BlackPearl Announces Fourth Quarter and Full Year 2012 Financial and Operating Results

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CALGARY, ALBERTA--(Marketwire - Feb 26, 2013) - BlackPearl Resources Inc. ("BlackPearl" or the "Company") (PXX.TO)(OMX:PXXS) is pleased to announce its financial and operating results for the three and twelve months ended December 31, 2012.

Highlights and accomplishments in 2012 included:

  • Oil and gas production increased 23% in 2012 to 9,366 boe/day; Q4 2012 production was 9,067 boe/day, up 4% from the prior year;
  • Oil and gas revenues increased 14% in 2012 to $205 million and cash flow from operations increased 6% to $83 million. Q4 2012 revenues were down 18% to $48 million compared to Q4 2011 and cash flow from operations in the fourth quarter was $18 million, a decrease of 36% from 2011;
  • Net income decreased to $45,000 in 2012 compared with net income of $18.9 million in 2011; 2011 net income included a gain on disposition of certain oil and gas properties and a large deferred tax benefit;
  • As reported on February 13, 2013, BlackPearl''s oil and gas proved plus probable reserves increased 496% in 2012 to 213 million barrels of oil equivalent, before royalties and "best estimate" contingent resource for our three core properties were 582 million barrels of oil equivalent, before royalties (see cautionary statement on contingent resources below(1));
  • At Blackrod, the 80,000 barrel per day SAGD commercial development application was filed in May 2012 with the Energy Resources Conservation Board (ERCB) and Alberta Environment. The first phase of the project is expected to be 20,000 barrels of oil per day. In addition, Sproule Unconventional Limited, our independent reserves evaluator, reclassified 180 million barrels of "best estimate" contingent resource to probable reserves pertaining to the first phase of SAGD development at Blackrod. In addition, detailed engineering design work for Blackrod commenced in the fourth quarter. We will expand the pilot in 2013, drilling an additional well pair during the first quarter.
  • At Mooney, ASP (Alkali Surfactant Polymer) injection continued in 2012. As a result of re-pressurization of the reservoir, production increased most notably in the fourth quarter. In addition, we successfully drilled 16 horizontal wells in 2012 on phase two and three development lands at Mooney. Further drilling on these lands is planned in 2013. These wells will be produced conventionally and then added to the ASP flood in the future;
  • At Onion Lake, in 2012 we drilled 43 vertical wells as part of our continuing primary development program. This program has identified further locations that we can add to our development drilling inventory as well as potentially expand our thermal development area. We will continue with our primary development program with 20 wells planned in 2013. Concurrently with our primary development, we continue to advance our Onion Lake thermal development plans and anticipate regulatory approval of our planned 12,000 barrel of oil per day SAGD project in the first half of 2013. 

John Festival, President of BlackPearl, commenting on 2012 activities indicated that "our long term sustainable growth will come from our two large thermal projects and we made good strides advancing both of these projects in 2012. At Blackrod, we filed our development application with regulatory authorities and we gained valuable knowledge from operating the pilot well pair during the last twelve months. We will use what we learned from the first well pair to expand the pilot in 2013 and to assist in our commercial development design.

"At Onion Lake, we continued to advance our thermal development plans through the regulatory review process which should culminate in obtaining project approvals in 2013. Potentially, we could have development approvals for both our Onion Lake and Blackrod thermal projects in 2013.

"We were also pleased with the development of our conventional heavy oil program in 2012. We saw a very positive response from our ASP flood at Mooney late in the year and the initial drilling results on our expansion lands have been very good, which will allow us to expand the flood to these areas in the next 12 to 18 months. At Onion Lake, primary production in certain areas is maturing. As a result, we saw production declines at Onion Lake in 2012; however, we have a drilling inventory of over 100 wells and plan to continue primary development until we transition into our thermal project.

"In 2013, we look forward to securing development financing for one or both of our thermal projects. We are evaluating a number of financing alternatives. Our aim is to balance minimizing dilution to our shareholders while not taking on excessive financial risk. We expect to provide our shareholders with our financing strategy over the next three or four months."

  1. This news release makes reference to contingent resources. Contingent resources are defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. In the case of the contingent resources assigned to BlackPearl''s three core projects the contingencies include the requirement for more evaluation drilling to better define the resource, the absence of submission of commercial SAGD development applications (for future phases of development at Blackrod), the likelihood of attaining regulatory approvals for commercial SAGD development (for our Onion Lake SAGD project), further establishment of increased oil production response from the ASP flood at Mooney and the uncertainty of the timing of production and development. There is no certainty that it will be commercially viable to produce any of the contingent resources. .These volumes are the arithmetic sums of the Best Estimate Resources for Blackrod, Mooney and Onion Lake. Best estimate (P50) is a classification of estimated resources described in the COGE Handbook as being considered to be the best estimate of the quantity that will be actually recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate. Please refer to our Annual Information Form for a more detailed discussion of our contingent resources.
 
Financial and Operating Highlights
    Three months
ended
December 31,
Twelve months
ended
December 31,
    2012 2011 2012 2011
         
Daily sales volumes (1)        
  Oil (bbls/d) 8,994 8,682 9,304 7,460
  Natural gas (mcf/d) 440 317 374 960
  Combined (boe/d) 9,067 8,735 9,366 7,620
       
($000s, except where noted)      
Revenues        
Oil and natural gas revenue - gross 47,569 58,160 204,525 179,443
           
Net income (loss) for the period (4,277) 15,504 45 18,911
  Per share, basic ($) (0.01) 0.05 0.00 0.07
  Per share, diluted ($) (0.01) 0.05 0.00 0.06
         
Cash flow from operations (2) 17,684 27,791 82,595 77,717
         
Capital expenditures 34,635 56,974 139,548 192,634
Property dispositions - (3,500) - (6,100)
         
Working capital, end of period (7,788) 37,825 (7,788) 37,825
Long term debt - - - -
         
Shares outstanding, end of period (000s) 295,766 284,802 295,766 284,802
           
(1) Boe is based on a conversion ratio of 6 mcf of natural gas to 1 bbl of oil. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and is not intended to represent a value equivalency at the wellhead.
(2) Cash flow from operations is a non-GAAP measure and, therefore, may not be comparable to similar measures used by other companies. It represents cash flow from operating activities before abandonment costs incurred and changes in non- cash working capital related to operations.
 

FOURTH QUARTER 2012 ACTIVITIES

Oil and gas revenues were $47.6 million in the fourth quarter of 2012 compared to $58.2 million in the same quarter of 2011. The decrease in revenues was primarily due to a significant drop in the average wellhead prices received.

Lower wellhead prices in Q4 2012 were the result of lower oil prices and wider heavy oil differentials. The WTI oil price in Q4 2012 was US$88.51 per barrel compared to US$94.03 per barrel in 2011 and the heavy oil differential (between WTI and Western Canadian Select) was $18.46 per barrel in Q4 2012 compared to $10.70 per barrel in 2011. Increased production in Canada and the US, together with pipeline constraints and refinery outages contributed to the decrease in North American oil prices.

BlackPearl sold an average of 9,067 boe per day during the fourth quarter of 2012, an increase of 4 percent over the same quarter in 2011. The increase in sales volumes are mostly attributable to continued development drilling at Onion Lake and Mooney, as well as the re-pressurization response from the first phase of the ASP flood at Mooney, partially offset by natural declines at Onion Lake.

Royalty rates decreased to 23% in the fourth quarter of 2012 compared to 25% in the same quarter of 2011. The decrease in the royalty rate in 2012 reflects the proportionate increase in production from the Mooney field, which has lower royalties than our other producing areas due to incentive programs for EOR projects and the lower initial royalty rates for drilling new wells. Operating costs were generally comparable in Q4 2012 and 2011.Transportation costs increased significantly in Q4 2012 from the prior year primarily due to increased production volumes from the Mooney area where travel distances to sales delivery points are greater than our other areas. G&A expenses increased due to one-time costs related to applying to have the Company''s Swedish Depository Receipts listed on the main market exchange in Sweden.

Cash flow from operations in the fourth quarter of 2012 was $17.7 million compared to $27.8 million in the fourth quarter of 2011. The decrease in cash flow from operations was primarily due to the drop in average wellhead prices received. We had a net loss in the fourth quarter of 2012 of $4.3 million compared to net income of $15.5 million in 2011. The decrease in net income is primarily a result of a decrease in heavy oil prices, an impairment charge to two of our non-core properties of $5.0 million and the recognition of certain deferred tax benefits in 2011.

Capital expenditures in the fourth quarter of 2012 were $34.6 million, a 39 percent decrease compared to the fourth quarter of 2011. The decrease is a result of the reduced drilling activity in Q4 2012.

Production
  Three months
ended
December 31,
Twelve months
ended
December 31,
(boe/day) 2012 2011 2012 2011
Onion Lake 4,857 6,805 5,947 6,272
Mooney 3,329 1,102 2,537 788
John Lake 649 413 573 343
Blackrod SAGD Pilot 221 178 272 57
Other 11 237 37 160
  9,067 8,735 9,366 7,620
 
Operating Statistics
  Three months
ended
December 31,
Twelve months
ended
December 31,
  2012 2011 2012 2011
($ per boe)        
Oil and natural gas revenue 58.45 73.88 61.45 65.00
Royalties 13.29 18.13 13.68 16.49
Transportation costs 3.07 0.60 2.76 0.52
Operating costs 17.89 17.80 17.82 17.80
Netback(1) 24.20 37.35 27.19 30.19
(1) Operating netback is a non-GAAP measure. It does not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures used by other companies in the oil and gas industry.
 

2013 Guidance

Our plans and outlook for 2013 are outlined below. Typically these plans will be modified throughout the year as conditions and circumstances change.

2013 Guidance Initial
Guidance
February
 Update
Production (boe/d)    
  Annual average 10-500 - 11,000 9,000 - 10,000
  Exit 11,000 - 12,000 10,000 - 10,500
     
Cashflow from operations ($millions) 75 - 85 50 - 60
Capital expenditures ($millions) 140 - 160 125 - 140
     
Year-end debt ($millions) 80 - 90 80 - 90
Year-end working capital ($millions) 0 - 5 0 - 5
     
Pricing Assumptions (annual average)    
  Crude oil - WTI US$88 US$95
  Light/heavy differential US$18 US$27
  Foreign Exchange (Cdn$ to US$) 1.00 1.00

Our initial guidance for 2013 anticipated a capital spending program of $140 to $160 million. As a result of a significant decrease in heavy oil prices during the first quarter of 2013 we elected to defer some of our first quarter capital spending. As a result, we have decreased our estimated 2013 capital spending to between $125 and $140 million. The Blackrod project continues to dominate our 2013 capital expenditure program, accounting for over 45% of our revised budget. Our plans in 2013 for the Blackrod area remain unchanged. We plan to expand the existing pilot with a second well pair, continue with detailed engineering design for the first phase of development and order long lead equipment items for the central processing facility. At Mooney we will continue development of the phase two lands with 15 to 20 horizontal wells planned; a decrease from our original plan of drilling 20 to 25 wells. At Onion Lake we will continue primary development with 20 vertical wells planned. We have also reduced spending on some of our minor non-core assets.

Cash flow from operations is expected to be between $50 and $60 million. The decrease in our estimated cash flow from operations from our initial guidance reflects lower forecast oil prices in the first quarter of 2013 and reduced capital spending which impacts our production guidance.

It is expected that this capital program will be funded from anticipated cash flow from operations and the Company''s credit facilities.

The Company''s financial statements, notes to the financial statements, management''s discussion and analysis and Annual Information Form have been filed on SEDAR (www.sedar.com) and are available on the Company''s website (www.blackpearlresources.ca). The Annual Information Form includes the Company''s reserves and resource data for the period ended December 31, 2012 as evaluated by Sproule Unconventional Limited and other oil and natural gas information prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities. BlackPearl''s annual general meeting of shareholders will be held on May 9, 2013 in Calgary Alberta.

Forward-Looking Statements

This news 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 statements typically contain words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "scheduled", "should", ''predict", "targeting", "seek", "intend", "could", "potential", "outlook" or similar words suggesting future outcomes. In particular, but without limiting the foregoing, this news release contains forward-looking statements pertaining to our business plans and strategies; capital expenditure and drilling programs; timing for receipt of regulatory approvals for our Onion Lake thermal project and the first phase of development at our Blackrod SAGD project, ability and expected timing to finance our capital expenditure programs, particularly the thermal projects at Blackrod and Onion Lake; anticipated oil and gas production levels from the Onion Lake thermal project and the Blackrod SAGD project; future oil and gas prices and their impact on BlackPearl; and corporate guidance for 2013 included in the "2013 Guidance" section of this release.

In addition, 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 reserves and resources described exist in the quantities predicted or estimated and can be profitably produced in the future.

The forward-looking statements in this news release reflect certain assumptions and expectations by management. The key assumptions that have been made in connection with these forward-looking statements include the continuation of current or, where applicable, assumed industry conditions, the continuation of existing tax, royalty and regulatory regimes, commodity price and cost assumptions, the continued availability of cash flow or financing on acceptable terms to fund the Company''s capital programs, the accuracy of the estimate of the Company''s reserves and resource volumes and that BlackPearl will conduct its operations in a manner consistent with past operations. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect.

By their very nature, forward-looking statements involve inherent risks and uncertainties which could cause actual results to differ materially from those contained in forward-looking statements. 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; substantial capital requirements; 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; potential cost overruns; variations in foreign exchange rates; diluent supply shortages; competition for capital, equipment, new leases, pipeline capacity and skilled personnel; uncertainties inherent in the SAGD bitumen and Alkali Surfactant Polymer recovery processes; credit risks associated with counterparties; the failure of the Company or the holder of licenses, leases and permits to meet requirements of such licenses, 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 and others may be found under "Risk Factors" in the Annual Information Form.

Undue reliance should not be placed on these forward-looking statements. Readers are cautioned that the actual results achieved will vary from the information provided herein and the variations could be material. Readers are also cautioned that the foregoing list of assumptions, risks and factors is not exhaustive. Consequently, there is no assurance by the Company that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements. Furthermore, the forward-looking statements contained in this news release are made as of the date hereof, and the Company 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.

Contact:
BlackPearl Resources Inc.
John Festival
President and Chief Executive Officer
403-215-8313
BlackPearl Resources Inc.
Don Cook
Chief Financial Officer
403-215-8313
403-265-8324
www.blackpearlresources.ca

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