Toscana Energy Income Corporation ("Toscana" or the
"Corporation") (TSX:TEI) announces the Corporation’s 2017
year-end reserves and the decision by the Board of Directors of the
Corporation to commence a review of strategic alternatives in
respect of the Corporation to enhance shareholder value.
2017 Highlights
- Continued to grow high quality, long life, low decline asset
base with forecast decline of 5%.
- Proved Developed Producing (PDP) reserves represent
approximately 83% of Proved Reserves.
- Proved reserves represent approximately 71% of Proved plus
Probable Reserves with $4.8 million of future development capital
to capture additional Probable reserves upside.
- Increased booked drilling inventory by 150% compared to
2016.
- Net Asset Value (NAV) on a PDP basis is $2.37/share, on a
Proved basis is $3.84/share and $7.03 /share on a Proved plus
Probable basis.
Note: NAV is calculated using reserve values
before tax discounted at 10% and reducing estimated net debt at
December 31, 2017
Corporate Reserves
The reserves data set forth below is based upon
independent reserve assessments and evaluations prepared by:
- Sproule Associates Limited (“Sproule”) dated February 15, 2018
with an effective date of December 31, 2017;
- GLJ Petroleum Consultants (“GLJ”) dated February 5, 2018 with
an effective date of December 31, 2017; and
- McDaniel and Associates Consultants Ltd. (“McDaniel”) dated
February 9, 2018 with an effective date of December 31, 2017(the
Sproule report, GLJ report and McDaniel report collectively
referred to as the “Reserve Reports”).
The following tables summarize the Corporation’s
crude oil, natural gas liquids and natural gas reserves and the net
present values before income taxes of future net revenue for the
Corporation’s reserves using forecast prices and costs based on the
Reserve Reports. The Reserve Reports have been prepared in
accordance with the standards contained in the Canadian Oil and Gas
Evaluation Handbook and the reserve definitions contained in
National Instrument 51-101 - Standards of Disclosure for Oil and
Gas Activities (“NI 51-101).
All evaluations and reviews of future net
revenues are stated prior to any provisions for interest costs or
general and administrative costs and after the deduction of
estimated future capital expenditures for wells to which reserves
have been assigned. It should not be assumed that the estimates 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 for the fiscal year ended 2017.
Reserves Summary
Proved reserves comprised 72% of the
Corporation’s total proved plus probable reserves at December 31,
2017. The Corporation had 584 Mboe of proved undeveloped reserves
(including royalty interests) at December 31, 2017, representing
6.9% of total proved and probable reserves and 9.6% of total proved
reserves.
The future capital expenditures assumed in the
Reserve Reports (undiscounted) is $17.1 million for the proved and
probable reserves and $12.3 million for total proved reserves.
The following tables provide summary reserve
information based upon the Reserve Reports and using published
price forecasts used by each of Sproule and GLJ.
|
Light and Medium Crude Oil |
Conventional Natural Gas |
NGL |
Total Oil Equivalent |
Reserves Category |
Gross |
Net1 |
Gross |
Net1 |
Gross |
Net1 |
Gross |
Net1 |
(Mbbl) |
(Mbbl) |
(MMcf) |
(MMcf) |
(Mbbl) |
(Mbbl) |
(MBOE) |
(MBOE) |
Proved |
|
|
|
|
|
|
|
|
Developed
Producing |
1,322 |
1,272 |
17,359 |
16,593 |
415 |
327 |
4,630 |
4,364 |
Developed
Non-Producing |
109 |
110 |
1,532 |
1,482 |
59 |
44 |
424 |
400 |
Undeveloped |
371 |
343 |
845 |
876 |
50 |
50 |
561 |
538 |
Total
Proved |
1,802 |
1,724 |
19,735 |
18,951 |
524 |
420 |
5,615 |
5,302 |
Probable |
619 |
575 |
9,069 |
8,425 |
182 |
155 |
2,313 |
2,134 |
Total Proved
plus Probable |
2,421 |
2,299 |
28,804 |
27,375 |
706 |
575 |
7,928 |
7,436 |
Notes:
(1) “Net” reserves means the
Corporation’s working interest (operated and non-operated) share
after deduction of royalty obligations, plus the Corporation’s
royalty interest in reserves. (2) Due to rounding,
certain totals may not be consistent from one table to the
next.
|
Light and Medium Crude Oil |
Conventional Natural Gas |
NGL |
Total Oil Equivalent |
|
Royalty Interest |
Royalty Interest |
Royalty Interest |
Royalty Interest |
|
(Mbbl) |
(Mmcf) |
(Mbbl) |
(Mboe) |
Developed
Producing |
52 |
1,521 |
124 |
430 |
Developed
Non-Producing |
11 |
75 |
1 |
24 |
Undeveloped |
- |
102 |
6 |
23 |
Total
Proved |
62 |
1,698 |
131 |
477 |
Probable |
19 |
468 |
38 |
133 |
Total Proved
plus Probable |
81 |
2,166 |
169 |
610 |
|
Light and Medium Crude Oil |
Conventional Natural Gas |
NGL |
Total Oil Equivalent |
|
Company Interest1 |
Company Interest1 |
Company Interest1 |
Company Interest1 |
|
(Mbbl) |
(Mmcf) |
(Mbbl) |
(Mboe) |
Developed
Producing |
1,373 |
18,879 |
540 |
5,060 |
Developed
Non-Producing |
120 |
1,607 |
60 |
448 |
Undeveloped |
371 |
947 |
56 |
584 |
Total
Proved |
1,864 |
21,433 |
655 |
6,092 |
Probable |
638 |
9,537 |
220 |
2,446 |
Total Proved
plus Probable |
2,502 |
30,970 |
875 |
8,537 |
Note:
(1) “Company Interest” reserves
means the Corporation’s working interest (operating and
non-operating) share before deduction of royalties and
including royalty interests of the Corporation.
Reserves
Values
The estimated before tax net present value of
future net revenues associated with the Corporation’s reserves
effective December 31, 2017 and based on the published future price
forecasts are summarized in the following table:
Reserve Values
($’000s) |
|
|
|
|
|
|
|
|
Undiscounted |
5 |
% |
10 |
% |
15 |
% |
20 |
% |
Proved Producing |
|
97,512 |
75,694 |
|
61,847 |
|
52,359 |
|
45,487 |
|
Non-producing |
|
4,375 |
3,763 |
|
3,211 |
|
2,748 |
|
2,368 |
|
Undeveloped |
|
12,645 |
9,521 |
|
7,198 |
|
5,452 |
|
4,123 |
|
Total
Proved |
|
114,531 |
88,978 |
|
72,256 |
|
60,559 |
|
51,978 |
|
Probable |
|
56,158 |
34,057 |
|
22,643 |
|
15,994 |
|
11,801 |
|
Total Proved
and Probable |
|
170,689 |
123,034 |
|
94,898 |
|
76,553 |
|
63,779 |
|
Notes:
(1) The estimated future net revenues are
stated after deducting future estimated site restoration costs and
are reduced for estimated future abandonment costs and estimated
capital for future development associated with the reserves.
(2) The net present value of future revenues does not
represent fair market value.
Review of Strategic
Alternatives
Toscana also announces that its Board of
Directors has initiated a process to explore and evaluate strategic
alternatives with a view to enhancing shareholder value. Toscana
believes that the current trading price of its common shares does
not reflect the value of the Corporation.
Such strategic alternatives may include, but are
not limited to, a corporate sale, merger or other business
combination, a sale of all or a portion of Toscana’s assets, the
refinancing or extension of the outstanding debentures, commencing
a substantial issuer bid pursuant to which Toscana will acquire its
common shares, or effecting any other transaction or transactions
that will result in unlocking additional value for
shareholders.
Toscana is generating free cash flow from its
operations and has additional liquidity through its existing credit
facilities. Toscana’s outstanding debentures mature on June 30,
2018 and are fully convertible. Throughout the strategic review
process, Toscana will continue to execute on its business strategy.
Toscana’s management team and its Board are committed to acting in
the best interests of the Corporation and believe this will
ultimately benefit shareholders.
A special committee led by Don Copeland, the
Chairman of the Board, will work with management and the
Corporation’s external advisors to supervise the review of
strategic alternatives. The special committee has a mandate to
solicit, review and consider strategic alternatives and to consider
and recommend to the Board of Directors whether any transaction is
in the best interests of Toscana. Toscana has not set a
definitive schedule to complete its strategic review or made a
decision to pursue any particular strategic alternative. Given the
nature of the strategic review process and the need for
confidentiality during this process, Toscana does not intend to
discuss developments with respect to the evaluation process unless
a transaction is approved, or disclosure becomes appropriate.
Toscana cautions that there are no guarantees that the strategic
alternative review will result in a transaction or if a transaction
is undertaken, as to its terms or timing.
About Toscana Energy Income Corporation
Toscana Energy Income Corporation is a
conventional oil and gas producer with the mandate to acquire high
quality, long life oil and gas assets including royalties,
non-operated working interests and unitized production for yield
and capital appreciation. Toscana Energy Income Corporation is
managed by Sprott Toscana through Toscana Energy Corporation.
Sprott Toscana is a member of the Sprott Group of Companies.
For further information, please visit our website
at www.sprott-toscana.com or contact:Joseph S. Durante,
Chief Executive Officer Tel: (403) 410-6793 Fax: (403)
444-0090 E-Mail: jdurante@sprott-toscana.com
BOE Equivalency
Barrel of oil equivalents or BOEs 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. Given 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 Mcf: 1 bbl, utilizing a conversion ratio of 6 Mcf: 1 bbl may
be a misleading indication of value.
Oil and Gas Advisory
The reserves information contained in this news
release have been prepared in accordance with NI 51-101. Complete
NI 51-101 reserves disclosure will be included in our Annual
Information Form for the year ended December 31, 2017. Listed below
are cautionary statements applicable to our reserves information
that are specifically required by NI 51-101:
Individual properties may not reflect the same
confidence level as estimates of reserves for all properties due to
the effects of aggregation.
With respect to finding and development costs,
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 costs generally will not reflect total
finding and development costs related to reserve additions for that
year.
This press release contains estimates of the net
present value of our future net revenue from our reserves. Such
amounts do not represent the fair market value of our reserves.
Reserves included herein are stated on a company
interest basis (before royalty burdens and including royalty
interests) unless noted otherwise as well as on a gross and net
basis as defined in NI 51-101. "Company interest" is not a term
defined by NI 51-101 and as such the estimates of Company interest
reserves herein may not be comparable to estimates of “gross”
reserves prepared in accordance with NI 51-101 or to other issuers'
estimates of company interest reserves.
Non-IFRS measures:
Management uses “net asset value”, “netback”,
“funds flow from operations prior to performance fee
internalization”, “funds flow from operations”, “unused
portion of credit facility”, “credit facility utilization” and
“credit facility availability” to analyze operating performance and
to determine the Corporation’s ability to fund future capital
investment. These terms, as presented, do not have any
standardized meaning prescribed by International Financial
Reporting Standards (“IFRS”) and therefore may not be comparable
with the calculation of similar measures for other entities.
Readers are cautioned regarding the reliability of such
measures.
Forward-Looking Statements:
This news release contains forward‐looking
statements and forward‐looking information within the meaning of
applicable securities laws. These statements relate to future
events or future performance. All statements other than
statements of historical fact may be forward‐looking statements or
information. Forward‐looking statements and information are
often, but not always, identified by the use of words such as
"appear", "seek", "anticipate", "plan", "continue", "estimate",
"approximate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should",
"believe", "would" and similar expressions.
More particularly and without limitation, this
news release contains forward‐looking statements and information
concerning the Corporation's petroleum and natural gas production
and reserves and Toscana’s review of strategic alternatives. The
forward‐looking statements and information are based on certain key
expectations and assumptions made by management of the Corporation,
including expectations and assumptions concerning well production
rates and reserve volumes; project development and overall business
strategy. Although management of the Corporation believes that the
expectations and assumptions on which such forward looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward‐looking statements and
information since no assurance can be given that they will prove to
be correct.
Forward-looking statements and information are
provided for the purpose of providing information about the current
expectations and plans of management of the Corporation relating to
the future. Readers are cautioned that reliance on such statements
and information may not be appropriate for other purposes, such as
making investment decisions. Since forward‐looking statements and
information 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, the risks associated with the oil and gas industry in
general such as operational risks in development, exploration and
production delays or changes in plans with respect to exploration
or development projects or capital expenditures; the uncertainty of
reserve estimates; the uncertainty of estimates and projections
relating to reserves, production, costs and expenses; health,
safety and environmental risks; commodity price and exchange rate
fluctuations; marketing and transportation; loss of markets;
environmental risks; competition; incorrect assessment of the value
of acquisitions and failure to realize the anticipated benefits of
acquisitions; ability to access sufficient capital from internal
and external sources; failure to obtain required regulatory and
other approvals and changes in legislation, including but not
limited to tax laws, royalties and environmental regulations.
Accordingly, readers should not place undue reliance on the
forward‐looking statements, timelines and information contained in
this news release. Readers are cautioned that the foregoing list of
factors is not exhaustive.
The forward‐looking statements and information
contained in this news release are made as of the date hereof and
no undertaking is given 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 or the Toronto Stock Exchange
(“TSX”). The forward-looking statements or information
contained in this news release are expressly qualified by this
cautionary statement.