PNE Pine Cliff Energy Ltd

Pine Cliff Energy Ltd. (“Pine Cliff” or the “Company”) (TSX: PNE) is pleased to announce its year-end financial and operating results, the filing of its 2018 disclosure documents and an operations update on the oil well drilled in Q4 2018. Included in the filings were Pine Cliff's annual information form (“AIF”), which includes disclosure and reports related to reserves data and other oil and gas information pursuant to National Instrument 51‐101 Standards of Disclosure for Oil and Gas Activities and its consolidated financial statements and related management's discussion and analysis for the year ended December 31, 2018 (the “Annual Report”).  Selected highlights are shown below and should be read in conjunction with the Annual Report and the AIF. 

2018 Highlights

Pine Cliff’s natural gas market diversification strategy was successful in generating positive adjusted funds flow in 2018, despite enduring the lowest AECO gas prices in 19 years.   Pine Cliff was also able to use its extensive seismic database to expand the Company’s prospect inventory by identifying a number of operated, drilling locations on its existing land base.  And on the macro side, LNG Canada announced in the last quarter of 2018 that it will be proceeding with a $40 billion LNG project in Western Canada that will initially export two Bcf per day of Western Canada gas. This project would be one of Canada’s largest infrastructure projects ever undertaken and will play a significant role in addressing the issue of getting Canadian natural gas to the world. Other significant Pine Cliff highlights from the fourth quarter and 2018 include:

• generated $4.4 million of adjusted funds flow ($0.01 per basic share) for the three months ended December 31, 2018;
• generated $10.5 million ($0.03 per basic share) of adjusted funds flow during the year ended December 31, 2018;
• realized a $2.51 per Mcf gas price for the three months ended December 31, 2018, 44% higher than the AECO 5A benchmark of $1.74 per Mcf;
• realized a $2.07 per Mcf gas price for the year ended December 31, 2018, 34% higher than the AECO 5A benchmark of $1.54 per Mcf;
• achieved average production of 19,684 Boe/d (94% natural gas) in 2018, only 8% lower than the 21,408 Boe/d in 2017, despite incurring only $6.5 million of drilling and recompletion capital spending in 2018, over half of which was spent in the fourth quarter of 2018 with no corresponding increase in production from that specific spend until 2019;
• completed a private placement of $19 million of term debt to Alberta Investment Management Corporation and extended $12 million of insider debt to 2020 to eliminate $18 million in bank debt, ending 2018 with $3.6 million in cash; and
• drilled and completed a 100% working interest horizontal oil well that was successfully brought on production in January, 2019.

Operations Update on Pekisko Oil Well

In 2018, Pine Cliff focused on identifying growth opportunities within the Company’s Central Alberta land base using the 420 square kilometers of 3D and 813 kilometers of 2D seismic owned or licensed in the area. This work resulted in Pine Cliff drilling its first horizontal oil well (100% working interest) targeting the Pekisko formation which came on production on January 14, 2019.  Although the well was initially restricted for the first 14 days, it flowed at an average rate of 410 Boe/d for the first 30 days of production, consisting of 238 Bbl/d of 30 degree API oil and 940 Mcf/d of raw natural gas. Production for the first 57 days averaged 390 Boe/d (63% oil and NGLs).  

Pine Cliff currently estimates that there are approximately 19 gross (15.8 net) Pekisko and Basal Quartz oil well locations on the Company’s Central Alberta lands that would be economic to drill at today’s commodity pricing, with 3 (2.5 net) of these locations already booked in the Company’s Reserve Report prepared by McDaniel & Associates Consultants Ltd. at December 31, 2018.  Pine Cliff owns extensive infrastructure, operations and seismic in Central Alberta and it will continue to evaluate further development and acquisition potential in this area.

Financial and Operating Results

					Three months ended December 31,		Year ended December 31,
					2018	2017	2018	2017
($000s, unless otherwise indicated)
Oil and gas sales (before royalty expense)					30,110	28,663	107,385	125,018
Cash flow from operating activities					1,415	(4,350)	8,616	25,009
Adjusted funds flow1					4,433	3,759	10,513	28,705
Per share – Basic and Diluted ($/share)1					0.01	0.01	0.03	0.09
Loss					(28,520)	(32,996)	(72,719)	(67,864)
Per share – Basic and Diluted ($/share)					(0.09)	(0.11)	(0.24)	(0.22)
Capital expenditures					4,302	3,091	10,665	13,477
Net Debt1					56,819	53,638	56,819	53,638
Production (Boe/d)					19,576	21,489	19,684	21,408
Weighted-average common shares outstanding (000s)					94%	95%	94%	95%
Basic and diluted					307,076	307,076	307,076	307,076
Combined sales price ($/Boe)					16.72	14.50	14.95	16.00
Operating netback ($/Boe)1					3.56	2.85	2.68	4.88
Corporate netback ($/Boe)1					2.46	1.90	1.47	3.68
Operating netback ($ per Mcfe)1					0.59	0.48	0.45	0.81
Corporate netback ($ per Mcfe)1					0.41	0.32	0.25	0.61

1 This is a non-GAAP measure, see “NON-GAAP Measures” for additional information.

For further information, please contact:

Philip B. Hodge – President and CEOCheryne Lowe –CFO and Corporate SecretaryTelephone: (403) 269-2289Fax: (403) 265-7488Email: info@pinecliffenergy.com

Cautionary Statements

Certain statements contained in this news release include statements which contain words such as “anticipate”, “could”, “should”, “expect”, “seek”, “may”, “intend”, “likely”, “will”, “believe” and similar expressions, statements relating to matters that are not historical facts, and such statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions.  Forward-looking information in this news release includes, but is not limited to: future capital expenditures, including the amount and nature thereof; future acquisition opportunities including Pine Cliff’s ability to execute on those opportunities; future drilling opportunities and Pine Cliff’s ability to generate reserves and production from the undrilled locations; oil and natural gas prices and demand; expansion and other development trends of the oil and natural gas industry; business strategy and guidance; expansion and growth of our business and operations;  maintenance of existing customer, supplier and partner relationships; supply channels; accounting policies; risks; Pine Cliff’s ability to generate cash flow; and other such matters.

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.  The risks, uncertainties and assumptions are difficult to predict and may affect operations, and may include, without limitation: foreign exchange fluctuations; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us; and other factors, many of which are beyond our control. The foregoing factors are not exhaustive.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do, what benefits will be derived there from.  Except as required by law, Pine Cliff disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Natural gas liquids and oil volumes are recorded in barrels of oil (“Bbl”) and are converted to a thousand cubic feet equivalent (“Mcfe”) using a ratio of one (1) Bbl to six (6) thousand cubic feet. Natural gas volumes recorded in thousand cubic feet (“Mcf”) are converted to barrels of oil equivalent (“Boe”) using the ratio of six (6) thousand cubic feet to one (1) Bbl. This conversion ratio is based on energy equivalence primarily at the burner tip and does not represent a value equivalency at the wellhead. The terms Boe or Mcfe may be misleading, particularly if used in isolation.

Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of oil, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

The forward-looking information contained in this news release is expressly qualified by this cautionary statement.

NON-GAAP Measures

This press release uses the terms “adjusted funds flow”, “operating netbacks”, “corporate netbacks” and “net debt” which are not recognized under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other companies.  These measures should not be considered as an alternative to, or more meaningful than, IFRS measures including net income (loss), cash provided by operating activities, or total liabilities.  The Company uses these measures to evaluate its performance, leverage and liquidity.  Adjusted funds flow is a non-Generally Accepted Accounting Principles (“non-GAAP”) measure that represents the total of funds provided by operating activities, before adjusting for changes in non-cash working capital, and decommissioning obligations settled.  Net debt is a non-GAAP measure calculated as the sum of bank debt, subordinated promissory notes at the principal amount, amounts due to related party and trade and other payables less trade and other receivables, cash, prepaid expenses and deposits and investments.  Operating netback is a non-GAAP measure calculated as the Company’s total revenue, less operating expenses, divided by the Boe production of the Company.  Corporate netback is a non-GAAP measure calculated as the Company’s operating netback, less general and administrative expenses, interest and bank charges plus finance and dividend income, divided by the Boe production of the Company.  Please refer to the Annual Report for additional details regarding non-GAAP measures and their calculation. 

The TSX does not accept responsibility for the accuracy of this release.