Pearl Exploration and Production Ltd.



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  May 29, 2007 - 09:49 ET
Pearl Announces Second Quarter Results

  CALGARY, ALBERTA--(CCNMatthews - May 29, 2007) - Pearl Exploration and Production Ltd. ("Pearl" or the "Company") (TSX VENTURE:PXX) is pleased to announce the results of the three and six months ended March 31, 2007.



Financial Highlights and Operational Highlights:

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($000s, except per share data) Three months ended Six months ended
March 31, 2007 March 31, 2007
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Revenue 19,422 24,740
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Net loss (17,599) (22,863)
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Net loss per share basic (0.13) (0.23)
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Total assets 586,276 586,276
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Three months ended March 31, 2007
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Oil - net production, bopd 4,622
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Gas - net production, mcf/day 13,923
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Total net production, boe/d(1) 6,966
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Oil - average selling price per bbl $ 35.89
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Gas - average selling price per mcf $ 7.32
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(1) gas production converted at 6:1

 


The second fiscal quarter has seen Pearl move from an emphasis on acquisitions to a development mode. After acquiring five companies in less than 18 months, the focus is now on drilling wells on the acquired properties to increase production, cash flow and reserves. Management believes that the 2007 development program will maximize the returns on shareholder equity.

Production continues to rise. Pearl ended the second quarter with an average of 6,966 barrels of oil equivalent per day ("boepd"), up 300% from the previous quarter which averaged 1,674 boepd. The Company expects to exit May, 2007 at 8,600 boepd. Year end exit rates are anticipated to reach 12,000 to 14,500 barrels of oil equivalent per day.

A total budget of $193 million was approved by the Board of Directors for 2007 which includes drilling 210 wells. These wells are primarily located on the low risk development properties in western Canada with over 70% of the budget earmarked for the Onion Lake and Mooney fields. In the first quarter of 2007, the Company was able to drill 68 wells which puts Pearl on track to achieve its drilling goals prior to year end. On the Onion Lake lands, the Company was able to drill 25 wells prior to spring break-up. Heavy oil field development is characterized by large drilling programs and the Company continues to pursue optimization of drilling time and costs which is key to making these fields profitable. Drilling times at Onion Lake have been reduced to less than three days per well, a significant achievement.

The most successful project to date in terms of production increases is the Mooney field. The Company located a sweet spot in the eastern portion of the field and the most recent well drilled tested 530 barrels of oil per day. In addition, pressure response from water injection has been encouraging. As a result of this performance, Pearl has shifted its plans for 18 wells in other fields to Mooney in order to maximize the Company's short term production goals.

There is a significant lag time between drilling and production increases as heavy oil wells require a clean-up period; therefore much of the production increases will occur in the second and third calendar quarters of 2007 as a result of the capital program undertaken to date. Despite some shortfalls in production in January and February as a result of harsh winter weather, the Company believes it will achieve the production target of 12,000 - 14,500 barrels of oil equivalent per day stated in December 2006.

Drilling also has a significant impact on reserve distribution. With the number of wells being drilled in 2007, the Company expects to add significant additional reserves and shift existing reserves from the probable to proven category as well as from the possible to probable category. The most significant move in reserves is, however, the potential shifting of resources to reserves. While conventional "cold" recovery in heavy oil fields rarely exceeds 10%, the application of steam injection can result in 10-50% recovery efficiency. Bearing this in mind, the Company has been aggressively pursuing steam flood pilot projects on its two largest assets at San Miguel and Onion Lake. Given the size of these two fields in terms of oil in place, the addition of steam reserves should have a significant effect on the Company's profile.

Pearl has incurred losses in both the current and prior quarters as a result of additional expenses relating to its oil and gas operations including production costs, depletion and higher general and administrative costs. With the addition of the Atlas assets, the Company's revenue stream has increased significantly. As further production volumes are added from the Company's development activities in 2007, oil and gas revenues will continue to increase.

While the focus in the quarter has been development, the Company continues to pursue an active new venture and corporate acquisition program focused on heavy oil in the U.S. and Canada. Pearl's expectations are to add at least two additional properties this year with the emphasis on heavy oil fields with large volumes of oil in place. With the recent resurgence of interest in heavy oil, the Company believes these projects will continue to appreciate in value.

The unaudited financial statements, notes and MD&A are filed on SEDAR (www.sedar.com) and are available on Pearl's website (www.pearleandp.com).

Pearl is a public company focused on delivering disciplined growth by establishing a North American portfolio of oil and gas projects with an emphasis on large resource opportunities. Additional information on Pearl is available on our website at www.pearleandp.com.

All references in this release to boe's are based on a 6 to 1 conversion ratio. Boe's may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the Company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.



The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

FOR FURTHER INFORMATION PLEASE CONTACT:


Pearl Exploration and Production Ltd.
Keith Hill
President and Chief Executive Officer
(604) 689-7842
(604) 689-4250 (FAX)
Email: khill@namdo.com

or

Pearl Exploration and Production Ltd.
Arlene Weatherdon
Chief Financial Officer
(403) 716-4054
(403) 265-8324 (FAX)
Email: arlene.weatherdon@pxx.ca

or

Pearl Exploration and Production Ltd.
Sophia Shane
Corporate Development
(604) 689-7842
(604) 689-4250 (FAX)
Email: sophias@namdo.com
Website: www.pearleandp.com
 
 

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