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Black Pearl Drills Nothing in 1Q16; Spends $2 Million

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BlackPearl Resources Inc. is pleased to announce its financial and operating results for the three months ended March 31, 2016.

Highlights 

• Production averaged 9,166 barrels of oil equivalent (boe) per day, an 11% increase compared to Q1 2015 volumes. The increase is attributable to the production ramp-up on the Onion Lake thermal project. 
• Operating costs and transportation costs averaged $15.03/bbl, a 36% decrease from Q1 2015.
• During a period of exceptionally low oil prices we reduced our bank debt by $2 million to $86 million at March 31, 2016.
• The first phase of the Onion Lake thermal EOR project is currently producing 5,300 barrels of oil per day – on target to reach its design capacity of 6,000 barrels per day by mid-year.
• The Blackrod SAGD pilot continues to provide very positive results – the pilot has averaged over 550 barrels of oil per day at a steam oil ratio of 2.75 over the last 12 months.   

Operations Review

Blackpearl did not undertake any new drilling activity during the first quarter of 2016. Capital expenditures in the first quarter were $2 million.

At Onion Lake, Blackpearl continues to achieve a steady production ramp-up from the first phase of our thermal EOR project. Blackpearl initiated steam injection in June of last year and achieved first oil in September. During the first quarter of 2016 oil production from the project averaged over 4,200 bbl/d, with a steam oil ratio of 3.5. In April, the project produced approximately 5,300 bbl/d with a steam oil ratio of 2.9 and we are on target to reach our design capacity of 6,000 bbl/d by mid-year. Blackpearl started preliminary planning for the second 6,000 bbl/d phase on the project; however, they do not expect to incur any significant expenditures on this phase until oil prices improve. The thermal project in the Onion Lake area is our lowest cost production. During the first quarter of 2016 operating and transportation costs were $15.17/bbl on the thermal project, and costs are expected to trend lower as production volumes increase.

At Blackrod, Blackpearl did not undertake any new activities in 2016; however, the existing SAGD pilot is continuing to perform exceptionally well. In March, oil production averaged over 600 bbls/d, with a steam oil ratio of 2.7. The pilot well’s production rate has averaged in excess of 550 bbl/d of oil for 12 consecutive months and has cumulatively produced over 300,000 barrels of oil. Blackpearl plans to continue operating the pilot. 

At Mooney, during the first quarter of 2016 Blackpearl temporarily shut-in the majority of the first phase of the ASP flood until oil prices improve. Temporarily shutting-in the ASP flood is not expected to affect the ultimate recovery of the reserves in the area.  

Production

Oil and gas production averaged 9,166 barrels of oil equivalent per day in the first quarter of 2016, an 11% increase compared with the first quarter of 2015. The increase reflects the successful ramp-up of production from the Onion Lake thermal EOR project. Production has decreased in non-thermal areas as a result of limited new drilling activity, natural declines as well as the result of the Company’s decision to temporarily shut-in oil production at Mooney and on our conventional Onion Lake properties. Approximately 900 bbl/d are currently shut-in at Mooney and 1,000 bbl/d at Onion Lake. Blackpearl plans to put these wells back on production when oil prices recover to a level where they can contribute positive cash flow to our operations.

Financial Results

During the first quarter Blackpearl realized a gain of $6.1 million from our oil hedging program, which was the equivalent of adding $7.84 per barrel to our wellhead price in the quarter.

Bank debt at March 31, 2016 was $86 million. The total credit facilities available to the Company are currently $150 million.

Outlook

Blackpearl plans to spend $10 to $15 million on capital projects, unchanged from our February guidance. 

The capital program is expected to be funded from anticipated funds flow from operations which is expected to be between $20 and $25 million, up from February guidance of $5 to $10 million. The increase in funds flow is a result of an increase in our forecast oil prices for the remainder of the year. For budget purposes, we are using US$40/bbl WTI prices, a heavy oil differential of US$14/bbl and Cdn$1=US$0.77 foreign exchange rate for the remainder of the year. A portion of anticipated funds flow is also expected to be used to reduce our debt levels. Yearend debt levels are expected to between $75 and $80 million, a decrease from our February guidance of $90 to $95 million. 

Oil and gas production is anticipated to average between 9,000 and 10,000 boe/d in 2016, unchanged from our February guidance.