Painted Pony loses $15.6-million in 2014RE:The reserves blow the cork right off the bottle LOL
Painted Pony loses $15.6-million in 2014 Painted Pony Petroleum Ltd (C:PPY)
Shares Issued 99,526,775
Last Close 3/3/2015 $7.20
Wednesday March 04 2015 - News Release
Mr. Patrick Ward reports
PAINTED PONY ANNOUNCES 2014 FINANCIAL AND OPERATING RESULTS AND INCREASED CAPACITY AT ALTAGAS FACILITY
Painted Pony Petroleum Ltd. has released its 2014 financial and operating results. In addition, Painted Pony is pleased to announce the following updates on growth plans:
- Increased firm capacity at the AltaGas Townsend Facility from 150 MMcf/d to 198 MMcf/d beginning in the second half of 2017;
- The 2015 capital expenditure budget has been reduced to $104 millibon from $295 million, which is expected to result in 2015 average production of approximately 16,000 boe/d, a 21% increase over 2014.
Highlights of 2014 results relative to 2013 include:
- Exited 2014 with working capital of $2.8 million;
- 74% increase in funds flow from operations to $89 million ($0.97 per share);
- 52% increase in average production to 13,192 boe/d (79.2 MMcfe/d);
- 106% increase in average natural gas liquids ("NGL") production to 923 bbl/d;
- 43% increase in British Columbia field operating netbacks to $3.33 per Mcfe;
- 17% reduction in operating costs to $1.27 per Mcfe;
- 20% reduction in general and administrative costs to $0.37 per Mcfe.
EXPANDED PAINTED PONY CAPACITY AT THE ALTAGAS TOWNSEND FACILITY
Painted Pony and AltaGas have agreed that Painted Pony's firm capacity of 150 MMcf/d (with a 135 MMcf/d "take or pay" commitment beginning three months after facility start-up) at the AltaGas Townsend Facility will increase to 198 MMcf/d (180 MMcf/d of which will be "take or pay") 12 months after facility start-up. This increased commitment will allow Painted Pony to utilize 100% of the facility's processing capacity. Expected completion of the AltaGas Townsend Facility has been revised to mid-2016, in time to accommodate Painted Pony's production volumes in the third quarter of 2016. This revised schedule is expected to result in cost savings on both facility construction costs and the processing fees to be paid by Painted Pony when the facility begins processing gas, while also providing flexibility to Painted Pony's drilling and completion plans.
2015 CAPITAL EXPENDITURE PROGRAM
Painted Pony's Board of Directors have approved a revised 2015 budget of $104 million, subject to review on a quarterly basis. This prudent budget has been reduced significantly from the $295 million program announced on December 8, 2014, with the intention of preserving a strong balance sheet during this period of weak commodity prices, taking advantage of continued improvements in well productivity and positioning the Corporation for significant growth upon completion of the AltaGas Townsend Facility in 2016.
During 2015, Painted Pony intends to drill 14 (14.0 net) and complete 11 (11.0 net) Montney horizontal natural gas wells in the Blair and Townsend areas. Included in this are 8 (8.0 net) wells that are pre-drills for the Townsend area and will not be brought on production until 2016. Due to improved well productivity, only 6 (6.0 net) wells are required to be drilled in order to keep the Corporation's recently expanded processing capacity full and deliver 21% production growth to 16,000 boe/d for 2015, including 1,100 bbl/d of NGL. Current production is in excess of 16,000 boe/d, including volumes being processed at the recently completed Painted Pony owned facility at West Blair and expanded 50% owned facility at Daiber.
Painted Pony is taking steps to reduce costs during this period of low commodity prices. Each of Painted Pony's executive officers has voluntarily taken a 12% reduction in their salary and the Board of Directors has determined to reduce their annual retainer by the same percentage.
As well, Painted Pony has asked each of its suppliers and service providers to reduce their rates, working with the Corporation to reduce capital and operating costs. Together with the revised drilling schedule, deferring some drilling and completion of wells to later in 2015 and into 2016, the Corporation plans to meet its operational objectives while realizing average savings of over 10% on operating and capital costs.
Hedging
The Corporation has a risk management program that aims to reduce the impact of commodity price volatility with hedges in place through the first quarter of 2017. In the first quarter of 2015 the Corporation has hedged 37.9 MMcf/d of natural gas at an average AECO price of $3.58/Mcf. For the remainder of 2015, the Corporation has hedged 37.9 MMcf/d of natural gas at an average AECO price of $3.14/Mcf. From January 1, 2016 to March 31, 2017, the Corporation has hedged 19.0 MMcf/d at an average AECO price of $3.05/Mcf.
2014 FINANCIAL & OPERATING RESULTS
Production
Average production volumes for 2014 reached 13,192 boe/d (89% natural gas), representing an increase of 52% over 2013 average production of 8,693 boe/d (82% natural gas). Production averaged 13,665 boe/d in the fourth quarter of 2014, weighted 93% to natural gas and representing an increase of 47% over the fourth quarter of 2013. Average NGL production for 2014 was 923 bbl/d, up 106% over 2013 production of 449 bbl/d.
Funds Flow from Operations
During 2014, Painted Pony generated funds flow from operations of $89 million, which represents a 74% increase over 2013. On a per share basis, Painted Pony generated funds flow from operations of $0.97 per share, an increase of 67% over 2013 results of $0.58 per share.
Operating Costs and Netbacks
Painted Pony improved its operating costs on a per boe basis in 2014 to $1.27 per Mcfe ($7.64 per boe), a 17% reduction from 2013. Painted Pony realized total field operating netbacks of $3.56 per Mcfe for 2014, a 13% improvement over 2013 netbacks of $3.15 per Mcfe. In British Columbia field operating netbacks of $3.33 per Mcfe for 2014 were up 43% over 2013 netbacks of $2.33 per Mcfe. This increase was due to higher realized prices, lower operating costs, improved well productivity and increased focus on the liquids rich Townsend area.
General and Administrative Costs
Painted Pony improved its general and administrative ("G&A") costs on a per boe basis in 2014 to $0.37 per Mcfe ($2.19 per boe), a 20% improvement over 2013.
Net Loss
The 2014 net loss of $15.6 million was primarily due to a $43.4 million loss on disposition of the Corporation's Saskatchewan assets.
Capital Expenditures
Capital expenditures for 2014 totaled $271 million focused on drilling & completions, facility construction and land acquisition in the Montney.
Facilities and equipment expenditures in 2014 totaled $45 million, resulting in construction of the 25 MMcf/d gas dehydration and condensate stabilization facility in the Townsend area, construction of the 25 MMcf/day natural gas compression and dehydration facility in the West Blair area, and expansion of the 50% working interest dry gas facility in the Daiber area from 25 MMcf/d to 50 MMcf/d. When combined with 40 MMcf/d of firm capacity at the AltaGas plant in the Blair area, this provides Painted Pony with 115 MMcf/d of gas processing capacity in the Montney. These facilities are all now fully operational and are having a positive impact on production in 2015.
The purchase of 14.5 sections of prospective Montney land in British Columbia for $67 million increased the Corporation's acreage in the liquids rich Townsend area by 50%. The acquired land is expected to add over 170 liquids-rich drilling locations within three prospective intervals of the Montney. The average reservoir thickness at Townsend is approximately 340 metres (1,100 feet) and the liquids yields are substantially higher than regional averages. Management believes the new acreage exhibits the same over-pressured geological characteristics as the Corporation's existing Townsend block, which could enhance both well productivity and reserves. Wells are expected to yield similar liquids recovery of 40 to 80 bbls/MMcf of condensate, propane and butane (C3+).
Technology and Well Performance
The drilling of 21 (19.5 net) and completion of 19 (17.5 net) Montney natural gas wells was accomplished at a cost of $143 million. All of the wells completed in 2014 utilized an open-hole, multi-stage ("OHMS") system. Painted Pony was an industry leader in completing Montney wells using this technology in our area, as well as moving to parallel-pair drilling and completions, including the recently completed first parallel-triple. More recently the Corporation has completed wells with shorter stage lengths and increased tonnage. Although at varying stages of implementation, all of these initiatives have delivered strong improvements in well productivity and recoveries, resulting in the highest average peak month gas rate of any Montney operator during the past three years. As a result of these improvements in well productivity, fewer wells and less capital will be required to deliver on the significant growth in the Corporation's five year plan.
Financial Position
Painted Pony had working capital of $2.8 million and undrawn credit facilities of $175 million at December 31, 2014, leaving the Corporation well positioned to execute on its development plans.
Financial and Operating Highlights
Year ended December 31, 2014 2013 Change Financial ($ millions, except per share and shares outstanding) Petroleum and natural gas revenue(1) 160.5 103.1 56% Funds flow from operations(2) 88.9 51.2 74% Per share - basic(3) and diluted(4) 0.97 0.58 67% Net loss (15.6) (5.7) 174% Per share - basic(3) and diluted(4) (0.17) (0.06) 183% Operational Daily production volumes Natural gas (Mcf/d) 70,593 42,853 65% Natural gas liquids (bbls/d) 923 449 106% Crude oil (bbls/d) 503 1,102 (54)% Total (boe/d) 13,192 8,693 52% Total (Mcfe/d) 79,152 52,158 52% Realized prices Natural gas ($/Mcf) 4.48 3.45 30% Natural gas liquids ($/bbl) 75.39 62.54 21% Crude oil ($/bbl) 102.34 93.02 10% Total ($/boe) 33.34 32.49 3% Total ($/Mcfe) 5.56 5.42 3% Field operating netbacks(6) British Columbia ($/boe) 19.99 13.96 43% Saskatchewan ($/boe)(7) 52.36 48.72 7% Total ($/boe) 21.34 18.88 13% Total ($/Mcfe) 3.56 3.15 13%
The full 2014 report, containing the audited financial statements for 2014 and the related Management's Discussion and Analysis will be available on SEDAR at www.sedar.com and on Painted Pony's website at www.paintedpony.ca.
© 2015 Canjex Publishing Ltd.
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