10% present value (PV) of Connacher's proved and probable (2P) bitumen
reserves increases 46% to $2 billion at year-end 2009; 10% PV of 3P bitumen
reserves surpasses $3 billion
Henceforth, in this press release, bitumen and unconventional and heavy oil are terms used interchangeably. Also, in this press release, unless otherwise stated, reserves refer to reserves of either bitumen or conventional crude oil, natural gas or natural gas liquids or barrels of oil equivalent ("boe") and resources refers to bitumen resources. Future net revenue is calculated after the deduction of forecast royalties, operating expenses, capital expenditures and well abandonment costs, but before corporate overhead or other indirect costs, including interest and income taxes from forecast revenue. The 10 percent pre-tax present value of future net revenue is also referred to as "present value" or "present worth" or "PV". Certain amounts cited herein have been rounded for presentation purposes. Outstanding financial hedges were not included in the evaluation.
All references to barrel of oil equivalent ("boe") are calculated on the basis of 6 Mcf:1 bbl. Readers are cautioned that the conversion used in calculating barrels of oil equivalent is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Furthermore, boe may be misleading if used in isolation. Future net revenues disclosed herein do not represent fair market value. Also, estimations of reserves, resources and future net revenue discussed in this press release constitute forward looking information. See "Forward Looking Information" below.
The reserve estimates provided herein were prepared by GLJ in a report ("GLJ 2009 Year-End Report") with an effective date of
All new reserve estimates are as at
The GLJ 2009 Year-End Report was prepared utilizing the GLJ
The GLJ 2009 Year-End Report and the comparative GLJ 2008 Year-End Report both incorporated Alberta's prevailing royalty regime.
Highlights are as follows:
Unconventional Reserves (Bitumen or Heavy Oil)
Connacher owns a 100 percent working interest in approximately 98,000 net acres of oil sands leases, primarily located at its Great Divide project in northeastern Alberta, situated 80 kilometers southwest of Fort McMurray and a 50 percent working interest at Halfway Creek, Alberta. Numerous oil accumulations in the McMurray formation have been identified for development.
Great Divide Pod One has been producing bitumen since late 2007, with commercial production commencing
After production of 2.3 million barrels of bitumen in 2009:
Total 1P bitumen reserves declined one percent over year-end 2008 levels of 175 million barrels to 173 million barrels. The GLJ 2009 Year-End Report estimated Connacher's 1P bitumen reserves would generate
Total 2P bitumen reserves were estimated at 379 million barrels, a year over year increase of three percent; 2P bitumen reserves were forecast to generate
Total 3P bitumen reserves were estimated at 462 million barrels, compared to 443 million barrels a year ago, an increase of four percent; 3P bitumen reserves were forecast to generate
Best Estimate Contingent bitumen resources were estimated to have increased two percent from 133 million barrels to 135 million barrels; the 10 % PV increased 131 percent to
Best Estimate Prospective bitumen resources increased 18 percent to 97 million barrels; the 10 % PV rose 122 percent to
Please refer to the tables attached hereto for the volumes and the estimated undiscounted and 10 percent pre-tax present values assigned to 1P, 2P and 3P reserves and separately to Low Estimate, Best Estimate and High Estimate Contingent and Prospective resources. It should be noted that reserves, Contingent resources and Prospective resources involve different risks associated with achieving commerciality. There is no certainty that it will be commercially viable to produce any portion of the Contingent resources. There is no certainty that any portion of the Prospective resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources. The prospective resource estimates set forth in this press release have been risked for the chance of discovery but not for the chance of development and hence are considered partially risked estimates. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no certainty as to the timing of such development. Reference should be made to "Bitumen Reserves and Resources", "Forward Looking Information" and the notes following the tables set forth below for a description of the risks associated with the company's reserves, contingent resources and prospective resources.
Conventional Reserves
Connacher's conventional reserve base remained fairly stable in 2009.
After production of approximately 1.1 million boe during 2009:
1P reserves declined six percent to 6.9 million boe compared to levels at
Connacher's 2P conventional reserves only declined one percent to 9.7 million boe. The company's 2P conventional reserves were forecast to generate
The decline in proved reserves reflected a modest capital program during 2009 and production during the year. The nine percent decline in the 10 % PV of 2P reserves reflected the decline in 1P reserves and lower price assumptions for natural gas.
Total Corporate Bitumen and Conventional (Combined Equivalent boe) Reserves
On a combined equivalent basis, at
The company's 1P combined equivalent reserves at
The company's 2P combined equivalent reserves at
Connacher's 3P combined equivalent reserves were forecast to generate
On a per share basis, this estimated 10% PV of approximately
Similarly, the 10% PV of the company's combined equivalent 3P reserves equates to approximately
No reserve volumes or future net revenue or present value thereof were assigned herein to Connacher's 22 percent equity interest in Petrolifera Petroleum Limited's crude oil and natural gas reserves.
Connacher Oil and Gas Limited is a Calgary-based crude oil, natural gas and bitumen or heavy oil producer. Our principal asset is located at Great Divide in the oil sands region of Alberta. We also own conventional properties in Alberta and Saskatchewan, a refinery in Montana, USA and hold a significant 22 percent equity stake in Petrolifera Petroleum Limited, a crude oil and natural gas producer active in
Forward Looking Information
This press release contains forward looking information, including but not limited to estimated reserves and resources and future net revenues associated therewith, future capital expenditures, the anticipated impact of Alberta's proposed royalty regime on estimated future net revenues, development of additional oil sands resources (including Algar), and the proposed timing of the release of the company's 2009 audited financial and operating results. The forward looking information is based on current expectations that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to risks associated with the oil and gas industry (e.g. 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 associated with geological interpretations; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, risks associated with obtaining, maintaining and the timing of receipt of regulatory approvals, permits, and licenses, uncertainties relating to access to capital markets and the risk of volatile global economic conditions. Additional risks and uncertainties are described in the company's Annual Information Form which is filed on SEDAR at www.sedar.com.
This press release includes information pertaining to the reserves, resources and the value of future net revenue of the Corporation as at
Contingent resources disclosed herein were assigned in regions with lower core-hole drilling density than the reserve regions and are outside Connacher's current areas of application for development. These resource estimates are not classified as reserves at this time, pending further reservoir delineation, project application, facility and reservoir design work. Contingent resources entail additional commercial risk than reserves. Adjustments for commercial risks were not incorporated in the estimates of contingent resources set forth herein. A range of Contingent Resource estimates (Low, Best and High) were prepared to reflect a range of technical uncertainty. Low Estimate Contingent Resources were assigned to mapped regions of oil-in-place with at least 12 m of continuous bitumen pay along with a conservative estimate of recovery factor. Best Estimate Contingent Resources were assigned to mapped regions of oil-in-place of identified pods outside areas of application for development with at least 10 m of continuous bitumen pay along with a best estimate of recovery factor. High Estimate Contingent Resources were assigned to mapped regions of oil-in-place of identified pods outside areas of application for development with at least 9 m of continuous bitumen pay along with a more optimistic estimate of recovery factor. There is no certainty that it will be commercially viable to produce any portion of the Contingent Resources.
Prospective resources disclosed herein were attributable to undiscovered pods in unexplored regions, utilizing average parameters from the pods discovered to date and the statistical success within the explored regions of the leases. Prospective Resources entail additional commercial exploration risks than reserves and Contingent Resources. A range of Prospective Resources estimates were prepared to reflect a range of technical uncertainty. Best and High estimates of Prospective Resources were assigned using net pay thresholds of 10 m and 9 m, respectively. No Low Estimate Prospective Resources were assigned, given the risk of not encountering an undiscovered pod of sufficient size to be considered commercial. Adjustments for commercial risks were not incorporated in the estimates of Prospective Resources set forth herein. There is no certainty that any portion of the Prospective Resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the Prospective Resources.
Due to the risks, uncertainties and assumptions inherent in forward looking information, prospective investors in the company's securities should not place undue reliance on forward looking information. Forward looking information contained in this press release is made as of the date hereof and are subject to change. The company assumes no obligation to revise or update forward looking information to reflect new circumstances, except as required by law.
Summary Tables
Tables may not add due to rounding. Estimates of Reserves, Resources and Future Net Revenue constitute forward looking information. See "Forward Looking Information" in the press release to which these summary tables are attached.
A. Volumes
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Connacher Oil and Gas Limited
Bitumen Reserves and Resources
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31/12/08 31/12/09 %
(mbbl) change
31/12
09/08
Proved Reserves (1P)(1) 175,462 173,225 (1)
Proved and Probable Reserves (2P)(1)(2) 369,684 379,180 3
Proved, Probable and Possible Reserves
(3P)(1)(2)(3) 442,504 461,672 4
Low Estimate Contingent Resources(4)(6) 132,175 148,408 12
Best Estimate Contingent Resources(4)(7) 132,772 134,919 2
High Estimate Contingent Resources(4)(8) 185,681 188,766 2
Low Estimate Prospective Resources(5)(6) 0 0 0
Best Estimate Prospective Resources(5)(7) 82,645 97,142 18
High Estimate Prospective Resources(5)(8) 213,584 236,786 11
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Connacher Oil and Gas Limited
Conventional Canadian Reserves
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LIGHT/MEDIUM OIL/NGL (mbbl) NATURAL GAS (mmcf)
31/12/08 31/12/09 % 31/12/08 31/12/09 %
change change
31/12 31/12
09/08 09/08
Proved Reserves
(1P)(1) 2,620 2,379 (9) 28,547 27,324 (4)
Probable
Reserves(2) 818 845 3 9,575 11,733 22
-------- --------
Proved +
Probable
Reserves
(2P)(1)(2) 3,438 3,224 (6) 38,122 39,057 2
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EQUIVALENT (mboe)
31/12/08 31/12/09 %
change
31/12
09/08
Proved Reserves
(1P)(1) 7,378 6,933 (6)
Probable
Reserves(2) 2,414 2,801 16
--------
Proved +
Probable
Reserves
(2P)(1)(2) 9,792 9,734 (1)
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Connacher Oil and Gas Limited
Combined Conventional and Bitumen Reserves(9)
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31/12/08 31/12/09 %
change
(mboe) 31/12
09/08
Proved Conventional Reserves(1) 7,378 6,933 (6)
Proved Bitumen Reserves(1) 175,462 173,225 (1)
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Total Proved Reserves (1P)(1) 182,840 180,158 (1)
Probable Conventional Reserves(2) 2,414 2,801 16
Probable Bitumen Reserves(2) 194,222 205,955 6
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Total Probable Reserves(2) 196,636 208,756 6
Proved + Probable Conventional Reserves
(2P)(1)(2) 9,792 9,734 (1)
Proved + Probable Bitumen Reserves(1)(2) 369,684 379,180 3
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Total 2P Reserves(1)(2) 379,476 388,914 2
Total 3P Reserves(1)(2)(3) 451,296 471,406 4
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B. Present Value
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Connacher Oil and Gas Limited
10 percent Present Value of Future Net Revenue
Bitumen Reserves and Resources - Before Tax
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31/12/08 31/12/09 %
change
($MM) 31/12
09/08
Proved Reserves (1P)(1) 888 1,369 54
Proved and Probable Reserves (2P)(1)(2) 1,372 2,001 46
Proved, Probable and Possible Reserves
(3P)(1)(2)(3) 2,103 3,156 50
Low Estimate Contingent Resources(4)(6) 119 176 48
Best Estimate Contingent Resources(4)(7) 167 384 131
High Estimate Contingent Resources(4)(8) 311 531 70
Low Estimate Prospective Resources(5)(6) 0 0
Best Estimate Prospective Resources(5)(7) 106 236 122
High Estimate Prospective Resources(5)(8) 355 610 72
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Connacher Oil and Gas Limited
10 percent Present Value of Future Net Revenue
Total Company (Conventional and Bitumen) - Before Tax(9)
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($MM)
31/12/08 31/12/09 %
change
31/12
09/08
Proved Conventional Reserves(1) 137 122 (11)
Proved Bitumen Reserves(1) 888 1,369 54
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Total Proved Reserves (1P)(1) 1,025 1,491 45
Probable Conventional Reserves(2) 33 32 (2)
Probable Bitumen Reserves(2) 484 632 31
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Total Probable Reserves(2) 517 664 28
Proved + Probable Conventional Reserves
(2P)(1)(2) 171 155 (9)
Proved + Probable Bitumen Reserves(1)(2) 1,372 2,001 46
---------------------
Total 2P Reserves(1)(2) 1,543 2,156 40
Total 3P Reserves(1)(2)(3) 2,274 3,311 46
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Notes:
(1) Proved reserves are those reserves that can be estimated with a high
degree of certainty to be recoverable. It is 90 percent likely that
the actual remaining quantities recovered will exceed the estimated
proved reserves.
(2) Probable reserves are those additional reserves that are less
certain to be recovered than proved reserves. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the sum of the estimated proved plus probable reserves.
(3) Possible reserves are those additional reserves that are less
certain to be recovered than probable reserves. There is only a
10 percent probability that the quantities actually recovered will
equal or exceed the sum of proved plus probable plus possible
reserves. Possible reserves were only estimated for bitumen.
Possible bitumen reserves were estimated to be 73 million barrels in
2008 and 82 million barrels in 2009.
(4) 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.
(5) Prospective Resources are those quantities of petroleum estimated,
as of a given date, to be potentially recoverable from undiscovered
accumulations by application of future development projects.
(6) Low Estimate is considered to be a conservative estimate of the
quantity that will actually be recovered from the accumulation. If
probabilistic methods are used, this term reflects P90 confidence
level.
(7) Best Estimate is considered to be the best estimate of the quantity
that will actually be recovered from the accumulation. If
probabilistic methods are used, this term is a measure of central
tendency of the uncertainty distribution (P50).
(8) High Estimate is considered to be an optimistic estimate of the
quantity that will actually be recovered from the accumulation. If
probabilistic methods are used, the term reflects a P10 confidence
level.
(9) Does not include bitumen resources or undeveloped land value.
(10) Pricing assumptions in the GLJ Year End 2008 Report and GLJ Year End
2009 Report were as follows:
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Bitumen WTI Natural Gas
(wellhead) ($/bbl) (US$bbl) (AECO) ($/mcf)
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Year End Year End Year End Year End Year End Year End
2008 2009 2008 2009 2008 2009
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2010 31.33 51.50 68.00 80.00 7.94 5.96
2011 42.25 53.01 74.00 83.00 8.34 6.79
2012 50.06 54.36 85.00 86.00 9.70 6.89
2013 54.66 57.03 92.01 89.00 8.95 6.95
2014 55.92 60.77 93.85 92.00 9.14 7.05
2015 57.21 62.14 95.73 93.84 9.34 7.16
2016 58.54 63.53 97.64 95.72 9.54 7.42
2017 59.88 64.96 99.59 97.64 9.75 7.95
2018 61.24 66.41 101.59 99.59 9.95 8.52
Thereafter +2%/yr +2%/yr +2%/yr +2%/yr +2%/yr +2%/yr
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For further information: Richard A. Gusella, President and Chief Executive Officer, or Peter D. Sametz, Executive Vice President and Chief Operating Officer, or Grant D. Ukrainetz, Vice President, Corporate Development, Phone: (403) 538-6201, Fax: (403) 538-6225, [email protected], Website: www.connacheroil.com
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