Insignia Energy announces a 600% increase in 2009 year-end reserves
CALGARY, March 2 /CNW/ - Insignia Energy Ltd. ("ISN" - TSX) ("Insignia" or the "Company") is pleased to announce the results of its independent reserve evaluation effective December 31, 2009 of the Company's reserves by GLJ Petroleum Consultants Ltd. ("GLJ").
2009 YEAR-END RESERVE HIGHLIGHTS
--------------------------------
- Proved reserves increased by 601% to 5.4 mmboe and proved plus
probable reserves increased by 630% to 13.3 mmboe, compared to 2008
year end levels.
- On a per-share basis, proved plus probable reserves increased by 200%
and proved reserves increased by 188% compared to 2008 year end
levels.
- The net present value of the future net revenue attributable to the
Company's proved plus probable reserves (before tax and discounted at
10%) was $158.1 million resulting in a net asset value per share of
$5.42 per common share.
- Insignia replaced 2300% of annual production for an all-in annual
Finding, Development and Acquisition ("FD&A") cost of $10.21 per
barrel of oil equivalent ("boe") before consideration of future
development capital ("FDC") on a proved plus probable basis. FD&A
costs including FDC were $18.01 per boe on a proved plus probable
basis.
- Net acquisition spending was $110.3 million resulting in a net
acquisition cost of $9.30 per boe on a proved plus probable basis,
prior to FDC and $17.63 per boe on a proved plus probable basis
including FDC.
- Reserves additions resulted in a one year recycle ratio of 1.6 times
based on an annual 2009 estimated operating netback of $16.81 per boe
and an annual FD&A cost of $10.21 and a one year recycle ratio of 2.2
times based on a fourth quarter 2009 estimated operating netback of
$22.14 per boe and an annual FD&A cost of $10.21.
- Based on fourth quarter 2009 average production of 2,243 boe per day,
Insignia's reserve life index ("RLI") increased more than three times
on a year over year basis to 16.2 years on proved plus probable basis
and 6.6 years on a proved basis.
NET ASSET VALUE ("NAV")(a)
--------------------------
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December December
31, 2009 31, 2008
NAV NAV
GLJ Price GLJ Price
Forecast Forecast
$Millions, except per share amounts (2010-01) (2009-01)
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Net(b) Proved Plus Probable Reserves Discounted
at 10% (Before Tax) $158.1 $26.8
Undeveloped Lands(c) 30.2 8.5
Net Cash (Debt) (Unaudited)(d) (17.4) 53.3
Proceeds from Dilutive Stock Options 3.3 0.4
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Net Asset Value 174.2 89.0
Shares Outstanding (000's)(d)(e) 32,142 16,372
NAV/Share $5.42 $5.44
(a) Financial information is based on management prepared financial
statements for the year ended December 31, 2009 which are in the
process of being audited by Insignia's independent auditors and,
accordingly, such financial information is subject to change based on
the results of the audit. See "Cautionary Statements - Unaudited
Financial Information" below.
(b) "Net" means the Company's working interest (operating or non-
operating) share after deduction of royalty obligations plus the
Company's royalty interest in reserves.
(c) Undeveloped land value is based on a management prepared internal
estimate as at December 31, 2009. Insignia had a total of 232,787 net
undeveloped acreage at year end 2009.
(d) Net Cash (Debt) excludes any future income tax asset. For the 2008
year end it assumes that the Company's Equity Commitment was
exercised whereby the Company would issue 3,676,470 common shares for
total proceeds of $25 million.
(e) Represents total common shares outstanding (basic) plus the dilutive
stock options (2009-1,482,000, 2008-99,000).
RESERVES
--------
See "Cautionary Statement - Information Regarding Disclosure on Oil and Gas Reserves and Operational Information" for explanations and discussions and "Cautionary Statement - Forward looking information and statements" for a statement of principal assumptions and risks that may apply.
The Company's total proved plus probable reserves increased by 630% in 2009 to 13.3 MMboe and proved reserves increased by 601% to 5.4 MMboe. These increases are mainly attributable to the acquisition of Grey Wolf Exploration Inc. ("Grey Wolf") in the third quarter of 2009.
Summary of Oil and Gas Reserves as of December 31, 2009
LIGHT AND CONVENTIONAL
MEDIUM OIL HEAVY OIL NATURAL GAS
------------------- ------------------- -------------------
RESERVES Gross Net Gross Net Gross Net
CATEGORY (Mbbl) (Mbbl) (Mbbl) (Mbbl) (MMcf) (MMcf)
------------- --------- --------- --------- --------- --------- ---------
PROVED
Producing 317 260 26 25 13,968 12,981
Developed
Non-
Producing 14 12 - - 2,656 2,348
Undeveloped - - - - 11,052 9,889
--------- --------- --------- --------- --------- ---------
TOTAL PROVED 331 272 26 25 27,676 25,217
PROBABLE 199 157 9 8 42,074 35,300
--------- --------- --------- --------- --------- ---------
TOTAL PROVED
PLUS
PROBABLE 530 429 35 33 69,749 60,518
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
NATURAL GAS TOTAL OIL
LIQUIDS EQUIVALENT
------------------- -------------------
RESERVES Gross Net Gross Net
CATEGORY (Mbbl) (Mbbl) (Mbbl) (Mbbl)
------------- --------- --------- --------- ---------
PROVED
Producing 203 158 2,874 2,606
Developed
Non-
Producing 96 71 552 474
Undeveloped 152 108 1,994 1,756
--------- --------- --------- ---------
TOTAL PROVED 452 337 5,421 4,836
PROBABLE 635 425 7,856 6,473
--------- --------- --------- ---------
TOTAL PROVED
PLUS
PROBABLE 1,087 761 13,277 11,309
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Present Values of Future Net Revenue
As of December 31, 2009, Forecast Prices and Costs
BEFORE INCOME TAXES DISCOUNTED AT
(%/year)
-------------------------------------------------
RESERVES 0% 5% 10% 15% 20%
CATEGORY (M$) (M$) (M$) (M$) (M$)
----------------------- --------- --------- --------- --------- ---------
PROVED
Producing 85,716 69,370 58,849 51,480 46,007
Non-Producing 16,901 14,026 12,021 10,555 9,440
Undeveloped 38,582 25,847 18,181 13,159 9,660
--------- --------- --------- --------- ---------
TOTAL PROVED 141,198 109,243 89,051 75,195 65,107
TOTAL PROBABLE 173,402 104,917 69,050 47,790 34,121
--------- --------- --------- --------- ---------
TOTAL PROVED PLUS
PROBABLE 314,600 214,160 158,101 122,984 99,228
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
AFTER INCOME TAXES DISCOUNTED AT
(%/year)
-------------------------------------------------
RESERVES 0% 5% 10% 15% 20%
CATEGORY (M$) (M$) (M$) (M$) (M$)
----------------------- --------- --------- --------- --------- ---------
PROVED
Producing 85,716 69,370 58,849 51,480 46,007
Non-Producing 16,901 14,026 12,021 10,555 9,440
Undeveloped 38,582 25,847 18,181 13,159 9,660
--------- --------- --------- --------- ---------
TOTAL PROVED 141,198 109,243 89,051 75,195 65,107
TOTAL PROBABLE 145,797 90,933 61,292 43,200 31,272
--------- --------- --------- --------- ---------
TOTAL PROVED PLUS
PROBABLE 286,995 200,176 150,343 118,395 96,379
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Notes:
(1) Net present value of future net revenue may not represent fair market
value.
(2) Other Company revenue and costs not related to a specific production
group have been allocated proportionately to the above noted
production groups.
(3) Estimated future abandonment and reclamation costs related to a
property have been taken into account by GLJ in determining reserves
that should be attributed to a property and, in determining the
aggregate future net revenue therefrom, there was deducted the
reasonable estimated future well abandonment costs. No allowance was
made, however, for reclamation of well sites or the abandonment and
reclamation of any facilities or wells which have no reserves
assigned.
Summary of Pricing and Inflation Rate Assumptions
Forecast Prices and Costs, GLJ Forecast Effective January 1, 2010
OIL NATURAL GAS
------------------- --------------------------------------
Natural Pentanes
WTI at Gas AECO Plus Butanes
Cushing Edmonton Average Edmonton Edmonton Inflation Exchange
Oklahoma City Gate Price Par Par Rates(1) Rate(2)
Year ($US/Bbl)($Cdn/Bbl)($Cdn/Mcf)($Cdn/Bbl)($Cdn/Bbl) %/Year ($US/$Cdn)
----- --------- --------- -------- --------- --------- --------- --------
Forecast
2010 80.00 83.26 5.96 84.93 64.11 2.0 0.950
2011 83.00 86.42 6.79 88.15 66.54 2.0 0.950
2012 86.00 89.58 6.89 91.37 68.98 2.0 0.950
2013 89.00 92.74 6.95 94.59 71.41 2.0 0.950
2014 92.00 95.90 7.05 97.82 73.84 2.0 0.950
2015 93.84 97.84 7.16 99.79 75.33 2.0 0.950
2016 95.72 99.81 7.42 101.81 76.85 2.0 0.950
2017 97.64 101.83 7.95 103.86 78.41 2.0 0.950
2018 99.59 103.88 8.52 105.96 79.99 2.0 0.950
2019 101.58 105.98 8.69 108.10 81.60 2.0 0.950
2020+ Escalated oil, gas and product prices at 2% per year thereafter
Notes:
(1) Inflation rates for forecasting prices and costs.
(2) Exchange rates used to generate the benchmark reference prices in
this table.
Reconciliation of Gross Reserves By Principal Product Type
Forecast Prices and Costs
LIGHT AND MEDIUM OIL HEAVY OIL
----------------------------- -----------------------------
Proved Proved
Plus Plus
Proved Probable Probable Proved Probable Probable
FACTORS (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl) (Mbbl)
------------- --------- --------- --------- --------- --------- ---------
December 31,
2008 101 98 199 26 176 201
Discoveries - - - 6 3 9
Extensions - - - - - -
Infill
Drilling - - - - - -
Improved
Recovery - - - - - -
Technical
Revisions 56 3 60 21 4 25
Acquisitions 227 96 323 - - -
Dispositions - - - (15) (173) (188)
Economic
Factors 6 2 8 (6) (1) (7)
Production (60) - (60) (6) - (6)
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December 31,
2009 331 199 530 26 9 35
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CONVENTIONAL NATURAL GAS NATURAL GAS LIQUIDS
----------------------------- -----------------------------
Proved Proved
Plus Plus
Proved Probable Probable Proved Probable Probable
FACTORS (MMcf) (MMcf) (MMcf) (Mbbl) (Mbbl) (Mbbl)
------------- --------- --------- --------- --------- --------- ---------
December 31,
2008 3,755 4,526 8,281 20 18 37
Discoveries 607 364 970 17 10 27
Extensions - - - - - -
Infill
Drilling - - - - - -
Improved
Recovery - - - - - -
Technical
Revisions 248 (1,179) (931) 10 (3) 7
Acquisitions 25,821 38,531 64,352 440 611 1,051
Dispositions (174) (160) (334) - (1) (2)
Economic
Factors (37) (9) (46) (1) 1 -
Production (2,544) - (2,544) (33) - (33)
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December 31,
2009 27,676 42,074 69,749 452 636 1,087
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BOE
-----------------------------
Proved
Plus
Proved Probable Probable
FACTORS (Mbbl) (Mbbl) (Mbbl)
------------- --------- --------- ---------
December 31,
2008 773 1,045 1,818
Discoveries 124 74 198
Extensions - - -
Infill
Drilling - - -
Improved
Recovery - - -
Technical
Revisions 127 (191) (64)
Acquisitions 4,971 7,129 12,100
Dispositions (44) (201) (245)
Economic
Factors (7) - (7)
Production (523) - (523)
-------------------------------------------
December 31,
2009 5,421 7,856 13,277
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Note: Insignia has no unconventional reserves (Bitumen, Synthetic Crude
Oil, Natural Gas from Coal, etc.).
FD&A COSTS
----------
In 2009 Insignia's capital program was dominated (90% of the program) by the successful acquisition of Grey Wolf in the third quarter of 2009. Net acquisition spending was $110.3 million resulting in a net acquisition cost of $9.30 per boe on a proved plus probable basis, prior to FDC and $17.63 per boe on a proved plus probable basis including FDC. Exploration and Development Expenditures ("E&D") included opportunistic land purchases and low cost seismic purchases in a low natural gas price environment. In 2009 Insignia spent $12.1 million on E&D of which $5.5 million was on land and seismic and $6.6 million on drilling, completions and equipping, of which, $4.5 million was associated with the Grey Wolf properties, incurred late in 2009 and no additional reserves were attributed to these expenditures in the 2009 reserve report.
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Three Year Average
2009 2008 2007-2009
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Proved Proved Proved
plus plus plus
Proved Probable Proved Probable Proved Probable
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Exploration and
Development
expenditures
($ thousands)
(note 2) 12,131 12,131 5,866 5,866 21,121 21,121
Net
Acquisitions/
(Dispositions)
($ thousands)
(note 2) 110,259 110,259 45,313 45,313 157,302 157,302
Change in
future
development
capital
($ thousands)
- Exploration
and
Development (270) (5,331) (584) (200) (854) (5,531)
- Acquis-
itions/
Disposi-
tions 25,563 98,756 1,352 9,818 27,649 110,308
Reserves
additions
after
revisions
(Mboe)
- Exploration
and
Development 244 127 70 99 527 715
- Acquis-
itions/
Disposi-
tions 4,927 11,855 657 1,359 5,647 13,315
-----------------------------------------------------------
5,171 11,982 727 1,458 6,174 14,030
Finding,
Development
& Acquis-
ition Costs
($/boe)
Including
Change in
Future
Development
Cost (note 1)
Exploration
and
development 48.61 53.54 75.53 57.08 38.48 21.80
Acquis-
itions/
Disposi-
tions 27.57 17.63 70.99 40.57 32.75 20.10
-----------------------------------------------------------
Total F,D&A 28.56 18.01 71.43 41.70 33.24 20.19
Excluding
Change in
Future
Development
Cost
Exploration
and
development 49.72 95.52 83.88 59.09 40.11 29.53
Acquis-
itions/
Disposi
tions 22.38 9.30 68.93 33.35 27.85 11.81
-----------------------------------------------------------
Total F,D&A 23.67 10.21 70.37 35.10 28.90 12.72
Reserves
Replacement
Ratio 989% 2291% 355% 712%
Reserve Life
Index based on
fourth quarter
production
(years) 6.6 16.2 1.9 4.4
Notes:
1. Calculation includes reserve revisions and changes in future
development costs. Insignia also calculates finding, development and
acquisition ("FD&A") costs which incorporate both the costs and
associated reserve additions related to acquisitions net of any
dispositions during the year. Since acquisitions can have a
significant impact on Insignia's annual reserve replacement costs,
the Company believes that FD&A costs provide a more meaningful
portrayal of Insignia's cost structure.
2. 2009 figures include information based on estimated unaudited
financial results that may change on the completion of the audited
financial statements.
FDC USING FORECAST PRICES AND COSTS
Proved plus
Proved Future Probable Future
Development Development
Year Costs Costs
--------------------------------- ------------------- -------------------
($ thousands) ($ thousands)
2010 20,333 36,741
2011 5,911 33,686
2012 - 28,481
2013 - 5,306
2014 - -
2015 and subsequent 552 563
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Undiscounted total 26,795 104,777
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Discounted @ 10%/yr 24,836 90,776
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LAND HOLDINGS
-------------
The Company has completed an internal evaluation of the fair market value of the Company's undeveloped land holdings as at December 31, 2009. This evaluation was completed principally using industry activity levels, third party transactions and land acquisitions that occurred in proximity to Insignia's undeveloped lands during the past year. The Company has estimated the value of its net undeveloped acreage at $30.2 million.
A summary of the Company's land holdings at December 31, 2009 is outlined below:
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Developed Undeveloped Total
(acres) Gross Net Gross Net Gross Net
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Alberta 92,103 61,247 200,692 171,110 292,795 232,357
Other 26,408 21,609 76,340 61,677 102,748 83,286
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Total 118,511 82,856 277,032 232,787 395,543 315,643
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CAUTIONARY STATEMENTS
---------------------
Unaudited financial information
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, operating netback 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.
Information Regarding Disclosure on Oil and Gas Reserves and Operational Information
The reserves data set forth above is based upon an independent reserves assessment and evaluation prepared by GLJ with an effective date of December 31, 2009 (the "GLJ Report"). The presentation summarizes the Company's crude oil, natural gas liquids and natural gas reserves and the net present values before income tax of future net revenue for the Company's reserves using forecast prices and costs based on the GLJ Report. The GLJ Report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in NI 51-101.
All evaluations and reviews of future net cash flows are stated prior to any provisions for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimates of future net revenues presented in the tables above represent the fair market value of the reserves. There is no assurance that the forecast prices and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of our crude oil, natural gas liquids and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas and natural gas liquids reserves may be greater than or less than the estimates provided herein.
The reserve data provided in this release only represents a summary of the disclosure required under National Instrument 51-101 ("NI 51-101"). Additional disclosure will be provided in the Company's Annual Information Form filed on www.sedar.com on or before March 31, 2010.
In relation to the disclosure of net asset value ("NAV"), the 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 and foreign exchange rates that vary over time. It should not be assumed that the future net revenues estimated by GLJ represent the fair market value of the reserves, nor should it be assumed that Insignia's internally estimated value of its undeveloped land holdings represent the fair market value of the lands.
Non-GAAP Measures Advisory
The above information includes non-GAAP measures not defined under generally accepted accounting principles ("GAAP"), including operating netback, recycle ratio, net cash and reserve life index. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. Operating netback is calculated as revenue less royalties, operating expenses, transportation expenses and net of any realized gains or losses on financial contracts. Recycle ratio is calculated as operating netback divided by the capital cost of reserve replacement which is one of our indicators to ensure our capital programs are adding reserves at an economic cost. Reserve life index is calculated by dividing our reserves by our annualized fourth quarter production which is one of our indicators for quality of a reserve base.
Forward-looking information and statements
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the following: the volumes and estimated value of Insignia's oil and gas reserves; the life of Insignia's reserves; the volume and product mix of Insignia's oil and gas production; future oil and natural gas prices; future results from operations and operating metrics; future costs, expenses and royalty rates; future interest costs and the exchange rate between the $US and $Cdn.
The recovery and reserve estimates of Insignia's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. In addition, forward-looking statements or information are based on a number of material factors, expectations or assumptions of Insignia which have been used to develop such statements and information but which may prove to be incorrect. Although Insignia believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because Insignia can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: results from drilling and development activities consistent with past operations; the continued and timely development of infrastructure in areas of new production; continued availability of debt and equity financing and cash flow to fund Insignia's current and future plans and expenditures; the impact of increasing competition; the general stability of the economic and political environment in which Insignia operates; the timely receipt of any required regulatory approvals; the ability of Insignia to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects in which Insignia has an interest in to operate the field in a safe, efficient and effective manner; the ability of Insignia to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and cost of pipeline, storage and facility construction and expansion and the ability of Insignia to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which Insignia operates; and the ability of Insignia to successfully market its oil and natural gas products.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors that may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of Insignia's products; unanticipated operating results or production declines; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in development plans of Insignia or by third party operators of Insignia's properties, increased debt levels or debt service requirements; inaccurate estimation of Insignia's oil and gas reserve and resource volumes; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; and certain other risks detailed from time-to-time in Insignia's public disclosure documents, (including, without limitation, those risks identified in this news release and Insignia's Annual Information Form).
The forward-looking information and statements contained in this news release speak only as of the date of this news release, and Insignia does not assume any obligation to publicly update or revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
BOE equivalent
Barrel of oil equivalents or 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.
ABOUT INSIGNIA
--------------
Insignia is a Calgary, Alberta based oil and gas exploration, development and production company whose shares are traded on The Toronto Stock Exchange under the trading symbol "ISN".
%SEDAR: 00003847E
For further information: Jeff Newcommon, President & CEO, (403) 536-8138, [email protected], Website: www.insigniaenergy.ca
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