Petrobank Energy and Resources Ltd. ("Petrobank" or the "Company") (TSX:PBG)
announces our year end 2011 reserves evaluation by McDaniel and Associates
Consultants Ltd. ("McDaniel") and provides an operational update of our Heavy
Oil Business Unit ("HBU") activities. May River reserves and contingent
resources are provided for reference, however, as disclosed, this property was
sold February 28, 2012.
All references to $ are Canadian dollars unless otherwise noted. All reserve and
resource numbers presented herein are total company interest in such reserves or
resources, unless otherwise noted. Total Company share includes Petrobank's 59%
share of PetroBakken Energy Ltd. ("PetroBakken") reserves and net present values
("NPV").
SUMMARY
-- THAI(R) proved reserves for the Kerrobert project have been adjusted to
zero. Additionally, proved plus probable ("2P") reserves at Kerrobert
were adjusted to 3.6 million barrels. These reductions were based upon
the early start-up stage production levels at Kerrobert at year end
2011.
-- THAI(R) proved plus probable plus possible ("3P") reserves recognized
for the Kerrobert project are unchanged at 8.5 million barrels.
-- Best estimate contingent bitumen resources based on steam assisted
gravity drainage ("SAGD") associated with the May River property
totalled 624 million barrels.
-- Exploitable Oil-in-Place ("EOIP") (see "Exploitable Oil-in-Place")
associated with our Plover and Luseland properties was recognized for
the first time and totalled 28.7 million barrels; EOIP of all heavy oil
properties totalled 80.5 million barrels.
-- Positive production trend at our Kerrobert project with average daily
production increasing from 30 barrels of oil per day ("bopd") in Q3 2011
to 41 bopd in Q4 2011 and averaging approximately 155 bopd for January
and February 2012.
-- PetroBakken's 2P reserves increased by 19% to 203.5 million barrels of
oil equivalent ("MMboe") at December 31, 2011, replacing 2011 production
by 315%.
-- PetroBakken's Cardium business unit's 2P reserves increased by 66% in
2011, replacing production by 800%.
-- PetroBakken's Bakken business unit's 2P reserves increased by 7% in
2011, replacing production by 173%.
CORPORATE RESERVES / RESOURCES SUMMARY BY BUSINESS UNIT
Company Interest(1)
HBU - HBU - Total
PetroBakken Heavy Oil Bitumen Company(2)
(Mboe)(4) (Mbbls)(4) (Mbbls) (Mboe)
----------------------------------------------------------------------------
Proved Developed Producing 74,110 - - 43,725
Total Proved 119,867 - - 70,722
Proved + Probable (2P) 203,464 3,598 90,603 214,245
Proved + Probable + Possible
(3P) 203,464 8,490 102,982 231,516
Best Estimate Contingent
Resources(3) - - 624,127 624,127
(1) "Company Interest" reserves, which represent the Company's working
interest share of reserves including the Company's royalty interests in
reserves and before deduction of the Company's royalty obligations.
(2) Total Company includes HBU reserves and resources and Petrobank's 59%
share of PetroBakken reserves as at December 31, 2011.
(3) See "Resources and Contingent Resources".
(4) "Mboe" means thousand barrels of oil equivalent and "Mbbls" means
thousand barrels.
Net Present Value, Before Tax, Forecast Prices ($ millions) (1)
HBU - HBU - Total
PetroBakken Heavy Oil Bitumen Company(2)
----------------------------------------------------------------------------
Proved Developed Producing 2,405.8 - - 1,419.4
Total Proved 3,133.9 - - 1,849.0
Proved + Probable (2P) 4,720.4 4.6 548.2 3,337.8
Proved + Probable + Possible
(3P) - 139.6 640.9 780.5
Best Estimate Contingent
Resources - - 2,431.9 2,431.9
(1) PetroBakken based on Sproule Associates Ltd.'s forecast prices. HBU
based on McDaniel forecast bitumen and heavy oil netback prices.
Interest expenses and corporate overhead were not included. Net present
values are discounted at 10%. The net present values do not represent
the fair market value of the reserves and/or resources.
(2) Total Company includes HBU net present values and Petrobank's 59% share
of PetroBakken net present value as at December 31, 2011.
The full reserve disclosure tables, as required under National Instrument
51-101, will be contained in the Company's Annual Information Form which will be
filed on the SEDAR website at www.sedar.com later in March.
HBU RESERVES
Petrobank received the world's first THAI(R) reserves at our Kerrobert project
for year-end 2010. At that time, we had two demonstration wells in operation for
approximately 15 months and had initiated the full-field development of another
10 well-pairs and associated surface facilities. The Kerrobert project was
operational with all 12 production wells capable of production in September,
2011. As the THAI(R) process builds, early stage production in late 2011 was
less than what our original two demonstration wells were producing in late 2010.
The demonstration wells had been on production for more than a year by late
2010. Because reserves are measured at year-end and the full-field development
wells were showing lower production at that specific point in time, McDaniel
lowered their estimate for proved and 2P production. This lower estimated
production resulted in the proved production profile showing negative net
present value and therefore caused the elimination of proved reserves. The lower
estimated 2P production profile also resulted in a 25% decrease in proved plus
probable reserves at December 31, 2011. There was no change to the proved,
probable and possible (see "Possible Reserves") estimated production or reserves
of 8.5 million barrels. In the near term, operating success at Kerrobert should
result in significantly higher assigned reserves from Kerrobert's 18.7 million
barrels of EOIP.
McDaniel has estimated EOIP at Dawson, Plover and Luseland of 33.2 million
barrels, 3.5 million barrels and 25.1 million barrels, respectively. Including
Kerrobert, total EOIP of all the Company's heavy oil properties was 80.5 million
barrels.
McDaniel has continued to evaluate our Conklin and May River bitumen properties
using SAGD extraction techniques as they have classified it as an immobile
bitumen reservoir. 2P reserves at Conklin are essentially unchanged at 90.6
million barrels of bitumen. Best estimate contingent resources at May River are
essentially unchanged compared to our June 1, 2011 update at 624 million
barrels. These reserves and contingent resources were sold effective February
28, 2012.
HBU RESERVES / RESOURCES SUMMARY
The following tables summarize the McDaniel report as at December 31, 2011 and
2010. Reserves were assigned to the Conklin, Alberta pilot project and our
Kerrobert, Saskatchewan property (4 sections) and contingent resources were
assigned to our May River leases (62 sections) near Conklin. The McDaniel report
does not include any reserves or recoverable resources associated with our
Glover lease (10 sections), our Sutton Creek lease (36 sections), our Plover and
Luseland properties (11 sections), or our Dawson property (31.5 sections).
Reserves and Resources (1)as of
December 31, 2011 2010 Change
(MMbbl) (MMbbl) %
----------------------------------------------------------------------------
Kerrobert
Proved Reserves (P) 0.0 3.0 (100)
-------------------------------
Proved plus Probable Reserves
(2P) 3.6 4.8 (25)
Proved plus Probable plus
Possible Reserves (3P) (2) 8.5 8.5 0
Conklin and May River
Properties (sold Feb. 28,
2012)
-------------------------------
Proved Reserves (P) 0.0 0.0 n/a
Proved plus Probable Reserves
(2P) 90.6 90.6 0
Proved plus Probable plus
Possible Reserves (3P) (2) 103.0 101.5 1
Low Estimate Contingent
Resources (3) (4) 484.9 474.0 2
Best Estimate Contingent
Resources (3) (4) 624.1 560.1 11
High Estimate Contingent
Resources (3) (4) 793.0 697.2 14
(1) Gross reserves and/or resources include the working interest
reserves/resources excluding the Company's royalty interests in reserves
and before deductions of royalties payable to others.
(2) Possible reserves are those additional reserves that are less certain to
be recovered than probable reserves. See "Possible Reserves".
(3) Contingent resources, as evaluated by McDaniel, are those quantities of
bitumen estimated to be potentially recoverable using SAGD technology
from known accumulations but are classified as a resource rather than a
reserve primarily due to the absence of regulatory approvals, detailed
design estimates and near term development plans and are in addition to
3P reserves. See "Resources and Contingent Resources".
(4) A low estimate means higher certainty (P90), a best estimate (P50) means
most likely and a high estimate means lower certainty (P10).
Before Tax Net Present Value - December 31, 2011 - $Millions (1) (2) (3)
Net Present Value Discounted at: 0% 5% 8% 10%
----------------------------------------------------------------------------
Kerrobert
Proved Reserves (1P) 0 0 0 0
------------------------------------
Proved plus Probable Reserves (2P) 11 7 6 5
Proved plus Probable plus Possible
Reserves (3P) 240 180 154 140
Conklin and May River Properties
(sold Feb. 28, 2012)
------------------------------------
Proved Reserves (1P) 0 0 0 0
Proved plus Probable Reserves (2P) 2,365 1,081 712 548
Proved plus Probable plus Possible
Reserves (3P) 3,012 1,290 835 641
Low Estimate Contingent Resources 11,312 4,243 2,429 1,681
Best Estimate Contingent Resources 16,438 6,010 3,463 2,432
High Estimate Contingent Resources 22,677 8,230 4,774 3,387
(1) Based on McDaniel forecast bitumen and heavy oil netback prices.
(2) Interest expenses and corporate overhead were not included.
(3) The net present values do not represent the fair market value of the
reserves and/or resources.
HEAVY OIL BUSINESS UNIT OPERATIONAL UPDATE
Kerrobert Project
Fourth quarter 2011 production increased to 41 bopd from 30 bopd in the third
quarter. This trend of increasing production continued in early 2012 with
average January and February production of approximately 155 bopd. We have
recently begun to see upgraded THAI(R) oil, with typical API gravity in the 13
degree range compared to native oil with 10 degree API.
During our third quarter 2011 operational update, we disclosed that our
operational plan at Kerrobert was to continue to optimize air injection rates in
order to gradually build out the combustion front, increase the overall pressure
in the reservoir and to increase sustained production of upgraded THAI(R) oil.
We are managing operations based on this plan and continue to optimize the
THAI(R) process in a consistent and patient operating manner to progressively
increase THAI(R) production.
Dawson Demonstration Project
As previously disclosed in mid-December 2011, we have elected to defer further
work on the Dawson project until the second quarter of 2012. We will reassess
development plans after spring break-up.
Plover Property
During 2012, we drilled three stratigraphic wells at our Plover Property. We
continue to develop plans to further evaluate and develop this property.
Archon Technologies Ltd. ("Archon")
During the fourth quarter 2011, Archon filed three THAI(R) related patents that
will contribute to extending the patent life of our technology and enhancing the
scope of the THAI(R) process.
PETROBAKKEN (59% OWNED BY PETROBANK)
PetroBakken announced year end reserves on February 27, 2012, highlighted as
follows:
-- PetroBakken's 2P reserves increased by 19% to 203.5 MMboe at December
31, 2011, replacing 2011 production by 315%.
-- PetroBakken's average light oil weighting of their reserves is 80%; 85%
when natural gas liquids are included.
-- PetroBakken delivered finding, development and net acquisition ("FD&A")
costs of $18.95/boe excluding changes in Future Development Capital
("FDC"), and $30.74/boe, including changes in FDC.
-- PetroBakken's Cardium business unit increased 2P reserves by 66% in
2011, replacing production by 800%. Incremental 2P reserve additions in
this business unit of 32.7 MMboe resulted in total 2P reserves of 72.2
MMboe at the end of the year.
-- PetroBakken's Bakken business unit increased 2P reserves by 7% in 2011,
replacing production by 173%. The 2P reserves for the Bakken increased
by 12.9 MMboe and at year-end totalled 88.5 MMboe.
PetroBakken Reserves
Forecast Prices(1)
As at December Royalty PetroBakken
31, 2011 Company Gross(2) Interests(3) Interest(4)
-------------------------------------------------------------
Total Natural Sub-
Oil NGL Gas total Sub-total Total
(Mbbl) (Mbbl) (MMcf) (Mboe) (Mboe) (Mboe)
----------------------------------------------------------------------------
Proved
Developed
Producing 57,800 4,170 67,825 73,274 836 74,110
Total Proved 95,397 6,279 103,292 118,891 976 119,867
Proved +
Probable (2P) 161,665 10,745 176,919 201,897 1,568 203,464
----------------------------------------------------------------------------
PetroBakken Net Present Value - Before Tax ($millions)(5)(6)
Forecast Prices(1)
As at December 31, 2011
0% 5% 10%
----------------------------------------------------------------------------
Proved Developed Producing 3,724.1 2,887.9 2,405.8
-------------------------------
Total Proved 5,328.8 3,932.9 3,133.9
Proved + Probable (2P) 9,691.7 6,354.8 4,720.4
----------------------------------------------------------------------------
PetroBakken Net Present Value - After Tax ($millions)(5)(6)
Forecast Prices(1)
As at December 31, 2011
0% 5% 10%
----------------------------------------------------------------------------
Proved Developed Producing 3,367.5 2,638.8 2,215.6
-------------------------------
Total Proved 4,548.2 3,377.0 2,701.8
Proved + Probable (2P) 7,755.8 5,139.0 3,839.1
----------------------------------------------------------------------------
Working Interest Reserve Reconciliation (Mboe)(2)
Forecast Prices(1)
As at December 31, 2011
Developed Total Proved+
Producing Proved Probable
----------------------------------------------------------------------------
PetroBakken reserves at
December 31, 2010 65,326 102,003 169,816
2011 production net of royalty
interest (14,773) (14,773) (14,773)
Net dispositions (433) (677) (927)
Net additions and revisions 23,154 32,338 47,781
---------------------------------------------
PetroBakken reserves at
December 31, 2011 73,274 118,891 201,897
PetroBakken year-over-year
increase in reserves 12% 17% 19%
PetroBakken production
replacement 157% 219% 323%
----------------------------------------------------------------------------
Notes:
(1) Based on the Sproule price forecast effective December 31, 2011.
(2) Company Gross reserves, which represent PetroBakken's working interest
share of reserves excluding PetroBakken's royalty interests in reserves
and before deduction of royalty obligations.
(3) Royalty interest reserves owned by PetroBakken.
(4) "PetroBakken Interest" reserves, which represent PetroBakken's working
interest share of reserves including PetroBakken's royalty interests in
reserves and before deduction of PetroBakken's royalty obligations.
(5) PetroBakken working interest reserves value plus royalties received less
royalties and burdens.
(6) Estimated values of future net revenue disclosed in this press release
do not represent fair market values.
(7) The disclosures required in accordance with National Instrument 51-101
of the Canadian Securities Administrators will be available in
PetroBakken's Annual Information Form to be filed on the SEDAR website
at http://www.sedar.com/ prior to March 31, 2012.
PetroBakken FD&A Costs(1)
For the year ended December 31, 2011
Acquisitions &
F&D Dispositions FD&A(3)
----------------------------------------------------------------------------
Capital expenditures
(unaudited-$000s)
Capital expenditures 943,271 - 943,271
Acquisition/(Disposition)
capital(2) - (51,631) (51,631)
---------------------------------------------
Total capital 943,271 (51,631) 891,640
Less: Land value 34,289 - 34,289
---------------------------------------------
Total capital excluding land
value 908,982 (51,631) 857,351
Change in FDC ($000s)
Total Proved 362,379 - 362,379
Proved + Probable (2P) 555,147 (26) 555,121
Total costs ($000s)
Total Proved 1,305,650 (51,631) 1,254,019
Proved + Probable (2P) 1,498,418 (51,657) 1,446,761
Net reserve additions (mboe)
Total Proved 32,480 (677) 31,803
Proved + Probable (2P) 47,989 (927) 47,063
----------------------------------------------------------------------------
FD&A costs ($/boe) (including
land)
Total Proved 40.20 76.26 39.43
Proved + Probable (2P) 31.22 55.73 30.74
FD&A costs ($/boe) (excluding
land)
Total Proved 39.14 76.26 38.35
Proved + Probable (2P) 30.51 55.73 30.01
----------------------------------------------------------------------------
For the year-ended Dec. 31,
2010(4)
FD&A costs ($/boe) (including
land)
Total Proved 37.19 129.41 55.07
Proved + Probable (2P) 26.11 105.91 39.31
FD&A costs ($/boe) (excluding
land)
Total Proved 32.93 129.41 38.86
Proved + Probable (2P) 23.35 105.91 28.47
For the year-ended Dec. 31,
2009
FD&A costs ($/boe) (including
land)
Total Proved 45.22 47.12 46.83
Proved + Probable (2P) 33.02 32.38 32.48
FD&A costs ($/boe) (excluding
land)
Total Proved 40.52 47.12 42.56
Proved + Probable (2P) 30.37 32.38 29.81
For the three years-ended Dec.
31, 2011
FD&A costs ($/boe) (including
land)
Total Proved 39.83 54.83 46.76
Proved + Probable (2P) 29.70 38.08 33.58
FD&A costs ($/boe) (excluding
land)
Total Proved 37.15 44.52 40.56
Proved + Probable (2P) 27.97 31.41 29.56
----------------------------------------------------------------------------
(1) 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.
(2) Portion of the purchase prices allocated to property, plant & equipment
and reflects the net present value of each corporate acquisition as at
its acquisition date based on 2P NPV10%, before tax.
(3) PetroBakken uses FD&A as a measure of the efficiency of its overall
capital program including the effect of acquisitions and dispositions.
(4) Included the corporate acquisitions of Berens Energy Ltd., Rondo
Petroleum Inc., Result Energy Inc. and certain other asset acquisitions.
FINANCIAL STATEMENT RELEASE DATE AND INVESTOR CONFERENCE CALL
Petrobank plans to release fourth quarter 2011 financial results after markets
close on Wednesday, March 14, 2012. Management of Petrobank will be holding a
conference call for investors, financial analysts, media and any interested
persons on Thursday, March 15, 2012 at 9:00 a.m. Mountain Time (11:00 a.m.
Eastern Time) to discuss Petrobank's fourth quarter financial and operating
results. The investor conference call details are as follows:
Live call dial-in numbers: 416-695-6616 / 800-952-6845
Replay dial-in numbers: 905-694-9451 / 800-408-3053
Replay pass code: 4657181
The live audio webcast link is:
http://events.digitalmedia.telus.com/petrobank/031512/index.php.
Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas
exploration and production company with operations in western Canada. The
Company operates high-impact projects through two business units and a
technology subsidiary. Petrobank's 59% owned TSX-listed subsidiary, PetroBakken
Energy Ltd. (TSX:PBN), is an oil and gas exploration and production company
combining light oil Bakken and Cardium resource plays with conventional light
oil assets. Whitesands Insitu Partnership, a partnership between Petrobank and
its wholly-owned subsidiary Whitesands Insitu Inc., applies Petrobank's patented
THAI(R) heavy oil recovery process in the field. THAI(R) is an evolutionary
in-situ combustion technology for the recovery of bitumen and heavy oil. THAI(R)
and CAPRI(R) are registered trademarks of Archon Technologies Ltd., a
wholly-owned subsidiary of Petrobank Energy and Resources Ltd., for specialized
methods for recovery of oil from subterranean formations through in-situ
combustion techniques and methodologies with or without upgrading catalysts.
Used under license by Petrobank Energy and Resources Ltd.
Forward-Looking Statements: Certain information provided in this press release
constitutes forward-looking statements. Specifically, this press release
contains forward-looking statements relating to financial results, results from
operations, the timing of certain projects, anticipated recovery factors, future
oil and gas exploration and development activities, potential resource and
reserve increases and future production rates. Forward-looking statements are
necessarily based upon assumptions and judgments with respect to the future
including, but not limited to, the outlook for commodity markets and capital
markets, success of future evaluation and development activities, the successful
application of technology, prevailing commodity prices, the performance of
producing wells and reservoirs, well development and operating performance,
general economic and business conditions, weather, and the regulatory and legal
environment. The reader is cautioned that assumptions used in the preparation of
such information, although considered reasonable at the time of preparation, may
prove to be incorrect. Actual results achieved during the forecast period will
vary from the information provided herein as a result of numerous known and
unknown risks and uncertainties and other factors. You can find a discussion of
those risks and uncertainties in our Canadian securities filings. Such factors
include, but are not limited to: general economic, market and business
conditions; fluctuations in oil prices; the results of exploration and
development drilling, risks associated with the development and application of
early stage technology, recompletions and related activities; timing and rig
availability; fluctuation in foreign currency exchange rates; the uncertainty of
reserve and resource estimates; changes in environmental and other regulations;
risks associated with oil and gas operations; and other factors, many of which
are beyond the control of the Company. There is no representation by Petrobank
that actual results achieved during the forecast period will be the same in
whole or in part as those forecast. Except as may be required by applicable
securities laws, Petrobank assumes no obligation to publicly update or revise
any forward-looking statements made herein or otherwise, whether as a result of
new information, future events or otherwise.
Resources and Contingent Resources: In this press release, Petrobank has
disclosed estimated volumes of "contingent resources". "Resources" are oil and
gas volumes that are estimated to have originally existed in the earth's crust
as naturally occurring accumulations but are not capable of being classified as
"reserves". "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. In respect of the May River project, contingencies include
current uncertainties around the specific scope and timing of the development of
the project; lack of regulatory approvals; uncertainty regarding marketing plans
for production from the subject area; and need for improved estimation of
project costs. Contingent resources do not constitute, and should not be
confused with, reserves. Petrobank disposed of the May River property following
the date of the McDaniel evaluation and there is no certainty that it will be
commercially viable to produce any portion of the contingent resources on the
May River property.
Possible Reserves: Possible reserves are those additional reserves that are less
certain to be recovered than probable reserves. There is a 10% probability that
the quantities actually recovered will equal or exceed the sum of proved plus
probable plus possible reserves.
Exploitable Oil-In-Place (EOIP): Exploitable Oil in Place is the estimated
discovered volume of oil, from known accumulations, before any production has
been removed, which is contained in a subsurface stratigraphic interval that
meets or exceeds certain reservoir characteristics considered necessary for the
application of known recovery technologies. Examples of such reservoir
characteristics include continuous net pay, porosity, and mass bitumen content.
EOIP is a resources that does not constitute, and should not be confused with,
reserves. There is no certainty that it will be commercially viable to produce
any portion of the resource.
Net Present Values (NPV): Estimated values of future net revenue disclosed in
this press release do not necessarily represent fair market values.
Barrels of Oil Equivalent: Disclosure provided in this press release in respect
of barrels of oil equivalent ("boe") units may be misleading, particularly if
used in isolation. A boe conversion relationship of 6 mcf to 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 well head.
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