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Highpine announces fourth quarter and year end 2008 financial and operational results, 2008 reserves and 2009 outlook

Posted on: Wednesday, 11 March 2009, 15:05 CDT

CALGARY, March 11 /PRNewswire-FirstCall/ - Highpine Oil & Gas Limited (TSX: HPX) ("Highpine" or the "Company") announced today its fourth quarter and full year 2008 financial and operational results, 2008 year end reserves as well as 2009 outlook and results to date.

Highpine delivered record production, cash flow and earnings in 2008. Capital spending was $174.7 million in the year. Excess cash generated during 2008 was applied against Company debt with Highpine exiting the year with modest net debt of $48.0 million, and with no amounts drawn under existing bank facilities. Financial discipline was maintained throughout 2008, with the result that, the net debt of $48.0 million represents a debt to cash flow ratio of 0.3 times based on an annualized 2008 fourth quarter cash flow. The Company has the balance sheet strength and financial flexibility to navigate through the unsettled commodity and financial market environment that exists.

2008 Results: - For 2008, record cash flow from operations of $324.4 million ($4.77 per diluted share) represented a 67% increase from the $193.8 million ($2.83 per diluted share) recorded in 2007. - At year end 2008, Highpine had net debt of $48.0 million, which represented a $127.0 million reduction from 2007 year end net debt. - 2008 net earnings increased to a record of $57.2 million. - Production increases and strong commodity prices contributed to record oil and natural gas revenues in 2008. Oil and natural gas revenues increased 46% for the 2008 year to $590.5 million from $403.6 million in 2007. - Production averaged 19,133 boe/d in 2008, up 8% from 17,736 boe/d in 2007. 2008 production consisted of 68% liquids and 32% natural gas. The 2008 production represents a record high annual average for Highpine. - Liquids prices realized in 2008 increased 35% to $98.12/boe compared to $72.50/boe for the 2007 year. Average natural gas price realization for the year increased 24% to $9.17/mcf compared to $7.39/mcf for 2007. - Operating costs in 2008 averaged $11.27/boe compared to $10.34/boe in 2007, largely due to a higher than expected frequency of work-overs related to wells with electrical submersible pumps. In the fourth quarter of 2008 operating costs of $10.88/boe were down from $11.96/boe for the same period in 2007. - Operating netbacks in 2008 were $48.42/boe compared to $33.28/boe in 2007. Fourth quarter operating netbacks were $27.95/boe compared to $34.98/boe for the same period in 2007. - Net capital expenditures for the year amounted to $174.7 million with approximately 47% of such expenditures incurred in Pembina Nisku activity. - Highpine participated in drilling 42 (28.8 net) wells at a 79% success rate in 2008 with 16 (13.6 net) wells drilled in the fourth quarter at an 81% success rate. - Net general and administrative expenses per boe of $1.61 for 2008 were reduced by 14% compared to 2007. Net general and administrative expenses in 2008 decreased 7% to $11.3 million, down from $12.2 million in 2007.

2008 OPERATIONS

Highpine's fourth quarter 2008 production averaged 17,013 boe/d. The largest contributor to the decrease in production in the quarter was the unexpected performance of the 16-36-48-08 W5 long reach well, which commenced production in December 2007. After a few months of production the 16-36 well was not receiving pressure support from the pool injection well and was shut-in late July due to a regulatory imposed production curtailment. Production from the well at a restricted rate resumed in September and the well was granted single well good production practice in mid December. Severe cold weather affecting Highpine operations and third-party facilities also contributed to lower production volumes in December.

Highpine's operated wells and facilities ran at a 95% efficiency rate through 2008 however, Highpine's operating capability was reduced by unexpected down-time and curtailments imposed by third party midstream processing facilities in January and February and scheduled turnarounds. Highpine's assumption of operatorship of its 66% owned Easyford Battery in July 2008 contributed to improved operational efficiency.

Highpine participated in 42 (28.8 net) wells in 2008. At Ansell, 8 (4.5 net) gas wells were drilled with 100% success. At Joffre, 7 (3.5 net) wells were drilled resulting in 3 (1.75 net) gas wells, 3 (1.5 net) coal bed methane wells and 1 (0.25 net) dry hole. In West Central Alberta, 7 (3.7 net) successful wells were drilled including 2 (2 net) gas wells at Caroline and 1 (0.6 net) oil well at Chip Lake. In the Rock Creek in the Pembina/Brazeau River area, 7 (6.1 net) gas wells were drilled including 2 horizontal wells. In Pembina Nisku, 13 (11 net) wells were drilled resulting in 3 (3 net) oil wells, 2 (1 net) gas wells and 8 (7 net) abandoned wells.

By year end, Highpine received a total of 10 well licences in the northeast extension of the Pembina Nisku fairway as a result of Alberta Energy Resources Conservation Board hearings held in June and September.

2008 YEAR END RESERVES AND FINDING AND DEVELOPMENT COST SUMMARY

"2008 was a transition year for our company as our focus on the Pembina Nisku decreased," remarked Jonathan Lexier, President and Chief Executive Officer of Highpine. "For the first time Pembina Nisku spending represented less than 50% of our capital program. We had tremendous success outside the Nisku with 29 (17.8 net) wells drilled at a 97% success rate. Reserves added in these areas amounted to 6.5 mmboe. These new non-Nisku reserves were added at a capital efficiency of $14.26 per boe. We exited 2008 with a more diversified portfolio of potential opportunities which we look forward to better understanding and exploiting in 2009."

Highpine's 2008 capital program added 7.9 million barrels of oil equivalent (mmboe) replacing 113% of production on a total proved and probable basis, before revisions and the net effect of acquisitions and dispositions.

Year end 2008 total proved reserves were 26.0 mmboe compared to 28.6 mmboe at year end 2007. Year end 2008 total proved and probable reserves were 42.5 mmboe compared to 44.2 mmboe at year end 2007.

In 2008, Highpine incurred $174.7 million of capital spending with $113.5 million spent on drilling and completions and the balance related to facilities, land and seismic. Approximately $104 million of capital was spent in the Pembina area, largely focused on the Nisku, with the remaining capital allocated to the W5 gas fairway. Approximately $20 million of capital was spent securing 46 sections of land on Montney prospects in northwest Alberta, including 42 sections in the Wapiti area.

Highpine's total 2008 finding, development and acquisition ("FD&A") costs, excluding the net change in future development capital, for total proved reserves were $39.50/boe and for total proved and probable reserves were $32.61/boe. Including the net change in future development capital, Highpine's FD&A costs for total proved reserves were $40.17/boe and for total proved and probable reserves were $36.64/boe. A low success rate in the northeast extension of the Pembina Nisku trend, coupled with negative revisions to existing Nisku reserves, resulted in higher than anticipated finding and development costs.

During 2008 Highpine renewed its focus on opportunities in the W5 gas fairway. Licensing issues surrounding sour drilling in the Tomahawk area, technical advances in resources style plays such as the Pembina Rock Creek formation, exploration success in Joffre and Ansell, as well as a strengthening in natural gas pricing, all contributed to this re-direction of capital. During 2008, Highpine invested approximately $64 million in the W5 gas fairway as compared to $20 million in 2007. In addition, Highpine spent $18 million targeting development of the Pembina Rock Creek formation. In excess of 80% of the total proved plus probable reserve additions were the result of non-Nisku drilling in 2008.

Highpine's 2008 finding and development costs (before revisions and future development capital) for W5 gas fairway discoveries was $14.26/boe ($93 million of capital expenditures and 6,523 mboe).

Paddock, Lindstrom & Associates Ltd. ("Paddock") has evaluated Highpine's reserves as at December 31, 2008. The reserves presented below, include Highpine's working interests before royalty interests and before royalty costs. Where volumes are expressed on a barrel of oil equivalent (boe) basis, gas volumes have been converted to barrels of oil equivalent in the ratio of one barrel of oil to six thousand cubic feet of natural gas.

Summary of Crude Oil, NGL and Natural Gas Reserves and Net Present Values of Estimated Future Net Revenue as of December 31, 2008 Based on Forecast Price Assumptions* ------------------------------------------------------------------------- Natural Gas Crude Oil NGL's Total (bcf) (mbbls) (mbbls) (mboe) ------------------------------------------------------------------------- Proved developed producing 52.7 7,309 4,806 22,897 Proved developed non-producing 8.0 828 341 2,502 Proved undeveloped 10.9 518 286 2,614 ------------------------------------------------------------------------- Total proved 71.6 8,655 5,433 26,013 Probable additional 51.6 5,181 2,742 16,529 ------------------------------------------------------------------------- Total proved plus probable 123.2 13,836 8,175 42,542 ------------------------------------------------------------------------- * Highpine working interest only - does not include Highpine royalty interests and royalty costs Net Present Values of Future Net Revenue ---------------------------------------------- Before Income Taxes Discounted at (%/year) ---------------------------------------------- Reserves Category 0 5 10 15 20 ---------------------------------------------- (Thousand of Dollars) Proved Developed Producing 636,031 523,270 448,475 394,747 354,124 Developed Non-Producing 77,662 56,847 344,235 35,847 29,897 --------- -------- -------- -------- -------- Total Developed 713,693 580,117 492,710 430,594 384,021 Undeveloped 67,812 46,482 34,224 26,371 20,939 --------- -------- -------- -------- -------- Total Proved 781,505 626,599 526,934 456,965 404,960 Probable 478,387 319,895 231,517 175,991 138,215 --------- -------- -------- -------- -------- Total Proved Plus Probable 1,259,892 946,494 758,451 632,956 543,175 --------- -------- -------- -------- -------- WTI @ CDN/US Cushing Exchange AECO C Propane Butane Oil & Gas Price Forecast $US/BBL Rate C$/MMBTU C$/BBL C$/BBL ------------------------------------------------------------------------- Year 2009 60.00 0.84 7.24 42.11 56.14 2010 67.50 0.86 7.90 46.33 61.77 2011 75.00 0.88 8.26 50.36 67.14 2012 82.50 0.90 8.60 54.20 72.27 2013 90.00 0.90 9.13 59.19 78.92 ------------------------------------------------------------------------- Prices escalated at 2% per year from 2013 Poor production performance, primarily from a number of Nisku wells in the Pembina and Brazeau areas resulted in negative revisions to both total proved (0.2 mmboe) and total proved and probable (2.6 mmboe) gas, oil and natural gas liquids reserves. Reserves Reconciliation* ------------------------------------------------------------------------- Natural Gas Crude Oil NGL's Combined BOE ------------------------------------------------------------------------- Total Proved & Total Proved & Total Proved & Total Proved & Proved Probable Proved Probable Proved Probable Proved Probable ------------------------------------------------------------------------- (bcf) (mbbls) (mbbls) (mboe) Dec. 31, 2007 69.79 112.57 11,972 18,066 4,988 7,359 28,592 44,186 Discoveries and exten- sions 19.97 34.47 709 1,250 569 976 4,606 7,972 Acquis- itions 0.10 0.12 2 2 19 22 Dispos- itions (0.09) (0.11) (18) (23) (2) (2) (35) (43) Revisions (4.77) (10.42) (878) (2,327) 1,507 1,471 (166) (2,593) Produc- tion (13.45) (13.45) (3,130) (3,130) (1,631) (1,631) (7,002) (7,002) ------------------------------------------------------------------------- Dec. 31, 2008 71.55 123.18 8,655 13,836 5,433 8,175 26,013 42,542 ------------------------------------------------------------------------- ------------------------------------------------------------------------- * Highpine working interests only - does not include Highpine royalty interests and royalty costs

NET ASSET VALUE

The following net asset value calculation utilizes a net present value of the Company's oil and gas reserves as evaluated by Paddock as at December 31, 2008. It does not take into account the possibility of Highpine being able to recognize additional reserves through future capital investment in its existing properties beyond those included in the December 31, 2008 reserve report.

Forecast Prices and Costs Before Tax ($ millions) ---------------- Proved plus probable reserves(1) 760 Undeveloped land(2) 134 Seismic(3) 17 Financial(4) (46) ---------------- Net asset value 865 ---------------- ---------------- Diluted class "A" common shares (thousands)(5) 67,407 Net asset value per diluted class "A" common share $12.83 Notes: (1) Net present value of future net revenue discounted at 10% as evaluated by Paddock as at December 31, 2008. Net present value of future net revenue does not represent fair market value of the reserves. (2) The undeveloped land held by Highpine as at December 31, 2008 was evaluated by Antelope Land Services Ltd. (3) The value ascribed to seismic owned at December 31, 2008 was estimated by management of Highpine. (4) Financial is working capital deficiency of Highpine as at December 31, 2008 less proceeds receivable upon the exercise of in-the-money options as at December 31, 2008. (5) Includes 66,815,098 class "A" common shares and 592,000 in-the-money options as at December 31, 2008.

FINANCIAL

At year end, the Company had a working capital deficiency of $48.0 million which included a cash balance of $10.4 million. The management of the 2008 cash flow of $324.4 million resulted in a reduction of 2007 year end net debt by $127.0 million which has better positioned the Company going into the uncertain commodity price environment faced by the industry in 2009.

During 2008, the Company purchased for cancellation a total of 1.8 million class "A" common shares at an average cost of $12.33 per share pursuant to its normal course issuer bid.

2009 UPDATE AND OUTLOOK

"2009 has ushered in a starkly different business environment for everyone, including Highpine. Highpine's business plan, to continue to progress key strategic areas in 2009, is robust enough to deal with current commodity pricing", commented Jonathan Lexier. "By carefully managing our cash flow, we should have the resources to allow for modest investment in each of our strategic areas. This drilling will allow us to better understand these opportunities and determine how to build value for our shareholders. Management has re-formulated, and will continuously monitor, spending plans for 2009 that are deliberate, measured and mindful of the fact that we are stewards of an enviable balance sheet that provides our shareholders with comfort, and management with tremendous financial flexibility."

To date in the first quarter Highpine has been active, drilling 8 (5.6 net) wells resulting in 4 (2.1 net) oil wells, 1 (0.5 net) gas well, and 3 (3.0 net) abandoned wells.

Highpine participated in 2 (0.5 net) successful Nisku oil wells in Berrymoor, with net pay of 26 metres and 14 metres, respectively. Testing of these wells is expected to commence in early April. Plans to bring this production to market through Highpine's operated Easyford battery are underway. The Company abandoned 2 (2.0 net) Nisku wells in the Tomahawk area.

Highpine recently drilled and completed 2 (1.5 net) gas wells in the Ansell area which tested at 2.3 MMcf/d (vertical) and 10.0 MMcf/d (horizontal). These wells are expected to be tied-in during the second quarter.

Highpine drilled and cased 1 (0.6 net) oil well at Chip Lake.

Highpine's 94% working interest, long reach Nisku well at 14-36, spuded in 2008, recently reached total depth and has been completed. Testing of this well is to be conducted in late March with production expected early in the second quarter.

Highpine has commenced drilling the second Wayne-Rosedale exploratory Nisku well at 2-19-27-22 W4M as well as the third, and last commitment well, at 1-33-27-22 W4M. The first well at 14-27-28-22 W4M was a dry hole.

Two 100% working interest wells are currently drilling; one at Brazeau and one at Joffre. Highpine is also participating in a deep Leduc test which commenced drilling on January 5, 2009. Drilling of this well is not expected to be completed until late in the second quarter.

Capital expenditures for the first half of 2009 are anticipated to be approximately $48 million compared to Highpine's previously announced budget of $75 million. Management has been carefully restricting expenditures to maintain Highpine's strong balance sheet and in anticipation of significant cost reductions during the second half of 2009 as industry activity slows.

First quarter production for 2009 is estimated at approximately 16,300 boe/d, 2,200 boe/d below our budgeted rate of 18,500 boe/d. The shortfall to budget is related to unexpected cold weather facility related down time (1,000 boe/d). In addition the on-stream date of incremental production has been deferred to optimize incentives available under the recently announced Alberta royalty incentive program. This new production will now commence during the second quarter.

Highpine is still anticipating its 2009 annual average production will be in the 19,000 boe/d range, taking into account the estimated first quarter production volumes and a reduced capital program. Highpine estimates there is currently between 3,000 and 4,000 boe/d of net production to be brought on stream starting in April. Significant volumes are expected from a well drilled into the Nisku WW pool at 14-36-48-8W5, the Ansell horizontal well, and a number of other wells drilled in the fourth quarter of 2008 and the first quarter of 2009.

ALBERTA GOVERNMENT ROYALTY INCENTIVE PROGRAM

On March 3, 2009, the Alberta Government announced an Energy Incentive Program designed to provide an incentive to small and mid-sized resource companies to invest in Alberta through lower royalties on new production and royalty credits for new drilling. Highpine estimates that it is eligible for $35 million in royalty relief based on the formulae provided in the announced program. Highpine anticipates receiving benefits of approximately $6 million this year for this portion of the announced program based on drilling currently planned for the remainder of 2009.

The incentive program also allows for a temporary, reduced royalty for wells where first production commences between April 1, 2009 and March 31, 2010. The benefit of this portion of the program is anticipated to improve Highpine's cash flow by approximately $1 million in 2009.

FINANCIAL STATEMENTS

The following is Highpine's consolidated balance sheets as at December 31, 2008 and 2007, Highpine's consolidated statements of operations and retained earnings (deficit), and consolidated statements of cash flows for the three and twelve months ended December 31, 2008 and 2007. These statements as well as the summary financial and operating results should be read in conjunction with Highpine's audited consolidated financial statements including the accompanying notes for the years ended December 31, 2008 and 2007 as filed on SEDAR.

CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------- December 31, December 31, 2008 2007 ------------------------------------------------------------------------- ($000s) (unaudited) Assets Current assets Cash and cash equivalents 10,399 - Accounts receivable 47,372 75,772 Prepaid expenses and deposits 11,774 4,642 Financial instruments 1,769 406 ------------------------------------------------------------------------- 71,314 80,820 Property, plant and equipment 926,608 980,906 Investments 1,858 850 ------------------------------------------------------------------------- 999,780 1,062,576 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current liabilities Accounts payable and accrued liabilities 117,586 108,560 Future income taxes 458 105 ------------------------------------------------------------------------- 118,044 108,665 Long-term debt - 146,675 Future income taxes 156,176 131,249 Asset retirement obligations 11,501 11,378 Deferred lease inducements 240 324 Shareholders' equity Share capital 594,030 959,456 Contributed surplus 14,709 15,030 Retained earnings (deficit) 105,080 (310,201) ------------------------------------------------------------------------- 713,819 664,285 ------------------------------------------------------------------------- 999,780 1,062,576 ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) ------------------------------------------------------------------------- Three months Twelve months ended ended December 31, December 31, 2008 2007 2008 2007 ------------------------------------------------------------------------- ($000s, except per share amounts) (unaudited) Revenues Oil and natural gas revenues 85,764 125,553 590,446 403,598 Royalties (25,899) (36,515) (179,247) (116,784) Financial instruments Realized gains/(losses) 489 (3,474) (490) 487 Unrealized gains/(losses) 1,280 99 1,363 (2,788) ------------------------------------------------------------------------- 61,634 85,663 412,072 284,513 Expenses Operating costs 17,035 21,690 78,919 66,937 Transportation costs (recovery) (424) 426 (7,259) 4,925 General and administrative 2,837 2,683 11,276 12,171 Depletion, depreciation and accretion 50,849 56,569 233,904 194,207 Interest and finance costs 37 2,433 3,271 9,390 Stock-based compensation 1,494 1,140 6,586 4,463 Impairment of goodwill - - - 358,096 Impairment/unrealized loss on investments 3,689 300 3,689 300 ------------------------------------------------------------------------- 75,517 85,241 330,386 650,489 ------------------------------------------------------------------------- Earnings (loss) before taxes (13,883) 422 81,686 (365,976) Future income taxes (reduction) (1,520) (19,383) 24,501 (20,922) ------------------------------------------------------------------------- Net earnings (loss) and comprehensive income (12,363) 19,805 57,185 (345,054) Retained earnings (deficit), beginning of period 117,443 (330,006) (310,201) 34,853 Reduction of share capital - - 358,096 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Retained earnings (deficit), end of period 105,080 (310,201) 105,080 (310,201) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings (loss) per share Basic $(0.18) $0.29 $0.85 $(5.09) Diluted $(0.18) $0.29 $0.84 $(5.09) ------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------------------------------------------- Three months Twelve months ended ended December 31, December 31, 2008 2007 2008 2007 ------------------------------------------------------------------------- ($000s) (unaudited) Cash provided by (used in): Operating Activities Net earnings (loss) (12,363) 19,805 57,185 (345,054) Items not involving cash: Depletion, depreciation and accretion 50,849 56,569 233,904 194,207 Future income taxes (reduction) (1,520) (19,337) 24,501 (20,876) Stock-based compensation 1,494 1,140 6,586 4,463 Unrealized losses (gains) on financial instruments (1,280) (99) (1,363) 2,788 Amortization of deferred lease inducements (21) (21) (84) (84) Impairment of goodwill - - - 358,096 Impairment/unrealized loss on investments 3,689 300 3,689 300 Abandonment expenditures (727) (456) (1,770) (1,472) Change in non-cash operating working capital 14,660 (1,989) 35,806 (5,799) ------------------------------------------------------------------------- 54,781 55,912 358,454 186,569 ------------------------------------------------------------------------- Financing Activities Normal course issuer bid - - (21,812) - Common shares issued for cash - - 1,000 - Share issue costs - - (21) - Proceeds on exercise of stock options - 31 4,400 1,894 Long-term debt - (15,591) (146,675) 7,785 ------------------------------------------------------------------------- - (15,560) (163,108) 9,679 ------------------------------------------------------------------------- Investing Activities Property, plant and equipment additions (87,949) (61,537) (175,509) (202,734) Proceeds on disposal of property, plant and equipment - 84 2,749 3,716 Property acquisitions - (495) (1,978) (495) Investments (4,697) - (4,697) - Change in non-cash investing working capital 26,530 21,596 (5,512) 3,265 ------------------------------------------------------------------------- (66,116) (40,352) (184,947) (196,248) ------------------------------------------------------------------------- Change in cash and cash equivalents (11,335) - 10,399 - Cash and cash equivalents, beginning of period 21,734 - - - ------------------------------------------------------------------------- Cash and cash equivalents, end of period 10,399 - 10,399 - ------------------------------------------------------------------------- ------------------------------------------------------------------------- SUMMARY FINANCIAL AND OPERATING RESULTS The following is a summary of Highpine's financial and operating results for the three and twelve months ended December 31, 2008 and 2007. Financial and Operating Results ------------------------------------------------------------------------- Three months ended Twelve months ended December 31, December 31, % % 2008 2007 Change 2008 2007 Change ------------------------------------------------------------------------- ($000s, except per share and share numbers) Financial Total revenue(1) 87,533 122,178 (28) 591,319 401,297 47 Funds from operations(2) 40,848 58,357 (30) 324,418 193,840 67 Per share - diluted 0.60 0.85 (29) 4.77 2.83 69 Net earnings (loss) (12,363) 19,805 (162) 57,185 (345,054) 117 Per share - diluted (0.18) 0.29 (162) 0.84 (5.09) 117 Net Debt(3) 48,041 174,821 (73) 48,041 174,821 (73) Total assets 999,780 1,062,576 (6) 999,780 1,062,576 (6) Capital expenditures(4) 87,949 61,948 42 174,738 199,513 (12) Total shares outstanding (#) 66,815 67,886 (2) 66,815 67,886 (2) Weighted average shares outstanding (#) Basic 67,706 67,866 (0) 67,602 67,772 (0) Diluted 67,923 68,408 (1) 68,026 68,456 (1) ------------------------------------------------------------------------- Operating Average daily production Crude oil and NGLs (bbls/d) 11,159 13,394 (17) 13,008 11,332 15 Natural gas (mcf/d) 35,123 37,930 (7) 36,747 38,426 (4) ------------------------------------------------------------------------- Total (boe/d) 17,013 19,716 (14) 19,133 17,736 8 ------------------------------------------------------------------------- Average selling prices(5) Crude oil and NGLs ($/bbl) 59.72 82.38 (28) 98.12 72.50 35 Natural gas ($/mcf) 7.57 6.89 10 9.17 7.39 24 ------------------------------------------------------------------------- Total ($/boe) 54.80 69.22 (21) 84.32 62.34 35 ------------------------------------------------------------------------- Wells drilled - gross (net) (#) Oil 3(2.6) 4(3.9) - 4(3.6) 10(8.1) - Natural Gas 10(8.0) 4(3.3) - 29(17.9) 16(11.2) - Abandoned/other 3(3.0) -(-) - 9(7.3) 8(5.6) - ------------------------------------------------------------------------- Total 16(13.6) 8(7.2) - 42(28.8) 34(24.9) - Drilling success rate (%) 81 100 - 79 84 - ------------------------------------------------------------------------- Operating netback ($/boe) Oil and natural gas sales 54.80 69.22 (21) 84.32 62.34 35 Royalties (16.55) (20.13) (18) (25.60) (18.04) 42 Operating costs (10.88) (11.96) (9) (11.27) (10.34) 9 Transportation costs, net 0.27 (0.23) (217) 1.04 (0.76) (237) Realized hedging gain (loss) 0.31 (1.92) (116) (0.07) 0.08 (188) ------------------------------------------------------------------------- Operating netback 27.95 34.98 (20) 48.42 33.28 45 ------------------------------------------------------------------------- Notes: (1) Total revenue includes realized and unrealized hedging losses and gains. (2) Cash from operations is calculated as cash flow from operating activities before the change in non-cash working capital and abandonment expenditures. (3) Working capital (net debt) excludes unrealized financial instruments and current portion of future income taxes. (4) Capital expenditures include property acquisitions and are presented net of proceeds of disposals. (5) The average selling prices reported are before hedging activities. Additional information Highpine's complete results for the year ended December 31, 2008, including Management's Discussion and Analysis and Audited Consolidated Financial Statements are available on SEDAR at http://www.sedar.com/ and on the Company's website at http://www.highpineog.com/. CONFERENCE CALL ------------------------------------------------------------------------- Highpine will host a conference call for analysts, investors and interested parties, to discuss its financial and operational results at 2:30 p.m. Calgary time, on Wednesday, March 11, 2009. Jonathan Lexier, President and Chief Executive Officer, as well as members of Highpine's executive team, will be in attendance. The call can be accessed toll free by dialing Canada and USA: 1-800-319-4610; Outside Canada and USA: 1-604-638-5340. Please phone in 10-15 minutes prior to the start of the call. The conference call will also be broadcast live over the internet on Highpine's website located at http://www.highpineog.com/ Digital Playback will be available until April 11, 2009 in North America Toll Free: 1-800-319-6413, Pin Code: 6639 followed by the # sign. -------------------------------------------------------------------------

Highpine is a Calgary-based oil and natural gas company engaged in exploration for and the acquisition, development and production of natural gas and crude oil in western Canada. Highpine's current exploration and development efforts are focused in the West Pembina Nisku and West Central Alberta Gas Fairway, both located in Central Alberta. The Company's class "A" common shares trade on the Toronto Stock Exchange under the symbol "HPX".

Oil and Gas Advisory

The reserves information contained in this news release has been prepared in accordance with National Instrument 51-101 "Standards of Disclosure for Oil and Gas Activities" of the Canadian Securities Administrators ("NI 51-101"). Complete NI 51-101 reserve disclosure will be included in Highpine's Annual Information Form for the year ended December 31, 2008, which will be filed in late March 2009. Listed below are cautionary statements that are specifically required by NI 51-101:

Where applicable, oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This news release contains estimates of the net present value of our future net revenue from our reserves. Such amounts do not represent the fair market value of our reserves.

All amounts in this news release are stated in Canadian dollars unless otherwise specified.

Non-GAAP Measure

The term "funds flow" is not a recognized measure under Canadian generally accepted accounting principles ("GAAP"). Management believes that in addition to cash flow from operating activities, funds flow is a useful supplemental measure. Investors are cautioned, however, that this measure should not be construed as an alternative to cash flow from operating activities determined in accordance with GAAP as an indication of Highpine's performance. Highpine's method of calculating funds flow may differ from other companies, especially those in other industries and accordingly may not be comparable to measures used by other companies. Highpine calculates funds from operations as cash from operating activities before the change in non-cash working capital related to operating activities and abandonment expenditures.

Advisory Regarding Forward-Looking Statements

In the interest of providing Highpine's shareholders and potential investors with information regarding Highpine, including management's assessment of Highpine's future plans and operations, certain statements in this news release are "forward-looking statements" within the meaning of applicable Canadian securities legislation. In some cases, forward-looking statements can be identified by terminology such as "anticipate", "believe", "continue", "could", "estimate", "expect", "forecast", "intend", "may", "objective", "ongoing", "outlook", "potential", "project", "plan", "should", "target", "would", "will" or similar words suggesting future outcomes, events or performance. The forward-looking statements contained in this news release speak only as of the date of this document and are expressly qualified by this cautionary statement.

Specifically, this news release contains forward-looking statements relating to: the volumes and estimated value of our oil and gas reserves; the value of our undeveloped land holdings; the volume of our oil and gas production; future results from operations; future costs, expenses and royalty rates; future exploration and development activities (including drilling plans) and related capital expenditures; future benefits from a royalty incentive program; our liquidity and financial capacity; and funding sources for our capital program.

These forward-looking statements are based on certain key assumptions regarding, among other things: oil and natural gas prices; well production rates and reserve volumes; our ability to add production and reserves through our exploration and development activities; capital expenditure levels; the availability and cost of labour and other industry services; interest and foreign exchange rates; and the continuance of existing royalty regimes. The reader is cautioned that such assumptions, although considered reasonable by Highpine at the time of preparation, may prove to be incorrect.

Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: general economic, market and business conditions; industry capacity; fluctuations in market prices for oil and natural gas; liabilities inherent in oil and natural gas operations; uncertainties associated with estimating oil and natural gas reserves; competition for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel; incorrect assessments of the value of acquisitions; fluctuations in foreign exchange or interest rates; stock market volatility and market valuations; geological, technical, drilling and processing problems and other difficulties in producing petroleum reserves; delays resulting from or inability to obtain required regulatory approvals; changes in royalty rates and incentive programs relating to the oil and gas industry; changes in environmental and other regulations; risks associated with oil and gas operations and sour hydrocarbons; ability to access sufficient capital from internal and external sources; and other factors, many of which are beyond the control of Highpine. These risk factors are discussed in Highpine's Annual Information Form and Management's Discussion and Analysis for the year ended December 31, 2008, as filed with Canadian securities regulatory authorities.

There is no representation by Highpine that actual results achieved during the forecast period will be the same in whole or in part as those forecast and Highpine does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities law.

SOURCE Highpine Oil & Gas Limited

Source: PR Newswire

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