CALGARY, ALBERTA - BlackPearl Resources Inc. ("BlackPearl" or the "Company")
(TSX:PXX) (FIRST NORTH:PXXS) is pleased to announce its financial and operating
results for the three and nine months ended September 30, 2011.
Third quarter highlights include:
• Blackrod SAGD pilot has been steaming for over five months; oil production
is at 200 bbls/day and is continuing to ramp-up;
• Polymer injection commenced in July on Phase One of our ASP flood at
Mooney; heavy oil processing facility is under construction and we began
drilling on Phase Two expansion lands;
• Thermal (SAGD) application has been filed for a 12,000 bbl/day project at
Onion Lake; planning to build a heavy oil battery and pipeline;
• Successful drilling results achieved at John Lake and Zoller Lake;
• Oil production averaged 8,113 boe/day, a 22% increase compared to Q3 2010;
• Revenues increased 33% to $44.6 million compared to Q3 in 2010;
• Cash flow from operations increased 34% to $18.9 million compared with
$14.1 million in Q3 2010;
• Maintained a strong balance sheet with working capital of $64.2 million and
no debt after incurring capital expenditures of $135.7 million in the first
nine months of the year.
John Festival, President of BlackPearl, commenting on Q3 2011 activities,
indicated that “We have made excellent progress advancing all three of our core
properties in the third quarter.
At Blackrod, we are extremely pleased with the development of the SAGD pilot.
All of our early milestones have been met and we are confident we will meet our
commercial targets for our pilot in terms of steam-oil-ratio and peak oil
production rate. Based on the consistent geology across our Blackrod lease,
this pilot will be able to validate the entire project potential of over 70,000
barrels of oil per day.
At Onion Lake, we have slowed our conventional drilling program while waiting
for enhanced oil recovery approval for our SAGD project at Onion Lake. We
expect this approval within six months and we will continue with our
conventional drilling at that time.
Our near term growth will continue with conventional horizontal drilling at our
Mooney project, in preparation for our Phase Two polymer flood. While initially
delayed by forest fires in the spring, Phase One of our polymer flood at Mooney
is now operational and we anticipate initial response in the next six to twelve
months.
In addition, we have advanced some of our non-core assets with successful
drilling at John Lake, Zoller Lake and Salt Lake, which are currently producing
over 750 barrels of oil per day. Our ability to sell these properties in the
future and redeploying the capital into our core properties will reduce our
requirement to raise capital and dilute our shareholders as we move towards our
target of 30,000 barrels of oil per day in 2015.”
Property Review
Blackrod SAGD Pilot Project
At Blackrod, we initiated steam injection in the SAGD well pair in June. In
September, we installed a downhole pump in the lower horizontal well and
commenced oil production. Oil production has been steadily increasing, with
current production at over 200 barrels of oil per day. We anticipate in the
next six to twelve months the well will reach its target production range of
500 - 800 barrels per day.
We are also continuing to work on our commercial development application and we
are on target to file this application with regulatory authorities during the
first quarter of 2012. Our original plan was to initially seek approval for a
40,000 barrel per day project, but we have since decided to file the
application for an 80,000 barrel per day project to reflect the entire scope of
the project. The first phase of the project will likely be 10,000 to 20,000
barrels per day.
The Blackrod leases have a recoverable contingent resource assigned to them in
excess of 600 million barrels of oil and have the potential to support a
development of over 80,000 barrels of oil per day.
Onion Lake
Onion Lake is a conventional heavy oil property that also provides us with a
significant thermal SAGD opportunity. In our last update we indicated that we
were going to temporarily slow-down our conventional drilling program. This
will allow us time to drill the horizontal wells that will be used when we
transition to SAGD development. Drilling the horizontal wells before further
conventional development occurs will reduce the risk associated with drilling
in a partially depleted reservoir. We have filed an application with regulatory
authorities for a 12,000 barrel per day SAGD project. Upon approval, expected
in the first half of 2012, we will immediately commence drilling up to 14
horizontal wells which will be used as oil producers when SAGD operations
begins. In addition, we plan to drill up to 10 conventional vertical wells
before year-end in areas that will not impact future SAGD development.
Our focus at Onion Lake for the next few months is to optimize production from
the wells drilled during the first half of the year as well as plan for the
construction of a heavy oil treating facility and a 30 kilometre pipeline that
would tie into an oil gathering system. Owning infrastructure in our core areas
ensures we retain more control over the entire operation and are less reliant
on third party facilities.
Mooney
At Mooney, Phase One of the ASP (Alkali, Surfactant, Polymer) flood began in
July, with the initial injection of chemicals and water. We encountered minor
problems with some of the surface facilities during the start-up phase but
these issues have been resolved and we have been continuously injecting for
over three months. The objective is to initially re-pressurize the reservoir,
after which we would expect to see response through increased oil production.
It is expected to take six to twelve months to re-pressurize the reservoir and
then an additional six to twelve months to reach peak production rates of
between 3,000 and 4,000 barrels of oil per day. Construction of the heavy oil
battery to handle increased fluid volumes is on-going and we expect to have the
facility in operation by mid 2012.
As a result of the temporary slow-down in drilling at Onion Lake we have
shifted some of our 2011 capital program to Mooney. We expect to drill up to 14
horizontal wells before year-end, 10 of which will be drilled on the Phase Two
expansion lands. These wells will be produced conventionally until we add them
to the ASP flood in the future.
Non-core Areas
John Lake is a conventional heavy oil project located in the Cold Lake oil
sands region. We have drilled three successful horizontal wells in the area
during the last 12 months and plan to drill an additional five wells before
year-end. Oil production from the area has increased to over 400 barrels per
day. We believe the area has the potential to support a development of 40 to 50
horizontal wells. We own 100% of this project.
Zoller Lake, in central Saskatchewan, is a heavy oil prospect in the Birdbear
formation. During the third quarter we drilled two successful horizontal wells,
each producing over 100 barrels of oil per day. We are planning to drill up to
four additional wells next year. We own 100% of this project.
Production
Oil and gas production averaged 8,113 boe (barrels of oil equivalent) per day
in the third quarter of 2011, a 22% increase from the comparable quarter in
2010. In addition, Q3 2011 production represented a 24% increase above Q2 2011
levels. The increase in production is mainly attributable to the 63 wells
drilled at Onion Lake in the spring, the majority of which were put on
production during Q3 2011. We still have 18 wells from this spring drilling
program to bring on production. These wells will be brought on production when
our thermal development plan receives regulatory approval which is expected in
the first half of 2012.
In Q3 2011, we commenced ASP injection at Mooney and expect to see increased
oil production in 6 to 12 months. Initially, production from Mooney will be
lower than prior periods as we converted 22 producing oil wells to injectors as
part of the ASP flood.
┌─────────────────────┬───────────────────┬─────────────────┐
│ │Three months ended │Nine months ended│
│ │ │ │
│ │September 30, │September 30, │
├─────────────────────┼─────────┬─────────┼────────┬────────┤
│(boe/day) │2011 │2010 │2011 │2010 │
├─────────────────────┼─────────┼─────────┼────────┼────────┤
│Onion Lake │7,065 │5,157 │6,092 │4,855 │
├─────────────────────┼─────────┼─────────┼────────┼────────┤
│Mooney │ │ │ │ │
├─────────────────────┼─────────┼─────────┼────────┼────────┤
│ ASP flood area │175 │788 │274 │880 │
├─────────────────────┼─────────┼─────────┼────────┼────────┤
│ Non-flood areas│334 │102 │408 │124 │
├─────────────────────┼─────────┼─────────┼────────┼────────┤
│John Lake │401 │53 │320 │42 │
├─────────────────────┼─────────┼─────────┼────────┼────────┤
│Other │138 │546 │135 │930 │
├─────────────────────┼─────────┼─────────┼────────┼────────┤
│ │8,113 │6,646 │7,229 │6,831 │
└─────────────────────┴─────────┴─────────┴────────┴────────┘
Financial Results
Oil and gas revenues increased 33% in the third quarter of 2011 to $44.6
million compared with $33.4 million in Q3 2010. The increase was primarily
attributable to a 22% increase in oil sales volumes and higher crude oil prices
in 2011.
The higher wellhead price reflects stronger WTI oil prices in Q3 2011 compared
with 2010 (US$89.74/bbl vs US$76.08/bbl), partially offset by an increase in
heavy oil differentials (Cdn$17.27/bbl vs Cdn$15.66/bbl). The Canadian dollar
was stronger in 2011 compared to the US dollar (0.98 in Q3 2011 compared with
1.039 in Q3 2010), which reduced the revenues we would otherwise receive.
Operating costs were $18.31 per boe in Q3 2011, which is higher than previous
quarters. The increase reflects bringing on a significant number of new wells
at Onion Lake during Q3. These wells tend to have higher initial expenses due
to increased sand production, increased fuel costs until wells are tied into
the fuel gas system, and increased emulsion trucking and treating costs. In
addition, although the incremental costs of initially re-pressurizing the
reservoir at Mooney are being capitalized, the existing operating costs are
continuing with lower production levels (since half the wells were converted to
injectors), which contributes to higher operating costs on a per barrel basis.
The increase in oil production and higher wellhead prices resulted in cash flow
from operations (before working capital adjustments) increasing 34% in Q3 to
$18.9 million compared to $14.1 million for the same period in 2010.
Financial and Operating Highlights
┌─┬───────────────────────────┬───────────────────────┬───────────────────────┐
│ │ │ Three months │ Six months │
│ │ │ended │ended │
│ │ │ │ │
│ │ │ September 30 │ September 30 │
├─┼───────────────────────────┼───────────┬───────────┼───────────┬───────────┤
│ │ │2011 │2010 │2011 │2010 │
├─┴───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Daily production / sales │ │ │ │ │
│volumes (1) │ │ │ │ │
├─┬───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │Oil (bbl/d) │8,028 │6,166 │7,033 │6,208 │
├─┼───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │Natural gas (mcf/d) │512 │2,881 │1,176 │3,738 │
├─┼───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │Combined (boe/d) │8,113 │6,646 │7,229 │6,831 │
├─┼───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │ │
├─┴───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Product pricing ($) │ │ │ │ │
├─┬───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │Crude oil - per bbl │59.87 │57.17 │62.18 │58.51 │
├─┼───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │Natural gas - per mcf │4.10 │3.52 │3.91 │4.26 │
├─┼───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │Combined - per boe │59.70 │54.66 │61.46 │55.83 │
├─┼───────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │ │
├─┴───────────────────────────┴───────────┼───────────┼───────────┼───────────┤
│($000's, except per share and boe │ │ │ │
│amounts) │ │ │ │
├─────────────────────────────┬───────────┼───────────┼───────────┼───────────┤
│Revenue │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Oil and gas revenue - gross │44,564 │33,421 │121,283 │104,124 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Royalties ($/boe) │13.82 │14.61 │15.84 │14.56 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Transportation costs ($/boe) │0.31 │1.42 │0.49 │1.10 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Operating costs ($/boe) │18.31 │13.57 │17.80 │15.10 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Net income (loss) for the │(51) │(1,443) │3,407 │4,746 │
│period │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ Per share, basic and│ │ │ │ │
│diluted │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ Basic │0.00 │(0.01) │0.01 │0.02 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ Diluted │0.00 │(0.01) │0.01 │0.02 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Cash flow from operating │ │ │ │ │
│activities, before working │18,924 │14,136 │49,355 │ │
│capital adjustments │ │ │ │43,091 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Capital expenditures │40,499 │19,926 │135,660 │57,796 │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Working Capital, end of │64,167 │92,006 │64,167 │92,006 │
│period │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Long term debt │- │- │- │- │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│Shares outstanding, end of │284,732,011│272,900,553│284,732,011│272,900,553│
│period │ │ │ │ │
├─────────────────────────────┼───────────┼───────────┼───────────┼───────────┤
│ │ │ │ │ │
└─────────────────────────────┴───────────┴───────────┴───────────┴───────────┘
(1) Boe amounts are based on a conversion ratio of 6 mcf of gas to 1 barrel of
oil. Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf: 1 barrel is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not represent
a value equivalency at the wellhead.
2012 Guidance
In 2012, we expect our capital spending to be between $125-$135 million. A
major emphasis of our capital spending program next year will be on building
infrastructure in each of our core areas. These infrastructure projects
include:
• Constructing a heavy oil battery at Mooney to handle increased volumes from
the ASP flood;
• Building a heavy oil battery at Onion Lake and planning for a pipeline to
connect the facilities to a major oil gathering system;
• Drill up to 14 horizontal wells at Onion Lake that will eventually be used
for thermal development of the property.
Although these infrastructure projects do not add to our production base they
are necessary to efficiently develop and control operations in our core areas.
In addition to these infrastructure projects, we will continue with our
conventional development program at Onion Lake with up to 50 wells planned. We
also plan to drill 5 to 10 horizontal wells on phase two lands at Mooney. At
Blackrod, we will begin the detailed engineering work for the first commercial
development phase of our SAGD project as well as drill 10 additional
delineation wells required for the commercial application.
It is expected that this capital program will be funded from existing working
capital and anticipated cash flow from operations. We also have an unutilized
$25 million line of credit that is available. We have a lot of flexibility in
our capital program and if cash flows are lower than anticipated we are able to
adjust capital spending if required.
We are also planning to sell some of our non-core properties in 2012. If we are
successful in selling properties we would likely expand our capital program and
accelerate the development in our core areas.
Exit production levels for 2012 are expected to be approximately 12,500 boe per
day. The most significant increase in production is expected to come from the
response of phase one of the ASP flood at Mooney.
The 2011 third quarter report to shareholders, including the financial
statements, management's discussion and analysis and notes to the financial
statements are available on the Company's website (www.blackpearlresources.ca)
or SEDAR (www.sedar.com).
This news release includes terms commonly used in the oil and natural gas
industry, such as cash flow and cash flow from operations which represent cash
flow from operating activities expressed before changes in non-cash working
capital. These terms are used by the Company to analyze operating performance,
leverage and liquidity and to provide shareholders and investors with
additional information to measure the Company's performance and efficiency and
its ability to fund a portion of its future activities and to service any
long-term debt if incurred in the future. These terms do not have standardized
meanings prescribed by GAAP and therefore may not be comparable with the
calculation of similar measures by other entities. Consequently, these are
referred to as non-GAAP measures.
Forward-Looking Statements
This news release contains certain forward-looking statements and
forward-looking information (collectively referred to as “forward-looking
statements”) within the meaning of applicable Canadian securities laws. All
statements other than statements of historical fact are forward-looking
statements. Forward-looking information typically contains statements with
words such as “anticipate”, “believe”, “plan”, “continuous”, “estimate”,
“expect”, “may”, “will”, “project”, “should”, or similar words suggesting
future outcomes. In particular, this document contains forward-looking
statements pertaining to the Company's estimated production levels of the
Blackrod SAGD pilot, resource estimates at Blackrod as well as potential
production levels from the area, timing of regulatory approvals at Onion Lake
and development plans at Onion Lake, Blackrod and Mooney as well as 2012
guidance information.
Statements relating to reserves and contingent resources are forward-looking,
as they involve the implied assessment, based on certain estimates and
assumptions, that the reserves and contingent resources described exist in the
quantities predicted or estimated and can profitably be produced in the future.
Undue reliance should not be placed on forward-looking statements, which are
inherently uncertain, are based on estimates and assumptions, and are subject
to known and unknown risks and uncertainties (both general and specific) that
contribute to the possibility that the future events or circumstances
contemplated by the forward-looking statements will not occur. There can be no
assurance that the plans, intentions or expectations upon which forward-looking
statements are based will be realized. Actual results will differ, and the
differences may be material and adverse to the Company and its shareholders.
With respect to forward-looking statements contained in this press release,
management has made assumptions regarding future production levels; future oil
and natural gas prices; future operating costs; timing and amount of capital
expenditures; the ability to obtain financing on acceptable terms; availability
of skilled labour and drilling and related equipment; general economic and
financial market conditions; continuation of existing tax and regulatory
regimes; and the ability to market oil and natural gas successfully to current
and new customers. Although management considers these assumptions to be
reasonable based on information currently available to it, they may prove to be
incorrect.
By their very nature, forward-looking statements involve inherent risks and
uncertainties (both general and specific) and risks that the goals or figures
contained in forward-looking statements will not be achieved. These factors
include, but are not limited to, risks associated with fluctuations in market
prices for crude oil, natural gas and diluent, general economic, market and
business conditions, substantial capital requirements, uncertainties inherent
in estimating quantities of reserves and resources, extent of, and cost of
compliance with, government laws and regulations and the effect of changes in
such laws and regulations from time to time, the need to obtain regulatory
approvals on projects before development commences, environmental risks and
hazards and the cost of compliance with environmental regulations, aboriginal
claims, inherent risks and hazards with operations such as fire, explosion,
blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and
other dangerous conditions, potential cost overruns, variations in foreign
exchange rates, diluent supply shortages, competition for capital, equipment,
new leases, pipeline capacity and skilled personnel, uncertainties inherent in
the SAGD bitumen recovery process, credit risks associated with counterparties,
the failure of the Company or the holder of licences, leases and permits to
meet requirements of such licences, leases and permits, reliance on third
parties for pipelines and other infrastructure, changes in royalty regimes,
failure to accurately estimate abandonment and reclamation costs, inaccurate
estimates and assumptions by management, effectiveness of internal controls,
the potential lack of available drilling equipment and other restrictions,
failure to obtain or keep key personnel, title deficiencies with the Company's
assets, geo-political risks, risks that the Company does not have adequate
insurance coverage, risk of litigation and risks arising from future
acquisition activities. Further information regarding these risk factors may be
found under “Risk Factors” in the Annual Information Form. Readers are
cautioned that these factors and risks are difficult to predict and that the
assumptions used in the preparation of such information, although considered
reasonably accurate at the time of preparation, may prove to be incorrect.
Accordingly, readers are cautioned that the actual results achieved will vary
from the information provided herein and the variations could be material.
Readers are also cautioned that the foregoing list of factors is not
exhaustive. Consequently, there is no representation by the Corporation that
actual results achieved will be the same in whole or in part as those set out
in the forward-looking information. Furthermore, the forward-looking statements
contained in this report are made as of the date hereof, and the Corporation
does not undertake any obligation, except as required by applicable securities
legislation, to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information, future
events or otherwise. The forward-looking statements contained herein are
expressly qualified by this cautionary statement.
For further information, please contact:
John Festival - President and Chief Executive Don Cook - Chief Financial
Officer Officer
Tel.: (403) 215-8313 Tel: (403) 215-8313
BlackPearl's Certified Advisor on First North is E. Öhman J:or Fondkommission
AB.
Company Registration Number: 409596-1
The report for the three months ending December 31, 2011 will be published on
or before February 28, 2012.
BLACKPEARL ANNOUNCES THIRD QUARTER 2011 FINANCIAL AND OPERATING RESULTS
| Source: BlackPearl Resources Inc.
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