Painted Pony Petroleum has provided an update covering the operational progress made since the end of the third quarter of 2008.
Painted Pony carried out an active fourth quarter exploration and development program with the drilling of 13 (4.2 net) successful wells. In the last quarter of 2008, Painted Pony drilled 12 (3.7 net) Bakken horizontal oil wells in Saskatchewan and one (0.5 net) gas well in NE BC.
The Company grew sales volumes to an estimated fourth quarter 2008 average rate of 1,173 boe/d from the third quarter average daily rate of 925 boe/d. Oil and liquids made up 55% of fourth quarter sales, with 45% from natural gas. Light oil sales from Saskatchewan averaged 620 bbls/d and NE BC contributed 553 boe/d (96% gas and 4% NGL's). Sales in 2008 averaged 761 boe/d compared to 25 bbls/d in 2007.
The Company has entered into two farm-out agreements in NE BC for Montney tests on its Cypress and Cameron land blocks. The first well on the Cypress block commenced drilling on December 26th, 2008. A second well on the Cameron block commenced drilling February 8th, 2009. The farmee has committed to drilling two additional Montney wells on the Cameron block. The Company believes that this resource play is being actively pursued by other companies on lands offsetting the Company's land blocks. Painted Pony is currently evaluating the drilling of additional Montney tests on its offsetting lands in 2009.
Also in NE BC, the Company participated in the experimental completion of two Buckinghorse/ Fort Saint John Group shale gas wells. Both wells flowed gas and have been placed on production for further evaluation. The Company is encouraged by the initial results on this new resource-type project but notes that it is in the very early stages of proving up the commercial viability of the project. The Company is considering additional drilling/completions targeting this shale gas play during 2009.
Painted Pony continues to monitor its capital spending program in light of the turmoil in the equity and commodity markets. The Company has adjusted its capital program as necessary to continue to conservatively manage its balance sheet. At the end of 2008, the Company had estimated unaudited positive working capital of $11.5 million and no debt. The Company's bank lines were reconfirmed at the end of January 2009 at $22.0 million. It is the Company's objective to maintain its balance sheet in 2009 with little to no debt.
Painted Pony plans to drill 2 (1.7 net) horizontal Bakken oil wells and 2 (1.0 net) Bluesky/Gething gas wells during the first quarter of 2009. The Company is currently evaluating its 2009 second to fourth quarter budget plans.
The Company has built its land position through drilling to earn land, freehold leasing and purchases at crown land sales. The March 16, 2007 farmout agreement with Advantage Oil and Gas Ltd. as described in the Company's prospectus dated May 8, 2007 has expired in accordance with its terms. At December 31, 2008, the Company owned 54,000 net acres of developed and undeveloped land (98% undeveloped) in SE Saskatchewan and 93,900 net developed and undeveloped acres of land (79% undeveloped) in NE BC.
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