million and proved plus probable NPV10 was $176.8 million, increases of 5% and 11% since December 31, 2010.


Summary of Company SK Net Present Values of Future Revenue                  
(1),(2),(3),(4),(5),(6)                                                     
Forecast Prices and Costs                                                   
Before Income Taxes ($millions)                                             
----------------------------------------------------------------------------
                        As at June 30, 2011        As at December 31, 2010  
                          0%         5%        10%           0%          10%
----------------------------------------------------------------------------
Proved                                                                      
 Developed                                                                  
 producing            107.9       93.6       83.3        103.0         80.7 
 Developed non-                                                             
 producing              0.6        0.5        0.5          0.1          0.1 
 Undeveloped           42.9       34.0       27.4         37.7         25.3 
----------------------------------------------------------------------------
Total proved          151.4      128.1      111.2        140.8        106.0 
Probable              115.0       84.4       65.6         92.8         54.0 
----------------------------------------------------------------------------
Total proved plus                                                           
probable              266.4      212.5      176.8        233.7        160.0 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest reserves are before royalties
    owned by others. The estimated future net revenues are stated before
    deducting income taxes and future estimated site restoration costs and
    are reduced for estimated future abandonment costs, the Saskatchewan
    Capital Tax and estimated capital for future development associated with
    the reserves. 
2.  It should not be assumed that the undiscounted and discounted net
    present values represent the fair market value of the reserves. 
3.  The estimates of net present values for individual properties may not
    reflect the same confidence level as estimates of net present values for
    all properties, due to the effects of aggregation. 
4.  Sproule price decks dated January 1, 2011 and July 1, 2011. 
5.  Includes non-associated gas, associated gas and solution gas. 
6.  Numbers in this table are subject to rounding error. 

Summary of Company SK Working Interest                                      
Reserves(1),(3),(4),(5)                                                     
Forecast Prices and Costs                                                   
As at June 30, 2011                                                         
----------------------------------------------------------------------------
                            Light and               Natural Gas             
                           Medium Oil  Natural Gas      Liquids       Total 
                                (mbbl)       (mmcf)       (mbbl)   (mboe)(2)
----------------------------------------------------------------------------
Proved                                                                      
 Developed producing          2,090.5          790        122.1     2,344.2 
 Developed non-producing         17.4            -            -        17.4 
 Undeveloped                  1,252.0          327         44.6     1,351.1 
----------------------------------------------------------------------------
Total proved                  3,359.8        1,117        166.7     3,712.6 
Probable                      2,213.2          577         85.5     2,394.8 
----------------------------------------------------------------------------
Total proved plus probable    5,573.0        1,693        252.2     6,107.4 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Notes:


1.  Painted Pony's total working interest reserves are before royalties
    owned by others. 
2.  Oil equivalent amounts (boe) have been calculated using a conversion
    rate of six thousand cubic feet of natural gas per barrel of oil (6 mcf:
    1 bbl). 
3.  One thousand barrels is equal to 1 mbbl, and one thousand boe is equal
    to 1 mboe. One million cubic feet of natural gas is equal to 1 mmcf. 
4.  The estimates of reserves for individual properties may not reflect the
    same confidence level as estimates of reserves for all properties, due
    to the effects of aggregation. 
5.  Numbers in this table are subject to rounding error. 

Advisory

Special Note Regarding Forward-Looking Information

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 2011; (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 2011 are expected to show growth from the first quarter of 2011; (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 forgoing assumptions may prove to be untrue.

Certain information regarding Painted Pony set forth in this document, including estimates of the quantities of the Company's proved reserves, probable reserves and contingent resources, estimates of the net present value of future net revenue of the estimates of the Company's proved reserves, probable reserves and contingent resources, and estimates of the value of the Company's undeveloped acreage 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 or 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 (www.sedar.com) or Painted Pony's website (www.paintedpony.ca).

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.

Special Note Regarding Disclosure of Reserves or Resources

"Contingent Resources" is defined in the Canadian Oil and Gas Evaluation Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status.

The contingent resources estimates, including the corresponding estimates of before tax present value estimates, are estimates only and the actual results may be greater than or less than the estimates provided herein. There is no certainty that it will be commercially viable or technically feasible to produce any portion of the resources.

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.

Mcfges may be misleading, particularly if used in isolation. A Mcfge conversion ratio of 1 bbl: 6 Mcf 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)
    www.paintedpony.ca

    Painted Pony Petroleum Ltd.
    300, 602 - 12 Ave SW
    Calgary, AB T2R 1J3