Enercapita Energy Announces 2017 Year End Reserves

CALGARY, ALBERTA – Enercapita Energy Trust (the “Trust”) is pleased to report the summary results of the independent reserves evaluation (the “Sproule Report”) of Enercapita Energy Ltd. (the “Company”, and together with the Trust and Enercapita Energy L.P., “Enercapita”) effective December 31, 2017, as prepared by Sproule Associates Limited (“Sproule”).

The year 2017 was a transformational year for Enercapita as the Company continued to execute its business plan of aggregating a portfolio of high-quality, long-life, low-decline producing assets with a focus on maximizing free cash flow. The Company has successfully integrated the 2017 acquisitions and the Company continues to benefit from higher oil prices as we have commenced operations in 2018 with enhanced corporate oil weighting and netbacks, free cash flow and overall financial strength.

2017 RESERVES HIGHLIGHTS:

The following outlines the key highlights of the Company’s 2017 year-end reserves:

  • Increased total Proved and Probable (“2P”) reserves by 272% from 2016, to 58.5 million barrels of oil equivalent (“boe”). This represents $842.0 million of net present value of future net revenues discounted at 10% (“NPV 10%”) before tax.
  • Increased Total Proved (“1P”) reserves by 219% from 2016, to 36.1 million boe. This represents $562.7 million NPV 10% before tax.
  • Increased Proved Developed Producing (“PDP”) reserves by 138% from 2016, to 19.1 million boe. This represents $366.9 million NPV 10% before tax.
  • Increased Proved reserves per Preferred Unit by 103% and PDP reserves per Preferred Unit by 52% in 2017 from 2016.
  • Added 11.1 million boe of PDP reserves, replacing over 789% of 2017 production (estimated at 1.6 MMboe).
  • Delivered an “all-in” FD&A cost of $10.24 per boe1, on a total Proved plus Probable basis, including changes in undiscounted FDC.
  • Reported a 2017 recycle ratio of 2.6 times FD&A2, on a PDP basis.

Notes:

1 “All-in” FD&A was calculated by dividing the total 2017 capital (development capital, A&D capital and the change in future development capital) by the total 2017 2P reserve “Adds and Revisions”.
2 Recycle Ratio is equal to the Company’s 2018 forecasted net operating income (as per the Sproule Report), divided by FD&A.

2017 INDEPENDENT RESERVES EVALUATION:

The evaluation of the Company’s reserves was done 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”).

Independent reserve evaluators, Sproule, evaluated 100 percent of the Company’s total net present value reserves.

RESERVES SUMMARY:

The following tables summarize the Company’s working interest oil, natural gas liquids and natural gas reserves and the net present values (“NPV”) of future net revenue for these reserves (before taxes) using forecast prices and costs as set forth in the Sproule Report.

Year End 2017 Reserves
Crude Oil and NGLs(4) Natural Gas(5) Oil Equivalent Total Reserves NPV of Future Net Revenue (before tax)
Discounted at
Company Share Reserves(3): 5% 10% 15%
             
(Mbbls) (MMcf) (Mboe) ($000’s) ($000’s) ($000’s)
Proved:
Proved Producing 13,788 31,959 19,114 475,450 366,906 298,118
Proved Non-Producing 1,285 4,519 2,038 40,122 31,710 25,552
Proved Undeveloped 11,805 19,026 14,976 274,353 164,069 101,557
Total Proved 26,878 55,503 36,128 789,925 562,685 425,227
Probable 16,867 33,011 22,369 455,412 279,297 184,858
Total Proved plus Probable 43,745 88,514 58,497 1,245,337 841,982 610,086

Notes:

(3) Company’s total working interest share before the deduction of any royalties and including any royalty interests of the Company, amounts may not add due to rounding.
(4) Includes light, medium, heavy and tight oil and natural gas liquids.
(5) Includes conventional natural gas, solution gas and coal bed methane.

The Company’s Proved Developed Producing reserves as at December 31, 2017 are 72% liquids.

SUMMARY OF SELECTED SPROULE PRICE FORECASTS AS AT DECEMBER 31, 2017:

Year WTI Cushing Oklahoma 40o API
($US/bbl)
Canadian Light Sweet 40o API (CAD$/bbl) AECO-C Spot CAD$/Mmbtu Exchange Rate
$US/$CAD
2018 55.00 65.44 2.85 0.79
2019 65.00 74.51 3.11 0.82
2020 70.00 78.24 3.65 0.85
2021 73.00 82.45 3.80 0.85

Increasing by 2.0% per year after 2021

RESERVE LIFE INDEX (“RLI”):

Enercapita management strives to create unitholder value through the efficient development of high-quality, large original oil in place, conventional, crude oil reservoirs. The cost-effective growth of the Company’s reserves, combined with the sustainable production of these reserves, is expected to generate accretive long term returns for Enercapita unitholders.

The following table highlights the RLI of the Company:

Reserve Life Index (Years) (6) 2017 2016 2015
Total Proved 15.4 9.8 11.3
Total Proved plus Probable 24.7 13.7 14.7

Note:

(6) Calculated based on the amount for the relevant reserves category prepared by Sproule, divided by the production estimate for the applicable year.

READER ADVISORY:

Forward-Looking Statements: This press release contains forward-looking statements, including, but not limited to, forward-looking statements relating to the operations of the Company, including oil weighting and netbacks, free cash flow and financial strength, and returns for Enercapita unitholders. In addition, the use of any of the words “can”, “will”, “estimate”, “anticipate”, “believe”, “should”, “forecast”, “future”, “continue”, “may”, “expect”, and similar expressions are intended to identify forward-looking statements. Statements relating to “reserves” are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions that the reserves described can be profitably produced in the future. The forward-looking statements contained herein are based on certain key expectations and assumptions made by Enercapita, including, but not limited to, expectations and assumptions concerning the success of optimization and efficiency improvement projects, the availability of capital, current legislation, pipeline, transportation and processing capacity, receipt of required regulatory approval, the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the Company’s growth strategy, general economic conditions, availability of required equipment and services and the costs of obtaining such equipment and services, and expectations as to commodity prices. Although Enercapita believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Enercapita can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects, capital expenditures, acquisitions or other corporate transactions; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. To the extent any guidance or forward-looking statements herein constitute a financial outlook, they are included herein to provide readers with an understanding of management’s plans and assumptions for budgeting purposes and readers are cautioned that the information may not be appropriate for other purposes.

The forward-looking statements contained in this press release are made as of the date hereof and Enercapita undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Reserves and Production Disclosure: Reserves and production information presented herein has been presented on a gross basis which are the Company’s total working interest share before the deduction of any royalties and including any royalty interests of the Company. The reserves estimates presented herein have been evaluated by Sproule in accordance with NI 51-101 and the COGE Handbook and are effective December 31, 2017 using Sproule’s December 31, 2017 forecast pricing. It should not be assumed that the estimates of future net revenues presented herein represent the fair market value of the reserves. There is no assurance that the forecast prices and costs assumptions will be attained and variances could be material. The recovery and reserve estimates of the Company’s 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 liquid reserves may be greater than or less than the estimates provided herein.

Barrels of Oil Equivalent: The term “boe” or barrels of oil equivalent may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (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. Additionally, given that the value ratio based on the current price of crude oil, as compared to natural gas, is significantly different from the energy equivalency of 6:1; utilizing a conversion ratio of 6:1 may be misleading as an indication of value.

Oil and Gas Metrics: This press release contains a number of oil and gas metrics, including FD&A, recycle ratio and RLI, which do not have standardized meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate the Company’s performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods.

 

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