Petro-Reef Resources Ltd. (TSX VENTURE:PER), ("Petro-Reef" or the "Company") is
pleased to announce a production increase of 181 BOE/day and a 12% increase in
proved plus probable reserves.
Petro-Reef has tied in its Alexander 09-12-56-27W4 step-out well producing from
the Detrital oil zone. The well came on stream on October 26, 2011, and during
the first 19 days on production the well has flowed at an average rate of 193
BOE/day (181 BOE/day net) - 151 bbl/day (142 bbl/day net) of oil and 247 mcf/day
(232 mcf/day net) of natural gas. Petro-Reef has a 94% working interest in the
9-12 well.
The Company believes that this step-out well in Section 12 confirms that the
Detrital oil trend extends west from Section 7 where Petro-Reef has three wells
producing from the same zone. The Company has completed the reprocessing of 35
sections of 3-D seismic data on its Alexander lands which has been incorporated
into the October 1, 2011 independent reserves evaluation, prepared by McDaniel &
Associates Consultants Ltd. ("McDaniel") (the "McDaniel Update Report"). Four
additional Detrital development locations have been included in the McDaniel
Update Report.
Petro-Reef's gross proved plus probable reserves at October 1, 2011 indicated an
increase of 12% to 1,771,150 BOE from 1,580,000 BOE at December 31, 2010, after
extensions, technical revisions, discoveries, acquisitions, economic factors,
and production. After considering the production for the period January 1 to
September 30, 2011 of 180,300 BOE, the 2011 reserve additions totalled 371,450
BOE which represents an increase of 24% over the 2010 year end reserves.
Using a 10% net present value ("NPV"), the value of proved plus probable
reserves at forecast prices and costs (before income taxes) was unchanged at
$34,735,200 as compared with proved plus probable reserves of $34,741,400 as at
December 31, 2010.
Petro-Reef's gross proved, probable plus possible reserves at October 1, 2011
totaled 2,623,050 BOE. Using a 10% NPV, the value of proved, probable plus
possible reserves at forecast prices and costs (before income taxes) totaled
$56,281,100. The possible reserves include four potential development locations
targeting the Detrital zone offsetting the Company's recent 09-12-56-27W4 well.
Only extensions to the existing producing zones were included in the possible
reserves. The resource plays in the Nordegg at Goose River and the Wabamum and
other plays identified by the seismic reprocessing at Alexander were not
included in the evaluation.
Proved plus probable reserves were comprised of 47% natural gas and 53% crude
oil and natural gas liquids (December 31, 2010 - 54% natural gas and 46% crude
oil and natural gas liquids).
Of the total proved plus probable reserves reported (using forecast prices)
Petro-Reef's reserves are 54% proved and 46% probable.
Based on proved plus probable reserves and production volumes, Petro-Reef's
reserve life index was 7.0 years (41.1 years remaining life) on a proved plus
probable basis at October 1, 2011 compared with 4.2 years (39.8 years remaining
life) at the end of 2010.
Summary of Oil and Gas Reserves - Forecast Prices and Costs
The table below provides a summary of the oil and natural gas reserves
attributable to Petro-Reef as at October 1, 2011. As the tables below summarize
the data contained in the McDaniel Update Report, they may contain slightly
different numbers than those contained in the original report due to rounding.
Also due to rounding, certain columns may not add exactly.
Light / Medium Oil Natural Gas BOE
Gross Net Gross Net Gross Net
(Mbbl) (Mbbl) (MMcf) (MMcf) (MBOE) (MBOE)
---------------------------------------------------------
Reserves Category
Proved
Developed Producing 125.4 112.1 2,397.7 2,056.5 525.0 454.8
Developed Non-
Producing 256.4 212.3 607.8 528.0 357.7 300.3
Undeveloped 74.2 65.5 157.2 140.7 100.4 89.0
---------------------------------------------------------
Total Proved 456.0 389.9 3,162.7 2,725.2 983.1 844.1
Probable 483.3 397.1 1,828.4 1,593.1 788.0 662.6
---------------------------------------------------------
Total Proved &
Probable 939.3 787.0 4,991.1 4,318.3 1,771.1 1,506.7
Possible 595.7 511.2 1,537.2 1,341.6 851.9 734.8
---------------------------------------------------------
Total Proved,
Probable &
Possible 1,535.0 1,298.2 6,528.3 5,659.9 2,623.0 2,241.5
----------------------------------------------------------------------------
Notes:
1. "Mbbl" means thousands of barrels
2. "MMcf" means million cubic feet
3. "MBOE" means thousands of barrels of oil equivalent
Summary of Net Present Values of Future Net Revenue as of October 1, 2011
Forecast Prices and Costs
Before Income Taxes
Discounted at (% / Year)
0 5 10 15 20
(M$) (M$) (M$) (M$) (M$)
------------------------------------------------
Reserves Category
Proved
Developed Producing 6,691 6,281 5,920 5,600 5,316
Developed non-producing 14,146 12,741 11,666 10,812 10,112
Undeveloped 2,485 2,243 2,035 1,855 1,698
------------------------------------------------
Total Proved 23,322 21,265 19,621 18,267 17,126
Probable 26,501 19,274 15,114 12,470 10,646
------------------------------------------------
Total Proved & Probable 49,823 40,539 34,735 30,737 27,772
Possible 32,858 25,995 21,546 18,415 16,080
------------------------------------------------
Total Proved, Probable &
Possible 82,681 66,534 56,281 49,152 43,852
----------------------------------------------------------------------------
After Income Taxes Before tax
Discounted at (% / Year) Net Value
0 5 10 15 20 10%/yr
(M$) (M$) (M$) (M$) (M$) ($/boe)
------------------------------------------------
Reserves Category
Proved
Developed Producing 6,691 6,281 5,920 5,600 5,316 11.24
Developed non-producing 14,146 12,741 11,666 10,812 10,112 32.62
Undeveloped 2,485 2,243 2,035 1,855 1,698 20.27
--------------------------------------
Total Proved 23,322 21,265 19,621 18,267 17,126 19.93
Probable 22,238 16,054 12,502 10,257 8,719 19.17
--------------------------------------
Total Proved & Probable 45,560 37,319 32,123 28,524 25,845 19.59
Possible 24,702 19,465 16,070 13,679 11,895 25.27
--------------------------------------
Total Proved, Probable &
Possible 70,262 56,784 48,193 42,203 37,740 21.43
----------------------------------------------------------------------------
Notes:
1. NPV of future net revenue includes all resource income including, sale
of oil, gas, by-product reserves, processing third party reserves, and
other income.
2. Income taxes include all resource income and prior tax pools.
3. Unit values are based on net reserves volumes.
4. All of the Company's reserves are located in Canada.
5. The estimated values disclosed in the McDaniel Update Report do not
necessarily represent fair market value.
Reconciliation of Changes in Reserves - Proved plus Probable Reserves
The reserves reconciliation reflects current proved, probable, and proved plus
probable reserves.
Light / Medium Oil
----------------------------------------------------------------------------
Gross Proved
Gross Probable Plus Probable
Factors Gross Proved (Mbbl) (Mbbl) (Mbbl)
----------------------------------------------------------------------------
December 31, 2010 372.8 330.1 702.9
Extensions 108.4 272.6 381.0
Technical
Revisions 32.0 (119.5) (87.5)
Production (57.1) - (57.1)
----------------------------------------------------------
October 1, 2011 456.1 483.2 939.3
----------------------------------------------------------------------------
Natural Gas BOE
----------------------------------------------------------------------------
Gross Gross
Proved Proved
Gross Gross Plus Gross Gross Plus
Proved Probable Probable Proved Probable Probable
Factors (MMcf) (MMcf) (MMcf) (MBOE) (MBOE) (MBOE)
----------------------------------------------------------------------------
December 31, 2010 3,467.2 1,794.6 5,261.8 950.7 629.2 1,579.9
Extensions 180.1 619.3 799.4 138.4 375.9 514.3
Technical
Revisions 254.3 (585.1) (330.8) 74.2 (217.0) (142.8)
Production (738.9) (0.4) (739.3) (180.2) (0.1) (180.3)
----------------------------------------------------------
October 1, 2011 3,162.7 1,828.4 4,991.1 983.1 788.0 1,771.1
----------------------------------------------------------------------------
Notes:
1. Gross reserves means the Company's working interest reserves before
calculation of royalties, and before consideration of the Company's
royalty interests.
2. All of the Company's reserves are located in Canada.
3. There were no changes to discoveries, acquisitions, dispositions and
economic factors in the McDaniel Update Report
Forecast Prices Used in Estimates
McDaniel employed the following pricing, exchange rate and inflation rate
assumptions in estimating Petro-Reef reserve data as of October 1, 2011:
Edmonton Par Cromer Medium Natural Gas
Price 40 29.3 degrees AECO Gas
WTI Crude Oil degrees API API Prices
Year ($US /bbl) ($Cdn/bbl) ($Cdn/bbl) ($Cdn/MMBtu)
----------------------------------------------------------------------------
Historical
2005 56.56 68.72 57.47 8.58
2006 66.23 72.80 61.25 7.16
2007 72.30 76.35 65.40 6.65
2008 99.60 102.20 93.20 8.15
2009 61.80 65.90 62.80 4.20
2010 79.50 77.50 73.80 4.15
2011(9 mths) 95.45 94.35 87.90 3.80
Forecast
2011(3 mths) 85.00 86.20 79.20 3.80
2012 91.80 93.10 85.60 4.30
2013 93.60 95.00 87.30 4.75
2014 95.50 96.90 89.10 5.25
2015 97.40 98.80 90.80 5.75
Edmonton Edmonton Inflation
Condensate Butane Rate Exchange Rate
Year ($Cdn/bbl) ($Cdn/bbl) (%/Yr) ($US /$Cdn)
----------------------------------------------------------------------------
Historical
2005 69.63 52.58 2.1 0.83
2006 75.06 60.10 2.2 0.88
2007 77.36 63.75 2.0 0.94
2008 104.75 75.25 2.4 0.94
2009 68.15 49.25 2.0 0.88
2010 84.25 66.05 2.0 0.97
2011(9 mths) 101.90 73.05 2.0 1.02
Forecast
2011(3 mths) 90.20 69.50 2.0 0.98
2012 95.10 75.00 2.0 0.98
2013 97.10 76.60 2.0 0.98
2014 99.00 78.10 2.0 0.98
2015 101.00 79.60 2.0 0.98
Thereafter 2.0% Escalation Rates
----------------------------------------------------------------------------
Notes:
1. Inflation rates for forecasting prices and costs.
2. Exchange rates used to generate the benchmark reference prices in this
table.
3. Product sale prices will reflect these reference prices with further
adjustments for quality and transportation to point of sale.
4. Forecast prices and costs as supplied by our independent and qualified
reserves evaluator, McDaniel.
The McDaniel Update Report, effective October 1, 2011, was prepared in
accordance with National Instrument 51-101 - Standards of Disclosure for Oil and
Gas Activities and the COGE handbook, and is dated November 21, 2011.
Estimates are prepared such that there is a 90% probability that at least the
estimated proved reserves will be recovered and a 50% probability that at least
the sum of the estimated proved reserves plus probable reserves will be
recovered. 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 the estimated
proved plus probable plus possible reserves.
About Petro-Reef Resources Ltd.
Petro-Reef Resources Ltd. is a Calgary-based crude oil and natural gas
exploration and production company with producing properties in Alberta, Canada.
Additional information about the Company is available under Petro-Reef's profile
on SEDAR at www.sedar.com.
BOE Reference
Reference is made to barrels of oil equivalent ("BOE"). BOE may be misleading,
particularly if used in isolation. In accordance with National Instrument
51-101, a BOE conversion ratio of six mcf of natural gas to one bbl of oil has
been used, which is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead.
Forward-Looking Statements
This press release contains certain forward-looking information and statements
within the meaning of applicable securities laws (collectively, "forward-looking
information"). The use of the words "potential", "estimate" and similar
expressions are intended to identify forward-looking information. In particular,
but without limiting the foregoing, this press release contains forward-looking
information pertaining to potential Detrital development locations and reserve
life index. Various assumptions were used in drawing the conclusions or making
the projections contained in the forward-looking information throughout this
press release.
Forward-looking information is based upon the opinions and expectations of
management of Petro-Reef as at the effective date of such information. The
forward-looking information contained in press release reflects several material
factors and expectations and assumptions of Petro-Reef including, without
limitation: the accuracy of current production data; historical well production;
reservoir conditions on the Company's Alexander lands; the accuracy of the
estimates of Petro-Reef's reserves volumes; and certain commodity pricing and
other cost assumptions.
Petro-Reef believes the material factors, expectations and assumptions reflected
in the forward-looking information are reasonable at this time but no assurance
can be given that these factors, expectations and assumptions will prove to be
correct. The forward-looking information included in this press release is not a
guarantee of future performance and should not be unduly relied upon. Such
information involves known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from those
anticipated in such forward-looking information including, without limitation:
the impact of general economic and industry conditions; fluctuation of commodity
prices; fluctuation of foreign exchange rates; environmental risks; industry
competition; availability of qualified personnel and management; availability of
materials, equipment and third party services; stock market volatility; timely
and cost effective access to sufficient capital from internal and external
sources; unanticipated operating results or production declines; changes in tax
or environmental laws or royalty rates; inaccurate estimation of Petro-Reef's
oil and gas reserves volumes; for reasons currently unforeseen, the current
development locations identified by the Company may prove to be unsuitable or
unavailable; and certain other risks detailed from time to time in Petro-Reef's
public disclosure documents including, without limitation, those risks
identified in this press release, which are available under Petro-Reef's SEDAR
profile at www.sedar.com.
The forward-looking information contained in this press release speaks only as
of the date of this press release, and Petro-Reef does not assume any obligation
to publicly update or revise its forward-looking information to reflect new
events or circumstances, except as may be required pursuant to applicable laws.
The forward-looking information contained herein is expressly qualified by this
cautionary statement.
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