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 first quarter of 2009. The accomplishments include:
- Drilling 3 (2.5 net) successful wells targeting the Bakken oil formation in
southeast Saskatchewan and the Bluesky/Gething gas zone in northeast British
Columbia,
- Building the land base to 54,018 net acres in Saskatchewan and 96,675 net
acres in British Columbia,
- Growing production to 1,225 boe/d, weighted 51% oil and liquids and 49% gas,
- Evaluating the Montney/ Doig formations in 2 farm-out pilot wells in northeast
British Columbia, and
- Exiting the first quarter with positive working capital of $6.4 million and
$22 million of unutilized credit facilities.
The first quarter of 2009 was a challenging period for the energy industry.
Commodity prices continued to be volatile and financial markets were very
unstable. Faced with this uncertainty, Painted Pony continued to maintain a
positive balance sheet, and to examine the economics of each planned capital
expenditure. There were, however, certain positive developments that assisted
the Company in determining those operations that would generate higher returns.
These included: provincial royalty incentives, reduced drilling costs brought
about by the reduced industry activity, and drilling shorter horizontal wells,
while maintaining productivity/recovery parameters at levels similar to wells
drilled with longer horizontal legs.
In the first quarter of 2009, the Company drilled two short horizontal Bakken
oil wells 100% working interest, in the Huntoon area of Saskatchewan. One of
these wells was completed and placed on production in the quarter. Completion of
the second well and its placement on production was delayed by spring break-up
until late May. Spring break-up in the second quarter of 2009 has caused some
temporary disruptions to the Company's Saskatchewan sales volumes due to
difficulty accessing some of the Company's oil well battery sites. However, the
impact on our second quarter results is expected to be mitigated by the
incremental volumes from the new wells.
In northeast British Columbia, Painted Pony participated in the drilling of 1
(0.5 net) gas well in the Cameron area targeting the Bluesky/Gething zone. The
gas well was completed and tied in, with initial production commencing early in
the second quarter.
The Company entered into two farm-out agreements whereby a senior oil and gas
producer farmed in on portions of the Montney/Doig rights within the Cypress and
Cameron areas. Under the terms of the agreements, four tests will be drilled on
these land blocks in 2009. The first well on the Cypress block commenced
drilling at the end of 2008 and the second well on the Cameron block commenced
drilling during the first quarter of 2009. The Cameron well has been completed
and is being evaluated, while the Cypress well is awaiting completion after
break up. Both agreements contain rolling option provisions whereby additional
lands can be earned through conducting additional activities on the farm-out
lands. Under the terms of the farm-out agreements, Painted Pony does not pay any
drilling or completion costs, and can elect whether to pay its proportionate
share of the equipping and tie-in costs.
The Company participated in the experimental recompletion and tie-in of one
Buckinghorse/ Fort St. John shale well in the first quarter of 2009 as part of a
pilot program. With over 70,000 net acres with potential for Buckinghorse shale,
the Company is in the very early stages of proving up the commercial viability
of the project.
Acquisition
On May 26, 2009, the Board of Directors approved the Company entering into an
agreement with a private company to acquire certain oil properties focused in
the Bakken-prospective fairway in the Company's Midale/ Huntoon core area in
southeast Saskatchewan for $10.0 million, before closing adjustments and related
costs. The proposed acquisition has an effective date of May 1, 2009 and is
expected to close on July 15, 2009. The completion of the acquisition is subject
to certain conditions, including normal regulatory approvals.
Current production from the acquired properties, based on field estimates, is
approximately 148 bbls/d of Bakken oil, with an additional 12 bbls/d shut-in due
to Spring breakup. The assets include 3,410 net acres (5.3 net sections) of
undeveloped adjacent lands prospective for Bakken oil. All of the assets are
currently operated by Painted Pony. This acquisition increases the Company's
average working interest in the areas to greater than 80%.
Outlook
In the second quarter of 2009, the Company anticipates drilling 2 (1.7 net) oil
wells, and is currently evaluating its budget plans for the second half of the
year. Two additional farmout wells targeting the Montney/Doig zone have been
committed to on the Cameron block in 2009. The Company has approximately 60,000
net acres with Montney/ Doig rights.
Investor Relations
Painted Pony will also be undertaking a series of presentations to interested
parties over the next couple of weeks in various cities in Canada and the United
States. Readers are invited to visit the Company's updated presentation dated
May 28, 2009 available aftermarket today on our website at www.paintedpony.ca.
Financial and Operating Highlights
(Unaudited)
Three months ended March 31, 2009 2008
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Financial
Petroleum and natural gas revenue (before
royalties) $ 4,559,432 $ 1,354,759
Funds flow from operations (1) $ 1,890,014 $ 1,073,860
Per share - basic and diluted(2) $ 0.05 $ 0.06
Cash flow from operating activities (1) $ 1,499,252 $ 1,314,606
Net earnings (loss) $ (1,597,149) $ 3,345,551
Per share - basic and diluted(2) $ (0.05) $ 0.19
Capital expenditures, including ARC(4) $ 7,530,067 $ 30,586,484
Net working capital $ 6,407,092 $ 4,686,036
Total assets $ 92,605,471 $ 58,660,444
Shares outstanding
Class A 28,222,700 19,392,700
Class B 1,173,600 1,173,600
Operational
Daily sales volumes
Oil sales (bbls/d) 583 148
Natural gas liquids (bbls/d) 37 -
Natural gas (mcf/d) 3,631 -
Total (boe/d) 1,225 148
Realized prices
Oil ($/bbl) $ 51.51 $ 100.50
Gas ($/mcf) $ 5.30 -
Field operating netbacks
Oil ($/bbl) $ 32.10 $ 69.60
Gas & liquids ($/boe) $ 12.25 -
Company combined ($/boe) $ 21.69 $ 69.60
Wells drilled(3)
Gross 3 11
Net 2.5 3.7
Net success rate 100% 100%
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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 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 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" in 2008 excludes a stratigraphic well. "Net
wells drilled" refers to net revenue interest. "Net success rate" in 2008
excludes a stratigraphic well.
4. Asset retirement costs.
Advisory
This news release contains certain forward-looking statements, which include
assumptions with respect to (i) drilling success; (ii) production; and (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. Certain or all of the 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, 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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