First Quarter Results:

— Cash flow from operations were CAD18.6 million (CAD0.28 per diluted share) compared to CAD74.2 million (CAD1.08 per diluted share) in the first quarter of 2008.

— Production averaged 16,208 boe/d in the first quarter of 2009, compared to 19,331 boe/d for the first quarter of 2008.

— At quarter end, Highpine Oil & Gas had net debt of CAD67.5 million comprised of CAD20.8 million of bank debt and a working capital deficiency of CAD46.7 million.

— Liquids prices realized in the first quarter were CAD45.17/boe compared to CAD93.17/boe in the first quarter of 2008. Average natural gas prices were CAD5.60/mcf compared to CAD8.51/mcf for the first quarter of 2008.

— Operating costs in the first quarter averaged CAD10.96/boe compared to CAD11.19/boe in 2008. Lower natural gas prices have led to a reduction in Highpine Oil & Gas’ cost of power.

— Operating netbacks after hedges in the first quarter were CAD14.98/boe compared to CAD44.89/boe in the same period in 2008.

— Net capital expenditures for the quarter year were CAD38.2 million with about 60% of the expenditures related to Pembina Nisku activity.

— Highpine Oil & Gas participated in drilling 13 gross (10.6 net) wells at a 62% success rate in the first quarter.

— Net general and administrative expenses per boe for the first quarter were CAD2.13 compared to CAD1.61 for the first quarter of 2008.

“The first quarter of this year saw the lowest world wide oil pricing in almost half a decade” stated Jonathan Lexier, president and chief executive officer of Highpine Oil & Gas. “For a company with such a large liquids weighting to their production mix, this presented Highpine Oil & Gas with our most challenging environment for cash flow in some time. Fortunately, liquids pricing has improved greatly and with our higher current production levels, cash flow for the remainder of 2009 is expected to be ahead of the pace achieved in the first quarter of 2009.”

Q1 2009 Operations Update

Highpine Oil & Gas’ first quarter 2009 production averaged 16,208 boe/d in line with previous guidance of 16,300 boe/d. During April, Highpine Oil & Gas placed seven wells on production which were scheduled to come on stream during the first quarter but were delayed to maximize the benefit of recently announced incentives. Current production is about 17,500 boe/d. Highpine Oil & Gas is reducing its previously announced 2009 average annual production guidance from 19,000 boe/d to about 17,500 boe/d due to a combination of factors including delays in optimizing production from the Pembina Nisku WW pool and the expectation of continued low natural gas prices resulting in the deferral of a number of development drilling projects until prices recover.

Highpine Oil & Gas drilled 13 (10.6 net) wells in the first quarter of 2009. A 50% interest horizontal gas well was drilled at Ansell and came on stream in April at a restricted rate of 6 mmcf/day. A 62.5% interest oil well was completed at Chip Lake. Two 100% wells were drilled at Joffre. One well has been successfully completed as a coal bed methane gas well and the other awaits completion as a conventional Ellerslie producer following spring break-up. Three unsuccessful wells were drilled on the Wayne Rosedale Nisku play. Total cost for seismic and drilling at Wayne Rosedale amounted to CAD3.2 million. Highpine Oil & Gas does not plan any additional drilling on the Wayne Rosedale property in 2009.

Six (4.4 net) wells were drilled targeting Nisku in the Pembina Fairway. A 100% re-entry / side track of a previously watered out Nisku well in Brazeau area was successful, and holds promise for additional similar re-entries. The 94.4% long reach well in the Pembina Nisku WW pool was completed and brought onstream in early April. Two 100% interest dry holes were drilled near Tomahawk. One well encountered an uneconomic pay thickness and the other did not find reservoir. On March 11, 2009 Highpine Oil & Gas announced two (0.5 net) successful Nisku wells near Berrymoor, Alberta. Both wells were completed in late April. The 9-5 well has been tested at rates up to 1,800 bbl/d (286 m3/d) of clean oil and the 14-5 well has been tested at rates up to 1,400 bbl/d (222 m3/d) of clean oil. The oil has an API gravity of 42, and the solution gas has measured H2S concentrations up to 21%.

During the first quarter of 2009, Highpine Oil & Gas acquired a 100% interest in 1,024 gross hectares, 2,560 gross acres of petroleum and natural gas rights at Alberta Crown land sales.

Future Plans

Second quarter activities are focused on the completion of tie-ins and production optimization. Future drilling is expected at Tomahawk Nisku, Pembina Rock Creek, and Wapiti Montney depending on surface conditions at that time. Planning is underway to tie-in the recently completed Berrymoor Nisku oil wells to Highpine Oil & Gas’ Easyford battery. The earliest production could be on stream is late in the fourth quarter, depending on the regulatory process required for the pipeline routing.

Planned spending for the balance of the year is estimated at about CAD60 million for an anticipated 2009 capital program of about CAD100 million.


At the end of the first quarter, the company had net debt of CAD67.5 million which includes bank debt of CAD20.8 million drawn on a current available bank line of CAD225 million. The bank credit facilities are anticipated to be renewed later this month, with a commitment received from the company’s financial lenders to provide a total credit facility of CAD200 million on renewal.

Capital spending in the first quarter was CAD38.2 million with about 60% incurred in the Pembina area. Capital spending was spent primarily on drilling and completions in the quarter with 13 gross (10.6 net) wells drilled.