PetroBakken Provides Operational Update Highlighted by Production of Over 43,000 boepd at the End of September 2011, A 22% Increase Over Q2 2011 10/03 07:00 AM
CALGARY, ALBERTA--(Marketwire - Oct. 3, 2011) - PetroBakken Energy Ltd. (PBKEF:$6.5800,$0.0715,1.10%) ("PetroBakken" or the "Company") , a 59% owned subsidiary of Petrobank Energy and Resources Ltd. (PBEGF:$6.2680,$0.2080,3.43%) , is pleased to report drilling and operating results for the third quarter of 2011.
Production at the end of September exceeded 43,000 barrels of oil equivalent per day ("boepd") (87% light oil and NGLs), a 22% increase over second quarter 2011 production levels, based on field estimates. Our Bakken business unit production is again over 20,000 boepd while our Cardium business unit production now exceeds 14,000 boepd, with the remainder of the production generated by our southeast Saskatchewan Conventional and AB/BC business units. We estimate that we have approximately 3,000 boepd of additional productive capacity currently down due to well maintenance, site access constraints (primarily related to flooding originating in the second quarter) and facility maintenance.
Drilling activity in the quarter resulted in 96 (69.9 net) wells, a decrease of 19 (5.1 net) wells over the same period last year. Third quarter activity saw 32 (25.2 net) wells drilled in the Bakken, 44 (31.3 net) wells drilled in the Cardium, 19 (12.4 net) wells drilled in our Saskatchewan Conventional business unit and 1 (1.0 net) well in our AB/BC business unit. Consistent with an active program, at the end of the quarter we had an inventory of 47.7 net wells either waiting to be completed or to be placed on production. Of these wells, 13.7 net wells were in the Bakken (6.8 net of which are on production but not stimulated) and 24.5 net wells were in the Cardium.
We continue to execute on our business plan and currently have 18 drilling rigs operating: 8 within the Cardium fairway of Alberta, 6 within the Bakken fairway in southeast Saskatchewan, 2 drilling conventional prospects in southeast Saskatchewan and 2 drilling exploration wells in central Alberta. We anticipate that an additional 48 net wells will be drilled and a total of 75 net wells will be brought on stream by the end of the year. This would leave an anticipated inventory of 21 net wells which would be expected to be brought on stream in the first quarter of 2012.
At the end of September, PetroBakken had $1.14 billion drawn (essentially unchanged from the end of June 2011) on our three year, $1.35 billion credit facility, leaving us with over $200 million of credit capacity available on the current line in addition to our growing cash flow. Recently, there has been some market focus on our convertible debentures which mature in February 2016. The debentures have a one-time, one-day early put option on February 8, 2013 that allows those holders that elect to exercise the option to request payment in full for their debentures. In the event that holders request payment, PetroBakken has the option to repay in cash or through the issuance of PetroBakken shares based on the then current share price.
The Company has been, and will continue to be, pursuing various options to provide additional flexibility in order to repay any bonds that may be put back to us with either cash or shares. In addition to our growing production base and the potential for increasing cash flow over time, those options include: modifying our capital program and/or altering our dividend to provide additional free cash flow; issuing additional debt instruments; instituting a dividend reinvestment program; renegotiating the terms of the existing convertible debentures; or realizing on asset sales. Early in the second quarter of 2011, the Company engaged TD Securities Inc. as financial advisor, to assist the Company in our assessment and pursuit of certain options to provide increased liquidity, and we continue to actively evaluate alternatives going forward. Further announcements on the progress of this process will be made at the appropriate time.
We have positioned our asset base to focus on value creation for our shareholders, and decisions on how best to manage the business are made with both a short term and long term strategic outlook in mind. PetroBakken has built a strong portfolio of assets with a multi-year inventory of light oil drilling locations from which we can generate accretive, long term, growth. This portfolio includes over 440,000 net acres with over 1,400 net drilling locations in the well established Bakken and Cardium light oil resource plays; more than 480,000 net undeveloped acres and 300 light oil net drilling locations for conventional opportunities in southeast Saskatchewan; over 120,000 net undeveloped acres on new potential light oil resource plays (many that have seen significant attention by the industry in recent land sales); and a material land position in northeast British Columbia for future natural gas opportunities. With this asset base, and based on our current activity plans, we intend to deliver year-end 2011 production of 46,000 to 49,000 boepd. At the mid-point of this range, and based on US$85 WTI per barrel, we would expect to generate annualized cash flow of approximately $850 million. With expected continued growth in production in 2012, we would anticipate funds flow from operations (based on a similar WTI price) to grow further to equal or exceed our total capital expenditures and dividend payments. However, if conditions change, we will not hesitate to evaluate the other alternatives available to us, including altering our dividend and/or capital spending levels.
Current economic conditions and market rumours have caused shareholder focus to be turned away from the high quality, light oil assets that underpin the Company, to the perceived strength of our balance sheet in light of the convertible debenture put date (that is 16 months away) and our current capital and dividend plans. We are aware of the concern over our debt position and, as outlined above, we have several options at our disposal which we are actively assessing to effectively manage this situation in varying commodity price environments while continuing to pursue our strategies for long term, accretive, growth.par_putt
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