Painted Pony Petroleum Ltd.

Painted Pony Petroleum Ltd.

November 24, 2011 08:33 ET

Painted Pony Reports Third Quarter 2011 Financial Results and Operational Update

CALGARY, ALBERTA--(Marketwire - Nov. 24, 2011) - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX VENTURE:PPY.A) (TSX VENTURE:PPY.B) is pleased to report the financial results for the three months ended September 30, 2011 and to provide an operational update. Highlights include:

  • Production averaged 4,064 boe per day (weighted 65% gas and 35% oil and liquids), an increase of 32% from the third quarter of 2010;
  • Painted Pony drilled a total of 18 (13.2 net) wells during the quarter, including 13 (10.3 net) in Saskatchewan and 5 (2.9 net) wells in British Columbia. To date in 2011, the Company has drilled a total of 39 (27.3 net) wells;
  • In northeast British Columbia, operating and transportation costs declined by 32% to $7.66 per boe in the third quarter of 2011 as compared to the same period in 2010;
  • The Company completed and tested a 50% working interest lower Montney horizontal well at d-44-C/94-B-16 which tested in excess of 24 mmcf per day at 2,700 psi;
  • Two (0.4 net) non-operated Montney wells at Cameron/Kobes were completed in the third quarter and tested at rates of 10.9 mmcf per day and 10.8 mmcf per day;
  • Subsequent to quarter-end, the Company commenced production testing on the 100% working interest Blair a-41-F/94-B-16 pad. The upper Montney well on this pad produced at an average of 10.5 mmcf per day at over 700 psi for the first seven days on production;
  • The Company has negotiated an expansion to the Blair Creek gas plant, which will increase gross processing capacity from 24 mmcf per day to 70 mmcf per day. Painted Pony's firm share of this capacity will increase to 32 mmcf per day. This expansion, which will be fully funded by the midstream operator, is expected to be completed by the end of the second quarter of 2012. Additionally, the Company is constructing a new production facility at its d-44-C/94-B-16 pad, which will deliver production from the northern Cameron area directly into the Spectra Energy Transmission sales system; and
  • Painted Pony exited the quarter with a positive working capital position of $6.7 million and an $80 million undrawn credit facility. Subsequent to quarter-end, the Company closed a bought deal financing for total proceeds of $103.8 million before costs.


Painted Pony's sales volumes averaged 4,064 boe per day during the three months ended September 30, 2011, an increase of 32% compared to the third quarter of 2010 and a 13% increase over the second quarter of 2011. Volumes were weighted 65% towards gas, compared to 43% in the comparable 2010 period.

In Saskatchewan, oilfield operations have gradually resumed as the wet surface conditions which have impeded industry activity since spring 2011 have begun to subside. Third quarter sales volumes averaged 1,365 boe per day compared to 1,422 boe per day in the second quarter of 2011. Solution gas and associated liquids sales from the Midale/Huntoon area resumed in late September after repairs were completed at a midstream gas processing facility.

Sales volumes in northeast British Columbia averaged 2,699 boe per day during the third quarter of 2011, compared to 2,171 boe per day in the second quarter of 2011. This represents an increase of 24% from the second to the third quarter of 2011 and a 99% increase from the third quarter of 2010.


Painted Pony continues to delineate and develop its Montney gas assets in northeast British Columbia. During the third quarter of 2011, the Company participated in the drilling of 4 (1.9 net) horizontal Montney wells and increased its total land position to 135,115 net acres (211 net sections). The Company currently has 85,200 net acres (133 net sections) of Montney rights.

On the Cameron/Kobes block, 3 (0.9 net) Lower Montney wells were drilled and completed. The 50% working interest well at d-44-C/94-B-16 tested at a stabilized rate of 24.5 mmcf per day, and at the c-A58-J/94-B-9 and a-C10-J/94-B-9 wells (both 20% working interest), initial production rates were 10.9 mmcf per day and 10.8 mmcf per day respectively. Two new production facilities (one operated and one non-operated) are presently under construction on the Cameron/Kobes block. Both are expected to be on stream by year end 2011, adding approximately 50 mmcf per day gross additional gas processing capacity to the area.

At Blair/Town, Painted Pony drilled one (1.0 net) well in the third quarter of 2011 at a-41-F/94-B-16. A second (1.0 net) well on this pad has been subsequently rig-released since the end of the third quarter. Initial combined production rates from this pad were approximately 13.5 mmcf per day. This includes 10.5 mmcf per day from the upper Montney well plus 3.0 mmcf per day from the lower Montney well. Production rates from the lower Montney well on this pad have been constrained by wellbore operational problems which arose during completion operations. The Company is investigating alternatives for remedial operations. The existing Blair Creek midstream gas processing facility is being expanded from 24 mmcf per day to a total capacity of 70 mmcf per day, of which Painted Pony's firm share will increase to 32 mmcf per day. The expansion is scheduled to be completed by the end of the second quarter of 2012.


In Saskatchewan, the Company drilled a total of 13 (10.3 net) wells, 11 (8.3 net) Bakken wells and 2 (2.0 net) Mississippian wells, during the third quarter of 2011. Sales of solution gas and associated liquids from the Midale-Huntoon area resumed late in the third quarter after repairs at a non-operated midstream facility were completed. In the Midale area, the gathering system was expanded and seven single well batteries were tied-in to the Company's existing facility. This expansion eliminates the need for the Company to truck produced volumes from individual well sites. In addition to the gathering system expansion, the Midale battery was connected to a third party oil sales line. These facility upgrades are expected to help lower area operating costs during the fourth quarter of 2011.


Subsequent to quarter-end, the Company closed a bought deal financing for total proceeds of $103.8 million before costs. The Company has also announced the conversion of its Class B shares to Class A shares, subject to necessary regulatory approvals, effective on December 1, 2011. On the effective date, the holders of the 1,173,600 outstanding Class B shares will receive 0.8250 of a Class A share in exchange for each one (1) Class B share held, resulting in an aggregate of up to 968,220 Class A shares being issued, subject to rounding adjustments.


Painted Pony's development of the Montney asset continues. At Blair/Town, the corporate focus has shifted to developing the 100% working interest lands, and initial results have been encouraging. The Company intends to drill 4 (3.5 net) Montney wells in British Columbia and 9 (4.4 net) wells in Saskatchewan during the fourth quarter of 2011. For 2012, Painted Pony currently plans to spend approximately $200 million on capital projects, to drill 25 (19.8 net) wells in British Columbia and 27 (18.0 net) wells in Saskatchewan.


Interested parties are invited to visit the Company's website to view an updated presentation. Painted Pony's Class A Shares and Class B Shares trade on the TSX Venture Exchange under the symbols "PPY.A" and "PPY.B", respectively.

Financial and Operational Highlights
Three months ended September 30 , Nine months ended September 30 ,
2011 2010 2011 2010
Financial (000s, except per share)
Petroleum and natural gas revenue (before royalties) $ 16,647 $ 14,764 $ 53,408 $ 41,662
Funds flow from operations(1) $ 9,159 $ 9,123 $ 31,633 $ 25,983
Per share - basic(2) $ 0.15 $ 0.19 $ 0.55 $ 0.58
Per share - diluted(3) $ 0.15 $ 0.19 $ 0.53 $ 0.57
Cash flow from operating activities $ 8,586 $ 7,699 $ 31,995 $ 25,275
Net income $ 4,765 $ 2,258 $ 5,085 $ 4,709
Per share - basic(2) $ 0.08 $ 0.05 $ 0.09 $ 0.10
Per share - diluted(3) $ 0.08 $ 0.05 $ 0.09 $ 0.10
Capital expenditures(4) $ 45,924 $ 20,670 $ 108,416 $ 88,175
Working capital $ 6,709 $ 22,454 $ 6,709 $ 22,454
Total assets $ 360,227 $ 223,347 $ 360,227 $ 223,347
Shares outstanding
Class A 59,633,673 50,975,700 59,633,673 50,975,700
Class B 1,173,600 1,173,600 1,173,600 1,173,600
Diluted weighted-average shares 61,334,305 47,384,870 59,299,501 45,746,842
Daily sales volumes
Oil (bbls per day) 1,312 1,687 1,464 1,643
Condensate (bbls per day) 41 28 51 26
NGL's (bbls per day) 50 38 94 26
Gas (mcf per day) 15,965 7,961 13,715 5,720
Total (boe per day) 4,064 3,080 3,895 2,648
Realized prices
Oil (per bbl) $ 89.48 $ 75.94 $ 92.16 $ 76.92
Gas (per mcf) $ 3.60 $ 3.65 $ 3.76 $ 4.09
Field operating netbacks
British Columbia (per boe) $ 14.18 $ 10.74 $ 14.67 $ 11.63
Saskatchewan (per boe) $ 51.56 $ 54.01 $ 57.90 $ 54.85
Company combined (per boe) $ 26.73 $ 34.97 $ 32.66 $ 38.90
  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 cash expenditures and non-cash decommissioning obligations and share-based payments.


This news release contains certain forward-looking information (collectively referred to herein as "forward looking statements") within the meaning of applicable Canadian securities laws. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "potential", "intend", "objective", "continuous", "ongoing", "encouraging", "estimate", "expect", "may", "will", "project", "should", or similar words suggesting future outcomes. These forward-looking statements 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.

Forward-looking statements are based upon the opinions and expectations of management of the Company as at the effective date of such statements and, in some cases, information supplied by third parties. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions and that information received from third parties is reliable, it can give no assurance that those expectations will prove to have been correct. Forward-looking statements are subject to certain risks and uncertainties that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements.

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) Painted Pony will have sufficient financial resources with which to conduct the capital program; (v) the accuracy of geological and geophysical data and Painted Pony's interpretation of that data; (vi) production rates in 2011 and 2012 are expected to show growth from 2010 and from the third quarter of 2011; (vii) that production from new wells will be substantially similar to production rates associated with existing wells in the vicinity of the Company's properties; (viii) the continued ability of the Company to generate internal cash flow and the availability of capital on acceptable terms; and (ix) 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 and forgoing 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 ( or Painted Pony's website (

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 Production Estimates

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
    (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