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Press release from Marketwire

Painted Pony Announces Second Quarter 2013 Financial Results, Operational Update and $125 Million Credit Facility

Tuesday, August 13, 2013

Painted Pony Announces Second Quarter 2013 Financial Results, Operational Update and $125 Million Credit Facility

08:30 EDT Tuesday, August 13, 2013

CALGARY, ALBERTA--(Marketwired - Aug. 13, 2013) - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Company") (TSX VENTURE:PPY) is pleased to report its financial and operating results for the three and six month periods ending June 30, 2013. Highlights for the second quarter of 2013 include:

OPERATIONS UPDATE

  • production averaged 7,928 barrels ("bbls") of oil equivalent ("boe") per day ("boe/d") (weighted 82% gas), an increase of 38% over the second quarter of 2012. During the quarter, over 1,500 boe/d remained shut-in due to weather related curtailments and infrastructure capacity constraints. During the first week of August, field estimated volumes averaged over 9,200 boe/d;
  • generated funds flow from operations of $12.6 million, representing an increase of 64% over the second quarter of 2012;
  • achieved funds flow from operations per basic and diluted share of $0.14, an increase of 27% over the second quarter of 2012;
  • generated average field operating netbacks of $19.96 per boe. British Columbia field operating netbacks grew to $14.61 per boe, an increase of 186% from the second quarter of 2012;
  • participated in the drilling of 2 (1.3 net) wells, with 1 (1.0 net) well targeting Montney gas and 1 (0.3 net) wells targeting light oil. In the first half of 2013, the Company participated in the drilling of 9 (5.0 net) wells, with 6 (3.6 net) wells targeting Montney gas and 3 (1.4 net) wells targeting light oil. Overall to date, Painted Pony has participated in the drilling of 42 (22.7 net) wells on the Company's Montney gas project; and
  • exited the second quarter of 2013 with a positive working capital position of $7.3 million and an undrawn demand credit facility of $100 million.

CORPORATE UPDATE

Painted Pony also announces the following corporate developments:

  • Painted Pony entered into $125 million syndicated credit facilities with three chartered banks (the "Facilities"); and
  • Painted Pony applied for Depository Trust Company ("DTC") eligibility with respect to the Company's common shares.

MONTNEY GAS OPERATIONS

Painted Pony continues to pursue the development and expansion of its Montney gas assets in northeastern British Columbia. During the second quarter of 2013, the Company drilled a second 100% well on the 91-F/94-B-16 pad, targeting the upper Montney. To date during 2013, the Company has drilled or is currently drilling a total of 8 (5.6 net) Montney horizontal wells. A further 5 (4.0 net) horizontal wells are expected to be drilled during the balance of 2013, including 2 (2.0 net) new wells on the liquids-rich project at Townsend.

Townsend

In the second quarter of 2013, the Company equipped two 100% working interest wells on the 11-J/94-B-09 pad, which were completed and tested during the first half of 2013 on lands acquired in December 2012. Earlier this year, Painted Pony announced two 100% working interest wells in the Townsend block (please refer to press release dated March 27, 2013).

These wells proved to be a challenge to bring on production due to their robust wellhead flow rates and high associated liquids content. Both wells have experienced intermittent production due to area facility constraints associated with the higher than expected gas production rates and free condensate liquids yields of the wells.

The Lower Montney well on the Townsend 11-J pad was produced for 7.1 days during the second quarter of 2013 and it flowed at approximately 1,819 boe/d of field-estimated raw gas, including wellhead condensate. This well has continued to produce through a third party facility since early July. The Upper Montney well on the Townsend 11-J pad was then produced for a period of 5.2 days during the second quarter of 2013, at which time it flowed at approximately 2,230 boe/d of field-estimated raw gas, including wellhead condensate. This well is expected to remain shut-in until late in 2013, when a new operated gas processing facility, including enhanced liquids-handling capacity, is expected to come on-stream. This facility will have sufficient additional capacity for the next two (2.0 net) Townsend wells planned for the fourth quarter of 2013.

Blair

During the second quarter of 2013, Painted Pony drilled a second 100% working interest Upper Montney horizontal well on the 91-F/94-B-16 pad. The two Upper Montney wells on this pad were subsequently completed and tested, and have now been placed onto production, after flowing at a total peak 24-hour rate of 15.3 million cubic feet of gas per day (please refer to press release dated July 25, 2013). They were completed using different completion and stimulation techniques; one was completed using an open-hole ball drop system, and the other was completed using a cased-hole perf-and-plug system. The Company continues to closely monitor the performance of these wells, as they provide important comparative data concerning the efficiency of open-hole ball-drop completions in the Blair area. Previously, Painted Pony had enjoyed success with ball-drop style completions in the Townsend area.

In the third quarter to-date, Painted Pony has drilled two 100% working interest Montney horizontal wells on the 14-F/94-B-16 pad targeting the Middle Montney and the Lower Montney. These wells are scheduled to be completed immediately and tied in to the Blair Creek gas plant for testing and production.

Gundy/Cameron

In the first quarter of 2013, 2 (0.4 net) additional horizontal wells were drilled on the Gundy 75-J/94-B-09 pad and are currently being completed and production tested. Test results from these wells are expected later in this quarter.

Cypress

In May 2013, following the completion of repairs to an area pipeline, production resumed from the Cypress area. In addition, the Company is continuing its field reactivation activities which include various upgrades to processing and disposal facilities.

LIGHT OIL OPERATIONS

In Saskatchewan, Painted Pony has participated in the drilling of 3 (1.4 net) wells to-date this year, of which 1 (0.3 net) Bakken well was drilled at Flat Lake during the second quarter of 2013. This well has been completed and is expected be placed onto production immediately.

At Midale, Saskatchewan, the Company has received all necessary approvals to implement a pilot pressure maintenance program on its Bakken project. This water injection scheme is expected to improve overall oil recovery by up to 50 percent from current levels. Injection is expected to commence during the third quarter of 2013.

Painted Pony continues to maintain an inventory of light oil opportunities, focusing on the continuing development of lower-risk projects in southeastern Saskatchewan. A further 5 (3.1 net) wells targeting light oil are expected to be drilled during the balance of this year.

PRODUCTION

During the second quarter of 2013, Painted Pony's production averaged 7,928 boe/d (weighted 82% gas), a 38% increase over the same period in 2012. Spring break-up and adverse weather conditions along with scheduled and un-scheduled plant turnarounds in both British Columbia and Saskatchewan affected several of the Company's key producing properties during the second quarter. Consequently, over 1,500 boe/d of production was shut-in during this period (please refer to press release dated July 25, 2013).

Painted Pony's field-estimated sales volumes for July were approximately 8,700 boe/d (82% gas-weighted). During the first week of August, field-estimated volumes averaged over 9,200 boe/d.

FINANCIAL RESOURCES

In the second quarter of 2013, Painted Pony generated funds flow from operations of $12.6 million, equating to $0.14 per basic and diluted share. Cash flow from operations in the second quarter of 2013 was $15.7 million. The Company exited the second quarter of 2013 with a positive working capital position of $7.3 million and a demand credit facility of $100 million.

SYNDICATED CREDIT FACILITIES

On August 8, 2013, the Company entered into the $125 million syndicated credit Facilities with three chartered banks consisting of the National Bank of Canada (as administrative agent), Alberta Treasury Branches and the Canadian Imperial Bank of Commerce.

The Facilities have a committed borrowing base of $125 million and replaces Painted Pony's demand credit facility of $100 million. The Facilities revolve for a 364 day period plus a one year term-out, which are extendible annually, and are subject a semi-annual review.

DTC ELIGIBILITY

The Company has applied for eligibility status for its common shares by DTC, a subsidiary of the Depository Trust & Clearing Corporation. DTC is the world's largest post-trade financial services company. DTC provides electronic clearance, settlement, and information services for the vast majority of the equities and other securities in the U.S. Trading of securities through DTC allows for cost-effective clearing and guaranteed settlement, thus enhancing the attractiveness of DTC eligible shares to investors.

PERSONNEL

Painted Pony has welcomed Nereus L. Joubert to the Company's Board of Directors. Dr. Joubert was elected by the shareholders at the Company's annual and special meeting of shareholders held on June 5, 2013. Dr. Joubert has held several executive positions in the Sasol Group of companies in the past 19 years including the role of Country President of Sasol Canada between March 2011 and June 2013, when he retired from Sasol. He has served as director on the boards of subsidiaries of Sasol Limited (a NYSE and Johannesburg Securities Exchange listed company) including Sasol Petroleum International (Pty) Limited, Sasol Synfuels (Pty) Limited and Sasol's Canadian legal entities.

The Company also welcomes Mr. John Van de Pol as the Company's Vice-President, Finance and Chief Financial Officer, effective September 3, 2013. Mr. Van de Pol is a Chartered Accountant with more than 33 years of oil and gas industry experience (please refer to press release dated July 22, 2013). Mr. Van de Pol will replace Ms. Joan E. Dunne, upon her retirement as Vice President, Finance and Chief Financial Officer of the Company. Ms. Dunne will continue with the Company in an advisory role until December 31, 2013. The Board would like to thank Ms. Dunne for her leadership as a founder and as the Chief Financial Officer of the Company since inception, and wishes her all the best in her retirement.

Financial and Operating Highlights

(unaudited)

Three months ended Six months ended
June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Financial ($ millions, except per share and shares outstanding)
Petroleum and natural gas revenue(1) 24.4 15.1 49.4 34.6
Funds flow from operations(2) 12.6 7.7 26.7 18.5
Per share - basic(3) and diluted(4) 0.14 0.11 0.30 0.26
Cash flow from operating activities 15.7 8.0 27.3 19.8
Comprehensive income (loss) 0.7 (3.5 ) (1.1 ) (4.8 )
Per share - basic(3) and diluted(4) 0.01 (0.05 ) (0.01 ) (0.07 )
Capital expenditures(5) 15.2 13.4 67.7 50.9
Working capital(6) 7.3 42.3 7.3 42.3
Total assets 595.4 450.6 595.4 450.6
Shares outstanding(7) 88,488,760 70,427,027 88,488,760 70,427,027
Diluted weighted-average shares 88,653,311 70,036,445 88,383,367 69,888,637
Operational
Daily sales volumes
Gas (mmcf per day) 39.2 25.9 40.0 29.1
Oil (bbls per day) 1,006 1,270 1,205 1,341
NGL's (bbls per day) 385 155 393 176
Total (boe per day) 7,928 5,745 8,260 6,369
Realized prices
Gas ($ per mcf) 3.79 2.01 3.56 2.16
Oil ($ per bbl) 93.30 83.27 90.05 87.13
Field operating netbacks(8) ($ per boe)
British Columbia 14.61 5.11 14.30 6.64
Saskatchewan 51.87 50.78 49.25 53.01
Company combined 19.96 16.94 20.07 17.98
  1. Before royalties
  2. This table contains the term "funds flow from operations", which should not be considered an alternative to, or more meaningful than "cash flows from operating activities" as determined in accordance with International Financial Reporting Standards ("IFRS") as an indicator of the Company's performance. Funds flow from operations and funds flow from operations per share (basic and diluted) does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management uses funds flow from operations to analyze operating performance and leverage and considers funds flow from operations to be a key measure as it demonstrates the Company's ability to generate the cash necessary to fund future capital investment. The reconciliation between funds flow from operations and cash flows from operating activities can be found in "Management's Discussion and Analysis". Funds flow from operations per share is calculated using the basic and diluted weighted average number of shares for the period, consistent with the calculations of earnings per share.
  3. Basic per share information is calculated on the basis of the weighted average number of shares outstanding in the period.
  4. Diluted per share information reflects the potential dilution effect of options, which may be anti-dilutive.
  5. Including decommissioning expenditures and share-based payments.
  6. This table contains the term "working capital". Working capital does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management calculates working capital as current assets less current liabilities and uses working capital to analyze operating performance and leverage.
  7. Class A shares at December 31, 2011 were re-designated as Common shares effective June 7, 2012.
  8. This table contains the term "field operating netbacks". Field operating netback does not have any standardized meaning prescribed by IFRS and may not be comparable with the calculation of similar measures for other entities. Management calculates field operating netback on a per unit basis as oil gas and natural gas liquids revenues less royalties and transportation and operating costs.

Painted Pony is a Canadian oil and gas exploration company that trades on the TSX Venture Exchange under the symbol "PPY".

For more information please visit www.paintedpony.ca.

Neither 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.

Advisory

This news release also contains other industry benchmarks and terms, such as working capital (calculated as current assets less current liabilities), funds flow from operations (calculated by adding to cash flows from operating activities the changes in non-cash working capital and decommissioning expenditures) and field operating netbacks (calculated on a per unit basis as oil, gas and natural gas liquids revenues less royalties and transportation and operating costs), which are not recognized measures under IFRS. These measures are commonly utilized in the oil and gas industry and are considered informative for management and stakeholders. Painted Pony's method of calculating field operating netbacks may not be comparable to that used by other companies. Field operating netbacks should not be viewed as an alternative to cash flow from operations or other measures of financial performance calculated in accordance with IFRS. Per unit field operating netbacks reflect revenues less royalties, transportation and operating costs divided by production for the period. Painted Pony's method of calculating field operating netbacks may not be comparable to the method used by other companies.

Special Note Regarding Forward-Looking Information

This news release contains certain forward-looking statements, which are based on numerous assumptions including but not limited to: (i) drilling success; (ii) production; (iii) future capital expenditures; and (iv) cash flows from operating activities. In addition, and without limiting the generality of the foregoing, the key assumptions underlying the forward-looking statements contained herein include the following: (i) commodity prices will be volatile, and natural gas prices will remain low, throughout 2013; (ii) capital, undeveloped lands and skilled personnel will continue to be available at the level Painted Pony has enjoyed to date; (iii) Painted Pony will be able to obtain equipment in a timely manner to carry out exploration, development and exploitation activities; (iv) production rates in 2013 are expected to show growth from 2012; (v) Painted Pony will have sufficient financial resources with which to conduct the proposed capital program; (vi) Painted Pony's timing estimates for completion and bringing wells onto production will prove correct and (vii) the current tax and regulatory regime will remain substantially unchanged. The reader is cautioned that certain or all of the forgoing assumptions may prove to be incorrect.

Certain information regarding Painted Pony set forth in this news release, including its future plans and operations, anticipated well results, and the planning and development of certain prospects, may constitute forward-looking statements and forward-looking information (collectively the "forward-looking statements") under applicable securities laws and necessarily involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Painted Pony's control, including without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, volatility of commodity prices, environmental risks, inability to obtain drilling rigs or other services, capital expenditure costs, including drilling, completion and facility costs, unexpected decline rates in wells, wells not performing as expected, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, 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, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, and stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof. Readers are cautioned that the foregoing list of factors is not exhaustive. Painted Pony's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive therefrom. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.

Additional information on these and other factors that could affect Painted Pony's operations and financial results are included in the Company's Management's Discussion and Analysis for the year ended December 31, 2012 and the Company's Annual Information Form for the year ended December 31, 2012 and in reports which are on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) or Painted Pony's website (www.paintedpony.ca).

The forward-looking statements contained in this document are made as at the date of this news release and Painted Pony does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of gas ("mcf") to one barrel of oil ("bbl") (6 mcf:1 bbl) is used as an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. All boe conversions in this news release are derived by converting natural gas to oil in the ratio of six mcf of gas to one barrel of oil. 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 ratio of 6:1 may be misleading as an indication of value.

The well test results disclosed in this news release represent short-term results, which may not necessarily be indicative of long-term well performance or ultimate hydrocarbon recovery therefrom.

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
Painted Pony Petroleum Ltd.
Patrick R. Ward
President & CEO
(403) 475-0440
(403) 238-1487 (FAX)


Painted Pony Petroleum Ltd.
Joan E. Dunne
Vice President, Finance & CFO
(403) 475-0440
(403) 238-1487 (FAX)
www.paintedpony.ca

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