Pearl Provides operational and financial update
July 23, 2008 CALGARY,
ALBERTA- Pearl Exploration and Production Ltd. ("Pearl"
or the "Company") (TSX VENTURE:PXX)(FIRST NORTH:PXXS) is pleased to
provide the following operational and financial update.
Operational Highlights
Mooney
During the first half of
2008 Pearl
drilled four net horizontal wells in our Mooney area. Three of the new
wells will form the basis of a polymer pilot which has been accelerated to be
initiated in Q4 2008. Preliminary results from the pilot are expected by
Q1 2009. Plans for a field wide polymer flood implementation are expected
to be finalized by Q2 2009 with implementation targeted as early as the end of
2009. The implementation of the waterflood continues with its initiation
expected in Q4 2008 and continuing into the first half of 2009. In
addition, plans are underway to commence a development drilling program by year
end to extend the productive area to the west with the goals of increasing
production and proven and probable reserves.
Onion Lake
In Onion
Lake the Cyclic Steam
Stimulation (CSS) thermal pilot commenced steam injection on May 15th over a
month ahead of schedule. The first steam cycle on the first well was
completed on June 19th and the well is currently producing between 90 and 100
barrels of oil per day which is within expected modeling parameters.
Steam injection on the second well began on June 20th and first production is
expected to commence before the end of July.
San Miguel
At San Miguel, Pearl
and its 50% partner TXCO have finished construction of its Steam-Assisted
Gravity Drainage (SAGD) pilot located within the Chittim "B" Field.
Steam injection commenced on June 1, 2008 with preliminary results expected by
Q1 2009. Temperature monitoring of the well pair indicates that the steam
chamber is building as anticipated. At the Saner Ranch Field,
construction is continuing on the second production pilot. The Saner
Ranch pilot includes both a vertical inverted five spot well pattern and a
horizontal three well pattern utilizing a modified Fracture Assisted Steamflood
Technology (FAST) process. The three horizontal wells were drilled and
completed successfully in Q2 2008. All major long lead time items for the pilot
are on site with assembly of facilities and infrastructure installation
proceeding on schedule. The pilot is expected to be operational in the third
quarter of 2008 and preliminary results are expected during the first half of
2009. By the end of the second quarter of 2009, Pearl
and its partner expect to select which of the three recovery techniques will
use be used to form the basis of a commercial development project.
Blackrod
At Blackrod, as previously
announced, the Company has entered into an agreement to acquire an additional
30% working interest in 3,886 contiguous hectares of oil sands leases in the
project area. In addition, Pearl
is continuing with its plans to drill a 10 to 15 core well program in the
2008/2009 winter to further delineate this deposit and gather additional
petrophysical data. Pearl remains on track to initiate steaming at its
Steam-Assisted Gravity Drainage (SAGD) pilot, comprised of single well pair
pilot and related facilities, during the first half of 2009. The application
for the required governmental approvals of the thermal SAGD pilot project was
submitted in May of 2008.
Production
Production for the second
quarter averaged approximately 8,200 Boe/d, down from the previous quarter due
to the sale of a portion of our non-core assets and natural decline.
Current production is approximately 5,600 barrels a day due to a temporary
curtailment of 600 Boe/d of production in our Mooney area while we install some
in-field infrastructure and approximately 300 Boe/d of shut-in production
awaiting workovers in other areas. We anticipate having all of this
shut-in production back on-line by mid-August.
Financial Highlights
As a result of both
substantially higher oil and gas prices realized in the second quarter and our
previously announced sale of non-core assets, the Company is in a very strong
financial position with over $55 million in positive working capital at the end
of Q2. Second quarter realized well-head pricing averaged approximately
$84.50 per barrel for our heavy oil and 9.75/Mcf for gas resulting in wellhead
netbacks in the $40/Boe range Despite a recent pullback in both
light oil and natural gas prices, average pricing for heavy oil and natural gas
sales have continued to strengthen into July with wellhead pricing currently
averaging approximately $100 per barrel for our heavy oil and approximately
$10.50/Mcf for our natural gas production. In comparison, the well
head price utilized by Pearl
to establish its 2008 budget was approximately $43 per Boe.
Pearl President and CEO Keith
Hill stated, "We are very pleased to report our
significant progress in all of our core projects including operating steam
flood pilots in both Onion Lake, Saskatchewan and San Miguel,
Texas and the acceleration of our polymer pilot
in the Mooney area of Alberta.
Due to very favourable commodity prices and our recent disposition of some
non-core properties, Pearl
is in a very strong financial position to continue to work these projects
through to development decision points expected in the first half of
2009. We strongly believe that we are now in a position to start to
realize the substantial imbedded resource value in our core areas and it is our
intention to pursue this value without incurring any unnecessary dilution to
our shareholders. In addition, we continue to look for opportunities to
divest our remaining portfolio of non-core assets as we focus our technical and
financial resources exclusively on our large resource conversion
projects."
Pearl also reports that
it has granted an aggregate of 440,000 incentive stock options to certain
officers of the Company. The options are exercisable, subject to vesting
provisions, over a period of five years at a price of Cdn $1.75 per share.
Pearl Exploration and
Production Ltd. is a public company focused on converting its captured
resources into reserves and becoming a substantial North American heavy oil
project development company. Additional information on Pearl
is available on the Company's website at www.pearleandp.com.
For further information,
please contact:
Keith Hill - President
and Chief Executive Officer
Tel.:
(604) 689-7842
E-mail: khill@namdo.com
|
Randy Neely - Chief Financial Officer
Tel:
(403) 716-4054
E-mail: randy.neely@pxx.ca
|
Sophia Shane - Corporate
Development
Tel:
(604) 806-3575
E-mail:
sophias@namdo.com
|
|
All references in this release to boe's are based on a
6 to 1 conversion ratio. Boe's
may be misleading, particularly if used in isolation. A boe conversion of 6
Mcf: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.
Pearl's
Certified Advisor on First North is E.
�hman J:or Fondkommission AB.
Forward-looking
statements: This document
contains statements about expected or anticipated future events and financial
results that are forward-looking in nature and as a result, are subject to
certain risks and uncertainties, such as general economic, market and business
conditions, the regulatory process and actions, technical issues, new
legislation, competitive and general economic factors and conditions, the
uncertainties resulting from potential delays or changes in plans, the
occurrence of unexpected events, and the Company's capability to execute and
implement its future plans. Actual results may differ materially from
those projected by management. For such statements, we claim the safe
harbour for forward-looking statements within the meaning of the Private
Securities Legislation Reform Act of 1995.
The TSX Venture Exchange has not
reviewed and does not accept responsibility for the adequacy or accuracy of
this release.