Orleans Energy Ltd. ("Orleans" or the "Company") (TSX VENTURE:OEX) is pleased to
provide the following information.
Operations Update
As a result of a very successful drilling program executed throughout 2007,
Orleans' daily production at year-end 2007 exceeded its production exit target
of 3,500 barrels of oil equivalent ("boe") per day. Orleans continued to be
active with the drill bit in the fourth quarter of 2007, drilling five wells
(4.5 net), including two gas wells recently brought on-stream and three gas
wells awaiting tie-in. Collectively in 2007, the Company drilled 18 wells (15.8
net), of which only three (1.25 net) were non-operated. Orleans' overall
drilling program in 2007 yielded very favourable results, with 100% of the well
bores completed for hydrocarbon production encompassing 13 gas wells and five
oil wells. Orleans drilled wells across the majority of its focus areas,
including: 10 gas wells (9.5 net) in Kaybob, three horizontal oil wells (3.0
net) in Leo, two gas wells (0.75 net) in Pine Creek, two oil wells (1.5 net) in
Gordondale and one gas well (1.0 net) at Gilby.
Kaybob, West Central Alberta
Throughout 2007 Orleans' primary focus was on its West Central Alberta Kaybob
property, wherein the Company has expanded its land base from six sections (4.4
net) to 27.5 sections (25.0 net), via Crown land acquisitions and strategic
farm-ins, concentrating on exploration and development of an exciting "deep
basin" resource-style natural gas prospect in the Triassic Montney formation. In
2007, Orleans drilled 10 (9.5 net) Montney gas wells, with seven (6.5 net) wells
currently on-stream, and three (3.0 net) wells tested and awaiting tie-in.
Orleans has undertaken a number of operational initiatives, including the
application of improved and larger fracture stimulation technology, horizontal
drilling utilizing the "Packer Plus" multi-stage fracture assembly and common
lease pad drilling as a means to improve productivity and reserves recovery and
minimize lease construction, pipeline costs and surface disturbance. The
Company's first horizontal well (1.0 net), drilled in the fourth quarter, was
stimulated with a five stage fracture treatment including 150 tonnes of proppant
being displaced along the horizontal section. The well was placed on-stream in
late-December at an initial "flush" production rate of 3.8 mmcf per day.
In December 2007, as a result of the rapid growth in production additions at
Kaybob, Orleans constructed a dedicated eight inch pipeline to increase the
takeaway capacity from the Company's western Kaybob lands. This pipeline is
expected to mitigate the risk of Orleans' production volumes from future
drilling being constrained in the area.
Additionally, the Company has received approval from the Energy Utilities Board
to drill on reduced spacing up to three wells per section across 10 sections of
its Kaybob western acreage and has applied for similar reduced spacing on the
majority of its remaining lands.
In 2008, Orleans intends to initially drill eight (6.7) horizontal wells on its
Kaybob lands, with five (3.7 net) targeting the western block and three (3.0
net) on the eastern block. The majority of these wells will be drilled off
common lease pads, allowing for reduced lease, road and pipeline costs and more
rapid turnaround to on-stream production.
Leo, Central Alberta
Commencing in July 2007, Orleans drilled three (3.0 net) multi-leg horizontal
wells in the light gravity crude (36 degree API) Upper Mannville D & E oil
pools. The wells were brought on-stream in August, increasing the pool
production in excess of 200 boe per day. In 2008, the Company intends to
initiate a waterflood scheme to enhance oil production and reserves recoveries
from the pool. The Company has an additional three (3.0 net) horizontal
locations to drill in the pool.
Pine Creek, West Central Alberta
In the third quarter of 2007, the Company participated in the drilling of two
(0.75 net) gas wells in joint venture with area partners, targeting deep
Cretaceous-aged, multi-zone sweet natural gas. One well (0.25 net) was completed
and commingled in four separate intervals and was brought on-stream in November.
The second well (0.5 net) is currently being completed in three separate zones
and is anticipated to be tied-in by the end of the first quarter 2008.
Gilby, Central Alberta
In December 2007 the Company drilled a Gilby Edmonton Sand well (1.0 net),
encountering multiple pay sections. This well was tied-in and brought on-stream
mid-January 2008 at an initial "flush" production rate of 700 mcf per day. Also
in December, Orleans received approval to drill on reduced spacing, up to four
wells per section on 14.5 sections of Company lands, yielding a future drilling
inventory in excess of 40 Edmonton Sand wells. Orleans also received approval to
drill on reduced spacing in the Mannville, allowing for three wells per section
in the Glauconite formation and two wells per section in the Ellerslie
formation, across eight sections of Orleans' acreage.
Hedging Update
In this current period of uncertain gas prices, the Company has prudently
maintained a systematic commodity hedging strategy, whereby it has the following
hedge positions in-place for 2008:
----------------------------------------------------------------------------
Commodity Daily Volume Fixed Swap Term
----------------------------------------------------------------------------
Oil - WTI 200 bbls US$ 81.56/bbl Jan '08 - Jun '08
----------------------------------------------------------------------------
Gas - AECO-C 3,000 GJs C$ 6.64 /GJ or $7.01/Mcf Jan '08 - Mar '08
----------------------------------------------------------------------------
Gas - AECO-C 7,000 GJs C$ 6.72 /GJ or $7.09/Mcf Apr '08 - Oct '08
----------------------------------------------------------------------------
Gas - AECO-C 4,000 GJs C$ 6.68 /GJ or $7.05/Mcf Nov '08 - Dec '08
----------------------------------------------------------------------------
Oil and Gas Reserves
The following tables provide information on Orleans' oil and gas reserves as of
December 31, 2007, as evaluated by the Company's independent reserve engineering
firm, Sproule Associates Limited ("Sproule"). The evaluation of the Company's
petroleum and natural gas reserves was conducted pursuant to National Instrument
51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101").
Orleans' production profile continues to be supported by a high-quality reserves
base, weighted 76% natural gas and 24% light crude oil and natural gas liquids,
with a reserve life index of approximately six years (proved) and in excess of
10 years (proved plus probable).
Orleans' successful, internally-generated drilling program and disciplined
capital investments in 2007, continued to yield favourable results, as validated
by the following highlights of its year-end reserves and estimated capital
spending efficiency metrics:
- Increased the Company's average daily production to approximately 2,800 boe
per day in 2007, a 60% increase from 1,750 boe per day in 2006.
- Achieved year-end 2007 production exit target rate of 3,500 boe per day.
- Expanded the Company's total proved plus probable oil and gas reserves to 13.7
million boe at December 31, 2007 from 11.4 million boe at December 31, 2006.
- Executed an efficient capital investment program resulting in an estimated
finding and development cost of approximately $19 per proved plus probable boe
and approximately $20 per proved boe (includes change in undiscounted future
development costs), yielding a production replacement ratio of 3.3 times (proved
plus probable) and 2.1 times (proved).
- Generated a net asset value of $4.06 per fully-diluted share (discounted at
10%) and $4.51 per fully-diluted share (discounted at 8%) (unaudited).
----------------------------------------------------------------------------
December 31, 2007 Reserves Summary (Company interest before royalties)
----------------------------------------------------------------------------
(per Sproule's December 31, 2007
escalated price forecast) Natural Gas Crude Oil & NGLs Oil Equivalent
----------------------------------------------------------------------------
(Bcf) (Mbbls) (Mboe) (6:1)
----------------------------------------------------------------------------
Proved developed producing 23.68 1,168.3 5,113.9
----------------------------------------------------------------------------
Proved developed non-producing 1.37 36.1 263.6
----------------------------------------------------------------------------
Proved undeveloped 10.47 293.2 2,038.6
----------------------------------------------------------------------------
Total Proved 35.52 1,497.6 7,416.2
----------------------------------------------------------------------------
Probable 26.92 1,818.8 6,305.2
----------------------------------------------------------------------------
Total Proved plus Probable 62.44 3,316.4 13,721.3
----------------------------------------------------------------------------
Note:
(1) Columns may not add due to rounding.
----------------------------------------------------------------------------
December 31, 2007 Net Present Values ("NPV") Summary (Company interest
before royalties)
----------------------------------------------------------------------------
(per Sproule's December 31, 2007 Present value of cash flows
escalated price forecast) before-tax ($000s)
----------------------------------------------------------------------------
(amounts in $000s) 0% 8% 10% 15%
----------------------------------------------------------------------------
Proved developed producing $ 138,230 $ 105,446 $ 99,881 $ 88,651
----------------------------------------------------------------------------
Proved developed non-producing 6,997 5,364 5,060 4,423
----------------------------------------------------------------------------
Proved undeveloped 31,541 18,524 16,391 12,197
----------------------------------------------------------------------------
Total Proved 176,767 129,333 121,332 105,271
----------------------------------------------------------------------------
Probable 158,586 79,953 69,342 50,151
----------------------------------------------------------------------------
Total Proved plus Probable $ 335,353 $ 209,286 $ 190,674 $ 155,422
----------------------------------------------------------------------------
Note:
(1) Net present values are determined under the existing Alberta royalty
framework as the Government proposed new royalty structure has yet to be
enacted and legislated.
A summary of Sproule's escalated price forecast assumptions as of December
31, 2007 are as follows:
----------------------------------------------------------------------------
Edmonton
WTI Par Price Natural Gas Natural Gas
Cushing 40 degrees Henry Hub AECO-C
Oklahoma API Price Price
Year ($US/bbl) ($Cdn/bbl) ($US/MMbtu) ($Cdn/MMbtu)
----------------------------------------------------------------------------
Forecast
----------------------------------------------------------------------------
2008 89.61 88.17 7.56 6.51
----------------------------------------------------------------------------
2009 86.01 84.54 8.27 7.22
----------------------------------------------------------------------------
2010 84.65 83.16 8.74 7.69
----------------------------------------------------------------------------
2011 82.77 81.26 8.75 7.70
----------------------------------------------------------------------------
2012 82.26 80.73 8.66 7.61
----------------------------------------------------------------------------
2013 82.81 81.25 8.83 7.78
----------------------------------------------------------------------------
2014 84.46 82.88 9.01 7.96
----------------------------------------------------------------------------
2015 86.15 84.55 9.19 8.14
----------------------------------------------------------------------------
2016 87.87 86.25 9.37 8.32
----------------------------------------------------------------------------
2017 89.63 87.98 9.56 8.51
----------------------------------------------------------------------------
Thereafter 2% Escalation Rate
----------------------------------------------------------------------------
----------------------------------------------------------------------------
NGLs NGLs NGLs
Edmonton Edmonton Edmonton
Propane Butanes Pentanes Exchange
Plant Gate Plant Gate Plant Gate Rate
Year ($Cdn/bbl) ($Cdn/bbl) ($Cdn/bbl) ($US/$Cdn)
----------------------------------------------------------------------------
Forecast
----------------------------------------------------------------------------
2008 52.29 65.72 90.30 1.000
----------------------------------------------------------------------------
2009 50.14 63.01 86.58 1.000
----------------------------------------------------------------------------
2010 49.32 61.98 85.17 1.000
----------------------------------------------------------------------------
2011 48.20 60.57 83.23 1.000
----------------------------------------------------------------------------
2012 47.88 60.17 82.68 1.000
----------------------------------------------------------------------------
2013 48.19 60.56 83.21 1.000
----------------------------------------------------------------------------
2014 49.16 61.78 84.88 1.000
----------------------------------------------------------------------------
2015 50.14 63.02 86.59 1.000
----------------------------------------------------------------------------
2016 51.15 64.28 88.33 1.000
----------------------------------------------------------------------------
2017 52.18 65.58 90.10 1.000
----------------------------------------------------------------------------
Thereafter 2% Escalation Rate
----------------------------------------------------------------------------
Capital Efficiency
The following highlights the efficiency of Orleans' capital expenditures
during 2007 in addition to the comparative fiscal year 2006 and the
Company's "full-cycle" three-year average:
----------------------------------------------------------------------------
Finding, Development & Acquisitions ("FD&A") Costs
----------------------------------------------------------------------------
Fiscal 2007 Fiscal 2006 Three Year Average
------------------------------------------------------------
(amounts in
$000s except
reserve units Proved Proved + Proved Proved + Proved Proved +
and unit costs) Probable Probable Probable
----------------------------------------------------------------------------
Total capital
expenditures
(1) $ 46,000 $ 46,000 $ 159,722 $ 159,722 $ 230,345 $ 230,345
----------------------------------------------------------------------------
Future capital
- Ending
Period (2) 20,081 52,762 22,277 34,328 20,081 52,762
----------------------------------------------------------------------------
Future capital
- Beginning
Period (2) (22,277) (34,328) (5,014) (8,184) (23) (180)
----------------------------------------------------------------------------
All-in total,
including
change in
future
capital (3) $ 43,804 $ 64,434 $ 176,985 $ 185,866 $ 250,403 $ 282,927
----------------------------------------------------------------------------
Total reserve
additions
(mboe) 2,156.0 3,368.1 4,989.7 8,239.6 9,055.4 14,967.4
----------------------------------------------------------------------------
FD&A Cost
($/boe) $ 20.32 $ 19.13 $ 35.47 $ 22.56 $ 27.65 $ 18.90
----------------------------------------------------------------------------
Notes:
(1) Total capital expenditures for 2007 are estimated and unaudited.
(2) Future capital expenditures required to convert proved non-producing and
probable reserves to proved producing.
(3) The aggregate of the exploration and development costs estimated to be
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.
NI 51-101 requires that future capital or Future Development Costs ("FDC") be
included in the FD&A cost calculation on an undiscounted time basis. Orleans
believes that it is meaningful to also report the impact of FDC on FD&A costs on
a discounted basis as FDC are incurred over the economic life of the reserves,
and to account for the fact that oil and gas reserves values are generally
referenced on a time discounted basis. Under a 10% discount factor for FDC, the
FD&A costs for 2007 are estimated at approximately $20 for proved reserves and
approximately $18 for proved plus probable reserves, compared to the
aforementioned $20.32 and $19.13 on an FDC undiscounted basis, respectively.
----------------------------------------------------------------------------
Production Replacement Fiscal 2007 Fiscal 2006 (1) Three Year Average
----------------------------------------------------------------------------
Total reserve additions
(proved plus probable)
(mboe) 3,368.1 8,239.6 14,967.4
----------------------------------------------------------------------------
Total production (mboe)
(estimated) 1,020.2 638.8 2,022.1
----------------------------------------------------------------------------
Production Replacement 3.3 12.9 7.4
----------------------------------------------------------------------------
Note:
(1) Fiscal 2006 reserve additions augmented by the corporate acquisitions of
Morpheus Energy Corporation and Mercury Energy Corporation in June 2006.
Net Asset Value
Orleans' intrinsic value, as measured by its net asset value, is as follows:
----------------------------------------------------------------------------
December 31, 2007 NPV 8% NPV 10%
----------------------------------------------------------------------------
(per share figures based on
fully-diluted shares) ($000s) $/share ($000s) $/share
----------------------------------------------------------------------------
Proved plus probable reserves NPV
(1,2) $ 209,286 $ 5.06 $ 190,674 $ 4.61
----------------------------------------------------------------------------
Undeveloped acreage (3) 10,065 0.24 10,065 0.24
----------------------------------------------------------------------------
Net debt (4) (47,300) (1.14) (47,300) (1.14)
----------------------------------------------------------------------------
Seismic (5) 2,859 0.07 2,859 0.07
----------------------------------------------------------------------------
Proceeds from stock options (6) 11,684 0.28 11,684 0.28
----------------------------------------------------------------------------
Net Asset Value (fully-diluted) $ 186,594 $ 4.51 $ 167,982 $ 4.06
----------------------------------------------------------------------------
Notes:
(1) As evaluated by Sproule as at December 31, 2007. Net present value of
future net revenue does not represent fair market value of the reserves.
(2) Net present values ("NPV") are before tax and based on Sproule's
December 31, 2007 escalated price forecast.
(3) Independently evaluated by a third party.
(4) Net debt as at December 31, 2007, including working capital deficit
(estimated and unaudited).
(5) Internally estimated market value of proprietary seismic only.
(6) Fully-diluted shares at January 2, 2008 total 41,328,398, including
outstanding shares of 37,571,372 and 3,757,026 stock options.
2008 Capital Budget and Market Guidance
Orleans' Board of Directors has approved an initial 2008 exploration and
development capital expenditure program (net risked) of approximately $30
million (the "2008 Capital Budget"). In light of the presently unstable outlook
for natural gas prices, Orleans has decided to initially execute a conservative
capital budget whereby its total budgeted capital investments are anticipated
not to significantly exceed budgeted cash flow from operations. Notwithstanding
this initial, cautious capital expenditures level, anticipated to facilitate
continued financial flexibility, the 2008 Capital Budget is programmed to
deliver approximately 30% growth in average daily production year-over-year and
advance the continued development of Orleans' West Kaybob asset base in concert
with the continued exploration and delineation of its East Kaybob acreage
position.
The 2008 Capital Budget encompasses the drilling of 11 operated wells, with an
approximate 86% working interest, including eight (6.7 net) horizontal wells at
Kaybob targeting the prolific Triassic Montney gas formation. The drilling and
completion expenditure component of Orleans' 2008 Capital Budget is projected to
approximate $22 million, with the remaining budgeted funds allocated towards
investments in field facilities of approximately $7 million and undeveloped land
expansion and seismic programs of approximately $1.5 million. In terms of
geographic area allocation of the budgeted drilling, completion and field
facilities capital expenditures, approximately $21 million is expected to be
deployed at Kaybob, with the residual capital allocated across the Company's
other core areas.
Based on the budgeted capital expenditures anticipated within the initial 2008
Capital Budget, average daily production for fiscal 2008 is projected at
approximately 3,600 to 3,700 boe per day, weighted 80% natural gas and 20% light
crude oil and natural gas liquids. This forecasted production range represents a
30% increase over Orleans' 2007 average daily production of approximately 2,800
boe per day and a 109% increase over the Company's 2006 average daily production
level of 1,750 boe per day. Orleans' year-end 2008 exit production rate is
anticipated to range 3,900 to 4,000 boe per day. The Kaybob drilling program
will be the primary driver of the robust economic production growth that the
Company expects to realize in 2008.
With regards to cash flow from operations for 2008, utilizing the current
forward 2008 strip commodity price assumptions of US$87.00 per bbl for West
Texas Intermediate ("WTI") oil, an AECO gas price of C$7.40 per Mcf and an
exchange rate of $0.985 (US$/C$), in addition to taking into effect the
aforementioned commodity hedge contracts in-place in 2008, cash flow from
operations generated from the median of the forecasted 2008 average daily
production range is estimated at approximately $32 million or $0.85 per share
(basic outstanding).
Toronto Stock Exchange Graduation
The Company intends to undertake the process of graduating the listing of its
common shares to the Toronto Stock Exchange ("TSX") from the current TSX Venture
Exchange. The listing of Orleans' common shares on the TSX will provide the
Company with access to Canada's largest stock exchange while enhancing Orleans'
trading liquidity and visibility within the North American capital markets. This
graduation process to the TSX is anticipated to be finalized in early second
quarter of 2008.
Orleans Energy Ltd. is a Calgary, Alberta-based emerging crude oil and natural
gas company, with common shares trading on the TSX Venture Exchange under the
symbol "OEX". Orleans is a team of dedicated, experienced professionals focused
on the creation of shareholder value via acquisition, drilling and development
of crude oil and natural gas assets in Alberta.
Certain information regarding the Company contained herein may constitute
forward-looking statements within the meaning of applicable securities laws.
Forward-looking statements may include estimates, plans, anticipations,
expectations, intentions, opinions, forecasts, projections, guidance or other
similar statements that are not statements of fact. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. These statements are subject to certain risks and uncertainties and may
be based on assumptions that could cause actual results to differ materially
from those anticipated or implied in the forward-looking statements. The
Company's forward-looking statements are expressly qualified in their entirety
by this cautionary statement.
In this news release, reserves and production data are commonly stated in
barrels of oil equivalent ("boe") using a six to one conversion ratio when
converting thousands of cubic feet of natural gas ("mcf") to barrels of oil
("bbl") and a one to one conversion ratio for natural gas liquids ("NGLs" or
"ngls"). Such conversion may be misleading, particularly if used in isolation. A
boe conversion ratio of 6 mcf: 1 bbl is based on energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
The term cash flow from operations or operating cash flow contained herein
should not be considered as an alternative to, or more meaningful than, cash
flow from operating activities as determined in accordance with Canadian
generally accepted accounting principles ("GAAP"). This term does not have a
standardized meaning under GAAP and may not be comparable to other companies.
Orleans believes that cash flow from operations is a useful supplementary
measure as investors may use this information to analyze operating performance,
leverage and liquidity. Cash flow from operations, as disclosed within this news
release, represents funds from operations before any asset retirement obligation
cash expenditures and is expressed before changes in non-cash working capital.
Additionally, net asset value represents the net present value of proved plus
probable reserves (discounted at the disclosed rate before income taxes) plus
estimated value for undeveloped land and seismic, plus stock option proceeds
less estimated and unaudited net debt. Net debt refers to outstanding bank debt
plus working capital deficit. Net debt is not a recognized measure under
Canadian GAAP.
Orleans Energy Ltd Com Npv (TSXV:OEX)
Historical Stock Chart
From Nov 2024 to Dec 2024
Orleans Energy Ltd Com Npv (TSXV:OEX)
Historical Stock Chart
From Dec 2023 to Dec 2024
