Petrobank Energy and Resources Ltd. ("Petrobank" or the "Company") (TSX:PBG) is
pleased to announce our third quarter 2010 financial and operating results,
highlighted by a 91 percent increase in funds flow from operations to $273
million ($2.56 per diluted share), and net income of $28 million ($0.25 per
diluted share).
Petrobank's results include the financial and operating results of PetroBakken
Energy Ltd. ("PetroBakken") (TSX:PBN), 59% owned by Petrobank and Petrominerales
Ltd. ("Petrominerales") (TSX:PMG), 65% owned by Petrobank. PetroBakken announced
second quarter financial and operating results on November 8, 2010.
Petrominerales announced second quarter financial and operating results on
November 2, 2010.
All references to $ are Canadian dollars unless otherwise noted.
Q3 2010 HIGHLIGHTS AND SIGNIFICANT TRANSACTIONS
(Comparisons are third quarter of 2010 compared to the third quarter of 2009.)
- Increased production by 85 percent to 72,762 boepd in the third quarter of 2010.
- Increased funds flow from operations by 91 percent to $273 million ($2.56 per
diluted share).
- Achieved net income of $28 million ($0.25 per diluted share) in the third
quarter compared to net income of $55 million ($0.56 per diluted share) in the
same 2009 period.
- Announced the distribution of our share ownership in Petrominerales to
Petrobank shareholders, continuing our long-held corporate goal of enhancing
shareholder value by creating strong, independent companies.
Petrobank's Heavy Oil Business Unit ("HBU")
- Completed the strategic acquisitions of the remaining 50 percent working
interests in the Kerrobert Phase 1 and Dawson projects for a net cash cost of
approximately $15 million to increase our domestic resource portfolio to 81
million barrels of conventional heavy Exploitable-Oil-In-Place ("EOIP") (1),
adding to our Conklin/May River 1.8 billion barrels of Best Estimate THAI(R)
Exploitable-Bitumen-In-Place(2).
- While our Phase 1 Kerrobert wells averaged only 78 bopd in Q3 2010 due to low
on-stream times caused by pump interventions, production in the month of
November has increased as we achieved improved on-stream times and has recently
averaged 280 bopd ranging up to 380 bopd in the last week.
- Our Phase 1 Kerrobert wells have now demonstrated economic production rates
and we continue to work with McDaniel & Associates Ltd. ("McDaniel") to
recognize THAI(R) reserves for year-end 2010.
- Initiated development of our Kerrobert Phase 1 expansion, incorporating 10 new
well-pairs, with initial air injection targeted for end of Q1 2011.
- Received final Alberta Energy Resources Conservation Board ("ERCB") approval
of our Dawson project in October 2010 and we anticipate the finalized Alberta
Environment ("AENV") approval by the end of November.
- Incurred $23 million of capital expenditures in the third quarter related to
our Kerrobert heavy oil project and the Conklin/May River oil sands projects.
PetroBakken
- Increased production by 124 percent to 40,095 boepd in the third quarter of
2010, primarily driven by the acquisition of TriStar on October 1, 2009 and
drilling activities in the Bakken.
- Generated operating netback (excluding hedging gains) of $43.61/boe.
- Invested in capital expenditures of $241 million in the third quarter, of
which $55.5 million related to asset and land acquisitions.
- Drilled 115 (75.0 net) wells with a 99 percent success rate in the third
quarter; including 54 (42.9 net) in the Bakken, 33 (12.5 net) in conventional
plays in southeast Saskatchewan, and 28 (19.6 net) in the Cardium. At the end of
the quarter, 22.8 net wells were waiting to be completed and/or placed on
production, the majority of which were associated with our Cardium play.
Petrominerales
- Increased crude oil production by 52 percent to 32,667 bopd.
- Generated operating netback of CAD$49.74 per barrel in the quarter, a 6
percent increase.
- Brought Candelilla-4 well on production from the Guadalupe formation at over
3,000 bopd.
- Commenced drilling the Boa-2 development well on the Corcel Block, and
completed drilling and logging of Arion-1.
- Raised US$550 million through a convertible bond issuance in August. The bonds
are convertible into common shares of Petrominerales at a conversion price of
US$34.746 and have an annual coupon rate of 2.625 percent.
PETROBANK'S LIQUIDITY AND CAPITAL RESOURCES
Each of Petrobank, PetroBakken and Petrominerales manage their capital structure
independently; they generate their own cash flows, and have the ability to fund
their operations through the issuance of secured and unsecured debt as well as
equity financing. Petrobank's capital resources are focused on funding corporate
activities and our HBU expenditures. At September 30, 2010, independent of
PetroBakken and Petrominerales, Petrobank on a standalone basis had no bank debt
outstanding and positive working capital of $6.2 million. A $30 million credit
facility remains undrawn.
Based on Petrobank's current ownership in PetroBakken, Petrobank expects to
receive $105 million of dividends annually paid monthly. Petrobank received $8
million from Petrominerales' Q3 dividend in October and expects to receive the
Q4 2010 dividend in January 2011. Petrobank also has the option of raising funds
by issuing equity, selling a portion of our ownership in PetroBakken or by
issuing additional debt secured by the interest in PetroBakken. We are in
discussions with our lead bank and other financial institutions to increase our
existing credit facility and extend it to a three year term.
Our current intention is to fund our HBU capital expenditure program with cash
on hand, available credit, cash from operations and dividends received from
PetroBakken.
SUMMARY OF FINANCIAL & OPERATING HIGHLIGHTS
Three months ended September 30,
%
2010 2009 Change
----------------------------------------------------------------------------
Financial ($000s, except where noted)
Oil and natural gas revenue 469,158 232,471 102
Funds flow from operations (1) 272,787 142,927 91
Per share - basic ($) 2.57 1.55 66
- diluted ($) 2.56 1.42 80
Net income 27,848 54,846 (49)
Per share - basic ($) 0.26 0.59 (56)
- diluted ($) 0.25 0.56 (55)
Capital expenditures
PetroBakken 241,309 107,820 124
Petrominerales 123,858 59,486 108
Heavy Oil Business Unit ("HBU") 49,385 26,737 85
----------------------------------------------------------------------------
Total Company 414,552 194,043 114
Total assets 7,824,430 2,590,943 202
Common shares, end of period (000s)
Basic 106,042 92,978 14
Diluted (2) 109,979 109,830 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
PetroBakken operating netback ($/boe except
where noted) (1) (3)
Oil and NGL revenue ($/bbl) (4) 68.43 67.65 1
Natural gas revenue ($/Mcf) (4) 3.82 3.55 8
Oil and natural gas revenue (4) 60.63 60.66 -
Royalties 8.64 9.62 (10)
Production expenses 8.38 6.83 23
----------------------------------------------------------------------------
Operating netback (5) 43.61 44.21 (1)
Petrominerales operating netback ($/bbl) (1)
Oil revenue (4) 67.08 61.96 8
Royalties 9.44 6.06 56
Production expenses 7.90 8.81 (10)
----------------------------------------------------------------------------
Operating netback 49.74 47.09 6
Average daily production
PetroBakken - oil and NGL (bbls) 33,230 15,185 119
PetroBakken - natural gas (Mcf) 41,193 16,177 155
----------------------------------------------------------------------------
Total PetroBakken (boe) (3) 40,095 17,881 124
Petrominerales - oil (bbls) (6) 32,667 21,546 52
----------------------------------------------------------------------------
Total Company conventional (boe) (7) 72,762 39,427 85
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine months ended September 30,
%
2010 2009 Change
----------------------------------------------------------------------------
Financial ($000s, except where noted)
Oil and natural gas revenue 1,575,331 647,653 143
Funds flow from operations (1) 941,333 418,433 125
Per share - basic ($) 9.07 4.82 88
- diluted ($) 8.84 4.44 99
Net income 151,397 87,971 72
Per share - basic ($) 1.46 1.01 45
- diluted ($) 1.36 0.96 42
Capital expenditures
PetroBakken 549,113 216,745 153
Petrominerales 355,123 234,249 52
Heavy Oil Business Unit ("HBU") 83,971 60,465 39
----------------------------------------------------------------------------
Total Company 988,207 511,459 93
Total assets 7,824,430 2,590,943 202
Common shares, end of period (000s)
Basic 106,042 92,978 14
Diluted (2) 109,979 109,830 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operations
PetroBakken operating netback ($/boe except
where noted) (1) (3)
Oil and NGL revenue ($/bbl) (4) 71.97 58.67 23
Natural gas revenue ($/Mcf) (4) 4.31 4.21 2
Oil and natural gas revenue (4) 64.71 54.25 19
Royalties 9.17 7.31 25
Production expenses 7.92 6.72 18
----------------------------------------------------------------------------
Operating netback (5) 47.62 40.22 18
Petrominerales operating netback ($/bbl) (1)
Oil revenue (4) 66.23 53.35 24
Royalties 7.72 5.23 48
Production expenses 6.27 8.03 (22)
----------------------------------------------------------------------------
Operating netback 52.24 40.09 30
Average daily production
PetroBakken - oil and NGL (bbls) 35,229 17,206 105
PetroBakken - natural gas (Mcf) 39,473 15,761 150
----------------------------------------------------------------------------
Total PetroBakken (boe) (3) 41,808 19,833 111
Petrominerales - oil (bbls) (6) 38,298 21,621 77
----------------------------------------------------------------------------
Total Company conventional (boe) (7) 80,106 41,454 93
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure. See "Non-GAAP Measures" section within this press
release.
(2) Consists of common shares, stock options, deferred common shares,
incentive shares and convertible debentures as at the period end date.
(3) Six Mcf of natural gas is equivalent to one barrel of oil equivalent
("boe").
(4) Net of transportation expenses and excludes revenue from purchased oil.
(5) Excludes hedging activities.
(6) Actual production sold for the three and nine months ended September 30,
2010 was 34,830 barrels of oil per day ("bopd") and 40,906 bopd,
respectively (2009 - 21,239 bopd and 21,345 bopd). After adjusting for
third party purchased oil and marketed on their behalf, Petrominerales
actual production sold and used in per barrel calculations was 32,696
bopd and 38,121 bopd, respectively.
(7) HBU bitumen volumes are excluded from average daily production as
Conklin and Kerrobert operations are considered to be in the pre-
operating stage and accordingly are capitalized.
HEAVY OIL BUSINESS UNIT OPERATIONAL UPDATE
Conklin Project
As we previously disclosed, the P1B and P2B production wells have taken longer
than anticipated to establish full communication with the combustion zone. This
is primarily due to operational constraints placed on the re-drill of these
wells, which resulted in the toe of the new wells being placed short of the
existing combustion zone. During the third quarter we continued to cycle the
wells between steam injection and production, which has progressed
communication. P3B has been offline since August 25th to repair a casing vent
leak, which affected operations on P1B and P2B due to intermittent plant
availability.
Produced oil quality has varied from heavy oil, consistent with the production
wells being at the edge of the combustion zone, to upgraded THAI(R) oil.
Production rates averaged 101 bopd with peak rates of 495 bopd during the third
quarter. We intend to utilize the Conklin pilot as a platform to test new
technologies such as enriched oxygen injection, direct oxidation of H2S into
sulphur and other enhancements to the THAI(R) technology.
Kerrobert Project
Since the second quarter we have been optimizing the performance of the
progressive cavity pumps ("PCP") to manage changes in the produced oil
characteristics. PCP performance is affected by several factors including:
changing API gravity and viscosity as oil quality improves due to THAI(R) oil
volumes increasing, higher temperatures at the pump inlet, and higher volumes of
produced gas with CO2. These conditions evolve from startup through to steady
state production when the THAI(R) process has become fully developed, requiring
a matching of PCP configuration to production conditions. We have now
established a pumping protocol to correspond to these evolving conditions and we
are operating in a near-steady state environment with improving well on-stream
time.
As we move from the third quarter into the fourth quarter, production has
materially increased. The third quarter daily average production was 78 bopd. In
October, based on field estimates, average daily production improved to
approximately 150 bopd and the production day average was 225 bopd. In October,
the number of on-stream days improved to 74 percent and oil cuts averaged 70
percent with several days exceeding 90 percent. Peak production rates of 460
bopd at KP2 and 235 bopd at KP1 were achieved in the last two months. During
October we experienced a two week period where the KP2 well averaged 195 bopd
and the facility averaged 290 bopd. At these rates we have achieved our economic
production threshold and we continue to progress towards our 600 bopd per well
target. In-situ oil upgrading has exceeded expectations with average produced
oil quality of approximately 18 degrees API compared to the native reservoir
quality of 10.3 degrees API. With this level of upgrading we are close to
achieving the Lloyd Blend Kerrobert pipeline specification of 20.5 degrees API.
As previously reported, we acquired 100 percent working interest of the Phase 1
project lands by purchasing Baytex Energy Ltd.'s 50 percent interest effective
September 30, 2010. With this acquisition, we now own 39 million barrels of
conventional heavy EOIP resources at Kerrobert and have initiated the planned 10
well-pair expansion. Environmental and enhanced oil recovery approvals from the
Saskatchewan Ministry of Energy and Resources were received on August 6, 2010.
Construction of pipeline infrastructure began early in the fourth quarter and
drilling operations are currently underway. Installation of surface equipment
and other infrastructure is scheduled for later in the fourth quarter. Start-up
operations for the pre-ignition heating cycle ("PIHC") on the injector wells are
planned for early January 2011 and initial air injection and first oil are
expected at the end of the first quarter 2011.
May River Project
The May River project is currently in the final detailed engineering phase, and
orders have been placed for some long lead time equipment, including power
generation and air compression. Upgrades to the existing roads are currently
being completed, along with other infrastructure work that can be accomplished
prior to receiving final regulatory approval. Draft approval from AENV, which is
conditional on receiving ERCB approval, was received on April 12, 2010, however
ERCB project approval remains in process and is expected to be granted upon
resolution of two Statements of Concern filed by local community groups. If
regulatory approval is received in 2010, first oil could occur by late-2012.
We intend to drill 17 oil sands stratigraphic wells this winter to further
delineate the broader reservoir, optimize well placements for the 18 well pairs
planned for the 10,000 bopd Phase 1 development and further delineates the
resource for future expansion phases of the May River project.
Our May River design is CO2 capture ready, incorporates power generation
utilizing low energy produced gas, sulphur recovery, and will be a net water
producer rather than a net user; making this project a leading edge design for
oil sands and conventional heavy oil development. The project utilizes a modular
approach that is designed to be readily installed and operated on heavy oil
projects world-wide. This design is the foundation of our planned expansion
phases at May River and the template for other projects in other reservoirs due
to its simple and modular engineering design.
Dawson Project
On October 28, 2010 we received final ERCB approval for our two well initial
project, and as previously disclosed, we received initial draft approval from
AENV on June 26, 2009 (contingent on receiving final ERCB approval). The final
AENV approval is expected during Q4 2010, completing the regulatory cycle for
this phase of the project.
The Dawson property is situated on a large Bluesky heavy oil/oil sands fairway
in the Peace River region of northwest Alberta. The upper portions of this
formation contain 11o API heavy oil, which is comparable to other conventional
heavy oil reservoirs throughout Western Canada. Existing conventional cold
production typically recovers less than 10 percent of the original-oil-in-place;
with THAI(R) we expect to improve the recovery rate to between 70 and 80
percent. Based on an initial McDaniel evaluation of the resource, the Dawson
property was estimated to contain 100 million barrels of conventional heavy
Total Petroleum Initially-In-Place ("PIIP")(3), with a corresponding EOIP of 44
million barrels, that is highly suited to THAI(R) development. Since our
acquisition of 100 percent of this property, McDaniel has had an opportunity to
reassess the resource potential at Dawson. Based on new 3D seismic data,
McDaniel is now assigning 203 million barrels of PIIP. As a result of this
acquisition, we now have a 100 percent interest in 31.5 sections of land in the
Dawson area.
Dawson will initially consist of two THAI(R) well pairs plus associated surface
facilities. Our full field development plans, based on the initial resource
potential, would have supported a 10,000 bopd project. With the increase in the
Dawson resource, we now believe that the resource could ultimately support a
25,000 bopd project. The current surface facilities at Kerrobert will be
transferred to Dawson since we are able to incorporate our first two Kerrobert
wells into the new expansion facilities. We anticipate work on the initial two
well project at Dawson to begin during the second quarter of 2011 and PIHC to
commence during the third quarter.
THAI(R) Reserves
Petrobank continues to work with McDaniel in the evaluation of the THAI(R)
resource extraction technology. McDaniel had conducted a comprehensive
evaluation of the performance of THAI(R) at Conklin and from this evaluation
McDaniel concluded that the THAI(R) process is technically proven. McDaniel
initially assigned a 17 percent greater exploitable resource base at Conklin
compared to steam assisted gravity drainage extraction. The ability to assign
exploitable resource is the first step in recognizing THAI(R) reserves. To
complete the reserve recognition process, McDaniel indicated that we would need
to achieve sustainable threshold economic production rates over a period of
several months.
Now that our Kerrobert project has demonstrated sustained production at economic
rates, McDaniel is evaluating these results as a basis for assigning THAI(R)
reserves. With continued sustained production, we expect that THAI(R) reserves
may be assigned by year-end 2010. Kerrobert can then be used as the "analogue"
for assigning reserves for current and future THAI(R) projects.
Archon Technologies
In the third quarter, Archon filed our eighth THAI(R)-related patent. This
patent improves early THAI(R) oil production rates and further increases the
level of in-situ oil upgrading. Archon's single-well modified THAI(R) patent was
issued in another six countries during the same period. This is the sixth
THAI(R) related patent issued to Archon and it has the potential to eliminate
the need for a separate air injection well, thus reducing drilling and
completion requirements to a single horizontal well and also dramatically
reducing the surface footprint.
Archon is pursuing two additional enhancements to the overall THAI(R) process:
oxygen enriched air injection and direct oxidation of H2S. The direct oxidation
of H2S will be beneficial on a stand-alone basis for small scale projects and in
conjunction with our CrystaSulf(C) process for large scale projects. We have
matured these technologies and will be testing them at a field scale level at
our Conklin pilot facility in 2011.
While the process to license our technology to major international third parties
has been protracted we have made progress during the third quarter and overall
there continues to be considerable interest in THAI(R) and related technologies.
Third party international licensing has progressed to the point where we have
two final agreements that may be executed prior to year-end.
SPINOUT OF PETROMINERALES HOLDINGS TO PETROBANK SHAREHOLDERS
On November 2, 2010, Petrobank and Petrominerales announced a corporate
reorganization that will see Petrobank shareholders receive Petrobank's
proportionate interest in Petrominerales (the "Reorganization"). Pursuant to the
Reorganization, a new Alberta corporation will be formed ("New Petrominerales")
which will, through a series of transactions under the Reorganization, directly
or indirectly acquire all of the outstanding shares of Petrominerales. The Board
of Directors of each company, after having received a recommendation from an
independent committee of its directors, have unanimously recommended that their
shareholders approved the Reorganization.
Petrobank shareholders will receive approximately 0.62 shares of New
Petrominerales and one replacement common share of Petrobank for each Petrobank
common share held. Following the Reorganization, Petrobank will continue to own
all existing assets, other than Petrominerales, including the heavy oil and
bitumen assets, Archon Technologies Ltd. including the THAI(R) and other related
technologies, and ownership of 109.8 million shares of PetroBakken.
This transaction is designed to enhance long-term value for Petrobank and
Petrominerales shareholders. The Reorganization is consistent with our long-held
corporate goal of enhancing shareholder value by creating strong, independent
companies. Benefits of the Reorganization include:
- Petrobank shareholders will receive direct ownership in the shares of New
Petrominerales;
- All new and existing Petrominerales shareholders will directly receive future
dividends from New Petrominerales;
- Canadian individual shareholders of New Petrominerales will receive dividends
eligible for the Canadian dividend tax credit;
- New Petrominerales' public float will increase, providing additional liquidity
to shareholders;
- New Petrominerales is expected to qualify for inclusion in the S&P/TSX
Composite Index following the Reorganization;
- Increased valuation for Petrobank and New Petrominerales may result from the
reduction or elimination of any holding company and parent company share price
trading discounts; and
- The expected date of the Reorganization of December 31, 2010 may allow U.S.
Petrobank shareholders to benefit from a lower tax rate on the transaction as
the receipt of the New Petrominerales shares are expected to be treated as
"qualified dividends", eligible for lower tax rates in 2010 compared to the
ordinary income tax rates that are expected in 2011.
The Reorganization is subject to the approval of the shareholders of each of
Petrobank and Petrominerales. It is anticipated that a joint-management
information circular containing additional information with respect to the
Reorganization will be mailed to each Petrobank and Petrominerales shareholder
this week and meetings of the shareholders of each of Petrobank and
Petrominerales will be held in mid-December, 2010. The Directors of each
Company, upon considering the recommendations of their respective independent
committee, have unanimously recommended that their shareholders approve the
Reorganization. Pending approvals from the shareholders of each Company,
approval of applicable courts, receipt of appropriate regulatory approvals and
satisfaction of other customary closing conditions, including the receipt of
relevant tax rulings, the transaction is scheduled to become effective on
December 31, 2010.
The Reorganization is expected to be non-taxable to Petrobank and Petrominerales
as well as Canadian resident shareholders of both companies. For U.S.
shareholders of Petrobank, this transaction will be treated as a taxable
dividend according to U.S. tax laws. It is expected that the dividend will be
considered a "qualified dividend" for U.S. tax purposes, subject to the reduced
tax rates applicable to long-term capital gains for individuals, provided
shareholders meet the holding-period requirements. For U.S. shareholders of
Petrominerales, this transaction is expected to be non-taxable. Tax information
will be published on the websites of both Petrobank and Petrominerales in the
near future; however shareholders are encouraged to seek the advice of their own
tax professionals.
Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas
exploration and production company with operations in western Canada and Latin
America. The Company operates high-impact projects through three business units
and a technology subsidiary. The Canadian Business Unit, operated by Petrobank's
59% owned TSX-listed subsidiary, PetroBakken Energy Ltd. (TSX:PBN), is a premier
light oil production company combining, high growth, long-life Bakken reserves
and production with legacy conventional light oil assets, delivering industry
leading operating netbacks, strong cash flows and production growth. PetroBakken
is applying leading edge technology to a multi-year inventory of Bakken and
Cardium light oil development locations, along with a significant inventory of
opportunities in the Horn River and Montney gas resource plays in northeast BC.
PetroBakken's strategy is to deliver accretive production and reserves growth,
along with an attractive dividend yield. The Latin American Business Unit,
operated by Petrobank's 65% owned TSX listed subsidiary, Petrominerales Ltd.
(TSX:PMG), is a Latin America-based exploration and production company producing
oil in Colombia with 17 exploration blocks covering a total of 2.1 million acres
in the Llanos and Putumayo Basins and five exploration blocks in Peru covering a
total of 9.4 million gross (5.4 million net acres in the Ucayali and Titicaca
Basins. Whitesands Insitu Partnership, a partnership between Petrobank and its
wholly-owned subsidiary Whitesands Insitu Inc., owns 104 net sections of oil
sands leases in Alberta, 36 sections of oil sands licenses in Saskatchewan and 4
net sections of petroleum and natural gas rights in Kerrobert, Saskatchewan, and
operates the Whitesands project which is field-demonstrating Petrobank's
patented THAI(R) heavy oil recovery process. THAI(R) is an evolutionary in-situ
combustion technology for the recovery of bitumen and heavy oil that integrates
existing proven technologies and provides the opportunity to create a step
change in the development of heavy oil resources globally. THAI(R) and CAPRI(R)
are registered trademark of Archon Technologies Ltd., a wholly-owned subsidiary
of Petrobank Energy and Resources Ltd., for specialized methods for recovery of
oil from subterranean formations through in-situ combustion techniques and
methodologies with or without upgrading catalysts. Used under license by
Petrobank Energy and Resources Ltd.
(1) Exploitable Oil-In-Place is the estimated volume of oil, before any
production has been removed, which is contained in a subsurface stratigraphic
interval that meets or exceeds certain reservoir characteristics considered
necessary for the application of known recovery technologies. Examples of such
reservoir characteristics include continuous net pay, porosity, and mass bitumen
content.
(2) Best Estimate THAI(R) Exploitable Bitumen In Place: McDaniel defines the
Best Estimate (P50) of a potentially THAI(R)-exploitable interval as containing
a minimum thickness of ten metres of substantially clean, continuous,
predominantly bitumen-saturated sand, net of non-reservoir, with log porosity
and mass bitumen content (ratio of bitumen to water and mineral matter) meeting
a minimum of 27 and 8 percent, respectively, and with both competent top and
lateral reservoir containment. The THAI(R) exploitable interval includes a
greater portion of the reservoir than the SAGD exploitable interval due to the
assumption that the THAI(R) process will access reservoir that would not be
accessible in a conventional SAGD process.
(3) Total Petroleum Initially-In-Place (PIIP) is that quantity of petroleum that
is estimated to exist originally in naturally occurring accumulations. It
includes that quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations, prior to production, plus those estimated
quantities in accumulations yet to be discovered.
Non-GAAP Measures: This press release contains financial terms that are not
considered measures under Canadian generally accepted accounting principles
("GAAP"), such as funds flow from operations and operating netback. These
measures are commonly utilized in the oil and gas industry and are considered
informative for management and shareholders. Management considers operating
netback important as it is a measure of profitability per barrel of production.
Operating netbacks may not be comparable to those reported by other companies
nor should they be viewed as an alternative to net income or other measures of
financial performance calculated in accordance with GAAP.
The following table shows the reconciliation of funds flow from operations to
cash flow from operating activities for the periods noted:
Three months ended Nine months ended
September 30, September 30,
2010 2009 Change 2010 2009 Change
----------------------------------------------------------------------------
Funds flow from
operations:
Non-GAAP 272,787 142,927 91% 941,333 418,433 125%
Changes in
non-cash working
capital (41,631) (8,900) 368% (112,696) (52,008) 117%
----------------------------------------------------------------------------
Cash flow from
operating
activities: GAAP 231,156 134,027 72% 828,637 366,425 126%
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Forward-Looking Statements. Certain information provided in this press release
constitutes forward-looking statements. The words "anticipate", "expect",
"project", "estimate", "forecast" and similar expressions are intended to
identify such forward-looking statements. Specifically, this press release
contains forward-looking statements relating to financial results, results from
operations, anticipated production rates, timing for completion of the
Reorganization, timing of mailing of shareholder materials and holding of
shareholder meetings, payment of future dividends, expected tax treatment of the
Reorganization, and the timing and scope of certain projects. Forward-looking
statements are necessarily based upon assumptions and judgments with respect to
the future including, but not limited to, the receipt of required shareholder
and regulatory approvals and satisfaction of other conditions to the
Reorganization, the outlook for commodity markets and capital markets, success
of future evaluation and development activities, the successful application of
technology, prevailing commodity prices, the negotiation of future licensing
arrangements, the performance of producing wells and reservoirs, well
development and operating performance, general economic and business conditions,
weather, the regulatory and legal environment and other risks associated with
oil and gas operations. The reader is cautioned that assumptions used in the
preparation of such information, although considered reasonable at the time of
preparation, may prove to be incorrect. Actual results achieved during the
forecast period will vary from the information provided herein as a result of
numerous known and unknown risks and uncertainties and other factors. You can
find a discussion of those risks and uncertainties in our Canadian securities
filings. Such factors include, but are not limited to: general economic, market
and business conditions; fluctuations in oil prices; the results of exploration
and development drilling, risks associated with the development and application
of technology, recompletions and related activities; timing and rig
availability, outcome of exploration contract negotiations; fluctuation in
foreign currency exchange rates; the uncertainty of reserve estimates; changes
in environmental and other regulations; risks associated with oil and gas
operations; and other factors, many of which are beyond the control of the
Company. There is no representation by Petrobank that actual results achieved
during the forecast period will be the same in whole or in part as those
forecast. Except as may be required by applicable securities laws, Petrobank
assumes no obligation to publicly update or revise any forward-looking
statements made herein or otherwise, whether as a result of new information,
future events or otherwise.
Barrels of Oil Equivalent: Disclosure provided in this press release in respect
of barrels of oil equivalent ("boe") units may be misleading, particularly if
used in isolation. A boe conversion relationship of 6 mcf to 1 bbl is based on
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the well head.
INVESTOR CONFERENCE CALL
Management of Petrobank will be holding a conference call for investors,
financial analysts, media and any interested persons on Tuesday, November 16,
2010 at 9:00am (Mountain time) (11:00 a.m. Eastern Time) to discuss Petrobank's
third quarter financial and operating results. The investor conference call
details are as follows:
Live call dial-in numbers: 416-340-8527 / 877-240-9772
Replay dial-in numbers: 416-695-5800 / 800-408-3053
Replay pass code: 7266801
The live audio webcast link is:
http://events.digitalmedia.telus.com/petrobank/111610/index.php and is also
available on our website at: http://www.petrobank.com/investors/.
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