Pinecrest Energy Inc. announces its first quarter 2014 results
TSX Venture Exchange: PRY
CALGARY, May 26, 2014 /CNW/ - Pinecrest Energy Inc. ("Pinecrest" or the "Company") is pleased to announce that it has filed on SEDAR its unaudited financial statements and related Management's Discussion and Analysis ("MD&A") for the three month period ending March 31, 2014. The statements will be available for review at www.sedar.com or www.pinecrestenergy.com.
|March 31||Three months ended|
|Petroleum and natural gas sales||18,229||33,829|
|Funds flow from operations(1)||7,237||21,378|
|Per share - basic||$0.03||$0.10|
|Per share - diluted||$0.03||$0.09|
|Per share - basic||$0.00||$0.02|
|Per share - diluted||$0.00||$0.02|
|Net debt and working capital deficit (2)||(119,947)||(131,591)|
|Common Shares Outstanding|
|Weighted average - basic||217,212||214,311|
|Weighted average - diluted||222,027||233,947|
|Number of days||90||90|
|Crude oil (bbls/d)||2,033||4,246|
|Natural gas (mcf/d)||366||274|
|Barrels of oil equivalent (boe/d-6:1)||2,143||4,315|
|Average realized price (3)|
|Crude oil ($/bbl)||99.16||88.12|
|Natural gas ($/mcf)||0.43||2.52|
|Netback per boe ($)(1)|
|Petroleum and natural gas sales||94.51||87.12|
|Transportation and production expenses||(27.72)||(18.88)|
|Realized loss on derivative financial instruments||(2.64)||(1.44)|
|Wells drilled - Gross||-||12|
|Wells drilled - Net||-||11.3|
|Success rate (%)||n/a||100|
(1) Non-GAAP measure
(2) Net debt and working capital is defined as current assets minus current liabilities, plus outstanding debt, excluding derivative financial instruments
(3) Before the effects of commodity price derivative contracts
Operations Update and Outlook
During the first quarter, Pinecrest successfully undertook remediation efforts on certain producing wells and deferred capital spending on all new drilling. The Company's current strategy is to limit capital spending while applying excess cash flow towards reducing indebtedness and monitoring waterfloods and the results of its remediation efforts.
The Pinecrest technical team, with the assistance of a third party technical expert, has identified some production impediments which they believe are the cause of the reduced production in its horizontal wells. With an understanding of these reservoir effects, the Company developed remediation plans and implemented treatments on selected vertical Slave Point producers with initial results that are encouraging. The wells that were effectively stimulated have sustained an increase of 1.5 to 2 times production three months later.
Based on these positive results, Pinecrest conducted remediation work on certain horizontal wells. Different treatment techniques with varied implementation costs and benefits were completed. Production from the wells has continued to improve. The wells are being monitored and further work is being planned for the balance of the Company's vertical and horizontal well inventory based on the results of these operations. The average treatment cost was $115,000 per well.
An encouraging initial result has been obtained from a treatment conducted on the Evi #2 Waterflood 102/03-32-087-11W5/0 producing well. The treatment improved the oil production rate from less than 10 barrels per day to an average of over 40 barrels per day, while reducing the watercut from 96% to less than 84%. Total oil production from the Evi #2 Waterflood is now up to an average of over 120 barrels per day from a low of 40 barrels per day in February, 2014. This result validates the technical team's conclusions regarding the cause of the changes in the oil production rate.
An updated capital plan will be provided later this year and until such time, Pinecrest will apply all of its free cash flow, other than maintenance capital, towards reducing its indebtedness. In this regard, exit Q2 2014 net debt and working capital is estimated to be approximately $115 million before unrealized hedging gains or losses. Pinecrest's banking syndicate has extended the borrowing base review until July 31, 2014.
The Company averaged 2,150 boed for Q1 and exited Q1 at 2,250 boed. Average production for April, based on field estimates was 2,150 boed with an additional 100 boed shut-in. With minimal capital being spent on production optimization and maintenance during Q1 2014, Pinecrest is encouraged that we have been able to maintain a relatively flat production profile throughout Q1 2014. Looking forward to Q2, Pinecrest anticipates that overall production will be temporarily reduced by spring break-up in the Red Earth area with every effort being undertaken to mitigate the effects of additional downtime.
The Company continues to maintain voidage and monitor the performance of its seven operated waterflood schemes. Early production gains followed by setbacks on certain waterfloods are being addressed. These setbacks were believed to be primarily caused by the impediments mentioned above. The Company will undertake remedial action as required. Since February, 2014, all waterflood production is stable or increasing as is expected in its phase of voidage replacement.
While further production monitoring and additional time is required to fully substantiate the early and encouraging remedial treatments, the Company is cautiously optimistic that the results and learnings can be applied to the Company's large drilling inventory with improved capital efficiencies.
In addition to remediation treatments, Pinecrest is looking at more cost effective and potentially improved initial completion techniques to be undertaken when our drilling program resumes. With lower capital costs for new wells, and improvement in production, Pinecrest believes positive steps are being taken to unlock the large oil resource in the Greater Red Earth area.
Annual General and Special Meeting
The Pinecrest Annual General and Special Meeting is scheduled for 10:00am on Tuesday, June 10, 2014 at the Bow Valley Conference Centre, Angus/Northcote Room, located at 300, 205 - 5th Avenue S.W., Calgary. Alberta, T2P 2V7.
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: waterflood and production optimization, oil recovery rates, drilling plans for 2014, expected production, expected oil to water ratios, the effects of waterfloods on recovery factors, decline rates, expectations for wells, success in drilling and waterflood activities, production rates, 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; 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; access to capital; 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. Forward-looking statements are made as of the date herein except as required by law, Pinecrest undertakes no obligation to publicly update or revise any forward-looking statements. Many of these risks and uncertainties and additional risk factors are described in the Company's Annual Information Form which is available at www.sedar.com. Readers should review such risk factors and others referred to in documents Pinecrest files at www.sedar.com.
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.
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.For further information:
Pinecrest Energy Inc.
Suite 500, 255 - 5th Avenue S.W.
Calgary, Alberta T2P 3G6
Wade Becker, President & CEO
Dan Toews, V.P. Finance & CFO
Tel: (403) 817-2550 or
Fax: (403) 817-2599