Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX
VENTURE:PPY.A) (TSX VENTURE:PPY.B) is pleased to report the progress made during
the second quarter of 2008. Our accomplishments included:
- Growing production by 433% from the first quarter of this year to an average
of 789 boe/d in the second quarter;
- Drilling 10 (4.5 net) Bakken wells in the second quarter of 2008, bringing
total Company activity in SE Saskatchewan in the first six months to 22 (9.3
net) wells at a 95% net success rate;
- Building the Company's total undeveloped land inventory at the end of June
2008 in SE Saskatchewan and NE BC to 103,360 net acres plus approximately 53,000
acres of option lands in SE Saskatchewan. The Company acquired an additional
7,100 net acres of potential Bakken-bearing lands in August 2008;
- Enjoying second quarter field netbacks of $91.20/bbl for SE Saskatchewan oil
and $36.00/boe for NE BC gas and products; and
- Identified Montney potential on NE BC lands.
Growing Production
Second quarter daily sales volumes increased 433% compared to the first quarter
to average 789 boe/d, weighted 57% gas, 40% oil, and 3% liquids. This increase
in sales was the combined result of additional volumes from the Company's
drilling program in SE Saskatchewan combined with gas and associated products
from NE BC assets purchased at the end of the first quarter of 2008. Production
in July 2008 averaged 840 boe/d, weighted 52% gas, 46% oil, and 2% liquids,
based on field estimates.
Exploring for Bakken and Montney
During the second quarter of 2008, Painted Pony continued to delineate the
Bakken formation in SE Saskatchewan. In the six months ending June 30, the
Company drilled 19 gross (7.37 net) successful Bakken horizontal wells, one (1.0
net) vertical stratigraphic exploration well and one (0.5 net) vertical
exploration well both on potential new Bakken trend areas and the drilling and
abandonment of one (0.4 net) horizontal well. Painted Pony has drilled 8 gross
(4.1 net) successful wells to-date in the third quarter of 2008, including the
drilling of one 100% horizontal well targeting the Frobisher formation in the
Bienfait area of SE Saskatchewan, currently being evaluated.
On March 31, 2008, Painted Pony closed the acquisition of natural gas-weighted
production and lands in the Company's core N.E. BC area of Cameron and Cypress.
In the two months between the effective and the closing date of the acquisition,
the Company participated in the successful drilling of two (0.55 net) wells in
the Gundy and Town areas. Activity in the second quarter of 2008 has been
primarily related to well equipping and tieing-in wells along with strategic
undeveloped land acquisitions. The Company's geo-technical team has focused on
identifying the Montney zone potential on these lands, along with Bluesky,
Gething, Cadomin and Halfway. The Company is currently evaluating proposals from
industry participants for a multi-well drilling program to help further evaluate
the Montney formation; this formation has yielded some prolific wells on lands
to the south and east of our lands. Operations can be carried out in this area
nine months of the year. In the Blair area of NE BC, the Company and its partner
have also identified a shallow shale gas play. The formation has shown great
promise after initial experimental completion work. Painted Pony has a number of
new operations planned and expects activity to commence in September targeting
the Montney, Bluesky/ Gething and Halfway formations.
Building Land Inventory
At June 30, 2008, the Company had approximately 34,200 net acres of undeveloped
land plus approximately 53,000 acres of option lands in SE Saskatchewan and
88,700 net developed and undeveloped acres of land in NE BC. An additional 7,100
net acres of potential Bakken-bearing land was purchased at the August 2008
Saskatchewan crown land sale.
Painted Pony continues to actively accumulate land in Saskatchewan through
earning land by drilling wells, participating in crown land sales and a freehold
leasing program. The Company currently owns approximately 41,300 net undeveloped
acres. In addition, Painted Pony has access to significant additional lands
prospective for light oil in the Bakken and other formations through various
farm-in agreements. In the fourteen months since inception of operations,
Painted Pony have developed a multi-year drilling inventory of approximately 250
Company-mapped horizontal drilling locations targeting light sweet oil from the
Bakken and other formations within S.E. Saskatchewan on lands accessible to
Painted Pony through farm-ins or ownership.
Strong Financial Position
On April 30, 2008, Painted Pony issued 8.8 million Class A shares at $4.35 per
share in a bought deal private placement equity financing, raising gross
proceeds of $38.28 million. At the end of June 2008, the Company had a positive
net working capital position of $32.3 million. These funds, plus the cash flows
from operations combined with the currently unutilized $12.5 million credit
facilities provide a strong financial basis for the exploration and development
program.
Board of Director Changes
Painted Pony is pleased to announce the appointment of Arthur J. G. Madden, CMA,
MBA to the Board of Directors and as Chairman of the Audit Committee. Mr. Madden
brings 34 years of industry experience, lastly as Vice President Finance, Chief
Financial Officer and Director of Adamant Energy Inc. from 2004 to May 2008, and
Vice President Finance and Chief Financial Officer of Cavell Energy Corporation
from 1994 to 2004.
The Company announces the resignation of Craig Reed as a Director. The Board
wishes to thank him for his valuable contributions.
Appreciation
The continued dedication by the management, staff, directors and their families
to the Company is essential to the successful execution of our business plan.
Recognition is due to each of them, and to Painted Pony's partners, suppliers,
and government agencies; their cooperation and assistance continues to allow the
Company achieve its goals.
The Company would like to acknowledge all the shareholders for their continued
support. Shares of junior oil and gas companies have experienced considerable
turbulence in the past few months, with the extraordinarily volatile commodity
prices combined with overall concerns in the financial markets. The Company
looks forward to unlocking the vast resources potentially contained,
particularly in the Bakken and Montney plays.
Readers are invited to visit the Company's updated presentation dated August 28,
2008 on our website at www.paintedpony.ca.
Financial and Operational Summary
(unaudited)
----------------------------------------------------------------------------
Three months Six months
ended ended
June 30, 2008 June 30, 2008
----------------------------------------------------------------------------
FINANCIAL
Revenue (before transportation, interest
and other) $ 6,435,897 $ 7,790,656
Funds flow from operations (1) $ 3,946,823 $ 5,020,683
Per share - basic $ 0.15 $ 0.23
Per share - diluted (2) $ 0.14 $ 0.23
Net earnings $ 1,525,544 $ 4,871,095
Per share - basic and diluted (2) $ 0.06 $ 0.22
Capital expenditures $ 12,592,454 $ 43,178,938
Net working capital $ 32,336,669 $ 32,336,669
Total assets $ 96,362,028 $ 96,362,028
Shares outstanding
Class A 28,222,700 28,222,700
Class B 1,173,600 1,173,600
OPERATIONAL
Daily Sales Volumes
Oil sales (bbls/d) 316 232
Natural gas liquids (bbls/d) 21 10
Natural gas (mcf/d) 2,713 1,357
Total (boe/d) 789 469
Realized Prices
Oil ($/bbl) $ 125.20 $ 117.32
Gas ($/mcf) $ 10.66 $ 10.66
Field Operating Netbacks
Oil - SE Saskatchewan operations ($/bbl) $ 91.20 $ 84.31
Gas & liquids - NE BC operations ($/boe) $ 36.00 $ 36.00
Net Undeveloped Land
SE Saskatchewan (acres) 34,239 34,239
NE BC (acres) 69,121 69,121
Total (acres) 103,360 103,360
Wells Drilled(3)
Gross 10 22
Net 4.5 9.3
Net success rate 90% 95%
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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 Canadian generally
accepted accounting principles ("GAAP") as an indicator of the Company's
performance. Therefore reference to funds flow from operations or funds
flow from operations per share (basic and diluted) 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 funds 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 after the deemed conversion of the Class B
shares to Class A shares.
2. Class B shares are converted into Class A shares at $10 divided by the
greater of $1.00 and the Current Trading Price, defined as being the
weighted average trading price per share of Class A shares for the last
30 consecutive trading days.
3. "Gross and net wells drilled" excludes a salt water disposal well, and
includes a stratigraphic well. "Net wells drilled" refers to net revenue
interest. "Net success rate" excludes a stratigraphic well.
Advisory
This news release contains certain forward-looking statements, which include
assumptions with respect to (I) drilling success (ii) production; (iii) future
capital expenditures; and (iv) cash flow. The reader is cautioned that
assumptions used in the preparation of such information may prove to be
incorrect.
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 plan 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, the
impact of general economic conditions, industry conditions, volatility of
commodity prices, currency fluctuations, environmental risks, competition, the
lack of availability of qualified personnel or management, 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, stock market volatility, 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, stock market
volatility and market valuations of companies with respect to announced
transactions and the final valuations thereof, and obtaining required approvals
of regulatory authorities. 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 Corporation will derive therefrom. Readers are cautioned
that the foregoing list of factors is not exhaustive. All subsequent
forward-looking statements, whether written or oral, attributable to the
Corporation 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.
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