Pearl Exploration and Production Ltd.

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  May 9, 2012 - 17:00 ET
BlackPearl Announces First Quarter 2012 Financial and Operating Results


CALGARY, ALBERTA--(Marketwire - May 9, 2012) - BlackPearl Resources Inc. ("BlackPearl" or the "Company") (TSX:PXX)(FIRST NORTH:PXXS) is pleased to announce its financial and operating results for the three months ended March 31, 2012.

First quarter highlights include:

  • Production from the Blackrod SAGD pilot continued to ramp-up during the quarter, production is currently over 400 bbls/day; 80,000 bbls/day commercial development application to be filed by the end of the month;
  • Oil and gas production averaged 9,581 bbl/day, a 37% increase from Q1 2011 and a 10% increase from Q4 2011;
  • Revenues increased 67% to $57.8 million in 2012 compared to Q1 2011;
  • Cash flow from operations increased 102% to $23.8 million in 2012 compared to Q1 2011;
  • Mooney area production was over 2,000 bbls/day for the quarter due to a successful Q4 drilling program;
  • Advanced the 12,000 bbl/day thermal development application at Onion Lake; approval is anticipated later this year.

John Festival, President of BlackPearl, commenting on Q1 2012 activities, indicated that, "We continued to make excellent progress in furthering the development of all of our core properties.

"At Blackrod, the SAGD pilot production continues to increase and we should reach our target of 500 barrels of oil per day later this year. At 400 barrels of oil per day, the pilot has already validated commerciality of the project. The 80,000 barrels per day commercial development application will be filed by the end of the month and we should begin to book reserves on the first phase of development.

"At Mooney, we continue to inject polymer and chemical in the flood area and expect to see an initial production response later this year. We started development drilling on the lands adjacent to the flood area last year and we are achieving excellent results. With the response from the ASP flood and the development drilling on the expansion lands, we expect to see production in excess of 5,000 barrels per day from the Mooney area next year.

"At Onion Lake, we are continuing with our conventional development plans while we continue to advance our 12,000 barrel per day SAGD thermal development application through the regulatory process. We anticipate approval of this application later this year.

"On the financial side, heavy oil differentials widened out in the first quarter, which impacted our realized oil price, but they have since narrowed closer to the historical average."

Property Review

Blackrod SAGD Pilot Project

At Blackrod, we continue to make solid progress with our SAGD pilot operations. Oil production has been steadily rising. The pilot is currently producing in excess of 400 barrels of oil per day with an instantaneous steam oil ratio of less than 3.0. We expect the well will reach its target production of 500 barrels of oil per day later this year. We are planning to take the pilot down in the second quarter to perform scheduled maintenance of the facilities.

In addition to operating the pilot, we have been working on our commercial development application for the area. We will be applying for an 80,000 barrels per day SAGD thermal development, with the first phase of the project planned for 20,000 barrels per day. We expect to file the application later this month and anticipate approval will take 18 to 24 months. Upon filing the commercial development application we expect our independent engineers to be in a position to shift a significant number of barrels of oil from the contingent resource category to 2P reserves related to the first phase of development. Work has also begun on the front end engineering and design (FEED) for the first phase of the commercial project.

The Blackrod leases have a recoverable contingent resource assigned to them in excess of 600 million barrels.

Onion Lake

Onion Lake is a conventional heavy oil property that also provides us with a significant SAGD thermal opportunity.

In Q1 2012, we successfully drilled 17 wells as part of our on-going conventional development plans. An additional 20 to 25 wells are planned for the remainder of the year. Our current drilling inventory for conventional development includes over 150 wells, which we expect to drill over the next three or four years.

We filed a 12,000 barrel per day SAGD development application at Onion Lake in 2011. The review of this application by Indian Oil and Gas Canada, the Saskatchewan government and the Onion Lake First Nation is continuing and we anticipate receiving regulatory approval late this year. Timing of thermal development at Onion Lake will be established after regulatory approval is obtained.


At Mooney, we continue to inject Alkali, Surfactant, Polymer (ASP) into the flood area lands with the intention of re-pressurizing the reservoir and increasing oil recovery from the area. We are seeing increased pressure build-up in the reservoir and expect to see a meaningful oil production response later this year. Anticipated peak production rates of 3,000 to 4,000 barrels of oil per day from the first phase of the flood area should be reached in 2013.

We are also continuing to develop the lands surrounding the existing Phase 1 flood area. In the fourth quarter of 2011 we drilled nine horizontal wells to the west of the existing flood. Eight of the nine wells are on production, with 30 day initial production rates averaging over 130 barrels of oil per day for each well. In the first quarter of 2012 we drilled three horizontal wells to extend the pool directly east of the Phase 1 flood lands. These wells will be completed and put on production in the second quarter of 2012. We plan to drill an additional 15 to 20 horizontal wells in the Mooney area during the remainder of the year. These wells will eventually be included in an expansion of the ASP flood.

Construction of the heavy oil processing facility to handle the increased production volumes is on-going and is expected to be commissioned during the third quarter.

Non-core Areas

John Lake is a conventional heavy oil property located 10 miles west of our Onion Lake development. The primary zone of interest on this property is the Sparky formation at a depth of approximately 525 metres. The Sparky reservoir provided limited success to previous operators using conventional vertical drilling due to low well productivity and high operating costs. BlackPearl elected to drill a horizontal well in late 2010 and achieved very encouraging results with production near 100 barrels of oil per day. In the fourth quarter of 2011 we drilled eight successful horizontal wells and have increased current production to over 500 barrels of oil per day. We have also delineated a new Cummings oil pool on our lands which we are successfully exploiting using vertical wells. We plan to drill up to 15 additional Sparky and Cummings wells at John Lake during the remainder of the year. We believe the area has the potential to support a development of 40 to 60wells. We own 100% of this project.


Oil and gas production averaged 9,581 barrels of oil equivalent per day in the first quarter of 2012, a 37% increase from the comparable quarter in 2011. In addition, Q1 2012 production represented a 10% increase above Q4 2011 levels. The increase in production is mainly attributable to the additional drilling at Onion Lake, as well as drilling activity in the non-flood area at Mooney.

Average Daily Sales Volume

Three months ended
March 31
(boe/day) 2012 2011
Onion Lake 6,732 5,520
ASP flood area 504 518
Non-flood areas 1,522 404
John Lake 559 297
Other 23 276
9,340 7,015
Blackrod SAGD pilot 241 -
9,581 7,015

Financial Results

Oil and gas revenues increased 67% in the first quarter of 2012 to $57.8 million compared with $34.7 million in Q1 2011. The increase was primarily attributable to a 33% increase in oil sales volumes and a 24% increase in realized crude oil prices in 2012.

The higher wellhead price reflects stronger WTI oil prices in Q1 2012 compared with 2011 (US$102.88/bbl vs US$93.95/bbl). Heavy oil differentials were wider this quarter than prior quarters as a result of scheduled and unscheduled refinery shutdowns, as well as capacity constraints on several pipeline systems.

Operating costs were $19.63 per boe in Q1 2012, which is an increase from previous quarters. The increase reflects higher workover and well servicing costs this quarter, as well as higher emulsion trucking charges, particularly in the Onion Lake area, due to tight capacity at nearby oil processing facilities.

The increase in oil production and higher wellhead prices resulted in cash flow from operations (before working capital adjustments) increasing 102% in Q1 to $23.8 million compared to $11.8 million for the same period in 2011. Net income increased to $3.6 million in 2012 from $0.5 million in Q1 2011.

Financial and Operating Highlights

Three months ended
March 31
2012 2011
Daily production / sales volumes (1)
Oil (bbl/d) 9,541 6,656
Natural gas (mcf/d) 234 2,153
Combined (boe/d) 9,581 7,015
Product pricing ($)
Crude oil - per bbl 68.20 56.47
Natural gas - per mcf 2.24 3.84
Combined - per boe 67.98 54.92
($000's, except per share and boe amounts)
Oil and gas revenue - gross 57,776 34,675
Royalties ($/boe) 15.60 14.28
Transportation costs ($/boe) 2.12 0.72
Operating costs ($/boe) 19.63 17.61
Net income (loss) for the period 3,574 462
Per share, basic and diluted 0.01 0.00
Cash flow from operating activities, before working capital adjustments 23,799 11,754
Capital expenditures 43,469 38,121
Working Capital, end of period 22,100 120,506
Long term debt - -
Shares outstanding, end of period 285,172,678 283,379,487
(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.

The 2012 first 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 ( or SEDAR (

This news release includes terms commonly used in the oil and natural gas industry, such as cash flow and cash flow from operations which represent cash flow from operating activities expressed before changes in non-cash working capital. These terms are 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. These terms do not have standardized meanings 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.

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 information typically contains statements with words such as "anticipate", "believe", "plan", "continuous", "estimate", "expect", "may", "will", "project", "should", "target", "forecast" or similar words suggesting future outcomes. In particular, this document contains forward-looking statements pertaining to the timing of filing development applications at Blackrod and the timing of receiving development approvals for our Blackrod and Onion Lake SAGD projects, the Company's estimated production levels of the Blackrod SAGD pilot, determination of commerciality of the Blackrod project, resource estimates at Blackrod the potential reclassification of resource into reserves at Blackrod as well as potential production levels from the area, drilling plans at Onion Lake, Mooney and John Lake and anticipated future production from these areas.

Statements relating to reserves and contingent resources are forward-looking, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and contingent resources described exist in the quantities predicted or estimated and can profitably be produced in the future.

Undue reliance should not be placed on forward-looking statements, which are inherently uncertain, are based on estimates and assumptions, and are subject to known and unknown risks and uncertainties (both general and specific) that contribute to the possibility that the future events or circumstances contemplated by the forward-looking statements will not occur. 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.

With respect to forward-looking statements contained in this press release, management has made assumptions regarding future production levels; future oil and natural gas prices; future operating costs; timing and amount of capital expenditures; the ability to obtain financing on acceptable terms; availability of skilled labour and drilling and related equipment; general economic and financial market conditions; continuation of existing tax and regulatory regimes; 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.

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, 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 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. Accordingly, 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 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.

BlackPearl's Certified Advisor on First North is E. Öhman J:or Fondkommission AB.

Company Registration Number: 409596-1

The report for the three months ending June 30, 2012 will be published on or before August 14, 2012.


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 (FAX)

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