Lone Pine Resources Inc., Calgary, (NYSE, TSX: LPR) has reported its financial and operational results for the third quarter of 2011.

Selected highlights for the quarter include:

  • Equivalent average daily net sales volumes of 98.8 MMcfe/d increased 4% from the second quarter of 2011
  • Liquids average daily net sales volumes of 3,544 bbls/d increased 16% from the second quarter of 2011
  • Net liquids production weighting increased to 22% from 19% in the second quarter of 2011
  • Adjusted EBITDA of $36.4 million increased 6% from the second quarter of 2011
  • Adjusted discretionary cash flow of $33.6 million increased 4% from the second quarter of 2011
  • Adjusted net earnings of $10.2 million increased 27% from the second quarter of 2011
  • 100% drilling success rate in the third quarter of 2011 consisting of 14 gross (14 net) light oil wells at Evi and 1 gross (1 net) natural gas well in the Nikanassin resource play at Narraway
  • Completed and brought onstream 11 gross (11 net) light oil wells at Evi and 3 gross (2.5 net) natural gas wells at Narraway
  • Borrowing base available under syndicated credit facility was increased by CDN$75 million to CDN$425 million
  • Spin-off from Forest Oil Corporation was completed on September 30, 2011

"We are pleased to report our continued growth and liquids transition in the third quarter of 2011," says David M. Anderson, president and CEO. "Third quarter average daily net sales volumes of 98.8 MMcfe/d represented a 4% increase over the second quarter of 2011 as we continued to grow our liquids weighting, which now stands at 22% of net sales volumes. Despite a pronounced decline in North American commodity prices in the third quarter, Lone Pine was able to generate increases in revenue, EBITDA, cash flow and earnings. With our recently increased borrowing base and our attractive portfolio of hedges in place through 2012, we are pleased with the current financial position of the company.

"We remain encouraged with the consistent results we have realized at Evi through the third quarter of the year where our modified completion technique implemented in the first half of 2011 continues to provide significantly improved results. Evi continues to be the focus of our capital program with over 65% of our second half of 2011 capital budget being allocated to the play, including strategic land acquisitions completed in the third quarter that expanded our land base by 32% in the area.

"The third quarter also included a very important corporate milestone with the completion of the spin-off from Forest on September 30, 2011. As a result of the dividend by Forest of its shares of Lone Pine common stock, Lone Pine is now 100% independent."

Third Quarter 2011 Results

Important Note: Lone Pine reports financial results in United States dollars and in accordance with United States GAAP and presents production volumes on a net after royalties basis, unless otherwise stated.

Average Daily Sales Volumes, Average Realized Prices and Revenues

Lone Pine's average daily net sales volumes for the third quarter of 2011 increased 4% to 98.8 MMcfe/d compared to 94.6 MMcfe/d in the second quarter of 2011. Lone Pine's average daily oil and NGLs net sales volumes for the third quarter of 2011 increased 16% to 3,544 bbls/d compared to 3,055 bbls/d in the second quarter of 2011.

The average realized natural gas price (before hedges) for the third quarter of 2011 decreased 5% to $3.57 per Mcf compared to $3.74 per Mcf in the second quarter of 2011. The average realized oil prices (before hedges) for the third quarter of 2011 of $77.49 per bbl with an average oil price differential of $12.08 per bbl compared to $92.78 per bbl and $9.78 per bbl, respectively, in the second quarter of 2011. The oil price differential realized in the third quarter of 2011 was negatively affected by a third party sales pipeline disruption in the Evi area that resulted in previously pipelined volumes being trucked to market for the majority of the quarter. The average realized NGL price for the third quarter of 2011 decreased 11% to $58.88 per bbl compared to $66.32 per bbl in the second quarter of 2011.

In the third quarter of 2011, Lone Pine realized total natural gas hedging gains of $1.8 million ($0.25 per Mcf) and total crude oil hedging gains of $1.7 million ($5.78 per bbl) for a total hedging gain of $3.5 million ($0.38 per Mcfe). Lone Pine did not have any hedges in place for any prior periods.

Production Expense and Cash Costs

Lone Pine's total production expense per unit for the third quarter of 2011 decreased 6% to $1.53 per Mcfe compared to $1.63 per Mcfe in the second quarter of 2011.

Depreciation and Depletion Expense

Lone Pine's depreciation and depletion expense per unit for the third quarter of 2011 decreased 6% to $2.29 per Mcfe compared to $2.44 per Mcfe in the second quarter of 2011.

Capital Expenditures

Lone Pine's total capital expenditures for the third quarter of 2011 were $94.3 million compared to $108.7 million in the second quarter of 2011. As highlighted in the company's September 21, 2011 press release, Lone Pine has a second half of 2011 capital budget of US$130 - US$140 million.

Credit Facility

The Company maintains a CDN$500 million credit facility between Lone Pine and a syndicate of banks that currently has a borrowing base of CDN$425 million. The borrowing base was increased in the September semi-annual redetermination by CDN$75 million from the previously available CDN$350 million. The credit facility, which matures in March 2016, is secured by substantially all of the Company's assets. As of September 30, 2011, Lone Pine had CDN$287 million outstanding under the credit facility.

Operational Highlights

Evi Light Oil Play

In the third quarter of 2011, Lone Pine drilled 14 gross (14 net) horizontal light oil wells at Evi with a 100% success rate and completed and brought onstream 11 gross (11 net) horizontal wells. Through the third quarter of 2011, Lone Pine has completed and brought onstream a total of 22 gross (22 net) horizontal wells with an average initial peak production rate of over 300 bbls/d per well and 60-day average production rates of approximately 200 bbls/d.

Since the end of the third quarter, Lone Pine has drilled an additional 6 gross (6 net) horizontal wells and has completed and brought onstream 6 gross (6 net) horizontal wells. The company is encouraged by recent execution in the field with pacesetter wells being drilled in approximately seven days versus the previously budgeted 10 - 12 days. Based on this improved operational efficiency, the company expects that it will execute the 2011 plan of drilling 42 gross (42 net) horizontal wells at Evi with the existing two rigs it currently has running in the area.

As of September 30, 2011, Lone Pine holds approximately 64,160 gross and 57,222 net acres in the Evi light oil play.

Nikanassin Resource Play

In the third quarter of 2011, Lone Pine drilled 1 gross (1 net) vertical well and completed 3 gross (2.5 net) vertical wells in the Nikanassin resource play in the Narraway/Ojay area. Since the end of the third quarter, Lone Pine has drilled an additional 1 gross (1 net) vertical well.

As of September 30, 2011, Lone Pine holds approximately 192,504 gross and 127,104 net acres in the Nikanassin resource play.