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Bonterra Energy Corp. Announces Year End 2018 Corporate Reserves Information


CALGARYFeb. 13, 2019 /CNW/ – Bonterra Energy Corp. (www.bonterraenergy.com) (TSX: BNE) (“Bonterra” or the “Company”) is pleased to provide the summary results of its independent reserve report (the “Sproule Report”) prepared by Sproule Associates Limited (“Sproule”) with an effective date of December 31, 2018.

Corporate Reserves Information
The following summarizes certain information contained in the Sproule Report. The Sproule Report was prepared in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserve information as required under NI 51-101 will be included in the Company’s Annual Information Form which will be filed on SEDAR on or by March 12, 2019.

Reserve Report Highlights

  • During 2018, Bonterra invested a modest $78.8 million in capital, split between $75.1 million to drill, complete and tie-in new wells and $3.7 million towards land and the purchase of other oil and gas assets and successfully grew both average daily production by three percent and total proved reserves by three percent. The Company returned approximately $37 million to shareholders in the form of dividends, demonstrating how the Company’s business model is designed to generate consistent returns for shareholders across a variety of commodity price environments.
  • Increased total proved reserves by three percent to 80.6 million BOE (68 percent oil and liquids), total proved plus probable (“P+P”) reserves by one percent to 101.2 million BOE (68 percent oil and liquids).
  • Increased total proved reserves by 2.0 million BOE which replaced production by 142 percent.
  • Total proved reserves represent 80 percent of total P+P reserves, an indication of the low-risk nature of Bonterra’s asset base.
  • P+P reserves per fully diluted share totaled 3.04 BOE compared to 3.00 BOE per share from the prior year, while total proved reserves per fully diluted share totaled 2.42 BOE, a three percent increase over 2.36 BOE in 2017.
  • Net present value of future net revenue discounted at 10 percent (before tax) (“NPV10 BT”) for P+P reserves totaled $1.4 billion, while total proved reserves totaled $1.1 billion and PDP reserves totaled $716 million. The Company’s PDP NPV10 BT was 32 percent higher than Bonterra’s year end 2018 enterprise value (market capitalization plus net debt) of $544 million.
  • Bonterra’s long-term sustainability continues to be enhanced as the number of 2018 Cardium net drilling locations which have been assigned reserves totaled 295 (291 proved and four probable), compared to 279 (275 proved and four probable) and 253 (245 proved and eight probable) in 2017 and 2016, respectively.
  • The Company generated attractive finding and development (“F&D”) recycle ratios of 2.1 times on a total proved basis and 1.9 times on a P+P basis, calculated based on the Company’s estimated corporate annual average field netback divided by the F&D costs (including future development capital (“FDC”).
  • Reserve life index (“RLI”) of approximately 21 years on a P+P basis, 17 years on a total proved basis, and eight years on a proved developed producing (“PDP”) basis (based on 2018 average production rate of 13,206 BOE per day), affords Bonterra many years of future development drilling opportunities.

Summary of Gross Oil and Gas Reserves as of December 31, 2018

 

Light and
Medium
Oil

Solution
Gas

Natural
Gas

Natural
Gas
Liquids

Oil
equivalent(4)

Future
Development
Capital

(MBbl)

 (MMcf)

(MMcf)

 (MBbl)

 (MBoe)

($000s)

Proved

Developed Producing

23,864

70,337

5,935

3,275

39,851

4

Developed Non-producing

684

1,516

191

57

1,025

996

Undeveloped

23,338

64,444

11,550

3,755

39,758

615,035

Total proved

47,885

136,297

17,676

7,086

80,634

616,035

Total Probable

12,182

34,573

4,833

1,842

20,591

10,027

Total P+P(1) (2) (3)

60,067

170,870

22,510

8,928

101,225

626,061

Notes:

(1)

Reserves have been presented on gross basis which are the Company’s total working interest share before the deduction of any royalties and without including any royalty interests of the Company.

(2)

Totals may not add due to rounding.

(3)

Based on Sproule’s December 31, 2018 escalated price deck.

(4)

Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel
of oil.

Reconciliation of Company Gross Reserves by Principal Product Type as of December 31, 2018 (1)(2)

Light &
Medium Oil

Conventional Natural
Gas

Natural Gas
Liquids

Oil Equivalent

Total
Proved

Proved +
Probable

Total
Proved

Proved +
Probable

Total
Proved

Proved +
Probable

Total
Proved

Proved +
Probable

(MBbl)

(MBbl)

(MMcf)

(MMcf)

(MBbl)

(MBbl)

(MBoe)

(MBoe)

Opening Balance, December 31, 2017

48,746

61,894

141,376

179,874

6,284

7,968

78,592

99,840

Extensions & Improved Recovery(2)

3,488

4,321

7,404

9,271

508

640

5,230

6,505

Technical Revisions

(2,040)

(3,907)

14,020

12,609

555

548

851

(1,257)

Discoveries

Acquisitions

443

575

1,869

2,498

116

155

871

1,146

Dispositions(3)

Economic Factors

212

148

(1,736)

(1,912)

(13)

(19)

(90)

(189)

Production

(2,964)

(2,964)

(8,960)

(8,960)

(363)

(363)

(4,820)

(4,820)

Closing Balance,
December 31, 2018
(4)

47,885

60,067

153,973

193,380

7,086

8,928

80,634

101,225

Notes:

(1)

Gross Reserves means the Company’s working interest reserves before calculation of royalties, and before consideration of
the Company’s royalty interests.

(2)

Increases to Extensions & Improved Recovery include infill drilling and are the result of step-out locations drilled by Bonterra
and other operators on and near Company-owned lands.

(3)

Includes volumes associated with Farm outs.

(4)

Totals may not add due to rounding.

Summary of Net Present Values of Future Net Revenue as of December 31, 2018

 

($M)

Net Present Value Before Income Taxes Discounted at (% per Year)

Reserves Category:

0%

5%

10%

15%

Proved

Producing

1,289,010

922,928

715,586

586,073

Non-producing

27,205

18,002

13,070

10,095

Undeveloped

1,024,361

601,316

379,722

251,837

Total proved

2,340,576

1,542,246

1,108,378

848,005

Probable

858,345

455,488

293,005

212,010

Total proved plus probable(1)(2)(3)

3,198,921

1,997,734

1,401,383

1,060,014

Notes:

(1)

Evaluated by Sproule as at December 31, 2018. Net present value of future net revenue does not represent fair value of the
reserves.

(2)

Net present values equals net present value before income taxes based on Sproule’s forecast prices and costs as of
December 31, 2018. There is no assurance that the forecast prices and costs assumptions will be attained and variances
could be material.

(3)

Includes abandonment and reclamation costs as defined in NI 51-101.

F&D Costs, Finding, Development & Acquisition (“FD&A”) Costs and Recycle Ratio

Over the past three years, Bonterra has incurred the following FD&A(3) and F&D(3) costs both excluding and including FDC:

Total Proved Reserves Net Additions

P+P Reserves Net Additions

2018

2017

2016

3 Yr Avg(4)

2018

2017

2016

3 Yr Avg(4)

FD&A Costs per BOE (1)(2)(3)

Including FDC

$12.82

$15.66

$10.87

$13.22

$14.33

$13.74

$9.93

$12.51

Excluding FDC

$11.40

$9.06

$4.91

$8.31

$12.70

$8.57

$4.58

$8.17

F&D Costs per BOE (1)(2)(3)

Including FDC

$12.99

$17.02

$10.89

$13.97

$15.56

$15.22

$9.91

$13.49

Excluding FDC

$12.54

$9.55

$4.81

$8.60

$14.95

$9.25

$4.44

$8.62

Recycle Ratio(5)

F&D (including FDC)

2.1

1.7

2.1

2.1

1.9

2.0

2.3

2.2

Notes:

(1)

Barrels of oil equivalent may be misleading, particularly if used in isolation.  A BOE conversion ratio of 6 MCF: 1 bbl is based
on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.

(2)

The aggregate of the exploration and development costs incurred in the most recent financial year and the change during
that year in estimated future development capital generally will not reflect total finding and development costs related to
reserve additions for that year.

(3)

FD&A and F&D costs are net of proceeds of disposition and the FD&A costs per BOE are based on reserves acquired net of
reserves disposed of.

(4)

Three year average is calculated using three year total capital costs and reserve additions on both a total proved and P+P
reserves on a weighted average basis.

(5)

Recycle ratio is defined as field netback per BOE divided by F&D costs on a per boe basis.  Field netback is calculated as
revenue minus royalties, operating expenses and transportation expenses.  Bonterra’s operating netback in 2018, used in
the above calculations, averaged $26.91 per BOE (unaudited).

2018 Operational Highlights
Capital invested during 2018 reflects a capital program that was heavily weighted to the first five months of 2018, enabling Bonterra to take advantage of favourable drilling conditions. A total of $78.8 million was invested through the year, with $75.1 million directed to drill, complete and tie-in 27 gross operated (26.8 net) wells and seven gross non-operated (1.0 net) wells.  Approximately $3.7 million was spent on land and the purchase of other oil and gas assets.

Bonterra’s 2018 full year and fourth quarter production summary follows:

  • Average production volumes for full year 2018 were 13,206 BOE per day (69 percent oil and liquids), representing a three percent increase over the 12,827 BOE per day average in 2017, and in line with the Company’s 2018 guidance of 13,200 to 13,500 BOE per day;
  • Average daily production in the fourth quarter was 12,789 BOE per day, relatively stable compared to the fourth quarter of 2017;
  • As a result of a significant erosion in Canadian realized oil pricing in Q4 2018, the Company elected to prudently reduce the monthly dividend from $0.10 to $0.01 per common share, which is expected to contribute to improved financial flexibility and continued strengthening of the balance sheet as prices and oil differentials recover into the first quarter of 2019.

2019 Guidance
Bonterra’s 2019 capital budget has been set within a range of $57 to $77 million, which will ultimately be dependent on Canadian realized pricing per BOE.  Capital expenditures and operational activities will be directed to a drilling program and associated facility capital, and is expected to result in average 2019 production volumes ranging between 12,600 and 13,200 BOE per day with a forecast exit rate range of 13,000 and 14,000 BOE per day.

Certain financial and operating information, such as production information, and F&D costs included in this press release are based on estimated unaudited financial results for the quarter and year ended December 31, 2018 and are subject to the same limitations as discussed under Forward Looking Statements set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2018 and changes could be material.

Bonterra Energy Corp. is a conventional oil and gas corporation with operations in AlbertaSaskatchewan and British Columbia, focused on its long-term model of generating sustainable growth plus a dividend. The Company’s shares are listed on The Toronto Stock Exchange under the symbol “BNE”.



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