Painted Pony Petroleum Ltd.
TSX VENTURE : PPY.A

Painted Pony Petroleum Ltd.

March 06, 2012 19:54 ET

Painted Pony Reports 2011 Year-End Reserve Growth of Over 300% and 2011 Land Report

CALGARY, ALBERTA--(Marketwire - March 6, 2012) - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX VENTURE:PPY.A) is pleased to announce the Company's 2011 year-end reserves report and land valuation.

The highlights of Painted Pony's 2011 year end reserve and land reports include:

  • increased the net present value, discounted at 8%, before income taxes, of proved plus probable reserves to $1.3 billion ($1.1 billion discounted at 10%);

  • increased proved plus probable reserves to 136.9 mmboe, up 321% from 32.5 mmboe at December 31, 2010; with approximately 12% of its Montney land base assigned reserves;

  • grew proved plus probable reserves per weighted average share by 238%;

  • increased total proved reserves by 177% to 31.4 mmboe from 11.3 mmboe at December 31, 2010;

  • replaced 2011 production by 68.7 times;

  • achieved a recycle ratio of 3.5 times, based on average 2011 estimated netback of $31.34/boe;

  • increased proved plus probable reserve life index ("RLI") to 71.7 years; and

  • Increased the value of undeveloped land holdings to $179.8 million.

RESERVES

The reserves data of the Company are based upon independent evaluations by GLJ Petroleum Consultants Ltd. ("GLJ") and Sproule Associates Limited ("Sproule") each with an effective date of December 31, 2011 as contained in a consolidated report of GLJ dated March 6, 2012 (the "Painted Pony Reserve Report"). The tables below summarize Painted Pony's crude oil, natural gas liquids ("NGL") and natural gas reserves and the net present values of future net revenue attributable to such reserves as evaluated in the Painted Pony Reserve Report, based on GLJ's January 1, 2012 forecast prices and costs assumptions. GLJ evaluated the Company's reserves on its British Columbia properties and Sproule evaluated the Company's reserves on its Saskatchewan properties. Sproule incorporated the GLJ forecast prices and costs assumptions in their evaluation. GLJ prepared the Painted Pony Reserve Report by consolidating the GLJ evaluation with the Sproule evaluation, all run on the GLJ pricing and cost assumptions.

At December 31, 2011, the Company consolidated proved plus probable reserves were 136.9 mmboe, up 321% from 32.5 mmboe at December 31, 2010, and up 60% from 85.6 mmboe at June 30, 2011. Total proved working interest reserves were 31.4 mmboe, compared to 21.8 mmboe at June 30, 2011 and 11.3 mmboe as at December 31, 2010.

Painted Pony's net present value of proved plus probable reserves ("NPV") as at December 31, 2011 discounted at 8% was $1.3 billion. At December 31, 2011, at a discount rate of 10%, the Company's NPV was $1.1 billion, a 33% increase from the June 30, 2011 NPV, and a 200% increase from the December 31, 2010 NPV.


Summary of Company Reserves (1),(3),(5)
Forecast Prices and Costs
As at December 31, 2011 As at June 30, 2011 As at Dec. 31, 2010
Light and Medium Oil
(mbbl)
Natural Gas
(mmcf)(4)
Natural Gas Liquids
(mbbl)
Total
(mboe)(2)
Total
(mboe)(2)
Total
(mboe)(2)
Proved
Developed producing 2,024 38,620 808 9,269 6,536 4,477
Developed non-producing 50 10,673 188 2,017 252 48
Undeveloped 837 102,892 2,113 20,098 15,057 6,811
Total proved 2,911 152,186 3,108 31,383 21,845 11,336
Probable 2,188 549,875 11,660 105,494 63,750 21,203
Total proved plus probable 5,099 702,060 14,768 136,877 85,594 32,539

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.

Summary of Net Present Values of Future Net Revenue (1),(2),(3),(4),(5)
Forecast Prices and Costs ($ millions)
Before Income Taxes
As at December 31, 2011 As at June 30, 2011 As at Dec. 31, 2010
0% 5% 8% 10% 15% 0% 10% 0% 10%
Proved
Developed producing 239 191 171 160 139 213 145 145 108
Developed non-producing 50 34 28 26 21 5 4 0 0
Undeveloped 408 243 185 157 107 329 136 123 49
Total proved 697 468 385 343 267 547 284 268 157
Probable 2,660 1,279 892 719 444 1,768 514 485 197
Total proved plus probable 3,358 1,747 1,277 1,062 711 2,315 798 753 354

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 December 31, 2011 was the GLJ price deck dated January 1, 2012.

(4) Numbers in this table are subject to rounding error.

Painted Pony's average production for 2011 was 4,221 boe/d (38% oil and liquids), with the fourth quarter production averaging 5,189 boe/d (32% oil & liquids). The Company's 2011 proved plus probable working interest reserve additions replaced 2011 production by 68.7 times, and annualized fourth quarter production by 55.5 times.

The net change in the future development costs ("FDC") associated with the proved plus probable reserves is $780.3 million and $105.8 million for proved reserves. Of the FDC expenditures included in the Painted Pony Reserve Report for proved plus probable reserves, approximately 20% or $204.6 million is expected to be incurred in 2012 and 2013, with the remainder expected to be invested through 2018.

Future Development Costs ($thousands)(1)
Proved Proved plus Probable
As at December 31, 2011
2012 60,616 69,228
2013 72,511 135,355
2014 49,481 152,065
2015 15,303 151,854
2016 - 139,980
2017 - 296,335
2018 - 82,435
Total 197,911 1,027,253
As at December 31, 2010 92,146 246,968

Notes:

(1) Numbers in this table are subject to rounding error.

The Company's proved reserve life index ("RLI") increased to 16.4 years while the proved plus probable RLI is 71.7 years, as compared to 8.9 and 25.7 years, respectively, at December 31, 2010, based on fourth quarter sales annualized. The growth in reserves volumes resulted from Painted Pony's successful 2011 drilling and acquisition program. In 2011, the Company drilled 42 (29.3 net) wells; of which 29 (20.7 net) were oil wells and 13 (8.6 net) were gas wells.

Painted Pony's total capital expenditures (unaudited) in 2011 were $165.5 million. This includes non-cash charges such as $3.4 million of non-cash share based payments and $3.4 million of non-cash decommissioning costs.

Painted Pony's Montney-based reserves in British Columbia account for a significant amount of the Company's reserves, and incorporate assigned reserves to approximately 12 percent of the Company's Montney acreage. At December 31, 2011, the Company's reserves in British Columbia are as follows:

Summary of Company Reserves(1),(3),(5)

British Columbia Assets

Forecast Prices and Costs

As at December 31, 2011
Light and Medium Oil
(mbbl)
Natural Gas
(mmcf)(4)
Natural Gas Liquids
(mbbl)
Total
(mboe)(2)
Proved
Developed producing - 37,366 571 6,799
Developed non-producing - 10,673 188 1,967
Undeveloped - 102,587 2,041 19,139
Total proved - 150,626 2,800 27,904
Probable - 548,801 11,450 102,916
Total proved plus probable - 699,427 14,249 130,820

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.

Summary of Net Present Values of Future Net Revenue(1),(2),(3),(4),(5)

British Columbia Assets

Forecast Prices and Costs ($ millions)

Before Income Taxes

As at December 31, 2011
0% 5% 8% 10% 15%
Proved
Developed producing 132 100 87 80 68
Developed non-producing 47 32 26 24 19
Undeveloped 376 216 162 135 89
Total proved 556 348 275 239 175
Probable 2,545 1,198 824 657 396
Total proved plus probable 3,101 1,546 1,100 897 571

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 December 31, 2011 was the GLJ price deck dated January 1, 2012.

(4) Numbers in this table are subject to rounding error.

METHOD OF PREPARATION

In this press release "working interest" reserves are calculated as the Company's share of reserves, excluding royalty interest reserves and before the deduction of royalty burdens payable. The reserve report was prepared utilizing definitions as set out under NI 51-101- Standards of Disclosure for Oil and Gas Activities ("NI 51-101").

UNDEVELOPED LAND

At December 31, 2011, the Company's undeveloped lands in Saskatchewan, British Columbia and Alberta were valued at $179.8 million. The land valuation was prepared by Seaton-Jordan & Associates Ltd. in accordance with NI 51-101.

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.

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 estimates of the Company's reserves, estimates of future net revenue from the Company's reserves, pricing, inflation and exchange rates and future development costs 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. 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.

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