- ISIN SE0002060863
BlackPearl Resources Inc.
BLACKPEARL ANNOUNCES SECOND QUARTER 2014 FINANCIAL AND OPERATING RESULTS
DGAP-News: BlackPearl Resources Inc.
06.08.2014 / 01:00
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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, 2014.
Second quarter highlights include:
-- Higher oil prices and narrower heavy oil differentials contributed to a 7%
increase in revenues to $62.2 million compared to Q2 2013; for the first
half of 2014 revenues increased 23% to $121.7 million;
-- Funds flow from operations was $23.2 million, comparable to last year. For
the first half of 2014 funds flow from operations was $46.2 million, a 41%
increase from the first half of 2013;
-- Oil and gas production for the quarter averaged 8,897 boe/day, an 11%
decrease compared to the second quarter of 2013. With the recent completion
of various infrastructure projects that temporarily impacted production our
current production is now approximately 9,200 boe/day. New well completions
during the summer are expected to further enhance our production growth;
-- Net earnings increased 80% in the quarter to $4.7 million compared with
$2.6 million in Q2 2013;
-- Positive working capital of $21.9 million at June 30, 2014, no debt and an
unutilized $150 million line of credit to finance our capital expenditure
program;
-- At Onion Lake, the first modules of the central processing facilities for
the thermal EOR project were delivered to site. Construction will continue
throughout the summer and is on schedule for a mid-2015 start-up;
-- At Blackrod, the second pilot well pair was converted from steam
circulation to production mode and is producing in excess of 270 barrels of
oil per day and continues to ramp-up;
-- At Mooney, infrastructure construction projects continued in the second
quarter, which temporarily impacted oil production rates, but will provide
necessary capacity expansion when we expand the ASP flood into the Phase 2
area early next year.
John Festival, President of BlackPearl, commenting on Q2 2014 activities,
indicated that:
'We made good progress with the construction of our thermal project at Onion
Lake. The first modules of the central processing facilities have been
delivered to site and modules will continue to be delivered throughout the
summer and fall. In August we will begin drilling the horizontal production
wells. At this stage the 6,000 bopd project is on schedule for a mid-2015
start-up and capital costs remain in line with our budget. At Blackrod, the
performance of the second pilot well pair is meeting or exceeding our
expectations and the performance of the initial pilot well. We continue to
believe that undertaking pilots is a key step to understanding the reservoir
before committing significant capital for commercial development. The
performance of our pilot at Blackrod continues to enhance our confidence that
we will have a successful commercial project. Infrastructure construction
delays due to an early break-up season have impacted our short-term production
at Mooney; however, we are happy with the ASP flood response and when these
infrastructure projects are complete we expect additional positive production
response. With production improvements at Mooney together with additional
primary drilling at Onion Lake we expect our corporate production to meet our
guidance targets by the end of the year. We are focused on project execution
with each of our projects. Financially, strong crude oil prices with moderate
heavy oil differentials had a positive impact on our revenues and cash flow in
the second quarter.'
Property Review
Blackrod SAGD Pilot Project
At Blackrod, we converted the second pilot well pair to SAGD operation
(production test phase) in March and oil production continues to ramp-up.
Production in June averaged 253 barrels of oil per day and is currently in
excess of 270 barrels of oil per day. The well pair is expected to reach peak
production rates of between 500 and 600 barrels of oil per day in 9 to 12
months. The instantaneous steam oil ratio (iSOR) in the second well pair is 3.4
and is expected to continue to drop as production rates increase. Our planned
commercial operation at Blackrod will target a steam oil ratio between 3.0 and
3.5.
The initial pilot well pair continues to perform well. To date, it has produced
in excess of 240,000 barrels of oil and is still producing approximately 180
barrels of oil per day under restricted steam injection rates. We are
continuing to test some different steaming strategies in this well to optimize
production and steam injection efficiencies that, if successful, will be
incorporated into the commercial development design.
The objective of the initial pilot well pair was to establish that the SAGD
process works in the Blackrod reservoir, and we achieved that objective. The
intent of the second well pair was to drill a commercial prototype by
incorporating the learnings from the first well pair and refining the operating
strategies and procedures. The modifications introduced in the second well pair
design include drilling the horizontal section longer than the initial well
pair (950 metres compared to 700 metres), modifying the start-up procedures and
steaming strategies, utilization of a different sand control system and changes
to the down-hole equipment configuration. We are also assessing the potential
for enhancing performance utilizing other industry validated technologies in
our commercial development design including drilling longer wells, utilizing
infill wells, employing gas co-injection and using inflow control devices. We
have included a production graph for our second pilot well pair on our website
which we will update on a monthly basis.
BlackPearl is planning an 80,000 barrel per day commercial development project
at Blackrod, which will be built in phases. The first phase of the project is
expected to be designed for 20,000 barrels of oil per day. We filed the
commercial development application for Blackrod in May 2012 with the Alberta
Energy Regulator (AER) and are anticipating regulatory approval in 2014. We are
continuing to consider funding alternatives for the development of the Blackrod
project including potential joint venture opportunities.
Onion Lake
Construction of the first phase of the Onion Lake thermal EOR project continued
throughout the quarter. Site preparation was completed in early July and the
first modules of the central processing facilities were delivered from the
fabrication shop to site. Field construction will ramp-up throughout the summer
and fall with a total of 97 modules to be delivered to site with a facility
construction workforce that is expected to peak at approximately 135 people.
Thermal development of the Onion Lake area will utilize a combination of the
traditional SAGD process (two horizontal wells drilled approximately 5 metres
apart) and a modified SAGD process (using existing and new vertical wells as
steam injectors and horizontal producers). The initial 6,000 barrel phase of
the project will utilize the modified SAGD process. Initially, we are planning
to drill 12 horizontal producer wells and 19 new vertical steam injectors, as
well as utilizing up to 16 existing vertical wells as steam injectors. These
wells are expected to be drilled during the third and fourth quarters this
year. Three water source wells have been drilled for the project and, in the
second half of 2014, the remaining source water infrastructure will be built
and three disposal wells will be drilled.
Our estimated capital cost of the first phase of the project remains unchanged
at $210 million and first steam is scheduled to commence in mid-2015.
In addition, we commenced a 20 well primary drilling program in June at Onion
Lake. Nine of these wells were drilled in the second quarter and the remaining
11 wells will be drilled in the third quarter. All of these wells are expected
to be put on production during the third quarter. These wells are being drilled
outside of the current thermal development area.
Mooney
At Mooney, no new drilling activity occurred during the second quarter due to
wet ground conditions. During the second quarter we were able to continue with
some infrastructure improvement projects that were not completed during the
first quarter. This included expansion of the water treatment facilities to
accommodate expansion of the ASP flood to our Phase 2 lands, construction of a
booster station and upgrade and expansion of the pipeline infrastructure in the
field in order to handle increased production from Phase 2 and Phase 3 wells.
This work necessitated shutting-in nine wells on the Phase 1 ASP lands for most
of the quarter. These wells were producing between 300 and 400 barrels of oil
equivalent per day before they were shut-in. The wells were brought back on
production in July. Completion of these infrastructure improvement projects
will be finished in the fall or next winter when ground conditions permit.
We expect to expand the ASP flood to the Phase 2 lands early in 2015. We are
planning to drill an additional six wells on the Phase 3 lands late this year
and expand the ASP flood to these lands in the future.
Production
Oil and gas production averaged 8,897 boe per day in the second quarter of 2014
compared to 9,986 boe per day for the same period in 2013. The decrease in
production in 2014 reflects natural production declines at Onion Lake, as well
as production that was shut-in at Mooney during the quarter in order to
undertake infrastructure improvements as described above. In addition, at
Mooney, due to pipeline pressure restrictions imposed on a third party gas
transporter, the amount of gas we were permitted to inject into their pipeline
system was reduced, which restricted our gas sales in the area as well as oil
production during the quarter.
Three months ended Six months ended
June 30, June 30,
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(boe/day) 2014 2013 2014 2013
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Onion Lake 3,915 4,995 4,094 4,660
Mooney 3,519 3,692 3,607 3,791
John Lake 1,065 800 1,067 791
Blackrod 306 304 259 189
Other 92 195 102 108
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8,897 9,986 9,129 9,539
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Financial Results
Oil and gas revenues increased 7% in the second quarter of 2014 to $62.2
million compared with $58.3 million in Q2 2013. The increase is attributable to
a 20% improvement in our average oil price received, partially offset by an 11%
decrease in oil sales volumes.
The increase in our realized wellhead price reflects higher WTI reference oil
prices in Q2 2014 compared with Q2 2013 (US$102.99/bbl vs US$94.29/bbl), and
comparable heavy oil differentials (Cdn$20.08/bbl vs Cdn$19.36/bbl).
Operating costs were $25.96 per boe in Q2 2014 compared with $20.90 per boe in
Q2 2013. The increase in operating costs is primarily due to the expensing of
all costs associated with the first phase of the ASP flood at Mooney. During
the initial re-pressurization of the reservoir these costs were being
capitalized.
Funds flow from operations increased by 41% to $46.2 million in the first half
of 2014 compared to $32.9 million in the same period in 2013. The increase is
funds flow in 2014 is primarily a result of higher wellhead sales prices in
2014. For the six months ended June 30, 2014, the Company generated net income
of $3.6 million compared to a net loss of $3.0 million in the same period in
2013. The increase in net income in 2014 compared to the same period in 2013 is
primarily a result of a higher wellhead sales price in 2014, partially offset
by higher production costs and the loss on risk management contracts.
Financial and Operating Highlights
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Three months ended Six months ended
June 30 June 30
($000, except where 2014 2013 2014 2013
noted)
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Daily production / sales
volumes
Oil (bbl/d) (2) 8,534 9,662 8,827 9,303
Natural gas (mcf/d) 2,176 1,942 1,814 1,414
Combined (boe/d) (1) 8,897 9,986 9,129 9,539
Product pricing ($)
Crude oil - per bbl 81.82 67.30 77.37 59.24
(before the effects of
hedging)
Natural gas - per mcf 4.61 3.59 4.93 3.46
Combined - per boe 79.53 66.20 75.82 58.50
Realized loss on risk (3.64) 0.00 (2.19) 0.00
management contracts -
per boe
Revenue
Oil and gas revenue - gross 62,174 58,322 121,729 98,993
Royalties ($/boe) 15.88 13.33 14.91 10.68
Transportation costs ($/boe) 2.16 3.32 2.01 3.45
Operating costs ($/boe) 25.96 20.90 24.89 21.93
Net income (loss) for the 4,684 2,597 3,558 (3,047)
period
Per share, basic and diluted 0.01 0.01 0.01 (0.01)
Funds flow from operations 23,161 22,823 46,198 32,862
Capital expenditures 48,044 27,315 97,404 46,416
Working Capital, end of 21,910 4,055 21,910 4,055
period
Long term debt - 25,000 - 25,000
Shares outstanding, end of 335,638,226 296,122,308 335,638,226 296,122,308
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 and 9,500 boe/d
for the year, unchanged from our Q1 update. Funds flow from operations for the
year is anticipated to range between $80 and $85 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 expected to be between $280 to $300 million
for the year, unchanged from our Q1 update. The second half of our 2014 capital
budget continues to be focused on the construction of the first phase of the
Onion Lake thermal project, including the drilling of over 30 producer,
injector and disposal wells. During the second half of 2014, we will also
complete our conventional drilling program at Onion Lake (11 wells) and up to
10 additional horizontal wells at Mooney and other areas.
The 2014 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 funds flow from operations which represent cash flow from
operating activities expressed before changes in non-cash working capital. This
term is 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. Funds flow from operations does not have a standardized meaning
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 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', 'planning', 'planned', 'potential', 'could', 'continue',
'continued', 'continuing', 'estimate', 'estimates', 'estimated', 'forecast',
'likely', 'expect', 'expected', 'may', 'intend', 'intends', 'intended',
'intention', 'deferred', 'successful', 'will', 'project', 'timing', 'in the
event', 'move toward', 'should', 'scheduled', 'outlook' or similar words
suggesting future outcomes.
In addition, statements relating to 'reserves', 'resources' or 'contingent
resources' are deemed to be forward-looking statements as they involve the
implied assessment, based on certain estimates and assumptions, that the
reserves and resource described exist in the quantities predicted or estimated
and can be profitably produced in the future.
In particular, but without limiting the foregoing, this report contains
forward-looking statements pertaining to our business plans and strategies;
capital expenditure and drilling programs including the target date of mid-2015
for completion of construction and first steam at Onion Lake and anticipated
timing of initial and peak oil production rates at the Onion Lake EOR project,
estimated capital costs of $210 million for the first phase of thermal
development at Onion Lake, anticipated corporate production being within our
production target guidelines by the end of the year, timing and expected
ramp-up time to reach peak production rates of 500 to 600 barrels of oil per
day for the second pilot well pair at Blackrod and the expected steam oil
ratios associated with this production and our planned commercial operations,
expected timing to receive regulatory approval for our commercial development
application at Blackrod, anticipated expansion of the ASP flood to phase two
lands at Mooney in 2015, as well as all the information contained in the
Outlook section.
The forward-looking information is based on expectations and assumptions by
management regarding future production levels, future oil and natural gas
prices, continuation of existing tax, royalty and regulatory regimes, foreign
exchange rates, estimates of future operating costs, timing and amount of
capital expenditures, performance of existing and future wells, the ability to
obtain financing on acceptable terms, availability of skilled labour and
drilling and related equipment, general economic and financial market
conditions 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.
Undue reliance should not be placed on forward-looking statements. 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.
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, volatility of commodity inputs, substantial capital
requirements, customary conditions including receipt of necessary regulatory
and stock exchange approvals on the issuance of common shares, 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, financial loss associated with
derivative risk management contracts, potential cost overruns, variations in
foreign exchange rates, variations in interest rates, diluent and water supply
shortages, competition for capital, equipment, new leases, pipeline capacity
and skilled personnel, uncertainties inherent in the SAGD bitumen and ASP
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. 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
News Source: NASDAQ OMX
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06.08.2014 Dissemination of a Corporate News, transmitted by DGAP - a
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Language: English
Company: BlackPearl Resources Inc.
Sweden
ISIN: SE0002060863
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