Press release from CNW Group
Pinecrest Energy Inc. Announces its 2012 Second Quarter Results and Provides Operational Update
Tuesday, August 28, 2012
TSX Venture Exchange: PRY
CALGARY, Aug. 28, 2012 /CNW/ - Pinecrest Energy Inc. ("Pinecrest" or the "Company") is pleased to announce that it has filed on SEDAR its audited financial statements and related Management's Discussion and Analysis ("MD&A") for the three and six month period ending June 30, 2012. The statements will be available for review at www.sedar.com or www.pinecrestenergy.com.
The following are the highlights of Pinecrest's operations for the quarter ended June 30, 2012:
- Increased average daily production to 2,951 boe/d (99% light oil) from 830 boe/d in Q2 2011, representing a 256% increase. During the quarter the Company experienced 17.4% unscheduled down time (the Company had budgeted 5%) due to weather related operational issues representing approximately 25,000 bbls of unbudgeted lost production over the entire quarter;
- Generated an operating netback of $63.97/boe;
- Increased funds from operations to $15.9 million from $4.6 million in Q2 2011, representing a 246% increase;
- Reduced Q2 2012 production and transportation costs to $15.08/boe from $21.76/boe in Q2 2011 representing a 31% decrease;
- Exited the quarter with a strong balance sheet with net debt and working capital deficit of $6.6 million on a bank line of $125 million;
- Commenced the H2 2012 capital program ahead of schedule, drilling 1 gross (0.96 net) horizontal light oil well with a 100% success rate, prior to the end of Q2;
- Established current production of approximately 3,050 boe/d (99% light oil), based on field estimates. In addition, the Company currently has 10 gross (9.5 net) wells, drilled, and in various stages of being completed or equipped to be brought on production; and
- Commenced injecting water in May, 2012 on a continuous basis on the Company's joint waterflood in Evi with encouraging results consistent with the Company's expectations. In addition, the Company is also planning an additional three operated waterflood projects which are at various stages in the application and/or approval process.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
The following is a review of Pinecrest's financial and operating performance for the three and six months ended June 30, 2012 and 2011:
|Three months ended June 30||Six months ended June 30|
|FINANCIAL ($ except per share amounts)|
|Petroleum and natural gas sales||22,426,042||7,747,513||189||50,617,411||13,847,449||266|
|Funds flow from operations(1)||15,865,873||4,579,331||246||36,140,701||8,172,305||342|
|Per share - basic||$0.07||$0.03||133||$0.17||$0.05||240|
|Per share - diluted||$0.07||$0.02||250||$0.15||$0.04||275|
|Net income (loss)||9,076,405||1,129,484||704||15,023,824||802,863||1,771|
|Per share - basic||$0.04||$0.01||300||$0.07||$0.00||100|
|Per share - diluted||$0.04||$0.01||300||$0.06||$0.00||100|
|Net debt and working capital (deficit)||(6,660,529)||(10,501,868)||37||(6,660,529)||(10,501,868)||37|
|Common Shares Outstanding|
|Weighted average - basic||214,157,793||170,337,311||26||206,622,244||170,131,401||21|
|Weighted average - diluted||241,996,599||199,998,889||21||236,890,033||199,481,193||19|
|Number of days||91||91||182||181|
|Crude oil (bbls/d)||2,934||810||262||3,140||779||303|
|Natural gas (mcf/d)||53||63||(16)||44||32||38|
|Barrels of oil equivalent (boe/d-6:1)||2,951||830||256||3,155||792||298|
|Average realized price|
|Crude oil ($/bbl)||83.83||104.00||(19)||88.41||97.47||(9)|
|Natural gas ($/mcf)||1.58||4.17||(62)||1.77||3.73||(53)|
|Barrels of oil equivalent ($/boe- 6:1)||83.51||102.55||(19)||88.16||96.63||(9)|
|Netback per boe ($)(1)|
|Petroleum and natural gas sales||83.51||102.55||(19)||88.16||96.63||(9)|
|Realized gain (loss) on risk management contracts||2.02||-||100||(0.17)||-||(100)|
|Production & transportation expenses||(15.08)||(21.76)||(31)||(14.41)||(20.00)||(28)|
|Success rate (%)||100||-||100||100%||100%||-|
(1) Non-GAAP measure
Pinecrest is not altering its 2012 forecasted capital program and is confident in its ability to achieve the previously stated year-end production guidance of 5,000 - 5,200 barrels of light oil per day. The Company currently has three rigs operating with a fourth to commence operations in early September.
During the second quarter Pinecrest was able to begin its H2 2012 capital program approximately 1 month early and drilled 1 gross (0.96 net) Slave Point well in its Red Earth core area (100% success rate). Additionally, the Company undertook several initiatives with the goal of achieving an overall reduction in on-stream capital (drilling, completion and equipping) costs. Based on field estimates from our most recent capital projects, these cost reductions are starting to be realized. Further details of these savings will be provided in the Company's Q3 2012 update.
Extended periods of heavy rain in mid-April and May hampered the Company's production operations during the second quarter of 2012. A significant component of the Company's current production is flow lined to the Pinecrest-operated Evi battery, however, wet weather and road conditions restricted propane delivery (used to run pump jack engines) resulting in unscheduled weather related downtime. In aggregate, Pinecrest lost approximately 15.5 days (17.4 %) to downtime over the second quarter which, in terms of volume, corresponds to approximately 385 bopd (normalized downtime during Q2 would result, on average, downtime of 4%-5%). The long term solution to this issue requires the electrification of these wells which we anticipate taking 18-24 months. In the interim, additional propane storage will be installed at these well sites.
Pricing for Canadian crude has experienced significant volatility in recent months. Edmonton light oil has gone from trading at a premium to West Texas Intermediate oil ("WTI") in the fourth quarter of 2011 to a significant discount in the first half of 2012. The volatility can be partially explained by seasonal refinery turnarounds, however, pipeline takeaway capacity and turnaround schedules in the light oil refining market have also impacted short term pricing on Canadian crude. During the second quarter of 2012, WTI pricing averaged US$93.51 per barrel and differentials on Edmonton light crude averaged $9.90 per barrel, with Pinecrest realizing a price of Cdn$83.83 per barrel. Recently, the differential has narrowed significantly, returning closer to historic norms. Pinecrest, however, sees the potential for continued volatility in Edmonton light crude oil pricing over the foreseeable future.
Results to date from the Company's first joint waterflood in Evi have been extremely encouraging. Water injection commenced on a continuous basis in May, 2012 and as a result, oil production rates from 2 wells (one vertical and one horizontal) offsetting the injector have increased by 4-5 times their rates prior to water injection. This response is similar to other analogous waterfloods in the greater Red Earth area and provides further support for the tremendous upside associated with waterflooding.
The Company has begun implementing its infill drilling program in Evi with the intent to implement water injection in these downspaced areas in the next six to eighteen months to capture the upside associated with waterflooding the Slave Point formation. Analagous waterfloods in the greater Red Earth area have been assigned incremental recovery factors ranging between 50 and 100 percent over primary recovery.
In addition, the Company is awaiting the approval of its second waterflood scheme from the ERCB which is expected to be forthcoming shortly. Once the approval is received the Company has made preparations to immediately move forward with implementing the field work required to commence water injection.
The information in this press release contains certain forward-looking statements. These statements relate to future events or our future performance. 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 "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. In particular, forward looking statements in this press release includes, but is not limited to: Pinecrest's capital program and 2012 business objectives, Pinecrest's 2012 budget, oil recovery rates, the effects of waterfloods on recovery factors, decline rates and type curves for wells, production rates, exit rates for production and bank debt, downspacing opportunities, the quantity of reserves, and projections of market prices and costs. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Pinecrest's control, including: the impact of general economic conditions; industry conditions; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions, of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves. Pinecrest's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Pinecrest will derive from them. Except as required by law, Pinecrest undertakes no obligation to publicly update or revise any forward-looking statements.
Many of the risks and uncertainties described above and additional risk factors are described in the Company's Annual Information Form which is available at www.sedar.com and www.pinecrestenergy.com. Readers are also referred to risk factors described in other documents Pinecrest files with Canadian securities authorities.
Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources or reserves described can be profitably produced in the future.
The Corporation uses the following terms for measurement within this press release that do not have a standardized prescribed meaning under IFRS and these measurements may differ from other companies and accordingly may not be comparable to measures used by other companies. The terms "funds from operations", "operating netback", and "netback per boe" are not recognized measures under IFRS. Management of the Corporation believes that these terms are useful, in addition to profit and loss and cash flow from operating activities as defined by IFRS, for evaluating the Corporation's operating performance and leverage. Funds from operations is expressed as cash flow from operating activities before changes in non-cash working capital and asset retirement expenditures. Operating netback is a measure of operating margin used in capital allocation decisions. Pinecrest defines operating netback as average realized price per BOE, less royalties per BOE, less operating and transportation expenses per BOE, plus any realized gain or loss per BOE on financial instruments.
Certain information provided in this press release in relation to the results of waterflooding Slave Point reservoirs on lands in close proximity to the land in which the Company has an interest, is considered analogous information under National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. Such information is based on publicly available information from governmental agencies and other industry producers and has been provided to give an indication of possible incremental recovery factors in the specified area. Other than comparing such information to the Company's own limited results in the specified area, the Company has not independently confirmed the accuracy of this information. There is no certainty that such incremental recovery factors will be obtained of even if so obtained, whether such factors can be achieved on an economic basis.
Barrels of Oil Equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of 6MCF:1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1,utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
SOURCE: Pinecrest Energy Inc.
For further information:
Pinecrest Energy Inc.
Suite 500, 255 - 5th Avenue S.W.
Calgary, Alberta T2P 3G6
Wade Becker, President and CEO
Dan Toews, V.P. Finance & CFO
Tel: (403) 817-2550 or
Fax: (403) 817-2599