Cequence Energy Ltd. provides year end reserve update
CALGARY, March 4 /CNW/ - Cequence Energy Ltd. ("Cequence" or the "Company") (TSX: "CQE") is pleased to provide the following information on its oil and gas reserves as of December 31, 2009 as evaluated by the Company's independent reserve engineering firm, GLJ Petroleum Consultants Ltd. ("GLJ"). The evaluation of the Company's petroleum and natural gas reserves was prepared in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the terms used in this press release have the meanings ascribed in NI 51-101 and the Canadian Oil and Gas Evaluation Handbook ("COGEH") reserve definitions.
For the year end December 31, 2009, Cequence's capital program achieved
the following results:
- Increased total proved plus probable reserves by 70 percent to
12.8 mboe and proved reserves by 56 percent to 7.5 mboe;
- Replaced 2009 production of 594 mboe by 9.9 times with proved plus
probable additions and by 5.6 times with proved additions;
- Increased the net present value of the Company's proved plus probable
reserves by 34 percent to $157.7 million using a discount rate of
10 percent;
- Achieved finding, development and acquisition costs including future
development capital of $13.67 per proved plus probable boe. FD&A
costs excluding future capital were $8.51 per boe on a proved plus
probable basis;
- Based on an exit production rate of 2,100 boe/d, Cequence has a
reserve life index of 9.8 years on a proved basis and 16.6 years on a
proved plus probable basis;
- Estimated capital expenditures for the year ended December 31, 2009
were $49.9 million, excluding asset retirement additions and
adjustments resulting from the renunciation of flow through shares.
Capital expenditures are estimated and unaudited as of the date of
this press release.
Net Asset Value
The following net asset value ("NAV") table shows what is normally referred to as a "produce-out" NAV calculation under which the current value of the Company's reserves would be produced at forecast future prices and costs and do not necessarily represent a "going concern" value of the Company. The value is a snapshot in time and is based on various assumptions including commodity prices that vary over time. It should not be assumed that the net present values estimated by GLJ represent the fair market value of the reserves.
NAV December 31, 2009 ($000s)
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Proved plus probable reserves discounted at 10% $ 157,689
Undeveloped lands, internal estimate 31,500
Working capital, excluding hedge 6,210
Investments 13,738
Long term debt (18,054)
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Net asset value $ 191,083
Basic shares outstanding 39,530
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Net asset value per share $ 4.83
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Finding and Development Costs
Proved
Change plus Proved
in Proved Probable plus
Capital Future Reserve Proved Reserve Probable
Expenditures Capital Additions Costs Additons Costs
($000s) ($000s) mboe $/boe mboe $/boe
-------------------------------------------------------------------------
FD&A Costs
Proved FD&A
including change
in future
capital 49,894 14,001 3,296 $19.39 na na
P+P FD&A including
change in
future capital 49,894 30,256 Na na 5,863 13.67
Proved FD&A
excluding change
in future
capital 49,894 na 3,296 $15.14 na na
P+P FD&A excluding
change in
future capital 49,894 na na na 5,863 8.51
FD Costs
Proved FD
including change
in future
capital 24,694 10,951 1,387 25.69 na na
P+P FD including
change in
future capital 24,694 27,206 na na 3,059 16.97
Proved FD
excluding change
in future
capital 24,694 na 1,387 17.80 na na
P+P FD excluding
change in future
capital 24,694 na na na 3,059 8.07
Corporate Reserve Information
The following represents selected information obtained from the independent engineering evaluation of GLJ effective December 31, 2009 ("GLJ Report"). The Company intends to file its annual information containing additional reserves and oil and gas information in form NI 51-101 on or about March 18, 2010.
Summary of Oil and Gas Reserves
Light and
Medium Crude Oil NGLs Natural Gas
------------------ --------------- ---------------
Gross Net Gross Net Gross Net
Reserves Category (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (MMcf)
---------------------- ---------- ------- ------- ------- ------- -------
Proved
Developed Producing 370 327 204 143 20,290 17,559
Developed Non-Producing 88 63 89 67 9,187 8,212
Undeveloped 11 8 85 61 10,424 9,500
---------- ------- ------- ------- ------- -------
Total Proved 469 398 378 270 39,902 35,271
---------- ------- ------- ------- ------- -------
---------- ------- ------- ------- ------- -------
Probable 202 170 260 176 28,812 25,064
---------- ------- ------- ------- ------- -------
Total Proved plus
Probable 671 568 638 446 68,714 60,335
---------- ------- ------- ------- ------- -------
---------- ------- ------- ------- ------- -------
Summary of Net Present Value of Future Net Revenue
Before Future Income Tax
Expenses Discounted at (%/year)
-------------------------------------------
0 5 10 15 20
Reserves Category (M$) (M$) (M$) (M$) (M$)
---------------------------- -------- -------- -------- -------- --------
Proved
Developed Producing 115,390 89,087 73,501 63,195 55,842
Developed Non-Producing 42,929 28,410 21,527 17,372 14,541
Undeveloped 35,623 16,071 8,186 4,290 2,108
-------- -------- -------- -------- --------
Total Proved 193,941 133,569 103,213 84,857 72,491
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Probable 157,730 84,306 54,476 38,900 29,417
-------- -------- -------- -------- --------
Total Proved plus Probable 351,671 217,874 157,689 123,757 101,908
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
GLJ employed the following pricing, exchange rate and inflation rate
assumptions as of December 31, 2009 in the GLJ Report in estimating Cequence's
reserves data using following forecast prices and costs:
Natural Gas Light Crude Oil NGL Mix
------------------- --------------- --------
AECO Gas Inflation Exchange
Henry Hub Price WTI Edmonton Edmonton Rates Rate
--------- -------- ------ -------- -------- --------- --------
($US/ ($Cdn/ ($US/ ($Cdn/ ($Cdn/ ($US/
Year MMBtu) MMBtu) bbl) bbl) bbl) %/year $Cdn)
-------- --------- -------- ------ -------- -------- --------- --------
Forecast
2010 6.00 5.96 80.00 83.26 84.93 2.0 0.95
2011 7.00 6.79 83.00 86.42 88.15 2.0 0.95
2012 7.10 6.89 86.00 89.58 91.37 2.0 0.95
2013 7.15 6.95 89.00 92.74 94.59 2.0 0.95
2014 7.35 7.05 92.00 95.90 97.82 2.0 0.95
2015 7.50 7.16 93.84 97.84 99.79 2.0 0.95
2016 7.75 7.42 95.72 99.81 101.81 2.0 0.95
2017 8.25 7.95 97.64 101.83 103.86 2.0 0.95
2018 8.79 8.52 99.59 103.88 105.96 2.0 0.95
2019 8.96 8.69 101.58 105.98 108.10 2.0 0.95
Thereafter escalation rate of 2%
Reconciliation of Company Gross Reserves by Product Type
The following table sets forth the changes between the Company's reserve
volume estimates made as at December 31, 2009 and the corresponding estimates
as at December 31, 2008, using forecast prices and costs:
Natural Gas
Light and Medium (associated &
Crude Oil non-associated) NGLs
----------------- ----------------- -----------------
Gross Gross Gross
Proved Proved Proved
Gross Plus Gross Plus Gross Plus
Proved Probable Proved Probable Proved Probable
Factors (Mbbl) (Mbbl) (MMcf) (MMcf) (Mbbl) (Mbbl)
------------------ -------- -------- -------- -------- -------- --------
December 31, 2008 451 646 24,561 38,558 251 420
Extensions &
Improved Recovery - - - - - -
Technical Revisions (81) (148) (286) (2,196) 18 46
Discoveries - - 8,809 20,806 29 60
Acquisitions 154 228 9,871 14,600 109 143
Dispositions - - - - - -
Economic Factors - - - - - -
Production (55) (55) (3,054) (3,054) (30) (30)
-------- -------- -------- -------- -------- --------
December 31, 2009 469 671 39,902 68,714 378 638
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
Sinclair Montney Development
Development at Sinclair began shortly after the reorganization of the Company in July 2009. The capital program for 2009 was designed with the goal of establishing the viability of a Montney resource play while at the same time efficiently preserving expiring mineral rights and fulfilling the outstanding flow through commitments inherited through the acquisition of HFG Holdings Inc. The drilling program resulted in two successful horizontal wells in the Basal Doig (Upper Montney) and three vertical wells testing the Lower Montney and Basal Doig. Also, Cequence successfully retained all prospective Lower Montney and Basal Doig mineral rights.
Based on the independent reserve evaluation at December 31, 2009, 1.5 mboe proved and 3.5 mboe proved and probable reserves have been assigned to the Basal Doig resource at Sinclair. Two proved undeveloped wells and three probable wells are included in the reserve report based on the success of the first two horizontal wells. Management estimates that further development at Sinclair will result in the recognition of up to 15 additional Basal Doig locations at Sinclair not recognized in the December 31, 2009 reserve report.
The Sinclair program is still in its initial stages and has continued in the first quarter of 2010. The Company is preparing to complete its first horizontal well in the Lower Montney in March 2010. To date, no reserves have been recognized in the Lower Montney.
Cequence is scheduled to provide an operational update with 2010 guidance and report financial results for the year ended December 31, 2009 on March 18, 2010.
Cequence Energy Ltd. is a Calgary, Alberta-based crude oil and natural gas company with common shares trading on the Toronto Stock Exchange under the symbol "CQE".
Forward Looking Information
Certain information included in this press release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", "intend", "estimate", "propose", "project" or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this press release may include, but is not limited to, information with respect to: operational decisions and the timing thereof, development and exploration plans and the timing thereof; and future production levels. Forward-looking information is based on a number of factors and assumptions which have been used to develop such information but which may prove to be incorrect. Although the Company believes that the expectations reflected in such forward-looking information is reasonable, undue reliance should not be placed on forward-looking information because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding and are implicit in, among other things: field production rates and decline rates; the ability of the Company to secure adequate product transportation; the impact of increasing competition in or near the Company's Doig / Montney plays; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business; Cequence's ability to operate the properties in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; the ability to replace and expand oil and natural gas reserves through acquisition, development of exploration; the timing and costs of pipeline, storage and facility construction and expansion; future oil and natural gas prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters; and the ability of the Company to successfully market its oil and natural gas products. Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used.
Certain financial and operating information included in this press release for the quarter and year ended December 31,2009, such as exploration and development expenditures, finding, development and acquisition costs and net asset value, are based on estimated unaudited financial results for the quarter and year then ended, and are subject to the same limitations as discussed under "Forward- looking information and statements" set out below. These estimated amounts may change upon the completion of audited financial statements for the year ended December 31, 2009 and changes could be material.
Forward-looking information is based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking information. The material risk factors affecting the Company and its business are contained in the Company's Annual Information Form which is available under the Company's issuer profile on SEDAR at www.sedar.com.
The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward looking information contained in this press release is expressly qualified by this cautionary statement.
Additional Advisories
Boes are presented on the basis of one Boe for six Mcf of natural gas. Disclosure provided herein in respect of 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.
The Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.
%SEDAR: 00023788E
For further information: Howard Crone, President and Chief Executive Officer, (403) 806-4040, [email protected]; or David Gillis, Vice President Finance and Chief Financial Officer, (403) 806-4041, [email protected]
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