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CALGARY, Feb. 5, 2013 /CNW/ - Palliser Oil & Gas Corporation ("Palliser" or the "Company") (TSXV: PXL) is pleased to announce its capital budget and outlook for 2013, and management appointments.
Unaudited fourth quarter and year-end 2012 results proved a record year for the Company in many respects. Average production for 2012 is estimated at 2,125 boe/d, representing a 54% increase over the 2011 average. Similarly, fourth quarter 2012 average production is estimated at 2,480 boe/d, representing a 50% increase over the same period in 2011. Palliser's production has grown in each of the last fifteen consecutive quarters while also achieving strong production per share growth during this time period. The Company realized significant reductions in operating expenses in 2012, largely as a result of expansion of Company owned and operated salt water disposal infrastructure. Operating expenses are estimated to be approximately $23/boe for the 2012 average, representing a greater than 25% improvement over the 2011 average.
The result of increased production and reduction in operating expenses is estimated to boost the Company's 2012 funds flow from operating activities to $17 million, a 286% increase from 2011. Although differentials between West Texas Intermediate ("WTI") and Western Canadian Select ("WCS") widened late in the fourth quarter, the Company's funds flow from operating activities are estimated to reach a record $5.5 million for the fourth quarter of 2012, supported by the Company's hedge position and increased shipments of heavy oil by rail.
2013 Capital Budget and Outlook
In light of the current wider heavy oil differential, the Board of Directors has approved a 2013 capital budget of $24 million. This capital program is anticipated to increase average production in 2013 by approximately 30% to 2,700 - 2,800 boe/d, with a 98% heavy oil weighting. This internally generated, organic growth driven capital program is to be funded by cash flow and credit facilities. On January 14, 2013 the Company announced an increase to its credit facility to a total of $52 million. The credit facility increase provides the Company with increased financial flexibility. The current 2013 budget forecasts funds flow from operating activities of $20 million with year-end net debt of $39 million, assuming $93.00 WTI per barrel and $63.00 WCS per barrel pricing.
Management anticipates heavy oil differentials will narrow toward the second half of 2013, largely as a result of the BP Whiting refinery coming back into service and will look to prudently expand capital expenditures at that time. Management will also closely monitor, and look to take advantage of the current attractive heavy oil acquisition market. Although the Company's projects are economic at current heavy oil prices, Palliser is in a strong position to see where differentials trend through the first half of 2013 as the majority of its capital spending typically takes place in the second half of the year.
Despite current wider heavy oil differentials, the Company is expecting 2013 realized operating netbacks to be approximately $26 per boe due to the Company's forecasted strong operational efficiencies, augmented by its hedge position and its increasing shift to shipping heavy oil by rail. Palliser commenced shipping by rail in September 2012, and is targeting 1000 bbl/d by the end of the first quarter of 2013, representing over 30% of corporate production shipped by rail. With minimal additional capital, Palliser can increase its percentage shipped by rail to in excess of 50% by year-end, if current wide heavy oil differentials persist. Palliser is benefiting from its operating infrastructure philosophy, whereby the majority of its production has double tank systems installed at its single well batteries, allowing the majority of its production to be able to ship clean and making it available to meet the specifications of the rail terminals.
The Company's high volume lift ("HVL") strategy has not only proven its consistency with a track record of 15 consecutive quarters of production growth, but has also proven to be economically viable with sustainable low operating expenses and high netbacks in comparison to our peers in the Lloydminster heavy oil area. Generally well performances continue to meet or exceed internal estimates, and further performance history continues to demonstrate additional increases to recovery factors.
Palliser continues to expand its heavy oil prospect inventory which currently stands at 170 locations, all of which are unbooked in the 2011 independent reserve report. This inventory provides the Company with a multi-year drilling and re-activation program, and significant growth opportunities for future capital programs. As of December 31, 2012, the Company's undeveloped heavy oil land position was 32,542 net acres.
Palliser anticipates releasing fourth quarter and year-end audited 2012 financial and operating results in late March to early April. The Company anticipates release of its year-end independent reserve report either prior to, or in conjunction with the year-end 2012 financial results.
Palliser is pleased to announce the appointment of Mr. Brett Frostad to the position of Vice President Exploration. Mr. Frostad has been with Palliser since June 2012 as Exploration Manager. The Company is also pleased to announce the appointment of Mr. Ken Staniforth to the position of Production Manager. Mr. Staniforth has been with the Company since April 2011 as Senior Production Engineer.
An updated corporate presentation may be viewed on the Company's website at www.palliserogc.com.
About Palliser Oil & Gas Corporation
Palliser is a Calgary-based junior oil and gas company focused on high netback heavy oil production in the greater Lloydminster area of Alberta and Saskatchewan.