Painted Pony Petroleum Ltd.
TSX VENTURE : PPY.A

Painted Pony Petroleum Ltd.

March 29, 2012 17:13 ET

Painted Pony Reports 2011 Financial Results

CALGARY, ALBERTA--(Marketwire - March 29, 2012) - Painted Pony Petroleum Ltd. (TSX VENTURE:PPY.A) ("Painted Pony" or the "Company") is pleased to report the financial results for the year ended December 31, 2011.

In 2011, the Company achieved several major milestones:

  • increased total proved plus probable reserves by 321% from 32.5 mmboe to 136.9 mmboe;
  • grew our net present value (NPV10%) of proven plus probable reserves by 200.0% to $1.062 billion from $354 million;
  • generated funds flow from operations of $44 million, up 21% from $36 million, and cash flow from operations of $45 million from $35 million;
  • produced an average of 4,221 boe/d, an increase of 48% over 2010. Fourth quarter production in 2011 averaged 5,189 boe/d (weighted 32% oil and liquids and 68% gas);
  • enjoyed 2011 field netbacks of $31.34 per boe on sales prices averaging $47.99 per boe;
  • exited 2011 with positive working capital of $68.3 million and an undrawn credit facility of $80 million;
  • raised a total of $183.9 million gross in two bought-deal equity financings;
  • drilled 42 (29.3 net) wells at a net success rate of 90%; 29 (20.7 net) targeting oil and 13 (8.6 net) targeting gas; and
  • converted the Class B shares to Class A shares.

In the calendar year 2011, the oil and gas industry experienced significant volatility in commodity prices combined with capital market cautiousness. Against this backdrop, Painted Pony continued its adherence to a conservative fiscal strategy, underpinning a strong share price throughout 2011 and providing stability and flexibility to react to these fluctuations. Painted Pony exited 2011 with positive working capital of $68.3 million and an undrawn credit facility of $80 million.

In 2011, Painted Pony expanded its oil exploration program into Alberta, targeting a regional Viking light oil play. Access to approximately 22 net sections of land, including farm-in lands, was accumulated during the year. In the first quarter of 2012, the first 100% working interest exploratory earning well was drilled on this play, with completion results expected after breakup.

The Company continued to develop its Saskatchewan light oil program throughout 2011, enjoying success on the Flat Lake Bakken oil project. Several recent Flat Lake discoveries appear to have proved up a new Bakken trend, and are expected to provide several years of development drilling inventory.

In February 2012, in response to the decline in North American natural gas prices, Painted Pony announced it had reduced its 2012 capital program to $120 million, reducing both the overall amount of its capital program and slowing its investment in gas projects in northeastern British Columbia by $90 million. Expenditures directed towards natural gas projects are expected to result in significant reserve additions.

During the first quarter of 2012, the Company completed drilling operations on 10 (7.9 net) horizontal wells; 5 (4.7 net) in Saskatchewan, 4 (2.2 net) in British Columbia and 1 (1.0 net) in Alberta. Looking ahead to the balance of 2012, the Company's capital plans call for the drilling of 26 (18.1 net) wells, including 23 (14.2 net) targeting light oil projects.

The recent weakness in gas markets, in tandem with a general bearish medium-term view, has created an unprecedented interest in value-added ventures among many of Canada's explorers and producers. The opportunity to directly participate in innovative energy projects such as LNG (LiquefiedLiquefied Natural Gas) export facilities, GTL (Gas-to-Liquids) conversion or power co-generation is increasingly attractive, as these businesses offer the potential to add significant value beyond basic gas production and processing.

Painted Pony is working hard to become an industry leader in the value-added gas business. One of Painted Pony's goals is to leverage upon the Company's ideally-located Montney gas asset in northeastern British Columbia. In this regard, the Company is a founding member of the Douglas Channel BC LNG project. The BC LNG CO-OP project, to be located in Kitimat, British Columbia, has received its necessary export permits and is slated to commence LNG exports in the first half of 2014. Painted Pony continues to evaluate a formal commitment to be a gas supplier to this project.

An updated presentation incorporating the Company's 2011 financial results will be available on the Company's website on March 30, 2012.

Painted Pony Class A Shares trade on the TSX Venture Exchange under the symbol "PPY.A". For more information please visit www.paintedpony.ca.

Painted Pony Petroleum Ltd. was recognized as a TSX Venture 50® Company in 2012. TSX Venture 50 is a trade-mark of TSX Inc. and is used under license.

Financial and Operational Highlights

Three Months ended December 31,
(Unaudited
) Year ended
December 31
,
2011 2010 2011 2010
Financial ($000s, except per share and shares outstanding)
Petroleum and natural gas revenue(1) 20,528 16,621 73,936 58,283
Funds flow from operations(2) 12,517 10,411 44,150 36,393
Per share - basic(3) 0.19 0.20 0.74 0.78
Per share - diluted(4) 0.19 0.20 0.73 0.77
Cash flows from operating activities 12,889 10,200 44,884 35,474
Comprehensive income 1,457 4,513 6,542 9,222
Per share - basic(3) 0.02 0.09 0.11 0.20
Per share - diluted(4) 0.02 0.09 0.11 0.19
Capital expenditures(5) 54,452 35,929 162,868 124,104
Working capital (deficiency) 68,291 (1,205 ) 68,291 (1,205 )
Total assets 478,656 244,579 478,656 244,579
Shares outstanding
Class A 69,693,027 51,016,700 69,693,027 51,016,700
Class B - 1,173,600 - 1,173,600
Diluted weighted-average shares 66,470,874 52,027,084 60,829,382 49,503,521
Operational
Daily sales volumes
Oil, condensate & NGL's (bbls per day) 1,663 1,830 1,622 1,729
Gas (mcf per day) 21,151 9,678 15,589 6,718
Total (boe per day) 5,189 3,443 4,221 2,848
Realized prices
Oil (per bbl) $ 95.80 $ 80.43 $ 93.07 $ 77.84
Gas (per mcf) $ 3.28 $ 3.67 $ 3.60 $ 3.94
Field operating netbacks
British Columbia (per boe) $ 13.05 $ 13.66 $ 14.12 $ 12.35
Saskatchewan (per boe) $ 59.59 $ 54.69 $ 58.34 $ 54.81
Company combined (per boe) $ 28.43 $ 35.54 $ 31.34 $ 37.88
  1. Before royalties
  2. This table contains the term "funds flow from operations", which should not be considered an alternative to, or more meaningful than "cash flows from operating activities" as determined in accordance with International Financial Reporting Standards ("IFRS") as an indicator of the Company's performance. Funds flow from operations and funds flow from operations per share (basic and diluted) does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management uses funds flow from operations to analyze operating performance and leverage and considers funds flow from operations to be a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investment. The reconciliation between funds flow from operations and cash flows from operating activities can be found in "Management's Discussion and Analysis". Funds flow from operations per share is calculated using the basic and diluted weighted average number of shares for the period, and after the deemed conversion of the Class B shares to Class A shares, consistent with the calculations of earnings per share.
  3. Basic per share information is calculated on the basis of the weighted average number of Class A shares outstanding in the period.
  4. Diluted per share information reflects the potential dilution effect of options and the convertible Class B shares, each of which may be anti-dilutive. Comprehensive income is adjusted for the amount of finance expense applicable to the Class B shares for the period. The conversion of Class B shares into Class A shares, if dilutive, is computed by dividing $10 by the greater of $1.00 and the Current Trading Price, defined as the weighted average trading price of the Class A shares for the last 30 consecutive trading days.
  5. Including decommissioning obligations and share-based payments.

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. In addition, and without limiting the generality of the foregoing, the key assumptions underlying the forward-looking statements contained herein include the following: (i) commodity prices will be volatile, and natural gas prices will remain low, throughout 2012; (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 2012 are expected to show growth from the fourth 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. The reader is cautioned that certain or all of the forgoing assumptions may prove to be incorrect.

Certain information regarding Painted Pony set forth in this document, including its future plans and operations,and the planning and development of certain prospects, 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

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. Given the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6 Mcf: 1 bbl, utilizing a conversion ratio at 6 Mcf: 1 bbl may be misleading as an indication of value.

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)

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