Painted Pony announces capital reductions while maintaining forecast production profile

CALGARY, Jan. 25, 2016 /CNW/ - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Corporation") (TSX: PPY) is pleased to announce that due to further realized capital efficiencies, the 2016 capital spending program has been reduced by 8% to $197 million from a previous estimate of $215 million.  Forecast 2016 production volumes remain unchanged and are expected to average approximately 138 MMcfe/d (23,000 boe/d) with daily production volumes expected to exceed 240 MMcfe/d (40,000 boe/d) by year end 2016. Painted Pony also anticipates a reduction in estimated 2017 capital spending of 15% or $52 million to $298 million from a previous estimate of $350 million. Painted Pony maintains previously forecast 2017 average daily production volumes of approximately 288 MMcfe/d (48,000 boe/d).

Further Improved Capital Efficiencies

The efficiencies achieved over the six most recent completions have contributed to a reduction in drilling, completion and equipping costs per well to $5.4 million from previous budget estimates of $5.9 million per well. This reduction is the result of a significant increase in the number of frac stages completed per operational day, reduced water usage, and other efficiencies. Painted Pony has been able to complete the most recent four net wells in three days per well versus the previously estimated four days per well resulting in significant cost savings. The benefits of this operational effectiveness is expected to continue to provide cost reductions going forward.

As a result of these efficiencies, the Corporation has been able to further reduce its 2016 capital spending forecast to $197 million, which represents a reduction of 31% from the original five-year plan capital spending estimate in early 2015 of $287 million and a reduction of 8% from the 2016 capital budget of $215 million announced in November 2015. Similarly, the lower drilling, completion and equipping costs have positively impacted the Corporation's 2017 capital spending forecast.  When combined with reduced infrastructure costs, the revised forecast of $298 million represents a reduction of 31% from the original five-year plan capital spending estimate in early 2015 of $435 million and a reduction of 15% from the 2017 capital spending estimate in November 2015 of $350 million.

AltaGas Propane Export Facility

AltaGas Ltd. ("AltaGas") recently announced plans to build a propane export terminal in the Prince Rupert area at Ridley Island, British Columbia.  (Please see AltaGas press release dated January 20, 2016.) As part of Painted Pony's strategic alliance with AltaGas, Painted Pony has the right to be a supplier for a portion of the Ridley Island Propane Export Terminal's capacity. This will allow Painted Pony's propane to access world prices.  AltaGas indicated it is working towards reaching a final investment decision in 2016.

Operational Update

As previously announced, Painted Pony has three rigs drilling in the Blair and Townsend areas which is part of a planned 29 net well drilling program for 2016.  Drilling and completions operations necessary for the start-up of the AltaGas Townsend Facility are on-schedule. The AltaGas Townsend Facility is approximately 70 % complete and is expected to begin commissioning operations in mid-2016. 

Painted Pony's current production year-to-date is approximately 105 MMcfe/d (17,500 boe/d) based on field estimates.  Production during the first quarter of 2016 is forecast to average approximately 99 MMcfe/d (16,500 boe/d).

Painted Pony currently delivers the majority of its natural gas production to Spectra's Station 2 receipt point in British Columbia ("Station 2").  The Station 2 to AECO spot pricing differential which averaged $1.23/Mcf during the second half of 2015, has averaged approximately $0.52/Mcf year-to-date in 2016. 

On March 2, 2016 Painted Pony expects to release fourth quarter and year-end 2015 financial and operating results as well as updated reserves as at December 31, 2015.

ADVISORIES

Boe Conversions:  Barrel of oil equivalent amounts have been calculated by using the conversion ratio of six thousand cubic feet (6 Mcf) of natural gas to one barrel of oil (1 bbl).  Boe amounts may be misleading, particularly if used in isolation.  A boe conversion ratio of 6 Mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Mcfe Conversions:  Thousands of cubic feet of gas equivalent amounts have been calculated by using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas.  Mcfe amounts may be misleading, particularly if used in isolation.  A conversion ratio of 1 bbl to 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-Looking Information:  This press release contains certain forward-looking information within the meaning of Canadian securities laws.  Forward-looking information relates to future events or future performance and is based upon the Corporation's current internal expectations, estimates, projections, assumptions and beliefs.  All information other than historical fact is forward-looking information.  Words such as "plan", "expect", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words that indicate events or conditions may occur are intended to identify forward-looking information.  In particular, this press release contains forward looking information relating to: the 2016 capital spending program and 2016 average and exit production volumes; the 2017 capital spending program and 2017 average production volumes; reductions in drilling, completion and equipping costs; reductions in infrastructure costs; construction by AltaGas of a propane export facility at Ridley Island, British Columbia and the Corporation's ability to supply propane to this facility; the AltaGas Townsend Facility construction completion and commissioning timeframe; the number of wells anticipated to be drilled in 2016; and an expectation that the differential between Station 2 and AECO pricing will continue to narrow.

Forward-looking information is based on assumptions including but not limited to future commodity prices, currency exchange rates, drilling success, production rates future capital expenditures and the availability of labor and services.  With respect to future wells, a key assumption is the validity of geological and technical interpretations performed by the Corporation's technical staff, which indicate that commercially economic volumes can be recovered from the Corporation's lands.  With respect to the 2016 capital spending program, assumptions include the realization of average production of 138 MMcf/d (23,000 boe/d) and January 20, 2016 commodity pricing for 2016 of an AECO price of $2.43/Mcf, WTI of US$33.65/bbl and an exchange rate of Cdn$/US$ of 1.455.  With respect to the 2017 capital spending program, assumptions include a renewal of the syndicated credit facility, the realization of average production of 288 MMcf/d (48,000 boe/d) and January 20, 2016 commodity pricing for 2017 of an AECO price of $2.90/Mcf, WTI of US$38.02/bbl and an exchange rate of Cdn$/US$ of 1.448. Estimates as to production rates assume that no material unexpected outages occur in the infrastructure the Corporation relies upon to produce its wells, that existing wells continue to meet production expectations and that future wells scheduled to come on production meet timing and production rate expectations.

Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations on which they are based will occur.  Although the Corporation's management believes that the expectations in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

Forward-looking information necessarily involves both known and unknown risks associated with oil and gas exploration, production, transportation and marketing.  There are risks associated with the uncertainty of geological and technical data, imprecision of reserve estimates, operational risks, risks associated with drilling and completions, the risk that anticipated project timelines change, environmental risks, risks of the change in government regulation of the oil and gas industry, risks associated with competition from others for scarce resources and risks associated with general economic conditions affecting the Corporation's ability to access sufficient capital.  Additional information on these and other risk factors that could affect operational or financial results are included in the Corporation's most recent Annual Information Form and in other reports filed with Canadian securities regulatory authorities. 

Forward-looking information is based on estimates and opinions of management at the time the information is presented.  The Corporation is not under any duty to update the forward-looking information after the date of this press release to revise such information to actual results or to changes in the Corporation's plans or expectations, except as required by applicable securities laws. 

Any "financial outlook" contained in this press release, as such term is defined by applicable securities laws, is provided for the purpose of providing information about management's current expectations and plans relating to the future.  Readers are cautioned that reliance on such information may not be appropriate for other purposes.

ABBREVIATIONS

Natural Gas

Natural Gas Liquids

Mcf

thousand cubic feet

bbls

barrels

Mcf/d

thousand cubic feet per day

bbls/d

barrels per day

MMcf/d

million cubic feet per day

NGL

natural gas liquids

boe

barrels of oil equivalent

Mcfe

thousand cubic feet equivalent

boe/d

barrels of oil equivalent per day

Mcfe/d

thousand cubic feet equivalent per day



MMcfe

million cubic feet equivalent



MMcfe/d

million cubic feet equivalent per day

ABOUT PAINTED PONY
Painted Pony is a publicly-traded natural gas and natural gas liquids Corporation based in Western Canada.  The Corporation is primarily focused on the development of natural gas and natural gas liquids from the Montney formation in northeast British Columbia.  Painted Pony's common shares trade on the Toronto Stock Exchange under the symbol "PPY".

SOURCE Painted Pony Petroleum Ltd.

For further information: Patrick R. Ward, President and CEO, (403) 475-0440; John H. Van de Pol, Senior Vice President and CFO, (403) 475-0440; Jason Fleury, Director, Investor Relations, (403) 776-3261; www.paintedpony.ca

RELATED LINKS
www.paintedpony.ca

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890