CALGARY, ALBERTA -- (Marketwire) -- 02/28/11 -- BlackPearl Resources Inc. ('BlackPearl' or the 'Company') (TSX: PXX)(FIRST NORTH: PXXS) is pleased to announce its financial and operating results for the three and twelve months ended December 31, 2010.
Highlights and accomplishments in 2010 included:
-- At Blackrod, BlackPearl received regulatory approval to proceed with a steam-assisted gravity drainage (SAGD) pilot project. The pilot will allow the Company to confirm operating data before starting commercial development. The SAGD well pair, water source and disposal wells, as well as the observation and monitoring wells have been drilled. Facilities are under construction. Initial steam injection is planned to start in the second quarter of 2011. The Company is also preparing a regulatory application for a 40,000 bbl/day commercial development. The application should be filed in the first quarter of 2012; -- At Onion Lake, the Company drilled 30 successful development wells in 2010. Onion Lake provides the majority of short-term production growth and accounted for 72 percent of total production for the year. In 2011, primary development will continue with plans to drill 100-120 wells during the year. In addition, BlackPearl continues to develop a plan for thermal development on a portion of the Onion Lake lands; -- At Mooney, the Company received regulatory approval for a polymer flood and the facilities for the flood are under construction. Polymer injection is expected to commence in the second quarter of 2011, and production response is anticipated six to twelve months thereafter; -- Strengthened the balance sheet with two equity financings, raising $78 million; -- Sold $42 million of non-core properties; mainly natural gas properties in southern Alberta and heavy oil properties in Saskatchewan; -- Had average oil and natural gas production of 6,951 boe/day in 2010, a 32 percent increase from 2009. This increase was achieved despite selling assets producing approximately 1,000 boe/day during the year. Year-end production increased to 8,000 boe/day; -- Increased oil and natural gas revenues by 59 percent to $143 million and cash flow from operations by 116 percent to $63 million. These increases reflect higher production and higher commodity prices in 2010 over 2009; -- Achieved a continued reduction in operating costs and general and administrative (G&A) expenses, on a per-boe basis. Operating costs were $14.51 per boe, a 6 percent drop from 2009, and G&A costs were $2.68 per boe compared with $3.60 per boe in 2009; and -- Had working capital of $144 million and no long term debt as at December 31, 2010.
John Festival, President of BlackPearl, commented on 2010 activities: 'In 2009 we established a new business plan for the Company. Last year was the start of the execution phase of this business plan, which we foresee accelerating in 2011. In 2010, we passed numerous milestones as we advanced all of our core projects. At Onion Lake, development drilling was slower than anticipated for a number of reasons, but we have a very active 2011 program with over 100 development wells planned. At Blackrod, we acquired the remaining 20 percent of the project from our partners, received regulatory approval for a SAGD pilot, and we expect to have steam in the ground by spring. At Mooney we received approval to initiate a polymer flood, and we should be ready to start water and chemical injection in the second quarter.'
'Another milestone for the Company in 2010 was completion of the contingent resource study for our three core properties,' Festival continued. 'The report estimates that we have 739 million barrels of contingent resource (best estimate), with a peak production potential of 80,000 barrels per day. This report establishes the potential of these core properties for our shareholders. Looking ahead, 2011 will be a very active year for BlackPearl. Capital spending will be near $150 million and we expect to increase exit production rates by 40 percent to 50 percent, in addition to moving our largest project, Blackrod, to the first stage of commercial production.'
FOURTH QUARTER 2010 ACTIVITIES
Production revenues were $38.7 million in the fourth quarter of 2010 compared to $27.7 million in the same quarter 2009, due to a significant increase in production and a small increase in wellhead prices. BlackPearl sold an average of 7,307 boe/day during the fourth quarter of 2010, an increase of 38 percent over the same quarter of 2009. The increased sales volumes are attributable to continued development at Onion Lake.
Crude oil prices increased by 12 percent in the fourth quarter of 2010 from the same quarter of 2009, with WTI oil averaging US$85.10 per barrel in the period. The increase in commodity prices is generally attributable to an increase in world crude oil demand as markets started to recover from the recent worldwide economic downturn, which originally caused a lower demand for commodities. Heavy oil prices, however, remained generally consistent with the fourth quarter of 2009 due to wider heavy oil differentials. The Western Canada Select to WTI price differential averaged US$18.19 per bbl in the fourth quarter of 2010 compared to US$12.30 per bbl in the fourth quarter of 2009. The wider differential was mainly attributable to pipeline disruptions in the U.S. which temporarily affected shipments of heavy oil. The general increase in oil prices offset by a wider differential resulted in an increase in BlackPearl's average wellhead price from $56.69 in the fourth quarter of 2009 to $57.63 in the fourth quarter of 2010.
Royalty rates were comparable quarter over quarter at 25 percent and 24 percent, respectively. Operating and transportation costs increased in the fourth quarter of 2010 due to increased sales volumes, while declining on a per-unit-of-production basis. G&A increased in the fourth quarter of 2010 due to higher staff levels and consulting fees related to the preparation of the contingent resource study in 2010. In addition, administrative costs in 2009 included a large ($1.3 million) recovery adjustment for provision for bad debts, which reduced fourth-quarter 2009 costs. On a per-unit-of-production basis, G&A declined substantially quarter over quarter.
Cash flow from operations and net loss in the fourth quarter of 2010 were $19.4 million and $3.9 million, respectively, compared to $14.7 million and $3.9 million, respectively, in the fourth quarter of 2009. The increased cash flow was due to the increase in production and heavy oil prices.
Capital expenditures in the fourth quarter of 2010 were $38.0 million, 117 percent higher than in the fourth quarter of 2009 and 91 percent higher than in the third quarter of 2010. The increase is a result of the drilling of 19 wells during the fourth quarter of 2010, as well as continued construction of the polymer flood facilities at Mooney and the steam generation and water handling facilities for the Blackrod SAGD pilot project.
------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31, 2010 2009 2010 2009 ------------------------------------------------------------------------- ($ per boe) Oil and natural gas revenue 57.63 56.69 56.31 46.74 Royalties 14.35 13.79 14.50 11.09 Transportation costs 1.03 1.52 1.08 1.81 Operating costs 12.90 14.85 14.51 15.36 ------------------------------------------------------------------------- Netback 29.35 26.53 26.22 18.48
In November 2010, BlackPearl provided an outlook for 2011, which is summarized below. No changes to this guidance are required at the present time.
First quarter 2011 production is expected to be lower than the Company's 2010 exit production rate of 8,000 boe/day as a result of the sale of the Salt Lake properties as at the end of the year, shutting in some production at Mooney to convert wells to polymer injection in anticipation of the start-up of the polymer flood in the second quarter, and shutting in some production at Onion Lake to accommodate pad drilling in some areas. In addition, reduced rig availability during the winter months will result in lower drilling activity at Onion Lake in the first quarter. Reduced first quarter production was anticipated in preparing the guidance information below.
2011 Guidance ------------------------------------------------------------ ------------------------------------------------------------ Production (boe/d) Annual average 9,200 - 9,700 Exit 11,000 - 13,000 Cash flow from operations ($millions) 65 - 70 Capital expenditures ($millions) 130 - 150 Year-end debt - Year-end working capital ($millions) 60 - 70 Pricing Assumptions (annual average) Crude oil - WTI US$80/bbl Light/heavy differential US$16/bbl Cdn$/US$ exchange rate 1.00 ------------------------------------------------------------
BlackPearl expects to exit 2011 with production of 11,000-13,000 boe/day. The relatively wide range in the exit rate target is due to the variability in the timing of initial response from the polymer flood at Mooney, which is expected to take six to 12 months.
In 2011, BlackPearl is planning a $130-$150 million capital expenditure program. The major components of this program are:
-- Onion Lake - $69 million to drill 100-120 wells; -- Blackrod - $22 million to complete construction of and commission the SAGD pilot; and -- Mooney - $43 million to complete construction of and commission the polymer flood.
This activity will be completely funded from existing working capital ($144 million at December 31, 2010) and forecast cash flow of $65-$70 million. No additional financing will be required in 2011; however, in the event that commodity prices drop and cash flows do not reach anticipated levels, the Company will lower its capital spending by reducing the number of wells drilled at Onion Lake to ensure it can remain debt-free.
Financial and Operating Highlights
--------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31, 2010 2009 2010 2009 --------------------------------------------------------------------------- Daily sales volumes (1) Oil (bbls/d) 6,871 4,506 6,375 4,324 Natural gas (mcf/d) 2,614 4,801 3,455 5,582 Combined (boe/d) 7,307 5,306 6,951 5,254 Product pricing Oil ($/bbl) 59.79 61.77 58.86 51.44 Natural gas ($/mcf) 3.59 4.62 4.14 4.10 Combined ($/boe) 57.63 56.69 56.31 46.74 ($000s, except per share amounts) Revenues Oil and natural gas revenue - gross 38,743 27,673 142,867 89,637 Interest and other income 2,154 95 4,027 321 Expenses Royalties 9,649 6,731 36,798 21,262 Transportation costs 690 744 2,734 3,466 Operating costs 8,670 7,250 36,824 29,461 General and administrative 6,788 6,913 costs 2,112 260 Depletion, depreciation & accretion 22,744 19,190 91,026 81,100 Other 933 (2,510) 3,996 (4,929) Net loss for the period (3,901) (3,897) (31,272) (47,315) Per share, basic and diluted ($) (0.01) (0.01) (0.12) (0.19) Cash flow from operating activities, before working capital adjustments 19,413 14,679 62,584 29,004 Capital expenditures 38,033 17,559 95,829 27,878 Working capital, end of period 144,032 57,995 144,032 57,995 Long-term debt - - - - Shares outstanding, end of period 283,215,387 261,960,717 283,215,387 261,960,717 (1) Boe is based on a conversion ratio of 6 mcf of natural gas to 1 bbl of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead.
The Company's financial statements, notes to the financial statements, management's discussion and analysis and Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.blackpearlresources.ca). The Annual Information Form includes the Company's reserves and resource data for the period ended December 31, 2010 as evaluated by Sproule Associates Limited and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities.
This news 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 historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as 'anticipate', 'believe', 'plan', 'continuous', 'estimate', 'expect', 'may', 'will', 'project', 'should', or similar words suggesting future outcomes. In particular, this document contains forward-looking statements pertaining to the Company's planned 2011 capital expenditure program, estimated production levels and anticipated cash flow from operations, development plans at Onion Lake, Blackrod and Mooney, and future drilling locations at Onion Lake.
Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. 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.
With respect to forward-looking statements contained in this press release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; and the ability to market oil and natural gas successfully to current and new customers. A description of some of the assumptions used for 2011 is located in '2011 Guidance' above. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors 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, substantial capital requirements, 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, potential cost overruns, variations in foreign exchange rates, diluent supply shortages, competition for capital, equipment, new leases, pipeline capacity and skilled personnel, uncertainties inherent in the SAGD bitumen 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. Further information regarding these risk factors may be found under 'Risk Factors' in the Annual Information Form. Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, readers are cautioned that the actual results achieved will vary from the information provided herein and the variations could be material.
Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Corporation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained in this report are made as of the date hereof, and the Corporation 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.
BlackPearl's Certified Advisor on First North is E. Ohman J:or Fondkommission AB.
Company Registration Number: 409596-1
BlackPearl Resources Inc.
President and Chief Executive Officer
BlackPearl Resources Inc.
Chief Financial Officer