Painted Pony Announces Expanded 2017 Capital Budget, Increased 2017 Production Forecast, Increased Firm Transportation And Conference Participation

CALGARY, Nov. 13, 2016 /CNW/ - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Corporation") (TSX: PPY) is pleased to announce an expanded 2017 capital budget to accelerate 2017 production.  The planned accelerated production, relative to the previously expected 2017 average annual production volumes, is due to a 100 MMcf/d expansion by AltaGas Ltd. ("AltaGas") of the AltaGas Townsend Facility ("Townsend Facility"). Construction is expected to be complete and ready for incremental volumes of natural gas by the end of 2017.    

HIGHLIGHTS:

  • Planned accelerated expansion of the Townsend Facility and associated infrastructure by an incremental 100 MMcf/d in 2017;
  • Estimated capital cost reductions for the Townsend Facility expansion are expected to reduce Painted Pony's capital lease fee per Mcfe on the expansion by more than 30%;
  • Increased expected 2017 year-end exit production volumes to 408 MMcfe/d (68,000 boe/d) with a 2017 capital budget of $319 million;
  • Forecasted to deliver annual average daily production growth of approximately 110% through the drill bit, from forecasted 2016 annual average daily production volumes of 138 MMcfe/d (23,000 boe/d) to forecasted 2017 annual average daily production volumes of 288 MMcfe/d (48,000 boe/d); and
  • Participated in the recent Spectra Energy Transmission ("Spectra") open season for the Zone 3 Expansion on the T-North pipeline and secured an incremental 250 MMcf/d of firm transportation with an expected on-stream date in the fourth quarter of 2018.

Pat Ward, President and CEO of Painted Pony, commented "the production acceleration, increase in liquids focus in 2017, and upward revisions to Painted Pony's 5-year plan will result in free cash flow in 2019 and 2020 with production expected to average 680 MMcfe/d (115,000 boe/d) in 2020."

2017 CAPITAL BUDGET

Townsend Facility Expansion
Painted Pony has approved the construction by AltaGas of a 100 MMcf/d expansion to the Townsend Facility, expected to be completed and on-stream in October 2017. The Corporation previously expected that an expansion to the Townsend Facility would occur in 2018.  The impact of this accelerated expansion is an expected 19% increase in fourth quarter 2017 exit production volumes to approximately 408 MMcfe/d (68,000 boe/d) from previous expectations of 342 MMcfe/d (57,000 boe/d).  This will increase annual average daily production by 4% to 288 MMcfe/d (48,000 boe/d) from previously expected annual average daily production volumes of 276 MMcfe/d (46,000 boe/d).  With the accelerated expansion of the Townsend Facility, Painted Pony now anticipates 2017 forecasted exit production volumes to be approximately 408 MMcfe/d (68,000 boe/d), a 19% increase in fourth quarter 2017 exit production volumes from previous expectations of 342 MMcfe/d (57,000 boe/d) and exit production growth of 70% when compared to 2016 forecasted exit production volumes of 240 MMcfe/d (40,000 boe/d). 

The capital cost of this expansion is expected to be 30% - 35% less per MMcf/d of processing capacity than the first phase of the Townsend Facility which was commissioned in July of 2016. The reduced cost is anticipated to reduce the total capital lease fee per MMcf/d for the Townsend Facility by approximately 10%.

Decreased Well Costs
Due to ongoing efficiencies, including faster drill times and completions, total budgeted well costs, including drilling, completions, and equipping costs, have decreased to $4.55 million per well from the previously budgeted amount of $4.8 million per well.  These cost savings positively impacted the 2016 capital program and the 2017 capital budget which Painted Pony now anticipates to be approximately $319 million which includes an expectation of drilling and completing 61 net wells. The 2017 capital budget is a 9% increase in capital spending, when compared to previously expected 2017 capital spending levels.

Increased Capital Efficiencies
Painted Pony's ongoing cost efficiencies provided an ability to optimize field operations by accelerating the drilling of 6.0 net wells and the completion of 5.0 net wells in the fourth quarter of 2016 that were previously planned to occur in the first quarter of 2017.  As a result, capital spending in 2016 is forecasted to increase by $14 million to $213 million and estimated capital spending in the first quarter of 2017, which includes drilling 22.0 net wells and completing 12.0 net wells, has been reduced from previous estimates by $23 million to $87 million.

Improved Cash Costs
Higher production volumes are anticipated to have a positive impact on Painted Pony's 2017 field cash per Mcfe costs which are now budgeted to be approximately $0.85/Mcfe, a reduction of approximately $0.16/Mcfe or 16% compared to 2016 forecast field cash costs of $1.01/Mcfe.  Painted Pony will continue to innovate and streamline field operations as production grows to achieve increasing levels of efficiency while delivering lower operating costs.     

Lower field cash costs combined with lower capital expenditures per well will result in the Corporation's leverage ratio improving to a forecasted 2017 year-end net debt to fourth quarter annualized funds flow ratio of 1.3 times, using November 1, 2016 strip commodity prices.  

Increased Firm Transportation
Painted Pony recently took part in Spectra's open season for the Zone 3 Expansion on the T-North pipeline and secured a long term transportation agreement for 250 MMcf/d. Construction of the Zone 3 Expansion is expected to be complete in December 2018. 

This agreement, combined with previously announced firm transportation contracts, provide Painted Pony with approximately 570 MMcf/d of firm transportation.  The Corporation believes this is sufficient egress capacity to support Painted Pony's growth plans through 2019.  Long-term firm transportation and natural gas processing agreements with key third-party service providers combine to underpin Painted Pony's multi-year growth plans.

Conference Participation
Painted Pony is pleased to announce that it will be participating in the GMP FirstEnergy Energy Growth Conference taking place on November 15 and 16, 2016 at The Ritz-Carlton Hotel located at 181 Wellington Street West, Toronto, Ontario. Mr. Pat Ward, President and CEO, will be presenting on Tuesday, November 15, 2016 at 9.40 am (ET) in Presentation Room A, Salon III.

Painted Pony will be undertaking a series of presentations to institutional investors while at this conference in addition to meetings with investors in the US prior to conference attendance. Interested parties are invited to view the updated Painted Pony investor presentation at:

http://paintedpony.ca/investors/dashboard/default.aspx

ADVISORIES

Boe Conversions: Barrel of oil equivalent ("boe") 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. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Mcfe Conversions: Thousands of cubic feet of gas equivalent ("Mcfe") 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. Given that the value ratio based on the current price of natural gas as compared to oil is significantly different from the energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may be misleading as an indication of value.

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 an expectation that AltaGas will expand the Townsend Facility in 2017, an expectation of 2017 year-end exit and average daily production; the 2017 capital budget; an expectation that Spectra will expand Zone 3 on the T-North pipeline and have such expansion on-stream in the fourth quarter of 2018; an expectation that cost efficiencies realized in 2016 will be realized in 2017; the number of wells expected to be drilled and completed in 2017; the expected capital to be spend and the number of wells to be drilled and completed in 2017; expected increasing efficiencies and lower operated costs.

Forward-looking information is based on certain expectations and assumptions including but not limited to future commodity prices, currency exchange rates interest rates, royalty rates and tax rates; the state of the economy and the exploration and production business; the economic and political environment in which the Corporation operates; the regulatory framework; anticipate timing and results of capital expenditures; the sufficiency of budgeted capital expenditures to carryout planned operations; operating, transportation, marketing and general and administrative costs; 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.  Estimates as to average annual and exit production 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 in 2016 and 2017 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.  As a consequence, actual results may differ materially from those anticipated.  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, operational risks, risks associated with drilling and completions, 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.

ABOUT PAINTED PONY

Painted Pony is a publicly-traded natural gas 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; info@paintedpony.ca; www.paintedpony.ca

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