Second quarter highlights include:
-- Higher oil prices and narrower heavy oil differentials contributed to a 7% increase in revenues to
$62.2 millioncompared to Q2 2013; for the first half of 2014 revenues increased 23% to $121.7 million; -- Funds flow from operations was $23.2 million, comparable to last year. For the first half of 2014 funds flow from operations was $46.2 million, a 41% increase from the first half of 2013; -- Oil and gas production for the quarter averaged 8,897 boe/day, an 11% decrease compared to the second quarter of 2013. With the recent completion of various infrastructure projects that temporarily impacted production our current production is now approximately 9,200 boe/day. New well completions during the summer are expected to further enhance our production growth; -- Net earnings increased 80% in the quarter to $4.7 millioncompared with $2.6 millionin Q2 2013; -- Positive working capital of $21.9 millionat June 30, 2014, no debt and an unutilized $150 millionline of credit to finance our capital expenditure program; -- At Onion Lake, the first modules of the central processing facilities for the thermal EOR project were delivered to site. Construction will continue throughout the summer and is on schedule for a mid-2015 start- up; -- At Blackrod, the second pilot well pair was converted from steam circulation to production mode and is producing in excess of 270 barrels of oil per day and continues to ramp-up; -- At Mooney, infrastructure construction projects continued in the second quarter, which temporarily impacted oil production rates, but will provide necessary capacity expansion when we expand the ASP flood into the Phase 2 area early next year.
John Festival, President of BlackPearl, commenting on Q2 2014 activities, indicated that:
"We made good progress with the construction of our thermal project at
At Blackrod, we converted the second pilot well pair to SAGD operation (production test phase) in March and oil production continues to ramp-up. Production in June averaged 253 barrels of oil per day and is currently in excess of 270 barrels of oil per day. The well pair is expected to reach peak production rates of between 500 and 600 barrels of oil per day in 9 to 12 months. The instantaneous steam oil ratio (iSOR) in the second well pair is 3.4 and is expected to continue to drop as production rates increase. Our planned commercial operation at Blackrod will target a steam oil ratio between 3.0 and 3.5.
The initial pilot well pair continues to perform well. To date, it has produced in excess of 240,000 barrels of oil and is still producing approximately 180 barrels of oil per day under restricted steam injection rates. We are continuing to test some different steaming strategies in this well to optimize production and steam injection efficiencies that, if successful, will be incorporated into the commercial development design.
The objective of the initial pilot well pair was to establish that the SAGD process works in the Blackrod reservoir, and we achieved that objective. The intent of the second well pair was to drill a commercial prototype by incorporating the learnings from the first well pair and refining the operating strategies and procedures. The modifications introduced in the second well pair design include drilling the horizontal section longer than the initial well pair (950 metres compared to 700 metres), modifying the start-up procedures and steaming strategies, utilization of a different sand control system and changes to the down-hole equipment configuration. We are also assessing the potential for enhancing performance utilizing other industry validated technologies in our commercial development design including drilling longer wells, utilizing infill wells, employing gas co-injection and using inflow control devices. We have included a production graph for our second pilot well pair on our website which we will update on a monthly basis.
BlackPearl is planning an 80,000 barrel per day commercial development project at Blackrod, which will be built in phases. The first phase of the project is expected to be designed for 20,000 barrels of oil per day. We filed the commercial development application for Blackrod in
Construction of the first phase of the
Thermal development of the
Our estimated capital cost of the first phase of the project remains unchanged at
In addition, we commenced a 20 well primary drilling program in June at
At Mooney, no new drilling activity occurred during the second quarter due to wet ground conditions. During the second quarter we were able to continue with some infrastructure improvement projects that were not completed during the first quarter. This included expansion of the water treatment facilities to accommodate expansion of the ASP flood to our Phase 2 lands, construction of a booster station and upgrade and expansion of the pipeline infrastructure in the field in order to handle increased production from Phase 2 and Phase 3 wells. This work necessitated shutting-in nine wells on the Phase 1 ASP lands for most of the quarter. These wells were producing between 300 and 400 barrels of oil equivalent per day before they were shut-in. The wells were brought back on production in July. Completion of these infrastructure improvement projects will be finished in the fall or next winter when ground conditions permit.
We expect to expand the ASP flood to the Phase 2 lands early in 2015. We are planning to drill an additional six wells on the Phase 3 lands late this year and expand the ASP flood to these lands in the future.
Oil and gas production averaged 8,897 boe per day in the second quarter of 2014 compared to 9,986 boe per day for the same period in 2013. The decrease in production in 2014 reflects natural production declines at
Onion Lake, as well as production that was shut-in at Mooney during the quarter in order to undertake infrastructure improvements as described above. In addition, at Mooney, due to pipeline pressure restrictions imposed on a third party gas transporter, the amount of gas we were permitted to inject into their pipeline system was reduced, which restricted our gas sales in the area as well as oil production during the quarter. Three months Six months ended June 30, ended June 30, ---------------------------------------- (boe/day) 2014 2013 2014 2013 ---------------------------------------- Onion Lake 3,915 4,995 4,094 4,660 Mooney 3,519 3,692 3,607 3,791 John Lake 1,065 800 1,067 791 Blackrod 306 304 259 189 Other 92 195 102 108 ---------------------------------------- 8,897 9,986 9,129 9,539 ----------------------------------------
Oil and gas revenues increased 7% in the second quarter of 2014 to
The increase in our realized wellhead price reflects higher WTI reference oil prices in Q2 2014 compared with Q2 2013 (
Operating costs were
Funds flow from operations increased by 41% to
Financial and Operating Highlights
$000, except where noted) Three months ended June 30 Six months ended June 30 2014 2013 2014 2013 ---------------------------------------------------------------------------- Daily production / sales volumes Oil (bbl/d) (2) 8,534 9,662 8,827 9,303 Natural gas (mcf/d) 2,176 1,942 1,814 1,414 Combined (boe/d) (1) 8,897 9,986 9,129 9,539 Product pricing ($) Crude oil - per bbl (before the effects of hedging) 81.82 67.30 77.37 59.24 Natural gas - per mcf 4.61 3.59 4.93 3.46 Combined - per boe 79.53 66.20 75.82 58.50 Realized loss on risk management contracts - per boe (3.64) 0.00 (2.19) 0.00 Revenue Oil and gas revenue - gross 62,174 58,322 121,729 98,993 Royalties ($/boe) 15.88 13.33 14.91 10.68 Transportation costs ($/boe) 2.16 3.32 2.01 3.45 Operating costs ($/boe) 25.96 20.90 24.89 21.93 Net income (loss) for the period 4,684 2,597 3,558 (3,047) Per share, basic and diluted 0.01 0.01 0.01 (0.01) Funds flow from operations 23,161 22,823 46,198 32,862 Capital expenditures 48,044 27,315 97,404 46,416 Working Capital, end of period 21,910 4,055 21,910 4,055 Long term debt - 25,000 - 25,000 Shares outstanding, end of period 335,638,226 296,122,308 335,638,226 296,122,308 (1) Boe amounts are based on a conversion ratio of 6 mcf of gas to 1 barrel of oil. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. (2) includes production from the Blackrod SAGD pilot.
We expect our oil and gas production to average between 9,000 and 9,500 boe/d for the year, unchanged from our Q1 update. Funds flow from operations for the year is anticipated to range between
The 2014 second quarter report to shareholders, including the financial statements, management's discussion and analysis and notes to the financial statements are available on the Company's website (www.blackpearlresources.ca) or SEDAR (www.sedar.com).
This news release includes terms commonly used in the oil and natural gas industry, such as funds flow from operations which represent cash flow from operating activities expressed before changes in non-cash working capital. This term is used by the Company to analyze operating performance, leverage and liquidity and to provide shareholders and investors with additional information to measure the Company's performance and efficiency and its ability to fund a portion of its future activities and to service any long-term debt if incurred in the future. Funds flow from operations does not have a standardized meaning prescribed by GAAP and therefore may not be comparable with the calculation of similar measures by other entities. Consequently, these are referred to as non-GAAP measures.
This release contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. Forward-looking information typically contains statements with words such as "anticipate", "anticipated", "planning", "planned", "potential", "could", "continue", "continued", "continuing", "estimate", "estimates", "estimated", "forecast", "likely", "expect", "expected", "may", "intend", "intends", "intended", "intention", "deferred", "successful", "will", "project", "timing", "in the event", "move toward", "should", "scheduled", "outlook" or similar words suggesting future outcomes.
In addition, statements relating to "reserves", "resources" or "contingent resources" are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resource described exist in the quantities predicted or estimated and can be profitably produced in the future.
In particular, but without limiting the foregoing, this report contains forward-looking statements pertaining to our business plans and strategies; capital expenditure and drilling programs including the target date of mid-2015 for completion of construction and first steam at
The forward-looking information is based on expectations and assumptions by management regarding future production levels, future oil and natural gas prices, continuation of existing tax, royalty and regulatory regimes, foreign exchange rates, estimates of future operating costs, timing and amount of capital expenditures, performance of existing and future wells, the ability to obtain financing on acceptable terms, availability of skilled labour and drilling and related equipment, general economic and financial market conditions and the ability to market oil and natural gas successfully to current and new customers. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.
Undue reliance should not be placed on forward-looking statements. There can be no assurance that the plans, intentions or expectations upon which forward-looking statements are based will be realized. Actual results will differ, and the differences may be material and adverse to the Company and its shareholders.
By their very nature, forward-looking statements involve inherent risks and uncertainties (both general and specific) and risks that the goals or figures contained in forward-looking statements will not be achieved. These factors include, but are not limited to, risks associated with fluctuations in market prices for crude oil, natural gas and diluent, general economic, market and business conditions, volatility of commodity inputs, substantial capital requirements, customary conditions including receipt of necessary regulatory and stock exchange approvals on the issuance of common shares, uncertainties inherent in estimating quantities of reserves and resources, extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time, the need to obtain regulatory approvals on projects before development commences, environmental risks and hazards and the cost of compliance with environmental regulations, aboriginal claims, inherent risks and hazards with operations such as fire, explosion, blowouts, mechanical or pipe failure, cratering, oil spills, vandalism and other dangerous conditions, financial loss associated with derivative risk management contracts, potential cost overruns, variations in foreign exchange rates, variations in interest rates, diluent and water supply shortages, competition for capital, equipment, new leases, pipeline capacity and skilled personnel, uncertainties inherent in the SAGD bitumen and ASP recovery process, credit risks associated with counterparties, the failure of the Company or the holder of licences, leases and permits to meet requirements of such licences, leases and permits, reliance on third parties for pipelines and other infrastructure, changes in royalty regimes, failure to accurately estimate abandonment and reclamation costs, inaccurate estimates and assumptions by management, effectiveness of internal controls, the potential lack of available drilling equipment and other restrictions, failure to obtain or keep key personnel, title deficiencies with the Company's assets, geo-political risks, risks that the Company does not have adequate insurance coverage, risk of litigation and risks arising from future acquisition activities. Further information regarding these risk factors may be found under "Risk Factors" in the Annual Information Form.
Readers are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Readers are also cautioned that the foregoing list of factors is not exhaustive. Consequently, there is no representation by the Corporation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained in this report are made as of the date hereof, and the Corporation does not undertake any obligation, except as required by applicable securities legislation, to update publicly or to revise any of the included 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
BlackPearl Resources Inc.John Festival President and Chief Executive Officer (403) 215-8313 BlackPearl Resources Inc. Don CookChief Financial Officer (403) 215-8313 www.blackpearlresources.ca Source: BlackPearl Resources Inc.