Highpine Oil & Gas Limited announces 2009 second quarter results

    CALGARY, Aug. 5 /CNW/ - Highpine Oil & Gas Limited (TSX: HPX) ("Highpine"
or the "Company") announced today its financial and operational results for
the second quarter ended June 30, 2009.

    Second Quarter Results:

    -   Funds from operations in the second quarter of 2009 were $29.7
        million ($0.44 per diluted share) compared to $112.9 million ($1.64
        per diluted share) in the second quarter of 2008.

    -   Production averaged 16,817 boe/d in the second quarter of 2009,
        compared to 20,486 boe/d for the second quarter of 2008.

    -   At June 30, 2009, Highpine had net debt of $52.5 million comprised of
        $42.6 million of bank debt and a working capital deficiency of $9.9

    -   Liquids prices realized in the second quarter of 2009 were $61.75/boe
        compared to $116.70/boe in the second quarter of 2008. Average
        natural gas prices were $3.97/mcf in the second quarter of 2009
        compared to $11.30/mcf for the second quarter of 2008.

    -   Operating costs in the second quarter of 2009 averaged $9.93/boe
        compared to $11.18/boe for the same period in 2008.

    -   Operating netbacks after hedges in the second quarter of 2009 were
        $21.81/boe compared to $62.77/boe in the same period of 2008.

    -   Net capital expenditures for the second quarter were $16.6 million
        with approximately 75% of the expenditures related to Pembina

    -   Highpine participated in drilling 3 gross (1.6 net) wells at a 67%
        success rate in the second quarter of 2009.

    -   Net general and administrative expenses per boe for the second
        quarter were $1.67 compared to $1.62 for the second quarter of 2008.


    Production in the second quarter averaged 16,817 boe/d. Several wells
were brought on in April to maximize incentives available from the Alberta
royalty incentive program that was effective April 1, 2009. Downtime amounted
to 600 boe/d over the quarter due to scheduled maintenance at the Blaze
Brazeau River facility (240 boe/d) and at Highpine's Violet Grove 16-29
battery (160 boe/d), as well as unplanned curtailments at several other third
party facilities (200 boe/d).
    Current production is 17,400 boe/d and is expected to reach 18,000 boe/d
in August with anticipated steadier facility run time throughout the field.
    Highpine's 14-36 well in the updip portion of the WW Pool has reached a
production level of 2,500 boe/d, including 2,000 bbls per day of oil. Highpine
has approximately 94% interest in the well.
    Operating costs in the second quarter averaged $9.93/boe and were
mitigated by reduced workover costs, overall lower service costs in the
industry as well as cost reduction initiatives undertaken by the Company.
    Three wells were rig released during the second quarter. Due to
favourable weather, a 100% interest Chip Lake Rock Creek well, scheduled for
the third quarter was drilled in June and successfully tested 250 bbl per day
of clean oil from 8.5 metres of pay with no water indicated on the logs. The
well commenced production in late July 2009 at a 5% royalty rate under the
Alberta government royalty incentive program. The Tay River Leduc test was dry
and abandoned. A 25% interest Rock Creek gas well in Pembina tested 5 mmcf/day
(gross) and is anticipated to be on stream later this year.
    In late July, a 100% interest potential Ellerslie gas well was drilled
and cased at Joffre with over 10 metres of pay; and a 12.5% working interest
potential Rock Creek gas well was drilled and cased at Pembina. Both wells are
anticipated to be completed and tested in August. July rig releases also
included 2 (1.65 net) exploratory dry holes in the Nisku at Tomahawk. No
further drilling is planned at Tomahawk at this time as Highpine evaluates
recent well data. Nisku oil drilling in the Easyford area is still anticipated
for the second half of this year. Wells are currently in the licensing
    At June 30, 2009 Highpine had total land holdings of 390,381 net acres,
including 309,283 net acres of undeveloped land.
    Jonathan Lexier, President and Chief Executive Officer comments, "Growth
in production and improved liquids realizations contributed to improve cash
flow this quarter over the first quarter, as expected. We believe we are on
track to fulfill our 2009 objectives of maintaining our fiscal prudence while
driving to our operational targets for production and cost control."


    At the end of the second quarter of 2009, the Company had net debt of
$52.5 million on an available bank line of $200.0 million. The debt to cash
flow ratio based on second quarter annualized cash flow is 0.4:1.
    Capital spending in the second quarter was $16.6 million with
approximately 75% incurred in the Pembina area. Capital spending was spent
primarily on drilling and completions in the second quarter with 3.0 gross
(1.6 net) wells drilled.


                             Three months ended          Six months ended
                                   June 30,                   June 30,
                           2009       2008   %        2009       2008   %
                                           Change                     Change
    ($000s, except per share and share numbers)
    Total revenue(1)     73,200    187,563    (61) 134,099    327,874    (59)
    Funds from
     operations(2)       29,714    112,873    (74)  48,302    187,113    (74)
    Per share - diluted    0.44       1.64    (73)    0.72       2.73    (74)
    Net earnings (loss) (13,940)    31,533   (144) (49,150)    41,988   (217)
    Per share - basic
     and diluted          (0.21)      0.46   (146)   (0.73)      0.61   (220)
    Net Debt(3)          52,529     46,671     13   52,529     46,671     13
    Total assets        952,077  1,020,913     (7) 952,077  1,020,913     (7)
     expenditures(4)     16,597     27,911    (41)  54,801     60,399     (9)
    Total shares
     outstanding(No.)    67,051     68,230     (2)  67,051     68,230     (2)
    Weighted average
     shares outstanding(No.)
    Basic                67,051     68,133     (2)  67,024     68,021     (1)
    Diluted              67,101     68,676     (2)  67,065     68,541     (2)
    Average daily
    Crude oil and
     NGLs(bbls/d)        10,027     14,273    (30)  10,122     13,923    (27)
    Natural gas(mcf/d)   40,742     37,281      9   38,351     35,913      7
    Total (boe/d)        16,817     20,486    (18)  16,514     19,909    (17)
    Average selling
    Crude oil and
     NGLs($/bbl)          61.75     116.70    (47)   53.43     105.24    (49)
    Natural gas($/mcf)     3.97      11.30    (65)    4.73       9.96    (53)
    Total ($/boe)         46.43     101.87    (54)   43.73      91.56    (52)
    Wells drilled
     - gross (net)(No.)
    Oil                   1(1.0)       -(-)     -    5(3.1)     2(2.0)     -
    Natural Gas           1(0.3)     1(0.8)     -    5(3.8)    15(6.8)     -
    Abandoned / other     1(0.3)     3(2.5)     -    6(5.3)     5(3.3)     -
    Total                 3(1.6)     4(3.3)     -  16(12.2)   22(12.1)     -
    Drilling success
     rate(%)                 67         24      -       63         73      -
    Operating netback
    Oil and natural
     gas sales            46.43     101.87    (54)   43.73      91.56    (52)
    Royalties            (15.45)    (28.73)   (46)  (15.29)    (26.87)   (43)
    Operating costs       (9.93)    (11.18)   (11)  (10.43)    (11.18)    (7)
     (costs) recovery     (0.36)      1.13   (132)   (0.29)      0.71   (141)
    Realized hedging
     gain (loss)           1.12      (0.32)  (450)    0.76      (0.12)  (733)
    Operating netback     21.81      62.77    (65)   18.48      54.10    (66)

    (1) Total revenue includes realized and unrealized hedging losses and
    (2) Funds from operations are 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.


    Highpine's complete results for the second quarter ended June 30, 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 Wednesday, August 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
    September 5, 2009 in North America Toll Free: 1-800-319-6413, Pin Code:
    6639 followed by the No. 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 from operations" 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 from operations 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

    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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