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Press release from Marketwire

BlackPearl Announces First Quarter 2010 Financial and Operating Results

Tuesday, May 11, 2010

BlackPearl Announces First Quarter 2010 Financial and Operating Results17:11 EDT Tuesday, May 11, 2010CALGARY, ALBERTA--(Marketwire - May 11, 2010) - BlackPearl Resources Inc. ("BlackPearl" or the "Company") (TSX:PXX)(FIRST NORTH:PXXS) is pleased to announce its financial and operating results for the three months ended March 31, 2010. Highlights of our first quarter activities include:- Oil and gas production averaged 6,685 boe/day, a 21% increase over Q1 2009;- Crude oil prices continued to strengthen, averaging WTI US$78.71 per barrel; heavy oil differentials remained tight at 10%; partially offset by a stronger Canadian dollar;- Revenues increased 131% to $36.4 million compared to Q1 in 2009; Cash flow from operations was $15 million, compared with negative $1.8 million in Q1 2009;- Acquired the remaining 20% working interest in the Blackrod SAGD project; we now own 100% of this property;- Drilled 8 development wells at Onion Lake, 60 additional wells planned for the remainder of the year;- Subsequent to March 31, strengthened the balance sheet with an equity offering of 10.3 million common shares for net proceeds of $28.8 million.John Festival, President of BlackPearl, commenting on Q1 2010 activities indicated that, "We had a very good first quarter. Production is increasing as a result of new drilling at Onion Lake and heavy oil prices stayed strong; both of which positively impacted our Q1 financial results. Our 2010 capital plans on our core properties are progressing as expected. The only major unexpected item for us in the first quarter was the purchase of the remaining 20% interest at our Blackrod SAGD property, which we think we achieved at an attractive value for our shareholders. Proceeds from recent asset dispositions and our equity offering will allow us to expand our capital program, which will primarily be additional development drilling at Onion Lake. Production for the next two quarters will be impacted by the sale of about 700 boe per day, but this will be more than made up by the end of the year through our capital investments. We think by the end of the year we could be producing in excess of 8,000 boe per day, which is ahead of our 2010 target."Property ReviewBlackrod SAGD ProjectAt Blackrod, we exercised our right of first refusal and acquired the 20% working interest in the project held by Serrano Energy Ltd., for $21 million. BlackPearl now owns 100% of this project and we plan to construct and operate a SAGD pilot later this year or early next year. In connection with the pilot, we completed construction of a 31 kilometre all-weather road to the proposed plant site. In addition, during the first quarter we drilled a water source well, a water disposal well and two observation wells. All of these wells will be used to operate the pilot. Engineering design for the steam and water handling facilities for the pilot are on-going.Onion LakeAll of our short-term production growth will occur at Onion Lake. Development drilling continued during the first quarter, with eight wells drilled. We are planning a much more active second half of 2010 at Onion Lake, with over 60 wells planned. We plan to upgrade the fuel gas system and water disposal facilities at Onion Lake later this year. Over the next three to five years we plan to drill over 200 wells and then convert a portion of the Onion Lake field to thermal (SAGD) recovery.MooneyAt Mooney, BlackPearl is preparing to build the first phase of its ASP flood (Alkali Surfactant Polymer) later this year following receipt of regulatory approval. This will involve construction of water and polymer handling facilities and converting 22 producing wells to injectors. Once injection commences we anticipate production response in six to twelve months. During the first quarter we have also filed an application for reduced crown royalties on the EOR project as a result of the increased capital costs of implementing an ASP flood. ProductionOil and gas production for the three months ended March 31, 2010 was 6,685 boe/day, a 21% increase compared to the same period in 2009. It also represents a 26% increase from Q4 production in 2009 of 5,306 boe/day. The increase is attributable to development drilling activity at Onion Lake last fall as well as during the first quarter this year.Production in the second quarter will be impacted by producing property asset dispositions that occurred in the first and second quarters. In total, these properties were producing approximately 700 boe/day at the time of the sale. Average Daily Production Three months ended March 31, (boe/d) 2010 2009 --------------------------------------------------------------------------- Onion Lake 4,301 2,167 Mooney 1,136 1,705 Ear Lake 361 433 Salt Lake 288 375 Long Coulee/Little Bow 403 466 Other 196 364 --------------------------------------------------------------------------- 6,685 5,510 --------------------------------------------------------------------------- Financial ResultsHigher production volumes and stronger crude oil prices positively impacted revenues and cash flow from operations during the first quarter of 2010. The 26% increase in production and the 91% increase in our average wellhead price resulted in revenues increasing 131% to $36.4 million in Q1 2010 and cash flow from operations increasing to $15 million. The higher wellhead price reflects stronger WTI oil prices (US$78.71/bbl vs US$43.08/bbl), tighter heavy oil differentials (10% differential in 2010 compared with 21% in 2009) partially offset by a stronger Canadian dollar compared to the US dollar (1.041 in Q1 2010 compared with 1.244 in Q1 2009).Operating costs were $17.54 per barrel in Q1 2010, which is higher than what we have been experiencing in recent quarters. The increase in operating costs is a result of about 25% of our production base coming from new wells. New heavy oil wells are initially more expensive to operate due to higher sand production, and the fact that the new wells are not yet tied into our fuel gas system, and therefore we are required to purchase propane to run our equipment. The operating costs from the new wells will tend to drop after a few months of production. Financial and Operating Highlights --------------------------------------------------------------------------- Three months ended March 31, 2010 2009 --------------------------------------------------------------------------- Daily sales volumes(1) Oil (bbl/d) 5,941 4,423 Natural gas (mcf/d) 4,462 6,527 Combined (boe/d) 6,685 5,510 Product pricing Oil ($/bbl) 63.77 31.99 Natural gas ($/mcf) 5.01 5.08 Combined ($/boe) 60.55 31.77 ($000's, except per share and boe amounts) Revenue Oil and gas revenue - gross 36,429 15,755 Royalties ($/boe) 15.54 5.80 Transportation costs ($/boe) 0.87 2.63 Operating costs ($/boe) 17.54 20.50 Net income (loss) for the period (8,053) (20,516) Per share, basic and diluted (0.03) (0.10) Cash flow from operating activities, before working capital adjustments 15,029 (1,804) Capital expenditures 32,183 3,147 Working Capital, end of period 46,266 8,570 Long term debt - - Shares outstanding, end of period 262,181,385 209,341,716 (1) boe based on a conversion ratio of 6 mcf of gas to 1 barrel of oil. Boes 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. The 2010 first 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).Forward-Looking StatementsCertain of the statements made and information contained herein is forward-looking statements and forward looking information (collectively referred to as "forward-looking statements") within the meaning of Canadian securities laws. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", "predict", "targeting", "seek", "intend", "could", "potential" or similar words. In particular, this document contains forward-looking statements pertaining to the Company's 2010 capital expenditure program, estimated production levels and anticipated cash flow from operations, estimated production lost from asset sales, development plans at Onion Lake, Blackrod and Mooney, future drilling locations at Onion Lake and estimated future operating costs.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 in fact be realized. Actual results will differ, and the difference may be material and adverse to the Corporation and its shareholders. The Company believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. The Company's Annual Information Form, 2009 year-end Management Discussion and Analysis and other documents filed with securities regulatory authorities describes the risks, assumptions and other factors that could influence actual results and which are incorporated herein by reference. Furthermore, the forward-looking statements contained in this news release 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.BlackPearl's Certified Advisor on First North is E. Ohman J:or Fondkommission AB.Company Registration Number: 409596-1The report for the three months ending June 30, 2010 will be published on or before August 14, 2010.FOR FURTHER INFORMATION PLEASE CONTACT: BlackPearl Resources Inc. John Festival President and Chief Executive Officer (403) 215-8313 or BlackPearl Resources Inc. Don Cook Chief Financial Officer (403) 215-8313 (403) 265-8324 (FAX) www.blackpearlresources.ca