PetroBakken Provides Operational Update and 2013 Capital and Production Guidance

Fri Jan 11, 2013 6:30am EST

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Marketwire

PetroBakken Energy Ltd.

January 11, 2013 - 06:30:00 AM

PetroBakken Provides Operational Update and 2013 Capital and Production
Guidance

CALGARY, ALBERTA--(Marketwire - Jan. 11, 2013) - PetroBakken Energy Ltd.
("PetroBakken" or the "Company") (TSX:PBN), is pleased to announce that
average production for the month of December 2012, was 53,200 barrels of oil
equivalent a day ("boepd") based on field estimates. We are also pleased to
announce a $675 million capital plan in 2013 that is expected to result in an
8 to 12 percent growth in average annual production. 

Operational Update 

PetroBakken had a successful year in 2012. Early in the year we completed
certain initiatives to strengthen our financial position and increase balance
sheet liquidity. This included terming-out our debt through the issuance of
US$900 million of high yield notes and disposing of approximately 4,200 boepd
of non-core properties. The asset dispositions allowed us to expand our
capital program during the second half of the year and more than replace the
disposed production. Our 2012 December average production of 53,200 boepd
represented a 6% increase over our 2011 December average (a 16% increase post
dispositions) and was comprised of over 21,500 boepd from our Bakken business
unit, over 22,500 boepd from our Cardium business unit, and the remainder from
our Saskatchewan Conventional and AB/BC business units. 

In the fourth quarter, we drilled 79 net wells, completed 106 net wells and
brought 99 net wells on production, exiting the year with 21 net wells in
inventory. We drilled a total of 217 net wells and completed 234 net wells in
2012. Fourth quarter activity is broken down by operating area as follows: 



                                                                            
Q4 2012 Drilling Activity                                                   
                                                        On                  
                            Drilled     Completed   Production  Inventory(1)
Business Unit             Gross   Net  Gross   Net  Gross   Net  Gross   Net
----------------------------------------------------------------------------
  Bakken                     37    28     48    40     50    43      4     1
  Conventional (SE SK)       20    14     17    12     18    13      9     4
  Cardium (central AB)       37    33     60    51     49    41     17    14
  Alberta/BC                  4     4      3     3      2     2      2     2
----------------------------------------------------------------------------
Total                        98    79    128   106    119    99     32    21
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
 (1)  Inventory refers to the number of wells pending completion and/or tie-
      in at December 31, 2012.                                              



Our inventory of 14 net wells in the Cardium, 1 well in the Bakken, 4 net
wells in southeast Saskatchewan, and 2 net wells in our new plays partly
reflects the advancement of capital from 2013 into 2012 and will contribute to
production volumes in the first quarter of 2013. We expect the first quarter
of 2013 to be our busiest of the year, and we currently have 16 drilling rigs
operating: 6 in southeast Saskatchewan, 7 in the Cardium and 3 in our
Alberta/British Columbia emerging plays. 

Of note, in our Swan Hills resource play we drilled 3 horizontal wells at Deer
Mountain. 2 of the 3 net wells at Deer Mountain were completed and put on
production and we are encouraged by initial results. Our capital plan for 2013
includes 12 (10 net) horizontal wells to be drilled on our Swan Hills play, of
which 8 (8 net) will be drilled at Deer Mountain and 4 (2 net) will be drilled
on farm-in land. 

2013 Capital Plan 

For 2013, our initial capital program is structured to build on the success of
2012. The execution of this plan began in late 2012, when we accelerated the
spending of $100 million of capital from 2013 to the end of 2012. The
accelerated capital should allow us to minimize field operation interruptions
and make efficient use of oil field services during the active winter drilling
season in order to add new production in the first quarter of 2013. This
initial accelerated capital, together with projected 2013 capital of $675
million, is expected to allow us to grow our average annual production by 8%
to 12% while targeting relatively flat year-over-year exit production. 

We anticipate 71% ($480 million) of our 2013 capital will be directed to
drilling, completion and tie-in activities with an additional $140 million
being spent on facilities, optimization, workover capital and sustaining
capital. The 2013 capital plan is expected to deliver an average daily
production rate of 46,000 to 48,000 boepd and exit 2013 production of
approximately 49,000 to 52,000 boepd, with an 85% liquids weighting. Our
initial capital plan (including the acceleration of $100 million into 2012) is
materially lower than previous years, which we believe to be prudent given the
current price volatility and wider light oil differentials being experienced
by the industry. Our capital plan may be adjusted throughout the year to take
into account changes to realized prices and service costs. 

From a capital allocation standpoint, we will focus on continuing to grow our
production in the Cardium which, like our Bakken and Conventional business
units, should become cash flow positive in 2013. The Cardium development
program will focus on pad-drilling in Brazeau, Lochend and West Pembina, to
shorten on-stream cycle times and reduce capital costs for surface leases,
drilling, completions, equipping and tie-ins. We will also continue to invest
in our cash flow positive assets in the Bakken and Southeast Saskatchewan. The
Bakken program balances facilities and infrastructure spending with cluster
development drilling to maintain strong capital efficiencies and a low
operating cost structure. We have also allotted capital for the commercial
expansion of our EOR pilots to build upon the encouraging results to date.
Finally, we will invest in developing our new plays in Alberta that will drive
future growth. 

Our 2013 drilling activity will see a total of approximately 129 wells
drilled, broken down by operating area as follows: 



----------------------------------------------------------------------------
                                               Capital             New Wells
Area                                     ($million)(1)              (Net)(1)
----------------------------------------------------------------------------
Bakken                                              85                    32
----------------------------------------------------------------------------
Cardium                                            290                    67
----------------------------------------------------------------------------
SE Saskatchewan Conventional                        27                    16
----------------------------------------------------------------------------
Alberta / BC (Emerging Plays)                       78                    14
----------------------------------------------------------------------------
Total                                              480                   129
----------------------------------------------------------------------------
(1) 2013 capital spending estimates and associated drill counts do not   
    include the acceleration of $100 million of 2013 into December 2012. 



It is expected that corporate declines for 2013 will be in the range of 39%
for the year. This is higher than the decline that we experienced in 2012
primarily as a result of the late year production additions from our expanded
capital program in the second half of the year. Due to the typical horizontal
well production profile, our corporate production in 2013 is expected to have
higher initial declines during the first half of the year followed by notably
lower declines during the second half of the year. With a balanced approach to
2013 capital plans resulting in a more active Q1 drilling program, followed by
a load leveled Q3 and Q4 program, we anticipate that our 2014 corporate
decline rate will be in the range of 30-35%. 

We remain focused on creating value for our shareholders by developing
long-life, accretive, light-oil resource plays that support organic growth of
production and reserves. We believe that we are well positioned for the coming
year with over 2,250 potential drilling locations, over 1 million acres of
undeveloped land and balance sheet flexibility that allows us to actively
develop our resources and respond to changing industry conditions.

2013 Guidance



 Production                                                                 
                                                                            
                                    Oil and NGL (bbls/d)    39,000 to 41,000
                                    Natural Gas (mmcf/d)            41 to 43
                                           Total (boe/d)    46,000 to 48,000
 Exit Production (boe/d)                                    49,000 to 52,000
 Funds Flow(1)                                                              
     Funds Flow from Operations ('000)                   $645,000 - $680,000
     Funds Flow per share(2)                                   $3.30 - $3.50
 Declared Dividends per share                                          $0.96
 Capital Expenditures(3)                                                    
     Drilling and Completions ('000)                                $480,000
     Facilities, Workovers, Optimization, Sustaining                        
      Capital ('000)                                                $140,000
     Land, Seismic and Other ('000)                                  $55,000
 Total ('000)                                                       $675,000
                                                                            
(1)  Commodity price assumptions include WTI US$90.00 /bbl, AECO CDN$3.50   
     /mcf, foreign exchange rate of US$/CDN$1.00, and corporate oil         
     differential of 10%.                                                   
(2)  Funds flow per share calculation based on 194 million shares           
     outstanding for 2013.                                                  
(3)  Projected capital expenditures exclude acquisitions, which are         
     evaluated separately.                                                  



$1.4 Billion Credit Facility and $300 Million Convertible Debentures 

In December 2012, holders of $293.4 million of Convertible Debentures elected
to put them back to PetroBakken. We have elected to repay these debentures in
cash on the settlement date of February 8, 2013. We initially plan to repay
the debentures using our $1.4 billion credit facility, which was approximately
$610 million drawn at the end of 2012. The credit facility has a current
maturity date of June 2015 and has the potential to be increased to $1.5
billion under an accordion feature. 

2013 Hedging Strategy 

In order to provide greater cash flow security, we have expanded our hedging
program and are targeting to increase the net-hedged production for 2013 from
12,000 bopd to 18,000 bopd. This is an increase to our past practice of
hedging approximately 25% of our net production. The following table provides
our current hedge position



----------------------------------------------------------------------------
         Hedged Barrels (bbls/d)  Average Floor (US$)  Average Ceiling (US$)
----------------------------------------------------------------------------
2013 1H                   14,164               $78.50                $116.71
----------------------------------------------------------------------------
     2H                   14,000               $79.46                $114.37
----------------------------------------------------------------------------
2014 1H                    9,000               $80.42                $107.80
----------------------------------------------------------------------------
     2H                    5,750               $80.87                $107.59
----------------------------------------------------------------------------
2015 1H                    2,000               $80.00                $102.99
----------------------------------------------------------------------------
     2H                      500               $80.00                $102.55
----------------------------------------------------------------------------



Completion of Corporate Reorganization and Introduction of a Share Dividend
Program 

On December 31st, 2012 Petrobank Energy and Resources Ltd. and PetroBakken
completed a corporate reorganization which resulted in Petrobank shareholders
effectively receiving Petrobank's share holdings in PetroBakken while
maintaining their interest in the remaining Petrobank assets. This transaction
eliminated Petrobank's 56% ownership in PetroBakken through the distribution
of the 107.8 million shares owned by Petrobank to the Petrobank shareholders.
This resulted in our market float increasing from approximately 83 million
shares to 191 million shares, providing investors with increased trading
liquidity. 

Concurrent with the reorganization, PetroBakken has adopted a Share Dividend
Program ("SDP"). PetroBakken currently has a dividend reinvestment plan
"(DRIP)" in place that is available only to Canadian PetroBakken shareholders.
The new SDP will be available to Canadian shareholders and will also enable
most Non-Canadian shareholders to participate. The DRIP and the SDP will both
allow shareholders to effectively receive their monthly PetroBakken dividends
in additional PetroBakken shares at a 5% discount to the market price at the
date of the dividend payment. Further information in respect of the DRIP and
SDP, including additional tax information and information on how to enrol your
shares, will be available through our website at www.petrobakken.com.  

Management Promotions 

We are pleased to announce the following internal management appointments. Mr.
Rene Laprade has been promoted to the position of Senior Vice President and
Chief Operating Officer. Rene has been with PetroBakken since our inception as
Senior Vice President, Operations. Mr. Brad Malley has been promoted to Vice
President, Drilling and Completions. Mr. David Salahub has been promoted to
Vice President, Production. Ms. Doreen Scheidt has been promoted to Vice
President and Controller. Finally, Mr. Lars Glemser has been promoted to
Treasurer. 

PetroBakken Energy Ltd. is an oil and gas exploration and production company
combining light oil Bakken and Cardium resource plays with conventional light
oil assets, delivering industry leading operating netbacks, strong cash flows
and production growth. PetroBakken is applying leading edge technology to a
multi-year inventory of Bakken and Cardium light oil development locations.
Our strategy is to deliver accretive production and reserves growth, along
with an attractive dividend yield.

Non-GAAP Measures. This press release contains financial terms that are not
considered measures under IFRS, such as funds flow from operations and funds
flow per share. These measures are commonly utilized in the oil and gas
industry and are considered informative for management and stakeholders.
Specifically, funds flow from operations reflects cash generated from
operating activities before changes in non-cash working capital. Management
considers funds flow from operations and funds flow per share important as it
helps evaluate performance and demonstrate the ability to generate sufficient
cash to fund future growth opportunities, pay dividends and repay debt. Funds
flow from operations and funds flow per share may not be comparable to those
reported by other companies nor should they be viewed as an alternative to
cash flow from operations or other measures of financial performance
calculated in accordance with IFRS. Further information in respect of these
non-GAAP measures is set forth in our MD&A. 

Forward-Looking Statements. Certain information provided in this press release
constitutes forward-looking statements. Specifically, this press release
contains forward-looking statements relating to future results from
operations, projected financial results, future capital costs, future
production rates, proposed exploration and development activities and capital
spending levels. Forward-looking statements are necessarily based upon
assumptions and judgements with respect to the future including, but not
limited to, the success of future drilling, completion, recompletion and
development activities, the outlook for commodity markets and capital markets,
the performance of producing wells and reservoirs, well development and
operating performance, general economic and business conditions, weather and
access to drilling locations, the availability and cost of labour and
services, the regulatory and legal environment and other risks associated with
oil and gas operations. Although we believe that the expectations and
assumptions on which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking statements because
we can give no assurance that they will prove to be correct. Since
forward-looking statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual results could
differ materially from those currently anticipated due to a number of factors
and risks. These include, but are not limited to, risks associated with the
oil and gas industry in general (e.g., operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the uncertainty
of reserve estimates; the uncertainty of estimates and projections relating to
production, costs and expenses, reliance on industry partners, availability of
equipment and personnel, uncertainty surrounding timing for drilling and
completion activities resulting from weather and other factors, changes in
applicable regulatory regimes and health, safety and environmental risks),
commodity price and exchange rate fluctuations and general economic
conditions. Certain of these risks are set out in more detail in our Annual
Information Form which has been filed on SEDAR and can be accessed at
www.sedar.com. Except as may be required by applicable securities laws,
PetroBakken assumes no obligation to publicly update or revise any
forward-looking statements made herein or otherwise, whether as a result of
new information, future events or otherwise.


FOR FURTHER INFORMATION PLEASE CONTACT: 
PetroBakken Energy Ltd.
John D. Wright
President and Chief Executive Officer
(403) 268.7800


PetroBakken Energy Ltd.
Peter D. Scott
Senior Vice President and Chief Financial Officer
(403) 268.7800


PetroBakken Energy Ltd.
Bill A. Kanters
Vice President Capital Markets
(403) 268.7800


PetroBakken Energy Ltd.
Eighth Avenue Place, 2800, 525 - 8th Avenue S.W.
Calgary, Alberta, T2P 1G1
(403) 268.7800
(403) 218.6075 (FAX)
ir@petrobakken.com
www.petrobakken.com
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