Crew Energy Announces Year End 2018 Reserves

CALGARY, Feb. 7, 2019 /CNW/ – Crew Energy Inc. (TSX: CR) of Calgary, Alberta (“Crew” or the “Company”) is pleased to provide highlights from our independent corporate reserves evaluation prepared by Sproule Associates Ltd. (“Sproule”) with an effective date of December 31, 2018 (the “Sproule Report”).

2018 RESERVES HIGHLIGHTS

With net capital expenditures of $93 million ($103.2 million gross)¹, Crew successfully expanded reserves through the drilling of ten (10.0 net) and completion of 14 (12.2 net) wells in the Montney at West Septimus, of which three (3.0 net) extended reach horizontal (“ERH”) wells were drilled in the Ultra-Condensate Rich (“UCR”) area.  In addition, four (4.0 net) multi-lateral horizontal wells were drilled at Lloydminster.

Highlights of the proved developed producing (“PDP”), total proved (“1P”) and total proved plus probable (“2P”) reserves from the Sproule Report are provided below.  Finding, development and acquisition (“FD&A”)^1,2 costs and finding and development (“F&D”)^1,2 costs include changes in future development capital (“FDC”)².

• Improving Capital Efficiencies and Robust Recycle Ratios^1,2: Crew’s 2P F&D and FD&A cost per boe has improved over prior years and reflects the success of the Company’s UCR drilling program which features enhanced completions design, longer lateral lengths and reduced drill times compared to previous wells. Recycle ratios are based on the estimated corporate operating netback divided by the F&D costs or the FD&A costs.

• Continued Development Success at West Septimus:  PDP reserves at West Septimus increased 10% over 2017, with 1P and 2P reserves up 3% and 2%, respectively, primarily due to the focus on drilling in the UCR area which generates higher returns and stronger economics in the current commodity price environment.
• Condensate Growth a Focus at West Septimus:  Within the UCR area at West Septimus, shifting to ERH wells led to a 28% increase in 1P reserves to 30,170 mboe, while 2P reserves increased 17% to 71,681 mboe. Condensate increased by 30% on 1P reserves and represents 30% of UCR 2P reserves³. Corporate 2P condensate reserves totaled 50,053 mbbl.
• Meaningful Reserves Value in UCR Area:  Within Crew’s UCR area, the net present value of future net revenue discounted at 10% (before tax) (“NPV10 BT”) for 2P was $774.1 million⁴ assigned to 14 of 32 net prospective sections at West Septimus. Corporately, the Company’s NPV10 BT totaled $507.9 million on PDP reserves, $1.2 billion on 1P reserves and $2.5 billion on 2P reserves.

• ERH Wells Improve Capital Efficiencies:  Crew brought three new ERH wells onto production in late 2018 within our UCR area and has an additional six (6.0 net) wells to bring on in the first quarter of 2019. The Company now has 38 ERH undeveloped 2P locations assigned by Sproule in the UCR area. The ERH program will require fewer wells to develop the resource, resulting in a smaller overall surface footprint providing superior economic returns relative to the previously drilled shorter-reach horizontal wells.
• Average 3-Year F&D Trending in the Right Direction: With an ongoing focus on lowering capital costs while improving drilling and completions efficiencies, Crew achieved another consecutive year of declining average three year 2P F&D costs in 2018.

• Continued Corporate Reserves Growth with Conservative Capital Program:  Approximately $67 million of our $103.2 million exploration and development capital program was directed to drilling and completions activities in 2018.  This generated increases across all reserves categories, including approximately 0.3% growth in PDP reserves, 2% in 1P reserves and 11% in 2P reserves compared to 2017, with Crew’s reserves replacement ratios⁵ on PDP, 1P and 2P totaling 102%, 140% and 568%, respectively.
• Multilateral Development Increased Heavy Oil Inventory: Recent success drilling multilateral horizontal wells resulted in additions to overall heavy oil reserves in 2018.  Heavy oil multilaterals now represent 32% and 31% of Crew’s total 1P and 2P heavy oil reserves, respectively.

2018 RESERVES DETAIL

The detailed reserves data set forth below is based upon an independent reserves assessment and evaluation prepared by Sproule with an effective date of December 31, 2018.  The following presentation summarizes the Company’s crude oil, natural gas liquids and natural gas reserves and the net present values before income tax of future net revenue for the Company’s reserves using forecast prices and costs based on the Sproule Report.  The Sproule Report has been prepared in accordance with 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”). The reserves evaluation was based on Sproule forecast escalated pricing and foreign exchange rates at December 31, 2018 as outlined in the table herein entitled “Price Forecast”.

All evaluations and summaries of future net revenue are stated prior to provision for interest, debt service charges and general administrative expenses and after deduction of royalties, operating costs, estimated well abandonment and reclamation costs for entities with reserves assigned and estimated future capital expenditures associated with reserves.  It should not be assumed that the estimates of net present value of future net revenues presented in the tables below represent the fair market value of the reserves.  There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material.  The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.  Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.  Reserves included herein are stated on a company gross basis (working interest before deduction of royalties without including any royalty interests) unless noted otherwise.  In addition to the detailed information disclosed in this news release, more detailed information will be included in the Company’s Annual Information Form (the “AIF”) for the year ended December 31, 2018, which will be filed on the Company’s profile at www.sedar.com on or before March 29, 2019.

See “Information Regarding Disclosure on Oil and Gas Reserves and Operational Information” for additional cautionary language, explanations and discussions and “Forward Looking Information and Statements” for a statement of principal assumptions and risks that may apply.

The preparation and audit of Crew’s 2018 annual consolidated financial statements is not yet complete, and accordingly all financial amounts referred to in this news release are unaudited and represent management’s estimates.  Readers are advised that these financial estimates may be subject to change.

Corporate Reserves^(1,2,5)

Reserves Values^(1)(2)(3)(4)  

The estimated before tax net present value (“NPV”) of future net revenues associated with Crew’s reserves effective December 31, 2018 and based on the Sproule Report and the published Sproule (December 31, 2018) future price forecast are summarized in the following table:

Price Forecast

The Sproule December 31, 2018 price forecast is summarized as follows:

Reserves Reconciliation

The following reconciliation of Crew’s gross reserves compares changes in the Company’s reserves as at December 31, 2018 based on the Sproule (December 31, 2018) future price forecast relative to the reserves as at December 31, 2017.

Capital Program Efficiency

Future Development Capital

The following table provides a summary of the estimated FDC required to bring Crew’s reserves on production.