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Pinecrest Energy Inc. Announces its Second Quarter 2014 Results

August 29, 2014



ENP Newswire - 29 August 2014

Release date- 28082014 - Calgary, Alberta - Pinecrest Energy Inc. announces that it has filed on SEDAR its unaudited financial statements and related Management's Discussion and Analysis for the three and six month period ended June 30, 2014.

The statements will be available for review at www.sedar.com or www.pinecrestenergy.com.

Operations Update and Outlook

During the second quarter of 2014, Pinecrest continued remediation efforts on certain producing wells and deferred capital spending on all new drilling. The Company's current strategy is to limit capital spending, maintain a relatively flat production profile and apply excess cash flow towards reducing indebtedness while monitoring the performance of its waterfloods and remediation efforts.

The Pinecrest technical team has furthered its understanding in the Slave Point reservoir and has identified certain pumping limitations they believe contribute to the reduced production performance in certain of its horizontal wells. With an understanding of these reservoir effects, the Company has begun to implement a remediation plan to address these potential limitations.

Pinecrest will continue to apply all of its free cash flow, other than maintenance capital, towards reducing its indebtedness. Exit Q3 2014 net debt and working capital is estimated to be approximately $112 million before unrealized hedging gains or losses. Pinecrest's banking syndicate has extended the annual borrowing base review until September 29, 2014.

The Company averaged 2,070 boed for Q2, 2014. Based on field estimates, current production capability is 2,000 boed. Pinecrest is encouraged that we have been able to maintain a relatively flat production profile throughout the first half of 2014 with minimal capital being spent on production optimization and maintenance.

The Company continues to maintain voidage and monitor the performance of its seven operated waterflood schemes. Early production gains followed by setbacks on certain waterfloods are being addressed. The Company will undertake remedial action as required.

Pinecrest management is encouraged by the positive increase in oil production that has been sustained for over five months resulting from the treatment undertaken in Q1, 2014 on the Evi #2 03-32-087-11W5 well. Field estimates for July show the well producing at approximately 31 bopd with an 88% water cut, and production of approximately 50 bopd, with an 84% water cut during the first three weeks of August.

Evi #2 and Evi #3 waterfloods continue to demonstrate the low decline, long life nature of the Slave Point reservoir in the Red Earth area. While further production monitoring and additional time is required to fully substantiate the early and encouraging remedial treatments, the Company is cautiously optimistic that the results and learnings can be applied to the Company's large drilling inventory with improved capital efficiencies.

In addition to remediation treatments, Pinecrest is looking at more cost effective and potentially improved initial completion techniques to be undertaken when our drilling program resumes. With lower capital costs for new wells, and improvement in production, Pinecrest believes positive steps are being taken to unlock the large oil resource in the Greater Red Earth area.

Contact:

Pinecrest Energy Inc.

Wade Becker

President & CEO

Dan Toews

V.P. Finance & CFO

Tel: (403) 817-2550

Fax: (403) 817-2599

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: waterflood and production optimization, oil recovery rates, drilling plans for 2014, expected production, expected oil to water ratios, the effects of waterfloods on recovery factors, decline rates, expectations for wells, success in drilling and waterflood activities, production rates, 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; 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; access to capital; 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. Forward looking statements are made as of the date herein except as required by law, Pinecrest undertakes no obligation to publicly update or revise any forward-looking statements.

Many of these risks and uncertainties and additional risk factors are described in the Company's Annual Information Form which is available at www.sedar.com. Readers should review such risk factors and others referred to in documents Pinecrest files at www.sedar.com.

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.

The Corporation uses the following terms for measurement within this press release that 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.

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.


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Source: ENP Newswire


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