The chief executive of PetroBakken Energy Ltd. sought to assure investors Wednesday that the company's financial picture will improve as oil production from its Alberta and Saskatchewan land ratchets up.

"As shareholders, we're aware of the fact that we are spending more than we're taking in," John Wright said at his company's annual general meeting.

"We're aware of the fact that we borrowed money to put the company in the place it is today, and to accelerate our capital program. We're aware of the fact that we have a constant dividend payout."

PetroBakken (TSX:PBN) aims to end the year with daily production of between 46,000 and 49,000 barrels of oil equivalent output. It produced a daily average of 41,652 barrels during the first three months of the year.

If the Calgary energy producer reaches its 2011 goal and continues to grow in coming years — especially if the price of crude oil is in the US$100 per barrel range — the company will quickly earn enough cash to pay down debt, increase its dividend, rearrange its capital structure or speed up spending, Wright said.

"What I will assure you all as shareholders is that we have no intention of continuing down a path that is going to affect the long-term financial fiscal health of the company, and we have full control over the rate of expenditure and the pace of our development and we will exercise that control," he told shareholders.

"But we'll also ask you to bear with us as we let our program bear fruit and show you what we can do."

PetroBakken has set a 2011 capital budget of $900 million. It spent about a third of that during the first quarter, typically the busiest time of year for Western Canada's oil and gas industry.

PetroBakken is 59 per cent owned by Petrobank Energy & Resources Ltd. (TSX:PBG). It was created in 2009 through the merger of Petrobank's Canadian division and TriStar Oil & Gas.

It focuses on two main regions: the Bakken in southeastern Saskatchewan and the Cardium in west-central Alberta. Both contain mature oil pools that have been revived thanks to new horizontal drilling and rock-fracturing technology.

"Starting last year, the Bakken threw off more cash than we needed to reinvest in it to maintain that production rate, and it will continue to do that for the foreseeable future. So it has now become a cash cow for the company," said Wright.

PetroBakken delved into the Cardium through a series of acquisitions, and is now the second-largest player in the formation.

Costs have been an issue lately in the Cardium, Wright said.

"The cost of services have been going through the roof because the industry is red-hot. We are a huge user of services. We are probably one of the most active drillers in Western Canada. Costs affect us."

However, Wright said the economics of producing oil in the region are sound because of high oil prices.

PetroBakken has been criticized for paying too much for its Cardium land, but at the meeting, Wright said he stands by the investment.

"We focused on where we wanted to buy the land. We bought the companies that had the specific lands that we wanted," he said.

"And I think that now we have a land base that is second to none, and unrivalled, in fact, for its long-term growth potential. I can't put a price on that, but it's certainly more than what we paid, I assure you."

On Tuesday, PetroBakken announced that Wright would resign as chairman of PetroBakken's board of directors, handing that role to Kenneth McKinnon. Wright will continue as president and CEO.

PetroBakken shares dropped 14 cents to $16.15 in Wednesday afternoon trading on the Toronto Stock Exchange.

Source: Winnipeg Free Press

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