ProspEx Reports 2009 Results and Provides Operational Update
(All amounts are in Canadian dollars, unless stated otherwise)
CALGARY, March 15 /CNW/ - ProspEx Resources Ltd. ("ProspEx" or the "Company") today announced its fourth quarter and year end 2009 financial and operating results, as well as an update on current operations. The Company has filed its audited consolidated financial statements and related management's discussion and analysis ("MD&A") for the year ended December 31, 2009 on www.psx.ca and www.sedar.com. Certain selected financial and operational information for the twelve months ended December 31, 2009 and the 2008 comparatives are set out below and should be read in conjunction with ProspEx's consolidated financial statements and related MD&A.
PRESIDENT'S MESSAGE
In 2009, ProspEx enjoyed its best year since the inception of the Company five years ago. ProspEx achieved its lowest ever finding and development costs, demonstrated substantial drilling success, and added to its inventory of repeatable drilling opportunities. This resulted from the adoption of a new growth strategy - drilling horizontal wells with multi-stage fracture stimulation technologies in conventional reservoirs.
The impact of this new strategy is apparent in the Company's operating and financial results. ProspEx's 2009 finding and development ("F&D") costs were $6.77 per boe on a proved plus probable ("P+P") basis, and $9.46 per boe on a proved basis, including future development capital and revisions, but not the effects of acquisitions and dispositions. ProspEx believes these costs will rank in the best quartile of its peer group.
At East Kakwa, over 2,300 barrels of oil equivalent ("boe") per day of new production (net to ProspEx) has been brought on stream since November 1, 2009 from the Company's first three horizontal wells. These wells have validated an additional 20 (11 net) horizontal drilling locations, creating a repeatable inventory of lower risk opportunities for the future.
To enable the transformation to the new strategy, the Company disposed of assets that did not fit within the new strategy in order to strengthen its balance sheet and sharpen its operational focus. ProspEx's acquisition and disposition activities generated net proceeds of $35.0 million in 2009. As a result, net debt was reduced from $51.4 million at the start of the year to only $21.6 million at year end.
Despite significant asset dispositions, ProspEx increased its reserves base during 2009, replacing 310% of 2009 production on a P+P basis, and 178% on a proved basis according to the reserves report prepared by the Company's independent reserves evaluator, GLJ Petroleum Consultants Ltd. ("GLJ") effective as of December 31, 2009 (the "2009 Reserves Report"). Reserves per fully diluted share increased by 13% on a proved basis, and 23% on a P+P basis.
The Company also increased the depth of its prospect inventory in 2009, securing the mineral rights in two new core areas, Brazeau River and Pembina. The Company believes these areas offer opportunity that is geologically analogous to East Kakwa. The Company's first horizontal well at Brazeau is currently undergoing completion and testing; while the first horizontal well at Pembina is planned for the third quarter of 2010.
In summary, despite an exceptionally challenging business environment, ProspEx emerged from 2009 with a larger prospect inventory exhibiting visible growth potential with robust economics, and a stronger balance sheet relative to the beginning of the year.
HIGHLIGHTS
Operating
- In 2009 ProspEx drilled two successful East Kakwa horizontal wells
using multi-stage fracturing technology. Initial production rates
were eight and 10 million cubic feet ("mmcf") per day. Remaining P+P
reserves of 8,056 thousand barrels of oil equivalent ("mboe"), net to
ProspEx, were assigned to this project by GLJ in the 2009 Reserves
Report.
- A third East Kakwa horizontal well drilled in the first quarter of
2010 has come on stream at an initial rate of approximately five mmcf
per day. Reserves attributable to this location and some surrounding
lands were not recognized in the 2009 Reserves Report.
- ProspEx acquired the mineral rights in 2009 on two additional
projects, Brazeau and Pembina in West Central Alberta, which are
believed by the Company to be geologically analogous to East Kakwa.
The first horizontal well at Brazeau has been drilled, with
completion and testing operations currently in progress. The first
horizontal well in the Pembina area is planned for the third quarter
of 2010.
- Exploration and development capital spending in 2009 was
$17.7 million, down from $51.5 million in 2008 in response to
relatively low natural gas prices and deteriorating capital markets.
When taking into account $35.0 million of net proceeds from
acquisitions and dispositions, total capital spending was
$(17.2) million.
- Annual average production was 2,832 boe per day, compared to the 2008
annual average of 3,875 boe per day, reflecting the disposition of
non-core assets, temporary curtailment of production due to low
natural gas prices and natural production declines.
Reserves and Finding & Development Costs
- ProspEx's P+P reserves were estimated to be 12,214 mboe at
December 31, 2009 by GLJ, in accordance with the reporting guidelines
of National Instrument 51-101 ("NI 51-101") of the Canadian
Securities Administrators.
- F&D costs were $6.77 per boe on a P+P basis, including revisions and
changes in future development capital but excluding the effect of
acquisitions and dispositions.
- Finding, Development & Acquisition ("FD&A") costs for 2009 were
$(2.69) per boe, on a P+P basis. The negative FD&A costs resulted as
the sum of disposition proceeds and future capital associated with
divested assets exceeded 2009 exploration and development capital and
new future development capital.
- F&D costs were $9.46 per boe on a proved basis, including revisions
and changes in future development capital but excluding the effect of
acquisitions and dispositions.
- FD&A costs for 2009 were $(4.12) per boe, on a proved basis. The
negative FD&A costs resulted as the sum of disposition proceeds and
future capital associated with divested assets exceeded 2009
exploration and development capital and new future development
capital.
- Despite an active asset disposition program, proved reserves in the
2009 Reserves Report increased 11% year over year, while P+P reserves
increased by 22%. Reserves per fully diluted share increased by 13%
on a proved basis, and by 23% on a P+P basis.
- The 2009 Reserves Report reflects the replacement of 178% of 2009
production on a proved basis and 310% on a P+P basis, including the
effect of asset dispositions.
- ProspEx's net asset value at December 31, 2009 was estimated to be
$2.99 per basic share using GLJ's estimates of P+P reserves, GLJ's
January 2010 price forecast, a discount rate of 10% and 57,385,162
outstanding shares.
Financial
- Year-end net debt was down substantially to $21.6 million at
December 31, 2009 (not including fair value of commodity contracts,
associated future taxes and current loss on sublease). The proceeds
from asset dispositions were largely used to reduce debt.
- Cash flow over the full year 2009 was $12.7 million, compared to
$44.3 million in 2008, due to a 27% decrease in production and a 41%
decrease in realized prices. Fourth quarter 2009 cash flow was
$2.5 million.
ProspEx Resources Ltd.
Consolidated Highlights
For the periods ended
(unaudited) Three Three
months months Year Year
ended ended ended ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2009 2008 2009 2008
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FINANCIAL ($000s)
Oil and gas revenue 8,088 15,046 33,246 76,705
Net (loss) earnings (1,231) 487 (10,437) 7,560
Cash flow (1) 2,540 9,593 12,705 44,326
Total assets 154,155 202,984 154,155 202,984
Total net debt (2) 21,644 51,422 21,644 51,422
Net (loss) earnings per share
($ per share)
basic (0.02) 0.01 (0.18) 0.13
diluted (0.02) 0.01 (0.18) 0.13
Cash flow per share
($ per share) (1)
basic 0.04 0.17 0.22 0.78
diluted 0.04 0.17 0.22 0.76
Weighted average common shares
(000s)
basic 57,385 57,385 57,385 57,054
diluted 57,385 57,385 57,385 58,101
PRODUCTION VOLUMES
Natural gas (mcf/d) 11,327 16,868 13,015 18,562
Natural gas liquids (bbls/d) 557 719 617 707
Oil (bbls/d) 32 57 46 74
Total (boe/d) 2,477 3,587 2,832 3,875
SALES PRICES
Natural gas ($/mcf) 5.02 7.53 4.87 8.32
Natural gas liquids ($/bbl) 51.30 44.72 40.06 66.58
Oil ($/bbl) 76.35 76.12 64.01 109.59
Total ($/boe) 35.49 45.59 32.17 54.08
OPERATING NETBACKS ($/boe)
Price 35.49 45.59 32.17 54.08
Royalties (5.15) (8.18) (4.12) (10.51)
Operating costs (8.72) (4.58) (8.30) (7.78)
Transportation (1.21) (1.00) (1.06) (0.97)
------ ------ ------ ------
Total 20.41 31.83 18.69 34.82
CAPITAL ($000s)
Drilling and completions 1,442 6,706 7,084 27,612
Facilities 154 4,104 (25) 11,288
Land and lease 570 1,305 6,121 6,818
Seismic 402 323 745 3,168
Capitalized general
and administrative 1,421 359 3,762 2,602
Property (disposition)
acquisition (7,689) 20 (34,956) 9,226
Other capital assets 73 9 83 168
-- - -- ---
Total (3,627) 12,826 (17,186) 60,882
(1) Cash flow is defined as cash flow from operations before changes in
operating non-cash working capital.
(2) Total net debt is defined as long term debt less working capital (or
plus working capital deficiency), excluding fair value of commodity
contracts, associated future tax assets (liabilities) and current
loss on sublease.
Cash flow and total net debt do not have a standardized measure
prescribed by Canadian generally accepted accounting principles and
therefore may not be comparable with measures for other companies.
OPERATIONAL REVIEW
Capital Program
Exploration and development capital expenditures were $17.7 million in 2009, compared to $51.5 million in 2008. In the fourth quarter of 2009, exploration and development capital expenditures were $4.0 million, compared to $12.8 million in the fourth quarter of 2008.
Over the course of 2009 ProspEx had an active acquisition and disposition program, with one asset acquisition in East Kakwa and three asset dispositions at West Wapiti, Medallion and Garrington. Net proceeds from the four transactions totaled $35.0 million. The assets divested in 2009 did not offer opportunities consistent with the Company's strategy of utilizing horizontal drilling with multi-stage fracturing technology to exploit conventional assets. The proceeds from these dispositions were largely used to reduce debt.
As net disposition proceeds exceeded exploration and development capital, total capital spending in 2009 was $(17.2) million.
ProspEx spent $6.1 million in 2009 on mineral land and leases, adding approximately 22,000 net acres to the Company's land position. This spending equates to 35% of exploration and development capital, reflecting the emphasis on adding new opportunities to the Company's prospect inventory in 2009. The majority of lands acquired in 2009 were extensions of the Company's East Kakwa land position, and two new land positions at Brazeau River and Pembina in West Central Alberta. The new West Central lands are located on Mannville channel trends that the Company believes are geologically analogous to the East Kakwa assets, and have been somewhat derisked by historical industry drilling on and adjacent to the lands. Based on analysis of this historical drilling data, ProspEx believes the new lands offer horizontal drilling opportunities in liquids rich, gas saturated reservoirs. The Company's net undeveloped land position at December 31, 2009 was approximately 90,000 acres.
ProspEx's 2009 drilling program was focused primarily in the Kakwa area of the Deep Basin. Over the full year, the Company incurred $7.1 million in drilling and completion expenditures to drill five gross (2.7 net) wells, four (2.4 net) of which were in the Kakwa area. The Company incurred $1.4 million in drilling and completion expenditures to drill one (0.6 net) well in the fourth quarter.
This drilling program was designed to demonstrate the applicability of horizontal drilling utilizing multi-stage fracturing technology to the Company's Kakwa assets. Two horizontal wells were drilled at East Kakwa in 2009, with a third horizontal drilled in the first quarter of 2010. The horizontal multi-frac drilling technology was successful in dramatically increasing productivity over the Company's typical vertical wells. Initial production rates of five to 10 mmcf per day were achieved by the horizontal wells, compared to 1.8 mmcf per day from the average vertical well, for an improvement of about three to six times. As the horizontal wells are estimated to cost only twice the cost of the vertical wells, the improvement in economics is substantial.
The three horizontal wells were spaced along the length of the Company's East Kakwa land position, with the intent of proving the applicability of horizontal multi-fracturing technology across the land base. Two of these wells were drilled prior to year end and are therefore included in the 2009 Reserves Report, which is discussed in detail below. Based on the results of these two wells, coupled with ProspEx's five vertical wells and the seismic data, GLJ has recognized P+P reserves on the equivalent of 15.5 sections of land around and between the first two horizontal wells in the 2009 Reserves Report.
In the winter of 2008/2009 ProspEx drilled two vertical wells to evaluate a Falher channel at West Kakwa, approximately 20 kilometres west of the Company's East Kakwa lands. The two West Kakwa wells encountered a thick Falher channel, however reservoir quality was lower than that observed in East Kakwa. In order to obtain a baseline of vertical well productivity, ProspEx completed and tested these two vertical wells in the first quarter of 2010. Low test rates were recorded for both wells and the Company has deferred horizontal drilling activity on this trend.
In the first quarter of 2010 ProspEx drilled a horizontal well in the Brazeau River area of West Central Alberta, targeting a Notikewin channel. This is the first horizontal well drilled on a land position acquired in 2009. Completion and testing operations at the Brazeau well are currently in progress.
Capital spending in the first quarter of 2010 is expected to be approximately $9 to $10 million. The Company is planning a capital budget of $30 million (net of Alberta Royalty Drilling Credits) for 2010, which ProspEx anticipates can be funded from a combination of cash flow and incremental debt. Capital spending for the remainder of 2010 is therefore expected to be approximately $20 million. The capital program planned for the remainder of the year includes six (3.2 net) horizontal wells, including the Company's first horizontal well targeting a Mannville age channel in the Pembina area, as well as follow-up horizontal drilling in East Kakwa, Brazeau River and Pembina, contingent on initial well results.
Please be advised that the forecasts above with respect to capital spending may constitute a "financial outlook" as contemplated by National Instrument 51-102 ("NI 51-102") of the Canadian Securities Administrators entitled Disclosure Obligations. The purpose of such information is to forecast the anticipated capital spending of the Company for 2010 and for the first quarter of 2010.
Production
Production Q4 2009 Q4 2008 2009 Annual 2008 Annual
(boe/d) Average Average Average Average
------------ ------------ ------------ ------------
West Central 1,280 1,914 1,573 1,726
Deep Basin 1,183 924 947 1,214
Southern Alberta 6 743 304 926
Other 8 6 8 9
------------ ------------ ------------ ------------
Total 2,477 3,587 2,832 3,875
Annual average production for 2009 was 2,832 boe per day, down from the 2008 annual average of 3,875 boe per day.
The main reason for the decline in production in 2009 was the disposition of assets that did not fit the Company's strategy. In addition, the temporary curtailment of production during the third and fourth quarters due to the relatively low natural gas price environment, and natural declines of the Company's production base also reduced production for the year.
Recent production performance has been driven by the success of ProspEx's horizontal drilling program in the East Kakwa area. The Company's first horizontal well in East Kakwa came on stream in early November, 2009 and has averaged approximately 7.4 mmcf per day of raw gas and 260 barrels per day of liquids since that date (approximately 820 boe per day net to ProspEx's 60% working interest). The second horizontal well came on stream in early February, 2010, at a rate of approximately 10 mmcf per day of raw gas and 350 barrels per day of liquids, (approximately 1,110 boe per day net to ProspEx's 60% working interest). ProspEx's third horizontal well was recently brought on production at a rate of approximately five mmcf per day of raw gas and 175 barrels per day of liquids (460 boe per day net to ProspEx's 50% working interest).
Production for the fourth quarter of 2009 was 2,477 boe per day, an increase of 25% compared to the third quarter of 2009. The Company's curtailment of production due to the relatively low natural gas price environment ended in late October, with approximately 220 boe per day of curtailment averaged over the full quarter. Production also increased when the Company's first East Kakwa horizontal well came on stream in early November. Total corporate production in late December is estimated to have been approximately 2,700 boe per day (not including production from the Garrington assets which were divested in late December).
Production for the first quarter of 2010 is expected to average approximately 3,000 boe per day. Current production is approximately 3,400 boe per day, including the production from the third East Kakwa horizontal well. Prolific production performance from the new East Kakwa horizontal wells has caused a temporary curtailment in production of approximately 150 boe per day from the five vertical wells at East Kakwa, due to higher operating pressures in the area pipeline system. Modifications to this system are in progress, with the curtailed production expected to be restored in late March, 2010. ProspEx's most recent horizontal well at Brazeau River in West Central Alberta is expected to come on stream in the third quarter of 2010. The Company is reiterating its previous guidance of annual average production for 2010 in the 3,300 to 3,500 boe per day range, with production in late 2010 of approximately 4,000 boe per day.
Guidance regarding production may constitute a "financial outlook" as contemplated by NI 51-102. The purpose of such guidance is to forecast the anticipated production for the Company for 2010 and the first quarter of 2010.
FINANCIAL
In light of the weakness in capital and commodity markets in early 2009, ProspEx' financial strategy in 2009 was to restrict capital spending to be roughly equivalent to cash flow, while using asset dispositions to reduce debt and strengthen the Company's balance sheet. With an improving business environment and success at East Kakwa, capital spending was accelerated later in the year, with fourth quarter exploration and development capital spending of $4.0 million, compared to cash flow for the quarter of $2.5 million.
Cash flow for the full year 2009 was $12.7 million, compared to exploration and development capital spending of $17.7 million. Cash flow decreased due to lower production levels, and a 41% decrease in the overall realized average product price ($32.17 per boe in 2009 compared to $54.08 per boe in 2008).
Net proceeds from the Company's asset acquisition and disposition program were $35.0 million. These proceeds were largely used to reduce debt. As a result, net debt declined from $51.4 million at December 31, 2008 to $21.6 million at December 31, 2009 (not including fair value of commodity contracts, associated future taxes and current loss on sublease). ProspEx has a $33 million credit facility with a major Canadian bank. The facility revolves for 364-day periods, renewable at the option of the lender. This facility is subject to an annual review on May 31, 2010.
The Company recorded a loss for the year with earnings of $(10.4) million, or $(0.18) per fully diluted share. In the fourth quarter earnings were $(1.2) million, or $(0.02) per fully diluted share. Earnings were negative due to lower commodity prices and reduced production in 2009.
Capital spending in the first quarter of 2010 is expected to be approximately $9 to $10 million, with cash flow forecast at approximately $5 to $6 million. Net debt at March 31, 2010 is therefore expected to be approximately $25 - $26 million.
Please be advised that the forecasts with respect to capital spending, cash flow and net debt above may constitute a "financial outlook" as contemplated by NI 51-102. The purpose of such information is to forecast the anticipated capital spending, cash flow, and net debt of the Company for the first quarter of 2010.
OIL AND GAS RESERVES DATA
An independent evaluation of ProspEx's corporate reserves at December 31, 2009 was conducted by GLJ and prepared in accordance with the reporting guidelines of NI 51-101. Under NI 51-101, the estimate most likely to be accurate for reserves is the P+P category. In this category the Total Company Interest reserves were estimated to be 57.8 billion cubic feet ("bcf") of natural gas and 2,582 thousand barrels ("mbbls") of oil and natural gas liquids ("NGL") for a total of 12,214 mboe at December 31, 2009. On a proved basis, Total Company Interest reserves were estimated to be 37.3 bcf of natural gas and 1,734 mbbls of oil and NGL for a total of 7,948 mboe at December 31, 2009.
The complete reserves disclosure as required under NI 51-101, will be contained in ProspEx's 2009 Annual Information Form, to be filed on SEDAR on or before March 31, 2010.
The Company's 2009 reserves performance was primarily driven by two activities: the disposition of non-core assets, and drilling at East Kakwa. Over the course of 2009 ProspEx disposed of three non-core properties and closed an asset acquisition. Net of the acquisition, aggregate divested P+P reserves were estimated at 4,104 mboe, with net proceeds of $35.0 million. In addition, $23.2 million of P+P future development capital was removed from the Company's reserves books in association with the dispositions. For the purposes of calculating FD&A costs, aggregate net proceeds allocatable to the net divestiture program were therefore $14.16 per boe on a P+P basis. On a proved basis, net of the acquisition, aggregate divested reserves were estimated at 2,746 mboe, with net proceeds of $35.0 million. In addition, $16.0 million of proved future development capital was removed from the Company's reserves books in association with the dispositions. Aggregate FD&A costs allocatable to the net divestiture program were therefore $18.57 per boe on a proved basis.
At East Kakwa ProspEx drilled three successful wells in 2009: one (0.2 net) vertical trend extension well and two (1.2 net) horizontal wells. As a result of this drilling success, coupled with previous drilling and 3D seismic, GLJ has recognized 89 bcf of gross initial raw recoverable gas (which translates to 8,056 mboe net to ProspEx at December 31, 2009) of P+P reserves. These reserves are attributed to an area equivalent to 15.5 sections spanning approximately 13 kilometres of Falher channel trend. In the 2009 Reserves Report there were no reserves attributed to lands evaluated by the Company's most recent horizontal well. This well, drilled in the first quarter of 2010 at the northern end of ProspEx's lands, should result in the recognition of additional reserves in a future reserves report.
The East Kakwa P+P reserves include five producing vertical wells; two horizontal wells drilled as of December 31, 2009; and 17 undeveloped horizontal drilling locations. Initial gross raw recoverable P+P gas reserves for the 19 horizontal wells average 4.3 bcf per well, compared to 1.4 bcf per well for the vertical wells. The estimated reserves therefore imply an improvement of 3.1 times through drilling horizontally, compared to the vertical wells. Future development capital for drilling and completion of $3.5 million was booked to each undeveloped location. The average P+P reserves per well and future capital costs assigned by GLJ are consistent with ProspEx's internal economic model for the East Kakwa trend.
Overall, the assigned GLJ P+P reserves represent a 50% recovery of the original gas in place mapped by GLJ. The average well spacing is approximately 400 acres per well, or 1.5 wells per section. Given the relatively low recovery factor and large spacing area per well, ProspEx believes that there may be the potential to drill additional wells in the trend to increase the recovery factor and total ultimate reserves. This potential is expected to be confirmed over time by the production performance of wells drilled on the trend.
Despite the substantial asset dispositions described above, the 2009 Reserves Report demonstrates that ProspEx was able to grow its reserves base in 2009. The Company replaced 178% of 2009 production on a proved basis, and 310% of 2009 production on a P+P basis. Reserves growth over the year was 11% on a proved basis and 22% on a P+P basis. Reserves per fully diluted share increased by 13% on a proved basis and 23% on a P+P basis.
The Company's P+P reserve life index at December 31, 2009 increased to 13.5 years (calculated using fourth quarter 2009 production on an annualized basis). The proved reserve life index was 8.8 years.
Reported reserves included a modest upward revision to reserves on a proved basis of 344 mboe, and an upward revision of 386 mboe on a P+P basis, as downward revisions in the Harmattan area were offset by positive revisions at Kakwa.
F&D costs (not including acquisitions and dispositions) for 2009 were $6.77 per boe on a P+P basis, including revisions and changes in future development capital. As the sum of disposition proceeds and future capital associated with divested assets exceeded 2009 exploration and development capital and new future capital; FD&A costs for 2009 were $(2.69) per boe, on a P+P basis.
On a proved basis, including revisions and changes in future development capital, F&D costs were $9.46 per boe. FD&A costs on a proved basis were $(4.12) per boe, again due to the effect of dispositions.
Recycle ratio is the ratio of operating netback to finding and development costs, and is a measure of the economic efficiency of the capital program. A recycle ratio of 2.0 was achieved on a proved basis, and 2.8 on a P+P basis. As the Company's FD&A costs were negative, recycle ratio is calculated here using F&D costs.
During 2009, ProspEx was able to increase its underlying net asset value in a very challenging environment. ProspEx's net asset value at December 31, 2009 is estimated to be $2.99 per basic share, compared to $2.61 per basic share at December 31, 2008. This increase in net asset value was achieved despite a lower GLJ price forecast for natural gas used in the December 2009 estimates. The net asset value calculations use GLJ's estimates of P+P reserves from the 2009 Reserves Report; a discount rate of 10% and the book value of undeveloped land ($22.6 million or $250 per acre at December 31, 2009; compared to $24.3 million or $200 per acre at December 31, 2008). The net asset value per basic share was calculated by dividing the net asset value by 57,385,162 shares.
Reserve Balance
Company Interest (working interest plus royalties receivable)
December 31, 2009
(forecasted prices)
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Oil
Oil NGLs Natural Gas Equivalent
(mbbls) (mbbls) (mmcf) (mboe)
-------------------------------------------------------------------------
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Proved Producing 14 713 14,251 3,102
Proved Developed
Non-Producing 83 277 6,482 1,440
Proved Undeveloped - 648 16,553 3,407
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Total Proved 96 1,638 37,286 7,948
Proved Plus Probable (1) 126 2,456 57,788 12,214
(1) Columns may not add due to rounding
Company Interest
Reserves Reconciliation
-------------------------------------------------------------------------
Proved Proved Plus Probable
---------------------------------------------------------
Oil & Natural Oil Oil & Natural Oil
NGLs Gas Equivalent NGLs Gas Equivalent
(mbbls) (mmcf) (mboe) (mbbls) (mmcf) (mboe)
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Opening
Balance -
Jan. 1, 2009 1,114 36,149 7,139 1,487 51,337 10,043
Drilling
additions
and improved
recovery 875 20,225 4,245 1,405 33,105 6,923
Technical
revisions &
economic factors 103 1,441 344 86 1,797 386
Acquisitions/
Divestitures (116) (15,777) (2,746) (153) (23,701) (4,104)
Production (242) (4,750) (1,034) (242) (4,750) (1,034)
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Closing balance
- Dec. 31,
2009(1) 1,734 37,286 7,948 2,582 57,788 12,214
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(1) Columns may not add due to rounding
Performance Metrics
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Proved Plus
Total Proved Probable
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Capital ($000s)
Future development capital
January 1, 2009 20,617 32,117
December 31, 2009 30,300 40,749
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Change in future development capital 9,683 8,632
Exploration & development capital 17,687 17,687
Future development capital associated
with dispositions 16,032 23,168
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Total capital for 2009 F&D calculation 43,402 49,487
Acquisition & disposition capital (34,956) (34,956)
Future development capital associated
with dispositions (16,032) (23,168)
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Total capital for 2009 FD&A calculation (7,586) (8,637)
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Reserves
-------------------------------------------------------------------------
Reserves for F&D calculation (mboe)
(excluding acquisitions & dispositions) 4,589 7,309
Reserves for FD&A calculation (mboe)
(including acquisitions & dispositions) 1,843 3,205
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2009 Finding & Development Costs ($/boe) 9.46 6.77
2009 Finding, Development
& Acquisition Costs ($/boe) (4.12) (2.69)
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2008 Finding & Development Costs ($/boe) 39.77 68.62
2008 Finding, Development
& Acquisition Costs ($/boe) 29.46 36.33
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Three Year Average Finding
& Development Costs ($/boe) 18.74 14.58
Three Year Average Finding,
Development & Acquisition Costs ($/boe) 18.04 14.37
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2009 Operating Netback ($/boe) 18.69 18.69
2009 Finding & Development Costs ($/boe) 9.46 6.77
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2009 Recycle Ratio 1.98 2.76
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2009 Reserves additions including revisions (mboe) 1,843 3,205
2009 Production (mboe) 1,034 1,034
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2009 Reserves Replacement 178% 310%
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Reserves at Dec. 31, 2009 (mboe) 7,948 12,214
Fourth Quarter Production (boe/d) 2,477 2,477
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2009 Reserves Life based on fourth
quarter production annualized (years) 8.8 13.5
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Present Value of Cash Flows
ProspEx's reserves were evaluated in the 2009 Reserves Report using GLJ's January 1, 2010 price forecast. Cash flows are prior to income taxes and general and administrative expenses. Undeveloped land values are not included. Well abandonment costs have been included for wells that have reserves assigned.
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Discount Rate
($000s) 0% 5% 10% 15%
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Proved Producing 88,565 71,925 61,097 53,513
Proved Developed
Non-Producing 36,991 26,549 20,982 17,529
Proved Undeveloped 96,055 60,058 42,216 31,856
----------------------------------------------
Total Proved(1) 221,611 158,532 124,295 102,898
Total Proved plus Probable 374,846 233,572 170,617 135,299
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(1) Columns may not add due to rounding
Net Asset Value per Share
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Discount Rate
($000s) before tax 0% 5% 10% 15%
-------------------------------------------------------------------------
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Total P+P reserves value 374,846 233,572 170,617 135,299
Plus undeveloped land value 22,619 22,619 22,619 22,619
Less net debt (21,644) (21,644) (21,644) (21,644)
----------------------------------------------
Net asset value 375,821 234,547 171,592 136,274
Shares outstanding
(000s at Dec. 31, 2009) 57,385 57,385 57,385 57,385
Net asset value
per outstanding share $ 6.55 $ 4.09 $ 2.99 $ 2.37
Reader's Advisory
Certain information contained in this press release constitutes forward-looking information or statements including, without limitation, information and statements respecting anticipated capital expenditures, production results, additions and deletions, technical and commercial viability of prospects, production and reserves additions and deletions from the Company's historical and future capital programs, acquisitions or dispositions, decline rates, costs of development, operating expenses, general and administrative expenses, royalties, expected timing of the receipt of regulatory approvals, expected timing of the completion of facilities projects and the Company's ongoing strategy and plans.
Statements relating to "reserves" and "resources" are forward-looking information as they involve the implied assessment, based on certain estimates and assumptions that the reserves and resources described exist in the quantities predicted or estimated and can profitably be produced in the future.
Forward-looking information and statements are often, but not always, identified by the use of words such as "anticipate", "seek", "believe", "expect", "hope", "plan", "intend", "forecast", "target", "project", "guidance", "may", "might", "will", "should", "could", "estimate", "predict" or similar words or expressions suggesting future outcomes or language suggesting an outlook. By their very nature, forward-looking information and statements involve inherent risks and uncertainties, both general and specific, and risks that predictions, forecasts, projections and other forward-looking information and statements will not be achieved. We caution readers not to place undue reliance on these statements as a number of important factors could cause the actual results to vary materially from the forward-looking information or statements. These factors include, but are not limited to: the volatility of oil and gas prices; production and development costs; capital expenditures; the imprecision of reserve and resource estimates and estimates of recoverable quantities of oil, natural gas and liquids; the Company's ability to replace and expand oil and gas reserves; environmental claims and liabilities; incorrect assessments of value when making acquisitions; increases in debt service charges; the loss of key personnel; the marketability of production; defaults by third party operators; unforeseen title defects; fluctuations in foreign currency and exchange rates; adequacy of insurance coverage; compliance with environmental laws and regulations; changes in tax and royalty laws; the Company's ability to access external sources of debt and equity capital; and the Company's ability to obtain equipment in a timely manner to carry out development activities. Further information regarding these factors may be found under the headings "Description of the Business - Risk Factors Relating to Our Business" and "Industry Conditions" in the Company's most recent Annual Information Form, under the heading "Operational and Other Business Risks" in the Company's Management's Discussion and Analysis for the year ended December 31, 2009, and in the Company's most recent consolidated financial statements, management information circular, quarterly reports, material change reports and news releases available under the Company's profile on SEDAR (www.sedar.com). Readers are cautioned that the foregoing list of factors that may affect future results is not exhaustive. When relying on our forward-looking statements to make decisions with respect to the Company, investors and others should also carefully consider information set forth in the section "Forward-Looking Information" of the Company's most recent Annual Information Form respecting the assumptions upon which the Company bases certain forward-looking information and the uncertainties inherent in such assumptions.
The Company does not assume responsibility for the accuracy and completeness of the forward-looking information or statements and such information and statements should not be taken as guarantees of future outcomes. Subject to applicable securities laws, the Company does not undertake any obligation to revise these forward-looking information or statements to reflect subsequent events or circumstances. Furthermore, the forward-looking information contained in this press release are made as of the date of this document and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. The forward-looking information and statements contained in this press release are expressly qualified by this cautionary statement.
"Operating netbacks" are calculated by subtracting transportation costs, royalties payable, and operating costs from the average price received during the period.
"Reserves replacement ratio" is calculated by dividing the sum of the reserves added, plus or minus any revisions, and dividing by the production volume over the period.
"Reserve life index" is calculated by dividing the reserves balance at year end by the annualized production rate during the prior quarter.
"Reserves per share" at year end is calculated by dividing the reserves balance at year end by the weighted average number of fully diluted shares outstanding in the year.
The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet to one barrel 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 aggregate of the exploration and development costs 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 reserves additions for that year.
The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties due to the effects of aggregation. Total proved reserves of the Company and total P+P reserves of the Company were estimated by GLJ effective as of December 31, 2009 as 7,948 mboe and 12,214 mboe, respectively.
As referred to above, to view ProspEx's audited financial statements and related MD&A for the twelve months ended December 31, 2009, please visit www.psx.ca or www.sedar.com. To the extent that investors do not have access to the internet, copies of the audited financial statements and related MD&A can be obtained on request without charge by contacting ProspEx at (403) 268-3940, or at 2500, 255 - 5th Avenue SW, Calgary, Alberta T2P 3G6.
%SEDAR: 00021285E
For further information: John Rossall, President & CEO or George Yee, Vice President Finance & Chief Financial Officer at [email protected] or (403) 268-3940
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