CALGARY, ALBERTA--(Marketwire - Aug. 10, 2011) - 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 six months ended June 30, 2011.
Second quarter highlights include:
John Festival, President of BlackPearl, commenting on Q2 2011 activities indicated that, "We are extremely pleased with the milestones achieved in the first half of the year. Our goal when we joined BlackPearl was to validate the potential of the properties and then commence development of these core areas. We have made major strides this quarter with the completion of the polymer facilities at Mooney and the commencement of operations on the thermal SAGD pilot at Blackrod. In addition, We made significant progress at Onion Lake, not only in maintaining our conventional drilling program but also advancing our SAGD development plans with the filing of a commercial development application for the area.
Our production growth in Q2 was hampered by forest fires and wet weather, but these are temporary issues, and we should have a strong second half of the year, with year-end production still targeted at 11,000 barrels of oil per day."
Blackrod SAGD Project
At Blackrod, construction of the SAGD pilot facilities was completed during the second quarter, and we initiated steam injection in June. We are in the warm-up phase of the pilot whereby steam is injected into both the injector and producer horizontal wells. Initial observations indicate that the reservoir is accepting steam as anticipated, and we are achieving uniform heat distribution from the heal to the toe of the horizontal wells, both very good indicators for future production and operating results from the SAGD well pair. Within the next month we will install a downhole pump and commence oil production.
Work is continuing on a 40,000 barrel per day commercial application for the Blackrod project. This application requires extensive work on an environmental impact assessment of the project. We expect to file the application with regulatory authorities in the first half of 2012.
The Blackrod leases have a recoverable contingent resource assigned to them in excess of 700 million barrels of oil and have the potential to support a development of over 70,000 barrels of oil per day (bopd).
We had a very active second quarter at Onion Lake with a total of 63 wells drilled. Due to wet weather in Saskatchewan this spring, the majority of these wells will not be put on production until sometime in the third quarter. Additional drilling at Onion Lake is planned for the second half of the year.
We are also evaluating the potential of building our own oil processing battery and pipeline tie-in at Onion Lake. If these facilities were constructed, we would be less reliant on third party processors accepting our incremental production at Onion Lake. In addition, we believe it is advantageous to own the infrastructure in our core areas to ensure we retain more control over the entire operation. A decision on this proposal will be made later this year when the feasibility study is completed and we have cost estimates finalized.
In addition to conventional development, a portion of the Onion Lake lands are amenable to thermal development. In fact, the majority of the contingent resource estimates for Onion Lake are based on thermal development in the area. To assist in the transition from conventional to SAGD development, we will have to "pre-spend" some capital by drilling the horizontal wells that will be used in the SAGD operations. This will ensure that we are not drilling in areas that have been partially depleted or disturbed by conventional drilling. We expect to drill up to 20 horizontal wells by the end of 2012. These wells will not be put on production until we begin SAGD development. We have recently filed an application with regulatory authorities for a 10,000 bopd commercial SAGD project in the area. We will temporarily slow down our planned conventional drilling program at Onion Lake until some of the horizontal wells are drilled.
At Mooney, construction of the ASP (Alkali, Surfactant, Polymer) facilities during the second quarter was hampered as a result of the forest fires in the Slave Lake area. Fortunately none of our facilities were damaged by the fires; however, construction and all production activities were halted for about three weeks. The facilities have since been completed, and chemical and water injection commenced in early July. We expect production response from the flood will take 6 to 12 months. Production from phase one of the ASP flood is expected to be in the range of 3,000 to 4,000 barrels of oil per day. During the second half of 2011, we will be expanding the existing heavy oil battery to process the incremental oil and water production. The battery expansion is designed to handle all of the production of phase one and two of the ASP flood. This will allow us additional flexibility in timing the expansion of the ASP flood. We also plan to drill up to ten horizontal wells on the phase 2 expansion lands this fall. These wells will be produced conventionally until we add them to the ASP flood.
We continue to invest in some of our non-core properties. At our John Lake field in central Alberta, during the second quarter we drilled two horizontal wells which will be completed and put on production during the third quarter. The John Lake field was originally developed by another operator using vertical wells, with modest success. In 2010, BlackPearl elected to drill a horizontal well and achieved very encouraging results, with initial production rates in excess of 100 bopd. If the two newest wells are successful we plan to drill an additional 5- 10 wells at John Lake in the second half of 2011 and Q1 2012. The field may ultimately be capable of supporting a development of 30 to 40 horizontal wells.
At Druid, in southwest Saskatchewan, we are currently building an oil treating and water disposal facility. This will allow us to re-activate several wells in the area which were previously shut-in for economic reasons due to lack of water disposal facilities. We expect to be able to bring on 200 – 400 bopd when construction of the facilities is complete.
In the US, we have elected to have several of our heavy oil leases in Utah expire as we have no activities planned in the area.
Overall, average production decreased 9% to 6,545 boe (barrels of oil equivalent) per day for the second quarter of 2011 from 7,163 boe per day in Q2 2010. For the six months ended June 30, 2011, production decreased 2% to 6,779 boe per day from 6,925 boe per day for the same period 2010. The decrease in 2011 oil production is a result of asset dispositions in late 2010 and Q1 2011, wet weather in Saskatchewan this spring which hampered our ability to truck oil and the forest fires in the Slave Lake area which required us to shut-in the entire Mooney field for three weeks in Q2.
Although we had an active development drilling program at Onion Lake in the second quarter of 2011, these wells will not significantly impact our production volumes until the second half of 2011. We have commenced ASP injection at Mooney and expect to see increased oil production in 6 to 12 months.
|Three months ended
|Six months ended
|Ear Lake (sold in 2010)||-||316||-||340|
|Salt Lake (sold in 2010)||-||253||-||270|
|Long Coulee (sold in 2011)||-||368||87||166|
Oil and gas revenues increased 23% in the second quarter of 2011 to $42.0 million compared with $34.3 million in Q2 2010. The increase is attributable to higher crude oil prices in 2011.
The higher wellhead price reflects stronger WTI oil prices in Q2 2011 (US$102.50/bbl vs US$78.03/bbl). Heavy oil differentials were similar for the comparable periods at 18%. The Canadian dollar was stronger in 2011 compared to the US dollar (0.968 in Q2 2011 compared with 1.028 in Q2 2010), which reduced the revenues we would otherwise receive.
Operating and transportation costs were $17.82 per boe in Q2 2011, which were slightly less than Q1 2011 at $18.33 per boe, but higher than Q2 2010 at $15.31 per boe. New heavy oil 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. These initial costs are reduced after several months of production from the new wells.
Cash flow from operations (before working capital adjustments) increased 37% in Q2 to $18.8 million compared to $13.8 million for the same period in 2010.
Financial and Operating Highlights
|Three months ended
|Six months ended
|Daily production / sales volumes (1)|
|Natural gas (mcf/d)||882||3,890||1,514||4,174|
|Product pricing ($)|
|Crude oil - per bbl||71.00||55.03||63.63||59.18|
|Natural gas - per mcf||3.99||3.97||3.88||4.53|
|Combined - per boe||70.59||52.58||62.53||56.40|
|($000's, except per share and boe amounts)|
|Oil and gas revenue – gross||42,044||34,274||76,719||70,703|
|Transportation costs ($/boe)||0.46||1.00||0.60||0.94|
|Operating costs ($/boe)||17.36||14.31||17.49||15.86|
|Net income for the period||2,996||5,155||3,458||6,189|
|Per share, basic and diluted|
|Cash flow from operating activities, before working capital adjustments||18,834||13,761||30,494||
|Working Capital, end of period||84,870||97,440||84,870||97,440|
|Long term debt||-||-||-||-|
|Shares outstanding, end of period||284,239,554||272,845,386||284,239,554||272,845,386|
|(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. Aboe 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.|
The 2011 second 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.
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, future operating costs, resource estimates at Blackrod as well as potential production levels from the area, development plans at Onion Lake, Blackrod and Mooney, and future drilling locations at Onion Lake.
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.
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 September 30, 2011 will be published on or before November 14, 2011.