Sign Up for FREE Daily Energy News
 
BREAKING NEWS:
Copper Tip Energy Services
WEC - Western Engineered Containment
Hazloc Heaters
Hazloc Heaters
Copper Tip Energy
WEC - Western Engineered Containment

Crew Energy Inc. Announces First Quarter 2017 Financial and Operating Results, Updated Montney Resource Evaluation and Non-Core Asset Disposition – Part 3


DECEMBER 31, 2016 RESOURCE EVALUATION

The following discussion in "Crew Northeast British Columbia Montney Resource Evaluation" is subject to a number of cautionary statements, assumptions and risks as set forth therein. See "Information Regarding Disclosure on Oil and Gas Reserves, Resources and Operational Information" at the end of this release for additional cautionary language, explanations and discussion, and see "Forward-looking Information and Statements" for a statement of principal assumptions and risks that may apply. See also "Definitions of Oil and Gas Resources and Reserves" in this news release. The discussion includes reference to TPIIP, DPIIP and ECR as per the Resource Evaluation as at December 31, 2016, prepared in accordance with the NI 51-101 and current COGE Handbook guidelines. Unless otherwise indicated in this news release, all references to ECR and prospective volumes are Best Estimate ECR and Best Estimate prospective volumes, respectively. All information referenced in the Resource Evaluation is prior to the pending disposition of Crew's Goose area, expected to close in the second quarter of 2017.

In accordance with NI 51-101 Crew's contingent resources have been subclassified into specified project maturity subclasses. Those that apply to Crew's resources include "development pending", "development on hold", and "development not viable". Sproule considers the 'development pending' and 'development on hold' project maturity subclasses to be economic and are therefore included in ECR. The economic status of the 'development not viable' project maturity subclass is undetermined and is therefore not included in the ECR reported. The "development not viable" sub-classification represented less than 2% of the sum of all three sub-classifications on a BOE basis, and accordingly, has not been considered to be material for reporting purposes. Crew does not have any resources within the "development unclarified" subclass.

CREW NORTHEAST BRITISH COLUMBIA MONTNEY RESOURCE EVALUATION

The Montney formation in NE BC has been identified as a world-class unconventional resource play with the potential for significant volumes of recoverable resources. The area includes dry gas, liquids-rich gas and light oil development opportunities, with Crew having access to all three hydrocarbon windows. It is one of the largest and lowest cost liquids-rich natural gas resource plays in North America and Crew's land base comprises 300,000 net acres, ideally situated in some of the most prospective parts of the play, with good access to infrastructure and multiple egress options.

Sproule was engaged to conduct an updated independent Montney resource evaluation of Crew's principal lands in the NE BC Montney region including Septimus, West Septimus, Groundbirch/Monias, Attachie, Tower and other minor NE BC Montney lands (the "Evaluated Areas") effective as of December 31, 2016, and based on Sproule's forecast price deck as at December 31, 2016 (the "Resource Evaluation"). The Resource Evaluation highlights the development potential on the Company's undeveloped land base providing Crew with significant opportunities to progress conversion of Resource to ECR and ultimately to increased reserve bookings over time. Further, the diversity of Crew's NE BC Montney assets with exposure to liquids-rich gas, crude oil and dry natural gas allows us to effectively navigate through commodity price cycles.

TPIIP for the natural gas-bearing lands in the Evaluated Areas remains unchanged relative to year end 2015 at 64.3 Tcf. Natural gas ECR was evaluated on an unrisked and risked basis in the Resource Evaluation and was subdivided into the Maturity Subclasses of 'development pending' and 'development on hold'. The risked 'development pending' natural gas ECR totaled 7.3 Tcf and the risked 'development on hold' ECR totaled 0.43 Tcf, which includes 104 bcf of 'development pending' natural gas and 26 bcf of 'development on hold' natural gas on Crew's oil-bearing lands.

The ECR of our ngl was also evaluated on an unrisked and risked basis in the Resource Evaluation and was subdivided into the Maturity Subclasses of 'development pending' and 'development on hold'. The risked 'development pending' ngl ECR totaled 211 MMbbl and risked 'development on hold' ngl ECR totaled 16 MMbbl which includes 3 mmbbls of 'development pending' ngl and 1 mmbbls of 'development on hold' ngl on Crew's oil-bearing lands.

On the oil-bearing Montney lands, TPIIP increased 1% to 7,979 MMbbl and DPIIP increased 2% to 1,647 MMbbl. Oil ECR was evaluated on an unrisked and risked basis in the Resource Evaluation and was subdivided into the Maturity Subclasses of 'development pending' and 'development on hold'. The risked 'development pending' oil ECR totaled 17 MMbbl and risked 'development on hold' oil ECR totaled 4 MMbbl.

Risking of the contingent resources included a quantitative assessment of the contingencies applicable to the project including evaluation drilling, corporate commitment and timing of production and development. Risking of the prospective resources included a quantitative assessment of these same factors, as well as a quantitative assessment of the chance of discovery.

The following tables summarize the results of the Resource Evaluation along with comparatives to the December 31, 2015 evaluation using the resource categories set out in the COGE Handbook on a "best estimate" case.

/T/

----------------------------------------------------------------------------

Dec. 31, Dec. 31, % 2016 2015 Change ---------------------------------------------------------------------------- Conventional Natural Gas Resource Categories (1)(2)(3)(4)(5)(6) Tcf Tcf Total Petroleum Initially In Place (TPIIP) 64.3 64.3 0 Discovered Petroleum Initially In Place (DPIIP) 35.2 35.2 0 Undiscovered Petroleum Initially In Place (UPIIP) 29.1 29.1 0 ---------------------------------------------------------------------------- Notes: (1) TPIIP, DPIIP and UPIIP have been estimated using a one percent porosity cut-off in the Resource Evaluation, which means that essentially all gas bearing rock has been incorporated into the calculations. (2) All volumes in table are Company gross and raw gas volumes. (3) Sproule's analysis identified four intervals in the Montney consisting of one interval in the Upper Montney and three intervals in the Lower Montney. (4) Crew's acreage was divided into five (5) areas in the "gas window". (5) There is uncertainty that it will be commercially viable to produce any portion of the resources. (6) There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

----------------------------------------------------------------------------

Dec. 31, Dec. 31, % 2016 2015 Change ---------------------------------------------------------------------------- Light & Medium Crude Oil Resource Categories (1)(2)(3)(4)(5)(6)(7) Mmbbls Mmbbls Total Petroleum Initially In Place 1 (TPIIP) 7,979 7,895 Discovered Petroleum Initially In Place 2 (DPIIP) 1,647 1,613 Undiscovered Petroleum Initially In 1 Place (UPIIP) 6,332 6,282 ---------------------------------------------------------------------------- Notes: (1) TPIIP, DPIIP and UPIIP have been estimated using a one percent porosity cut-off in the Resource Evaluation, which means that essentially all oil bearing rock has been incorporated into the calculations. (2) All volumes in table are Company gross. (3) The oil volumes are quoted as Stock Tank Barrels ("STB"). (4) Sproule's analysis identified four intervals in the Montney consisting of one interval in the Upper Montney and three intervals in the Lower Montney. (5) Crew's acreage was divided into five (5) areas in the "oil window". (6) There is uncertainty that it will be commercially viable to produce any portion of the resources. (7) There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

----------------------------------------------------------------------------

Best Best 2016 Reserves and Risked and Unrisked Chance of Estimate Estimate ECR(1)(2)(3)(6)(7)(8) Development Unrisked Risked ----------------------------------------------------------------------------

Conventional Natural gas (Bcf)

Reserves (3) 100% 1,426 1,426 Development Pending ECR 87% 8,388 7,298 Development on Hold ECR 85% 500 425

NGL (Mmbbls) (4)(5)

Reserves (3) 100% 59 59 Development Pending ECR 88% 240 211 Development on Hold ECR 84% 19 16

Light & Medium Crude Oil (Mmbbls)

Reserves (3) 100% 12 12 Development Pending ECR 89% 19 17 Development on Hold ECR 80% 5 4 ---------------------------------------------------------------------------- Notes: (1) All DPIIP other than cumulative production, reserves, and ECR has been categorized as unrecoverable at this time. A portion of the Unrecoverable DPIIP may in the future be determined to be recoverable and reclassified as contingent resources or reserves as additional technical studies are performed, commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks. (2) All volumes in table are company gross and sales volumes. Reserves and development pending volumes include economic cutoff. (3) For reserves, the volumes are proved plus probable reserves as at December 31, 2016. (4) The liquid yields are based on average yield over the producing life of the property. (5) Liquid yields are unique to each area. They are estimated based on gas composition of gas samples in the area and expected plant recoveries. (6) There is no certainty that it will be commercially viable to produce any of the resources. (7) All ECR are risked for the chance of development. For ECR, the chance of development is defined as the probability of a project being commercially viable. In quantifying the chance of development, contingencies that were assessed quantitatively to be less than one in the risking calculation included evaluation drilling, corporate commitment and timing of production and development. The chance of development is multiplied by the unrisked resource volume estimate, which yields the risked volume estimate. As many of these factors have a wide range of uncertainty and are difficult to quantify, the chance of development is an uncertain value that should be used with caution. (8) The economic status of the 'development not viable' project maturity subclass is deemed to be undetermined and is therefore not included in the ECR reported, representing, on a risked basis, 125 bcf of conventional natural gas, 2 mmbbls of ngl and 3 mmbbls of light and medium crude oil.

/T/

An estimate of risked Net Present Value ("NPV") of future net revenue of the development pending contingent resources subclass only is preliminary in nature and is provided to assist the reader in reaching an opinion on the merit and likelihood of Crew proceeding with the required investment. It includes contingent resources that are considered too uncertain with respect to chance of development and cannot be classified as reserves until the contingencies are lifted. There is uncertainty that the risked NPV of future net revenue will be realized. The other subclasses of resources are not included in this NPV and therefore this is not reflective of the value of the resource base.

/T/

---------------------------------------------------------------------------- Before-Tax NPV(1) 2016 Risked ECR Development Pending(2) ($ millions) ---------------------------------------------------------------------------- Undiscounted 26,539 Discounted at 5% 6,447 Discounted at 10% 1,997 Discounted at 15% 693 Discounted at 20% 217 ---------------------------------------------------------------------------- Notes (1) Based on the Resource Evaluation and Sproule's forecast pricing at December 31, 2016 which is set forth in Crew's press release dated February 9, 2017. (2) Risk in the above table is the chance of development. ECR are discovered resources by definition. (3) There is uncertainty that it will be commercially viable to produce any portion of the resources.

/T/

The estimated cost to fully develop and bring on commercial production of the 'development pending' contingent resources for all three product types is approximately $11.2 billion (or approximately $3.0 billion discounted at 10%). The forecasted timeline to bring these resources onto production is between two and 17 years utilizing the same technology in horizontal drilling and multi-stage fracturing that Crew has already proven to be effective in the Montney formation in NE BC.

/T/

----------------------------------------------------------------------------

Best Best Prospective Resources Chance of Estimate Estimate (1)(2)(3)(4)(5)(6)(7) Commerciality Unrisked Risked ---------------------------------------------------------------------------- Conventional Natural Gas (Tcf) 66% 10,311 6,774 NGL (MMbbl) 66% 327 215 Light & Medium Crude Oil (MMbbl) 66% 149 98 ---------------------------------------------------------------------------- Notes: (1) All UPIIP other than prospective resources has been categorized as unrecoverable at this time. (2) All volumes in table are company gross and sales volumes. (3) The liquid yields are based on average yield over the producing life of the property. (4) Liquid yields are unique to each area. They are estimated based on gas composition of gas samples in the area and expected plant recoveries. (5) There is no certainty that any portion of the resources will be discovered. If discovered there is no certainty that it will be commercially viable to produce any of the resources. (6) Prospective resources are risked for the chance of discovery and the chance of development. For prospective resources, the chance of development multiplied by the chance of discovery is defined as the probability of a project being commercially viable. In quantifying the chance of commerciality, factors that were assessed quantitatively to be less than one in the risking calculation included evaluation drilling, corporate commitment and timing of production and development, along with the overall chance of discovery. The chance of commerciality is multiplied by the unrisked prospective resource volume estimate, which yields the risked volume estimate. As many of these factors have a wide range of uncertainty and are difficult to quantify, the chance of commerciality is an uncertain value that should be used with caution. (7) All prospective resources are subclassified as either the 'prospect' or 'lead' project maturity subclass.

/T/



Share This:



More News Articles


New SHOWCASE Directory Companies

 

Catch Engineering
GLJ Petroleum Consultants Ltd.
DTN
Hy-Lok Distribution Inc
Enverus
Clear Glycol Inc.
Pacbrake Company
Fusion Production Systems Inc