FOR: PACE OIL & GAS LTD.
Pace Delivers Increased Oil Production and Reports Operational Update and Budget for 2012JAN 17, 2012 - 21:25 ET
CALGARY, ALBERTA--(Marketwire - Jan. 17, 2012) -
Pace Oil & Gas Ltd. ("Pace" or the "Company") (TSX:PCE) is pleased to provide an operational update highlighting its continued oil growth, its 100% oil focused capital program and guidance for 2012.
Pace continues to deliver increased oil production and consistent oil weighted production growth. During the fourth quarter of 2011 oil and liquids production increased to over 7,000 bbls/d and Pace achieved its exit production target of 15,000 boe/d. Consistent with its objective of maintaining a strong balance sheet, Pace's capital program for the 2011/12 winter program and the remainder of 2012 is designed to match its cash flow. The 2012 capital program of -approximately $100 million will be 100% directed towards its large oil prospect inventory and focused on continually increasing oil production and cash flow per share.
Pace's capital for 2012 will be allocated as follows:
|Southern Alberta (Glauconite, Lithic, Pekisko, Waterflood Development)||35-40||%|
|Dixonville (Montney C, Waterflood Optimization)||15-20||%|
|Red Earth (Slave Point)||15-20||%|
|Haro South (Pekisko)||~10||%|
|Land, Seismic, G&A, and Other||15-25||%|
The budget will be directed towards our large inventory of oil plays and will be financed from our cash flow strengthened by our oil hedging in place as detailed later in this release.
During 2011 the Company drilled a total of 40 (37.5 net) wells with 38 (36.8 net) wells targeted towards oil. Production for the month of December 2011 averaged approximately 14,750 boe/d and total oil and liquids production was approximately 7,200 bbls/d, an increase of more than 34% from Q4 2010. In December 2011 oil and liquids production increased to 49% of total production, up from 41% in Q4 2010. During 2012 Pace plans on drilling 33 (27 net) wells. Drilling and completion costs are expected to make up 75% of the budget with facilities costs expected in the 5%-10% range and land, seismic, G&A and other contribution of 15%-25%.
In Southern Alberta Pace has over 300,000 net acres of high working interest lands and is successfully pursuing a development exploitation program of horizontal drilling to grow its oil weighted production in this area. Using 3D seismic and vertical well control Pace has been able to drill predictable and repeatable economic horizontal wells. In 2011 Pace drilled a total of 17 (15.8 net) wells in this area and increased oil production by more than 20% from December 2010 with December 2011 total production from this area increasing to over 4,900 boe/d (46% liquids).
In 2012, 35%-40% of Pace's capital program will be allocated to Southern Alberta where the company plans to drill 24 (18 net) horizontal wells. In addition to the drilling opportunities, the Company will spend approximately $5 million to initiate a waterflood in the Retlaw BBB and NNN pools. The Company expects positive waterflood response within 9-12 months from the initial injection.
The waterflood at Dixonville continues to show strong results with increasing reservoir pressures and increasing oil rates. In December 2011, Dixonville oil production averaged approximately 3,200 bbls/d of oil and more than 3,600 boe/d with associated gas, an increase of more than 30% from December 2010. In 2012, Pace will put the remaining 1/3 of the 150 million barrel oil pool under waterflood with the conversion of 16 producing wells to water injection and upsize bottom hole pumps as reservoir pressure responds. Continued oil production optimization is planned with Pace forecasting increased production from this pool.
Pace continues to pursue ASP (alkaline surfactant polymer) and related Enhanced Oil Recovery technologies for Dixonville and other operated oil pools. Expected success in these areas represent significant additional oil production and reserve upside for Pace.
At Red Earth the Company will be increasing capital allocation to pursue the Slave Point light oil resource play on Pace lands. Pace currently holds 25,500 net acres of Slave Point rights and continues to expand its holdings in this area. In Q4 2011, Pace successfully drilled a 100% horizontal Slave Point oil well. In addition to this completion and a recompletion on an existing well, Pace is planning to drill, complete and tie in 2 (2 net) horizontal Slave Point oil wells prior to spring break up. Based on early results of our program Pace anticipates additional Slave Point drilling in the last half of 2012.
North West Alberta
In Northwest Alberta Pace has a low decline gas production base and oil resource opportunities. Pace increased production to over 4,000 boe/d (27% oil) from this area in December 2011 with oil and liquids production increasing approximately 50% from December 2010 from operational enhancements related to our existing production base. At Haro, Pace has a large-scale, 22° API oil resource play targeting the Pekisko formation. Pace's external reserve evaluators, McDaniel and Associates Consultants Ltd., evaluated Pace's acreage and assigned Discovered Petroleum Initially-In-Place of 1.16 billion barrels on 95 sections. Although in the early stages, Pace is encouraged by the oil production from the limited number of producing wells in this trend. The Haro area is restricted to seasonal access during the winter months from January until spring break-up around the end of March.
In Q1 2012 Pace is planning to drill 4 (4 net) and complete 3 Pekisko oil wells that will continue Pace's lands at least for another five years. This program is expected to be 10% of our 2012 budget. The Company remains confident that it will be able to identify key processes to develop this large scale resource.
Pace's capital will focus exclusively on its oil opportunities in 2012 and capital spending of approximately $100 million will be funded by cash flow. Pace has a high-quality, low-risk asset base and numerous oil resource opportunities to provide sustained growth. Pace expects its oil production to grow by more than 25% over 2011 increasing to over 8,000 bbls/d by the end of 2012. This increased oil production and our focus on reducing operating costs will improve netbacks and cash flow per share.
Production for 2012 is expected to average 14,500 - 15,250 boe/d with 50% - 52% coming from liquids which will generate more than 80% of the Company's cash flow. We maintain our optionality on our large gas resource prospect inventory but the success and strong economics of our oil plays allow us to focus on our oil prospects.
Details of the Company's guidance are as follows:
|Oil (bbls/d)||7,150 - 7,550|
|NGLs (bbls/d)||225 - 275|
|Natural Gas (mmcf/d)||42.8 - 44.6|
|Production (boe/d)||14,500 - 15,250|
|% Liquids||50% - 52||%|
|Oil (WTI - US $ per bbl)||$95.00|
|Gas (AECO - CDN $ per mcf)||$3.00|
|Operating expenses ($/boe)||~$13.50|
|Transportation expenses ($/boe)||$1.50 - 2.00|
|Capital Program ($mm)||~$100|
Pace is building second half 2012 incremental optional capital programs within the Red Earth and Southern Alberta areas.
Pace currently has the following commodity oil hedges in place as part of its strategy to manage its cash flow:
|Crude oil collar||Calendar 2012||500 bbls/d||$||95.00 to $117.75|
|Crude oil fixed||Calendar 2012||500 bbls/d||$||93.03|
|Crude oil fixed||Calendar 2012||500 bbls/d||$||97.63|
|Crude oil fixed||Calendar 2012||250 bbls/d||$||98.50|
|Crude oil fixed||Calendar 2012||250 bbls/d||$||102.62|
|Total Current||Calendar 2012||2,000 bbls/d||$||96.55 to $102.25|
In December 2011 Pace completed its semi-annual credit review with its syndicate of banks and maintained its credit facility at $275 million. At December 31, 2011 Pace had drawn approximately $151 million on this facility. The syndicate of banks is led by Canadian Imperial Bank of Commerce and National Bank of Canada as syndication agent and includes Bank of Montreal, The Bank of Nova Scotia, Alberta Treasury Branches and HSBC Bank Canada.
Normal Course Issuer Bid
Pace purchased 413,100 shares at an average price of $4.98 per share in 2011 under its current Normal Course Issuer Bid. At December 31, 2011 the Company had 47,202,700 shares outstanding.
Pace is a top-tier oil weighted intermediate producer. Pace has a solid oil production base in Dixonville, a significant oil resource play inventory in Southern Alberta combined with its light oil property in Red Earth, plus a prolific natural gas resource base in the sweet spot of the Deep Basin. The Company is excited about the oil opportunities it has identified and looks forward to delivering solid results in the months and years ahead. Pace trades on the TSX under the symbol PCE and over the counter in the US under the symbol PACEF.
Natural gas is converted to barrels of oil equivalent ("boe") at a ratio of six thousand cubic feet to one barrel of oil. Boe's may be misleading, particularly if used in isolation.
Certain statements contained within this press release constitute 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. The use of any of the words "targeting", "continue", "until", "forecast", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. In particular, 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 and reserves described can be profitably produced in the future. In addition, this press release contains forward-looking statements with respect to: (i) production volumes and expectations regarding the timing of when additional production volumes will be brought on stream; (ii) Pace's drilling plans and the results therefrom including expectations regarding well completions and the start up of new wells; (iii) future development and exploration activities and the timing thereof; (iv) Pace's plans for the development of its proven and probable undeveloped reserves. With respect to the forward-looking statements contained within Pace has made assumptions regarding:
Although Pace believes 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 Pace 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. These statements speak only as of the date of this press release or as of the date specified in the documents incorporated by reference into this press release, as the case may be. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to:
other factors which are included under "Risk Factors" in Pace's Annual Information Form on file with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. The forward-looking statements contained in this document speak only as of the date of this document and Pace does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.