We're Headed To $8.00 Natural Gas

Re: We're Headed To $8.00 Natural Gas

PMT as an almost exclusive NG producer once was a $24 stock paying 24 cents a month. Yes it does have net debt of $483 million. But with the value of it's huge land base and when higher NG and oil prices come about. This debt will shrink measurably compared to the higher NAV for PMT and it's higher cash flow.  

Stability and Bold New Ventures

Perpetual's core properties combine stability with high-impact growth opportunities. Perpetual is one of the only intermediate-sized Canadian energy companies with a large component of sustainable base assets, our cash flow generators, which require modest capital investment to offset production declines.

Perpetual Energy's Production by Core Area and Commodity

 
Q1 2012
Q12011

Gas (MMcf/d)
 
 

Eastern District
87.6
105.5

West Central District
26.1
25.6

Total (Mmcf/d)
113.7
131.1

Oil & NGL (bbl/d)
 
 

Eastern District
2,230
271

West Central District
1,235
1,349

Total (bbl/d)
3,465
1,620

Total (Mmcfe/d)
 
 

Eastern District
101.1
107.1

West Central District
33.5
33.6

Total (MMcfe/d)
134.6
140.7

Deemed natural gas production (MMcf/d)
27.7
22.7

Total plus deemed production (MMcfe/d)
162.3
163.4

Eastern District

The Eastern District is geographically comprised of assets in northeast and east central Alberta. Production in this multi-zoned potential area comes from multiple Cretaceous and Devonian aged reservoirs and consists of both conventional and tight unconventional shallow gas reservoirs as well as conventional heavy oil. The northern part of this district largely overlaps the Athabasca Oil Sands area and the Corporation has also amassed a material inventory of oil sands leases for future development that will require a variety of subsurface recovery technologies.

The vast majority of Perpetual's shallow gas properties feature well established, high working interest production and most are operated by Perpetual. The base shallow gas production profile is predictable due to the lengthy production histories and the large number of independent producing entities in Perpetual's asset base. The large number of wells and facilities means unexpected downtime at any single site does not have a material impact on overall production.

Competitive operating costs and access to markets proximal to the producing properties combine to deliver relatively high field netbacks. Perpetual has an extensive inventory of low cost opportunities for value creation including workovers, uphole recompletions and an inventory of drilling prospects which extends throughout the shallow gas asset base. The Corporation has a history of adding production through relatively modest capital expenditures to offset most of the annual natural production declines.

Conventional heavy oil production in the east central region has been Perpetual's focus since early 2011. The existing land and seismic base from the shallow gas assets provided an accessible fairway to explore for and develop heavy oil from Cretaceous Mannville-aged strata. Perpetual's exploration and development program is essentially extending the regional heavy oil development of the Lloydminster area further west into thinner sands, utilizing horizontal development technology, which has proven to be highly economic with current oil prices.

Northeast Alberta - The Northeast area has been Perpetual's largest core area measured by production and total acreage, and is comprised primarily of the original assets acquired from Paramount Resources Ltd. at the inception of the Trust in 2003. Significant areas of production in this core area include Calling Lake, Craigend, Darwin, Leismer, Liege, Marten Hills, Panny, Peter Lake, Saleski, Wabasca/Hoole and Woodenhouse. Production is primarily from the Devonian Grosmont and various overlying Cretaceous formations. The majority of the shut-in gas related to the gas over bitumen issue is in the Wabiskaw-McMurray formation in this area. Production was shut-in in 2003 and 2004 as a result of shut-in orders related to the gas over bitumen regulatory issue. Production at Legend was shut-in on October 31, 2009 as a result of an interim Energy Resources Conservation Board (ERCB) shut-in order related to a more recent gas over bitumen dispute with oil sands owners in the area. The majority of the shut-in assets at Legend were sold in 2010. Perpetual receives a financial solution on a monthly basis through the Alberta Crown royalty system which allows for the recovery of a portion of the cash flow lost from these assets as a result of these shut-ins.

Bitumen/Heavy Oil - Perpetual has over 333,000 net acres of bitumen rights within the northeast area of the Eastern District, including leases at Liege, Ells, Saleski, Panny, Wabasca Lake, Hoole, Calling Lake and Marten Hills. Main bitumen targets include Cretaceous Bluesky, Grand Rapids, Wabiskaw and Clearwater as well as Devonian Grosmont and Leduc. Certain reservoirs exhibit potential to achieve production through near cold-flow technology where modest amounts of heat and/or solvent are envisioned to establish production whereas others will likely require intensive thermal recovery techniques to develop the bitumen resource.

An independent resource assessment of several of Perpetual's oil sands leases recognized a best estimate of 1,157 MMbbl of discovered bitumen initially in place and a best estimate of 2,079 MMbbl of undiscovered bitumen initially in place, primarily at Panny and Liege. The best estimate contingent resource and additional prospective resource recognized is 212 MMbbl and 417 MMbbl respectively. Estimates for the Bluesky formation at Panny are based on the potential application of cyclic steam stimulation. In the carbonate reservoirs at Liege, bitumen resource was assigned on the basis of exploitation using Steam Assisted Gravity Drainage ("SAGD") which is currently considered technology under development.

The Corporation has filed a pilot project application for the Panny area which is currently under review at the ERCB. Perpetual has also applied for Innovative Energy Technologies Program (IETP) funding for the pilot.

East Central Alberta - Shallow gas production from the Birchwavy area is primarily from various conventional regional and channel reservoirs in the Cretaceous Mannville zone. A significant inventory of uphole recompletions and conventional shallow gas drilling prospects has been identified for future development to partially offset conventional gas production declines. A significant inventory of proved and probable undeveloped reserves in the resource play in the Viking formation is booked in this area which holds significant potential for Viking and Colorado shallow shale gas development in the future.

Mannville Heavy Oil - Perpetual has defined and initiated development of over ten medium and heavy oil pools in Birchwavy East. Oil production in the region has grown from less than 200 bbl/d in the first quarter of 2011 to nearly 3,000 bbl/d exiting the first quarter of 2012. Production is primarily from thin regional Sparky and Lloydminster sands similar to those being developed in the greater Lloydminster region. Exploration and development of this heavy oil is the focus of Perpetual's current capital program. The oil quality is consistent with Western Canadian Blend at Hardisty.

Viking/Colorado - Perpetual has an interest in over 500,000 hectares of Colorado Group shale gas rights that extend over the southern properties. This resource consists of 200-300 meter thick gas saturated shale. The Viking sand is the lowest most member of the Colorado Group in which the Corporation has approximately 90 Bcf of booked proven plus probable reserves. There are over 400 wells within the region which are completed using various techniques targeting select intervals of the Colorado group with wide ranging results

Perpetual has conducted an extensive technical evaluation of this resource including recovering and analyzing over 675 meters of core in order to determine how to target and best exploit the resource in place. The study has revealed an original gas in place within this area to be in the range of 16 to 36 Bcf/section over the 228 township region. A pilot to evaluate the commercial recovery of this resource, that incorporates learnings from the technical study, is currently being developed.

A portion of the findings from the technical review that has been completed can be found in papers that have been recently presented in Calgary at GeoConvention 2012:Vision, the SPWLA (Society of Petrophysicists and Well Log Analysts) Topical Conference held in Pittsburg, PA and at Weatherford Labs Open House in Golden, CO.

Defining and Targeting Play in Colorado Group Gas Shales, East Central Alberta

Presentation Video: Colorado Shale characterization presented at "GeoConvention 2012 Vision"
Presentation: A Reservoir and Geomechanical Model of the Colorado Shale, Western Canadian Sedimentary Basin (Baker Hughes)
Presentation: The Importance and Value of Open-hole Geophysical Log Calibration in Non-Archie Rocks (Weatherford Laboratories)

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West Central District

The strategic focus on growth in west central Alberta was initiated in 2008 with grass roots exploration that resulted in the purchase of a significant Crown acreage position for Montney gas in the Elmworth area south of Grande Prairie. The goal was to complement the Corporation's existing shallow gas prospect inventory with higher impact, deep basin style, liquids-rich resource play opportunities. In 2009, Perpetual completed the acquisitions of Profound Energy Inc. with focused assets in the Pembina/Carrot Creek area, and in 2010 acquired additional assets in the Edson area to further establish the West Central district. Production is established from the greater Pembina area and includes light crude oil from the Cardium, Second white specks, Ostracod, Ellerslie and Fernie sand formations. Liquids rich natural gas (20 to 40 bbl/MMcf) comes from both vertical wells with multiple commingled Cretaceous and Jurassic aged objectives, and horizontal well with multi-stage fracture stimulations in the Wilrich, Notikewin, Falher and Rock Creek formations.

The Corporation further refined the focus area of the West Central district to the Wilrich in the greater Edson area and the Montney in the Elmworth area.

Edson Wilrich Gas - The Edson area is a critical element of Perpetual's commodity diversification and growth plans. Production is from various formations, however, the Wilrich formation is the focus for horizontal development. The Wilrich is an extensive tight silty-sand reservoir which is exploited through horizontal wells with multi-stage fracture stimulations. The Corporation has identified over 80 net locations in the inventory with an average 3 Bcfe recoverable per location. Natural gas liquids of 36 bbl/MMcf make this inventory highly economic even at low natural gas prices. A type curve established from over 14 producing Perpetual-operated wells estimates initial production rates of 4.5 MMcf/d. The most recently drilled wells in the West Edson area have exceeded the type curve performance to date.

Elmworth Montney Gas - Through grass roots exploration efforts and successful Crown lands sale purchases, Perpetual acquired material exposure to the Montney liquids rich gas play developing at Elmworth in west central Alberta. To manage operational and technical risk, Perpetual entered into a joint venture arrangement with an industry partner whereby the partner would fund and operate three wells to evaluate the lands to earn a 50 percent working interest. The farm-in arrangement was completed in January 2011, and as a result Perpetual has a 50 percent interest in 78 sections of land with contingent resource and reserves established for Montney gas development. Offsetting leaseholders have been actively drilling the Montney play in the region adding more than 20 new wells in the past 18 months to define the type curve and liquid content of the reservoir. The Elmworth Montney acreage holds approximately 3Tcf of gas in place (internal estimate) and is an important part of the future inventory for the Corporation.