Painted Pony Petroleum 3rd Quarter Updates

TSX:PPY Map of Painted Pony Resources operations
Map of Painted Pony Resources operations

TSX:PPY Map of Painted Pony Resources operations
Map of Painted Pony Resources operations

CALGARY- Energy – Painted Pony Petroleum Ltd. has provided an update on current Montney production results and report its financial and operating results for the three and nine month periods ending September 30, 2013. Highlights include:

  • production on the recently drilled 50% working interest lower Montney well at Daiber d-D44-C/94-B-16 has been flowing in line for the last seven days at a sustained rate of 14.8 million cubic feet per day (“MMcf/d”) or 2,460 barrels of oil equivalent per day (“boe/d”), of which 1,230 boe/d is net to Painted Pony; 
  • a 100% working interest, liquids rich lower Montney well at Townsend a-A11-J/94-B-09, which produced intermittently during the third quarter, has now been on-stream since October 30, 2013 at an estimated average production rate of approximately 1,460 boe/d (8.0 MMcf/d plus associated natural gas liquids of 20 barrels per MMcf); 
  • production for the third quarter of 2013 averaged 8,925 boe/d, weighted 83% towards natural gas, an increase of 41% over the third quarter of 2012; 
  • in addition, the Company estimates volumes in excess of 2,500 boe/d are currently shut-in and expected to come on production in the fourth quarter of 2013 and first quarter of 2014; 
  • generated third quarter funds flow from operations of $12.2 million, representing an increase of 44% over the third quarter of 2012; 
  • achieved funds flow from operations of $0.14 per basic and diluted share in the third quarter, an increase of 17% over the third quarter of 2012; 
  • realized third quarter wellhead natural gas prices of $2.95 per thousand cubic feet of natural gas (“Mcf”), which represents a premium of more than 20% to the AECO reference price of $2.44 per Mcf of natural gas; 
  • generated average third quarter field operating netbacks of $16.75 per barrel (“bbl”) of oil equivalent (“boe”); and 
  • entered into a syndicated credit facility agreement for $125 million backed by three Canadian financial institutions.

MONTNEY NATURAL GAS OPERATIONS

Painted Pony continues to pursue the development and expansion of its Montney natural gas assets in northeast British Columbia. During the third quarter of 2013, the Company drilled three (2.5 net) horizontal Montney wells, including two (2.0 net) 100% working interest wells at Blair and one (0.5 net) well at Daiber. For the nine months ended September 30, 2013, the Company has participated in the drilling of nine (6.1 net) horizontal Montney wells.

The Company remains encouraged by the results of the ball-drop completion technology. To date, Painted Pony has used the ball-drop completion system on six (5.0 net) of its recently drilled Montney wells, including two (2.0 net) wells on the Townsend 11-J/94-B-09 pad, two (1.0 net) wells on the Daiber 44-C/94-B-16 pad and single wells on each of the Blair 91-F/94-B-16 and 14-F/94-B-16 pads. The Company has realized cost savings using the ball-drop system of approximately $0.7 million per well and increased production performance, in comparison to the perf-and-plug method.

Daiber

At Daiber, in the third quarter of 2013, the Company drilled one (0.5 net) horizontal well targeting the upper Montney at d-C44-C/94-B-16 and in October 2013, the Company drilled one (0.5 net) horizontal well targeting the lower Montney, at d-D44-C/94-B-16. The lower Montney well has been flowing in line for the last seven days at a sustained rate of 14.8 MMcf/d (please refer to the Company’s press release dated November 4, 2013). Processing volume at Painted Pony’s Daiber 44-C facility has reached maximum capacity from current production from two of the three lower Montney producers on this pad.

Townsend

The 100% working interest lower Montney well at Townsend a-A11-J/94-B-09, which produced intermittently during the third quarter, has resumed production following infrastructure modifications. This liquids-rich well has now been on-stream since October 30, 2013 at an average production rate of 8.0 MMcf/d including an estimated 20 barrels per MMcf of natural gas liquids, representing 1,460 boe/d.

The Company remains pleased with successful drilling results at Townsend and, on November 3, 2013, the Company spudded the first of three 100% working interest wells at Townsend on the 56-H/94-B-09 pad as part of its fourth quarter 2013 drilling program. These wells will target the upper, middle and lower Montney zones and are expected to be completed and tied-in to production facilities in the first quarter of 2014.

Blair

During the third quarter of 2013 at Blair, the Company drilled one (1.0 net) horizontal well targeting the lower Montney at b-C14-F/94-B-16 and one (1.0 net) horizontal well targeting the middle Montney at b-B14-F/94-B-16. These two wells were tied-in and commenced production in November 2013.

As previously announced, the ball-drop completion technology system was employed as an alternative to the conventional perf-and-plug system at the Blair 91-F/94-B-16 pad. The ball-drop well at a-A91-F/94-B-16 produced approximately 575 million cubic feet of natural gas over its initial three month period, whereas the perf-and-plug well at a-91-F/94-B-16 produced approximately 416 MMcf of natural gas over the same time frame. Both 91-F/94-B-16 wells are upper Montney horizontal wells. These results represent a 38% increase in production volumes attributable to the ball-drop system.

LIGHT OIL OPERATIONS

In Saskatchewan, Painted Pony has participated in the drilling of three (1.4 net) wells to date in 2013 including two (0.8 net) Bakken wells at Flat Lake. Painted Pony continues to maintain an inventory of light oil opportunities, focusing on the development of lower-risk projects in southeastern Saskatchewan. A further five (3.1 net) wells are expected to be drilled during the balance of this year. These wells will target a mix of plays, including the Bakken, Frobisher and Midale zones.

FINANCIAL RESULTS

During the third quarter of 2013, Painted Pony achieved funds flow from operations of $12.2 million, while funds flow from operations for the nine months ended September 30, 2013 was $38.9 million, representing an increase of 44% over the same periods in 2012. The Company continues to realize high field operating netbacks from its core properties in both northeast British Columbia and southeast Saskatchewan. The Company achieved a field operating netback of $11.12 per boe in northeast BC, an increase of 24% over the third quarter of 2012. In Saskatchewan, the Company generated a third quarter field operating netback of $56.20 per boe a 38% increase from $40.84 per boe realized in the third quarter of 2012.

Capital Expenditures for the third quarter of 2013 were $39.1 million, which included drilling and completions costs of $25.0 million and facility and equipment costs of $9.1 million. As at September 30, 2013, Painted Pony had a working capital deficiency of $20.7 million.

Financial and Operating Highlights
(unaudited)
  Three months ended September 30,   Nine months ended September 30,  
  2013   2012   2013   2012  
Financial ($ millions, except per share and shares outstanding)  
Petroleum and natural gas revenue(1) 25.2   16.9   74.6   51.5  
Funds flow from operations(2) 12.2   8.5   38.9   27.0  
  Per share – basic(3) and diluted(4) 0.14   0.12   0.44   0.38  
Comprehensive loss (0.2 ) (2.6 ) (1.3 ) (7.4 )
  Per share – basic(3) and diluted(4) (0.00 ) (0.04 ) (0.01 ) (0.11 )
Capital expenditures(5) 39.1   33.5   106.9   84.5  
Working capital (deficiency)(6) (20.7 ) 20.3   (20.7 ) 20.3  
Total assets 615.9   476.3   615.9   476.3  
Shares outstanding(7) 88,456,760   70,648,127   88,456,760   70,648,127  
Diluted weighted-average shares 88,455,543   70,460,984   88,407,690   70,080,812  
Operational                
Daily production volumes                
  Natural gas (mmcf per day) 44.5   29.3   41.5   29.2  
  Oil (bbls per day) 1,034   1,214   1,147   1,299  
  Natural gas liquids (bbls per day) 470   226   419   193  
  Total (boe per day) 8,925   6,327   8,484   6,355  
Realized prices                
  Natural gas ($ per mcf) 2.95   2.38   3.34   2.24  
  Oil ($ per bbl) 105.58   85.12   94.76   86.50  
  Natural gas liquids ($ per bbl) 72.10   47.15   62.14   54.21  
Field operating netbacks(8)($ per boe)                
  British Columbia 11.12   8.95   13.13   7.43  
  Saskatchewan 56.20   40.84   51.29   49.12  
  Company combined 16.75   16.25   18.90   17.41  
                 
  1. Before royalties
  2. This table contains the term “funds flow from operations”, which should not be considered an alternative to, or more meaningful than “cash flows 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 flows 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, consistent with the calculations of earnings per share.
  3. Basic per share information is calculated on the basis of the weighted average number of shares outstanding in the period.
  4. Diluted per share information reflects the potential dilution effect of options.
  5. Including decommissioning expenditures and share-based payments.
  6. This table contains the term “working capital (deficiency)”. Working capital (deficiency) does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management calculates working capital (deficiency) as current assets less current liabilities and uses this ratio to analyze operating performance and leverage.
  7. Class A shares at December 31, 2011 were re-designated as Common shares effective June 7, 2012.
  8. This table contains the term “field operating netbacks”. Field operating netback does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management calculates field operating netback on a per unit basis as oil, natural gas and NGL revenues less royalties and transportation and operating costs.

Painted Pony is a Canadian oil and natural gas exploration company that trades on the Toronto Stock Exchange under the symbol “PPY”.

For more information please visit www.paintedpony.ca.

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