BlackPearl Announces Fourth Quarter and Full Year 2016 Financial and Operating Results and Year-End Reserves and Resources, Work Commences on Phase 2 Thermal Expansion at Onion Lake
(firmenpresse) - CALGARY, ALBERTA -- (Marketwired) -- 02/23/17 -- BlackPearl Resources Inc. ("we", "our", "us", "BlackPearl" or the "Company") (TSX: PXX)(OMX: PXXS) is pleased to announce its financial and operating results for the three and twelve months ended December 31, 2016, the results of its 2016 year-end oil and gas reserves and resource evaluations and the commencement of construction of the Phase 2 thermal expansion at Onion Lake.
Highlights and accomplishments included:
John Festival, President of BlackPearl, commented that "The past two years have been very difficult due to low oil prices; however, we did more than just shut in production, cut costs and survive. We have managed the construction and start-up of a best in class thermal project at Onion Lake which has paved the way for additional phases. We have also been able to enter 2017 with no debt and the financial capacity to fund phase 2 of our Onion Lake thermal project. Building a successful thermal project was the result of learning from our pilots, careful project management and teaming up with experienced vendors. Surviving difficult financial circumstances was the result of discipline both in our hedging program and in our capital allocation. We intend to employ both these characteristics as prices improve as we continue to grow and build in our core areas. In 2017, we will allocate capital to drilling primary wells and bringing on shut in production, but most importantly, our focus will be on our 6,000 barrel per day phase 2 expansion at Onion Lake. We have signed a contract to build the facilities for phase 2 and expect to announce the remaining debt instruments shortly that are necessary to fully fund our capital program. We anticipate funding the remainder of the project with no additional equity dilution to shareholders. Long life, low decline production will be the bedrock of our company as we look to the future, which will include the funding and construction of our Blackrod oil sands project. In addition, 2016 was a significant milestone for Blackrod as we received regulatory and environmental approval for an 80,000 bbl/d commercial development."
Financial and Operating Highlights
FOURTH QUARTER 2016 ACTIVITIES
Oil and natural gas sales increased 56% in the fourth quarter of 2016 to $35.4 million from $22.6 million in the same period in 2015. The increase in oil and gas sales is attributable to a 41% increase in average sales price received in the fourth quarter of 2016 and a 10% increase in production volumes (on a boe basis). WTI oil prices averaged US$49.29 per barrel in Q4 2016 compared to US$42.18 per barrel in Q4 2015. Higher WTI oil prices combined with comparable heavy oil differentials and a weaker Canadian dollar relative to the US dollar resulted in our wellhead price averaging $38.83 per barrel in the fourth quarter of 2016 compared with $27.65 per barrel in the fourth quarter of 2015.
BlackPearl sold an average of 10,479 boe/day during the fourth quarter of 2016 compared with 9,521 boe/day during the fourth quarter of 2015. Higher production in the fourth quarter of 2016 primarily reflects an increase in production from our Onion Lake thermal project. During the fourth quarter the thermal project produced 6,119 barrels of oil per day.
Production costs were $11.1 million or $12.11 per boe in the fourth quarter of 2016 compared to $14.7 million or $17.77 per boe in the fourth quarter of 2015. The decrease in per unit operating costs is mainly attributable to lower costs related to our Onion Lake thermal project. General and administrative expenses were $1.6 million in the fourth quarter of 2016 compared to $1.8 million in the fourth quarter of 2015.
During the fourth quarter, the Company sold a gross overriding royalty interest on its Onion Lake property for cash proceeds of $55 million whereby the Company will pay an approximate 1.75% royalty on production from substantially all of its Onion Lake lands.
During the year debt was reduced from $88 million to nil at the end of 2016. The Company used a significant portion of its cash flow and the proceeds from the royalty sale to reduce its debt in 2016.
Funds flow from operations in the fourth quarter of 2016 was $15.8 million compared to $10.9 million in the fourth quarter of 2015. The increase reflects higher revenues in Q4 2016, partially offset by lower realized gains on risk management contracts. Net loss in the fourth quarter of 2016 was $2.2 million compared to a net loss of $31.2 million in the fourth quarter of 2015. The decrease in net loss in Q4 2016 is primarily a result of no impairment losses recognized during 2016 compared to an impairment charge of $33 million recorded in 2015.
Capital spending was $6.2 million during the quarter compared with $1.7 million in Q4 2015.
Production
BlackPearl''s Q4 2016 oil and gas sales volumes were 10,479 boe per day, a 10% increase over production during the same period in 2015. The increase in fourth quarter production is attributable to the Onion Lake thermal project.
Operating Netback
Hedging Position
Periodically we will enter into risk management contracts in order to ensure a certain level of cash flow to fund planned capital projects. The table below summarizes the Company''s current risk management contracts:
2017 Outlook - Initial Guidance
Capital spending in 2017 will be approximately $200 million, with expansion of the Onion Lake thermal project our main focus. We have begun preliminary spending on planning and long lead items for the project with a target completion date of mid-2018. In addition to the expansion of the Onion Lake thermal project, we also plan to resume drilling on some of our conventional heavy oil projects at John Lake, Onion Lake and other minor project areas, as well as continuing to operate the Blackrod SAGD pilot.
We are planning to fund a significant portion of the capital costs of the Onion Lake expansion with our funds flow from operations, which we are budgeting to be between $65 and $70 million in 2017, and our undrawn credit facilities. We are looking to supplement these sources with $75 to $100 million of additional term debt financing to provide us with financial flexibility during the construction phase. In the event that we are unable to obtain additional financing we will reduce capital spending on our conventional heavy oil projects. Year-end debt is expected to be between $135 and $140 million.
Oil and gas production is expected to average between 10,000 and 11,000 boe/d in 2017. This will include bringing back some of our shut-in production at Onion Lake as well as reactivating phase one of the ASP flood at Mooney.
The initial guidance is based on a WTI oil price of US$54.50/bbl, a heavy oil differential of US$14.75/bbl and a Cdn/US dollar exchange rate of 0.75.
Oil and Gas Reserves
The following tables summarize certain information contained in the independent reserves report prepared by Sproule Unconventional Limited ("Sproule") as of December 31, 2016. The report was prepared in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Additional reserve information as required under NI 51-101 has been included in the Company''s Annual Information Form which has been filed on SEDAR. It should not be assumed that the net present value of reserves estimated by Sproule represents the fair market value of these reserves.
Summary of Oil and Gas Reserves
Notes:
(1) BOEs may be misleading, particularly if used in isolation. In accordance with NI 51-101, 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) Columns may not add due to rounding.
Net Present Value of Reserves
Notes:
(1) Based on Sproule''s December 31, 2016 forecast prices.
(2) Columns may not add due to rounding.
Estimated Future Development Capital
The following table summarizes the future development capital ("FDC") Sproule estimates is required to bring total proved and total proved plus probable reserves on production.
Reconciliation of Changes in Reserves
The following table summarizes the changes in Sproule''s evaluation of the Company''s share of oil and natural gas reserves (before royalties) from December 31, 2015 to December 31, 2016.
Note:
(1) Columns may not add due to rounding
The pricing assumptions used in the Sproule evaluation are summarized below.
Pricing Assumptions
Notes:
(1) The pricing assumptions were provided by Sproule.
(2) None of the Company''s future production is subject to a fixed or contractually committed price.
Definitions:
Contingent Resources
The following tables summarize certain information contained in the contingent resource evaluations prepared by Sproule as of December 31, 2016. The reports were independently prepared in accordance with definitions, standards and procedures contained in the COGE Handbook.
It should not be assumed that the estimates of recovery, production, and net revenue presented in the tables below represent the fair market value of the Company''s contingent resources. There are certain contingencies which currently prevent the classification of these contingent resources as reserves. Information on these contingencies is provided in the footnotes to the tables below. There is no certainty that it will be commercially viable to produce any portion of the contingent resources. Please refer to our Annual Information Form for a more detailed discussion of our contingent resources.
An estimate of risked net present value of contingent resources is preliminary in nature and is provided to assist the reader in reaching an opinion on the merit and likelihood of the Company proceeding with the required investment. It includes contingent resources that are considered too uncertain with respect to the chance of development to be classified as reserves. There is uncertainty that the risked net present value of future net revenue will be realized.
Summary of Best Estimate (P50) Contingent Resource Volumes - By Property (1)(2)
NPV of Best Estimate (P50) Contingent Resource Volumes - By Property
Notes:
Other
The Company''s financial statements, notes to the financial statements, management''s discussion and analysis and Annual Information Form have been filed on SEDAR () and are available on the Company''s website (). The Annual Information Form includes the Company''s reserves and resource data for the period ended December 31, 2016 as evaluated by Sproule and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. BlackPearl''s annual meeting of shareholders will be held on May 4, 2017 in Calgary, Alberta.
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 historic fact are forward-looking statements. Forward-looking statements are typically identified by such words as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "potential", "targeting", "intend", "could", "might", "should", "believe" or similar words suggesting future events or future performance.
In particular, this release contains forward-looking statements pertaining to the estimated capital costs of between $180 to $185 million to construct phase 2 of the Onion Lake thermal project and the estimated mid-2018 completion date, estimated timing to see the full impact on production of the re-initiation of the ASP flood at Mooney, anticipated debt funding for the Phase 2 thermal expansion at Onion Lake with no additional equity dilution to fund the expansion, estimated volumes and net present values of BlackPearl''s proved and probable reserves and contingent resources and all the information under 2017 Outlook - Initial Guidance.
The forward-looking information is based on, among other things, expectations and assumptions by management regarding its future growth, 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, recoverability of the Company''s reserves and contingent resources, the ability to obtain financing on acceptable terms, availability of skilled labour and drilling and related equipment on a timely and cost efficient basis, general economic and financial market conditions, environment matters 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.
By their nature, forward-looking statements involve numerous known and unknown risks and uncertainties that contribute to the possibility that actual results will differ from those anticipated in the forward looking statements. These risks 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, conditions including receipt of necessary regulatory and stock exchange approvals with respect to 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. Readers are also cautioned that the foregoing list of factors is not exhaustive. 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. 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. Furthermore, the forward-looking statements contained in this release are made as of the date hereof, and the Company 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.
Non-GAAP Measures
Throughout this release, the Company uses terms "funds flow from operations", "operating netback" and "net debt". These terms do not have any standardized meaning as prescribed by GAAP and, therefore, may not be comparable with the calculation of similar measures presented by other issuers.
Funds flow from operations is calculated based on cash flow from operating activities before decommissioning costs incurred and changes in non-cash working capital related to operations. Management utilizes funds flow from operations as a key measure to assess operating performance and the ability of the Company to finance operating activities, capital expenditures and debt repayments. Funds flow from operations is not intended to represent cash flow from operating activities or other measures of financial performance in accordance with GAAP. The following table reconciles non-GAAP measure funds flow from operations to cash flow from operating activities, the nearest GAAP measure.
Operating netback is calculated as oil and gas revenues less royalties, production costs and transportation costs on a dollar basis and divided by total production for the period on a boe basis. Oil and gas revenues exclude the impact of realized gains on risk management contracts. Operating netback is a non-GAAP measure commonly used in the oil and gas industry to assist in measuring operating performance against prior periods on a comparable basis. Our operating netback calculation is consistent with the definition found in the Canadian Oil and Gas Evaluation (COGE) Handbook.
Net debt is calculated as long-term debt plus working capital for the period ended. Working capital consists of cash and cash equivalents, trade and other receivables, inventory, prepaid expenses and deposits, fair value of risk management assets less accounts payable and accrued liabilities, current portion of decommissioning liabilities, deferred consideration and fair value of risk management liabilities. Management utilizes net debt as a key measure to assess the liquidity of the Company.
The information in this release is subject to the disclosure requirements of the Company under the EU Market Abuse Regulation and the Swedish Securities Markets Act. The information was publicly communicated on February 23, 2017 at 3:00 p.m. Mountain Time.
Contacts:
BlackPearl Resources Inc.
John Festival
President and Chief Executive Officer
(403) 215-8313
BlackPearl Resources Inc.
Don Cook
Chief Financial Officer
(403) 215-8313
Robert Eriksson
Investor Relations Sweden
+46 8 545 015 50
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Datum: 23.02.2017 - 16:00 Uhr
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