Painted Pony Announces Further Capital Cost Reductions, Updated Hedges and Investor Conference Participation

CALGARY, April 6, 2016 /CNW/ - Painted Pony Petroleum Ltd. ("Painted Pony" or the "Corporation") (TSX: PPY) is pleased to announce further capital cost reductions which will reduce forecast 2016 capital spending. Additionally, Painted Pony has hedged incremental production volumes through 2016 and 2017 to reduce the impact of commodity price volatility as part of our active risk management program. AltaGas Ltd. ("AltaGas") has confirmed that the AltaGas Townsend Facility (the "Facility") is approximately 85% complete and ahead of schedule.  

2016 Capital Program

The updated 2016 capital program is expected to deliver previously forecasted production volumes targets, including a 2016 exit production rate anticipated to be in excess of 240 MMcfe/d (40,000 boe/d), for total spending of approximately $179 million. This represents a reduction of approximately $36 million (17%) from 2016 capital spending guidance of $215 million released in November 2015 and a reduction of approximately $18 million (9%) from 2016 capital spending guidance of $197 million released in January 2016. Drilling, completion and equipping costs have been further reduced by 19% to $4.8 million per well from $5.9 million per well as budgeted in November of 2015. These additional costs savings are the result of ongoing efficiencies achieved in Painted Pony's capital operations. The Corporation will continue to implement operational efficiencies to ensure any additional capital cost savings are identified and captured. 

Updated Hedging

During the first quarter of 2016, Painted Pony entered into additional financial hedges to provide commodity price risk mitigation. Total hedges now cover approximately 61% of forecast 2016 annual average natural gas production volumes. For the first three quarters of 2016, hedges consist of AECO fixed-price swaps at an average price of $3.30/Mcf on 61 MMcf/d of forecast average natural gas production volumes of approximately 100 MMcf/d. For the fourth quarter of 2016, Painted Pony has entered into Station 2 fixed price hedges on 55 MMcf/d of natural gas production at an average price of $2.09/Mcf. These Station 2 hedges are in addition to AECO fixed price hedges during the fourth quarter of 2016 on 78 MMcf/d of natural gas production at an average price of $3.30/Mcf of forecast fourth quarter average natural gas production volumes of approximately 215 MMcf/d.

Financial hedges for 2017 cover approximately 49% of forecast 2017 annual average natural gas production volumes. These 2017 hedges consist of AECO fixed price hedges on 58 MMcf/d of average natural gas production at an average price of $3.33/Mcf and Station 2 fixed price hedges on approximately 65 MMcf/d of average natural gas production at an average price of $2.09/Mcf. 

Painted Pony is well protected in this low commodity price environment with existing hedges and anticipates continuing to mitigate commodity price risk by hedging incremental production volumes to provide downside price risk protection and reduce future cash flow volatility.

Operational Update

To date, Painted Pony's three drilling rigs have drilled 13 (13.0 net) wells. All of the wells necessary to meet the initial commitment at the Facility have been drilled and rig-released. 

Completion crews have finished 9 (9.0 net) completions to date. Painted Pony has planned for a total of 14 (14.0 net) completions during the first half of 2016 which is expected to ensure the volume commitment for the Facility is met. The 2016 capital program anticipates a total of 30 (30.0 net) completions which, in addition to meeting volume commitments at the Facility, will provide production growth momentum into 2017.

AltaGas Townsend Facility

Construction of the Facility is now approximately 85% complete and continues to progress ahead of schedule. AltaGas expects the Facility to begin commissioning operations mid-year 2016.  Recent photos and aerial videos of the construction site illustrating the ongoing progress can be viewed on the Painted Pony website at http://paintedpony.ca/investors/Media-Gallery/default.aspx

Production
Based on field estimates, Painted Pony averaged approximately 99 MMcfe/d (16,500 boe/d) during the first quarter of 2016, inclusive of approximately 3 MMcfe/d (500 boe/d) of price-driven, shut-in production volumes. Painted Pony anticipates production volumes to average 93 – 99 MMcfe/d (15,500 – 16,500 boe/d) during the second quarter of 2016, inclusive of any further price-driven shut-in production volumes. 

Investor Conference Participation

Painted Pony is pleased to announce that it will be participating in the Raymond James Canadian Energy Investor Day and the Canadian Association of Petroleum Producers ("CAPP") Scotiabank Investment Symposium. The Raymond James Canadian Energy Investor Day is taking place on April 8, 2016 at the Le Meridien Hotel San Francisco located at 333 Battery Street in San Francisco, California. The CAPP Scotiabank Investment Symposium is taking place on April 13, 2016 at the Delta Hotel located at 75 Lower Simcoe Street in Toronto, Ontario.  Mr. Patrick Ward, President & CEO, will present on the "NE B.C. Gas Markets – Outlook for Realized Prices" panel scheduled for 4:00 pm (EST) in the Soco Ballroom. 

In addition to Mr. Ward's presentation and panel participation, the Corporation will be undertaking a series of presentations to institutional investors while at these conferences. Interested parties are invited to view the updated Corporate Presentation on Painted Pony's website, www.paintedpony.ca.

ADVISORIES

Currency:  All amounts referred to in this press release are stated in Canadian dollars unless otherwise specified.

Boe Conversions: Barrel of oil equivalent ("boe") amounts have been calculated by using the conversion ratio of six thousand cubic feet (6 Mcf) of natural gas to one barrel of oil (1 bbl). Boe amounts may be misleading, particularly if used in isolation. A boe conversion ratio 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 wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalent of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Mcfe Conversions: Thousands of cubic feet of gas equivalent ("Mcfe") amounts have been calculated by using the conversion ratio of one barrel of oil (1 bbl) to six thousand cubic feet (6 Mcf) of natural gas. Mcfe amounts may be misleading, particularly if used in isolation. A conversion ratio of 1 bbl to 6 Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of natural gas as compared to oil is significantly different from the energy equivalent of 1:6, utilizing a conversion on a 1:6 basis may be misleading as an indication of value.

Forward-Looking Information: This press release contains certain forward-looking information within the meaning of Canadian securities laws. Forward-looking information relates to future events or future performance and is based upon the Corporation's current internal expectations, estimates, projections, assumptions and beliefs. All information other than historical fact is forward-looking information. Words such as "plan", "expect", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words that indicate events or conditions may occur are intended to identify forward-looking information. In particular, this press release contains forward looking information relating to anticipated reductions in 2016 capital spending; an expectation that the AltaGas Townsend Facility will be operational in the time frame anticipated; 2016 exit production; capital spending in 2016; the Corporation's ability to continue to implement operational efficiencies; the Corporation's ability to continue to enter into hedges to mitigate commodity price risk; the number of completions planned during the first half of 2016; the number of completions planned during 2016; the timeframe for commissioning of the AltaGas Townsend Facility; unaudited field production estimates; and average production volumes during the second quarter of 2016.

Forward-looking information is based on certain expectations and assumptions including but not limited to future commodity prices, currency exchange rates interest rates, royalty rates and tax rates; the state of the economy and the exploration and production business; the economic and political environment in which the Corporation operates; the regulatory framework; anticipated timing and results of capital expenditures; the sufficiency of budgeted capital expenditures to carry out planned operations; operating, transportation, marketing and general and administrative costs; drilling success, production rates, future capital expenditures and the availability of labor and services. With respect to future wells, a key assumption is the validity of geological and technical interpretations performed by the Corporation's technical staff, which indicate that commercially economic volumes can be recovered from the Corporation's lands. Estimates as to average annual and exit production assume that no material unexpected outages occur in the infrastructure the Corporation relies upon to produce its wells, that existing wells continue to meet production expectations and that future wells scheduled to come on production in 2016 meet timing and production rate expectations.

Undue reliance should not be placed on forward-looking information, as there can be no assurance that the plans, intentions or expectations on which they are based will occur. Although the Corporation's management believes that the expectations in the forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. As a consequence, actual results may differ materially from those anticipated.

Forward-looking information necessarily involves both known and unknown risks associated with oil and gas exploration, production, transportation and marketing. There are risks associated with the uncertainty of geological and technical data, operational risks, risks associated with drilling and completions, environmental risks, risks of the change in government regulation of the oil and gas industry, risks associated with competition from others for scarce resources and risks associated with general economic conditions affecting the Corporation's ability to access sufficient capital. Additional information on these and other risk factors that could affect operational or financial results are included in the Corporation's most recent Annual Information Form and in other reports filed with Canadian securities regulatory authorities.

Forward-looking information is based on estimates and opinions of management at the time the information is presented. The Corporation is not under any duty to update the forward-looking information after the date of this press release to revise such information to actual results or to changes in the Corporation's plans or expectations, except as required by applicable securities laws.

Any "financial outlook" contained in this press release, as such term is defined by applicable securities laws, is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes. 

ABOUT PAINTED PONY

Painted Pony is a publicly-traded natural gas corporation based in Western Canada.  The Corporation is primarily focused on the development of natural gas and natural gas liquids from the Montney formation in northeast British Columbia.  Painted Pony's common shares trade on the Toronto Stock Exchange under the symbol "PPY".

SOURCE Painted Pony Petroleum Ltd.

Patrick R. Ward, President and CEO, [phone]; John H. Van de Pol, Senior Vice President and CFO, [phone]; Jason Fleury, Director, Investor Relations, [phone], [email protected]; www.paintedpony.ca