BlackPearl Announces Fourth Quarter and Full Year 2012 Financial and Operating Results

BlackPearl Announces Fourth Quarter and Full Year 2012 Financial and Operating 
Results 
CALGARY, ALBERTA -- (Marketwire) -- 02/26/13 -- BlackPearl Resources
Inc. ("BlackPearl" or the "Company") (TSX:PXX)(OMX:PXXS) is pleased
to announce its financial and operating results for the three and
twelve months ended December 31, 2012.  
Highlights and accomplishments in 2012 included: 


 
--  Oil and gas production increased 23% in 2012 to 9,366 boe/day; Q4 2012
    production was 9,067 boe/day, up 4% from the prior year;
 
--  Oil and gas revenues increased 14% in 2012 to $205 million and cash flow
    from operations increased 6% to $83 million. Q4 2012 revenues were down
    18% to $48 million compared to Q4 2011 and cash flow from operations in
    the fourth quarter was $18 million, a decrease of 36% from 2011;
 
--  Net income decreased to $45,000 in 2012 compared with net income of
    $18.9 million in 2011; 2011 net income included a gain on disposition of
    certain oil and gas properties and a large deferred tax benefit; 
 
--  As reported on February 13, 2013, BlackPearl's oil and gas proved plus
    probable reserves increased 496% in 2012 to 213 million barrels of oil
    equivalent, before royalties and "best estimate" contingent resource for
    our three core properties were 582 million barrels of oil equivalent,
    before royalties (see cautionary statement on contingent resources
    below(1));
 
--  At Blackrod, the 80,000 barrel per day SAGD commercial development
    application was filed in May 2012 with the Energy Resources Conservation
    Board (ERCB) and Alberta Environment. The first phase of the project is
    expected to be 20,000 barrels of oil per day. In addition, Sproule
    Unconventional Limited, our independent reserves evaluator, reclassified
    180 million barrels of "best estimate" contingent resource to probable
    reserves pertaining to the first phase of SAGD development at Blackrod.
    In addition, detailed engineering design work for Blackrod commenced in
    the fourth quarter. We will expand the pilot in 2013, drilling an
    additional well pair during the first quarter.
 
--  At Mooney, ASP (Alkali Surfactant Polymer) injection continued in 2012.
    As a result of re-pressurization of the reservoir, production increased
    most notably in the fourth quarter. In addition, we successfully drilled
    16 horizontal wells in 2012 on phase two and three development lands at
    Mooney. Further drilling on these lands is planned in 2013. These wells
    will be produced conventionally and then added to the ASP flood in the
    future;
 
--  At Onion Lake, in 2012 we drilled 43 vertical wells as part of our
    continuing primary development program. This program has identified
    further locations that we can add to our development drilling inventory
    as well as potentially expand our thermal development area. We will
    continue with our primary development program with 20 wells planned in
    2013. Concurrently with our primary development, we continue to advance
    our Onion Lake thermal development plans and anticipate regulatory
    approval of our planned 12,000 barrel of oil per day SAGD project in the
    first half of 2013. 

 
John Festival, President of BlackPearl, commenting on 2012 activities
indicated that "our long term sustainable growth will come from our
two large thermal projects and we made good strides advancing both of
these projects in 2012. At Blackrod, we filed our development
application with regulatory authorities and we gained valuable
knowledge from operating the pilot well pair during the last twelve
months. We will use what we learned from the first well pair to
expand the pilot in 2013 and to assist in our commercial development
design. 
"At Onion Lake, we continued to advance our thermal development plans
through the regulatory review process which should culminate in
obtaining project approvals in 2013. Potentially, we could have
development approvals for both our Onion Lake and Blackrod thermal
projects in 2013. 
"We were also pleased with the development of our conventional heavy
oil program in 2012. We saw a very positive response from our ASP
flood at Mooney late in the year and the initial drilling results on
our expansion lands have been very good, which will allow us to
expand the flood to these areas in the next 12 to 18 months. At Onion
Lake, primary production in certain areas is maturing. As a result,
we saw production declines at Onion Lake in 2012; however, we have a
drilling inventory of over 100 wells and plan to continue primary
development until we transition into our thermal project. 
"In 2013, we look forward to securing development financi
ng for one
or both of our thermal projects. We are evaluating a number of
financing alternatives. Our aim is to balance minimizing dilution to
our shareholders while not taking on excessive financial risk. We
expect to provide our shareholders with our financing strategy over
the next three or four months." 


 
1.  This news release makes reference to contingent resources. Contingent
    resources are defined in the COGE Handbook as those quantities of
    petroleum estimated, as of a given date, to be potentially recoverable
    from known accumulations using established technology or technology
    under development, but are not currently considered to be commercially
    recoverable due to one or more contingencies. Contingencies may include
    factors such as economic, legal, environmental, political and regulatory
    matters or a lack of markets. In the case of the contingent resources
    assigned to BlackPearl's three core projects the contingencies include
    the requirement for more evaluation drilling to better define the
    resource, the absence of submission of commercial SAGD development
    applications (for future phases of development at Blackrod), the
    likelihood of attaining regulatory approvals for commercial SAGD
    development (for our Onion Lake SAGD project), further establishment of
    increased oil production response from the ASP flood at Mooney and the
    uncertainty of the timing of production and development. There is no
    certainty that it will be commercially viable to produce any of the
    contingent resources. .These volumes are the arithmetic sums of the Best
    Estimate Resources for Blackrod, Mooney and Onion Lake. Best estimate
    (P50) is a classification of estimated resources described in the COGE
    Handbook as being considered to be the best estimate of the quantity
    that will be actually recovered. It is equally likely that the actual
    remaining quantities recovered will be greater or less than the best
    estimate. If probabilistic methods are used, there should be at least a
    50% probability that the quantities actually recovered will equal or
    exceed the best estimate. Please refer to our Annual Information Form
    for a more detailed discussion of our contingent resources. 
 
                                                                            
Financial and Operating Highlights                                          
                                                                            
----------------------------------------------------------------------------
                                            Three months       Twelve months
                                                   ended               ended
                                            December 31,        December 31,
                     
                     2012      2011      2012      2011
----------------------------------------------------------------------------
                                                                            
Daily sales volumes (1)                                                     
 Oil (bbls/d)                            8,994     8,682     9,304     7,460
 Natural gas (mcf/d)                       440       317       374       960
                                    ----------------------------------------
 Combined (boe/d)                        9,067     8,735     9,366     7,620
                                                                            
($000s, except where noted)                                                 
Revenues                                                                    
Oil and natural gas revenue - gross     47,569    58,160   204,525   179,443
                                                                            
Net income (loss) for the period       (4,277)    15,504        45    18,911
 Per share, basic ($)                   (0.01)      0.05      0.00      0.07
 Per share, diluted ($)                 (0.01)      0.05      0.00      0.06
                                                                            
Cash flow from operations (2)           17,684    27,791    82,595    77,717
                                                                            
Capital expenditures                    34,635    56,974   139,548   192,634
Property dispositions                        -   (3,500)         -   (6,100)
                                                                            
Working capital, end of period         (7,788)    37,825   (7,788)    37,825
Long term debt                               -         -         -         -
                                                                            
Shares outstanding, end of period                                           
 (000s)                                295,766   284,802   295,766   284,802
                                                                            
(1) Boe is based on a conversion ratio of 6 mcf of natural gas to 1 bbl of  
oil. Boe may be misleading, particularly if used in isolation. A boe        
conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency          
conversion method primarily applicable at the burner tip and is not intended
to represent a value equivalency at the wellhead.                           
(2) Cash flow from operations is a non-GAAP measure and, therefore, may not 
be comparable to similar measures used by other companies. It represents    
cash flow from operating activities before abandonment costs incurred and   
changes in non- cash working capital related to operations.                 

 
FOURTH QUARTER 2012 ACTIVITIES 
Oil and gas revenues were $47.6 million in the fourth quarter of 2012
compared to $58.2 million in the same quarter of 2011. The decrease
in revenues was primarily due to a significant drop in the average
wellhead prices received.  
Lower wellhead prices in Q4 2012 were the result of lower oil prices
and wider heavy oil differentials. The WTI oil price in Q4 2012 was
US$88.51 per barrel compared to US$94.03 per barrel in 2011 and the
heavy oil differential (between WTI and Western Canadian Select) was
$18.46 per barrel in Q4 2012 compared to $10.70 per barrel in 2011.
Increased production in Canada and the US, together with pipeline
constraints and refinery outages contributed to the decrease in North
American oil prices. 
BlackPearl sold an average of 9,067 boe per day during the fourth
quarter of 2012, an increase of 4 percent over the same quarter in
2011. The increase in sales volumes are mostly attributable to
continued development drilling at Onion Lake and Mooney, as well as
the re-pressurization response from the first phase of the ASP flood
at Mooney, partially offset by natural declines at Onion Lake. 
Royalty rates decreased to 23% in the fourth quarter of 2012 compared
to 25% in the same quarter of 2011. The decrease in the royalty rate
in 2012 reflects the proportionate increase in production from the
Mooney field, which has lower royalties than our other producing
areas due to incentive programs for EOR projects and the lower
initial royalty rates for drilling new wells. Operating costs were
generally comparable in Q4 2012 and 2011.Transportation costs
increased significantly in Q4 2012 from the prior year primarily due
to increased production volumes from the Mooney area where travel
distances to sales delivery points are greater than our other areas.
G&A expenses increased due to one-time costs related to applying to
have the Company's Swedish Depository Receipts listed on the main
market exchange in Sweden.  
Cash flow from operations in the fourth quarter of 2012 was $17.7
million compared to $27.8 million in the fourth quarter of 2011. The
decrease in cash flow from operations was primarily due to the drop
in average wellhead prices received. We had a net loss in the fourth
quarter of 2012 of $4.3 million compared to net income of $15.5
million in 2011. The decrease in net income is primarily a result of
a decrease in heavy oil prices, an impairment charge to two of our
non-core properties of $5.0 million and the recognition of certain
deferred tax benefits in 2011. 
Capital expenditures in the fourth quarter of 2012 were $34.6
million, a 39 percent decrease compared to the fourth quarter of
2011. The decrease is a result of the reduced drilling activity in Q4
2012. 


 
Production                                                            
                                                                      
                                  Three months           Twelve months
                                         ended                   ended
                                  December 31,            December 31,
                      ------------------------------------------------
(boe/day)                     2012        2011        2012        2011
                      ------------------------------------------------
Onion Lake                   4,857       6,805       5,947       6,272
Mooney                       3,329       1,102       2,537         788
John Lake                      649         413         573         343
Blackrod SAGD Pilot            221         178         272          57
Other                           11         237          37         160
                      ------------------------------------------------
                             9,067       8,735       9,366       7,620
                      ------------------------------------------------
                                                                         
Operating Statistics                                                     
                                                                         
-------------------------------------------------------------------------
                                     Three months           Twelve months
                                            ended                   ended
                                     December 31,            December 31,
                                 2012        2011        2012        2011
----------------------------------------------------------------------
---
($ per boe)                                                              
Oil and natural gas                                                      
 revenue                        58.45       73.88       61.45       65.00
Royalties                       13.29       18.13       13.68       16.49
Transportation costs             3.07        0.60        2.76        0.52
Operating costs                 17.89       17.80       17.82       17.80
-------------------------------------------------------------------------
Netback(1)                      24.20       37.35       27.19       30.19
-------------------------------------------------------------------------
(1) Operating netback is a non-GAAP measure. It does not have a standardized
meaning prescribed by GAAP and, therefore, may not be comparable to similar 
measures used by other companies in the oil and gas industry.               

 
2013 Guidance 
Our plans and outlook for 2013 are outlined below. Typically these
plans will be modified throughout the year as conditions and
circumstances change. 


 
                                                   Initial          February
2013 Guidance                                     Guidance            Update
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production (boe/d)                                                          
 Annual average                            10-500 - 11,000    9,000 - 10,000
 Exit                                      11,000 - 12,000   10,000 - 10,500
                                                                            
Cashflow from operations ($millions)               75 - 85           50 - 60
Capital expenditures ($millions)                 140 - 160         125 - 140
                                                                            
Year-end debt ($millions)                          80 - 90           80 - 90
Year-end working capital ($millions)                 0 - 5             0 - 5
                                                                            
Pricing Assumptions (annual average)                                        
 Crude oil - WTI                                     US$88             US$95
 Light/heavy differential                            US$18             US$27
 Foreign Exchange (Cdn$ to US$)                       1.00              1.00

 
Our initial guidance for 2013 anticipated a capital spending program
of $140 to $160 million. As a result of a significant decrease in
heavy oil prices during the first quarter of 2013 we elected to defer
some of our first quarter capital spending. As a result, we have
decreased our estimated 2013 capital spending to between $125 and
$140 million. The Blackrod project continues to dominate our 2013
capital expenditure program, accounting for over 45% of our revised
budget. Our plans in 2013 for the Blackrod area remain unchanged. We
plan to expand the existing pilot with a second well pair, continue
with detailed engineering design for the first phase of development
and order long lead equipment items for the central processing
facility. At Mooney we will continue development of the phase two
lands with 15 to 20 horizontal wells planned; a decrease from our
original plan of drilling 20 to 25 wells. At Onion Lake we will
continue primary development with 20 vertical wells planned. We have
also reduced spending on some of our minor non-core assets.  
Cash flow from operations is expected to be between $50 and $60
million. The decrease in our estimated cash flow from operations from
our initial guidance reflects lower forecast oil prices in the first
quarter of 2013 and reduced capital spending which impacts our
production guidance. 
It is expected that this capital program will be funded from
anticipated cash flow from operations and the Company's credit
facilities. 
The Company's financial statements, notes to the financial
statements, management's discussion and analysis and Annual
Information Form have been filed on SEDAR (www.sedar.com) and are
available on the Company's website (www.blackpearlresources.ca). The
Annual Information Form includes the Company's reserves and resource
data for the period ended December 31, 2012 as evaluated by Sproule
Unconventional Limited and other oil and natural gas information
prepared in accordance with National Instrument 51-101 Standards of
Disclosure for Oil and Gas Activities. BlackPearl's annual general
meeting of shareholders will be held on May 9, 2013 in Calgary
Alberta.  
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
statements typically contain words such as "anticipate", "believe",
"plan", "continuous", "estimate", "expect", "may", "will", "project",
"scheduled", "should", 'predict", "targeting", "seek", "intend",
"could", "potential", "outlook" or similar words suggesting future
outcomes. In particular, but without limiting the foregoing, this
news release contains forward-looking statements pertaining to our
business plans and strategies; capital expenditure and drilling
programs; timing for receipt of regulatory approvals for our Onion
Lake thermal project and the first phase of development at our
Blackrod SAGD project, ability and expected timing to finance our
capital expenditure programs, particularly the thermal projects at
Blackrod and Onion Lake; anticipated oil and gas production levels
from the Onion Lake thermal project and the Blackrod SAGD project;
future oil and gas prices and their impact on BlackPearl; and
corporate guidance for 2013 included in the "2013 Guidance" section
of this release. 
In addition, 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
reserves and resources described exist in the quantities predicted or
estimated and can be profitably produced in the future. 
The forward-looking statements in this news release reflect certain
assumptions and expectations by management. The key assumptions that
have been made in connection with these forward-looking statements
include the continuation of current or, where applicable, assumed
industry conditions, the continuation of existing tax, royalty and
regulatory regimes, commodity price and cost assumptions, the
continued availability of cash flow or financing on acceptable terms
to fund the Company's capital programs, the accuracy of the estimate
of the Company's reserves and resource volumes and that BlackPearl
will conduct its operations in a manner consistent with past
operations. 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 which could cause actual results to differ
materially from those contained in forward-looking statements. 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 and Alkali Surfactant Polymer recovery
processes; credit risks associated with counterparties; the failure
of the Company or the holder of licenses, leases and permits to meet
requirements of such licenses, 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 and others may be found under "Risk Factors" in the Annual
Information Form. 
Undue reliance should not be placed on these forward-looking
statements. 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 assumptions, risks and factors is not exhaustive. Consequently,
there is no assurance by the Company that actual results achieved
will be the same in whole or in part as those set out in the
forward-looking statements. Furthermore, the forward-looking
statements contained in this news release are made as of the date
hereof, and the Company 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.
Contacts:
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)
www.blackpearlresources.ca
 
 
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