BlackPearl Resources Inc. BLKPF

4th Q and year end

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All good new to me. 

February 23, 2017

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

 

CALGARY, ALBERTA--(Marketwired - Feb. 23, 2017) - 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:

• Onion Lake is the cornerstone of the Company's current oil production. The first phase of thermal development reached and exceeded its design capacity of 6,000 barrels of oil per day (bbl/d) during the year with operating costs under $10/bbl. During Q4 2016, production from the project averaged 6,119 bbl/d. Our Board has sanctioned development of the 6,000 bbl/d Phase 2 expansion of the project and we have commenced construction. In addition, we have entered into a fixed price agreement to fabricate the central processing facilities and pad facilities for Phase 2. Total estimated capital costs for the project are between $180 and $185 million and the project is expected to be completed in mid-2018.

• During 2016, oil and gas production averaged 10,077 boe/day; a 21% increase compared to 2015 and higher than full year guidance for the year. The increase reflects the ramp-up of production from the Onion Lake thermal project during the year. Q4 2016 oil and gas production averaged 10,479 boe/day.

• During the year debt was reduced from $88 million to nil; the Company used its cash flow and proceeds from the sale of a royalty interest on our Onion Lake property to eliminate debt by year-end.

• At Blackrod, in 2016, we received regulatory approval for an 80,000 bbl/d SAGD development and the results from our successful pilot continue to support the commerciality of this large resource. In 2016, the pilot produced an average of 556 bbl/d, and cumulatively, has produced in excess of 460,000 barrels of oil.

• At Mooney, we were relatively quiet in 2016 as we shut-in a majority of the ASP flood due to low oil prices. However, as a result of the recent improvement in oil prices we re-initiated phase1 of the ASP flood. It will likely take six to twelve months before we see the full impact on production volumes from the re-start.

• During the fourth quarter of 2016, the Company sold a gross overriding royalty interest on its Onion Lake property for cash proceeds of $55 million whereby the Company will pay approximately 1.75% royalty on production from substantially all of its Onion Lake lands.

• Operating costs, on a per barrel of oil basis, dropped 38% in 2016 from 2015, which reflects the success of the Onion Lake thermal project as well as cost cutting measures implemented in our other producing areas.

• Q4 2016 revenue was $35 million and funds flow from operations (a non-GAAP measure) was $16 million, up from Q4 2015 as a result of higher oil prices. For the year, oil and gas revenue was $109 million and funds flow from operations was $45 million.

• Capital expenditures were $11 million in 2016 compared to $69 million in 2015. Reduced capital spending reflects lower oil prices and our desire to maintain a strong balance sheet.

• Proven plus probable reserves increased 6% in 2016 to 312 million barrels. The increase represents a 377% replacement of 2016 production. The increase is predominantly due to technical revisions and extensions in our Onion Lake area assets.

• Risked contingent resources (best estimate) for our three core properties totaled 499 million barrels of oil equivalent, comparable to 2015 resource estimates.

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."