Palliser Oil & Gas Corp : Palliser Announces Record Production and Credit Facility Increase

Palliser Announces Record Production and Credit Facility Increase

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January 14, 2013, Calgary, Alberta - Palliser Oil & Gas Corporation ("Palliser" or the "Company") (TSXV: PXL) is pleased to provide an operations update. The Company's December 2012 production, based on field estimates, averaged approximately 2,700 boe/d, weighted 98% to heavy oil and 2% to natural gas, in line with its exit production guidance range of 2,600 - 2,800 boe/d. Fourth quarter 2012 production averaged approximately 2,480 boe/d, representing an 11% increase over third quarter 2012 average production, and a 50% increase over fourth quarter 2011 average production. The Company's
2012 production average was approximately 2,125 boe/d, in line with its revised guidance range
(November 2012) of 2,100 - 2,150 boe/d, representing a 54% increase over the 2011 production average. Palliser's production has grown in each of the last fifteen consecutive quarters while also achieving strong production per share growth during this time period.
The fourth quarter 2012 heavy oil capital program included four (4.0 net) wells drilled (or re-entered) and two (2.0 net) wells reactivated with an overall success rate of 83%. The total 2012 heavy oil capital program of 14 (14.0 net) wells drilled (or re-entered) and seven (7.0 net) wells reactivated resulted in an overall success rate of 90% for the 21 (21.0 net) total operations. During the quarter, the Company also acquired 35 (28.1 net) wellbores within its greater Lloydminster core area, for future re-activation and re- entry potential, with additional associated undeveloped lands. Total forecasted capital expenditures for the fourth quarter amounted to approximately $9.0 million, resulting in total capital expenditures of approximately $37.5 million for 2012.
In 2012, the Company realized significant reductions in operating costs largely as a result of expansion of Company owned and operated salt water disposal infrastructure. Fourth quarter 2012 operating costs, based on field estimates, are forecasted to be in the range of $22.00 to $23.00/boe. Palliser strives to continually maximize its operating netbacks, through a combination of low operating costs and an active hedging program. In addition, commencing in September, Palliser has continued to increase the percentage of heavy oil production being shipped by rail, resulting in an increased wellhead net sales price. The Company is targeting to be shipping approximately 1,000 bbl/d by rail at the end of the first quarter of 2013.
Palliser has expanded its heavy oil prospect inventory to 170 locations, providing the Company with a multi-year drilling inventory and significant growth opportunities for future capital programs. During the fourth quarter of 2012, the Company increased its undeveloped heavy oil land position by 9% to 32,542 net acres.
The Company's credit facility has been increased from a total of $43 million to a total of $52 million. The increased credit facility consists of a revolving operating demand loan of $42 million and an acquisition and development demand loan of $10 million. The credit facility increase provides the Company with increased financial flexibility. The Company forecasts net debt to total approximately
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$38.0 million at December 31, 2012, and fourth quarter debt to annualized funds flow from operating activities is forecast to be in the range of 1.6 to 1.8 times.
Palliser expects to issue its 2013 guidance in late January.
About Palliser Oil & Gas Corporation
Palliser is a Calgary-based junior oil and gas company focused on high netback heavy oil production in the greater Lloydminster area of Alberta and Saskatchewan.
Forward-Looking Statements
Certain statements contained herein constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation, including, but not limited to management's assessment of future plans and operations, including: commodity focus; drilling plans and potential locations; expected production levels; development plans; reserves growth; production and operating sales and expenses; reservoir characteristics; the results of applying certain operational development techniques; certain economic factors; and capital expenditures. Forward- looking statements are typically identified by words such as "anticipate", "estimate", "expect", "forecast", "may", "will", "project" and similar words suggesting future events or performance or may be identified by reference to a future date. In addition, statements relating to oil and gas reserves and resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves or resources described, as the case may be, exist in the quantities predicted or estimated and can be profitably produced in the future. With respect to forward- looking statements herein, Palliser has made assumptions regarding, among other things; future capital expenditure levels; future oil and natural gas prices; "differentials" between West Texas Intermediate and Western Canadian Select benchmark pricing; future oil and natural gas production levels; future water disposal capacity; future exchange rates and interest rates; ability to obtain equipment and services in a timely manner to carry out development activities; ability to market oil and natural gas successfully to current and new customers; the impact of increasing competition; the ability to obtain financing on acceptable terms; and the ability to add production and reserves through development and exploitation activities. Although Palliser believes that the expectations reflected in the forward-looking statements contained herein, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included herein, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous risks and uncertainties that contribute to the possibility that the forward-looking statements will not occur, which may cause Palliser's actual performance and financial results in future periods to differ materially from any estimates or projections. Additional information on these and other factors that could affect Palliser's results are included in reports on file with Canadian securities regulatory authorities, including the Company's Annual Information Form, and may be accessed through the SEDAR website at www.sedar.com.
The forward-looking statements contained herein speak only as of the date hereof. Except as expressly required by applicable securities laws, Palliser does not undertake any obligation to, nor does it intend to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement. In addition, readers are cautioned that historical results are not necessarily indicative of future performance.
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Production volumes are commonly expressed on a barrel of equivalent ("BOE") basis whereby natural gas volumes are converted at a ratio of six thousand cubic feet to one barrel of oil. The intention is to convert oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. The term BOE may be misleading, particularly if used in isolation. The conversion ratio is based on an energy equivalent method and does not represent an economic value equivalency at the wellhead.

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FOR FURTHER INFORMATION PLEASE CONTACT: Palliser Oil & Gas Corporation
Allan B. Carswell President & COO [phone] [e-mail]
Or
Kevin J. Gibson
CEO
[phone] [e-mail]
Or
Ivan J. Condic
Vice President, Finance & CFO [phone]
[e-mail]