TSX Venture Exchange: PRY
CALGARY, Jan. 14, 2014 /CNW/ - Pinecrest Energy Inc. ("Pinecrest" or the "Company") announces an update to its production guidance for the fourth quarter of 2013, its credit facility and 2014 capital program.
Based on field estimates, average production for the fourth quarter of 2013 was approximately 2,580 boepd (97% oil and liquids). Average production for the month of December, based on field estimates, was 2,308 boepd, below the Company's budget and previous guidance. Current production is estimated to be 2,300 boepd (97% oil and liquids).
The production shortfall, relative to guidance, was the result of a number of factors which include:
- Steeper than anticipated declines from the three most recently drilled wells;
- Delayed start-up causing a corresponding delay in response at three Otter waterfloods. Water injection was delayed until mid-November to take advantage of a more economical water source. This project was originally scheduled to be commissioned on October 1, 2013 and as a result of the delay, no production response was observed by year-end; and
- Increased water-cut in three of the 22 offset producers to water injection wells. At Evi #2 waterflood, both offset wells are producing at higher water-cuts and the Company is currently preparing a remedial action plan in an attempt to restore oil production in the most adversely affected well. At Loon #1 waterflood, one well is producing at a higher water-cut but continues to produce at over two times the pre-injection rate.
Credit Facility and Corporate Debt
Pinecrest's syndication of Canadian chartered banks have recently completed its semi-annual valuation and the Company's credit facility remains at $165 million with a $150 million revolving credit facility and a $15 million development facility. The next scheduled review will occur on or before May 2014.
At December 31, 2013, the Company's net debt is anticipated to be approximately $130 million.
2014 Capital Program
Presently, the Company plans to spend minimal capital on minor production modifications for the first half of 2014 in an attempt to further arrest declines while continuing to monitor the response of its 22 wells currently under pressure maintenance. Until such time as there is full response from the Company's waterflood initiatives that are not currently exhibiting a response, Pinecrest will apply all of its free cash flow towards reducing its indebtedness.
The information in this press release contains certain forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", "would" and similar expressions. In particular, forward looking statements in this press release includes, but is not limited to: Pinecrest's capital program and 2014 business objectives, Pinecrest's 2014 budget, oil recovery rates, the effects of waterfloods on recovery factors, the potential success of waterfloods in the Slave Point area, decline rates and type curves for wells, production rates, effect of operations initiatives, timing for implementation of operating cost initiatives, future rates for production and bank debt, downspacing opportunities, the quantity of reserves, and projections of market prices and costs. These statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Pinecrest's control, including: the impact of general economic conditions; industry conditions; changing reservoir characteristics, regulatory approvals and permits; changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced; fluctuations in commodity prices and foreign exchange and interest rates; stock market volatility and market valuations; volatility 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; changes in income tax laws or changes in tax laws and incentive programs relating to the oil and gas industry; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves. Pinecrest's actual results, performance or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Pinecrest will derive from them. Except as required by law, Pinecrest undertakes no obligation to publicly update or revise any forward-looking statements.
Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the resources or reserves described can be profitably produced in the future.
Certain terms for measurement that may be used in this press release do not have a standardized prescribed meaning under GAAP and these measurements may differ from other companies and accordingly may not be comparable to measures used by other companies. The terms "funds from operations" and "operating netback" are not recognized measures under the applicable GAAP. Management of the Corporation believes that these terms are useful, in addition to profit and loss and cash flow from operating activities as defined by GAAP, for evaluating the Corporation's operating performance and leverage. Funds from operations is expressed as cash flow from operating activities before changes in non-cash working capital and asset retirement expenditures. Operating netback is a measure of operating margin used in capital allocation decisions. Pinecrest defines operating netback as average realized price per BOE, less royalties per BOE, less operating and transportation expenses per BOE, plus any realized gain or loss per BOE on financial instruments.
Certain information that may be provided in this press release in relation to the results of waterflooding Slave Point reservoirs on lands in close proximity to the land in which the Company has an interest, is considered analogous information under National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. Such information is based on publicly available information from governmental agencies and other industry producers and has been provided to give an indication of possible incremental recovery factors in the specified area. Other than comparing such information to the Company's own limited results in the specified area, the Company has not independently confirmed the accuracy of this information. There is no certainty that such incremental recovery factors will be obtained of even if so obtained, whether such factors can be achieved on an economic basis.
Barrels of Oil Equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of 6MCF:1bbl 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 crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1,utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
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 news release.
SOURCE: Pinecrest Energy Inc.
For further information:
Pinecrest Energy Inc.
Suite 500, 255 - 5th Avenue S.W.
Calgary, Alberta T2P 3G6
Wade Becker, President & CEO
Dan Toews, V.P. Finance & CFO
Tel: (403) 817-2550 or
Fax: (403) 817-2599