TSX Venture Exchange: PRY
CALGARY, Nov. 27, 2013 /CNW/ - Pinecrest Energy Inc. ("Pinecrest" or the
"Company") announces that it has filed on SEDAR its unaudited financial
statements and related Management's Discussion and Analysis ("MD&A")
for the three and nine months ended September 30, 2013. The statements
will be available for review at www.sedar.com or www.pinecrestenergy.com.
THIRD QUARTER 2013 HIGHLIGHTS
The following update highlights operational matters undertaken by
Pinecrest during the three months ended September 30, 2013:
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Completed field operations and injection well conversions on its third
(Evi Project #3) and fourth (Red Earth Project #1) operated waterflood
schemes, and commenced injection on both these schemes in late July.
Subsequent to September 30, the Company initiated injection on three
additional waterflood schemes in the Otter area, bringing the active
waterflood count to eight, comprising more than one third of total
corporate production;
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Drilled 3 gross (3.0 net) wells achieving a 100% success rate:
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Average production of 2,804 boe per day (97% light oil & NGLs). The
Company's production for the quarter was adversely affected by a major
facility turnaround (required 17 days of downtime; 307 boe per day lost
production over the quarter) and by the conversion of seven producing
oil wells to water injection (approximately 260 boe per day lost
production over the quarter);
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Top quartile field netback of $60.54 per boe;
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Observed a production response at its Evi Project #3 (November oil
production is up approximately 60% over June's production based upon
field estimates); and
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Average cost to drill, complete, and equip a well of $3.4 million.
Pinecrest has been continuously refining its well design and has most
recently achieved a cost savings of approximately $2.3 million per well
as compared to the first half of 2012.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
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September 30
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Three months ended
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Nine months ended
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2013
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2012
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2013
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2012
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FINANCIAL
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Petroleum and natural gas sales
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25,921
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21,006
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89,323
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71,623
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Funds flow from operations, before realized derivative
financial instrument gains or losses (1)
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13,574
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14,068
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53,069
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50,307
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Funds flow from operations (1)
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9,582
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14,975
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47,336
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51,116
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Per share - basic
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$0.04
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$0.07
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$0.22
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$0.24
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Per share - diluted
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$0.04
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$0.06
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$0.21
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$0.21
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Net income (loss)
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(843)
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4,578
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7,069
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19,602
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Per share - basic
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$0.00
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$0.02
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$0.03
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$0.09
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Per share - diluted
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$0.00
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$0.02
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$0.03
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$0.08
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Capital expenditures
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23,886
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56,979
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79,761
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132,480
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Net debt and working capital deficit (2)
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(128,617)
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(51,489)
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(128,617)
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(51,489)
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Common Shares Outstanding
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Weighted average - basic
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217,375
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214,289
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215,730
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209,197
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Weighted average - diluted
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217,375
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239,594
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228,203
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237,984
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OPERATING
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Number of days
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92
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92
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273
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274
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Production
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Crude oil (bbls/d)
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2,674
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2,730
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3,457
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3,002
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Natural gas (mcf/d)
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463
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65
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433
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51
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NGL (bbls/d)
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53
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7
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43
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7
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Barrels of oil equivalent (boe/d-6:1)
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2,804
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2,748
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3,572
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3,018
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Average realized price (3)
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Crude oil ($/bbl)
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103.90
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83.50
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93.66
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86.91
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Natural gas ($/mcf)
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2.52
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1.98
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2.97
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1.86
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NGL ($/bbl)
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51.54
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35.09
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48.91
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52.10
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Netback per boe ($)(1)
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Petroleum and natural gas sales
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100.46
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83.09
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91.59
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86.61
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Royalties
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(10.86)
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(6.67)
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(7.78)
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(6.67)
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Production and transportation expenses
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(29.06)
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(15.68)
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(22.74)
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(14.80)
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Field netback
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60.54
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60.74
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61.07
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65.14
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Realized gain (loss) on derivative financial instruments
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(15.46)
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3.59
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(5.88)
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0.98
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Operating netback
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45.08
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64.33
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55.19
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66.12
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Wells drilled
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Gross
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3.0
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13.0
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15.0
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23.0
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Net
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3.0
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12.8
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14.3
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22.5
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Success rate (%)
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100
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100
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100
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100
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(1)
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Non-GAAP measure
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(2)
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Net debt and working capital if defined as current assets minus current
liabilities, plus outstanding debt, excluding derivative financial
instruments
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(3)
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Before the effects of derivative financial instruments
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WATERFLOOD UPDATE
During 2013, the Company has continued to focus its efforts on
establishing a sustainable and predictable low decline light oil
production base through the implementation of seven operated waterflood
projects. During the quarter, seven wells producing approximately 260
barrels per day of oil were shut in and converted to water injectors
for the Otter Projects #1, #2 and #3. These three projects are more
than double the size of the initial four schemes and are forecast to
provide a meaningful impact to the Company's production profile.
Production response on these new projects is anticipated in Q1 2014.
Pinecrest currently has over one third of its production being pressure
maintained by waterflooding and as reservoir pressures rise and volumes
increase as projected, this production base is expected to grow to
approximately fifty percent of corporate production by early Q2 2014.
The Company continues to see encouraging results from the four
previously announced operated waterflood schemes, Evi Project #2
(December 2012), Loon Project #1 (March 2013), Evi Project #3 (July
2013) and Red Earth Project #1 (July 2013). Response times and
production increases for these schemes are within Company expectations.
Wells in areas downspaced to eight wells per section have been the
first to experience the effect of re-pressurization, resulting in
quicker production increases than those spaced at four wells per
section. The Company anticipates further gains in production rates
from these and future Pinecrest operated schemes in the Greater Red
Earth area. Pinecrest's active waterflood count is now comprised of
eight projects and the Company has applied for an additional four
schemes for implementation in 2014.
All schemes have been on continuous injection since start-up with
voidage replacement ratios (VRR) monitored and adjusted continuously as
fluid production from the schemes steadily increases. Excluding the
August battery turnaround, offsetting producing wells in all schemes
have been on continuous production with the exception of Evi Project
#2, in which a routine bottomhole pump failure occurred during breakup
causing the offsetting producing well to be down for 27 days which also
necessitated an injection rate reduction.
The following chart shows the shallowing impact of pressure maintenance
on the Company's waterflood production profile for the period September
2012 to October 2013. Additionally, the Company anticipates this
production to increase as the balance of the 2013 waterfloods respond.
OPERATIONS UPDATE
Wet weather delayed the implementation of the Company's third quarter
capital program and caused an increase in unscheduled downtime due to
difficult field conditions. During the third quarter, the Company
drilled three wells and completed two of these wells. The average cost
to drill, complete and equip the wells drilled in the quarter was $3.4
million per well, a $2.3 million per well savings as compared to the
first half of 2012.
Operating costs were also negatively impacted by the operating
conditions (lease repair and road maintenance). Additionally, the
initial start-up phase of the waterflood schemes caused an increase in
operating costs. Initially, water and power for the injection
facilities is supplied via temporary means. Water is trucked to each
site and power is supplied using rental generators and diesel fuel.
Pinecrest has completed the field electrification at the Red Earth and
Loon fields which will reduce costs. Injection water is now being
delivered by pipeline to all but one of the Company's injection
schemes, eliminating significant trucking costs. In addition, costs
associated with emulsion trucking have been reduced as the majority of
the wells have now been tied into central production facilities.
The Company expects that these initiatives and others currently being
implemented will have a positive impact on lowering the Company's
overall operating costs.
For the balance of 2013, Pinecrest is targeting total operating expenses
(production and transportation costs) of approximately $23.00 per boe.
The implementation of all of Pinecrest's operating cost initiatives
will not be fully realized until Q1 2014.
Current production is approximately 2,650 boed, with approximately 350
boed shut in due to field conditions. For the balance of the year the
company expects to invest minimal capital as it awaits the response of
its waterfloods.
OUTLOOK - GREATER RED EARTH AREA, ALBERTA
Pinecrest commenced operations in early 2011 with a minimal production
base and has organically grown the Company, almost exclusively, through
the drill bit by way of an aggressive capital program focused on the
large oil in place Slave Point formation in the Greater Red Earth
area. As a result, the corporate decline rate has, at times, mimicked
that of a horizontal Slave Point oil well. On average, a Slave Point
horizontal oil well will experience a first year natural decline of
approximately 65% to 70%, which is typical for all tight oil
reservoirs. With the licensing and implementation of the seven
operated waterfloods, the Company has now transitioned from a high
decline production base dominated by newly drilled horizontal wells to
a more stable, lower decline asset base. Pinecrest entered 2013 with
an estimated annualized monthly decline rate of approximately 55%
compared to an estimated current decline rate of 32%. It is expected
that this overall decline rate will continue to abate as the full
effect and benefit of the Company's waterflood initiatives occurs over
the coming months.
This reduction in corporate decline rates combined with improving
capital efficiencies and a focus on operating cost reductions, is
projected to grow production while spending significantly less capital
in the upcoming years. With the anticipated response of the remaining
four operated 2013 waterfloods, the Company expects to generate cash
flow in excess of capital requirements in 2014.
Advisory
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 2013 business
objectives, Pinecrest's 2013 budget, oil recovery rates, the effects of
waterfloods on recovery factors, the potential success of waterfloods
in the Slave Point area, decline rates and type curves for wells,
production rates, effect of operations initiatives, timing for
implementation of operating cost initiatives, 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; regulatory approvals and
permits; 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.
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
GAAP 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" and "operating netback" are not
recognized measures under the applicable GAAP. 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 GAAP,
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.
Image with caption: "Pinecrest Energy Inc. Total Waterflood Performance (CNW Group/Pinecrest Energy Inc.)". Image available at: http://photos.newswire.ca/images/download/20131127_C5698_PHOTO_EN_33983.jpg