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Connacher Reports Year-End 2018 Reserves


CALGARYApril 26, 2019 /CNW/ – Connacher Oil and Gas Limited (“Connacher” or the “Company”) announces its year-end reserves as of December 31, 2018, as evaluated by GLJ Petroleum Consultants Ltd. (“GLJ”), independent qualified reserves evaluators.

Proved producing reserves decreased by approximately 1.8 million barrels (gross) to 11.5 million barrels (gross). The net present value of future net revenue before income taxes (discounted at ten per cent) (“10% PV”) of the proved producing reserves decreased to $4.4 million from $30 million last year. Proved plus probable producing reserves are 18 million barrels (gross) compared to 20.4 million barrels (gross) in 2017. The 10% PV of the proved plus probable reserves decreased by $27 million to $1,054 million.

Estimated proved (“1P”) bitumen reserves totaled approximately 239 million barrels (gross), a decrease of 1.7% per cent over year-end 2017 volumes. The 10% PV of the 1P bitumen reserves decreased by $2 millionto $666 million in 2018 due to a decrease in the long term GLJ price forecast and changes to carbon tax regulation.

Proved plus probable (“2P”) reserve volumes decreased to 462 million barrels of bitumen, from 465 million barrels a year earlier. The 10% PV of these 2P bitumen reserves decreased by $27 million to approximately $1.1 billion due to a decrease in the long term GLJ price forecast and changes to carbon tax regulation.

Connacher’s first SAGD project at Great Divide, Pod One, has been producing bitumen since late 2007, with commercial production commencing March 1, 2008. Algar commenced producing bitumen in August 2010 and commerciality was achieved October 1, 2010. Production from Great Divide since startup through December 31, 2018 has totaled approximately 43 million barrels of bitumen. Such amounts have been deducted from earlier estimates of proved reserves prior to the calculation of reserves as at December 31, 2018.

Unless otherwise stated, reserves refer to reserves of bitumen. Future net revenue is calculated after the deduction of forecast royalties, operating expenses, estimated future capital expenditures and well abandonment costs, but before corporate overhead or other indirect costs, including interest and income taxes, from forecast revenue. Certain amounts cited herein have been rounded for presentation purposes. The GLJ December 31, 2017 report (“Year-End 2018 Report”) was prepared utilizing the GLJ January 1, 2019price forecast, effective December 31, 2018. Readers are referred to the notes to the Summary Tables included in this press release for details regarding the price forecast used by GLJ. Earlier reports were prepared using the price forecasts then being applied by GLJ. Future net revenues disclosed herein do not represent fair market value. Also, estimations of reserves and future net revenue discussed in this press release constitute forward looking information. See “Forward Looking Information and Reserves Advisory” below.

The Year-End 2018 Report was prepared using assumptions and methodology guidelines outlined in the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook”) and in accordance with National Instrument 51-101– Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Comparisons provided herein with respect to Connacher’s bitumen reserves and for 10% PV for December 31, 2017 are to estimates contained in the report, prepared by GLJ, with an effective date of December 31, 2017 (“Year-End 2017 Report”).

Furthermore, additional information regarding Connacher’s reserves and resources, including the Company’s interest in the resources and the risks and the level of uncertainty associated with the recovery of the resources, can be found in the Company’s annual information form (“AIF”) dated March 29, 2016 and Statement of Reserves Data and Other Oil and Gas Information dated April 26, 2019, which can be accessed at www.sedar.com.

Detailed information included in the Year-End 2018 Report regarding Connacher’s bitumen reserves and associated present values are set forth in the tables below, including a comparison of year-end 2018 results to year-end 2017 results.

Summary Tables

Set out below is a summary of the bitumen reserves and the value of future net revenue of the Corporation as at December 31, 2018 as evaluated by GLJ in the Year-End 2018 Report. The pricing used in the forecast price evaluations is set forth in the notes to the tables.

BITUMEN RESERVE VOLUMES

BASED ON FORECAST PRICES AND COSTS(7)

Bitumen

Gross(1)

Net(1)

(Mbbl)

(Mbbl)

Proved Reserves

Producing(2)(4)

11,533

10,752

Developed Non-Producing(2)(5)

0

0

Undeveloped(2)(6)

227,476

171,554

Total Proved(2) 

239,008

182,306

Total Probable(3) 

222,960

159,065

Total Proved Plus Probable(2)(3)

461,969

341,371

NET PRESENT VALUE SUMMARY

BASED ON FORECAST PRICES AND COSTS(7)

Net Present Value of Future Net Revenue Before Income Taxes
Discounted at (%/Year)

Net Present Value of Future Net Revenues After Income
Taxes Discounted at (%/Year)

0%

5%

10%

15%

20%

0%

5%

10%

15%

20%

($MM)

($MM)

($MM)

($MM)

($MM)

($MM)

($MM)

($MM)

($MM)

($MM)

Proved Reserves

Producing(2)(4)

-33

-9

4

12

16

-33

-9

4

12

16

Developed Non-Producing(2)(5)

0

0

0

0

0

0

0

0

0

0

Undeveloped

3,108

1,380

662

325

150

2,535

1,176

581

291

134

(2)(6)

Total Proved(2)

3,075

1,371

666

337

166

2,502

1,167

586

303

150

Total Probable(3)

3,010

983

387

168

73

2,085

658

249

100

36

Total Proved Plus Probable(2)(3)

6,085

2,353

1,054

506

239

4,587

1,826

835

403

186

Figures in tables may not add due to rounding.

Notes:

(1)

“Gross Reserves” are the Corporation’s working interest (operating or non-operating) share before deducting royalties and without including any royalty interests of the Corporation. “Net Reserves” are the Corporation’s working interest (operating or non-operating) share after deduction of royalty obligations, plus the Corporation’s royalty interests in reserves.

(2)

“Proved” reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

(3)

“Probable” reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

(4)

“Producing” reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate.  These reserves may be currently producing or, if shut-in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.

(5)

“Undeveloped” reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g., when compared to the cost of drilling a well) is required to render them capable of production.

(6)

The net present value of estimated future net revenues referred to herein should not be construed as the fair market value of estimated bitumen reserves attributable to Connacher’s properties.

(7)

Pricing assumptions in the Year-End 2018 Report were as follows: US$/CDN$ exchange rate was 0.770 for 2018. The following is the price forecast for the Year-End 2018 Report:

Year

Inflation
(%/Year)

Exchange
Rate
($US/$)

West Texas
Intermediate
Crude Oil at
Cushing
Oklahoma
Current
($US/bbl)

AECO/NIT
Spot
Current
($/MMBtu)

WCS Crude
Oil Stream
Quality at
Hardisty
Current
($/bbl)

Alberta
Natural Gas
Liquids

Edmonton
C5+ Stream
Quality

Current

($/bbl)

2019

2.00

0.750

56.25

1.85

47.67

67.67

2020

2.00

0.770

63.00

2.29

58.44

79.22

2021

2.00

0.790

67.00

2.67

65.82

83.54

2022

2.00

0.810

70.00

2.90

67.90

85.49

2023

2.00

0.820

72.50

3.14

70.12

87.80

2024

2.00

0.825

75.00

3.23

72.73

90.30

2025

2.00

0.825

77.50

3.34

75.76

93.33

2026

2.00

0.825

80.41

3.41

79.28

96.86

2027

2.00

0.825

82.02

3.48

81.24

98.81

2028

2.00

0.825

83.66

3.54

83.22

100.80

2029+

2.00

0.825

+2.00%/yr

+2.00%/yr

+2.00%/yr

+2.00%/yr

Comparison of Reserves 2017/2018

BITUMEN GROSS RESERVES (Mbbl)

31-Dec-17

31-Dec-18

Proved Producing

13,294

11,533

Proved Plus Probable Producing

20,366

17,973

Total Proved Reserves (1P)

242,608

239,008

Probable

222,731

222,960

Proved Plus Probable Reserves (2P)

465,339

461,969

Note: The definitions of the respective types of reserves set forth in the notes to the Summary Tables above also apply to the above table.

10% PRESENT VALUE OF FUTURE NET REVENUE OF BITUMEN RESERVES
– BEFORE TAX ($MM)

31-Dec-17

31-Dec-18

Proved Producing

30

4

Proved Plus Probable Producing

74

60

Total Proved Reserves (1P)

668

666

Probable

413

387

Proved Plus Probable Reserves (2P)

1,081

1,054

Note: The definitions of the respective types of reserves set forth in the notes to the Summary Tables above also apply to the above table.



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