/NOT FOR DISTRIBUTION IN THE UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
CALGARY, April 2, 2012 /CNW/ - Palliser Oil & Gas Corporation ("Palliser" or the "Company") (TSX VENTURE:PXL) is pleased to report the financial and operating results for the three months and year ended December 31, 2011 and year end reserves information. Certain selected financial and operational information are set out below and should be read in conjunction with Palliser's year end financial statements complete with the notes to the financial statements and related MD&A which is expected to be available on www.sedar.com and the Company's website at www.palliserogc.com on Tuesday, April 3, 2012. In addition, the Company's annual report is expected to be available on www.sedar.com and the Company's website at www.palliserogc.com on Tuesday, April 3, 2012.
Three months and year ended December 31, 2011 and 2010
|Three months ended December 31||Year ended December 31|
|2011||2010||% Change||2011||2010||% Change|
|Wells drilled (net wells)|
|Salt Water Disposal||4||-||-||4||1||300%|
|Undeveloped Land Greater Lloydminster||18,239||10,276||77%||18,239||10,276||77%|
|Undeveloped Land Medicine Hat||29,362||30,844||-5%||29,362||30,844||-5%|
|Total undeveloped land (net acres)||47,601||41,121||16%||47,601||41,121||16%|
|Average daily production|
|Crude Oil (bbl per day)||1,597||860||86%||1,319||567||133%|
|Natural Gas (Mcf per day)||360||412||-13%||344||418||-18%|
|Barrels of oil equivalent (boe per day, 6:1)||1,657||929||78%||1,377||637||116%|
|Crude Oil production (%)||96%||93%||3%||96%||89%||8%|
|Average sales prices|
|Crude Oil ($ per bbl)||$ 77.65||$ 61.84||26%||$ 69.26||$ 60.99||14%|
|Natural gas ($ per Mcf)||$ 2.77||$ 3.19||-13%||$ 3.41||$ 3.71||-8%|
|Barrels of oil equivalent ($ per boe, 6:1)||$ 75.45||$ 58.69||29%||$ 67.24||$ 56.77||18%|
|Operating netback ($ per boe)|
|Petroleum and natural gas revenue||$ 75.45||$ 58.69||29%||$ 67.24||$ 56.77||18%|
|Royalties||$ 20.74||$ 15.60||33%||$ 16.52||$ 14.77||12%|
|Production & operating expenses||$ 29.42||$ 23.14||27%||$ 31.31||$ 19.11||64%|
|Operating netback (1)||$ 25.29||$ 19.08||33%||$ 19.41||$ 22.03||-12%|
|Financial ($000's except per share amounts)|
|Three months ended December 31||Year ended December 31|
|2011||2010||% Change||2011||2010||% Change|
|Oil and natural gas revenue||$||11,499||$||5,016||129%||$||33,781||$||13,204||156%|
|Funds flow from operating activities (2)||$||2,014||$||873||131%||$||4,424||$||2,061||115%|
|Loss and comprehensive loss||$||(2,421)||$||174||-1491%||$||(4,905)||$||(960)||411%|
|Per share - basic and diluted||$||(0.05)||$||0.01||-600%||$||(0.12)||$||(0.03)||300%|
|Weighted average shares outstanding||44,170,752||34,473,321||28%||41,936,343||31,965,903||31%|
|Capital expenditures (3)||$||12,888||$||5,999||115%||$||41,560||$||13,596||206%|
|Working capital (net debt) (4)||$||(20,864)||$||(3,942)||429%||$||(20,864)||$||(3,942)||429%|
(1) Operating netback is a non-IFRS measure and is the net of revenue, royalties, operating and transportation expenses.
(2) Funds flow from operating activities is a non-IFRS measure that represents loss and comprehensive loss before non-cash items such as depletion, depreciation, and amortization, accretion expense, share-based compensation, deferred tax and decommissioning liability. Per share amounts are calculated using weighted average shares outstanding consistent with the calculation of net loss per share. Funds flow from operating activities is a key measure as it demonstrates the Company's ability to generate the funds necessary to achieve future growth through capital investment. This table also contains other industry benchmarks and terms, such as working capital (calculated as current assets less current liabilities) and operating netbacks (calculated on a per unit basis as production sales less royalties, transportation and operating costs), which are not recognized measures under IFRS. Management believes these are useful supplemental measures of, firstly, the total net position of current assets and current liabilities of the Company and secondly, the profitability relative to commodity prices. Other entities may calculate these figures differently than Palliser.
(3) Capital expenditures exclude decommissioning liability costs and capitalized share-based compensation.
(4) Working capital (net debt) is a non-IFRS measure representing the total bank loan, accounts payable and accrued liabilities, less accounts receivable, deposits and prepaid expenses.
Palliser's reserves have been independently evaluated by the Corporation's independent reserve engineering firm, GLJ Petroleum Consultants Ltd. ("GLJ"). The reserves were evaluated in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the Canadian Oil and Gas Evaluation Handbook (""COGEH"") reserves definitions.
Reserves and Net Present Value (Forecast Prices and Costs)
The following tables summarize Palliser's remaining gross interest reserve volumes along with the value of future net revenue utilizing GLJ's forecast pricing and cost estimates as at December 31, 2011.
|Oil & NGL||Gas||BOE|
|December 31, 2011|| Gross
|Total Proved plus Probable||3,714||3,114||1,197||1,131||3,915||3,303|
|Net Present Value of Future Net Revenue|
| Present Value ($000's)(1)
Discounted at Rate of
|December 31, 2011||0%||5%||10%|
|Producing||$ 30,266||$ 28,508||$ 27,012|
|Total Proved plus Probable||$100,880||$ 88,397||$78,626|
(1) Values shown are calculated on a before tax basis.
The following benchmark prices, inflation rates and exchange rates were used by GLJ for the forecast price and Cost Evaluation effective December 31, 2011.
|WTI Ref||Hardisty Heavy||Exchange||AECO Spot|
|Year||US $/bbl||CDN $/bbl||Rate||Cdn $/MMbtu|
Crude oil price is WTI at Cushing, Oklahoma, natural gas is the AECO spot price.
The following table is a reconciliation of Palliser's gross interest reserves at December 31, 2011 and December 31, 2010 using GLJ's forecast pricing and cost estimates as at December 31, 2011 and December 31, 2010.
|Heavy Oil (Mbbl)||Natural Gas( MMcf)||BOE (Mboe)|
|As at December 31, 2010||1,213||1,520||2,732||835||791||1,626||1,352||1,652||3,004|
|As at December 31, 2011||1,637||2,077||3,714||745||452||1,197||1,762||2,153||3,915|
(1) Additions include discoveries, extensions, infill drilling and improved recovery.
(2) Technical revisions include technical revisions and economic factors.
Finding, Development and Acquisition Costs ("FD&A")
The following table summarizes Palliser's finding, development and acquisition costs for the years ended December 31, 2011, 2010, and 2009 including future development costs ("FDC").
|FDC - opening balance (1)||$||9,165||$||4,048||$||1,918||$||1,918|
|FDC - closing balance||$||9,954||$||9,165||$||4,048||$||9,954|
|FDC - change||$||789||$||5,117||$||2,130||$||8,036|
|including FDC change||$||44,831||$||18,737||$||10,608||$||74,176|
|FD&A (before FDC)||$||48.29||$||15.44||$||17.20||$||28.92|
|FD&A (after FDC)||$||49.16||$||21.24||$||21.52||$||32.43|
|Proved plus Probable|
|FDC - opening balance||$||15,965||$||7,441||$||4,523||$||4,523|
|FDC - closing balance||$||22,793||$||15,965||$||7,441||$||22,793|
|FDC - change||$||6,828||$||8,524||$||2,918||$||18,270|
|including FDC change||$||50,870||$||22,144||$||11,444||$||84,458|
|FD&A (before FDC)||$||31.17||$||7.51||$||10.05||$||16.25|
|FD&A (after FDC)||$||36.00||$||12.21||$||13.50||$||20.73|
|Recycle ratio (before FDC)||0.6||2.9||1.2||1.2|
|Recycle ratio (after FDC)||0.5||1.8||0.9||0.9|
(1) Future capital expenditures required to convert proved non-producing and probable reserves into proved producing
The following table summarizes Palliser's undeveloped land holdings and the fair value of those landholdings, as at December 31, 2011 and 2010:
|Fair value of net undeveloped acres ($000)||$||5,666(1)||$||3,546(1)|
|Average working Interest||85%||82%|
(1) Valuation is based on management's estimation of fair market value.
|Net Asset Value|
|Reserve value ($000)||2011||2010|
|Proved + probable (1)||$||78,626||$||67,028|
|Working capital (deficiency) and bank indebtedness||(20,864)||(3,942)|
|Net asset value||$||64,778||$||67,082|
|Year end shares outstanding (000)||54,130||34,590|
|Net asset value per share - Basic||$||1.20||$||1.94|
|Fully diluted shares outstanding||57,862||37,046|
|Net asset value per share - Fully Diluted||$||1.19||$||1.81|
(1) Present value discount 10% before taxes
(2) Valuation is based on management's estimation of fair market value.
Reserve Life Index ("RLI")
The reserve life index has been calculated based on year end reserves divided by December 2011 month average production of 2,150 boe/d.
|Proved|| Proved plus
|Total Company Interest Reserves (Mboe)||1,762||3,915|
|December 2011 Production Average (boe/d)||2,150||2,150|
|RLI based on December 2011 Production Average (years)||2.3||5.0|
Report to Shareholders
Palliser Oil & Gas Corporation ("Palliser" or the "Company") is pleased to report to shareholders on the Company's activities in 2011.
2011 Operational Highlights
- Achieved 1,657 boe/d average production in Q4 2011, up 78% from Q4 2010, representing 11 consecutive quarters of production growth. Exit production increased to 2,150 boe/d (98% heavy oil) in December 2011, up 110% from December 2010. Production for 2011 averaged 1,375 boe/d, up 116% from 2010.
- Executed a $44 million capital program, which included drilling 22.0 net wells, resulting in 18.0 net heavy oil wells and 4.0 net salt water disposal wells; reactivating 8.0 heavy oil wells; building 4.0 net salt water disposal facilities; and acquiring approximately 300 boe/d of production in the Manitou Lake property acquisition.
- Achieved three-year average finding, development and acquisition costs of $20.73/boe (including future development capital) for proved plus probable reserve additions, representing a recycle ratio of 1.2 times based on fourth quarter 2011 operating netbacks of $25.29 per boe.
- Reduced operating costs significantly with the start-up of new salt water disposal facilities late in the fourth quarter.
- Built the Company's prospect inventory to 139 locations at the end of 2011 to provide a multi-year drilling inventory.
- Expanded the Company's undeveloped heavy oil land position to 18,239 net acres at year-end 2011, a 77% increase from 2010.
- Instituted a commodity price hedging program to provide price protection for the Company's heavy oil production.
Palliser achieved record production levels during the fourth quarter of 2011, representing 11 consecutive quarters of production growth. The Company exited the year with production of 2,150 boe/d (98% heavy oil), more than doubling production of 1,025 boe/d in December 2010. Production during the year averaged 1,375 boe/d, representing an increase of 116% from 637 boe/d in 2010.
We continue to focus on our heavy oil prospects in the greater Lloydminster area. Our capital program for 2011 amounted to $44 million, including the Manitou Lake property acquisition. Capital spending activity was focused on drilling new wells, reactivating old wells and building salt water disposal infrastructure and facilities in the Lloydminster, Manitou and Edam heavy oil areas. The Palliser operated disposal facilities have been designed to accept salt water by truck and by pipeline, which will reduce Palliser operating costs, as well as present revenue generating opportunities to handle third party trucked salt water for a fee.
In 2011, we maintained a 100% working interest in our capital program, which included drilling 22 wells, resulting in 18 wells being completed for heavy oil production and four salt water disposal wells for a 95% success rate (one well was cased as a future salt water disposal well). In addition, we reactivated eight wells. We also increased our heavy oil acreage by 77% and added numerous high quality prospects for future growth.
The past year was a very important one for Palliser, as we made great strides in the development of our high volume lift methodology, employing this technology on numerous prospects within the greater Lloydminster area. In addition, 2011 saw the Company transition from the test phase to the production phase of high volume lift by commissioning Palliser operated salt water disposal facilities employing our new high volume lift 'POD' development philosophy. Entering 2011, we did not own any salt water disposal facilities or infrastructure and were completely reliant on trucking all of our produced salt water to third parties. By the end of the year, we operated five salt water disposal facilities with six salt water disposal wells and 21 producing heavy oil wells tied into these facilities.
As the majority of this infrastructure wasn't operational until late in the fourth quarter of 2011, there was minimal impact on the operating costs for the yearly average. Operating costs (which peaked at $33.81/boe in the third quarter) averaged $31.31/boe for the year. However, as the Edam salt water disposal facilities became operational in the fourth quarter 2011, we began to see the operating cost trend reverse and drop, to average $29.42/boe for the fourth quarter, and $24.50/boe for the month of December.
Building on the progress made in the fourth quarter 2011, we continued to expand our salt water disposal infrastructure through the first quarter of 2012. At the time of this report, we had completed two well conversions to salt water disposal, built one salt water disposal facility and tied in nine producing wells. At Edam, a new salt water disposal well was tied into one of the existing salt water disposal facilities commissioned in the fourth quarter 2011, resulting in a doubling of the disposal capacity of this facility and allowing six producing wells to be tied in. At Lloyd, we built a new salt water disposal facility, added one salt water disposal well and pipelined three wells into that facility. This new Lloyd salt water disposal facility is expected to be commissioned and brought into service in April, 2012. This marks a milestone for Palliser as all our high water rate wells will be tied in directly to Palliser operated salt water facilities by the second quarter of 2012. We expect to see operating costs continue to drop through 2012 and average approximately $23/boe for the year.
As we tied in existing producing wells to the salt water disposal facilities during the first quarter, production from several wells was temporarily shut in while field modifications were made. We have budgeted first quarter 2012 production volumes to be below our 2011 December exit, although still well ahead of 2011 fourth quarter average production of 1,657 boe/d. We estimate first quarter average production to be approximately 1,800 boe/d and we are on track to meet our 2012 average daily guidance of 2,250 - 2,350 boe/d and exit production (December 2012 average) of 2,600 - 2,800 boe/d (98% oil weighting). With the new salt water disposal infrastructure in place, we expect to see operating costs below $25/boe in the second quarter.
Currently, Palliser has a total of six salt water disposal facilities and eight salt water disposal wells, with a total of 30 producing heavy oil wells tied in to these facilities. This is a fundamental change from only one year ago and puts the Company in a very strong position from both a production and an operating cost perspective for 2012 and beyond. The Company has entered into a new phase of development, with the deployment of the high volume lift 'POD' concept whereby new wells will commence production via pipeline into a Palliser owned facility, eliminating the cost associated with salt water trucking and disposal.
As previously reported, we are seeing significant production increases from individual wells tied in to the salt water disposal facilities, as new wells start producing and shut-in wells are brought back on stream. The production increases achieved to date have confirmed our belief that increased salt water disposal capacity would allow us to pump wells at higher rates, resulting in increased oil production and recovery factors. We have a number of similar high volume lift opportunities in our prospect inventory (which currently stands at more than 150 locations) for future growth and we see significant scope to expand our heavy oil operations by taking advantage of the knowledge base we have been developing and apply it to numerous additional pools within the greater Lloydminster area.
At December 31, 2011, Palliser's net debt totaled $20.9 million under a current total credit facility of $38.0 million. Over the past year, we have spent significant capital on infrastructure to reduce operating costs and improve netbacks, in anticipation of significant increases in forecasted funds flow from operating activities and profitability in 2012. Palliser's Board of Directors has approved a $30.0 million capital program for 2012, funded through existing credit facilities and funds flow from operating activities. Net debt at year-end 2012 is budgeted to be below 1.3 times forward annualized funds flow from operating activities.
To reduce cash flow risk from commodity price volatility, the Company initiated a hedging program in 2011. For the first half of 2012, fixed priced swaps have been put in place for 1,000 bbl/d of heavy oil at an average price of $77.83/bbl. These prices are for production sold into the Western Canadian Select ("WCS") stream and include the heavy oil differential to West Texas Intermediate ("WTI"). Currently, a combination of WCS and WTI hedges have been entered into for the balance of 2012 and as far out as the second quarter of 2013. This ongoing hedging program provides significant price protection to the Company's cash flow stream.
We look forward to significant production growth and increased profitability in 2012 and the years ahead, as the Company continues to maintain its heavy oil focus and further develop the high volume lift production methodology.
On behalf of the Board of Directors,
President and Chief Executive Officer
April 2, 2012
For further information regarding Palliser Oil & Gas Corporation, the reader is invited to visit the Company's website at www.palliserogc.com.
Palliser is a Calgary-based emerging junior oil and gas company currently focused on conventional heavy oil production in the greater Lloydminster area of both Alberta and Saskatchewan.
Certain statements contained herein constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation, including, but not limited to management's assessment of future plans and operations, including: commodity focus; drilling plans and potential locations; expected production levels; development plans; reserves growth; production and operating sales and expenses; reservoir characteristics; the results of applying certain operational development techniques; certain economic factors; and capital expenditures. Forward-looking statements are typically identified by words such as "anticipate", "estimate", "expect", "forecast", "may", "will", "project" and similar words suggesting future events or performance or may be identified by reference to a future date. In addition, statements relating to oil and gas reserves and resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves or resources described, as the case may be, exist in the quantities predicted or estimated and can be profitably produced in the future. With respect to forward-looking statements herein, Palliser has made assumptions regarding, among other things; future capital expenditure levels; future oil and natural gas prices; "differentials" between West Texas Intermediate and Western Canadian Select benchmark pricing; future oil and natural gas production levels; future water disposal capacity; future exchange rates and interest rates; ability to obtain equipment and services in a timely manner to carry out development activities; ability to market oil and natural gas successfully to current and new customers; the impact of increasing competition; the ability to obtain financing on acceptable terms; and the ability to add production and reserves through development and exploitation activities. Although Palliser believes that the expectations reflected in the forward-looking statements contained herein, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included herein, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous risks and uncertainties that contribute to the possibility that the forward-looking statements will not occur, which may cause Palliser's actual performance and financial results in future periods to differ materially from any estimates or projections. Additional information on these and other factors that could affect Palliser's results are included in reports on file with Canadian securities regulatory authorities, including the Company's Annual Information Form, and may be accessed through the SEDAR website at www.sedar.com.
The forward-looking statements contained herein speak only as of the date hereof. Except as expressly required by applicable securities laws, Palliser does not undertake any obligation to, nor does it intend to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement. In addition, readers are cautioned that historical results are not necessarily indicative of future performance.
Production volumes are commonly expressed on a barrel of equivalent ("BOE") basis whereby natural gas volumes are converted at a ratio of six thousand cubic feet to one barrel of oil. The intention is to convert oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. The term BOE may be misleading, particularly if used in isolation. The conversion ratio is based on an energy equivalent method and does not represent an economic value equivalency at the wellhead.
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 Press release.
For further information:
President and CEO
Allan B. Carswell
Vice President, Exploration and COO
Ivan J. Condic
Vice President, Finance and CFO