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Osum announces higher reserves and resources at Orion and Taiga


CALGARY, AB – Osum Oil Sands Corp. (“Osum” or “the Company“) announced today results from an updated assessment as of April 30, 2020 by GLJ Petroleum Consultants (“GLJ“). GLJ was engaged as an independent qualified reserve evaluator to evaluate the reserves and resources of Osum’s two thermal oil projects in the Cold Lake area: Orion and Taiga. The evaluation was prepared in accordance with reserve definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook (“COGEH“).
Compared with GLJ’s assessment at December 31, 2019, GLJ assigned or estimated:
  • 158.9 million barrels of total proved (“1P“) reserves, an increase of 17.3 million barrels (12%);
  • 698.3 million barrels of total proved plus probable (“2P“) reserves, an increase of 83.8 million barrels (14%); and
  • 365.2 million barrels of Risked Best Estimate Contingent Resources (subclass development unclarified), an increase of 123.8 million barrels (51%).

The updated evaluation follows the Q1 2020 delineation program for the Company’s Orion leases. The program confirmed the quality and extent of a previously identified Upper Grand Rapids channel-fill reservoir, and identified a thicker pay column in an area of the Clearwater reservoir. In addition, recovery factors at both Orion and Taiga were increased based on Orion well performance to date.

Inclusive of the volumetric increases in reserves, lower forecast commodity prices resulted in valuation decreases compared with GLJ’s previous assessment. At April 30, 2020, 1P PV10 (BT) was $1,035 million, a decrease of $558 million (35%), and 2P PV10 (BT) was $2,494 million, a decrease of $793 million (24%) from GLJ’s evaluation at December 31, 2019.

Steve Spence, Osum’s President and CEO, commented, “Our winter delineation program confirmed our expectations for the Upper Grand Rapids zone. Given its quality, we anticipate its development will underpin our next expansion phase at Orion. Furthermore, performance analogues from Orion continue to bolster our positive view of Phase 1 of Taiga which we expect will follow the full buildout of Orion, assuming market conditions are supportive.”

In the first quarter of 2020, production at Orion averaged 20,024 barrels per day. The Company has regulatory approval to expand production to 25,000 barrels per day at Orion (Phase 2D). Osum also has regulatory approval for 35,000 barrel per day at Taiga, a greenfield development located less than 20 kilometres from Orion.

Assessment Tables: Reserves and Resources

The following table displays gross bitumen reserves and bitumen reserves net of forecast royalties along with the present values of estimated future net revenue using a range of discount rates at April 30, 2020:

Bitumen Reserves
(millions bbl)

Net Present Value of Future Net Revenue
Before Taxes ($millions)
Forecast Prices (1) and Costs

Gross

Net

0%

5%

10%

15%

20%

Total Proved (1P)

158.9

126.6

2,800

1,630

1,035

707

512

Total Probable

539.4

431.2

13,362

3,796

1,459

651

298

Total Proved plus Probable (2P)

698.3

557.8

16,162

5,426

2,494

1,358

810

(1)      

GLJ Petroleum Consultants Price Forecast, April 1, 2020.

The following tables compare the gross bitumen reserves and resources for Orion and Taiga assets in December 31, 2019 and in April 30, 2020.

Gross Bitumen Total 1P Reserves
(millions bbl)

Gross Bitumen Total 2P Reserves
(millions bbl)

Dec. 31,
2019

April 30,
2020

%
change

Dec. 31,
2019

April 30
2020

%
change

Orion:

UGR (1)

0

6.0

N/A

2.2

24.9

1132%

Clearwater

141.6

152.9

8%

163.1

199.6

22%

Orion Total

141.6

158.9

12%

165.3

224.5

36%

Taiga Total

449.3

473.9

5%

Total Cold Lake

141.6

158.9

12%

614.6

698.4

14%

Notes:

(1) Upper Grand Rapids Reservoir

Best Estimate Contingent Resources
(1, 2) Unrisked (millions bbl)

Best Estimate Contingent Resources (1, 2)
Risked (millions bbl)

Dec. 31,
2019

April 30,
2020

% change

Dec. 31,
2019

April 30,
2020

% change

Orion:

UGR (3)

10.7

N/A

8.2

N/A

Clearwater

169.6

222.7

31%

129.7

170.3

31%

Orion Total

169.6

233.4

38%

129.7

178.5

38%

Taiga Total

147.0

245.7

67%

111.6

186.7

67%

Total Cold Lake

316.6

479.1

51%

241.4

365.2

51%

Notes:
(1) Gross Resource volumes
(2) Contingent Resources Project Maturity Subclass is Development Unclarified. Contingencies specific to this project include additional facility capacity, additional delineation, regulatory application approval, detailed development plans and cost estimates, and financing and corporate commitment and approvals.
(3) Upper Grand Rapids Reservoir

The table below summarizes the subclass and status of the Contingent Resources at Cold Lake. “Contingent Resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies specific to the projects described in the table below include: additional facility capacity, additional delineation, regulatory application approval, detailed development plans and cost estimates, and financing and corporate commitment and approvals. All contingencies preventing such contingent resources from being classified as reserves are “non-technical” contingencies. Contingent Resources in the Sandy Heterolithic Strata of the Clearwater Orion lease have technology under development status related to the under heat harvesting recovery process.

Project maturity subclasses are sub-classifications of Contingent Resources which help identify a project’s chance of commerciality. Project maturity subclasses (in order of increasing chance of commerciality) are ‘development not viable’, ‘development unclarified’, ‘development on hold’, and ‘development pending’. Projects are assigned a maturity subclass of ‘development unclarified’ if they are still under evaluation or require significant further appraisal to clarify the potential for development, and where the contingencies have not been fully defined.

Project

Project

Maturity

Subclass

Project

Evaluation

Scenario

Status

Risked Best

Estimate

Contingent

Resource Gross
(millions bbl)

Project
COC (1)

Project
Description

Estimated
Capital to
Reach First
Commercial
Production
(millions$)(2,3)

Timing of
First
Commercial
Production

Orion

Development

Unclarified

Pre-development Study

178.5

77%

Orion
Phase 3
10,000 bbl/d

229

2025

Taiga

Development

Unclarified

Pre-development Study

186.7

76%

Taiga
SAGD
20,000 bbl/d

453

2028

Notes:
(1) COC (“Chance of commerciality”) is equal to the chance of discovery x chance of development. The chance of discovery is 1.0.

(2) Capital cost details relate only to costs associated with achieving first commercial production within the phase described in the Project Description. Drill, complete, pump and pad costs to achieve commercial production includes unrisked estimated costs for initial well development. Sustaining capital costs incurred subsequent to achieving commercial production have not been included in total capital to first commercial production. Abandonment and reclamation costs have not been included in total capital to first commercial production.
(3) Capital is risked by chance of commerciality

About Osum

Established in Alberta in 2005, Osum Oil Sands Corp. is a private oil sands producer focused on the responsible application of in situ recovery technologies within Canada’s oil sands and carbonates. Additional information on the company is available at osumcorp.com.

Reserves and Resources

The reserve and resource estimates herein were extracted from the GLJ Report, which was prepared in accordance with resources and reserves definitions, standards and procedures contained in the COGEH. Reserves are classified according to the degree of certainty associated with the estimates. 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. 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. Other criteria that must also be met for the categorization of reserves are provided in the COGEH.

The qualitative certainty levels referred to in the definitions above are applicable to individual reserve entities (which refers to the lowest level at which reserves calculations are performed) and to reported reserves (which refers to the highest-level sum of individual entity estimates for which reserve estimates are prepared). Reported reserves should target the following levels of certainty under a specific set of economic conditions: (a) at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves; and (b) at least a 50 percent probability that the quantities actually recovered will equal or exceed the estimated proved plus probable reserves. A qualitative measure of the certainty levels pertaining to estimates prepared for the various reserves categories is desirable to provide a clearer understanding of the associated risks and uncertainties. However, the majority of reserves estimates will be prepared using deterministic methods that do not provide a mathematically derived quantitative measure of probability. In principle, there should be no difference between estimates prepared using probabilistic or deterministic methods. Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in the COGEH.

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. Contingent Resources are further classified in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by their economic status. Best Estimate Contingent (“BEC”) resource is considered to be the best estimate of the quantity that will actually be recovered from the accumulation. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.

The preparation of an evaluation requires the use of judgement in applying the standards and definitions contained in the COGEH. As the Company’s independent reserve evaluator, GLJ applies those standards and definitions based on its experience and knowledge of industry practice. However, because the application of the standards and definitions contained in the COGEH require the use of judgement there is no assurance that governing securities regulator(s) will not take a different view than GLJ as to some of the determinations in an evaluation.

In determining the valuation estimates contained in the GLJ Report, the following GLJ pricing forecast as at April 1, 2020 was utilized:

Year

Western
Canadian
Select
(C$/bbl)

WTI at
Cushing
(US$/bbl)

Diluent
(Condensate)
(C$/bbl)

AECO Gas
(C$/mmbtu)

Exchange
Rate
(US$/C$)

Q2-Q4 2020

20.34

30.00

37.47

1.95

0.720

2021

34.25

41.00

52.05

2.25

0.730

2022

43.54

47.50

61.56

2.35

0.735

2023

50.68

52.50

68.92

2.45

0.740

2024

57.72

57.50

75.84

2.55

0.745

2025

59.93

58.95

77.27

2.65

0.750

2026

61.51

60.13

78.84

2.70

0.750

2027

63.11

61.33

80.44

2.76

0.750

2028

64.75

62.56

82.08

2.81

0.750

2029

66.41

63.81

83.75

2.87

0.750

2030+

+2.0%/yr

+2.0%/yr

+2.0%/yr

+2.0%/yr

0.750



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