- ISIN SE0002060863
BlackPearl Resources Inc.
BLACKPEARL ANNOUNCES SECOND QUARTER 2013 FINANCIAL AND OPERATING RESULTS
BlackPearl Resources Inc.
08.08.2013 23:00
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CALGARY, ALBERTA - BlackPearl Resources Inc. ('BlackPearl' or the 'Company')
(TSX:PXX) (NASDAQ OMX Stockholm:PXXS) is pleased to announce its financial and
operating results for the three and six months ended June 30, 2013.
Second quarter highlights include:
-- Oil and gas production for the quarter averaged 9,986 boe/day, a 10%
increase compared to Q1;
-- Cash flow from operations was $22.8 million, a 15% increase from a year
earlier and a 127% increase compared to Q1 this year;
-- Higher oil prices and narrower heavy oil differentials contributed to a 19%
increase in revenues to $58.3 million compared to Q2 2012;
-- Net earnings for the quarter were $2.6 million compared to $0.2 million in
Q2 2012;
-- At Blackrod, recent operating adjustments have resulted in solid SAGD pilot
performance, June production was in excess of 600 barrels of oil per day.
We have drilled the second pilot well pair and expect to begin steam
injection later this year;
-- At Blackrod, we acquired an additional 10 sections of oil sands acreage
adjacent to our existing oil sands leases. Internal estimates indicate this
acquisition could add 50 to 75 million barrels of contingent resources
(best estimate) to the project;
-- At Onion Lake, we received technical approval for the 12,000 bbl/day
thermal project from the Saskatchewan government. Environmental approval
from the federal government is expected shortly;
-- At Mooney, we continue to achieve good operating performance from the ASP
(Alkali, Surfactant, Polymer) flood. We expect to expand the flood area in
2014.
John Festival, President of BlackPearl, commenting on Q2 2013 activities,
indicated that:
'Both operationally and financially we had a good second quarter. Increased oil
production combined with higher realized heavy oil prices resulted in a
significant improvement in revenues and cash flows compared to the first three
months of the year.
We are pleased with the recent performance of the pilot at Blackrod. The pilot
performance continues to demonstrate the project's commerciality and we will
continue to use the pilot to optimize our operating procedures as we advance
our application for the first 20,000 barrel per day commercial phase through
the regulatory approval process.
We are very close to receiving federal environmental approval for the Onion
Lake thermal project. Previously we announced it is our intention to proceed
with the Onion Lake project before we initiated the Blackrod development and we
were planning a $350 million debt offering to finance the Onion Lake project.
We elected to defer this financing as a result of the volatility in the debt
markets in June. We will continue to monitor the debt markets and to review
other financing options over the next few months.'
Property Review
Blackrod SAGD Pilot Project
At Blackrod, we have seen very positive initial results from the first SAGD
pilot well as a result of changes we made to the sand control system in the
well earlier this year. During the month of June the pilot produced in excess
of 600 barrels of oil per day. The June production volumes included some flush
production and we expect production from the well will stabilize between 400
and 450 barrels of oil per day in July.
We drilled a second SAGD well pair at Blackrod during the first half of 2013.
This well was drilled longer (950 metres) than the first well pair and deeper
in the reservoir. The objective of the well is to continue testing alternative
production techniques to optimize our operating procedures before we move
forward with commercial development. We expect to initiate steam injection in
the well later this year.
The regulatory approval process is continuing for the first 20,000 barrel per
day commercial phase of the Blackrod SAGD project. The application and
environmental impact assessment were filed in May 2012. Typically, it has taken
18 to 24 months to obtain regulatory approval for these projects.
During the second quarter we also acquired an additional 6,400 acres of oil
sands acreage directly south and contiguous to our existing Blackrod lands. Our
internal estimate suggests that the acquisition could add 50 to 75 million
barrels of 'best estimate' contingent resources to the Blackrod commercial
project (see cautionary statement on contingent resources later in this
release).
As indicated in previous news releases due to the much larger capital
requirements for the first phase of commercial development at Blackrod and the
challenging capital markets to raise funding for large projects we elected to
initially proceed with development of the Onion Lake thermal project. We expect
to advance the first phase of development at Blackrod after the Onion Lake
thermal project is operating although we will consider options to accelerate
the Blackrod development, which may include bringing on a joint venture partner
to fund the initial phase of development of the project.
We have a 100% working interest in the Blackrod project and as at December 31,
2012 our independent reserves evaluator assigned 180 million barrels of
probable reserves to the first phase of commercial development and a
best-estimate recoverable contingent resource of 476 million barrels for the
remainder of the project (see cautionary statement regarding contingent
resources later in this release).
Onion Lake
At Onion Lake, due to spring break-up, no new conventional drilling occurred in
the second quarter; however, the 11 wells drilled in the first quarter were
brought on production which increased our production from the area to
approximately 5,000 barrels per day for the quarter. We are planning to drill
an additional 20 to 25 wells during the second half of the year.
We are continuing to advance the Onion Lake thermal project through the
regulatory review process. Both provincial and federal government approval is
required before construction of the project can commence. During the second
quarter we received technical approval for the project from the Saskatchewan
government. We are waiting on environmental approval from the federal
government, which is anticipated during the third quarter.
Also, during the second quarter we reached agreement with the Onion Lake First
Nation ('OLFN') to exchange their working interest in the thermal project for a
gross overriding royalty interest. As a result, BlackPearl now has a 100%
working interest in the thermal project. The existing working interest
participation by OLFN will continue for all primary production operations. We
are continuing with detailed engineering design for the thermal project but
ordering of equipment will be deferred until financing is in place for the
project.
The Onion Lake thermal project is expected to have production capacity of about
12,000 barrels of oil per day with initial capital costs expected to be between
$300 and $350 million. At December 31, 2012, the Company's independent reserves
evaluator assigned 74 million barrels of 'best estimate' contingent resources
to the thermal project at Onion Lake.
Mooney
At Mooney, the ASP flood continues to perform in-line with our expectations.
Production in the flood area was flat between Q1 and Q2 at 1,846 and 1,857 boe
(barrels of oil equivalent) per day respectively. The southern portion of the
reservoir is still being re-pressurized and we expect it will take several more
months before we see a production response from the flood in these areas.
To date we have drilled 29 horizontal wells on the phase 2 expansion lands at
Mooney. We are planning to drill an additional 5 wells on these lands later
this year or early next year. The ASP flood will then be expanded to these
lands in 2014.
Production
Oil and gas production averaged 9,986 boe per day in the second quarter of
2013, a 5% increase from the comparable quarter in 2012 and a 10% increase from
our Q1 2013 production volumes. The increase in production is mainly
attributable to higher production associated with the ASP flood at Mooney as
well as additional drilling at Onion Lake during the first quarter.
Three months ended Six months ended
June 30, June 30,
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(boe/day) 2013 2012 2013 2012
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Onion Lake 4,995 6,396 4,660 6,527
Mooney 3,692 2,288 3,791 2,157
John Lake 800 457 791 508
Blackrod 304 298 189 274
Other 195 32 108 64
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9,986 9,471 9,539 9,530
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Financial Results
Oil and gas revenues increased 19% in the second quarter of 2013 to $58.3
million compared with $49.1 million in Q2 2012. The increase is attributable to
a 5% increase in oil sales volumes and a 13% increase in our realized oil price
in 2013.
The increase in our realized wellhead price reflects higher WTI reference oil
prices in Q2 2013 compared with Q2 2012 (US$94.29/bbl vs US$93.44/bbl), as
well as narrower heavy oil differentials (Cdn$19.36/bbl vs Cdn$23.08/bbl).
Operating costs were $20.90 per boe in Q2 2013 compared with $16.71 per boe in
Q2 2012. The increase in operating costs in 2013 is primarily due to starting
to expense injection and polymer costs associated with the ASP flood at Mooney.
During the initial re-pressurization of the reservoir these costs were
capitalized.
Transportation costs increased in the second quarter of 2013 compared to 2012
as a higher proportion of our production is now coming from the Mooney area
where trucking distances to sales points are longer than in our other areas.
Cash flow from operations (before working capital adjustments) increased 15% in
Q2 2013 to $22.8 million compared to $19.8 million in Q2 2012. The increase is
primarily attributable to higher sales volumes and higher oil prices.
Financial and Operating Highlights
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Three months ended Six months ended
June 30 June 30
($000, except where 2013 2012 2013 2012
noted)
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Daily production / sales
volumes
Oil (bbl/d) (2) 9,662 9,415 9,303 9,483
Natural gas (mcf/d) 1,942 334 1,414 284
Combined (boe/d) (1) 9,986 9,471 9,539 9,530
Product pricing ($)
Crude oil - per bbl 67.30 59.10 59.24 63.70
Natural gas - per mcf 3.59 1.94 3.46 2.06
Combined - per boe 66.20 58.82 58.50 63.44
Revenue
Oil and gas revenue - gross 58,322 49,099 98,993 106,875
Royalties ($/boe) 13.33 12.72 10.68 14.17
Transportation costs ($/boe) 3.32 2.82 3.45 2.47
Operating costs ($/boe) 20.90 16.71 21.93 18.18
Net income (loss) for the 2,597 218 (3,047) 3,792
period
Per share, basic and diluted 0.01 0.00 (0.01) 0.01
Cash flow from operating 22,823 19,765 32,862 44,130
activities, before working
capital adjustments
Capital expenditures 27,315 32,453 46,416 75,922
Working Capital, end of 4,055 9,604 4,055 9,604
period
Long term debt 25,000 - 25,000 -
Shares outstanding, end of 296,122,308 285,318,179 296,122,308 285,318,179
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.
(2) includes production from the Blackrod SAGD pilot.
Outlook
We expect our oil and gas production to average between 9,000 to 10,000 boe/d
for the year, unchanged from our Q1 update. Cash flow from operations for the
year is anticipated to range between $65 to $70 million. This is slightly
higher than our Q1 outlook as a result of using higher forecast oil prices in
our Q2 update. Capital spending is anticipated to be between $95 to $100
million for the year, a decrease from the $125 to $140 million forecast in our
Q1 update. The decrease in our planned capital expenditures reflects reduced
spending on our thermal projects at Onion Lake and Blackrod. Engineering and
design work will continue in the Onion Lake thermal project; however equipment
orders will be deferred until additional financing is in place. During the
second half of 2013, we also expect to drill 20 to 25 conventional heavy oil
wells at Onion Lake and up to 10 additional horizontal wells at Mooney and
other areas. It is expected that this capital program will be funded from
anticipated cash flow from operations and the Company's credit facilities. We
have not incorporated the potential of any additional financing for our thermal
projects in our current guidance.
The 2013 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).
Non-GAAP Measures
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.
Contingent Resources
This document makes reference to contingent resources. Contingent resources are
defined in the COGE Handbook as those quantities of petroleum estimated, as of
a given date, to be potentially recoverable from known accumulations using
established technology or technology under development, but are not currently
considered to be commercially recoverable due to one or more contingencies.
Contingencies may include factors such as economic, legal, environmental,
political and regulatory matters or a lack of markets. In the case of the
contingent resources assigned to BlackPearl's three core projects the
contingencies include the requirement for more evaluation drilling to better
define the resource, the absence of submission of commercial SAGD development
applications (for future phases of development at Blackrod), the likelihood of
attaining regulatory approvals for commercial SAGD development (for our Onion
Lake SAGD project), further establishment of increased oil production response
from the ASP flood at Mooney and the uncertainty of the timing of production
and development. There is no certainty that it will be commercially viable to
produce any of the contingent resources. Best estimate (P50) is a
classification of estimated resources described in the COGE Handbook as being
considered to be the best estimate of the quantity that will be actually
recovered. It is equally likely that the actual remaining quantities recovered
will be greater or less than the best estimate. If probabilistic methods are
used, there should be at least a 50% probability that the quantities actually
recovered will equal or exceed the best estimate. For further discussion
regarding our contingent resources see our 2012 Annual Information Form
available on the Company's website (www.blackpearlresources.ca) or SEDAR
(www.sedar.com).
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', 'anticipated', 'believe', 'appears', 'plan',
'target', 'continue', 'continuing', 'estimate', 'expect', 'hope', 'may',
'intends', 'deferred', 'will', 'project', 'timing', 'in the event', 'move
toward', 'should', 'scheduled', 'outlook' or similar words suggesting future
outcomes.
In particular, this document contains forward-looking statements pertaining to
the determination of commercial production rates for the Blackrod project,
anticipated timing for receipt of regulatory approval for the Blackrod
commercial development application as well as the Onion Lake thermal
development application, potential stabilized production of the Blackrod SAGD
pilot well, anticipated timing of steam injection at the second well pair at
Blackrod, anticipated additions to contingent resources from the recent
acquisition of oil sands acreage at Blackrod, estimated timing for development
of the first phase of the Blackrod SAGD project, drilling plans at Onion Lake
and Mooney for the remainder of the year, anticipated productive capacity and
capital costs of the Onion Lake thermal project, timing for additional
production response from the ASP flood at Mooney as well as the expected timing
to expand the flood and corporate guidance for 2013 included in the 'Outlook'
section of this release.
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.
The forward-looking statements in this report reflect certain assumptions and
expectations by management. The key assumptions that have been made in
connection with these forward-looking statements include the continuation of
current or, where applicable, assumed industry conditions, the continuation of
existing tax, royalty and regulatory regimes, commodity price and cost
assumptions, the continued availability of cash flow or financing on acceptable
terms to fund the Company's capital programs, the accuracy of the estimate of
the Company's reserves and resource volumes and that BlackPearl will conduct
its operations in a manner consistent with past operations. 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 which could cause actual results to differ materially from those
contained in forward-looking statements. 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 and Alkali Surfactant Polymer recovery processes, credit risks
associated with counterparties, the failure of the Company or the holder of
licenses, leases and permits to meet requirements of such licenses, leases and
permits, reliance on third parties for pipelines and other infrastructure,
changes in royalty regimes, failure to accurately estimate decommissioning
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.
Undue reliance should not be placed on these forward-looking statements.
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 assumptions, risks and factors is not
exhaustive. There can be no assurance by the Company 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 Officer, Tel.: (403)
215-8313
Don Cook - Chief Financial Officer, Tel: (403) 215-8313
News Source: NASDAQ OMX
08.08.2013 Dissemination of a Corporate News, transmitted by DGAP -
a company of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
DGAP's Distribution Services include Regulatory Announcements,
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Language: English
Company: BlackPearl Resources Inc.
Sweden
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ISIN: SE0002060863
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