Highpine Oil & Gas Limited announces 2009 first quarter results

    CALGARY, May 5 /CNW/ - Highpine Oil & Gas Limited (TSX: HPX) ("Highpine"
or the "Company") announced today its financial and operational results for
the first quarter ended March 31, 2009.

    First Quarter Results:

    -   Cash flow from operations were $18.6 million ($0.28 per diluted
        share) compared to $74.2 million ($1.08 per diluted share) in the
        first quarter of 2008.

    -   Production averaged 16,208 boe/d in the first quarter of 2009,
        compared to 19,331 boe/d for the first quarter of 2008.

    -   At quarter end, Highpine had net debt of $67.5 million comprised of
        $20.8 million of bank debt and a working capital deficiency of $46.7

    -   Liquids prices realized in the first quarter were $45.17/boe compared
        to $93.17/boe in the first quarter of 2008. Average natural gas
        prices were $5.60/mcf compared to $8.51/mcf for the first quarter of

    -   Operating costs in the first quarter averaged $10.96/boe compared to
        $11.19/boe in 2008. Lower natural gas prices have led to a reduction
        in Highpine's cost of power.

    -   Operating netbacks after hedges in the first quarter were $14.98/boe
        compared to $44.89/boe in the same period in 2008.

    -   Net capital expenditures for the quarter year were $38.2 million with
        approximately 60% of the expenditures related to Pembina Nisku

    -   Highpine participated in drilling 13 gross (10.6 net) wells at a 62%
        success rate in the first quarter.

    -   Net general and administrative expenses per boe for the first quarter
        were $2.13 compared to $1.61 for the first quarter of 2008.

    "The first quarter of this year saw the lowest world wide oil pricing in
almost half a decade" stated Jonathan Lexier, President and Chief Executive
Officer of Highpine. "For a company with such a large liquids weighting to
their production mix, this presented Highpine with our most challenging
environment for cash flow in some time. Fortunately, liquids pricing has
improved greatly and with our higher current production levels, cash flow for
the remainder of 2009 is expected to be ahead of the pace achieved in the
first quarter of 2009."


    Highpine's first quarter 2009 production averaged 16,208 boe/d in line
with previous guidance of 16,300 boe/d. During April, Highpine placed seven
wells on production which were scheduled to come on stream during the first
quarter but were delayed to maximize the benefit of recently announced
incentives. Current production is approximately 17,500 boe/d. Highpine is
reducing its previously announced 2009 average annual production guidance from
19,000 boe/d to approximately 17,500 boe/d due to a combination of factors
including delays in optimizing production from the Pembina Nisku WW pool and
the expectation of continued low natural gas prices resulting in the deferral
of a number of development drilling projects until prices recover.
    Highpine drilled 13 (10.6 net) wells in the first quarter of 2009. A 50%
interest horizontal gas well was drilled at Ansell and came on stream in April
at a restricted rate of 6.0 mmcf/day. A 62.5% interest oil well was completed
at Chip Lake. Two 100% wells were drilled at Joffre. One well has been
successfully completed as a coal bed methane gas well and the other awaits
completion as a conventional Ellerslie producer following spring break-up.
Three unsuccessful wells were drilled on the Wayne Rosedale Nisku play. Total
cost for seismic and drilling at Wayne Rosedale amounted to $3.2 million.
Highpine does not plan any additional drilling on the Wayne Rosedale property
in 2009.
    Six (4.4 net) wells were drilled targeting Nisku in the Pembina Fairway.
A 100% re-entry / side track of a previously watered out Nisku well in Brazeau
area was successful, and holds promise for additional similar re-entries. The
94.4% long reach well in the Pembina Nisku WW pool was completed and brought
onstream in early April. Two 100% interest dry holes were drilled near
Tomahawk. One well encountered an uneconomic pay thickness and the other did
not find reservoir. On March 11, 2009 Highpine announced two (0.5 net)
successful Nisku wells near Berrymoor, Alberta. Both wells were completed in
late April. The 9-5 well has been tested at rates up to 1,800 bbl/d (286 m3/d)
of clean oil and the 14-5 well has been tested at rates up to 1,400 bbl/d (222
m3/d) of clean oil. The oil has an API gravity of 42, and the solution gas has
measured H(2)S concentrations up to 21%.
    During the first quarter of 2009, Highpine acquired a 100% interest in
1,024 gross hectares, 2,560 gross acres of petroleum and natural gas rights at
Alberta Crown land sales.


    Second quarter activities are focused on the completion of tie-ins and
production optimization. Future drilling is expected at Tomahawk Nisku,
Pembina Rock Creek, and Wapiti Montney depending on surface conditions at that
time. Planning is underway to tie-in the recently completed Berrymoor Nisku
oil wells to Highpine's Easyford battery. The earliest production could be on
stream is late in the fourth quarter, depending on the regulatory process
required for the pipeline routing.
    Planned spending for the balance of the year is estimated at
approximately $60 million for an anticipated 2009 capital program of
approximately $100 million.


    At the end of the first quarter, the Company had net debt of $67.5
million which includes bank debt of $20.8 million drawn on a current available
bank line of $225.0 million. The bank credit facilities are anticipated to be
renewed later this month, with a commitment received from the Company's
financial lenders to provide a total credit facility of $200.0 million on
    Capital spending in the first quarter was $38.2 million with
approximately 60% incurred in the Pembina area. Capital spending was spent
primarily on drilling and completions in the quarter with 13 gross (10.6 net)
wells drilled.


    The following is a summary of Highpine's financial and operating results
for the three months ended March 31, 2009 and 2008.

    Three Months Ended March 31,                  2009       2008   % Change
    ($000s, except per share
     and share numbers)
    Total revenue(1)                            60,899    140,331        (57)
    Funds from operations(2)                    18,588     74,240        (75)
      Per share - basic and diluted               0.28       1.08        (74)
    Net earnings (loss)                        (35,210)    10,455       (437)
      Per share - basic and diluted              (0.53)      0.15       (453)
    Net Debt(3)                                 67,542    133,073        (49)
    Total assets                               975,874  1,052,720         (7)
    Capital expenditures(4)                     38,204     32,488         18
    Total shares outstanding #      67,051     67,932         (1)
    Weighted average shares
     outstanding #
    Basic                                       66,997     67,910         (1)
    Diluted                                     67,033     68,525         (2)
    Average daily production
    Crude oil and NGLs (bbls/d)                 10,219     13,573        (25)
    Natural gas (mcf/d)                         35,934     34,545          4
    Total (boe/d)                               16,208     19,331        (16)
    Average selling prices(5)
    Crude oil and NGLs ($/bbl)                   45.17      93.17        (52)
    Natural gas ($/mcf)                           5.60       8.51        (34)
    Total ($/boe)                                40.90      80.63        (49)
    Wells drilled - gross
     (net) #
    Oil                                          4(2.1)     3(2.0)         -
    Natural Gas                                  4(3.5)    13(6.0)         -
    Abandoned/other                              5(5.0)     2(0.8)         -
    Total                                      13(10.6)    18(8.8)         -
    Drilling success rate (%)                       62         89          -
    Operating netback ($/boe)
    Oil and natural gas sales                    40.90      80.63        (49)
    Royalties                                   (15.13)    (24.90)       (39)
    Operating costs                             (10.96)    (11.19)        (2)
    Transportation (costs) recovery              (0.22)      0.27       (181)
    Realized hedging gain                         0.39       0.08        388
    Operating netback                            14.98      44.89        (67)


    (1) Total revenue includes realized and unrealized hedging losses and
    (2) Funds from operations is calculated as cash flow from operating
        activities before the change in non-cash working capital and
        abandonment expenditures.
    (3) Net debt excludes unrealized financial instruments and current
        portion of future income taxes.
    (4) Capital expenditures include property acquisitions and are presented
        net of proceeds of disposals.
    (5) The average selling prices reported are before hedging activities.


    Wayne Gray, Vice President of Land has resigned from Highpine effective
May 15, 2009. "We respect Wayne's personal decision to spend more time with
his family and friends at this time. On behalf of everyone at Highpine I would
like to thank Wayne for his contributions and service over almost seven years
at Highpine, a period of rapid growth at the company," commented, Jonathan


    A reminder that Highpine's Annual General Meeting is to be held at 10:00
am. M.D.T on Wednesday, May 6, 2009 in the Grand Lecture Theatre of the
Metropolitan Conference Centre, 333 - 4th Avenue S.W., Calgary, Alberta. All
shareholders are encouraged to attend.
    Highpine is pleased to announce that Gordon Stollery will assume the
position of Non-executive Chairman of the Board of Directors of Highpine from
Hank Swartout following the annual meeting of shareholders of Highpine


    Highpine's complete results for the three months ended March 31, 2009,
including Management's Discussion and Analysis and Unaudited Consolidated
Financial Statements are available on SEDAR at http://www.sedar.com/ and on
the Company's website at http://www.highpineog.com/.


    Highpine will host a conference call for analysts, investors and
    interested parties, to discuss its financial and operational results at
    2:30 p.m. Calgary time, on Tuesday, May 5, 2009. Jonathan Lexier,
    President and Chief Executive Officer, as well as members of Highpine's
    executive team, will be in attendance.
    The call can be accessed toll free by dialing Canada and USA: 1-800-319-
    4610; Outside Canada and USA: 1-604-638-5340. Please phone in 10-15
    minutes prior to the start of the call. The conference call will also be
    broadcast live over the internet on Highpine's website located at
    http://www.highpineog.com/ Digital Playback will be available until June
    5, 2009 in North America Toll Free: 1-800-319-6413, Pin Code: 6639
    followed by the number sign.

    Highpine is a Calgary-based oil and natural gas company engaged in
exploration for and the acquisition, development and production of natural gas
and crude oil in western Canada. Highpine's current exploration and
development efforts are focused in the West Pembina Nisku and West Central
Alberta Gas Fairway, both located in Central Alberta. The Company's class "A"
common shares trade on the Toronto Stock Exchange under the symbol "HPX".

    Non-GAAP Measure

    The term "funds flow" is not a recognized measure under Canadian
generally accepted accounting principles ("GAAP"). Management believes that in
addition to cash flow from operating activities, funds flow is a useful
supplemental measure. Investors are cautioned, however, that this measure
should not be construed as an alternative to cash flow from operating
activities determined in accordance with GAAP as an indication of Highpine's
performance. Highpine's method of calculating funds flow may differ from other
companies, especially those in other industries and accordingly may not be
comparable to measures used by other companies. Highpine calculates funds from
operations as cash from operating activities before the change in non-cash
working capital related to operating activities and abandonment expenditures.

    Reader Advisory

    In the interest of providing Highpine's shareholders and potential
investors with information regarding Highpine, including management's
assessment of Highpine's future plans and operations, certain statements in
this news release are "forward-looking statements" within the meaning of
applicable Canadian securities legislation. In some cases, forward-looking
statements can be identified by terminology such as "anticipate", "believe",
"continue", "could", "estimate", "expect", "forecast", "intend", "may",
"objective", "ongoing", "outlook", "potential", "project", "plan", "should",
"target", "would", "will" or similar words suggesting future outcomes, events
or performance. The forward-looking statements contained in this news release
speak only as of the date of this document and are expressly qualified by this
cautionary statement.
    Specifically, this news release contains forward-looking statements
relating to: the volume of our oil and gas production; future results from
operations; future exploration and development activities (including drilling
plans) and related capital expenditures; our liquidity and financial capacity;
and funding sources for our capital program.
    These forward-looking statements are based on certain key assumptions
regarding, among other things: oil and natural gas prices; well production
rates and reserve volumes; our ability to add production and reserves through
our exploration and development activities; capital expenditure levels; the
availability and cost of labour and other industry services; interest and
foreign exchange rates; and the continuance of existing royalty regimes. The
reader is cautioned that such assumptions, although considered reasonable by
Highpine at the time of preparation, may prove to be incorrect.
    Actual results achieved during the forecast period will vary from the
information provided herein as a result of numerous known and unknown risks
and uncertainties and other factors. Such factors include, but are not limited
to: general economic, market and business conditions; industry capacity;
fluctuations 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; fluctuations in foreign exchange or
interest rates; stock market volatility and market valuations; geological,
technical, drilling and processing problems and other difficulties in
producing petroleum reserves; delays resulting from or inability to obtain
required regulatory approvals; changes in royalty rates and incentive programs
relating to the oil and gas industry; changes in environmental and other
regulations; risks associated with oil and gas operations and sour
hydrocarbons; ability to access sufficient capital from internal and external
sources; and other factors, many of which are beyond the control of Highpine.
These risk factors are discussed in Highpine's Annual Information Form and
Management's Discussion and Analysis for the year ended December 31, 2008, as
filed with Canadian securities regulatory authorities.
    There is no representation by Highpine that actual results achieved
during the forecast period will be the same in whole or in part as those
forecast and Highpine does not undertake any obligation to update publicly or
to revise any of the included forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be required by
applicable securities law.
    Where applicable, oil equivalent amounts have been calculated using a
conversion rate of six thousand cubic feet of natural gas to one barrel of
oil. BOE may be misleading, particularly if used in isolation. A boe
conversion ratio of six thousand cubic feet of natural gas to one barrel of
oil is based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the wellhead.
    All amounts in this news release are stated in Canadian dollars unless
otherwise specified.

For further information:

For further information: Jonathan A. Lexier, President and Chief
Executive Officer, Tel: (403) 508-9550, jlexier@highpineog.com; Harry D.
Cupric, Vice President, Finance and Chief Financial Officer, Tel: (403)
508-9595, hcupric@highpineog.com; Fax: (403) 508-9503, Website:

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