PINECREST ENERGY INC. PROVIDES 2011 OPERATIONAL UPDATE AND CAPITAL BUDGET

TSX Venture Exchange:  PRY

CALGARY, April 20 /CNW/ - Pinecrest Energy Inc. ("Pinecrest" or the "Company") (TSXV: PRY) is pleased to provide an operational update relating to its recent successful capital program in the greater Red Earth area of Alberta and its 2011 capital budget.

From inception 11 months ago, Pinecrest was formed for the purpose of taking advantage of our considerable in-house expertise utilizing multi-stage fracturing technology in order to create a growth company in the emerging, light oil Slave Point carbonate resource play in the greater Red Earth area of Alberta.  To date, the Company has established a sizable land position and low risk development drilling inventory in key areas of the play.  Additionally, the Company has acquired interests in producing infrastructure to ensure timely and regular marketing of its crude oil.

Operations

To date, the Company has drilled 16 gross (8.8 net) horizontal wells in the Company's greater Red Earth area targeting the Slave Point carbonate light oil resource, and 1 gross (1 net) vertical test well for a 100% success rate.  Thirteen gross (6.85 net) wells were drilled as long laterals ("long wells") with up to 20 fracture stimulations, and 3 gross (1.95 net) wells were drilled as short laterals ("short wells") with up to 10 fracture stimulations.  Of these wells, 12 gross (8.8 net) wells were operated by Pinecrest.

At Red Earth, the well completion technique continues to evolve.  As expected by the Company, initial results show an increase in initial production as compared to wells completed with fewer fracture stimulations.  As the wells are completed with water, oil production rates increase in all of the wells as they recover fracture fluids after the stimulation operation with decreasing water production over time.

Overall, the results of the Company's 16 Slave Point horizontal wells drilled to date have met or exceeded initial expectations.  Based on field estimates, average initial production ("IP") for the long wells is 325 barrels of oil per day ("bopd").  Average IP's for the short wells is 271 bopd.   The results of the Company's Slave Point drilling program are summarized below:

Sproule Associates Limited Slave Point Type Curves

         
Type Curve   Peak IP
(bopd)
Day 30 Rate
(bopd)
Day 60 Rate
(bopd)
3   250 226 205
4   300 272 248

Pinecrest Energy Inc.

         
    Peak IP
(bopd) 
Day 30
Rate
(bopd) 
Day 60
Rate
(bopd) 
Long Wells Range  280-400 160-273 268-285
  Average 325 266 274
  # Wells* 10 7 3
Short Wells Range  150-340 130-179 No Data
Available
  Average 271 151
  # Wells 3 3  

* Three additional horizontal wells currently on flow-back and are not included in the above data.

Pinecrest is currently in the process of completing an expansion of its Evi facility and a regional emulsion gathering system.  As a result of this activity, all of the Company's horizontal wells have been affected by intermittent downtime as a result of either spring break-up or start-up issues associated with new facilities and pipelines.  Overall, based on field estimates, total corporate production is expected to be between 2,350 to 2,500 bopd (99% light oil) by the end of April, 2011.

Waterflood Upside

The Company's acreage position in the greater Red Earth area is characterized by large original oil in place within the Slave Point formation.  The implementation of secondary recovery ("waterflooding") schemes to improve overall recoveries has already been well established in the Slave Point formation in the greater Red Earth area. Pinecrest believes the implementation of a waterflood on its acreage will result in significantly lower decline rates and materially improve overall oil recovery from the Company's Slave Point horizontal wells.  Additional oil recovery beyond primary recovery adds significant incremental value to the Company's Slave Point carbonate lands.

Based on analogous Slave Point pools currently under waterflood in the immediate vicinity of the Company's drilling inventory, Pinecrest's management believes the opportunity exists to increase recovery rates by 50% - 100% over the primary recovery rates.  Recovery factors assigned to these analogous pools by the ERCB concur with these estimates.

In this regard, Pinecrest and its partner are implementing a waterflood project in the Evi field located on the west side of the greater Red Earth area.  Government approval has been received, and injection is expected to commence in Q2 2011.  The Company expects to see results of this waterflood prior to the end of calendar year 2011.

2011 Capital Budget

The Board of Directors of Pinecrest has approved a 2011 capital budget of $105MM, primarily focused on the drilling, completion and tie-in of wells targeting the Slave Point light oil resource play in the Company's greater Red Earth core area.

The capital and operating assumptions used in the budget are as follows:

  • 23-26 net wells
  • Drilling and completion capital: $90MM
  • Pipelines and facilities capital: $15MM
  • Production exit rate: 3,000 - 3,200* boepd (>99% light oil)
  • US $85WTI per bbl
  • Exchange Rate: 1.00 $USD/CDN
  • Average crude quality: 39°API
  • Royalty rate: ~ 8.5%
  • Operating costs (incl. transportation): $12.75 per bbl

* Wells from capital spent in November and December 2011 not brought on until February 2012.

The budget is to be financed with a combination of cash flow, available cash on hand and the Company's  credit facilities, resulting in projected 2011 year end net debt of $15 million and a debt to forward cash flow ratio of less than 0.2 times.

Outlook

Pinecrest entered 2011 with an extensive low risk light oil development drilling inventory of over 180 net Slave Point drilling locations (4 wells per section), which represents over six years of development potential, based on expected 2011 activity levels.  This opportunity base does not include significant incremental upside associated with waterflood implementation, and the corresponding opportunity to downspace to 8 wells per section.

Management believes the high quality, light oil development inventory will drive strong per share reserve and production growth.  Concurrent with the execution of the development program, Pinecrest continues to evaluate and bring forward incremental growth opportunities.

Other Corporate Accomplishments

In February, Pinecrest was included in the 2011 TSX Venture 50.  The Venture 50 is a ranking of strong performing companies listed on TSX Venture Exchange and is comprised of ten companies from each of five sectors: Clean Technology, Mining, Oil & Gas, Diversified Industries, and Technology & Life Sciences. 

In addition, a selection of Canada's professional investment community was also polled by the TSX Venture Exchange to select the "Pick of the Street" in each Venture 50 sector. Over 200 fund managers, analysts, bankers, and retail brokers responded and Pinecrest was chosen as the "Pick of the Street" for the Canadian Oil and Gas sector.

For additional information, please refer to the updated April 2011 presentation on our website at www.pinecrestenergy.com.

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 2011 business objectives, Pinecrest's 2011 budget, oil recovery rates, the effects of waterfloods on recovery factors, decline rates and type curves for wells, production rates, exit rates for production and bank debt, downspacing opportunties, 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; 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.

Any references in this news release to initial production (IP) rates, 30 day production rates and 60 day production rates are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will continue production and decline thereafter.  While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.

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 and CEO
or
Dan Toews, V.P. Finance & CFO

Tel: (403) 817-2550 or
Fax: (403) 817-2599

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Pinecrest Energy Inc.

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