/NOT FOR DISTRIBUTION IN THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, May 15, 2012 /CNW/ - Palliser Oil & Gas Corporation ("Palliser" or the "Company") (TSXV: PXL) is pleased to report the financial and operating results for the three months ended March 31, 2012. Certain selected financial and operational information are set out below and should be read in conjunction with Palliser's interim financial statements complete with the notes to the financial statements and related MD&A which is available at www.sedar.com and the Company's website at www.palliserogc.com.
|Three months ended March 31|
|Wells drilled, re-entered or reactivated (gross and net)|
|Salt water disposal||1||-||100%|
|Undeveloped land Greater Lloydminster (net acres)||19,618||13,625||44%|
|Undeveloped land Medicine Hat (net acres)||29,042||31,769||-9%|
|Total undeveloped land (net acres)||48,660||45,394||7%|
|Average daily production|
|Crude oil (bbl per day)||1,743||1,147||52%|
|Natural gas (Mcf per day)||376||317||19%|
|Barrels of oil equivalent (boe per day, 6:1)||1,806||1,200||51%|
|Crude oil production (%)||97%||96%||1%|
|Average sales prices|
|Crude oil ($ per bbl)||$||70.93||$||60.57||17%|
|Natural gas ($ per Mcf)||$||2.15||$||3.31||-35%|
|Barrels of oil equivalent ($ per boe, 6:1)||$||68.94||$||58.78||17%|
|Operating netback ($ per boe)|
|Petroleum and natural gas revenue||$||68.94||$||58.78||17%|
|Realized loss on financial derivatives||$||2.31||$||-||-|
|Production & operating expenses||$||26.52||$||30.72||-14%|
|Operating netback (1)||$||23.93||$||14.10||70%|
|Financial ($000's except per share amounts)|
|Three months ended March 31|
|Oil and natural gas revenue||$||11,329||$||6,350||78%|
|Funds flow from|
|operating activities (2)||$||2,701||$||156||1631%|
|Per share - basic and diluted||$||0.05||$||-||-|
|Gain (loss) and comprehensive gain (loss)||$||600||$||(1,245)||-148%|
|Per share - basic and diluted||$||0.01||$||(0.03)||133%|
|Capital expenditures (3)||$||9,106||$||18,536||-51%|
|Working capital (net debt) (4)||$||(27,269)||$||(8,600)||217%|
(1) Operating netback is a non-IFRS measure and is the net of petroleum and natural gas sales, realized gain or loss on financial derivatives, royalties and production & operating expenses.
(2) Funds flow from operating activities is a non-IFRS measure that represents loss and comprehensive loss before non-cash items such as depletion, depreciation, and amortization, accretion expense, share-based compensation, deferred tax and decommissioning liability. Per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net loss per share. Funds flow from operating activities is a key measure as it demonstrates the Company's ability to generate the funds necessary to achieve future growth through capital investment. This table also contains other industry benchmarks and terms, such as working capital (calculated as current assets less current liabilities) and operating netbacks (calculated on a per unit basis as production sales less royalties, transportation and operating costs), which are not recognized measures under IFRS. Management believes these are useful supplemental measures of, firstly, the total net position of current assets and current liabilities of the Company and secondly, the profitability relative to commodity prices. Other entities may calculate these figures differently than Palliser.
(3) Capital expenditures exclude decommissioning liability costs and capitalized share-based compensation.
(4) Working capital (net debt) is a non-IFRS measure representing the
total bank loan, accounts payable and accrued liabilities, less
accounts receivable, deposits and prepaid expenses.
Report to Shareholders
Palliser Oil & Gas Corporation ("Palliser" or the "Company") is pleased to report to shareholders on the Company's activities in the first quarter of 2012.
First Quarter 2012 Operational Highlights
- Achieved 12 consecutive quarters of production growth;
- Average production of 1,806 boe/d in Q1 2012 was 51% higher than Q1 2011 average production of 1,200 boe/d and 9% higher than Q4 2011 average production of 1,657 boe/d;
- Grew funds flow from operating activities by 1631% to $2.7 million in Q1 of 2012 from $0.2 million in Q1 2011;
- Recorded a profit of $0.6 million as compared to a loss of $1.2 million for Q1 2011;
- Executed a $9.1 million capital program, which included drilling and re-activating three wells; building one salt water disposal facility; converting two non-producing wells to salt water disposal wells and tying-in nine wells to Company owned salt water disposal infrastructure;
- Reduced operating costs in Q1 2012 to $26.52/boe from $30.72/boe in Q1 2011 and $29.42/boe in Q4 2011;
- Increased operating netbacks 70% year over year from $14.10/boe in Q1 2011 to $23.93/boe in Q1 2012;
- Increased the Company's prospect inventory to 151 drilling, re-entry and reactivation locations at the end of the first quarter;
- Acquired 17 wellbores with reactivation potential; and
- Expanded the Company's undeveloped heavy oil land position to 19,618 net acres in Q1 2012, an 8% increase from 18,239 net acres in Q4 2011.
Palliser achieved record production of 1,806 boe/d during the first quarter of 2012, representing 12 consecutive quarters of production growth. Capital expenditures amounted to $9.1 million of the $30 million capital budget for 2012, with capital spending in the first quarter focused largely on salt water disposal infrastructure. Operating costs continue to trend lower, with first quarter 2012 operating costs of $26.52/boe as compared to $29.42 in the fourth quarter 2011. We converted two non-producing wells to salt water disposal, built one salt water disposal facility and tied in nine producing wells.
At Edam, one new salt water disposal well was tied into a recently commissioned salt water disposal facility, resulting in a doubling of the disposal capacity of this Palliser operated facility and allowing six producing wells to be tied in. At Lloyd, we built a new salt water disposal facility, added one salt water disposal well and pipelined three wells into that facility. During the first quarter, the Company reactivated one heavy oil well and drilled two step-out wells, which resulted in one heavy oil well. The other well was cased for salt water disposal, in an area where there is an immediate requirement. In the greater Lloydminster area, we acquired 17 mostly fully equipped, non-producing wellbores, with reactivation potential.
The focus in the first quarter was on expansion of our salt water disposal infrastructure. As of April, 2012, Palliser's high water rate wells are now all tied in directly to Palliser operated salt water facilities. Palliser has a total of six salt water disposal facilities and eight salt water disposal wells, with 30 heavy oil wells tied in to these facilities. This is a fundamental change from 2011 which puts us in a very strong position from the perspective of both production and operating costs for 2012 and beyond. The Company has entered into a new phase of development, with the deployment of the high volume lift 'POD' concept whereby new wells will commence production via pipeline into a Palliser owned facility, eliminating the cost associated with salt water trucking and disposal. Because a significant amount of infrastructure was added through the first quarter, the full impact of these facilities won't be realized until the second quarter of 2012, at which point, we expect operating costs to be below $25/boe. We anticipate further reductions through 2012, resulting in average operating costs of approximately $23/boe for the year.
As we tied in existing producing wells to the salt water disposal facilities during the first quarter, production from numerous wells was temporarily shut in while field modifications were performed. A strategic choice was made to focus on installing this infrastructure even though it meant the short term curtailment of production. Some of the wells were shut in for longer than anticipated, resulting in more downtime that originally forecasted however, the key infrastructure is now in place and heavy oil production from the affected wells has been increasing towards expected levels. The production gains achieved to date have confirmed our belief that expanded salt water disposal capacity would allow us to pump wells at higher rates, resulting in greater oil production and higher recovery factors. Despite lower production volumes in early 2012, we believe that we are on track to meet previously announced exit production guidance (December 2012 average) of 2,600 - 2,800 boe/d (98% oil weighting), with our average daily production now targeting the lower end of the guidance range of 2,250 - 2,350 boe/d.
To reduce cash flow risk from commodity price volatility, we have hedged approximately half of budgeted 2012 production volumes. In addition, we have entered into hedges for the first and second quarter of 2013, such that the overall hedging program now provides significant price protection to the Company's cash flow stream for more than a year.
Over the past year, we have spent significant capital on infrastructure to reduce operating costs and improve netbacks. Based on our current production and pricing assumptions (and hedges in place), we anticipate a 60% increase in operating netbacks year over year to $30/boe in 2012.
We have increased the number of cold flow heavy oil production (CHOPS) and high volume lift opportunities in our prospect inventory to 151 locations for future growth. We see significant scope to continue to expand our heavy oil operations by taking advantage of the knowledge base we have been developing and apply it to numerous additional pools within the greater Lloydminster area.
At March 31, 2012, Palliser's net debt totalled $27.3 million under a current total credit facility of $38.0 million. The credit facility was reviewed and confirmed by the bank in May 2012. Palliser's Board of Directors has approved a $30.0 million capital program for 2012, funded through existing credit facilities and funds flow from operating activities. Net debt at year-end 2012 is budgeted to be below 1.3 times forward annualized funds flow from operating activities.
As a testament to our efforts and the progress we are making in the development of high volume lift, Palliser's funds flow from operations grew 1631%, from $0.2 million in Q1 2011 to $2.7 million, this year and the Company recorded a first quarter profit of $0.6 million as compared to a loss of $1.2 million in the same period last year
We look forward to significant production growth and increased profitability in 2012 as we continue to focus on heavy oil and further developing the high volume lift production methodology.
On behalf of the Board of Directors,
President and Chief Executive Officer
May 15, 2012
For further information regarding Palliser Oil & Gas Corporation, the reader is invited to visit the Company's website at www.palliserogc.com.
Palliser is a Calgary-based emerging junior oil and gas company currently focused on conventional heavy oil production in the greater Lloydminster area of both Alberta and Saskatchewan.
Certain statements contained herein constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation, including, but not limited to management's assessment of future plans and operations, including: commodity focus; drilling plans and potential locations; expected production levels; development plans; reserves growth; production and operating sales and expenses; reservoir characteristics; the results of applying certain operational development techniques; certain economic factors; and capital expenditures. Forward-looking statements are typically identified by words such as "anticipate", "estimate", "expect", "forecast", "may", "will", "project" and similar words suggesting future events or performance or may be identified by reference to a future date. In addition, statements relating to oil and gas reserves and resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves or resources described, as the case may be, exist in the quantities predicted or estimated and can be profitably produced in the future. With respect to forward-looking statements herein, Palliser has made assumptions regarding, among other things; future capital expenditure levels; future oil and natural gas prices; "differentials" between West Texas Intermediate and Western Canadian Select benchmark pricing; future oil and natural gas production levels; future water disposal capacity; future exchange rates and interest rates; ability to obtain equipment and services in a timely manner to carry out development activities; ability to market oil and natural gas successfully to current and new customers; the impact of increasing competition; the ability to obtain financing on acceptable terms; and the ability to add production and reserves through development and exploitation activities. Although Palliser believes that the expectations reflected in the forward-looking statements contained herein, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included herein, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous risks and uncertainties that contribute to the possibility that the forward-looking statements will not occur, which may cause Palliser's actual performance and financial results in future periods to differ materially from any estimates or projections. Additional information on these and other factors that could affect Palliser's results are included in reports on file with Canadian securities regulatory authorities, including the Company's Annual Information Form, and may be accessed through the SEDAR website at www.sedar.com.
The forward-looking statements contained herein speak only as of the date hereof. Except as expressly required by applicable securities laws, Palliser does not undertake any obligation to, nor does it intend to, publicly update or revise any 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. In addition, readers are cautioned that historical results are not necessarily indicative of future performance.
Production volumes are commonly expressed on a barrel of equivalent ("BOE") basis whereby natural gas volumes are converted at a ratio of six thousand cubic feet to one barrel of oil. The intention is to convert oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. The term BOE may be misleading, particularly if used in isolation. The conversion ratio is based on an energy equivalent method and does not represent an economic value equivalency at the wellhead.
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 Press release.
President and CEO
Allan B. Carswell
Vice President, Exploration and COO
Ivan J. Condic
Vice President, Finance and CFO