Progress Announces First Quarter Results

Asset and Balance Sheet Management Top Priorities

CALGARY, May 1, 2012 /CNW/ - (TSX: PRQ) - Progress Energy Resources Corp. ("Progress" or the "Company") announced results for the first quarter of 2012 (the "Quarter").  Capital investment in the Quarter was $102.8 million net or $215.1 million gross including the North Montney Joint Venture ("NMJV"). In the Quarter capital expenditures were prioritized to the NMJV with PETRONAS, the Company's proprietary North Montney properties in British Columbia, and the Dunvegan light oil play in the Alberta Deep Basin.

In light of the continued decline in North American natural gas prices, Progress also announced today that the Company has reduced its 2012 capital program by approximately $100 million to $270 million, net. The reduction will be applied solely to the Company's proprietary North Montney program. The NMJV spending will remain as planned at $341 million ($50 million net) and the Dunvegan light oil program will increase to $50 million net.

"Progress is in the fortunate position of having minimal bank debt and a joint venture program where the majority of the capital investment is carried by our partner for the next 3 to 5 years." said Michael Culbert, President and Chief Executive Officer of Progress.  "Reducing proprietary capital while continuing to develop our Montney assets allows us to grow shareholder value in a weak natural gas price environment and continue to advance our LNG Export Joint Venture toward final investment decision by late 2014."

Highlights

• Generated cash flow of $41.3 million in the Quarter or $0.18 per share, diluted;
  
  
• Subsequent to the Quarter, Progress extended its 3-year extendible revolving $650 million credit facility maturity date from April 2014 to April 2015;
  
  
• Production averaged 46,766 barrels of oil equivalent ("boe") per day in the Quarter; volumes for the Quarter were impacted by the previously announced planned shut-ins and the deferral of tie-ins and completions;
  
  
• Total liquids production in the Quarter was 6,870 barrels per day, up 26 percent compared to the first quarter of 2011;
  
  
• Current production is approximately 43,500 boe per day with approximately 6,500 to 7,000 boe per day either shut-in or yet to be tied-in; due to the reduction of capital, an additional eight net wells are standing awaiting completion;
  
  
• Drilled a total of 20 wells (14.8 net) during the Quarter;
  
  
• Drilled seven horizontal (6.8 net) Montney wells and completed two of the seven wells in the proprietary North Montney program during the Quarter;
  
  
• Drilled five horizontals and two vertical (3.5 net) Montney wells on the NMJV properties. Five Montney horizontals at Lily were completed in the Quarter, with the wells testing at an average flow test rate of 5.2 mmcf per day at an average flowing pressure of 12.3 Mpa after five days;
  
  
• Drilled six Dunvegan horizontal oil wells (4.5 net) in the Deep Basin during the Quarter. Current production from 7.5 net Dunvegan horizontals is approximately 1,800 boe per day.

North Montney Proprietary Program
Progress holds the industry's largest Montney land position of approximately 800,000 net acres. The Company's primary focus is in the North Montney in the Foothills of northeast British Columbia where Progress holds approximately 625,000 net acres of largely contiguous Montney rights.  In February 2012, Progress announced a reduction in its capital program, along with plans to shut in approximately 10 percent of total natural gas production by April 2012, while delaying the completion of selected wells.

In the Quarter, Progress drilled seven horizontals targeting both the upper and lower Montney and, as per the previously announced capital reduction, only two of the wells were completed.  In addition, Progress completed three wells that were drilled in the fourth quarter of 2011, one Montney horizontal at Caribou and two Montney horizontals at Town North.  All five of these wells were tested successfully but are now shut in as part of the Company's corporate shut-in program.

North Montney Joint Venture
Progress, along with its partner, has begun aggressively developing the NMJV properties at Altares, Lily and Kahta.  Gross capital spending on the NMJV in the Quarter was $113.5 million ($14.2 net) and included drilling and completions, three 3D seismic programs, facility construction and selective land acquisitions. Five horizontals and two vertical Montney wells (3.5 net) were drilled in the Quarter, with horizontals targeting both the upper and lower Montney at Lily and a vertical test at Kahta.  Drilling in the Altares area is ongoing with two rigs running through spring break-up. Preliminary results have confirmed the in-situ overpressuring and robust thickness of the Montney on the NMJV lands with the first five horizontals in the Lily area testing at an average flow test rate of 5.2 mmcf per day at an average flowing pressure of 12.3 Mpa after five days. The first NMJV production will be on stream by mid-May through newly constructed facilities at Lily.

During the Quarter, the NMJV acquired an additional nine strategic sections of land that fell within the Lily area.  In addition, all 156,851 acres of the NMJV now have 3D seismic coverage which is currently being processed and will be available during the second quarter.

As part of the total consideration of $1.07 billion that PETRONAS paid to acquire a 50% working interest in the Altares, Lily and Kahta properties, $802.5 million will be paid in the form of a capital carry over the next three to five years.  At the end of the Quarter, the remaining capital carry balance was approximately $745 million.

The detailed feasibility study ("DFS") for the LNG Export Joint Venture ("LEJV") that was launched in November 2011 is approximately 75 percent complete. Completion of the DFS remains on track for the end of the third quarter of 2012, at which time the project is expected to enter the pre-FEED phase (Front-End Engineering and Design phase).  The involvement of key stakeholders has been a focus; First Nations, the provincial and federal governments, third party pipeline companies and potential off-takers have all been actively engaged as the LEJV continues its path towards final investment decision in late 2014.

Deep Basin Light Oil
Progress drilled six wells (4.5 net) targeting its Dunvegan light oil play in the Deep Basin of northwest Alberta.  Four of the wells were completed and brought on production in the Quarter, while two will be completed in the third quarter of 2012.  Current production from the Dunvegan is approximately 1,800 boe per day (75 percent liquids) from 7.5 net wells.  Progress plans to drill six additional Dunvegan horizontals in the second half of the year, with exit production expected to be approximately 2,600 boe per day.

Progress holds a material land position covering approximately 250,000 net undeveloped acres in the Deep Basin of northwest Alberta, including approximately 110,000 acres of Montney rights. Given the large and contiguous nature of the land base, the Company is able to test play concepts, including liquids-rich gas plays and light oil plays, and with success can quickly capitalize on its existing land position at a lower cost than industry competitors.

Financial Strength

Cash flow for the Quarter was $41.3 million or $0.18 per share, diluted.  Net capital investment was $102.8 million ($215.1 million gross).  As at March 31, 2012, the Company was drawn $40 million on its credit facility.  In April 2011, Progress amended and restated its bank credit facility to be a covenant-based facility rather than a borrowing base facility. This facility is a 3-year extendible revolving facility in the amount of $650 million from a syndicate of lenders with an initial maturity date of April 2014.  The maturity date may, at the request of the Company and with the consent of the lenders, be extended on an annual basis.  Subsequent to the Quarter, the maturity date was extended to April 2015.  Debt-to-total capitalization as at March 31, 2012 was 15 percent.

Progress' average natural gas price in the Quarter was $2.49 per thousand cubic feet ("mcf"), including the impact of the Company's hedging program.  Progress's realized price from natural gas properties, which includes the impact of natural gas liquids, was $3.64 per mcf.  Royalty rates averaged 8.7 percent in the Quarter as a result of lower natural gas prices and the impact of increased North Montney production benefiting from the British Columbia deep drilling credit.  As at March 31, 2012 total credits available to Progress to offset future royalty expense as a result of the British Columbia Deep Royalty Credit Program was $92.5 million.  Operating costs averaged $5.84 per boe in the Quarter reflecting the Company's continued focus on operational efficiencies and maximization of volumes through existing facilities.

Progress has entered into a series of hedges on a portion of its natural gas production buying puts on 70,000 gigajoule ("GJ") per day at a net floor of $2.00 per GJ. The Company also entered into a series of AECO fixed price swaps on 82,500 GJ per day at an average net price of $2.01 per GJ. Progress sold NYMEX WTI call options on 1,750 barrels ("bbls") per day of oil production at a net cap of $106.28 for the period of March 1, 2012 to June 30, 2012 and for a net cap of $118.40 for the period July 1, 2012 to August 31, 2012.

As noted earlier, in response to the continuing natural gas price environment, Progress is adjusting its planned 2012 capital spending program to $270 million, down from $365 million announced in February, 2012.  "We believe it is prudent to further decrease spending on our proprietary North Montney program given the continued weakness in North American natural gas markets," said Mr. Culbert. "Protecting our balance sheet is of outmost importance in order to position ourselves to succeed in realizing our long term goal of reaching 100,000 boe per day by 2015." Under the revised budget, approximately $170 million will be invested in the Company's proprietary North Montney program, $50 million net (gross budget of $341 million) on the NMJV properties, and $50 million in the Deep Basin targeting Progress' Dunvegan light oil play.  Based on the adjusted capital program for 2012, Progress expects to exit the year at 48,000-50,000 boe per day.

Second Quarter Dividend and Dividend Reinvestment Program
The Board of Directors of Progress today announced that the second quarter eligible dividend will be maintained at $0.10 per share.  The eligible dividend will be payable on July 16, 2012 to common shareholders of record as of June 30, 2012. The ex-dividend date is expected to be June 27, 2012.  Based on the May 1, 2012 closing share price on the Toronto Stock Exchange of $11.27, this represents an annualized yield of 3.5 percent.  The amount of future cash dividends, if any, is subject to the discretion of the Progress Board of Directors.

Progress has a dividend reinvestment plan (the "DRIP") that allows eligible shareholders of Progress to direct that their cash dividends be reinvested in additional common shares.  Progress's current DRIP participation rate is approximately 40 percent.  A registered shareholder who wishes to enroll in the DRIP may do so by contacting Computershare Trust Company of Canada, the Plan Agent.  Beneficial shareholders who wish to participate in the DRIP should contact the broker or other nominee through which their common shares are held to provide appropriate enrollment instructions and to ensure any deadlines or other requirements that such broker or nominee may impose or be subject to are met. U.S. residents may not participate in the DRIP program.

Consolidated Financial Statements and MD&A
First Quarter 2012 Consolidated Financial Statements and Notes to the Consolidated Financial Statements and Management's Discussion and Analysis for Progress Energy Resources Corp. have been filed on SEDAR (www.sedar.com) under Progress Energy Resources Corp. and can also be accessed on the Company's website at www.progressenergy.com.

Progress is a Calgary based energy Company primarily focused on natural gas exploration, development and production in northeast British Columbia and northwest Alberta. Common shares of Progress are listed on the Toronto Stock Exchange under the symbol PRQ.

Annual Meeting of Shareholders
Progress' Annual and Special Meeting of Shareholders is scheduled for Wednesday, May 2, 2012 at 3:30 p.m., Calgary time, at the Calgary Petroleum Club, 319-5^th Avenue S.W. Calgary, Alberta.

Advisory Regarding Forward-Looking Statements
This press release and financial highlights table (collectively the "press release") contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements.  In particular, forward looking statements in this press release include, but are not limited to, statements with respect to the focus of capital expenditures, the timing of capital spending and the results therefrom; payment of dividends; projections of future land holdings; completion of planned facility expansions and the timing thereof; future drilling plans and programs, the timing thereof and the results therefrom; timing of development of resources; expected commodity prices and industry conditions. 

The forward-looking statements and information are based on certain key expectations and assumptions made by Progress, including expectations and assumptions concerning prevailing commodity prices and exchange rates, applicable royalty rates and tax laws; future well production rates; reserve and resource volumes; the performance of existing wells; the success obtained in drilling new wells; and the sufficiency of budgeted capital expenditures in carrying out planned activities; and the availability and cost of labour and services and future operating costs.  Although Progress believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Progress can give no assurance that they will prove to be correct.

Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the risks associated with the oil and gas industry in general such as operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; the uncertainty of estimates and projections relating to reserves, resources, production, costs and expenses; health, safety and environmental risks; commodity price and exchange rate fluctuations; marketing and transportation; loss of markets; environmental risks; competition; incorrect assessment of the value of acquisitions; failure to realize the anticipated benefits of acquisitions; ability to access sufficient capital from internal and external sources; changes in legislation, including but not limited to tax laws, royalties and environmental regulations.

Management has included the above summary of assumptions and risks related to forward-looking information provided in this press release in order to provide securityholders with a more complete perspective on the Company's future operations and such information may not be appropriate for other purposes.  The Company's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that the Company will derive there from.  Readers are cautioned that the foregoing lists of factors are not exhaustive.  These forward-looking statements are made as of the date of this press release and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect the operations or financial results of Progress are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com).  The forward-looking statements and information contained in this press release are made as of the date hereof and Progress undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Barrels of Oil Equivalent
"Boe" means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas. Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Greg Kist, Vice President, Marketing, Corporate and Government Relations
Progress Energy Resources Corp.
403-539-1809 ([email protected])

Kurtis Barrett, Analyst, Investor Relations and Marketing
Progress Energy Resources Corp.
403-539-1843 ([email protected])