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Debt swoon hits BlackPearl
By GARY PARK For Petroleum News
The latest round of volatility in debt capital markets has brought to an abrupt halt plans by BlackPearl Resources to proceed with thermal-recovery oil projects in Saskatchewan and Alberta.
Just three weeks after the Calgary-based start-up announced it was ready to launch a US$350 million debt issue to cover capital investments of C$300 million-C$350 million, BlackPearl pulled the plug.
Company President John Festival said the projects must be initiated on a “solid financial footing and, until the debt markets have stabilized, we have decided to defer our proposed debt financing,” even though BlackPearl believes the Onion Lake (Saskatchewan) and Blackrod (Alberta) ventures could be “significant mid- to long-term value generators.”
Onion Lake is designed to yield 12,000 barrels per day using steam to enhance oil recovery and was originally intended to follow the Blackrod oil sands project, whose initial phase of 20,000 bpd was expected to cost up to C$800 million.
The order was switched when BlackPearl felt it would be unable to raise the needed capital through a combination of debt, non-core asset sales, joint-venture proceeds and new equity.
Analyst: company punished Jared Dziuba, an analyst with BMO Capital Markets, said the market is punishing the company for circumstances beyond its control.
But he said BlackPearl’s balance sheet strength will enable it to continue conventional programs.
Dziuba told the Calgary Herald that the financing needs clash with a “very volatile time in debt markets and a time when there is very little investor appetite for risk.”
He said those negative views have been compounded by the “poor performance” of Southern Pacific Resource in attempting to ramp-up its McKay steam-assisted gravity drainage, SAGD, project, driving that company’s stock down to a 52-week low.
BlackPearl production in the second quarter was expected to average 9,500-10,000 barrels of oil equivalent per day.
It said tighter heavy oil price differentials and higher output due to more cold flow drilling at Onion Lake and increased flow at the Blackrod SAGD pilot will generate improved second-quarter revenue and cash flow.
The first pilot well pair averaged more than 600 bpd during June and is expected to stabilize at 400-500 bpd, at which point a second well pair will be steamed and used to test a different completion technique.
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