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

Painted Pony Petroleum Ltd.

June 28, 2011 17:44 ET

Painted Pony Reports First Quarter 2011 Financial Results and Operational Update

CALGARY, ALBERTA--(Marketwire - June 28, 2011) - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX VENTURE:PPY.A)(TSX VENTURE:PPY.B) is pleased to report their financial results for the three months ended March 31, 2011 and an operational update. During the first quarter of 2011, Painted Pony Petroleum Ltd. continued to enjoy financial and operational success. Quarterly results include the following:

  • grew daily production to average 4,027 boe per day (weighted 50% oil and liquids and 50% gas) up 73% from first quarter 2010 and 17% from fourth quarter 2010;
  • generated funds flow from operations of $12.1 million ($0.21 per diluted share);
  • raised $80.0 million in a bought deal financing;
  • exited the first quarter of 2011 with positive working capital of $64.1 million and no debt with unutilized, increased credit facilities of $75 million;
  • realized first quarter 2011 field netbacks of $59.08 per bbl for oil, on sales prices averaging $87.08 per bbl; and,
  • added land in both Saskatchewan and British Columbia, bringing total land holdings to over 200,000 net acres.

OPERATIONAL ACTIVITIES

The Company conducted an active capital program during the first quarter of 2011, which included the drilling of 12 (8.1 net) wells.

BRITISH COLUMBIA

Painted Pony continues to focus on developing and expanding its liquid rich Montney gas project at Blair-Cameron in northeast British Columbia. Given recent operational successes, the Company has moved the Montney gas project beyond piloting into delineation and development. Three wells (1.5 net) on a single pad were drilled for Montney, each one targeting a different layer (Upper, Middle and Lower) of the Montney. All three (1.5 net) were successfully completed and put on production in the second quarter of 2011. The Montney project in northeastern British Columbia continues to perform above expectations. With several successful wells producing from each of the three primary targets within the Montney, Painted Pony plans to move to further delineation and development of this world-class resource.

Painted Pony also continues to actively evaluate the Buckinghorse shale gas potential. The first stimulations of two (1.0 net) wells drilled in late 2010, in this 800 meter thick resource, are currently planned for early in the fourth quarter of 2011.

SASKATCHEWAN

In Saskatchewan 9 (6.6 net) wells were drilled during the first quarter of 2011 targeting light oil. The Company enjoyed drilling success at Midale (Bakken), Alameda (Mississippian), and Ingoldsby (Mississippian). Further completions of the first quarter drilled wells have been put on hold by an extended period of unusually wet weather and associated flooding. This unusually long spring breakup has persisted since mid-March. The affected area covers a wide swath of industry activity and incorporates most of the Company's working interest oil properties. As with most operators in the area, the flooding conditions have significantly impacted Painted Pony's production operations, drilling program and work-over projects. To date, the Company estimates these adverse conditions have delayed the drilling schedule by more than 60 rig days in comparison to prior years.

Most recently, several towns in the Weyburn/Midale district experienced severe flooding and a state of emergency was declared by the province of Saskatchewan. Painted Pony continues to monitor the Saskatchewan situation, however at this time it is difficult to estimate when normal oilfield operations will resume. Accordingly, certain production volumes and new production additions may continue to be curtailed or delayed. This has been a major problem for all oil producers in the area and also for local farmers who have been unable to plant crops. The Energy Minister of Saskatchewan recently stated that this is a once in 500 years event.

PRODUCTION

Daily production grew to average 4,027 boe per day in the first quarter of 2011, up 17% over the fourth quarter of 2010, and 73% over the first quarter of 2010. Daily Saskatchewan sales in the first quarter averaged 2,082 boe per day (weighted 95% oil and liquids) and sales from British Columbia averaged 1,945 boe per day (weighted 99% gas).

Production in the second quarter has been adversely affected by flooding in Saskatchewan, and gas plant disruptions in both Saskatchewan and British Columbia have resulted in the Company's production being reduced by an estimated 500 boe/d. The Company expects to return to normal production growth in the third quarter of 2011.

LAND

At March 31, 2011, the Company held 200,521 net acres of land, consisting of 76,049 net acres (119 net sections) in Saskatchewan and 124,472 net acres (194 net sections) in British Columbia. To date during the second quarter of 2011, the Company has completed an asset acquisition and continues to participate in Crown land sales that complement existing core areas. The Company now has over 81,000 net acres (127 net sections) of Montney rights in northeastern British Columbia. A number of joint ventures have been announced in recent months in the "Northern Montney Trend" and land prices continue to escalate offsetting Painted Pony lands, despite suppressed gas prices.

FINANCIAL RESOURCES

Painted Pony's focus on conservative fiscal management continues. In February 2011, the Company issued 7,620,000 Class A shares at $10.50 per share, raising gross proceeds of $80.0 million. At March 31, 2011, Painted Pony had a positive working capital position of $64.1 million and no debt. In March 2011, the demand revolving operating credit facility was increased to $75.0 million, replacing the previous $65.0 million demand revolving credit facility. The facility is subject to review on or before September 30, 2011.

IFRS

Painted Pony's conversion to IFRS, including the redetermination of 2010 operations under IFRS in comparison to GAAP was completed during the second quarter of 2011. The net impact on funds flow from operations was minor (March 2011: $45,000 and March 2010: $10,000), notwithstanding numerous differences in components of after tax net income.

INVESTOR RELATIONS

Interested parties are invited to visit the Company's website on Wednesday, June 29, 2010 to view an updated presentation.

Painted Pony Class A Shares and Class B Shares trade on the TSX Venture Exchange under the symbols "PPY.A" and "PPY.B", respectively. For further information, please see www.paintedpony.ca.

Financial and Operational Highlights
(unaudited)

Three months ended March 31,20112010
Financial (000's except per share)
Petroleum and natural gas revenue (before royalties)$19,315$14,146
Funds flow from operations(1)$12,098$9,156
Per share – basic(2)$0.22$0.21
Per share – diluted(3)$0.21$0.20
Cash flow from operating activities$11,555$9,221
Net income$2,144$1,546
Per share – basic(2)$0.04$0.04
Per share – diluted(3)$0.04$0.03
Capital expenditures(4)$25,085$35,482
Net working capital$64,100$15,639
Total assets$330,156$186,881
Shares outstanding
Class A59,186,07344,136,700
Class B1,173,6001,173,600
Operational
Daily sales volumes
Oil (bbls per day)1,8111,722
Condensate (bbls per day)5427
NGL's (bbls per day)14119
Gas (mcf per day)12,1263,322
Total (boe per day)4,0272,322
Realized prices
Oil (per bbl)$87.08$79.58
Gas (per mcf)$3.77$5.21
Field operating netbacks
Oil (per bbl)$59.08$58.71
Gas & associated liquids (per boe)$17.03$13.45
Company combined (per boe)$35.95$47.02
  1. This table contains the term "funds flow from operations", which should not be considered an alternative to, or more meaningful than "cash flow 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 flow 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.
  2. Basic per share information is calculated on the basis of the weighted average number of Class A shares outstanding in the period.
  3. Diluted per share information reflects the potential dilution effect of options and the convertible Class B shares, each of which may be anti-dilutive. Net 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.
  4. Including decommissioning obligations and share-based payments.

Advisory

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 fourth quarter of 2010; (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 management's assessment of Painted Pony's future plans and operations, number, type and timing of wells to be drilled, the planning and development of certain prospects, production estimates, and expected production growth 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.

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.

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

    Painted Pony Petroleum Ltd.
    Joan E. Dunne
    Vice President, Finance & CFO
    (403) 475-0440
    (403) 238-1487 (FAX)
    www.paintedpony.ca