Progress Announces First Quarter Results

May 9, 2011

North Montney established as a top tier shale play in North America

CALGARY, May 9 /CNW/ – (TSX: PRQ) – Progress Energy Resources Corp. (“Progress” or the “Company”)
announced results for the first quarter of 2011 (the “Quarter”).
Production averaged 44,356 barrels of oil equivalent (“boe”) per day in
the Quarter, up 26 percent as compared to the first quarter in 2010.
Capital investment in the Quarter was $140.2 million and was primarily
directed towards the Company’s Montney properties in the Foothills of
northeast British Columbia and its multi-zone Deep Basin opportunities
in northwest Alberta.

“Progress is the largest land rights holder in a play that many industry
investors now consider to be among the premier unconventional gas plays
in North America,” said Michael Culbert, President and Chief Executive
Officer of Progress. “Our North Montney development provides
shareholders with unique exposure and leverage to large-scale,
long-term natural gas development in an area of northeast British
Columbia that has access to multiple markets and is well positioned to
benefit from future LNG development.”

Highlights

  • Produced 44,356 boe per day, up 26 percent compared to the same period
    in 2010; 

     

  • Generated cash flow of $63.3 million in the Quarter or $0.29 per share,
    diluted; 

     

  • Drilled a total of 24 wells (22.7 net);
  • Drilled eight horizontal and two vertical Montney wells in the Foothills
    of northeast British Columbia during the Quarter.  The wells were
    primarily drilled in four of the Company’s six Montney development pods
    at Town South, Town North, Kobes and Gundy; 

     

  • Completed construction of the first phase of the Town North gas handling
    facility with capability of 25 million cubic feet (“mmcf”) per day.
    Also completed modifications on the Beg North, Beg and Blueberry
    compressor facilities to optimize existing volumes; 

     

  • Drilled 11 wells in the Deep Basin during the Quarter.  Of these, five
    wells were completed with the remaining completions scheduled for the
    third quarter.  The Nikanassin continues to be the primary target for
    the Company’s Deep Basin program; 

     

  • Divested of 800 boe per day of assets for proceeds of approximately $35
    million; 

     

  • Completed a $200 million bought-deal financing of common shares at a
    price of $13.90 per common share and a $200 million Convertible
    Debenture bought-deal financing for gross proceeds of $400 million; 

     

  • Established a new 3-year extendible revolving $650 million
    covenant-based credit facility with the Company’s current banking
    syndicate.  As at March 31, 2011, Progress was undrawn on its bank
    line; 

     

  • Maintained the first quarter dividend at $0.10 per common share and
    declared a second quarter dividend of $0.10 per common share.

Foothills Montney Program Update

Progress has built the industry’s largest Montney land position totaling
over 1,400 net sections, or approximately 900,000 net acres, spanning
560 kilometers from northeast British Columbia to northwest Alberta.
The primary focus of the Company’s Montney program has been in the
Foothills of northeast British Columbia where Progress holds
approximately 660,000 net acres of largely contiguous Montney rights.
In November 2010, Progress announced that it was moving forward on its
first six development pods, each capable of achieving 50 mmcf per day
of natural gas production and sustaining that level for at least 10
years.  As Progress pursues its goal of doubling its production base
over the next five years, the Company anticipates entering into a
long-term agreement with a large midstream company for gas gathering
and processing services in northeast British Columbia.  This will
provide Progress with the ability to bring on-stream approximately 250
mmcf per day of Montney production in a timely manner from its pod
developments at attractive tolls.  Progress today produces in excess of
70 mmcf per day of Montney sweet gas.  Drilling plans for the remainder
of 2011 include 20 horizontal and two vertical wells.

At the Town North pod development (100 percent working interest), three
horizontal wells were drilled and completed with initial production
rates averaging 4.1 mmcf per day.  To accommodate these volumes, the
first 25 mmcf per day facility was constructed and brought on stream at
the end of April.

At the Gundy pod development (100 percent working interest), three
horizontal wells were drilled in the Quarter with initial production
rates averaging 4.6 mmcf per day.  The wells are initially flowing
through the Town South gas handling facility via a newly constructed
8-inch pipeline.  A new 25 mmcf per day facility will be constructed at
Gundy in the second half of 2011, 50 percent funded through the
province of British Columbia’s infrastructure program.

Progress’ most mature development pod is at Town South (100 percent
working interest) where the Company reached 50 mmcf per day of
production with the tying-in of one horizontal well drilled in the
Quarter and including the Gundy pod volumes, which will initially flow
through this facility.

In all areas, the Company continues to use perforation clusters in the
completion process which is expected to result in higher ultimate
recoveries per well.  Additionally, the Company has been using its vast
3-D seismic data set to determine the optimal placement of the
horizontal wellbores.  The Montney formation is approximately 300
meters thick throughout Progress’ North Montney lands and the optimal
placement of the wellbore within the formation will enhance the
effective fracturing and hence, drainage of a section. During the
winter, Progress shot or participated in three significant seismic
programs in the North Montney region totaling 350 square kilometers.

At the Kobes pod development (30 percent working interest), the Company
is currently producing approximately 6.5 mmcf per day, net to
Progress.  This development pod has proven to have among the strongest
initial production rates from the Lower Montney within the entire
Montney fairway.  One partner-operated well was spud in the Quarter and
is expected to be completed and tied-in during the third quarter.  The
results from Progress-operated wells at Kobes are being used to
evaluate the Company’s adjacent, 100-percent working interest lands at
West Gundy.

Deep Basin of Northwest Alberta Update

Progress drilled 11 wells (10.3 net) in its Deep Basin program with five
wells being completed in the Quarter.  The remaining wells are to be
completed during the third quarter.  Progress expects to drill six
additional wells in the Gold Creek, Wapiti and Elmworth areas over the
remainder of 2011.

Progress maintains ownership in the infrastructure in the Deep Basin
region.  The Company recently completed a cross-over pipeline that
allows additional liquids-rich gas volumes to be processed through the
Wapiti deep cut facility.  Progress is currently producing
approximately 25 mmcf per day of natural gas volumes through the Wapiti
facility yielding approximately 60 barrels per million cubic feet of
high-value natural gas liquids.

Progress holds a material land position covering approximately 280,000
net acres in the Deep Basin of northwest Alberta.  Given the large and
contiguous nature of the land base, the Company is able to test play
concepts, including liquids-rich gas plays and light oil plays, and
with success can quickly establish a meaningful position at lower cost
than industry competitors. Progress has the proven expertise in
unlocking new play types such as the Nikanassin formation for which the
Company co-developed a slick-oil completion technique that is now
widely used in the industry.

Program Funding

Progress has actively been pursuing several initiatives to provide
capital funding for the Company’s near to medium term growth plans.
During the first four months of 2011, the Company divested of non-core
assets with associated production of approximately 800 boe per day for
proceeds of approximately $35 million.  Additionally, Progress is in a
process where it has offered to joint venture with interested parties
on four properties encompassing approximately 166,000 gross Progress
working-interest Montney-rights acreage within the North Montney
region.

Financial Strength

Cash flow for the Quarter was $63.3 million or $0.29 per share,
diluted.  Capital investment was $140.2 million.  As at March 31, 2011,
the Company was undrawn on its $650 million revolving credit facility.
Debt-to-total capitalization as at March 31, 2011 was 12 percent.

On April 29, 2011 the Company amended and restated its bank credit
facility to be a covenant-based facility rather than a borrowing base
facility.  This facility is a 3-year extendible revolving secured
facility in the amount of $650 million from a syndicate of lenders with
an initial maturity date of April 29, 2014.   As Progress continues to
grow its production, reserves and cash flow with the objective of
doubling the size of the Company in the next five years, this new
facility will provide more certainty and flexibility to fund the
Company’s growth program.

Progress’ average gas price in the Quarter was $4.08 per thousand cubic
feet (“mcf”), including the impact of the Company’s hedging program.
The Company’s high heat content gas stream achieves a premium to AECO
prices.  Royalty rates averaged 10.6 percent in the Quarter as a result
of lower natural gas prices and the impact of higher gas-cost-allowance
recoveries in Alberta.  Operating costs averaged $5.38 per boe in the
Quarter reflecting the Company’s continued focus on operational
efficiencies and maximization of volumes through existing facilities.

Progress recently entered into a series of hedges on a portion of its
natural gas production buying puts on 30,000 gigajoule (“GJ”) per day
at a net floor of $3.43 per GJ.  The Company now has 60,000 GJ per day
or approximately 22 percent of its natural gas production hedged at a
net floor of approximately $3.41 per GJ or approximately $3.90 per mcf,
based on Progress’ high heat content gas, for the period from May 1,
2011 to October 31, 2011.  The Company also entered into a series of
AECO basis swaps on 40,000 million British Thermal Units (“mmbtu”) per
day for 2011 at a net differential of US$0.50 per mmbtu and on 40,000
mmbtu per day for 2012 at a net differential of US$0.62 per mmbtu.

Second Quarter Dividend and Dividend Reinvestment Program

The Board of Directors of Progress today announced that the second
quarter eligible dividend will be maintained at $0.10 per share.  The
eligible dividend will be payable on July 15, 2011 to common
shareholders of record as of June 30, 2011. The ex-dividend date is
expected to be June 28, 2011.  Based on the May 6, 2011 closing share
price on the Toronto Stock Exchange of $12.52, this represents an
annualized yield of 3.2 percent.  The amount of future cash dividends,
if any, is subject to the discretion of the Progress Board of
Directors.

Progress has a dividend reinvestment plan (the “DRIP”) that allows
eligible shareholders of Progress to direct that their cash dividends
be reinvested in additional common shares which, when issued from
treasury, will be issued at 95 percent of the Average Market Price (as
defined in the DRIP) on the applicable dividend payment date.  A
registered shareholder who wishes to enroll in the DRIP may do so by
contacting Computershare Trust Company of Canada, the Plan Agent.
Beneficial shareholders who wish to participate in the DRIP should
contact the broker or other nominee through which their common shares
are held to provide appropriate enrollment instructions and to ensure
any deadlines or other requirements that such broker or nominee may
impose or be subject to are met.

Outlook

Our 2011 capital program has been established at $350 million and is
expected to result in year-over-year production growth of approximately
13 percent.  Production is expected to exit 2011 at between 50,000 and
52,000 boe per day, before the impact of dispositions.  We have a
current productive capability of approximately 46,000 boe per day with
approximately 1,000 boe per day awaiting tie-in after break-up.
Production in the second quarter is expected to average in the range of
39,000 to 40,000 boe per day as a result of the impact of the 21-day
planned turn-around at the McMahon natural gas processing plant in Fort
St. John in northeast British Columbia.

The focus of our capital program for the remainder of the year will be
the continued advancement of our highly economic Montney pod
developments.  Our Montney developments have several advantages when
compared to other areas within the Montney fairway.  The natural gas we
produce is sweet and therefore does not require expensive sour gas
processing; we attract a deep drilling royalty credit of approximately
$2.1 million per well; and, we produce approximately 20 barrels per
million cubic feet of high-value natural gas liquids.  In aggregate,
these factors, along with strong initial production rates and
recoveries, place the North Montney among the most economic shale plays
in North America.

Natural gas prices have strengthened through the early part of the
second quarter of 2011, a period when prices are typically weak on a
relative basis due to lower demand.  We remain optimistic about the
long-term prospects for natural gas in western Canada.  We believe
that, in addition to the Kitimat LNG development, other larger
international parties are also considering LNG developments along the
west coast of Canada.  Although these potential projects are several
years away from commencing, we believe that resource development in
northeast British Columbia will enhance the value of this resource
which will ultimately be able to access higher priced Asian markets.

Progress is well positioned to execute on its growth plans.  We have a
strong balance sheet with no bank debt as at the end of the Quarter and
a new credit facility to provide certainty and flexibility for future
program funding.  As well, we have multiple levers from which to
provide future capital, including further non-core asset dispositions
and potential joint venture arrangements.  We believe the Montney shale
opportunity across our asset base provides our shareholders with a
global scale opportunity, capable of delivering low-risk, long-term
sustainable growth.

Consolidated Financial Statements and MD&A

First Quarter 2011 Consolidated Financial Statements and Notes to the
Consolidated Financial Statements and Management’s Discussion and
Analysis for Progress Energy Resources Corp. have been filed on SEDAR (www.sedar.com) under Progress Energy Resources Corp. and can also be accessed on the
Company’s website at www.progressenergy.com.

Progress is a Calgary based, mid-size energy Company primarily focused
on natural gas exploration, development and production in northwest
Alberta and northeast British Columbia. Common shares of Progress are
listed on the Toronto Stock Exchange under the symbol PRQ.

Annual Meeting of Shareholders

Progress’ Annual and Special Meeting of Shareholders is scheduled for
Wednesday, May 11, 2011 at 3:30 p.m., Calgary time, at the Calgary
Petroleum Club, 319-5th Avenue S.W. Calgary, Alberta.

Three Months Ended 

March 31

2011 2010
FINANCIAL HIGHLIGHTS
Income Statement ($ thousands, except per share amounts)
Petroleum and natural gas revenue 117,115 113,471
Cash flow1 63,320 46,803
Per share – diluted 0.29 0.28
Cash dividends declared2 23,087 21,415
Per share 0.10 0.10
Balance Sheet ($ thousands)
Working capital deficiency 23,339 44,456
Bank debt 0 139,704
Convertible debentures 421,350 298,902
Total debt 444,689 482,432
Capital expenditures 140,191 120,773
Foothills Acquisition 387,703
Property Dispositions (17,029)
OPERATIONAL HIGHLIGHTS
Average Daily Production
Natural gas (mcf/d) 233,488 178,993
Crude oil (bbls/d) 2,033 1,812
Natural gas liquids (bbls/d) 3,408 3,426
Total daily production (boe/d) 44,356 35,070
Average Realized Prices
Natural gas ($/mcf) 3.85 5.27
Crude oil ($/bbl) 82.89 75.33
Natural gas liquids ($/bbl) 67.85 52.68
Wells Drilled, Net 22.7 25.7

(1)  Represents cash flow from operating activities before changes in
non-cash working capital.

(2) The dividends declared include distributions and dividends that
grantees are entitled to on the vesting of the Share Unit Plan, the
Long Term Incentive Plan and the Performance Unit Incentive Plan.

Advisory Regarding Forward-Looking Statements

This press release and financial highlights table (collectively the
“press release”) contains forward-looking statements and
forward-looking information within the meaning of applicable securities
laws. The use of any of the words “expect”, “anticipate”, “continue”,
“estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”,
“believe”, “plans”, “intends” and similar expressions are intended to
identify forward-looking information or statements.  In particular,
forward looking statements in this press release include, but are not
limited to, statements with respect to the focus of capital
expenditures, the timing of capital spending and the results therefrom;
payment of dividends; projections of future land holdings; completion
of planned facility expansions and the timing thereof; future drilling
plans and programs, the timing thereof and the results therefrom;
timing of development of resources; expected commodity prices and
industry conditions.

The forward-looking statements and information are based on certain key
expectations and assumptions made by Progress, including expectations
and assumptions concerning prevailing commodity prices and exchange
rates, applicable royalty rates and tax laws; future well production
rates; reserve and resource volumes; the performance of existing wells;
the success obtained in drilling new wells; and the sufficiency of
budgeted capital expenditures in carrying out planned activities; and
the availability and cost of labour and services and future operating
costs.  Although Progress believes that the expectations and
assumptions on which such forward-looking statements and information
are based are reasonable, undue reliance should not be placed on the
forward looking statements and information because Progress can give no
assurance that they will prove to be correct.

Since forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risks associated with the oil and
gas industry in general such as operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the
uncertainty of reserve and resource estimates; the uncertainty of
estimates and projections relating to reserves, resources, production,
costs and expenses; health, safety and environmental risks; commodity
price and exchange rate fluctuations; marketing and transportation;
loss of markets; environmental risks; competition; incorrect assessment
of the value of acquisitions; failure to realize the anticipated
benefits of acquisitions; ability to access sufficient capital from
internal and external sources; changes in legislation, including but
not limited to tax laws, royalties and environmental regulations.

Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press release
in order to provide securityholders with a more complete perspective on
the Company’s future operations and such information may not be
appropriate for other purposes.  The Company’s actual results,
performance or achievement could differ materially from those expressed
in, or implied by, these forward-looking statements and, accordingly,
no assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them
do so, what benefits that the Company will derive there from.  Readers
are cautioned that the foregoing lists of factors are not exhaustive.
These forward-looking statements are made as of the date of this press
release and the Company disclaims any intent or obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or results or otherwise, other than as
required by applicable securities laws.

Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on these and other factors that
could affect the operations or financial results of Progress are
included in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website (
www.sedar.com).  The forward-looking statements and information contained in this
press release are made as of the date hereof and Progress undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws.

Barrels of Oil Equivalent

“Boe” means barrel of oil equivalent on the basis of 1 boe to 6,000
cubic feet of natural gas. Boe’s may be misleading, particularly if
used in isolation. A boe conversion ratio of 1 boe for 6,000 cubic feet
of natural gas is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.