Palliser Oil & Gas Corporation reports second quarter 2013 results, record funds flow from operating activities

Palliser Oil & Gas Corporation reports second quarter 2013 results, record 
funds flow from operating activities 
/NOT FOR DISTRIBUTION IN THE UNITED STATES NEWSWIRE SERVICES OR FOR 
DISSEMINATION IN THE UNITED STATES/ 
CALGARY, Aug. 21, 2013 /CNW/ - Palliser Oil & Gas Corporation ("Palliser" or 
the "Company") (TSX VENTURE:PXL) is pleased to announce financial and 
operating results for the three and six months ended June 30, 2013. Certain 
selected financial and operational information is set out below and should be 
read in conjunction with Palliser's unaudited condensed financial statements 
complete with the notes to the financial statements and related MD&A which 
will be available at www.sedar.com and the Company's website at 
www.palliserogc.com. 

Operating & Financial Highlights - Three and Six Months Ended June 30, 2013 
and 2012 (unaudited) 


                                                  
                      Three months ended              Six months ended 
                            June 30                          June 30 
                                          %                             %
                     2013       2012 Change        2013       2012 Change

Operating                                                                
                                                                         

Wells drilled,
re-entered or
reactivated                                  
(gross and
net)                                                                     

Oil                                          
                        2          4   -50%          12          6   100%

Salt water                                   
disposal                -          1  -100%           1          2   -50%

Total                                        
                        2          5   -60%          13          8    63%

Success (%)                                  
                     100%       100%     0%        100%        88%    14%

Undeveloped
land Greater                                 
Lloydminster                                           
(net acres)        34,922     23,617    48%      34,922     23,617    48%

Undeveloped
land Medicine                                
Hat (net                                               
acres)             24,410     29,042   -16%      24,410     29,042   -16%

Total
undeveloped                                  
land (net                                              
acres)             59,332     52,659    13%      59,332     52,659    13%

Average daily                                
production                                                               

Crude oil (bbl                               
per day)            2,730      1,877    45%       2,449      1,810    35%

Natural gas                                  
(Mcf per day)         257        390   -34%         276        383   -28%

Barrels of oil
equivalent                                   
(boe per day,
6:1)                2,773      1,942    43%       2,495      1,874    33%

Crude oil                                    
production (%)        98%        97%     1%         98%        97%     1%

Average sales                                
prices                                                                   

Crude oil ($                                 
per bbl)         $  69.30  $   60.67    14%    $  61.59  $   65.50    -6%

Natural gas ($                               
per Mcf)         $   3.43  $    1.80    91%    $   3.16  $    1.97    60%

Barrels of oil
equivalent ($                                
per boe, 6:1)    $  68.54  $   59.00    16%    $  60.82  $   63.79    -5%

Operating
netback ($ per                               
boe)                                                                     

Petroleum and
natural gas                                  
sales            $  68.54  $   59.00    16%    $  60.82  $   63.79    -5%

Realized gain
(loss) on                                    
financial
derivatives      $   2.20  $    3.53   -38%    $   3.93  $    0.72   446%

Royalties        $  16.88  $   12.69    33%    $  14.50  $   14.37     1%

Production,
operating &                                  
transportation
expenses         $  22.95  $   21.75     6%    $  26.02  $   24.05     8%

Operating                                    
netback ((1))    $  30.91  $   28.09    10%    $  24.23  $   26.09    -7%

    

Financial ($000's except per share amounts)
                                                                                        
                               Three months ended                       Six months ended
                                       June 30                                June 30
                                                     %                                      %
                            2013           2012 Change             2013           2012 Change
                                                                                             

Oil and natural                                         
gas sales          $      17,294  $      10,428    66%    $      27,470  $      21,756    26%
                                                                                             

Funds flow from                                                                              

  operating
  activities (                                          
  (2))             $       6,103  $       3,666    66%    $       7,785  $       6,366    22%

Per share -
basic and                                               
diluted            $        0.10  $        0.07    43%    $        0.12  $        0.12     0%
                                                                                             

Net income                                              
(loss) and                                                                                   

  comprehensive                                         
  income (loss)    $       (610)  $       4,538      -    $     (5,097)  $       5,139      -

Per share -
basic and                                               
diluted            $      (0.01)  $        0.08      -    $      (0.08)  $        0.09      -
                                                                                             

Weighted                                                
average                                                                                      

  shares                                                
  outstanding         63,915,979     54,130,348    18%       63,059,625     54,130,348    16%

Shares                                                  
outstanding           63,915,979     54,130,348    18%       63,915,979     54,130,348    18%
                                                                                             

Capital
expenditures (                                          
(3))               $       3,987  $       6,491   -39%    $      12,711  $      15,597   -19%

Working capital
(net debt) (                                            
(4))               $    (39,539)  $    (30,098)    31%    $    (39,539)  $    (30,098)    31%

Shareholders'                                           
equity             $      43,602  $      45,698    -5%    $      43,602  $      45,698    -5%



((1))  Operating netback is a non-GAAP measure and is the net of
       petroleum and natural gas sales, realized gain or loss on
       financial derivatives, royalties and production, operating and
       transportation expenses.

((2))  Funds flow from operating activities is a non-GAAP measure that
       represents cash flow from operations less decommissioning
       expenditures and changes in non-cash working capital related to
       operating activities. Funds flow per share amounts are
       calculated using weighted average shares outstanding consistent
       with the calculation of net income per share. Funds flow from
       operating activities is a key measure as it demonstrates the
       Company's ability to generate the funds necessary to achieve
       future growth through capital investment.

((3))  Capital expenditures exclude decommissioning liability costs and
       capitalized share-based compensation.

((4))  Working capital (net debt) is a non-GAAP measure representing
       the total bank loan, accounts payable and accrued liabilities,
       less accounts receivable, deposits and prepaid expenses.

Management believes these are useful supplemental measures of, firstly, the 
total net position of current assets and current liabilities of the Company 
and secondly, the profitability relative to commodity prices. Other entities 
may calculate these figures differently than Palliser.

Second Quarter 2013 Highlights
    --  Achieved record production of 2,773 boe/d. Production increased
        25% compared to the first quarter of 2013 and increased 43%
        compared to the second quarter of 2012;
    --  Achieved production, operating, and transportation expenses of
        $22.95 per boe.  Production, operating and transportation
        expenses decreased 23% compared to the first quarter of 2013
        and increased 6% compared to the prior year comparative
        quarter.  The Company remains focused on being a low operating
        cost producer;
    --  Achieved operating netback of $30.91 per boe.  Operating
        netbacks improved 96% compared to the first quarter of 2013 and
        10% compared to the second quarter of 2012;
    --  Record funds flow from operating activities of $6.1 million, or
        $0.10 per share in the second quarter.  Funds flow from
        operating activities increased 263% compared to $1.7 million in
        the first quarter of 2013 and increased 66% compared to $3.7
        million in the second quarter of 2012;
    --  Executed a $4.0 million capital program in the second quarter.
        The capital program included two wells completed for heavy oil
        production with a 100% success rate. Year to date capital
        expenditures of $12.7 million include 12 wells completed for
        heavy oil production with a 100% success rate;
    --  Increased undeveloped heavy oil land position. The Company's
        undeveloped heavy oil land position at June 30, 2013 was 34,922
        net acres, a 3% increase from March 31, 2013;
    --  Maintained a significant prospect inventory. The Company's
        prospect inventory stands at 140 locations, none of which are
        included in the 2012 independent reserves report; and
    --  Increased rail shipments to improve operating netbacks.
        Palliser increased rail shipments in the second quarter to
        1,101 boe/d, or 40% of the Company's production.

Operations

The second quarter of 2013 was a relatively quiet quarter for Palliser with 
capital expenditures totalling $4.0 million, representing 17% of the budgeted 
yearly capital program of $24 million. Activity levels were lower than the 
first quarter primarily due to spring breakup conditions. This 100% working 
interest capital program included reactivating two heavy oil wells, as well as 
upgrades and expansions to salt water disposal "SWD" facilities at Edam, 
Lloydminster and Manitou. The Company also expanded its net undeveloped heavy 
oil land holdings to 34,922 net acres as at June 30, 2013.

Second quarter production exceeded budgeted levels due primarily to production 
from 10 new wells drilled during the first quarter but not brought on stream 
until late in that quarter. These higher production volumes resulted in 
production, operating and transportation expenses of $22.95 per barrel in the 
second quarter of 2013, which represents a 23% reduction from the first 
quarter of 2013 and a 6% increase from the second quarter of 2012. The 
transportation component increased from $1.01 in the second quarter of 2012 to 
$2.01 per boe in the second quarter of 2013 as the Company intentionally 
incurred additional trucking costs to deliver oil to more lucrative rail 
contracts, which provide significantly higher netbacks per boe.

Financial

Differentials improved dramatically in the second quarter of 2013, with a 
narrowing of heavy oil differentials between West Texas Intermediate "WTI" and 
Western Canadian Select "WCS" pricing relative to the first quarter. This 
resulted in a 34% increase in net sales price from the first quarter of 2013 
and a 16% increase in net sales price from the second quarter of the previous 
year. Operating netbacks were $30.91 per boe which is a 96% increase over 
the first quarter of 2013 and 10% higher than the second quarter of 2012.

The Company's net debt at the end of the second quarter was $39.5 million, 
relative to a current total credit facility of $52 million. The significant 
improvement in funds flow in the second quarter, relative to the first 
quarter, resulted in a second quarter debt to annualized funds flow ratio of 
1.6 times. The remaining $11.3 million capital program budgeted for 2013 will 
be financed through funds flow and existing credit facilities with year-end 
net debt budgeted to be approximately $39 million.

Outlook

The second quarter of 2013 represented a strong quarter for Palliser, on the 
heels of an active first quarter capital program. Production ramped up through 
the second quarter from ten new wells brought on stream late in the first 
quarter. A prolonged spring breakup along with wet weather late in the second 
quarter, which extended into the third quarter, caused some production 
downtime in the field and the delay of numerous capital projects further into 
the third quarter. As a result, current production levels are approximately 
2,500 boe/d, based on field estimates.

The third quarter drilling program commenced in August with two new heavy oil 
wells and one salt water disposal well for a 100% success rate to date. 
Production additions from the ongoing capital program, as well as improved run 
time on existing production with improved weather conditions, should result in 
production growth through the remainder of the third and fourth quarters.

With approximately 40% of budgeted capital expenditures remaining to be spent, 
the Company is on track to achieve its 2013 production guidance of 2,700 - 
2,800 boe/d. Production, operating and transportation costs returned to the 
$23 per boe level in the second quarter and the Company remains on track to be 
a sustainable low operating cost heavy oil producer.

Heavy oil differentials, narrowed favorably during the second quarter, 
returning to more historic averages at or below the $20 per barrel level. 
Funds flow from operating activities in the second quarter exceeded $6 million 
due to improved heavy oil pricing, growing production, and a return to lower 
operating expenses. Palliser is on track to achieve its 2013 budget: funds 
flow from operating activities of approximately $20 million, operating 
netbacks of $26 per boe, and year-end net debt of $39 million.

To reduce funds flow risk from commodity price volatility, Palliser has 
recently added to its hedge positions. The Company currently has approximately 
40% of budgeted second half 2013 production volumes hedged at an average WTI 
CAD price of approximately $96 per barrel and approximately 20% of budgeted 
second half 2013 volumes hedged at an average WCS price of approximately $75 
per barrel. The Company has also entered into WTI CAD fixed price swaps for 
calendar 2014. This should provide the Company with greater price certainty 
and funds flow support.

Palliser is currently shipping approximately 45% of its oil production by rail 
to the Gulf Coast. The Company is realizing a significant price premium on 
volumes shipped by rail. By year end, we will have the ability to increase our 
rail shipments to in excess of 50% of production, if market conditions are 
favourable, with minimal incremental capital expenditure required.

Our original $24 million capital budget for 2013 assumed US$93 WTI per barrel 
and CAD$63 WCS per barrel pricing. Our internally driven capital program is to 
be funded by cash flow and credit facilities. With pricing in the second half 
of the year forecast to be higher than budgeted, the Company will be well 
positioned with flexibility to deploy any excess funds flow to the most 
prudent use of funds.

On behalf of the Board of Directors,

"Signed" Kevin J. Gibson
Chief Executive Officer

"Signed" Allan B. Carswell
President and Chief Operating Officer

August 21, 2013 Calgary, Alberta

For further information regarding Palliser Oil & Gas Corporation, the reader 
is invited to visit the Company's website at www.palliserogc.com.

Palliser is a Calgary-based emerging junior oil and gas company currently 
focused on high netback heavy oil production in the greater Lloydminster area 
of both Alberta and Saskatchewan.

Forward-Looking Statements
Certain statements contained herein constitute forward-looking statements or 
information (collectively "forward-looking statements") within the meaning of 
applicable securities legislation, including, but not limited to management's 
assessment of future plans and operations, including: commodity focus; 
drilling plans and potential locations; expected production levels; expected 
transportation methods; development and acquisition plans; reserves growth; 
production and operating sales and expenses; reservoir characteristics; the 
results of applying certain operational development techniques; certain 
economic factors; and capital expenditures. Forward-looking statements are 
typically identified by words such as "anticipate", "estimate", "expect", 
"forecast", "may", "will", "project" and similar words suggesting future 
events or performance or may be identified by reference to a future date. In 
addition, statements relating to oil and gas reserves and resources are deemed 
to be forward-looking statements as they involve the implied assessment, based 
on certain estimates and assumptions, that the reserves or resources 
described, as the case may be, exist in the quantities predicted or estimated 
and can be profitably produced in the future. With respect to 
forward-looking statements herein, Palliser has made assumptions regarding, 
among other things; future capital expenditure levels; future oil and natural 
gas prices; "differentials" between West Texas Intermediate and Western 
Canadian Select benchmark pricing; future oil and natural gas production 
levels; future water disposal capacity; future exchange rates and interest 
rates; ability to obtain equipment and services in a timely manner to carry 
out development activities; ability to market oil and natural gas successfully 
to current and new customers; the ability to ship volumes by rail; the impact 
of increasing competition; the ability to obtain financing on acceptable 
terms; and the ability to add production and reserves through development and 
exploitation activities. Although Palliser believes that the expectations 
reflected in the forward-looking statements contained herein, and the 
assumptions on which such forward-looking statements are made, are reasonable, 
there can be no assurance that such expectations will prove to be correct. 
Readers are cautioned not to place undue reliance on forward-looking 
statements included herein, as there can be no assurance that the plans, 
intentions or expectations upon which the forward-looking statements are based 
will occur. By their nature, forward-looking statements involve numerous risks 
and uncertainties that contribute to the possibility that the forward-looking 
statements will not occur, which may cause Palliser's actual performance and 
financial results in future periods to differ materially from any estimates or 
projections. Additional information on these and other factors that could 
affect Palliser's results are included in reports on file with Canadian 
securities regulatory authorities, including the Company's Annual Information 
Form, and may be accessed through the SEDAR website at www.sedar.com.

The forward-looking statements contained herein speak only as of the date 
hereof. Except as expressly required by applicable securities laws, Palliser 
does not undertake any obligation to, nor does it intend to, publicly update 
or revise any 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. In 
addition, readers are cautioned that historical results are not necessarily 
indicative of future performance.

Production volumes are commonly expressed on a barrel of equivalent ("BOE") 
basis whereby natural gas volumes are converted at a ratio of six thousand 
cubic feet to one barrel of oil. The intention is to convert oil and natural 
gas measurement units into one basis for improved analysis of results and 
comparisons with other industry participants. The term BOE may be misleading, 
particularly if used in isolation. The conversion ratio is based on an 
energy equivalent method and does not represent an economic value equivalency 
at the wellhead.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that 
term is defined in the policies of the TSX Venture Exchange) accepts 
responsibility for the adequacy or accuracy of this Press release.





SOURCE  Palliser Oil & Gas Corporation 
Kevin J. Gibson CEO kgibson@palliserogc.com (403) 209-5717 
or 
Allan B. Carswell President and COO acarswell@palliserogc.com (403) 209-5709 
or 
Ivan J. Condic Vice President, Finance and CFO icondic@palliserogc.com (403) 
209-5718 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/August2013/21/c7469.html 
CO: Palliser Oil & Gas Corporation
ST: Alberta
NI: OIL ERN  
-0- Aug/21/2013 22:01 GMT
 
 
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